Businesses of all sizes and descriptions are finding that they spend a lot of money on legal services.  Are they getting their monies’ worth?  Are the attorneys billing in accordance with ethical standards?  Do the attorneys’ fee statements meaningfully describe the work being done?  Was the time spent on the work reasonable?  Any substantial consumer of legal services wonders about these issues, but it is difficult for non-lawyers to penetrate the subject matter.

Palmer J. Swanson, PC has developed and put into practical application a protocol for the review and analysis of legal bills and expenses.  It has been able to assist clients in realizing significant savings.

The protocol involves approaching the bills on a phased basis in order to assure that the audit never costs more than the money that can be saved.

First: A random sample of invoices is reviewed by an attorney having at least eight years of civil litigation and insurance coverage experience.  None of the review work is performed by paralegals or even by attorneys who lack substantial experience.    Selected work product and reports of the law firm are analyzed for skill and time involved in preparation.   Importantly, not all matters appeal to an audit, which in many instances involves questioning the professional judgments of the lawyers whose work and bills are under review.  If the nature and posture of the case are such that the decisions of the firm cannot be easily called into question, a further audit is less likely to yield good results and is not recommended.  This threshold screening of the matter usually gives the auditors a reasonable idea as to whether further work is likely to be cost effective.  To put it otherwise, it is usually obvious to a skilled auditor at this point if the firm’s billings have gotten out of hand.

Second: If the bills don’t pass the foregoing “sniff test”, then,  if the client approves, they are scanned into media and the individual time entries are then extracted and exported into a data base.  The time entries are then subjected to a set of at least six statistical tests which tend to correlate with inappropriate billing practices.  These tests are not a litmus test for fraud or abusive practices, and even if the time entries fail all of the tests, there may be a perfectly reasonable explanation for that result.  We do not believe in the use of “canned” computer programs to evaluate professional services, nor do we believe that software is anything more than an analytic tool to assist in the evaluation of the work and billings of a law firm.  If 75% or more of the statistical tests are positive, then a fuller audit is likely to be recommended.  If they are not, then the bills are assessed again in somewhat greater detail to revisit the question of whether an audit will be cost effective.  A recommendation and cost estimate is then formulated and sent to the client for its decision.  If possible, an “order of magnitude” estimate of likely audit reductions in the bills is offered.

Third: If problems or concerns are identified and if the client gives approval, then the work proceeds to the next level, viz. an audit.  The audit can take many forms.  It is a professional judgment as to how to structure it and where and how to probe.  The audit may be limited to just certain timekeepers whose work is suspect, or it may focus on certain tasks performed by the firm, such as the research and drafting of motions whose cost was out of proportion to the quality of the work and/or the results achieved. There are a number of other possible axes of analysis, and the framing of the work is something which is the subject of careful planning, the objective being to avoid diminishing returns on the work in cost versus benefit terms.

As appropriate to the case, the audit may involve a “technical analysis” of the billing entries (e.g. block billing, vague entries, duplicative entries, etc); such analysis substantially focuses on the four corners of the bills and the time entries themselves.  Alternatively, the audit may involve a “performance analysis” wherein the various tasks performed by the firm are broken out in detail and the actual time spent is measured against what should have been spent.  The appropriate “time budget” for various tasks is set by an auditor who is an attorney with over 20 years of experience and who managed a large and diverse litigation firm for a number of years.  Often, the client requests that both a “technical analysis” and a “performance analysis” be done.     

No phase of the audit work is done by clerks or other untrained persons, as is common with other fee auditing operations.  When appropriate, examination of the pleadings and other documentation is undertaken to assist in the determination of reasonableness.  Our capability to scan documents into media form allows ease of review and comment.