Gerald F. Phillips, a mediator and arbitrator based in Century City, California, is a member of the Los Angeles County Bar Association Professional Responsibility and Ethics Committee, and the ethics subcommittee of the State Bar’s ADR Committee.

    In my experience as a consultant, expert witness, and neutral, I’ve found that most disputes over legal fees result from ignorance or insensitivity rather than deliberate deception. Attorneys, for the most part, try to achieve honesty in billing. But the temptation to overbill is built into the system. In economic terms, lawyers and their clients are adversaries. A lawyer’s personal income increases in proportion to the time billed, and his or her professional standing advances in proportion to meeting or exceeding annual billing standards.

    To level the playing field, house counsel must scrutinize monthly billing statements and prepare guidelines for acceptable billing practices. Making outside counsel fully aware that each statement will be carefully reviewed may be enough to prevent a problem. The following are among the more pernicious bill-padding abuses you should watch for:

    Hourly billing and incremental billing. California Business and Professions Code section 6148(b) states explicitly that a bill rendered by an attorney should clearly state the basis for the bill and include the amount, rate, and basis for calculation. Most firms bill by time increments of one-tenth or two-tenths of an hour. Company guidelines should specify the increments to be used. Some attorneys have billed on a three-tenths of an hour basis, and some even on a half-hour or one hour basis. House counsel should immediately determine if an outside attorney is billing in unconscionably large time segments.

    Rounding up.Some billing statements indicate that attorneys are rounding up, thus charging for time they did not work. This practice can easily inflate a bill by 15 to 30 percent. Rounding up to the nearest full hour can result in a gross overstatement of fees. Company guidelines should prohibit any rounding up.

    Block billing. Block billing, or assigning a one-time charge to multiple tasks, allows a lawyer to conceal the time spent on each task and prevents assessing whether tasks were performed within a reasonable time. It should not be approved. This practice enables attorneys to round up and bill more often in large time increments. Company guidelines should require that billing statements describe services in sufficient detail to allow a person unfamiliar with the case to understand what was done. Only one activity should be listed in each time period.

    Excessive review and revisions. Company guidelines should alert outside counsel that the client will not pay for excessive document revisions. A keen observer can often spot billing entries for the repeated review and revision of an associate attorney’s work product. If constant revising was necessary, then the original work probably wasn’t first-rate. Outside firms should not bill for both the original work and for excessive time spent making revisions. If the matter was handed first to an inexperienced attorney, the firm is billing the client for training.

    Excessive research. Overbilling for unnecessary research is often both indefensible and very difficult to uncover. One court has held that 16 hours spent researching the case law concerning objections to interrogatories was excessive, since the fundamentals should have been known to capable counsel. Excessive research may, in fact, be on-the-job training for young associates. If the client objects to paying educational expenses, restrict the number of research hours that may be conducted without prior approval.

    Vague entries and billing for overhead. The guidelines should provide that vague entries, such as review of file, trial preparation, research, or prepare for deposition, will not be approved. The same guideline should apply to entries for obvious secretarial functions, such as file creation or setting deposition dates.

    Neither the California Rules of Professional Conduct nor the Business and Professions Code adequately advises what proper billing practice is. Therefore, house counsel should establish guidelines, and a professional understanding, early in the business relationship.