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Brad Jenkins

Brad Jenkins, President and CEO of CloudNine Discovery, has over 20 years of experience leading customer focused companies in the litigation support arena. Brad has authored many articles on litigation support issues, and has spoken before national audiences on document management practices and solutions.

Doug Austin

Doug Austin, Professional Services Manager for CloudNine Discovery, has over 20 years experience providing legal technology consulting and technical project management services to numerous commercial and government clients. Doug has also authored several articles on eDiscovery best practices.

Jane Gennarelli

Jane Gennarelli is a principal of Magellan’s Law Corporation and has been assisting litigators in effectively handling discovery materials for over 30 years. She authored the company’s Best Practices in a Box™ content product and assists firms in applying technology to document handling tasks. She is a known expert and often does webinars and presentations for litigation support professionals around the country. Jane can be reached by email at jane@litigationbestpractices.com.

Is it Time to Ditch the Per Hour Model for Document Review? – eDiscovery Trends

April 08, 2013

By Doug Austin

 

Some of the recent stories involving alleged overbilling by law firms for legal work – much of it for document review – begs the question whether it’s time to ditch the per hour model for document review in place of a per document rate for review?

As discussed by D. Casey Flaherty in Law Technology News (DLA Piper Is Not Alone: Why Law Firms Overbill), DLA Piper has been sued by its client – to the tune of over $22 million – for overbilling.  When DLA Piper produced some 250,000 documents in response to its client’s eDiscovery requests, some embarrassing internal emails were included in that production.  For example:

  • “I hear we are already 200K over our estimate – that’s Team DLA Piper!”
  • “DLA seems to love to low ball the bills and with the number of bodies being thrown at this thing, it's going to stay stupidly high and with the absurd litigation POA has been in for years, it does have lots of wrinkles.”
  •  “It’s a Thomson project, he goes full time on whatever debtor case he has running. Full time, 2 days a week.”
  • “[N]ow Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode. That bill shall show no limits.”
  • “Didn’t you use three associates to prepare for a first day hearing where you filed three documents?”

In his article, Flaherty provides two other examples of (at least) perceived overbilling:

  • In the Madoff case, the government “used 6,000 hours of attorney time to procure a $140 million settlement offer (more than $23,000 delivered per hour spent)”.  Your federal tax dollars hard at work!  However, the plaintiffs’ law firms “expended 118,000 additional attorney hours on the same matter to deliver the final version of that settlement at $219 million” and seek $40 million for delivering $39 million in incremental value (once you subtract their proposed $40 million in fees).  “It appears that most of the 110 lawyers are contract attorneys performing basic document review; the plaintiffs firms are just marking them up at many, many multiples of their actual cost.”
  • In the Citigroup derivatives class action settlement, plaintiffs firms “reached a $590 million settlement from which they now seek almost $100 million in fees for 87,000 hours of billable time (average, $1,150 per hour). The bulk of the hours were spent on low-level document review work” where contract attorneys were paid $40 to $60 per hour and “the plaintiffs firms are seeking $550 to $1,000 plus per hour for those services”.

While the DLA Piper example isn’t specifically about document review overbilling, it does reflect how cavalier some firms (or at least some attorneys at those firms) can be about the subject of overbilling.  For the other two examples above, document review overbilling appears to be at the core of those disputes.  There are admittedly different levels of document review, depending on whether the attorneys are performing a straightforward responsiveness review, a privilege review, or a more detailed subject matter/issue coding review.  Nonetheless, the number of documents in the collection is finite and the cost for review should be somewhat predictable, regardless of the level of review being conducted.

Why don’t more firms offer a per document rate for document review?  Or, perhaps a better question would be why don’t more organizations insist on a per document rate?  That seems like a better way to make document review costs more predictable and more consistent.  I’m not sure why, other than “that’s the way we’ve always done it”, that it hasn’t become more predominant.  Knowing the per document rate and the number of documents to be reviewed up front would seem to eliminate overbilling disputes for document review, at least.

So, what do you think?  Is it time to ditch the per hour model for document review?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.
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Comments

  • April 09, 2013 Drew Lewis

    I agree with Craig's point about where the problem resides. More often than not, when we hear about these types of billing practices it is more of a commentary on the lawyer rather then the process. Efficient processes, legal project management, and the most high-end technologies will do little to cure the inherent defect within a professional that thinks it is fair to charge for work that was never performed. The billable hour facilitates that type of over billing (after all, does the client ever know how long a task really took?), but it may not be the disease itself.

  • April 09, 2013 Ralph Losey

    I'm inclined to agree with you Doug. My father in law, Julius Friedman, claims to have been the first attorney in my state of Florida to bill by the hour. It was a consumer friendly innovation that brought him many new clients. They were looking for greater predictability and fairness in lawyer billing. Before that time, late fifties, early sixties, all lawyers simply billed a lump sum, usually by month, or whenever they felt like it, with little or no description. Ie - $5,000 for legal services rendered. There were far fewer lawyers back then, and not much competition. Julius lived long enough (he practiced law for over 55 years) to see his consumer revolution do a complete 180, and make all lawyers slaves to the clock, and many client victims of time gouging. Billing by the hour is an inherently inefficient method of billing because it encourages inefficiency. My clients used to kid me and accuse me of billing by the word (yes, I've always been a profusive writer!). In the end Craig is also right, it is about fairness and trust.

  • April 08, 2013 Vipin

    A billing model based on per document, if built around a sound review process, is more beneficial for the corporation because not only is it more predictable for the corporation, but it also puts the burden on the review service provider to provide a high quality, defensible review that is also efficient. An hourly model puts all the burden on the corporation to assure the process is done efficiently, which is difficult to do, and as is shown in the few examples sighted, incentivizes the provider to work inefficiently. It also doesn't push the provider to develop a process that pushes efficiency.

  • April 08, 2013 Doug Austin

    Granted, Craig, a per document rate is not necessarily more equitable. But, it could at least be more predictable as clients know what the cost will be up front if they know the number of documents and the per document rate. That would at least eliminate surprises, right?
    Also, while a 300 page document shouldn't cost the same as a one-line email, couldn't it be argued that it would average out over a large enough document collection? It wouldn't be a perfectly equitable way for billing, but it would give the client some cost certainty, which I think is HUGE when trying to estimate the cost of the litigation.

  • April 08, 2013 Craig Ball

    A per document rate is merely different, but not inherently more equitable. Is there anything to commend it over hourly rates on the basis of it better reflecting the resources consumed for the effort invested? Should a 300-page document cost the same as an e-mail that merely says "OK?"

    Similarly a per page rate appears more equitable until we realize that few documents require being read in their entirety to be assessed by a reviewer. Do I have to read every page of a phone directory to tag it as a phone directory?

    When honest people are billing accurately for dilgent, competent work, the hourly rate remains a good measure. The problem resides in the place where accuracy, honesty, diligence and competence used to dwell.

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