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Yearly Wrap Up – 2011

Yearly Wrap Up

The most popular stories of 2011 on Controlling Legal Costs…

Reverse Auctions Becoming More Frequently Used by Corporations to Reduce Legal Costs (August 9th) – Reverse auctions have become more frequently utilized by corporations to reduce their legal spend. The online auction process allows firms to submit anonymous bids on specified projects. If a firm submits a new, lower bid the auction is extended to allow competing firms to submit a lower bid if they so desire. Although the process has been criticized for reducing law firms’ long term relationships with clients, general counsels have praised the idea for evaluating the cost-effectiveness of firms on a project by project basis.

5 Things to Watch Out For in Legal Billing (July 19th) – Internal pressures often arise in the general counsel’s office to reduce external legal spend. Accordingly, there are multiple ways for the department to reduce billing by examining legal bills submitted for violations of accepted practices. One of the more objectionable billing practices detailed here included having multiple attorneys’ present at depositions or intraoffice conferences, which is one common way that law firms may pad their billings. Oftentimes only one attorney is needed, but by sending more than one, each attorney bills for their time, which is often improper. Overhead, which is classified as the costs of running an office (not legal work) is another expense often incorrectly passed on to clients. Overhead includes such costs as computerized research charges, office supplies, and faxes, among others.

Recent FINRA Arbitration Decisions Critical of Excessive Attorney’s Fees (August 25th) – Forbes Magazine reported recent rulings that attacked the awarding of excessive attorneys’ fees in two arbitration decisions by the Financial Industry Regulatory Authority (“FINRA”). This represented a marked shift from prior FINRA policy, where little attention was paid to attorneys’ fees. Forbes contributor Bill Singer approved of the recent policy direction, and says this may become a trend in arbitrations.

Court Cuts Attorneys’ Costs 83% for Flagrantly Inappropriate Billing (July 14th) – A Massachusetts District Court reduced an attorneys’ fee request by 83% for being an “inappropriate” fee request. The court especially disagreed with the attorneys’ request due to excessive time spent on certain legal activities. There were numerous instances of attorneys billing amounts far beyond what anyone with the requisite level of experience would be billing for the same task. The court also found the fact that two attorneys were spending time in court as unnecessary. Finally, the attorneys appeared to be billing at an excessive rate because they allegedly assumed someone else would be paying the bills.

Utah Supreme Court Upholds Sanctions for Charging Excessive Legal Fees (August 10th) – The Utah Supreme Court found attorney Larry Long in violations of Rule 1.5(a) of the Utah Rules of Professional Conduct, which deal with attorney’s billing practices. Two complaints were filed against Long. First, by a former client whose account was sent to collection after agreeing to a $6,600 flat fee arrangement to be represented in a DUI case. After only one hearing, the client changed attorneys and Long sent the account to collections. A second complaint was filed by a judge who felt the attorney did not perform sufficient legal work to justify the fees he collected from his clients.

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