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7 PLL Persp. 1 (1995-1996)

handle is hein.lbr/aaplper0007 and id is 1 raw text is: 404.-, 4 VOLUME 7 IssuE 1 Law Firm Billing Practices: Information Ethics, Economics & Disclosure by Ronda W. Fisch, Reed Smith Shaw & McClay, Pittsburgh, PA FALL 1995 THICAL, BUDGETARY AND disclosure issues law firms face in light of ABA Opinion 93-379 were hotly debated at Law Firm Billing Practices: Information Ethics, Econom- ics & Disclosure, a program presented at the AALL Annual Meeting, on Monday, July 17, 1995. I was joined as coordinator of the program by the panelists: David I. Isbell, Chair of the ABA Committee that authored the opinion; Giuliano Chicco, Manager of Legal Resources/Law Librar- ian at General Electric; Bob McClean, Manager of Westlaw National Accounts and Kevin English, Manager of Lexis/Nexis Pricing. The perspectives of law firms, cli- ents, legal information vendors and librar- ians received equal representation in rela- tion to the ethical issues of the opinion and the implications associated with fixed price offers. On December 6, 1993, the ABA's Standing Committee on Ethics and Profes- sional Responsibility issued Formal Opin- ion 93-379: Billing for Professional Fees, Disbursements and Other Expenses. The opinion states that a lawyer may charge only for the actual cost of any of the services provided within the law firm, i.e., photo- copies, telephones, CALR searches, etc. Service departments are not to be a profit center for the firm and the addition of a surcharge to an expense, such as a CALR database search in Lexis, Westlaw or Dia- log is unethical, unless the surcharge is dis- closed to the client. While the practice of adding surcharges to CALR searches was greatly curtailed as a result of the Skaddenomics article in the September 1991 issue of The American Lawyer, the concept of fixed price contracts and task based billing has raised a number of ques- tions by librarians. Specifically, can firms .... -,Iv with Orninion 93-379 while at the same time reaping the benefits associated with special billing offers? In addition, the business of law has changed in the 1990s. Clients are in the driver's seat. They question legal bills and demand specific types of billing practices. Firms are challenged to work as cost effi- ciently as possible yet still face the possi- bility that the client will selectively deter- mine what will and will not be paid, even after the expense has been generated. With law firms, CALR vendors and often clients themselves being for-profit organizations, all are looking to make or save a buck. Mr. Isbell offered an overview of the intent of Formal Opinion 93-379, the ABA's effort to deal comprehensively with the subject of billing. While the opinion is neither enforceable nor binding, the gen- eral reaction of the profession suggests that it has forcible reasoning. As a result of the opinion, a number of law firms have changed their billing practices. The opin- ion addresses both aspects of billing: bill- ing for professional services as well as for disbursements and other charges. Charges must be reasonable and ethical and there must be a clear understanding between the client and the lawyer as to what the charges will be. Giuliano Chicco asserted that the re- lationship between counsel and client has changed dramatically. Traditional relation- ships between clients and firms as well as within law firms are in peril. Clients want legal information faster, cheaper, better and they are not afraid to shop, as proven by the Manhattan Project: General Electric's plan to save as much as $45 million dol- lars over three years by diverting work from New York City law firms because of GE's view that these firms are too expensive. Charging clients for online services has also become an issue. The question is no longer should CALR be used, but rather the di- lemma is whether the charge should be an overhead expense. When CALR was first introduced in law firms, the time keeping system enabled attorneys to buy into the CALR concept. For the first time in his- tory, attorneys could pass along the cost of the research to the clients. The firm would not be adversely impacted by the costs as- sociated with CALR. Rather, these costs would be passed directly to the client, based on a pay only for what you use method of billing. According to Giuliano, fixed price contracts have a liberating effect on the firms. Online research is now an equal partner with traditional research. The discussion became fervent when the issue of whether librarians' time should be billed to the client was elaborated upon, along with the misconception that libraries are free and therefore valueless. From the clients' perspective, Giuliano believes it is a bad trend to have to prove to manage- ment that the librarian is valuable by offer- ing to bill for the services. However, there is a difference between legal advice and raw information. Clients want to pay for a prod- uct, not be nickled and dimed for every piece of data that is needed to create the work product. At the heart of issue is the evalua- tion of the competitive environment. Yes, the client is in a buyer's market, but to that end, the buyers and the sellers have begun to work together. For example, the Uni- form Task Based Management System, ABA, May 1995, an important document for private law firms, is ajoint effort on the part of the corporate client and the law firm to create a task based management system. This form of billing enables corporate cli- ents to shop around and look at task based costs in order to make a fair comparison (continued on page 4) The Quarterly of the Private Law Libraries/SIS of the American Association of Law Libraries ..V F - I f with OniniQn 93-379 while at the

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