Strategic Legal Technology 
A recent law suit contends that a law firm’s online research client charge-backs are unlawful. This hints at the bigger issue is what should be overhead and what should be a charged to clients.
Carolyn Elefant writes in Law Firm Markup of Research Costs: Annoying or Unlawful? at Legal Blog Watch about a plaintiff who “claims that that Chadbourne [wrongfully] charged him $20,000 for computerized legal research services that actually cost the firm only $5,000.” She cites an NLJ article and links to and discusses several blog posts commenting on the article.
I think this suit and her post raise two questions:
(1) What should law firms bill back to clients and
(2) If a service is billed back, how should the rate be set.
My answer to the first: firms charge for whatever they can easily meter. Legal technology - online research, fax, phone, copiers - all come with built-in metering. Books, the library itself, space to store client documents, and circulating periodicals do not. Paralegal work is easily metered; secretarial work is not. (Firms may have missed charging for secretarial time working on documents, which the DMS can meter.)
The second question is harder to answer because it turns on how one interprets the Canons of Ethics. In the past, clients voiced discontent about fax and copying as profit centers though I don’t know if that ever translated into a lawsuit.
Three interpretations of this situation come to mind. Law firms
(1) work hard to allocate costs fairly to clients
(2) are randomly managed and lack a coherent vision of their core business, or
(3) are opportunistic and mercenary.
Am I missing potential explanations?
Speaking from the corporate operations side: All charges are negotiable as part of the engagement criteria (before the work is done, not after!). Doing legal work is a profession, but it is performed within a business. As a client, I can say, “We will not pay online research charges,” and that information should inform the firm’s bid.("Rates” are a starting point for a bid; all deals are negotiated. Isn’t that part of 1L Contracts?) If a corporate client says, “We won’t pay more than $50/hour for associates,” the firm can counteroffer, can accept it, or can walk away in an attempt to call the corporation’s bluff. Or you can make a fixed-price or outcome-based offer that takes all this “little stuff” off the table. Most clients value outcome over effort; the destination matters more than the road taken (within ethical guidelines).
Comment by Steven Levy 5/17/2009 @ 10:40 am
4. Lawyer’s don’t like being checked and micromanaged, therefore, law firms don’t monitor comprehensively, therefore, don’t have automatic, verifiable, accurate records of their efforts, therefore, have to work hard to allocate costs, therefore, leave it to the person concerned, therefore, end up with random, ill-managed results.
Comment by Suhasini Sakhare 5/18/2009 @ 12:01 am