Attorneys and firms who utilize legal software are often presented with a simple but potentially ethically fraught question, can I bill my clients for this? The distinction between attorney’s fees, overhead, and client costs has been present in legal community for years. See, San Diego County Bar Association Legal Ethics Opinion 2013-3 (https://www.sdcba.org/?pg=EthicsOpinion20133) Advances in legal software and artificial intelligence have made these questions particularly relevant today. Let’s take a closer look at the situation.
The California Rules of Professional Conduct, Rule 1.5 Fees for Legal Services states that “[a] lawyer shall not make an agreement for, charge, or collect an unconscionable or illegal fee.” In a general, attorneys for the Plaintiff are retained under a contingency fee agreement while attorneys for the defendant a retained with an hourly agreement. See, People v. Taylor (2011) 197 Cal.App.4th 757, 763. The Rules of Professional Conduct give thirteen different factors to consider whether a fee is considered “unconscionable or illegal."
The fee charged by an attorney is just one component of expense that alters the bottom line for both the attorney and the client. The other substantial factor is which costs are going to be reimbursed by the client. Here, the Rules of Professional Conduct do not provide as much guidance. However, the Business and Professions Code does.
Business and Professions Code 6147(a)(2) requires a contingency fee agreement state “how disbursements and costs incurred in connection with the prosecution or settlement of the claim will affect the contingency fee and the client’s recovery.” The underlying question being will the contingency fee be calculated on the gross or the net recovery.
Business and Professions Code 6148(a)(1) states that an attorney fee agreement shall contain “[a]ny basis of compensation including, but not limited to, hourly rates, statutory fees or flat fees, and other standard rates, fees, and charges applicable to the case.” When it comes to being reimbursed for costs, the “charges applicable to the case” section is at issue.
Ethical opinions and caselaw have largely made the distinction of what can and cannot be charged to a client on a spectrum of cost versus overhead. The distinction being that overhead is generally considered an expense associated with properly maintaining, staffing, and equipping an office. Meanwhile, costs are expenses reasonably incurred in connection with the client’s matter. See, e.g. ABA Formal Opinion 93-379 (https://nvbar.org/wp-content/uploads/ABA_Formal_Opinion_93-379.pdf)
The State Bar of California also provides guidance for attorneys and clients on their website. Specifically, the article “What to Expect Regarding Fees and Billing” (https://www.calbar.ca.gov/Public/Free-Legal-Information/Working-with-an-Attorney/What-to-Expect-Regarding-Fees-and-Billing) guides potential clients and attorneys on what the State Bar considers reasonable. With regards to expert witness and consultant charges, it states:
Experts and consultants’ charges. These costs generally relate to any time spent evaluating the case and testifying in court.
At Juris Economics we are economic consultants providing on demand economic services for all parties. As such, with a properly executed retainer agreement, our services should be billable as a client expense. To assist you in documenting your file, we also provide an invoice each time a report is run that is accessible in each customers billing portal.
Should you have any question regarding client billing, we encourage you to reach out to the appropriate State Bar. The Ethics Hotline for the State Bar of California can be accessed by calling 800-238-4427.
Should you need assistance with damage calculations, please contact Juris Economics at (858) 477-9537 or sales@juriseconomics.com
