Sunday, October 21, 2012

Wall Street Journal reports many clients now balk at legal research charges

It's been widely reported for some time that many clients balk at paying, in effect, to train new law firm associates. But today's online WSJ says that one recent survey of in-house legal departments found that 80% object to the charges submitted by outside counsel for legal research while 69% said that their clients believe they shouldn't have to pay for it all.  At least one large, corporate client has gone so far as to purchase its own subscription to Wexis and makes outside counsel to use that instead.

Law Firms Face Fresh Backlash Over Fees

After the recession sparked a widespread revolt over generous law-firm fees, clients are increasingly raising objections to big bills for legal miscellany.

Invoices for food, photocopies and legal research—items that once were rubber-stamped by companies—are drawing howls. As for charges for first-class flights? Clients are simply saying, "No more."

Some routine costs, such as an attorney's cab fare to the courthouse, are minuscule compared with the huge sums lawyers bill for work on complex mergers or lawsuits. But other items, such photocopying, often pile up and can amount to millions of dollars a year for some big companies.

"The expenses can add up," says Stewart Aaron, a litigation partner who heads the New York office of Arnold & Porter LLP. "Clients…are paying more attention."

. . . .

Johnson & Johnson has its own strategy for curbing charges for legal-research services. The health-care-products company maintains its own subscriptions to legal databases such as Westlaw and LexisNexis. It asks law firms to use its accounts when doing work for the company. A J&J spokesman says the practice is one of several used to reduce costs for outside legal work.

. . . .

The changes represent a shift from the way many law firms are accustomed to doing business. "Ten to 15 years ago there were only a couple of corporations that took this seriously," says David Paige, a legal-fee consultant and managing director at Sterling Analytics Group LLC. "Legal bills were considered untouchable."

Big law firms used to bill their clients for everything from word processing to photocopies and faxes—so-called soft costs firms incurred while doing client work. Those charges came on top of lawyers' hourly rates.

Law firms were "able to charge 20 to 25 cents a copy," says legal consultant Rob Mattern. "I remember having conversations with executive directors who said the soft costs were one of the larger individual areas of revenue for their firms."

Still, attorneys aren't supposed to make a profit from soft costs. While law firms may pass on "reasonable charges," according to a 1993 opinion by the American Bar Association, "the lawyer's stock in trade is the sale of legal service, not photocopy paper, tuna fish sandwiches, computer time or messenger services."

Clients started clamping down on legal bills more than a decade ago, and the approach gained popularity as the economy tanked. Today, many in-house lawyers view back-office charges with increased skepticism. A poll of 64 law firms this year by Mr. Mattern's firm, Mattern & Associates LLC, found that 80% of respondents had clients who balked at paying for legal research and 69% said they had clients who simply wouldn't pay at all.

Hat tip to Legal Research Plus.


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