When I first started practicing law, attorneys at the law firm at which I worked needed to enter a billing code to complete many legal tasks. If an attorney wanted to make a telephone call, use the photocopier, or conduct legal research, the attorney needed to enter a client code so that the expense could be tracked and potentially passed along to the client. However, as technology has evolved and competition in the legal marketplace increased, many law firms have stopped charging clients separately for expenses that were once routinely included on legal bills.
One of the most obvious examples of this trend involves telephone charges. Decades ago, long-distance telephone calls could impose meaningful expenses on law firms, and it made some sense for firms to pass these costs along to clients. When I worked in Biglaw, attorneys needed to enter client codes when placing certain calls so that the firm could track the expense. However, most law firms now eat telephone charges rather than pass this cost onto clients, likely because law firms just pay flat rates for this service. Moreover, attorneys increasingly use cell phones and internet-based calling services to communicate with clients and other individuals involved in litigation. Under these circumstances, charging clients separately for routine telephone calls would seem strange, and many law firms no longer bother with such charges.
Photocopying expenses are another area in which law firms have changed their practices. Earlier in my career, attorneys and staff often needed to enter client codes when using photocopiers so that the firm could determine how many pages were copied for a particular matter. Some law firms charged clients a set amount per page, and these charges could add up, especially in cases involving substantial document productions. Photocopying involves paper, toner, and maintenance costs, and it is understandable that law firms historically sought to recover these amounts from clients.
However, much of the legal profession has moved away from paper documents, and attorneys now routinely exchange discovery materials, court filings, and correspondence electronically. Although some copying is still necessary, it is often easier for law firms to absorb routine photocopying costs as overhead rather than track every page and charge clients accordingly. Clients may also resent seeing relatively small copying charges on invoices, particularly when they are already paying substantial amounts for legal services. Of course, extraordinary copying or printing expenses may still justify separate charges, but routine photocopying is increasingly treated as part of the cost of doing business.
Legal research expenses have undergone a similar transformation. When I worked in Biglaw, attorneys often needed to enter client codes before conducting research on Westlaw or Lexis so that the firm could track the expense associated with a particular matter. Depending on the firm’s arrangement with the research provider, individual searches and other activities could generate charges that were passed along to clients. This sometimes created the awkward situation in which clients paid for an attorney’s time conducting research and then received an additional charge for the tools the attorney used to perform that research.
Nowadays, many law firms have flat-fee arrangements with legal research providers that allow attorneys to conduct substantial amounts of research without incurring additional per-search charges. Other firms use less expensive research platforms or free resources that make legal research far more affordable than it was in the past. As a result, some law firms no longer separately charge clients for routine legal research, even though these services still impose overhead expenses on the firm. In many situations, this approach makes sense since clients generally expect attorneys to have access to the tools necessary to perform their jobs.
There are also practical reasons why law firms have moved away from charging clients for relatively minor expenses. Tracking these charges requires administrative systems, staff time, and accounting procedures that may cost more than the amounts ultimately recovered. Attorneys and staff can waste time entering billing codes, correcting mistakes, and responding to questions about expenses that might only total a few dollars. Moreover, clients sometimes dispute these charges, which can create unnecessary friction in the attorney-client relationship.
Perhaps most importantly, law firms need to remain competitive in an increasingly crowded legal marketplace. Clients are more sophisticated about legal billing than ever before, and many compare the billing practices of different firms when deciding whom to retain. A client who is already paying hundreds of dollars per hour for legal services may reasonably wonder why a firm is also charging a few dollars for telephone calls, photocopies, or routine legal research. Even when these charges are technically justified, they can create the impression that a law firm is nickel-and-diming its clients.
Of course, law firms should still pass along substantial out-of-pocket expenses, such as filing fees, deposition transcripts, travel costs, and other charges that are directly attributable to a particular representation. However, there is a meaningful distinction between these expenses and the ordinary overhead costs associated with operating a modern law practice.
As technology continues to reduce the costs of performing routine legal tasks, more law firms should reconsider whether separately charging clients for minor expenses is worth the trouble. Sometimes, absorbing a relatively small cost can save administrative time, improve client relationships, and make a law firm more competitive. The legal profession has changed considerably since the days when attorneys needed a client code to make a telephone call, and law firm billing practices should reflect that reality.
Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothman.law.
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