eDiscovery Daily Blog

• April 8, 2013

Some of the recent stories involving alleged overbilling by law firms for legal work – much of it for document review – begs the question whether it’s time to ditch the per hour model for document review in place of a per document rate for review?

As discussed by D. Casey Flaherty in Law Technology News (DLA Piper Is Not Alone: Why Law Firms Overbill), DLA Piper has been sued by its client – to the tune of over $22 million – for overbilling.  When DLA Piper produced some 250,000 documents in response to its client’s eDiscovery requests, some embarrassing internal emails were included in that production.  For example:

• “I hear we are already 200K over our estimate – that’s Team DLA Piper!”
• “DLA seems to love to low ball the bills and with the number of bodies being thrown at this thing, it’s going to stay stupidly high and with the absurd litigation POA has been in for years, it does have lots of wrinkles.”
•  “It’s a Thomson project, he goes full time on whatever debtor case he has running. Full time, 2 days a week.”
• “[N]ow Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode. That bill shall show no limits.”
• “Didn’t you use three associates to prepare for a first day hearing where you filed three documents?”

In his article, Flaherty provides two other examples of (at least) perceived overbilling:

• In the Madoff case, the government “used 6,000 hours of attorney time to procure a $140 million settlement offer (more than $23,000 delivered per hour spent)”.  Your federal tax dollars hard at work!  However, the plaintiffs’ law firms “expended 118,000 additional attorney hours on the same matter to deliver the final version of that settlement at $219 million” and seek $40 million for delivering $39 million in incremental value (once you subtract their proposed $40 million in fees).  “It appears that most of the 110 lawyers are contract attorneys performing basic document review; the plaintiffs firms are just marking them up at many, many multiples of their actual cost.”
• In the Citigroup derivatives class action settlement, plaintiffs firms “reached a $590 million settlement from which they now seek almost $100 million in fees for 87,000 hours of billable time (average, $1,150 per hour). The bulk of the hours were spent on low-level document review work” where contract attorneys were paid $40 to $60 per hour and “the plaintiffs firms are seeking $550 to $1,000 plus per hour for those services”.

While the DLA Piper example isn’t specifically about document review overbilling, it does reflect how cavalier some firms (or at least some attorneys at those firms) can be about the subject of overbilling.  For the other two examples above, document review overbilling appears to be at the core of those disputes.  There are admittedly different levels of document review, depending on whether the attorneys are performing a straightforward responsiveness review, a privilege review, or a more detailed subject matter/issue coding review.  Nonetheless, the number of documents in the collection is finite and the cost for review should be somewhat predictable, regardless of the level of review being conducted.

Why don’t more firms offer a per document rate for document review?  Or, perhaps a better question would be why don’t more organizations insist on a per document rate?  That seems like a better way to make document review costs more predictable and more consistent.  I’m not sure why, other than “that’s the way we’ve always done it”, that it hasn’t become more predominant.  Knowing the per document rate and the number of documents to be reviewed up front would seem to eliminate overbilling disputes for document review, at least.

So, what do you think?  Is it time to ditch the per hour model for document review?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.