Practice Management

Back in April of 2008 I proposed the establishment of a niche practice to keep personal injury attorneys honest (or at least working on their cases diligently).  After all, clients, doctors and other medical professionals do not get paid anything until the case is settled (hopefully for the best value) or a judgment obtained.  As far as I know, nobody took me up on this niche, but I have thought about it from time to time.

Now, Susan Cartier Liebel of Solo Practice University fame alerts me to the Legal Blog Watch article of an England-based law firm that has developed a niche practice of going after other law firms for overcharging.

According to Crain's Manchester Business, the law firm of Boote Edgar Esterkin has launched a legal service, which will open formal negotiations on behalf of clients who believe they have been overcharged by their law firms, or bring suit.

The associate in the firm that operates this unit states that he has seen a sharp rise in the number of clients experiencing problems in this regard.  Undoubtedly, this is probably related to the worldwide recession that is severely hurting some law firms.  Law firms get more aggressive in billing and collecting, and clients get more aggressive in keeping costs under control.

Obviously, rules are different in England than here.  But, according to the Devil's Advocate, Americans spent over $100 Billion in legal fees each year.  And, it is not that legal fee auditing and litigation services are not being provided in this country already.  For example, the litigation law firm of Meckler Bulger & Tilson of Chicago, Illinois maintains a "Legal Audit Group", and promotes itself as "one of only a handful of law firms nationally with a full service practice group concentrating on issues involving professional services provided by attorneys and other fiduciaries".  The firm, in short, assesses the reasonableness of attorneys' fees and costs.  They audit, litigate and hire out as expert witnesses in such disputes.

There are also hybrid firms that employ some attorneys, such as Stuart Maue that not only manage professional costs for clients, but audit legal fees.  In one case study, for example, the firm saved Kmart Corporation in excess of $15 million in legal and professional fees in their Chapter 11 bankruptcy.

It could be said that these disputes are a direct result of hourly fees.  That of course would contribute to any dispute, but it is more than that.  It seems fee disputes would occur no matter what the fee agreement or structure, including fixed fees.  I would imagine that disputes would be very prevalent in success fees as well because in the end these fees are subjective.

Legal fee audits, negotiations and litigation concern, as I stated, not just fees themselves but whether legal work was done or done in the most effective manner possible.  It concerns itself with whether legal work is completed in the most efficient manner possible.  It compares not as much how fees are billed or agreed upon, but what others are paying for similar legal work.  In other words, what are the law firm's competitors charging overall.  It concerns itself with whether the lawyer or law firm did the best job possible and at the most cost effective price.  And, in regard to law firms with different strata of attorneys it concerns itself with whether the most effective lawyers and attorneys in the firm worked on the project.  Anyway, these are some of the issues in fee disputes I have gleamed.

Some attorneys and law firms, such as Jim Schratz and Associates in Sonoma, California, which operates nationally, apparently takes legal fee audits and litigation on a fixed fee basis with a guarantee that if the client is not satisfied, they do not owe the firm anything.  The law firm claims to have, in once case, reduced a $4.1 million fee request by $1.1 million dollars.

These audits seem to be common in insurance defense issues and business bankruptcy issues.  And, although law firms and audit firms like to tout their best recoveries, the truth of the matter is there must be a bunch of smaller cases reviewed.

It seems to me that this could be a great stand alone niche or an add on for possibly a legal malpractice practice.  It would probably lend itself well to a mediation practice as well.  In any event, it is a niche that is worth a look.