LAW OFFICE

MANAGEMENT These are tough times for law firms, which

BY MARK E. LASSITER AND LYNDA C. SHELY need all the help they can get to collect their
fees in the current economic malaise.

How To Generate One of the most common reasons lawyers

Bills That Clients

do not get paid is client confusion over
the lawyer’s bill—or not sending a bill on

Understand— a regular basis.

Here are 10 practical—and ethical—

and Pay! tips for writing bills that clients will

understand and hopefully pay. Uncertain
economic times provide all the more reason
to use billing statements as communication
tools with your clients. These should be
tools that effectively convey a clear
chronology of all of the work you
performed during the month.

44 A R I Z O N A AT T O R N E Y O C T O B E R 2 0 1 1
1 Keep Your Time
Each Day
Some studies indicate that lawyers lose as
much as 50 percent of their billable time
when they forget to record the time each
day. Even if it requires jotting down entries
on a Post-it note and recording it into your
billing software later, at least write it down
when you finish an activity. If you’re “on
the road” and can’t write it down, then call
and leave yourself (or your secretary) a
voicemail with your time entries to remind
you to input your time when you return to
the office.
2 Know Your Audience
• oTHer lawyers in yoUr firm
With the possible exception of your secre-
tary, the first people who will see your time
entries are likely to be your firm’s partners
(your bosses!). The exact nature of your
activities as a professional within the firm
should be reflected in the descriptions in
your time entries. Common sense suggests
that they should be sufficiently detailed to
apprise your boss of the nature of your
billable activities on the firm’s client files
and thereby aid in justifying your existence
as a lawyer in the firm.
MARK E. LASSITER is a partner in the
Tempe Arizona law firm Davis Miles, PLLC,
where he heads the firm’s Commercial
Litigation and Dispute Resolution
Department. A popular CLE speaker, Mr.
Lassiter has given CLE presentations in 24
major U.S. cities, including programs
sponsored by the Seventh, Eighth and
Ninth Circuit Judicial Conferences, the
National Institute for Trial Advocacy, the
State Bars of Arizona and New Mexico, the
Federal Bar Association and other county
bar associations and legal groups. He
practices in the areas of Business, Real
Estate and Construction Law and
Alternative Dispute Resolution.
LYNDA SHELY is the principal of The
Shely Firm, PC, where she provides pro-
fessional responsibility advice and repre-
sentation to lawyers and law firms. Before
opening her own firm she was the State
Bar of Arizona’s Director of Lawyer Ethics
for 10 years.
ZADOROZHNYI VIKTOR © SHUTTERSTOCK.COM
O C T O B E R 2 0 1 1 A R I Z O N A AT T O R N E Y 45
LAW OFFICE
MANAGEMENT
If you keep poor or unintelligible time
records that require considerable editing
and revision at the end of each month by
the firm’s partners and the accounting
staff, then this will cost the firm and others
time, trouble and expense to edit those
entries. Strive to ensure your time entries
are accurate, understandable and suffi-
ciently descriptive of your activities for
clients and the firm.
• THe ClienT
Billing statements are the records that jus-
tify your professional fees and costs to your
clients. As such, they are the firm’s best
opportunity to “make your case” to the
client why the client should use your firm
instead of another. Ethical Rule 1.5(a)
requires that your fees be “reasonable” for
the services performed, based upon the
factors set forth in the Rule.
Billing statements are one of the most
useful communication tools lawyers have
to keep clients informed, not just about
the activities the clients participated in,
but all of the other services you provide
that clients don’t realize go into their rep-
resentation, such as research, communica-
tion with other parties, and preparing doc-
uments. Billing statements serve as a
chronology for the representation; write
down all activities to keep the chronology
accurate.
Every billing statement should be con-
sidered a marketing and promotional
opportunity for the firm. When billing
statements carefully reflect and explain the
nature and extent of the work done for the
clients, the clients will appreciate your
efforts and have greater comfort and ease
in paying the bills. However, incorrect or
insufficient billing descriptions confuse
clients, reduce the likelihood that the
client will pay the bill and strain client
relations. Frequently, clients turn to the
State Bar when they are frustrated with
incorrect or unintelligible billing state-
ments. Properly prepared invoices, on the
other hand, provide communication to
the client to keep them feeling that they
are part of the team and can understand
the value of your services.
• oPPosinG CoUnsel and THe jUdGe
46 A R I Z O N A AT T O R N E Y O C T O B E R 2 0 1 1
The next group of persons that may read a
firm’s bills are opposing counsel and the
judge. In many cases firms must submit fee
applications to opposing counsel and the
judge at the conclusion of the case if the
client prevails in the matter and applies for
its attorneys’ fees and costs as the “prevail-
ing party” in the dispute. The firm’s billing
statements will be attached to the firm’s
China Doll1 affidavits to support and justi-
fy the client’s request for attorneys’ fees
and costs as the prevailing party in the
action.
Invariably, opposing counsel will scruti-
nize your activity on the file and billings to
the client for the same. If the firm’s profes-
sional staff failed to keep good time
records, then this may be a tremendous
source of embarrassment to the firm and
grounds for reducing or refusing an award
of attorneys’ fees to the client. Because the
firm will “never get a second chance to
make a good first impression” with the
judge, it is important that attorney fee affi-
davits be accurate and thorough.
Note that below we describe the detail
that should be included in billing state-
ments. Some of that detail may need to be
redacted in a fee award application to pre-
serve the firm’s confidential communica-
tions with clients. Do not minimize your
billing descriptions in anticipation of a fee
application—it’s easier to redact than to
add after the fact.
• THe sTaTe Bar of arizona and
arBiTraTors of aTTorney fee
disPUTes wiTH THe ClienT
Finally, in those rare instances in which a
dispute arises with a client over your firm’s
fees, your billing records may be evidence
in a possible fee dispute or client charge
with the State Bar. In such a case the firm’s
billing practices and records may be
reviewed by State Bar Counsel or fee arbi-
trators. The firm’s time records can and
should justify and explain why the firm’s
professional fees and charges are proper
and appropriate in the context of the
client’s unique legal matter. Properly main-
tained time entries and records are a
lawyer’s best defense to a State Bar com-
plaint about the propriety and reasonable-
ness of your fees and also the best evidence
why your attorneys’ fees should be award-
ed in an arbitration of any fee dispute with
a client.
3 Bill Regularly––
Even When There’s
Nothing To Bill
Most of what lawyers do clients never see
or hear. They don’t see research, they
don’t see drafting, and frequently clients
do not even see negotiations with other
parties. One way to keep clients informed
about what is going on in their legal mat-
ter is to tell them in invoices—regularly.
In addition to keeping clients informed,
regular (i.e., monthly) billing assures regu-
lar cash flow and staying on top of clients
who begin to have payment problems.
Clients are far more likely to pay monthly
bills that are moderate than one huge bill
every six months. Failing to keep clients
informed about their mounting fees also
could be construed as failing to communi-
cate under ER 1.4.
Include “NO CHARGE” entries—
clients love to see that they are getting
something for “free.”
Send a monthly bill even if there was no
new activity for the month, especially if a
client owes an outstanding balance. It
serves as a reminder of overdue fees but
also tracks for you that you have commu-
nicated with the client that nothing went
on this month.
4 Tips for Billing
Descriptions for
Specific Activities
Distilled to its essence, lawyers and parale-
gals perform three typical categories of
tasks and actions in performing their legal
services. First, they communicate with
clients and others in telephone calls or per-
sonal meetings, second, they review or pre-
pare documents and correspondence, and
third, they perform legal and factual
research and analysis.
Although lawyers and paralegals no
doubt perform other tasks as well, easily
more than 90 percent of the work that
lawyers and paralegals do fall into one of
the three categories described above. To
properly record and state time entries for
each of the above categories, use the fol-
w w w . a z b a r. o r g / A Z A t t o r n e y
LAW OFFICE
MANAGEMENT
lowing rules and present-tense verbs to
describe your activities:
• CommUniCaTions
In order to properly record a time entry
for a communication, clearly state the fol-
lowing: First, the manner of the commu-
nication (e.g., “Telephone call from … ” or
“Meeting with … ”); Second, identify by
name all of the persons with whom you
communicated, using the titles “Mr.,”
“Ms.,” “Judge” or other appropriate
description; and Third, state a general
description of the topics or subjects dis-
cussed in the communication in a non-
narrative way. Use complete sentences.
correct example 1
“Telephone call [to/from] [Mr./Ms.
Smith] of Plaintiff ABC, Inc. about
the Defendant’s 1/17/11 offer to set-
tle the matter for $47,000.”
For return telephone calls use the
phrase “Return telephone call
[to/from]… ”
wrong way to record a call example 1
“Received call back from the client
about the settlement of the matter; he
is calling Mr. Smith and will get back
to us and he will prepare a check and
have it sent to us by Friday; we will
work out language regarding the
assignment of the copyright infringe-
ment rights before we send a check to
the plaintiff; the client wants to keep
the settlement agreement simple.”
(Note: This is an improper narrative
and the reader is unable to determine
the identity of the person at ABC, Inc.
with whom this communication was
had.)
• doCUmenT PreParaTion and
review
To record a time entry properly for review-
ing or preparing a document, clearly state
the following: First, the description of the
action that you performed concerning the
document (e.g., “Prepare… ” or “Review …
” or “Analyze … ” or “Revise … ”); Second,
identify by date and title the document
that was the subject of your action (e.g.,
“Review 6/17/01 letter from Tom Smith,
Esq.”); and Third, in the case of docu-
48 A R I Z O N A AT T O R N E Y O C T O B E R 2 0 1 1
Include “NO CHARGE”
entries—clients love to
see that they are getting
something for “free.”
ments that are written communications (as
opposed to court documents, pleadings,
discovery or transaction documents), state
a general description of the topics or sub-
jects discussed in the communication in a
non-narrative way.
correct example
“Prepare 6/17/01 letter to Tom
Smith, Esq. about ABC, Inc.’s accept-
ance of XYZ, Inc.’s 1/17/01 offer to
settle the matter for $47,000.”
incorrect example
“Prepared letter to opposing counsel
about client’s acceptance of the settle-
ment offer.” (Note: Where there have
been multiple settlement offers and
counter offers exchanged, this entry
would not clearly identify which settle-
ment offer had been accepted.)
Moreover, a judge reading this entry
would have to pause and ask, “Who is
the ‘client’ in this fee application?”
which can be avoided by simply identi-
fying the client by name in the time
record.
Sometimes it is necessary to prepare
multiple drafts of a document before it is
in final form. It is important to identify in
each of your time entries the draft number
or the date of the draft document to
apprise the client and the court that the
document went through multiple drafts
before it was finished. Otherwise it will
appear that the firm is “double billing” the
client for the same work. For example:
“Revise draft #2 of 26.1 Disclosure
Statement to add ‘facts’ and ’law’ sec-
tions.” If it is not clear what you have
revised or added, it will appear to the
client and the court that the firm is simply
correcting its own mistakes in earlier ver-
sions of the same document. Here are a
few examples of the correct way to com-
municate revisions and reviewing docu-
ments and the incorrect way to bill these
activities:
correct editing example 1
“Review and revise third draft of
Shopping Center Lease between
Arizona, L.L.C., as Landlord, and
Bagels R Us, Inc. dated 5/27/10 to
incorporate the purchase option and
right of first refusal provisions negoti-
ated by the parties.”
incorrect example 1
“Redraft Shopping Center for the
third time.” (Note: When reading this
entry the client will invariably ask,
“Why did you redraft it? Did you
screw it up the first two times and bill
me to correct these too?”)
correct review example 1
“Review Plaintiff Smith Plumbing’s
comments to first draft of the 26.1
Disclosure Statement received
7/7/02.”
• leGal researCH and analysis
To clearly record a time entry for perform-
ing legal or factual research, whether your
research is performed online or in the law
library, lawyers should: First, describe the
source of the research (e.g., Westlaw); and
Second, briefly describe the purpose of the
research (e.g., “to locate current address
information for all Defendants to be
served”).
5 Remember: Use
Complete Sentences
and Don’t Abbreviate
Acronyms, abbreviations and too-short time
entries only cause confusion, not payment.
For example, “Draft document,” “tele-
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LAW OFFICE
MANAGEMENT
Billing statements are
the firm’s best opportunity
to “make your case” to the
client why the client
should use your firm
instead of another.
phone call with RSS,” and “Research” are
insufficient billing entries. What docu-
ment and for what purpose? What did
you discuss with “RSS,” and are we sure
that there is only one person with the ini-
tials “RSS”? And a time entry that just
says “research” without explaining what
issue and for what purpose is pointless.
The more explanation added to a bill, the
more likely the client will understand
what you did and be willing to pay.
Detailed sentences also help in the event
that the client does not pay and the firm
must ask a court or arbitrator to decide if
the fee was reasonable for the services
performed.
Caution new lawyers against attempt-
ing to write billing entries like a text mes-
sage—even acronyms for federal or state
agencies may be confusing to clients. If
you must include abbreviations, either
include a glossary of terms or define the
abbreviation at least once in the statement.
Never assume that your understanding
of an acronym will be the same as a
client’s. Remember, for example, that
“SOL” has one connotation to lawyers
(statute of limitations, of course) and pos-
sibly another for clients (a true story).
6 Proofread and
Spellcheck
Clients hate to have their names mis-
spelled. They frequently will raise this as an
objection to fees in fee arbitration hear-
ings—both in the billing and if you mis-
spell their names in pleadings. Do not be
50 A R I Z O N A AT T O R N E Y O C T O B E R 2 0 1 1
sloppy—proofread.
Clients also do not like to be referred
to in billing statements or in letters as
“client”—use their names.
7 Never Block Bill or
Use Excessive
Minimum Units
The Ninth Circuit and the Arizona Court
of Appeals, Division One, have held that
block billing may inflate a bill and make it
difficult to ascertain the reasonableness of
the charges for a particular activity.2 For
instance:
8/23/10 TC w/ client; Conf. w/
opp. Counsel; R choice of law; office
conf. w/ co-counsel 15.4 hours.
The above billing entry is an improper
block bill. To correctly bill this time,
try:
8/23/10 TC w/ client (.4); Conf.
w/ opp. Counsel (1.0); R choice
of law (11.0); office conf.
w/co-counsel (3.0)15.4 hours
Caution: The Welch decision also upheld
the district court’s 20 percent reduction in
the fee request because it found that a
minimum billing unit of .25 hour for
everything was excessive. Lawyers are
warned—do not use .25 as a minimum
unit for everything.
If you want to use block billing, you
should discuss it with the client. It would
be advisable to explain the use of block
billing in the fee agreement.
8 Keep Track of Time--
Even For Contingent
and Flat-Fee Matters
Law firms are businesses. A firm cannot
quantify whether the lawyers are handling
matters efficiently, whether a flat fee or
contingent fee accurately reflects the actu-
al costs of performing the services, and
whether the firm should consider alternate
billing arrangements unless the lawyers and
paralegals keep track of their time.
Even if the firm charges a flat fee for a
service or a contingent fee, all professionals
should record their time. In contingent fee
cases it is crucial to keep time records
because the firm will not be able to make a
quantum meruit claim if it is terminated
prior to settlement.
For flat fee matters firms must regularly
reassess whether the flat fee fully reflects
the actual time spent on matters. This
requires recording time for each activity. At
least annually firms should review the actu-
al time spent versus the flat fees charged to
determine if the flat fee needs to be
increased.
9 Always Identify
Whether the Money
Is Coming From Trust
Or Owed
Billing statements must, according to ER
1.15 and Supreme Court Rule 43, identify
whether client money will be coming out
of trust to pay the invoice or whether the
client must pay the invoice. The Ethical
Rule and Supreme Court Rule require reg-
ular accountings of how client money
being held in trust is disbursed. Thus, if a
client has paid an advance fee deposit (aka
retainer) and part of that deposit will be
applied to the bill, the invoice should note
how much will be applied and how much
will be left in trust.
10 Enter Time in a Manner
Consistent With
District of Arizona
Local Rules
Rule 54.2 (e) of the Local Rules of Practice
for the District of Arizona requires “Task-
w w w . a z b a r. o r g / A Z A t t o r n e y
Based Itemized Statement of Attorneys’ Fees
and Related Non-Taxable Expenses.” That
sub-rule is “must reading” for every lawyer
and paralegal. It can be downloaded on
the web (www.azd.uscourts.gov/azd/
courtinfo.nsf/local+rules+2004?openview),
and it gives practical examples for time
entries (in addition to those shown above)
and states what federal judges expect to see
for such time and billing entries in fee
applications submitted to them.
Although this sub-rule only applies to
federal court cases, it makes no sense for
w w w . a z b a r. o r g / A Z A t t o r n e y
any law firm to have a “double standard” the requirements of this Rule 54.2(e)
(i.e., one set of rules for federal court cases would surely be welcomed and appreciated
and another for Arizona court cases), and by Arizona judges, as well. AZ
AT
endnotes
1. See Schweiger v. China Doll Rest., Inc., 138 Ariz. 183, 673 P.2d 927 (Ariz. Ct. App. 1983)
(holding that attorney fee application submitted by prevailing landlord in suit against tenant was
insufficient, where the fee request failed to specify the agreed upon hourly billing rate between
landlord and his counsel, the application failed to identify legal services performed, the attorney
that performed the services, and the date on which services were provided).
2. See, e.g., Welch v. Metropolitan Life, 480 F.3d 942 (9th Cir. 2007); Sleeth v. Sleeth, 244 P.3d 1169
(Ariz. Ct. App. 2010).
O C T O B E R 2 0 1 1 A R I Z O N A AT T O R N E Y 51