1. The Paralegal Sleuth Uncovering Crucial Information
DEC 08/JAN 09
VOLUME 1. ISSUE 3
20Ways to
Win at
Office Politics
Protecting
Your Trademark
from Thieves
Creating
Flawless Trial
Presentations
The Amazing Strength
of Janet Powell
In A
World
of Their
Own

2. 34 | Aug/Sept 2008 Aug/Sept 2008 | 35
By Becky Rolland
W
ith the end of the month comes the most dreaded as-
pect of the legal profession – compilation of the billable
hour. Although associates, law clerks and paralegals
equally admit frustration regarding reaching monthly
quotas, the billable hour helps law firms achieve their financial pro-
jections. For that reason, billable time is here to stay.
History of the Billable Hour
Early in the 20th century, law firms utilized “value billing" by
calculating legal fees based on “services rendered”. When repre-
sentation was complete, attorneys plowed through the files and
calculated the time spent, evaluated the results achieved, and tried
to determine what dollar amount should be billed based upon what
The
Truth
About
the
Billable
Hour
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Howeveryoulookatit,lawfirms
tookalongtimetocreatethe
billablehour.Theyaren’taboutto
giveituptooterriblysoon.
the client would find acceptable. Invoices did not include a specific
number of hours and had very few details. This system seemed to
work as legal fees were rarely challenged.
In the 1940s, state bar associations began publishing minimum
fee schedules that set standard prices for different legal services.
The schedules would "suggest" various fees such as one fee for
handling a contested divorce and another for drafting a will. While
these fee schedules were voluntary, they were enforced by the
threat of disciplinary action against a lawyer whose fees were
regarded as too low.
But with the reform of the Federal Rules of Civil Procedure
in 1938, lawyers' workloads increased dramatically. The pretrial
discovery rules before civil trials are credited with transforming
lawyers into litigators, who spend more time preparing cases
and exchanging motions than appearing in court. As the work
load became unpredictable and complexity of the case varied, it
became difficult to set a reasonable flat fee in advance.
Law firms began using the current billable time system in
the late '50s when billable hours were promoted as the key to
profits. The billable hour was used in setting income projections
and performance goals for attorneys. In 1958, an ABA committee
issued a pamphlet called The 1958 Lawyer and His 1938 Dollar
urging lawyers to start thinking like business men and looking at
their work habits beginning with time records, the lawyer's "sole
expendable asset”.
By 1960, hourly billing became the dominant billing method
used by non-contingency fee attorneys. As hourly billing spread,
the number of billable hours expected of firm attorneys increased
dramatically. Within the last ten years, the number of billable hours
expected of legal professionals has increased exponentially.
In the ‘70’s, the legal profession experimented briefly with
published fee schedules. However, in Goldfarb v. Virginia State
Bar, 421 U.S. 773 (1975), the Supreme Court put an end to this
practice referring to it as “a classic illustration of price-fixing” that
violated federal antitrust laws.
In 2005, the International Paralegal Management Association
(“IPMA”) reflected the following results in its survey of paralegals:
28% responded they did not have a billable hour requirement; 6%
set their own billable requirement; 7% billed below 1500 hours per
year; 22% stated their billable hours ranged between 1500-1599
hours; 35% billed 1600-1799; and 2% billed above 1800 hours per
month.
Court Determines Market Rates for Paralegals
Nineteen years ago, the U.S. Supreme Court handed down the
watershed case regarding paralegal fees, Missouri v. Jenkins, 491
U.S. 274, 109 S.Ct. 2462, 105 L.Ed. 2d 229 (1989), stating that
paralegal work should be compensable at market rates under
Section 1988 of the Civil Rights Act. Justice Brennan stated:
[B]y encouraging the use of lower-cost paralegals, rather
than attorneys wherever possible, permitting market-value billing
of paralegal hours’ encourages cost-effective delivery of legal
services….
Because the case was specific to a federal civil rights statute,
other courts may not follow this ruling. However, the current trend
is to allow recovery for paralegals’ billable time.
When cases involve attorney fee disputes, a prevailing party
can receive compensation for charges incurred through the use
of legal assistants, paralegals or law clerks (“legal assistants”)
provided that legal assistants perform tasks that would otherwise
require the time of the attorney. The court in Ahwatukee Custom
Estates v. Bach, 193 Ariz. 401, 403, 952 P.2d 106, 108, determined
that the time expended by non-lawyers should reasonably be
charged against the non-prevailing party. The applicant is required
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Aug/Sept 2008 | 3736 | Aug/Sept 2008
to show that a legal assistant has acquired legal training and
knowledge sufficient to permit him or her to contribute substan-
tially to the attorney’s analysis and preparation of a particular
legal matter.
Courts Define the Definition of a Paralegal
In Continental Townhouse East v.Brockbank, 152 Ariz. 537, 544,
733 P.2d 1120, 1127 (App. 1986), the court adopted the following
definition:
A legal assistant is a person, qualified through education,
training, or work experience, who is employed or retained by
a lawyer, law office, governmental agency, or other entity in a
capacity or function which involves the performance, under the
ultimate direction and supervision
of an attorney, of specifically-
delegated substantive legal work,
which work, for the most part,
requires a sufficient knowledge of
legal concepts that, absent such
assistant, the attorney would
perform the task.
According to National
Federation of Paralegal Associa-
tions, “substantive work is work
requiring recognition, evaluation,
organization, analysis and com-
munication of relevant facts and
legal concepts”.
Interestingly, courts have
denied attorney fees because of
the tasks that should have been completed by a paralegal. Specifi-
cally in Lockrey v. Leavitt Tube Employees Profit Sharing Plan,
1991 LEXIS 17175 (N.D. Ill. E.D.) and Kitamura Machinery of USA v.
Climteq, Inc., 1993 LEXIS 3330 (N.D. Ill. E.D.), attorney fees were
reduced because the court said the paralegal, not the attorney,
should have performed the deposition summaries and assembled
documents.
In re Busy Beaver Building Centers, Inc., the Court of Appeals
for the Third Circuit set the tone for the new market-driven ap-
proach to paralegal compensation. The Court considered:
… the costs of 'equivalent' practitioners of the art (including
their billing structures), as well as the applicant's billing practices
with 'equivalent' clients and practices of comparable non-bankrupt-
cy firms and the rates at which their services are provided.
In Busy Beaver, the Third Circuit overturned the lower Courts'
refusal to compensate for paralegal services when it categorized
their work as "clerical" holding that the classification of work as
clerical does not determine compensability. Rather, noting the
"remarkable transformation of the legal market" over the last two
decades, including the incorporation of paralegals providing a
wide range of services, the Court found the relevant question to be
whether billable rates of non-bankruptcy paralegals and bankruptcy
paralegals were comparable.
Finally, providing the court with information on the credentials of
each billing professional including attorneys, law clerks and parale-
gals is helpful but not essential in allowing paralegal fees. In Chevron,
U.S.A. Inc., v. Aker Maritime, Inc., et al. defendants contended that
no award should be made for paralegal fees or alternatively, that
the requested paralegal fees should be vastly reduced. Judge C.
Wilkinson, Jr. saw things differently when he stated:
“…that without listing any names or qualifications of Frilot, LLC’s
paralegals, Chevron states that paralegals customarily bill at $ 75
per hour and that …rate is within the range of prevailing market
rates and the rate is not contested.”
California Leads in Paralegal Qualifications
On September 13, 2000, Governor Gray Davis signed AB1761; a bill
that defines the term paralegal/legal assistant as an individual who
works under the supervision of an attorney; who must meet certain
educational criteria and must complete continuing education. The in-
tent of this bill is to differentiate those who work under the supervision
of an attorney and those who provide services directly to the public.
For those who work under the supervision of an attorney, the only
intended change to the profession is a higher standard of education
and mandatory continuing education to utilize the title of a paralegal.
The duties of those who work under the supervision of an attorney
remain unchanged and the bill simply codified existing case law.
In California, paralegals have the requirement of confirming that
they have law-related experience
under the supervision of an at-
torney and that their paralegal cer-
tificate is from an ABA-approved
school or a properly accredited
postsecondary institution that
offers at least 24 semester units of
law related study.
Paralegals are also required
to maintain continuing legal
education. In fact, public entities
and corporations in California have
begun asking law firms to prove
that their paralegals are compliant
under the law before they agree
to pay paralegal fees included in
attorney billing.
Since your law firm does not want to be put into a position of
having to write-off large paralegal fees because these fees were
unrecoverable, you should retain a copy of your credentials and CLE
certificates in a file for ready access. Law firms could be exposing
themselves to ethical issues by misrepresenting to a client that
employees are qualified paralegals and billing them as such when, in
fact, they are not.
Denial of Fees Due to Lack
of Description in Billing
A client will be more willing to pay a legal bill that explains what tasks
were preformed and whether the task was worthy of the amount
charged. A lack of this data may result in denial of fees. For example,
in McGreevy v. Oregon Mutual Insurance Co., 951 P.2d. 798 (C.A.
Wash. 1998), paralegal fees were denied when the only information
provided was the total number of hours worked and an hourly rate.
It is best to make billing entries very specific, listing what issue
was discussed or what documents were reviewed. Repeating the
same phrase such as “trial preparation” or “review file”, only leads to
suspicions of a duplicate entry.
In Walker v. U.S. Dept. of HUD, 99 F. 3d 761 (5th Cir. 1996), a
paralegal’s time was entirely disallowed because all activity for a day
was lumped together without adequate descriptions. Fee entries
that contained “terse listings” such as “library research,” “analyzing
documents,” “reading background documents,” “phone interviews,”
without any further explanation were rejected.
Stop Losing Time!
Paralegals often miss capturing valuable time entries because they
do not enter work in a timely and accurate fashion. Those that wait
until the last minute to enter time, trying to recollect and reconstruct
what they did the previous month, are more likely to lose billable
time. Important details are often missed when using scribbled notes
to record a telephone conversation or an entire month of e-mails
must be reviewed to determine what matters required follow-up.
To prevent a loss of billable time, record your time contem-
poraneously on a daily basis. A majority of time keeping software
programs have incorporated a “case timer” feature that allows the
timekeeper to have several matters open at once to record interrup-
tions by telephone calls and e-mail. Consider how easy it is to forget
to record a 10-minute conference with your attorney regarding one
matter, while you are working on another.
Another added convenience of time management software is the
ability to create “macros”. When entering a three letter macro code
as an abbreviation for the task performed, the system automatically
provides a detailed description. By creating descriptions of tasks
that clients can identify as a paralegal assignment instead of an
administrative task, law firms can proactively reduce the number of
write-offs for paralegal time billed.
Although time entry is tedious, by combining similar tasks that
can be recorded in blocks of time, such as telephone calls or check-
ing court dockets, you will ensure more time is captured.
Finally, be aware of what prevents you from billing time. If you
are constantly searching for files, recognize the problem, trace the
source and be proactive finding a solution. A poor method of tracking
billable time results in “leakage” of time and money lost for your firm.
Billable v. Non-Billable Time
Law firms differ in their treatment of non-billable time. Although
some firms allow two hours per week for non-billable time for tasks
“Law firms could be
exposing themselves
to ethical issues by
misrepresenting to a
client that employees are
qualified paralegals and
billing them as such when,
in fact, they are not.”
such as maintaining a closed file, entering and reviewing time
entries, and submitting check requests, most non-billable time is
discouraged. When you are entering non-billable time, maintain the
same standard of detailed and accurate descriptions of your work.
Most law firms encourage paralegal attendance in seminars to
maintain CLE credits. This does not mean that every seminar or
paralegal association meeting will be credited. It is best to be clear
about your law firm’s policy on non-billable matters.
Finally, as the quotas for billable time increases, pro bono
or community service work usually decreases, depending upon
whether it is the firm’s policy to allow billable hour credit for
these services.
If you think you are including too many non-billable entries, take
note that according to the IPMA survey: 17% of paralegals spend
less than 10% of their time on non-billable matters, 18% spend
11-30%, 8% said 31-50% of their time was non-billable, 3% said their
non-billable time comprised 51-70% of their time, 4% stated 70%
of their time is non-billable and 50% of the respondents were not
required to track billable time (note that for governmental and some
corporate entities tracking non-billable time is not required).
Future Trends
As current case law continues to recognize the paralegal’s contribu-
tion to the legal field, paralegals have become more profitable. It is a
winning combination for the client and the law office to utilize more
paralegals since not only can their time be charged to clients and
recovered as fees, they are less expensive to employ than associate
attorneys and do not earn a direct share of the firm’s profits. ■