Ethical Billing: Charging For In-House Services

The San Diego County Bar Legal Ethics Committee published an Opinion in July of this year on what constitutes reasonable billing. Generally, lawyers owe clients a fiduciary duty to charge only reasonable fees. But what constitutes a reasonable cost or expense in connection with representation? Lacking direct California authority on the matter, the Committee relied on American Bar Association Formal Opinion 93-379.

In relevant part, the Formal Opinion allows lawyers to bill clients for the direct or actual cost of in-house services—including photocopying, computer research, and on-site meals—that are directly related to a client’s case. Absent a specific agreement in advance with the client, the lawyer may not charge a client more than the direct cost associated with the service and any discounts the lawyer realizes in providing these services should be passed on to the client. Specifically, ABA Model Rule 1.5(a) prohibits “an unreasonable fee or an unreasonable amount of expenses.” In other words, without a prior agreement with the client, lawyers cannot charge clients more than the direct cost of the services plus a reasonable allocation of overhead expenses directly associated with providing the in-house service.

However, the San Diego Committee makes a special point to address the practice of billing secretarial overtime as an overhead cost. A lawyer may not charge a client for secretarial overtime that was spent working on matters other than the client’s matter. Only secretarial overtime that was spent solely on that client’s case may be billed to the individual client.

To read the complete San Diego Opinion click here to read ABA Formal Opinion 93-379 click here.

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