Billing Clients for Outsourced Legal Support – Ethics Series, Part 4

Billing Clients for Outsourced Legal Support – Ethics Series, Part 4

Written by Desiree Nordstrom.

Law Firms want to know how to appropriately bill their clients when using a contract attorney. The Model Rules of Professional Conduct, Rule 1.5 (a) states:

A Lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.

Passing the cost of service, along with appropriate billing for supervision and overhead costs is proper according to the ABA and individual bar association opinions. The Supreme Court of Ohio Board of Commissioners on Grievance and Discipline released an opinion that comments:

The most straightforward approach…may be for a lawyer or law firm to bill the client for the outsourced services as an expense based upon the actual cost of the service to the law firm, with an adjustment if necessary to cover a lawyer or law firm’s costs of supervision of the outsourced services.[1]

In this same opinion, the Ohio Board points out that it is “…left to a lawyer’s exercise of professional judgment” on whether to bill outsourced legal support as an expense or as a legal fee.

All ethical rules agree that surcharges are permissible if the total rate charged is “reasonable.” American Bar Association Formal Opinion No. 00-420[2], explains that a law firm that outsources to a contract lawyer can mark up the cost, provided that the total charge is a reasonable fee for the services provided to the client.

It is also important to note that adding a surcharge to the freelance attorney’s rate may be considered a “significant development” requiring disclosure to a client.[3] Law firms should keep an open line of communication with their clients. Clients are receptive and happy to pay lower overall rates for superb work produced by capable and skilled freelance attorneys.

To read more articles in our Ethics Series, click here, here, here, here, and here.

[1] The Supreme Court of Ohio, Opinion 2009-6, August 2009, http://www.sconet.state.oh.us/Boards/BOC/Advisory_Opinions/2009/op_09-006.doc.

[2] “ABA Formal Opinion 00-420 Surcharge to Client for Use of a Contract Lawyer,” http://www.abanet.org/cpr/pubs/issue_index.html.

[3] Check back for more information on the Duty to Disclose, which will be discussed in an upcoming OLN Ethic’s Series post.