Preventing bill padding by lawyers: a case for compliance programs?

According to a story in yesterday’s New York Times, a global law firm – DLA Piper –  has recently been accused of overcharging a client.  The firm has denied the allegations – which arose in connection with a lawsuit it brought to collect fees from the client. A subsequent story reprinted a letter distributed within the firm by several senior partners stating that DLA Piper “has always adhered to the highest level of ethics and integrity in all of its work, including billing practices…”  What struck me about the letter is that there is nothing in it to suggest that the firm uses compliance program measures to actually maintain the highest level of ethics and integrity in billing matters by the several thousand lawyers who work for it, and how much more persuasive the letter would have been had it included a discussion of this sort.

Of course, this may have been a mere drafting oversight, since the firm clearly recognizes the value of compliance programs  for its clients  and indeed expresses pride in the expertise of its partners who help clients with such programs.  One hopes that the firm would have applied this expertise to protecting its clients from the possibility of bill padding.

Still, if DLA Piper, in fact, has not instituted real compliance measures to address this risk area I imagine that it isn’t alone among large law firms in that regard.  Indeed, at a conference held last fall by the Practising Law Institute, a noted federal judge gave a very thoughtful presentation on the ever growing importance of compliance programs – but when asked by an attendee (me) if he thought that law firms should have them to prevent overbilling, responded that, given the professional standards applicable to the field, this wasn’t necessary.

I don’t for a minute suggest that law firms need to implement the sort of process-heavy compliance programs expected of financial services providers, health-care related companies, defense contractors or organizations with serious FCPA risks.  But as some law firms increasingly swell in size, then a culture of professionalism will presumably provide less protection against billing abuses than was once the case.  Additionally, given the desperate need that some lawyers may have in this market to hold on to their jobs, and the pressure in some firms to hit time charging quotas, the case for billing related compliance programs becomes greater still.

Moreover, even before the job market for lawyers turned sour, research had shown that the problem of billing fraud was indeed growing.  According to the results of two surveys of attorneys conducted by Prof. William Ross at the Cumberland School of Law: “approximately two-thirds of the respondents to the 2006-07 survey and 1995-96 surveys stated that they had specific knowledge of bill padding. Moreover, the attorneys who responded to the most recent survey seemed, on the whole, to be less ethical in their billing practices than those [who] responded to the earlier surveys. For example, 54.6 percent admitted that the prospect of billing additional time had at least sometimes influenced their decision to do work that they otherwise would not have performed, compared with only 40.3 percent in the 1996 survey. Similarly, the percentage of attorneys who admitted that they had engaged in ‘double billing’ rose from 23 percent in 1996-96 to 34.7 percent in 2006-07. The percentage of the attorneys who believed that this practice was unethical fell from 64.7 percent in 1995-96 to only 51.8 percent in 2006-07… .”

So, the problem is real, and so is the need to take meaningful steps to address it.  Hopefully, the allegations against DLA Piper will provide a good opportunity for other large law firms to ask themselves:  if we were accused of overcharging, would we be able to point to real preventive efforts? Moreover,  by implementing such efforts, firms can prevent bill padding in the first place.

(A related post: Should dentists and lawyers be rotated, like auditors?)