In August 2012, three different courts issued rulings which hold that vague, block billed time entries—which have long been the bread-and-butter of most law firms—just aren't a very accurate or reliable reflection of how much time those law firms actually spend working on the clients' behalf. This article by Litigation Limited (www.litigationlimited.com) summarizes these three decisions and considers their import for clients and corporate counsel who have not yet adopted outside counsel billing guidelines that prohibit block billing.
In Payan v. Nash Finch Co., Case No. 11CA0570 (Co. App. 2012), the Colorado Court of Appeals noted that “across-the-board percentage cuts are routinely employed by courts to remedy… block billing” and cited to a Ninth Circuit decision and California State Bar study which found that “block billing resulted in a 10% to 30% increase in time shown in billing statements.” Id.
In The Walman Optical Company v. Quest Optical, Inc., No. 11-CV-0096 (D. Minn. 2012), the Court ordered attorneys’ fees as sanctions for defendant Quest’s misconduct during discovery and asked plaintiff Walman to submit a fee petition and billing statements. However, after being presented with vague, block-billed time entries, the clearly infuriated Court slashed Walman’s fee request by more than 85 percent: “Due to [counsel’s] practice of block-billing – that is, billing multiple tasks under a single time entry – it is impossible for the Court to determine how much time [the lawyers] spent on specific tasks.”
Finally, in Yelton, et. al. v. PHI, Inc., et. al., Civ. Action No. 09-3144 (E.D. La., Aug. 14, 2012). , a Louisiana federal district court rejected approximately $1.5 million (or 75 percent) of a party’s $2 million request for attorney fees and expert witness costs because the law firm’s time entries were “vague, block billed and irrelevant.”
What's really interesting is that none of these disputes involved a contractual provision or statute that would have obviously awarded attorneys' fees award to a prevailing party. Instead, the courts awarded fees and costs as a sanction for the opposing party's misconduct during litigation... which means that every lawsuit or arbitration holds the potential for a significant award of costs and attorneys' fees. However, because each of the clients in these cases permitted their lawyers to bill using vague, block-billed time entries, the fee awards were ultimately slashed by 57 percent, 75 percent and 85 percent, respectively.
While it's well-known that clients who allow block billing pay a 10-30 percent premium over those clients who have outside counsel billing guidelines that prohibit the practice, these cases show that there are other reasons to prohibit block billing.