I Enjoyed Lunch with My Attorney Until I Received a Bill for It!

by Hinshaw & Culbertson LLP
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Confusion and Frustration Hiring Counsel for the First Time

The San Francisco Bay area is internationally known for startups in many industries including biotechnology, clean tech and social media. Being in San Francisco, we often hear horror stories about charges for attorney fees or we are asked hypothetical questions on how to start and structure a cost effective relationship with counsel. 

Experienced professionals with diverse backgrounds are stepping into dynamic leadership roles with startups such as Chief Executive Officer, Chief Operating Officer and General Counsel. From these executives and others, we hear expressions of confusion, surprise and frustration as they have their first experience selecting counsel for transactional matters or litigation and the billing protocol relating to the initial interaction.

Successful Startups Often Grow Instantaneously and Legal Needs Can Change Quickly

Startups may initially need limited legal advice, such as entity formation including articles of incorporation, and drafting an employee manual. Your startup many just have a few employees. In 2008, Twitter only had 8 employees. By 2012, Twitter employed over 800 individuals. Though Twitter’s case is an extreme example, positive growth at startups may also be accompanied by more complex legal issues and larger legal bills for ongoing services and litigation. In our experience, the earlier this process is managed, the more cost effective it will be in the future.

Don’t Wing It - Use Guidelines to Determine Billing Rates and Fee Structure

Many startups may be reluctant to question their attorney on fees as they begin a professional relationship. Others are hesitant to shop for price when they perceive their business as becoming a future industry leader (“Google hired them, so should we…”). Some individuals see the “10% discount” at the end of their legal invoice and believe they must be getting a bargain. Choosing counsel is certainly a very personal decision. Consulting and utilizing established common legal fee guidelines and generally accepted billing customs and practices can make the process easier and simpler from start to finish. 

Our New Blog Series Outlining How to Select New Counsel and Manage Legal Fees

Many of our prior blog entries detail compliance with billing guidelines and highlight key cases that show various aspects of attorney fee claims in larger corporate law cases (see a selection of our prior blog posts here). We thought it may be helpful to take a few steps back and detail the attorney client relationship and the billing process for those less accustomed to hiring lawyers and reviewing legal bills. Therefore, we will post the series of blog entries noted below outlining various aspects of legal fees with new counsel. 

Conclusion – We Look Forward to Hearing from You

We look forward to hearing from startups and other growing companies with any questions they may have about starting a relationship with legal counsel and billing for ongoing services.

Future Topics of This Blog Series Includes the Following:

  • Selecting Your Attorney
  • Agreeing on an Hourly Rate or Project Rate – Fees Depend on Complexity of Work
  • Deferred Billing – Is This Common? Is it for You?
  • Should You Pay a Retainer Fee?
  • Establishing Legal Fee Billing Guidelines
    • Who Bills You? What Rate of Service Do You Really Need (Partners, Associates and Transient Timekeepers)
    • The Billing Entries on Your Invoices
      • Block Billing – “Meeting; Conference; Task; Research.”
      • Vague Billing – “Research issue”, “Prepared report”
      • Administrative Entries – “Copied files and fixed coffee machine.”
      • Excessive Conferencing – “Meeting with Bob; Conference with Bob and Sarah; Discussion with Chad and Bob on project.”
      • Travel, Etc. – “Travel to startup office and back for meeting.”
  • Establishing Cost/Expense Billing Guidelines – Don’t Bill Me for Lunch!
  • Reviewing Your Legal Invoice Regularly – When Did My Monthly Legal Bill Become This?
  • Questioning Specific Charges – What is This Charge?
  • As Your Company Grows
    • Maintaining Billing Records
    • Reviewing and Monitoring Your Legal Bills
    • Potentially Submitting Legal Bills to Your Insurance Company on Appropriately Covered Matters

Dave McMahon can be reached at (415) 743-3706 or by email.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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