Representing Law Firms
In an era where companies are increasingly scrutinizing legal fees, it has become evident that not all firms conducting these reviews apply an unbiased methodology.
Rather, some entities are on a quest to slash legal costs with scant justification. In response to this troubling trend, I authored the article, "How to Cross-Examine a Legal Fee Auditor." Since its publication, numerous law firms have engaged Jim Schratz and Associates to dissect reports generated by these less rigorous firms.
The emergence of legal auditing as a field has been driven by rising concerns about abusive billing practices. From high-profile cases involving prominent figures and firms to the broader industry trend, the need for meticulous fee analysis has become apparent. The rise of legal auditors—some more thorough and ethical than others—has prompted many firms to question the validity of these audits and the competence of their auditors.
A fundamental aspect of effectively challenging a legal auditor's report is understanding the varying degrees of scrutiny involved in different types of audits. These range from comprehensive audits, which involve an exhaustive review of all relevant materials, to preliminary analyses and letter reports focusing on specific concerns. The methodology of each audit type, as well as the auditor's approach, significantly impacts the outcomes and must be thoroughly examined.
When preparing to cross-examine a legal auditor, several key questions should guide your inquiry:
- On-Site Review: Did the auditor conduct an on-site review of the files and interview relevant personnel?
- Software and Tools: Does the auditor use advanced software and systems to review billing entries comprehensively?
- Scope of Review: Did the auditor review all billing entries or only a sample?
- Auditor's Experience: Does the auditor have litigation experience that informs their understanding of the billing process?
- Audit Methodology: What is the foundation of the auditor's methodology, and is it supported by case law or industry guidelines?
- Documentation: Are the auditor's findings well-supported by detailed exhibits and documentation?
- Compensation Structure: How is the auditor compensated, and could this create conflicts of interest?
The auditor's ability to provide a reliable and objective review often hinges on their experience, methodology, and the thoroughness of their analysis. Legal audits are not governed by a standard set of principles, so auditors may employ varied approaches to assess fees. A competent legal auditor will support their conclusions with substantial evidence and maintain impartiality, which is crucial for upholding the integrity of the audit.
As the frequency of legal bill audits continues to rise, law firms must be prepared to defend their billing practices against scrutiny. Understanding the nuances of legal audits and preparing effectively for cross-examination can help ensure that a firm's fees are accurately represented and defended.