Why You Should Care About Legal Fee Auditing

Mia Nelson

Legal fee auditing is a process where accounting professionals review law firm billings on behalf of clients. If you're concerned about the existing or potential costs of working with a firm, especially when dealing with ongoing litigation, a legal fee audit may help you protect your financial interests. Let's take a look at what the process entails and why you should care about it.

Building Up Bills

Fees for legal services can accumulate for a variety of reasons. Legal work is expensive to start with, and many clients struggle to separate the signal from the noise when they look at their bills. You have a right, however, to demand detailed accounting of all legal work that's done for you, regardless of whether you're just someone fighting a parking ticket or a multinational corporation engaged in hundreds of millions of dollars of litigation.

Is Your Law Firm Screwing You Over?

Despite the numerous ethical safeguards in place in the legal industry, the reality is there's a non-zero chance your law firm is deliberately putting the squeeze on you. According to a 2007 survey, one out of three lawyers admitted to at least occasionally double billing their clients. Rounding is common, too, such as deciding that 90 minutes of work ought to be billed as two hours.

Big clients, in particular, can be vulnerable to sketchy billing practices. Purdue Pharma in 2006 had its defense fees from an Oxycontin case cut from $400 million to $200 million after its insurance carrier sought a legal fee audit.

How Is It Done?

You have the right to demand documentation of all fees you're assessed. Especially with big cases, firms sometimes try to drown requests in document dumps. For example, the Purdue Pharma case was met with over 1 million points of data regarding billing. The information was sent to the auditors in more than 200 boxes.

There are several tricks to legal fee auditing. First-hand examination is essential, but many companies now use document-scanning and machine-learning technologies to rapidly build a database of what the bills were. They will then analyze the billings for irregularities, assigning auditors to examine anything that's flagged. Bigger items will also be examined directly by people to try to maximize returns to clients.

When irregularities are found, there are two options. First, you should send a request for a refund to the law firm. Second, you may need to consider litigation.

For more information, contact a company like Legal Billing Adjusters.