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Beyond the Billable Hour and Legal Fees

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Many law firms recoup office expenses associated with a client’s legal matter by passing along the actual cost of the expense to the client.   If you think outside that box, here are some quick tips about charging clients for expenses:

  • Can you ever charge a client more than the cost of office expenses?  Yes, but only if the basis for the charge is disclosed, the client has agreed to the charge in advance, and the total charge to the client is not clearly excessive.  Here we’re talking about photocopying, long distance calls, computer research, postage, etc.  Ethics Decision 00-5 (unpublished opinion).
  • Can you ever charge a client more than the actual cost of third-party expenses? No.  Here we’re talking about court reporters, deposition transcripts, expert witness fees, court costs, etc.
  • Can you ever charge a client for a portion of the firm’s general overhead? No.  This would cover legal publications, office equipment, utilities, marketing expenses, etc.
  • Can you charge the client a flat rate for expenses? Perhaps.  In a recent opinion, the State Bar has indicated that it would be inappropriate to charge a $200 flat rate to clients for an out-of-office visit because the charge bears no relationship to the mileage for the visit, and the flat rate could result in a clearly excessive charge in violation of Rule 1.5.  See 2010 FEO 10.  My guess is that the State Bar likely will not opine on the minutiae of a law firm’s formula for recouping its other in-house expenses.  So, as long as a firm can reasonably determine a valid basis for charging its flat fee for expenses (good historical data), the total cost charged to the client would not be clearly excessive under the circumstances, and the client has agreed to the charge in advance, a law firm should be able to charge a flat rate for certain in-house expenses.