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THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK

FORMAL OPINION 1994-9

COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS

July 27, 1994

ACTION: FORMAL OPINION

TOPIC: Reasonableness of fees; preparation of bills; duty of supervision

OPINION:

DIGEST: A lawyer may delegate final authority for the preparation of fee bills to a non-lawyer, but remains ultimately responsible as a matter of ethics for any billing improprieties and for the reasonableness of the fee charged.

CODE: DRs 1-104(A), 2-106(A), 2-106(B); ECs 2-17, 3-6.

QUESTION

May a law firm delegate full discretion and authority for the preparation of fee bills to a non-lawyer employee?

OPINION

A law firm represents insureds in personal injury actions at the behest of an insurance company. At present, the firm's practice is periodically to send bills, signed by a partner, to the insurance company for its professional services. The firm employs a non-lawyer who prepares the bills based upon the attorneys' time sheets, proofreads them, and sends them to the client once a partner has signed them. The firm now wishes to dispense with attorney review and signature of all of the bills, and asks whether it is ethically permissible for the non-lawyer employee, whose title is "supervisory billing clerk," to sign some of the firm's bills in the firm name. This practice is not required by the insurance company or by any other third party or client.

The firm states that "supervisory billing clerk is familiar with some of the common mistakes that attorneys make on billing sheets and with the amount of time with which some tasks undertaken by attorneys can be billed," and notes that the clerk has "exhibited maturity, good judgment, hard work and trustworthiness." Essentially, the supervisory billing clerk will be preparing and issuing bills based on his or her own discretion and, in most cases, without any direct attorney involvement. Decisions as to the propriety of the bill would be left to the clerk's judgment. No attorney would be involved in the billing process unless the clerk saw the need to ask a question.

It is a fundamental precept of professional ethics that no lawyer may "enter into an agreement for, charge or collect an illegal or excessive fee." DR 2-106(A). The determination of fees and the rendition of bills is an important aspect of the fiduciary relationship between attorney and client, not a mere ministerial task. As EC 2-17 counsels:

The determination of a proper fee requires consideration of the interests of both client and lawyer. A lawyer should not charge more than a reasonable fee, for excessive cost of legal service would deter non-lawyers from using the legal system to protect their rights and to minimize and resolve disputes. Furthermore, an excessive charge abuses the professional relationship between lawyer and client.

See also ABA 93-379 (1993) (lawyers have a duty to disclose to the client the basis for future billing as well as "to render statements to the client that adequately apprise the client as to how that basis for billing has been applied"). This duty is not diminished when a third-party is paying the bills.

Any doubt that lawyers are ultimately responsible for the billing process is resolved by DR 2-106(B), which explains that "[a] fee is excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee" (emphasis supplied). The Code thus expressly contemplates that the reasonableness or excessiveness of legal fees will be judged through the eyes of an objective attorney, not of a non-lawyer.

Lawyers may delegate tasks to non-lawyers, however, consistent with their ethical obligations. As EC 3-6 teaches:

A lawyer often delegates tasks to clerks, secretaries, and other lay persons. Such delegation is proper if the lawyer maintains a direct relationship with the client, supervises the delegated work, and has complete professional responsibility for the work product.

While a lawyer or law firm may delegate the task of preparing and sending bills to clients and third-party payers (the physical signing of bills has no independent ethical significance), some measure of supervision is essential. If a bill rendered by the supervisory billing clerk were found to violate DR 2-106(A), for example, the lawyers would personally risk the imposition of professional discipline. DR 1-104(A) confirms this and emphasizes the ultimate responsibility of a lawyer for work delegated to non-lawyers:

A lawyer shall be responsible for . . . conduct of a non-lawyer employed or retained by or associated with the lawyer that would be a violation of the Disciplinary Rules if engaged in by a lawyer if . . . (1) [t]he lawyer orders the conduct; or (2) [t]he lawyer has supervisory authority over the . . . non-lawyer, and knows or should have known of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

For these reasons, the Committee concludes that although it would not be improper per se for a lawyer or law firm to delegate final billing authority to a non-lawyer, ultimate responsibility for improprieties will still reside with the attorneys in the firm. We believe it would be imprudent to permit a non-lawyer to have unsupervised and unlimited discretion regarding sensitive matters of judgment such as the propriety of attorney time entries, the propriety of charging for certain legal services, and the reasonableness of the legal fee being charged given that, in effect, the lawyers are the guarantors of the end product's compliance with applicable standards. That being said, it is for the law firm to determine how, in the circumstances, to best exercise its obligation to supervise the non-lawyer billing clerk so that his or her conduct in rendering bills comports with the Code.

CONCLUSION

A lawyer may delegate final authority for the preparation of fee bills to a non-lawyer, but remains ultimately responsible as a matter of ethics for any billing improprieties and for the reasonableness of the fee charged.