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Charging $183,000 For Online Legal Research?

I realize that when bankruptcy lawyers charge hundred of millions of dollars for handling bankruptcy cases that a measly $183,000 is a drop in the bucket.  Nevertheless, I was shocked to read in this article,  Legal Fees Pile Up for Delta, Northwest, that in the Northwest bankruptcy proceeding, one law firm billed  more than $183,000 for online research.

How do you justify that kind of charge?  For starters, by now, most firms can purchase top of the line, full service LEXIS or Westlaw, which allows for unlimited searches, for several hundred dollars a month.   Let's just assume for the sake of argument that the firm in question pays $1000 per month for LEXIS or Westlaw for each attorney in the firm.   At $183,000, that's 183 months worth of service.  Even assuming that twenty attorneys are working the case,  that would mean that each is working on the bankruptcy matter for nine full months (I assume that if they are working on other matters, the cost would be pro-rated).  So that's my first point:  I just don't understand how a firm could pay so much for online service.

Second, and more to the point, the cost of online service ought to be rolled into a firm's overhead.  Firms never billed clients to retain libraries and online research service has in most cases effectively replaced law firm libraries.  Moreover, online research is now priced at flat fees, rather than per search, which makes it more amenable to inclusion in overhead rather than pro rated.

What's sad is that the sophisticated clients that hire these firms don't even know that they're being overcharged.  And that's why these types of fees will continue:  because until clients put pressure on law firms to charge less, the firms have no incentive to do so.

Posted by Carolyn Elefant on March 26, 2006 at 11:19 PM | Permalink | Comments (0) | TrackBack (0)

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