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Firms Wave Goodbye to Billing for Research Costs

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Zahorsky by Marc Hauser.

With clients increasingly primed to demand discounts, balk at hourly rates and refuse to pay for associate lawyers, a greater number of law firms have found themselves absorbing legal research costs as a way to shrink their clients’ tabs.

More and more billing partners are knocking research costs off invoices before they’re even submitted to clients, legal consultant Rob Mattern of Mattern & Associates recently told me.

“They don’t trust that the rates charged are a fair representation of what the firm is paying [to the third-party legal research vendor].”

This trend is apparent at firms that negotiate deals with research providers but historically haven’t passed along discounts they received to their clients, sometimes as a means to collect on other, nonbillable items, Mattern added. Mattern’s firm’s 2012 Cost Recovery survey reported an influx of firms with clients who either balked at or outright refused to pay for legal research.

While some firms have adopted policies to charge clients only the hard costs billed to them, others are adding legal research charges to the cost of doing business.

“The third-party cost of online research used to be a billable charge to everyone, and we’re seeing pretty fast that’s been eroded and a lot of firms are treating it as overhead,” Lou Andreozzi, chairman of Bloomberg Law, told me.

In fact, 43 percent of law firm respondents said they absorb more of their legal research costs today than in 2010, according to a recent Bloomberg Law survey (PDF) of 97 law firms, ranging from 50 to more than 400 attorneys. And transactional matters are less likely to recover legal research costs than litigation.

How can firms looking to recover research costs respond to client pressure?

“The firms that do a good job of collecting and documenting [legal research costs] and have a defensible legal research policy will be fine,” Mattern says. “But the cat’s out of the bag. Clients are more educated, and the attorneys billing will be asking their firms, ‘Is this a fair recovery?’”

See also:

Bloomberg Law Video: Law Firms Eating More Costs

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