Bankruptcy Series – Billing Hygiene
Bankruptcies are intense and fast-paced. As bankruptcy proceedings commence the floodgates of billing are open for attorneys, consultants, and other professionals to bill for their services. Controlling costs, especially in the early stages, is paramount to ensure creditors can claim their payments from the estate. In 2013, the U.S. Trustee’s Program (USTP) published guidelines for Attorneys in Larger Chapter 11 Cases to encourage greater use of fee examiners and establish billing standards. But scrutinizing fees, with or without an appointed fee examiner, can be beneficial to monitoring billing activity and validating fees. Using technology to assist with fee reviews is a must- have to accurately analyze invoices in compressed time periods.
Legal Decoder (LD) has engaged on some of the largest bankruptcies in support of fee examination and its technology has analyzed billions of dollars in bankruptcy legal fees. The LD Compliance Engine has analyzed fees in bankruptcies such as PG&E, Toys R Us, and Purdue Pharma.
This post is part of a series of posts that discuss lessons learned through the analysis of bankruptcy fee data. It is important to note, while this blog series is specifically discussing bankruptcy work, the fee analysis done with the Compliance Decoder is used across all practices to reduce the risk of profit erosion and legal liability when the reasonableness of fees is challenged.
BILLING HYGIENE OF LINE-ITEM WORK NARRATIVES
Billing Hygiene refers to the clarity and conciseness of the description of billed work (“What work did you do?”). Billing Hygiene is most often the category of billing issues which contain the most issues (“flags”) on narrative line-items. It is not unheard of to find more than 50% of all line-items to have Billing Hygiene issues detected (“flagged”).
EXAMPLES OF BILLING HYGIENE ISSUES
#1 Vague Entries
The 2013 USTP Fee Guidelines state the United States trustee may object to vague entries with phrases like “Attention to” and “Review file .” LD’s Compliance Decoder can flag line items with potential vague entries. Vague entries are narrative entries that lack sufficient detail as to the nature of task(s) completed. Vague entry issues to look for:
• Missing purpose of work
• Drafting/Reviewing without listing specific document(s) or deliverables (e.g., “Review document.”)
• Ambiguous preparation (“Prepare for trial”)
• Excessively short narratives acronyms
Vague entries make it difficult to understand what work was performed and the purpose of that work. Vague entries can highlight unnecessary work performed, incomplete work, and bloated bills.
#2 Communication Inspecificity (Unclear Communication)
Communication Inspecificity refers to outside counsel's time entries regarding communications that do not identify the subject matter of the communication and name the counterparty to it. For example, “Call with John Smith” would be flagged but “Call with John Smith re: bankruptcy filing” would be compliant with billing guidelines. These calls could be productive or just meant to pad billing hours but, over time, they add to the overall cost and should be cleared by trustee or fee examiner before billing.
Another potential communication issue is the team meeting and call, especially weekly meetings. While weekly calls and meetings are a regular function of work, it is important that timekeepers provide details about these communications.
#3 Repeated Narrative
An obvious but overlooked issue is the Repeated Narrative which is just copying + pasting work descriptions. Line items with repeated narratives were the most flagged issue concerning Billing Hygiene. Small increments of repeated narratives over time can add up to significant costs without truly knowing if stated work was performed. For some firms, such as legal administration or processing firms, repeated narratives may be acceptable, but it should still be protocol to review the billed work to ensure that billing impropriety has not occurred.
Proper Billing Hygiene Frames Billed Work
Maintaining billing hygiene compliance is the most effective step to ensure billing guidelines are met and control costs. Clear and concise work narratives tell a story of work that is performed and how what conversations to have with firms that are not in compliance. Using technology like LD’s Compliance Decoder can provide objective information when having conversations with firms, creditors, and the estate about the direction of billing.