Travel Time and Billing

In In re Babcock & Wilson, 526 F.3d 824 (5th Cir. 2008), the court addressed whether the district court had erred in awarding a firm only 50% of its usual hourly rates for time its lawyers spent traveling, but not working, in a bankruptcy proceeding. The statute, 11 USC 330, gives broad discretion to district courts, the Fifth Circuit ultimately held, and so it affirmed the trial court's award of only 50% of the rate for time spent traveling. It suggests, in my view, that any firm seeking compensation for such time be sure to make the record clear that firms in the locality charge for travel time at full rates.

Interesting case in itself, but it reminded me also of the related issue of whether while traveling a lawyer could work on another matter, and bill the time to both clients. (The ABA, y'all know, has said 'no' to that.) Obviously, if there's work the lawyer could be doing for the travel-client, she should travel and work; but what if the lawyer has nothing she can do for the travel-client? If the lawyer can't bill time spent while traveling for the other client and also bill the travel time, then the rational lawyer (rational in terms of self-interest, at least) sits on the plane and enjoys a movie, and does the work for the other client later. I don't see the benefit of that approach. Now, granted, a non-self interested lawyer will work for the second client, and not charge the travel time to the first client, thus putting the client's interest ahead of her own. But, I doubt that happens that much, and so we end up with the lawyer traveling, doing nothing, but then working on the weekend for the other client.

Maybe I'm too cynical.

Comments

[John Steele]

Different hypo: both clients are fully informed and consent. Not a problem, right? The client who's paying solely for travel isn't barred from doing so, is it? And the client whose matter is being worked on during travel is allowed to pay for that and to consent that the other client will be billed as well.

[Scott Toban]

Professor -- Rather than too cynical, perhaps you are not being cynical enough. I believe that we actually end up with the lawyer (1) travelling for and billing that time to Client #1, (2) working for Client #2 during that travel time, and then (3) falsely memorializing the time billed to Client #2 as having occurred during hours following the travel time. (Unless there was a really good movie during the flight...)

[Doug Richmond]

I have tried to explain why it is permissible for a lawyer to travel for Client A and bill time to Client B for work done while traveling for Client A. See Douglas R. Richmond, "The New Law Firm Economy, Billable Hours, and Professional Responsibility," 29 Hofstra L. Rev. 207, 219-21 (2000). Allowing lawyers to charge only half-time while traveling (as the 5th Circuit blessed in the Babcock decision) is moronic.

[John Steele]

Doug,

You scenario can easily pass the test of: (1) did the clients understand the basis for the bill; (2) did the clients agree to that basis; and (3) is the fee not unreasonable (or, in California, unconscionable)?

But in a bankruptcy proceeding, is the decision make the trustee? And I suppose that a trustee can decline to agree, right?

[Doug Richmond]

In a bankruptcy the trustee may or may not be the decision-maker, depending on what entity a lawyer represents. Still, the bankruptcy court must approve the fees. I have simply never understood the notion of charging only half-time for travel. An hour spent traveling is still an hour. It is still an hour spent on the client's business. To be sure, a lawyer and client can negotiate a fee agreement that provides for travel time billed at less than the lawyer's full rate, but simply imposing that requirement arbitrarily, whether done by a court sua sponte or in response to a trustee's objection to a fee, is nonsensical.

[David Hricik]

John,

I've seen an engagement letter that basically said the client would be charged for travel even if the lawyer was working on another client's matter while traveling. I'm not sure how many clients scratched that out. I would.

David

[Doug Richmond]

David:

Why would you eradicate such a provision? Indeed, why do you, as a hypothetical client, even care? Assume that you hire me to argue an appeal in the 5th Circuit, thus necessitating my travel from Chicago to New Orleans. You want me to argue the appeal. So what if I bill another client en route? You still received the service for which you hired me--superior appellate advocacy in a distant city that necessitated travel. It wasn't like I could remain in Chicago and argue by conference call. So let's asssume I sent the engagement letter you don't like and you scratch out the offending provision. I refuse the representation as a result because I have a busy practice that requires me to multitask and your rigidity prevents me from doing so; if you don't accept my terms, another client will. Assuming that you valued my appellate advocacy skills over other lawyers' skills in the first place, as you apparently did, since there are capable appellate advocates practicing in Louisiana that you could have hired, how has your insistence on micromanaging my billing practices benefitted you?

Doug

[David Giacalone]

The only reason we allow a lawyer to charge fees for travel time is because the client has caused us to be unavailable for other work. If you do work for another client during the travel, there is no justification for charging the first client for that lost opportunity time. Time spent for another client does not make your services more valuable for the first client.

I hope the public doesn't come here to see just how greedy lawyers are and how willing some ethics experts are to make excuses for them.

[David Hricik]

Doug, I think I'd scratch it out because it creates the incentive to double bill - for me while you travel, and for the other client while you travel, and then for me later, when you're off the plane, for work you coul dhave done on the plane

Again, maybe I'm too cynical. I see people billing 2500 hours a year, and I don't know how...

[John Steele]

Without revealing confidences, I can attest that a very small minority of clients much prefer this arrangement. And I see no reason to forbid them from approving it.

An example. You are GC of a Fortune 20 company that is considering a $500 million investment abroad. You know that the board of directors is concerned about how regulatory and taxing entities will treat the investment. So you want to fly one of the nation's top lawyers out to address the board for 45 minutes. You could offer the lawyer a flat fee -- which would be perfectly lawful. Instead, you say, "start billing at your usual rate the minute you wake up on Sunday and start your travels, and then stop billing the minute you arrive back home Monday evening." Further, you say, "I have no problem if you bill any of that travel time to others, or not, as you desire. My only request is that you offer your best, candid advice to the board on Monday morning."

There is no reason to forbid such an arrangement and every reason to OK it.

Bear in mind that I am not suggesting that billing time to different clients is OK if it isn't disclosed to both.

We have comments from two different David's who would not approve such an arrangement if they were GCs. I have no problem with that either. I just don't think that other GCs should be forbidden from doing it when it's in the best interests of their corporate clients.

(And, for the record, it's one thing to casually say that you would never approve that arrangement, and it's another thing to reject it when you are actually a GC and it deprives you and the Board of the lawyer you'd really want to hire for that task.)

[Doug Richmond]

I traveled a great deal in my practice. If I worked on a plane, it was for the client for whom I was traveling. If I was traveling for Client A, I did not do work for Client B while on the plane and then bill both of them. Regardless of what might have been ethically permissible, I thought that the best business and client relations practice was to do what I did. I think most lawyers approach the issue the same way. I agree with John that other arrangements are ethically permissible, however, and I have no problem defending lawyers who bill differently than I did--so long as they honestly account for their time. As for billable hour totals, I know lots of lawyers who legitimately bill 2200-2700 hours per year with no double-billing. Whether they should or shouldn't work those kinds of hours is a personal question.

[Steve Lubet]

David Giacalone nailed it.

[David Hricik]

Doug, I don't disagree with anything you wrote except I'm more cynical than you. Just because you and I didn't cheat the system doesn't mean it doesn't happen.

[Angel]

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[V. Price]

Hi great blog n example. You are GC of a Fortune 20 company that is considering a $500 million investment abroad. You know that the board of directors is concerned about how regulatory and taxing entities will treat the investment. So you want to fly one of the nation's top lawyers out to address the board for 45 minutes. You could offer the lawyer a flat fee -- which would be perfectly lawful. Instead, you say, "start billing at your usual rate the minute you wake up on Sunday and start your travels, and then stop billing the minute you arrive back home Monday evening." Further, you say, "I have no problem if you bill any of that travel time to others, or not, as you desire. My only request is that you offer your best, candid advice to the board on Monday morning."

[V. Price]

hi I think I'd scratch it out because it creates the incentive to double bill - for me while you travel, and for the other client while you travel, and then for me later, when you're off the plane, for work you coul dhave done on the plane
Again, maybe I'm too cynical. I see people billing 2500 hours a year, and I don't know how...

[Mike G.]

I don't think there should be an issue here. The client paying you to travel is getting value: the time you are spending in the air. The client paying you for the memo is getting value; the time you spent on the memo. The fact that both clients received the value of that hour at the same time should be irrelevant. It makes no sense to have to wait until off the plane to do (and be paid for) the memo. Clients are not paying for lost "opportunity time"; they are paying for the value they get per hour of your work. In this case, both clients are getting value out of the time spend on the plane and it should be permissible to bill both accordingly.

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[Sharon Evans]

David is right, lawyers should always have charged their client for travel time because this might caused the cancellation of the other works. We should also take into consideration that they do have lots of clients and plenty of works to do.

[Patricia Young]

There is no such thing as traveling without spending so much of your personal money.

[Roble]

Perhaps it is customary to bill a client at every turn ... as a non - "deep-pocket" client, charging full-freight for simple drive time to the Courthouse is tantamount to paying people to simply go to work. In how many professions do people get paid to drive to work? Do doctors charge for drive-time to and from the hospital? And this is just one of the reasons that justice is for those that can afford it.