Ethics, Technology, and Billing

Last week, John Steele linked to a Law.com article about D. Casey Flaherty, corporate counsel for Kia Motors, who uses an innovative technology audit of law firm associates to see how efficient they are when using different kinds of technology.   For example, Flaherty measures how long it takes associates to complete law-related tasks on Word and Excel and penalizes firms (with a 5% fee reduction) until their associates show adequate efficiency with the software.  Flaherty’s goal is to ensure that lawyers who work on Kia’s legal matters are not fumbling around with technology on Kia’s dime.  What Flaherty has found is that, on average, lawyers take five hours to complete tasks that should take only one.

The story raises a number of interesting issues, including the relative lack of technological proficiency among lawyers (even at large firms, where one would expect more training to be available).  But for the moment, I want to explore one interesting ethics-related question: to what extent should a lawyer be permitted to bill time spent learning how to use technology?  For example, imagine a lawyer bills a client for 18 minutes of work (.3 hours) for “reviewing a spreadsheet,” when 15 minutes of the time was spent figuring out how to sum a column of numbers.  The task, of course, should take just a few seconds, but the lawyer is not a regular user of Excel and needed some time to figure it out.  Can this extra time be billed to the client ethically?

You could argue that the answer should be yes.  After all, a lawyer’s level sophistication and efficiency is priced into the hourly rate. That’s one reason why partners, who are more experienced and efficient than associates, have higher billable rates than their more junior colleagues.  But what’s interesting about technology is that a lawyer’s billable rate may not be correlated in any way to technological sophistication.  In fact, there may be a reverse correlation: junior lawyers may be more comfortable with technology and use it more efficiently than more senior lawyers.  (Flaherty’s technology audits were conducted on junior lawyers, so perhaps more senior lawyers would have passed and been more efficient.  My guess, though, is that the senior lawyers would have taken at least as long as the younger lawyers to complete the same tasks.)  In any event, I suspect that higher hourly rates do not correlate with technological sophistication and that time spent learning how to sum a column of numbers on a spreadsheet cannot be justified on the grounds that the lawyer’s hourly rate already reflects the lawyer’s (relative lack of) technological sophistication.

We can also look at this from the perspective of Rule 1.5, which requires a lawyer to charge a “reasonable” fee.  Unfortunately, the Rule is not that helpful in this context, because it speaks more to the reasonableness of the total fee charged, not the cost of performing specific tasks.  Nevertheless, I think Rule 1.5 can and should be read in light of newly adopted language in Comment [8] to Rule 1.1 (Competence), which says that, “[t]o maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology . . . .”  It seems to me that if a lawyer is not competent to use a particular form of technology (e.g., how to sum a column of numbers in Excel), the lawyer should not bill a client for the time it takes to become competent.  That time is arguably not “reasonable” to charge to the client under the circumstances.

Of course, there are going to be situations where it is perfectly reasonable for a lawyer to bill time, perhaps even significant time, to learn new aspects of technology. For example, it may be reasonable for a lawyer to bill a client to understand the nuances of predictive coding in the e-discovery context in a client’s case.  Other kinds of tasks may fall into a grey area, where it is not entirely clear whether the lawyer’s time spent learning a new technology-related task should be billed the client.  In any event, my point is simply that, at least in some instances, it may not be ethical to bill clients for the time it takes to become competent to perform relatively routine technology-related tasks.

What are some solutions?  Right now, law firms don’t have much of an incentive to train their lawyers effectively when it comes to the efficient use of technology.  After all, an associate can probably hide technological incompetence with an ambiguous entry: “Reviewed spreadsheet .3 hours.”  A client might catch it.  Or not.  As a result, the inefficiency is not necessarily hurting the firm’s bottom line and may actually help.  On the other hand, if clients are more insistent on billing structures that are less reliant on billable hours, law firms will have a greater incentive to ensure that their lawyers are as technologically proficient and efficient as possible, because any inefficiencies will be on the firm’s dime rather than the client’s.  In other words, the increasing prevalence and importance of law practice technology may offer yet another reason for clients to insist on a move away from the billable hour; it will force lawyers to become more technologically sophisticated than they currently are.

Another solution is for clients to conduct technology audits, as Kia has done, during the “beauty pageant” process.  Kia has developed — and made freely available — its technology audit, but I suspect that a third party could develop a very effective for-profit technology audit for in-house counsel to use.

A related solution would be for a third party to develop a technology certification process.  Law firms passing the test could be certified as “technologically efficient,” just as buildings can get LEED cetification for using energy efficiently.  Such a certification would be a positive signal to potential clients, particularly smaller companies and individuals who do not have the resources (like Kia) to conduct an audit of their own.

Yet another solution is to ensure that lawyers are more technologically savvy when they graduate from law school.  A few law schools have begun to offer this kind of training, but it seems to me that more can and should be done for the sake of graduates and their clients.

So what do you think?  To what extent should lawyers be permitted to bill clients for the time it takes to learn how to use law practice technology?  And how should inefficiencies be addressed?