Should law clerk report attorney’s billing practices?

Question: I’m a law clerk working for an attorney who represents homeowner associations. He gave me cellphone logs and told me to bill his clients for calls made. He gets mad if I round off numbers and tells me I need to bill by the minute a pro-rata share of $375 an hour. I was instructed to take voluminous fax documents from boards, count the pages, estimate how long it would take him to read had he done so, and charge a pro-rata share of $375 an hour, which greatly increased his revenue. He billed my time at $150 an hour while he paid me only $15 an hour. This and other shenanigans artificially pumped up his billing from $150,000 to well over $395,000 for one HOA case, made up of nonexistent time he claimed he spent researching the client’s case. Most boards paid without question, few were irate. The attorney told one director who did complain about the bill, “Your association is worth it!” This attorney avoids his clients. I hear him talking to his gym buddies constantly, then billing HOAs for that time. He also bills the HOAs for time they spend complaining about his bills! Can I tell the HOAs what he’s doing?

Answer: According to the State Bar of California, rules of professional conduct are intended to regulate its members’ conduct through discipline. The rules have been adopted by the bar and approved by the California Supreme Court pursuant to Business and Professions Code sections 6076 and 6077 to protect the public and to promote respect and confidence in the legal profession. All lawyers have ethical duties to their clients and a general obligation to uphold the reputation and decorum of the profession. By familiarizing yourself with the rules that lawyers must follow you are better able to gauge their work and conduct. These rules are available to the public at https://www.calbar.ca.gov.

Client-lawyer confidentiality encompasses the attorney-client privilege, the work-product doctrine and ethical standards of confidentiality (Rule 3-100 Confidential Information of a Client).

A law firm’s practices, unless criminal, should be kept confidential by all employees. If you do not feel comfortable with the way a firm operates you are free to leave, and it might be wise to do so. Even where you feel you have an ethical duty to report the firm’s activities, going behind your boss’ back and directly to his clients is not the best course of action. Doing so might be construed as interference, possibly subjecting you to a lawsuit.

It is best to bring your concerns to the attention of the firm first and exhaust your internal remedies to resolve potential improprieties by speaking with your supervising attorney. If you are not satisfied with the response, or no changes are made, your next step is to bring these practices to light by filing a complaint with the state bar.

The retainer agreement and rates charged to an association are between the association and the law firm, not a law clerk. The agreement will outline how billing is done and what can be charged. Rule 4-200 addresses fees for legal services; in particular it states a lawyer shall not enter into an agreement for, charge or collect an illegal or unconscionable fee.

If the association-client is dissatisfied, it has every right to question the attorney’s bills. It is still the client’s responsibility to initiate the discussion and question charges. That means boards in performing their due diligence must scrutinize attorney invoices including items and amounts billed. As a law clerk, your only communications regarding the attorney’s clients should be with your employer, the law firm or attorney directly, and possibly the state bar.

If, as this attorney says, the association “is worth it,” then keeping that in mind, it’s the board’s duty to take a look at its relationship with legal counsel. Boards have an obligation to supervise all third-party vendors, including attorneys, and to scrutinize all invoices. High rates, possible improper billing practices, even the total time spent on the association’s business, are open to question. Not all fee arrangements are created equal, and every board should negotiate the relationship that is best for its association.

Most important is the fact that associations do not need attorneys to guide their every step. Boards are expected to exercise common sense, and it is only in the most important matters where counsel may be needed.

Rather than have a law firm on retainer, a true waste of association funds, a better and more prudent plan is to hire the law firm when and if needed. That policy allows the association to control how much money it wants to spend on a particular project or transaction, spend only that amount, then move on without the burden of large monthly or yearly retainer fees. It also forces the association to do what the common interest development laws envisage: provide the association with self-government.

Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.