Cost Recovery and Profit Making
in Private Law Libraries
by
LaJean Humphries
Library Manager
Schwabe, Williamson & Wyatt
Canadian Association of Law Libraries
May 27, 2008
Agenda
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Trends
Policies
Communication w/ firm management
Ethical issues – “pitching cost recovery”
What you can do
Implementing successful cost recovery
ERM products
Trends
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Pre 93-379 library as profit center
Cost recovery struggle
No clear policies
ABA Legal Technology Survey Report –
Online Research volume
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ALM Survey
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http://lawfirminc.law.com/
What percentage of online charges paid
to Westlaw and LexisNexis does the firm
recover from clients?
2003
2004
2005
2006
40% or less
10%
3%
13%
14%
41-60%
18%
14%
11%
10%
61-80%
50%
42%
37%
38%
81-100%
29%
33%
37%
30%
Not applicable
1%
9%
We don't recover online
charges
1%
7%
Source: Amercian Lawyer, Law Firm, Inc., 2004-2007
2002
20042005
2007
23%
20.1%
13.3%
42.8%
45.5%
42.3%
Bill clients at cost + premium
5.9%
3.8%
3.8%
Bill clients at discounted cost
5.2%
4.5%
4.1%
17.1%
21.3%
23.1%
9.6%
10.2%
16%
2%
1%
3.3%
Cost inc/ in hourly rate
Bill clients at cost
Don't bill clients for online research
Don't know
Other
Source: ABA Legal Technology Survey Report Online Research, 2002,
2004-2005, 2007
Cost recovery by size of firm
Number of lawyers at all locations
Solo
3-9
10-49
50-99
100+
Bill clients at cost
Bill clients at cost + premium
Bill clients at discounted price
Don’t bill clients for online research
21.9%
2.7%
2.7%
43.8%
Source: 2007 Legal Technology Survey Report – Online Research, ABA.
44.3%
53.5%
2.8%
5.6%
2.8%
5.6%
26.4% 15.5%
60%
20%
45.1%
5.6%
7.0%
5.6%
Firm policies – most common
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No markups
Discounts passed through to clients
Nondiscounted databases used only for
billable work
Firm policies – frequently
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Do not recoup costs where:
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Online replaces paper
Online replaces duplicate copies
Caselaw retrieval
Citation verification – Shepard’s
Dictionaries
Some treatise collections
Firm policies – increasingly
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Policy reflected in engagement letters
Transparent pricing
Communicate with management
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Make friends with Accounting
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Expense reports
Actual recovery
Make friends with Excel
Make friends with group leaders
Law Firm Accounting 101 (Randall J.
Thompson)
http://www.aallnet.org/sis/pllsis/newslett/Spring08.asp
Online Research
No client
number
89%
Billable
11%
Total Value v. Actual Cost
$160,000
$140,000
$120,000
$100,000
Total Value
C ost
$80,000
$60,000
$40,000
$20,000
$1
2
3
4
5
6
Ethical issues
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Value of online research
Shareholder decision
Attorneys must communicate clearly
with clients
Value of online research
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“Computerassisted research is also
essential to modern complex
litigation.”
In re Cendant Corp.:
But, it costs so much
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“We have a healthy respect for the
quality of their work, but the only thing
worse than passing along the
sometimes high cost of CALR is the
thought of absorbing the cost
ourselves.” (Chicago Daily Law Bulletin, August
31, 1994)
What you can do
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Law firm’s history of online research
billing
Review ABA Formal Op. 93-379
Present current status of billing
procedure / policy
Look at the bills
What you can do (cont.)
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Cost recovery CLE
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Present scenarios
Collect results
Present findings to management
Implementing successful cost
recovery
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Attorney support / buy-in
Realistic expectations
Client validation
Billing
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Get it on the bill soon
“Computer assisted legal research, such as Lexis and
Westlaw, is used for the direct benefit of our clients,
saving a significant amount of time required by an
attorney performing the same function manually. We
pass on to you only our cost of this service, as
reflected above, as a substantial reduction in the
overall cost of delivering our legal services.”
”Recover 100% of Online Research Costs” July 20, 2005 (AALL program, Mark Estes)
ERM Products – what they can do
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Client-matter validation
Site tracking
ID/password management
Auto-population of ID/passwords
Reports
ERM products – what’s available
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Cost Recovery Manager (Lexis)
http://www.lexisnexis.com/infopro/training/reference/Pr
acticeMgt/CostRecoveryManager.pdf
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Lookup Precision (Advanced Productivity
Software)
http://www.aps-soft.com/Products/LookUp/default.asp
ERM products – what’s available
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OneLog (Info Technology Supply - UK)
http://www.itsltduk.co.uk/onelog.asp
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Research Monitor (Priory Solutions –
UK)
http://www.priorysolutions.co.uk/researchmonitor.htm
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Areus (Iconitel – US)
http://iconitel.com/
Lexis Cost Recovery Manager
Other tools
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PowerInvoice (LexisNexis)
Quickview (Westlaw)
Client code, reference number available
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Accurint
CourtLink
Dialog
GSI/LiveEdgar
Pacer
Thank you!
Questions? Feel free to contact me.
LaJean Humphries, Library Manager
Schwabe, Williamson & Wyatt
lhumphries@schwabe.com
503-796-2071