Late last week we reported on the profits that US firm Chadbourne & Parke have been accused of making out of charging for legal research…
Carolyn Elefant has written the best commentary we’ve seen yet on the subject for Legal Blog Watch
Here’s what she says ….
Law Firm Markup of Research Costs: Annoying or Unlawful?
Virtually every law firm that subscribes to commercial, computerized legal research providers like LexisNexis or Westlaw pays a flat rate for unlimited searches. Even so, the companies will ordinarily provide a breakdown of the per-minute cost of each individual search, which collectively would total far more than the cost of the flat fee.
So can a law firm that pays a flat fee subscription service — let’s say, hypothetically, $1,000/month — charge the client for the per diem or hourly cost — probably around $150 to $200 of each individual search? If the firm ran 10 searches for a client, the cost to the client would well exceed the subscription price.
That question lies at the crux of Texas businessman Virgil Waggoner’s recent lawsuit against Chadbourne & Parke for overcharging him for legal research costs. According to The National Law Journal, Waggoner claims that that Chadbourne charged him $20,000 for computerized legal research services that actually cost the firm only $5,000. The suit, filed by Patricia Meyer, of San Diego’s Patricia Meyer & Associates, alleges that the overcharges constitute unfair business practices, unjust enrichment, fraud and deceit.
A couple of other blogs are discussing the story, and so far I haven’t found much support for the law firm’s position. In a post at BNET Technology, author Eric Sherman sought comment from Roy Simon, the Howard Lichtenstein Distinguished Professor of Legal Ethics at Hofstra University School of Law, who responded that:
Bottom line: Lawyers can mark up expenses beyond cost plus overhead if the client agrees after full disclosure. A client might agree if the product (Lexis, or a court reporter) is one that the client really isn’t in a position to buy directly.
However, as Sherman points out, the Chadbourne retainer apparently did not include this disclosure. Moreover, even if it did, Sherman doesn’t believe it would justify markups:
Full article at http://legalblogwatch.typepad.com/legal_blog_watch/2009/05/law-firm-mark-up-of-research-costs-annoying-or-unlawful.html
