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Ways That Startup Lawyers Overcharge

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Re: Ways That Startup Lawyers Overcharge

#41

Post by bfe »

larrys wrote: post #35
bfe wrote: post #25

Earlier quoted context omitted.

The traditional and probably best way to find a good attorney is through your network of people you trust.

I agree that that is the standard and typical advice that people follow. But people tend to, in addition to doing the subjective "good work" [1], they refer people that they like personally or who encourage the type of relationship building that leads to more work. [2] Also, in theory at least, if an attorney ends up being referred a great deal and has a nice book of business they would raise their rates and/or push…

I'd say, try to identify people in your network who are sophisticated legal clients, who have engaged substantively with a number of attorneys over time, especially if they themselves are also attorneys. They should be able to distinguish attorneys who do great work and make their clients happy. When they recommend an attorney, ask for details about what impressed them with that attorney's work and service.

Re: Ways That Startup Lawyers Overcharge

#42

Post by nknighthb »

lr wrote: post #32

All of these are great to watch out for. However, the "Value Billing" one seems a little like, oh, let's see... Software! Programmers do value billing all the time. We write one piece of software and charge n number of customers for it. So, if programmers can do it, so can lawyers.

If you've been contracting with customers to provide them your time as a programmer and charging them in this way, your customers need to sue you. Legal services are not a packaged product, they are time, and that time is what is being paid for.

Re: Ways That Startup Lawyers Overcharge

#43

Post by grellas »

If your startup lawyer deals straight with you, gives you honest estimates, bills for time actually spent, uses good judgment in managing the legal time spent on your matter, avoids duplicative billing, is willing to deal fairly with situations when you question a billing item and have reasonable reasons for doing so, and, of course, does the job right and is a good lawyer to work with, then be thankful and do not quibble around the edges about things such .1 billing increments, small expense items advanced and expected to be reimbursed, and the like.

Remember that lawyers are in business too and want to devote their efforts where they will be most rewarded and appreciated. While that certainly doesn't mean cheating a client, it does mean dealing with clients who see the lawyer as a trusted ally and not as an adversary and who will not be nibbling at the ankles with every step a lawyer takes.

In dealing with any lawyer, watch out for padded bills that have vague descriptions of what was done, beware getting billed for substantial amounts of lawyer learning time, scrutinize all cases where double billing might be involved, make sure billing rates match your needs as a company (big firm vs. small firm), try always to get estimates in advance, negotiate fixed fees or caps where appropriate, get timely bills sent to you, review the bills carefully, and question billing items that don't look right. As concerns lawyer billing, those are the big items. If you pay attention to those, you will maximize your chances of getting good value from the firm and minimize the risk of abuses. Beyond that, you normally can ignore the small or trivial points. Remember that it is a professional relationship and mutual trust should be the order of the day. If it is not, then maybe it should not be maintained as a continuing relationship.

Re: Ways That Startup Lawyers Overcharge

#44

Post by Riseed »

If you're trying to be penny wise about legitimate third-party expenses like mileage and legal research, why pay $49 fee to a third party (in addition to state fees) to change your company’s name? You could have saved that third-party fee if you'd done it yourself through the Secretary of State's website.

As an additional tip, you may be able to save some money by doing some of the legal research yourself. Google works surprisingly well for some things, as does the local public library, which may have a subscription to Lexis Nexis or Westlaw. Facebook is a great resource for family law issues. There are also free law-specific resources like nolo.com (e.g. http://www.nolo.com/legal-encyclopedia/small-business) or avvo.com.

Re: Ways That Startup Lawyers Overcharge

#45

Post by papasmrf »

As a lawyer, I'll first say that it is always okay to haggle a little bit about the billing arrangement. I would expect an entrepreneur to want to negotiate.

Two, some of these practices described would raise eyebrows with state ethics committees. Double billing travel time, rounding up your billable hours, it all amounts to padding your bills. Lawyers have been disbarred for such practices, and this typically happens when people start wondering how they can be billed greater than 24 hours per day by the same attorney.

Lastly, if you are a start up, you have no business going to an attorney that is going to charge you $600.00 per hour. A rate that high should be reserved for some specialties, like perhaps patent litigation. If you are paying an attorney $600.00 to incorporate for you, you probably will not be in business for long.

Re: Ways That Startup Lawyers Overcharge

#46

Post by cykho »

The most atrocious overcharges we've experienced have been around equity asks. For some reason firms think it's good practice to ask for a sizable chunk as an interest payment for their incorporation fee (which they expect to be paid anyways). Even if a company is worth $1m (founders time for 4 years) half a point (standard ask) is $5k. If incorporation costs $10k (mid-range) that's 50%+ interest! Not to mention there is some risk mixing the roles of counsel (representing the company) and owner (a minority shareholders) I think this has spilled out from WSGR and hope it stops soon.

Re: Ways That Startup Lawyers Overcharge

#47

Post by Riseed »

vacri wrote: post #38
rayiner wrote: post #27

This is generally good advice, but I'd like to discuss #6 (double billing during travel) and #9 (overbilling on assignments). Both are highly unethical practices. I can't imagine that they're all that common, if only because in this day and age of electronic billing and sophisticated clients, it's so easy to get caught doing something like that. As for #4 and #7, as a client you can probably get concessions given tha…

The cost of training is baked into the price of every product you buy, and legal services is no different At $60/10min, they can take their lumps for training new staff, just like everyone else. If you call tech support, you're not charged extra when there's a trainee doing a ride-along. If you use retail, it doesn't cost more if a trainee cashier is serving you with a supervisor hovering over them. Having your car f…

It's not clear to me whether the issue was being charged an additional $200/hr for a ride-along law student, or being charged $200/hr for a law student's solo work.

I agree that charging extra for a ride-along simply doesn't seem fair. However, based on my experience, it's quite possible that the law student researched or wrote solo (billed at $200/hr), and then reported back to the lawyer with a finished product that only needed review (billed at $600/hr). Given the choice, I would much rather pay $200/hr than $600/hr.

Re: Ways That Startup Lawyers Overcharge

#48

Post by larrys »

bfe wrote: post #41
larrys wrote: post #35

Earlier quoted context omitted.

I agree that that is the standard and typical advice that people follow. But people tend to, in addition to doing the subjective "good work" [1], they refer people that they like personally or who encourage the type of relationship building that leads to more work. [2] Also, in theory at least, if an attorney ends up being referred a great deal and has a nice book of business they would raise their rates and/or push…

I'd say, try to identify people in your network who are sophisticated legal clients, who have engaged substantively with a number of attorneys over time, especially if they themselves are also attorneys. They should be able to distinguish attorneys who do great work and make their clients happy. When they recommend an attorney, ask for details about what impressed them with that attorney's work and service.

Agree. The way I identified my attorney was by asking someone who wrote a legal blog (this was years ago) in my industry (blog writer who was a tenured law professor) who they would recommend. They gave me several names.

The attorneys he referred was from personal knowledge of what they had done for clients as well as their own interactions in the past (was a federal prosecutor).

I didn't know the person who wrote the blog (at the time) just cold emailed for some suggestions.

Re: Ways That Startup Lawyers Overcharge

#49

Post by papasmrf »

nknighthb wrote: post #42
lr wrote: post #32

All of these are great to watch out for. However, the "Value Billing" one seems a little like, oh, let's see... Software! Programmers do value billing all the time. We write one piece of software and charge n number of customers for it. So, if programmers can do it, so can lawyers.

If you've been contracting with customers to provide them your time as a programmer and charging them in this way, your customers need to sue you. Legal services are not a packaged product, they are time, and that time is what is being paid for.

This comment really illustrates the major flaw in hourly billing. People begin to believe that all they are paying for is time. But they really are not just paying for time. They are paying for an attorney's expertise in getting the job done. This is why I try to stay away from hourly billing as much as possible. The billable hour is a scourge to the profession imho.

Re: Ways That Startup Lawyers Overcharge

#50

Post by nirmel »

I would love feedback on my startup, Lawdingo.com (YC W13), as I believe it addresses many of these issues. We get independent lawyers to be transparent about their prices, we solicit community reviews, and we make lawyers available instantly. I'd humbly recommend people try it out for their startup legal needs. It's free.
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