April 23, 2013
Last week a lawyer wrote to me and asked if it was ethical to charge, in addition to a flat fee for representing a client in a matter, an additional “administrative fee” of $25 for copies, postage, and other costs that might be incurred in the matter. I see these types of fees occasionally in retainer agreements, whether they’re hourly or flat.
The ethical question is not hard: all fees and costs must be reasonable. That leaves a lot of leeway, although there is authority that says that charges for costs should be related to the lawyer’s actual costs and not be a profit center for the firm.
If it’s difficult or time consuming to track costs for a particular client, you could charge a reasonable administrative fee. I would first want to track the costs in various client matters to see how much those costs typically run. But if ten clients’ costs are $100 and ten clients’ costs are zero, I don’t think it is reasonable to charge every client $50.
The practice of charging a vague administrative fee reminds me of when I go to my auto mechanic and there are charges on my bill for parts, for labor (per hour, by the way), and “shop supplies.” When I ask what that item means, the response is usually a noncommittal “Oh, you know. Rags and stuff.” No, actually, I don’t know. Rags? Seriously, you’re charging me extra for rags?
If you don’t want to bill separately for costs, fold them in to the hourly rate or flat fee you charge the client. Let’s leave the charges for shop supplies to the mechanics.