Legal Fee Audit FAQ

A legal fee audit is most helpful when fees are material to the outcome or when there are specific concerns about billing practices. Typical scenarios include:

• Fee petitions following a settlement or judgment;
• Coverage disputes where panel counsel or independent counsel bills are at issue;
• Class actions or complex litigation with multi-year fee applications;
• Internal reviews by insurers or self-insured entities of defense counsel invoices; and
• Cases where one party has alleged unreasonable fees, overstaffing, or abusive billing practices.

In many matters, an audit helps narrow the issues, focus negotiations, or provide the court with a clear, organized summary of large volumes of billing data.

Jim Schratz and Associates has been retained by a wide range of clients, including:

• Insurers reviewing defense counsel invoices or coverage-related fee claims;
• Policyholders seeking to support or defend their own fee applications;
• Law firms preparing fee petitions or responding to challenges from opposing parties;
• Government entities and public agencies; and
• Counsel seeking an independent expert to assist the court with complex fee issues.

In many matters, the audit work also forms the foundation for expert testimony, either at deposition or trial.

While every matter is unique, the process typically follows a consistent structure:

1. Initial consultation: A discussion of the matter, the size and scope of the fee request, any court deadlines, and the specific issues that concern the client.
2. Preliminary file review: A high-level review of invoices and key case documents to confirm that an audit is appropriate. This preliminary review is typically provided at no charge.
3. Budget and engagement: If an audit is warranted, a not-to-exceed budget and scope of work are discussed so that expectations are clear before moving forward.
4. Detailed analysis: Line-by-line review of billing entries, organization of time by phase or issue, and identification of patterns such as duplication, vague entries, or excessive time.
5. Report and recommendations: Preparation of a written report that explains the methodology, summarizes findings, and quantifies recommended adjustments, often in a format suitable for submission to the court.

Common issues include:

• Block billing that obscures the time spent on individual tasks;
• Multiple lawyers attending the same events without a clear justification;
• Clerical, administrative, or overhead tasks billed at professional rates;
• Excessive conferencing or internal meetings;
• Time spent on work that does not advance the client’s interests or the issues in dispute; and
• Hourly rates that may not align with market data or the nature of the case.

The goal is not to second-guess litigation strategy, but to determine whether the fees claimed are reasonable, necessary, and adequately documented.

Jim Schratz and Associates typically offers:

• An initial review of billing records at no charge to determine whether an audit is appropriate;
• A clear, agreed not-to-exceed budget for the audit work before substantial time is incurred; and
• A structure where, if the client decides not to use the audit, there is no charge for the final report.

The objective is to provide a transparent fee structure that allows clients to evaluate the audit’s value without taking on unnecessary risk.

Courts are often asked to evaluate substantial fee requests under tight deadlines. An independent audit can assist the court by organizing the data, applying recognized factors, and explaining recommended adjustments in a clear, methodical way.

In many matters, courts have cited Mr. Schratz’s methodology, adopted his analysis in whole or in part, or used his work as a framework for their own fee determinations. While each case is decided on its own facts, the focus is always on providing reliable, objective assistance to the court.

At the outset, it is helpful to have:

• Complete billing records in electronic format (preferably Excel or other sortable data);
• Any fee petitions, declarations, or supporting affidavits already prepared;
• Key pleadings or case summaries, including information about the result obtained;
• Any orders addressing fees, sanctions, or cost shifting; and
• The client’s specific concerns or issues they would like the audit to address.

Additional materials can be requested as needed, but a focused initial package allows the audit to begin efficiently and within the agreed budget.

Timing depends on the size of the fee request, the volume of invoices, and any court deadlines. Smaller matters may be completed within a few weeks, while complex, multi-year cases with multiple firms can take longer.

During the initial consultation, timing and deadlines are discussed so that the scope of work and budget align with the court’s schedule and the client’s needs.

Yes. In many matters, the audit report is only one part of the engagement. Jim Schratz also provides expert testimony at deposition and trial regarding:

• The reasonableness and necessity of fees;
• Billing practices and industry standards;
• Claims handling and insurance bad faith issues; and
• The methodology used to evaluate and adjust the fee request.

The same underlying analysis that supports the audit report informs the expert opinions presented to the court.