Insurance Claims Handling

Representing Law Firms in Fee Disputes and Audit Challenges

When a client or carrier challenges a law firm’s fees, you need someone who understands both sides of the audit process and can explain, in practical terms, why your bills are reasonable.

As legal fee audits have become more common, not every reviewer approaches the task with a balanced or defensible methodology. Some are focused primarily on cutting fees, often with limited support for their conclusions. In response to this trend, Jim authored "How to Cross-Examine a Legal Fee Auditor" , which has been widely used by law firms facing aggressive or unsupported audit reports.

Since then, many firms have retained Jim Schratz and Associates to review third-party audit reports, analyze the underlying methodology, and provide independent opinions that put the fee dispute back on solid ground. Jim’s experience conducting thousands of audits himself allows him to quickly identify where an auditor has overreached, misapplied standards, or ignored critical context about the case.

Understanding Different Types of Legal Fee Audits

Not all audits are created equal. Some are comprehensive reviews of the entire file, while others are limited to sampling or high-level letter reports. How an audit is structured has a direct impact on the reliability of its conclusions. Common approaches include:

• Full-scale audits: Detailed review of invoices, work product, pleadings, correspondence, and case history.
• Targeted or preliminary reviews: Focus on particular issues, timekeepers, or phases of the case.
• Letter reports: High-level opinions that may rely on limited data or assumptions about the work performed.

When fees are challenged, it is essential to understand what type of audit was performed, what the auditor actually reviewed, and whether the methodology used is consistent with accepted practices. Jim helps law firms dissect these issues and present a clear, fact-based response.

Key Questions When Challenging an Audit Report

Effective cross-examination of a legal fee auditor often turns on a few core questions. Jim works with counsel to evaluate points such as:

• On-site review: Did the auditor review the physical or electronic file and talk with those who handled the matter, or rely only on invoices?
• Software and tools: Does the auditor use appropriate systems to analyze billing entries, or rely on simple keyword searches and subjective impressions?
• Scope of review: Were all time entries reviewed, or only a sample? If sampled, how was that sample selected?
• Auditor’s experience: Does the auditor have meaningful litigation or claims-handling experience to understand how complex matters are staffed and billed?
• Methodology and standards: Is the auditor’s approach grounded in case law, guidelines, or recognized industry standards, or is it simply their personal view of what “seems high”?
• Exhibits and documentation: Are the conclusions supported by detailed calculations and exhibits, or are they stated in broad percentages without explanation?
• Compensation and bias: How is the auditor paid, and does the fee arrangement create an incentive to cut as much as possible?

Answering these questions often reveals whether an audit is a fair assessment or a result-driven effort to reduce fees. Jim’s role is to separate careful analysis from unsupported opinion, and to help the court understand the difference.

How Jim Schratz Assists Law Firms

For firms whose bills are under attack, Jim can:

• Review the opposing auditor’s report and workpapers, identifying errors, unsupported assumptions, and methodological flaws.
• Prepare written opinions that explain why the firm’s fees are reasonable in light of the work performed and the results achieved.
• Assist with strategy for deposing or cross-examining the opposing auditor, including targeted lines of questioning.
• Provide expert testimony at deposition or trial on the reasonableness of fees and the reliability of competing audit approaches.

Jim’s perspective is grounded in experience conducting thousands of legal fee audits himself, which allows him to speak credibly about what a thorough, neutral audit should look like. That background helps law firms present their billing in a way that is transparent, defensible, and understandable to courts and clients alike.

If your firm is facing a fee dispute or needs to challenge an audit report, Jim can review the file, evaluate the issues, and help you develop a clear response. You can begin with a free file review and receive a not-to-exceed budget before deciding how to proceed.