The Journal of The DuPage County Bar Association

Back Issues > Vol. 23 (2010-11)

Recovering Fees For Paralegal Time
By Anthony Abear

Does your paralegal routinely bill time spent copying? For the issuance of subpoenas?  For indexing discovery documents? For delivering a courtesy copy to the judge? If the type of work for which your paralegal bills time is not in substitution for the work of an attorney, then it may not be recoverable, either from your client or in a court action.

Paralegal services offer benefits to both the client and the attorney. As defined by Illinois statute:

“[A] paralegal [is] a person who is qualified through education, training, or work experience and is employed by a lawyer, law office, governmental agency, or other entity to work under the direction of an attorney in a capacity that involves the performance of substantive legal work that usually requires a sufficient knowledge of legal concepts and would be performed by the attorney in the absence of the paralegal.”[1]

The client benefits by the performance of legal work, normally performed by an attorney, yet at a reduced billing rate. The paralegal should be supervised by an attorney who is still ultimately responsible for the actions of the paralegal including violations of the  the Illinois Rules of Professional Conduct.[2] The attorney benefits with additional billable revenue and the freeing up of valuable time to bill other clients.

Paralegal Time Recoverable as Legal Fees.  In the late 1970s, Illinois courts first recognized the benefit which law clerks provide to a client and deemed such a clerk’s work recompensable.[3] Thus, in Merchandise National Bank v. Scanlon[4], the First District considered whether a law student’s time was billable or whether, in the alternative, the cost of the student’s time should be absorbed as law office “overhead” and a cost of doing business. The court stated:

                                                                                         “Unlike the work of secretaries and other supporting personnel, the work of senior law students is, in many instances, work of a kind necessary to the prosecution of the litigation which will, or ought to be performed, if not by them, by attorneys.”[5]

The Second District affirmed that reasoning and analysis that justified a law office’s billing for a law clerk’s services, but substantially limited the services for which it could bill.  In Losurdo Brothers v. Arkin Distributing Company[6], the court affirmed the trial court’s decision to refuse to allow the billing for a law clerk’s service that included delivery of an amended complaint and delivery of a notice of motion to the opposing counsel (at $40 per hour for a total of $84) wherein the court asserted that the it was “apparent that the law clerk was not performing legal work and that the majority of this time was travel.” The Losurdo court likewise refused to award a $3 duplicating cost billed by the law clerk asserting that said $3 cost is a cost normally associated with office overhead and would only be awarded if it were an “extraordinary” copying cost.

The United States Supreme Court has also confirmed that billable time for paralegals is a legitimate fee. In Missouri v. Jenkins, the Supreme Court held that an attorney recovering fees under a federal Section 1988 can also bill separately at market rate and be compensated for the services of paralegals.[7] While permissible, however, the Court noted that “purely clerical or secretarial tasks should not be billed at a paralegal rate.”[8]

The restriction upon appropriate paralegal billing was taken one step further in Michigan Avenue National Bank of Chicago v. Evans, Inc.[9]  In Michigan, the First Appellate Court affirmed a trial court determination denying an award for paralegal fees of $848 for indexing discovery documents, issuing subpoenas, and delivering a copy of a brief to a judge’s chambers. While this court’s decision might seem to undermine an attorney’s confidence in billing paralegal time, for the Michigan court, however, these actions were ministerial in nature and their billing should have been absorbed into the office overhead expense.[10]

The Second Appellate District lauded the use and benefit of paralegals in 1990 when it stated, “we agree with the trial court’s notion that paralegals are a valuable resource in the practice of law and find that their services, provided under the direction and control of a licensed attorney, should be recoverable…”[11] There, the court held that paralegal fees are permissible under Section 508 of the Illinois Marriage and Dissolution of Marriage Act, further asserting that clients derive benefits from work by law clerks and by paralegals, and endorsing the propriety of billing of paralegal fees.

In determining a proper rate of recovery for paralegal work, the District Court in In re Continental Illinois Securities Litigation attempted to determine the “market rate” for such work.[12]  The court found that:

“[A]n appropriate starting point is the salary paid the paralegal by the attorney.... Another proper component of the rate is the overhead specifically associated with the employee, such as health insurance and other fringe benefits.... Finally, the billing rate should include an element of profit. Lawyers will not be motivated to assign non-legal work to paralegals if there is no profit in it... It seems rational to presume that, up to a given salary level, the specific overhead for an employee would not exceed the employee’s salary. Thus, if the paralegal is paid $10.00 per hour, an allowance of an additional $10.00 for specific overhead seems adequate and probably generous... For this reason, it seems proper to cap the overhead component at $10.00 per hour.”

The Seventh Circuit reversed the District Court’s decision in Continental, effectively rejecting a “cost” approach to the analysis, finding:

“[The District Court was] trying to determine the value of a service that the market has set its own value on. The Supreme Court has disapproved the approach of basing reimbursement for paralegal expenses on the ‘cost’ of the paralegal, as distinct from the market value of his services, when it is customary to bill separately for the value of those services.” [13] 

The Seventh Circuit found that the District Court’s salary-plus-overhead method not only underestimated the actual value of paralegal services, it likely undermined efforts to economize litigation and “lead lawyers to substitute their own time, for which they are entitled to be compensated at market rates rather than at some constructed hourly cost, for that of cheaper paralegals.”[14]  It is thus clear that, so long as the work done by a paralegal involves legal analysis or other work that would otherwise normally be done by counsel, that work is compensable at a reasonable billable rate.

Paralegal Time Recoverable as Costs.  When work done by a paralegal is not of a kind normally billable by an attorney, it should generally be treated as non-billable overhead.  Just as attorneys should not bill their clients their normal rates for time they spend standing in front of the copier, they should not bill their paralegal’s time for such work, at least not as professional services.  Regardless of whether such work is being done by an attorney, a paralegal or someone else in the office, it is part of the office overhead which may only be billed as a cost in limited circumstances. 

Performing some tasks in-house such as copy and messenger services is not uncommon for some firms though often “fraught with tension between the lawyer and the client.”[15] While several of the cases cited above rejected recovery for time entries performing these types of tasks, under some circumstances, the Illinois Rules of Professional Conduct may allow attorneys to bill for such services as costs.[16] The ABA Standing Committee on Ethics and Professional Responsibility recognized in a formal opinion that “[l]ike professional fees, it seems clear that lawyers may pass on reasonable charges for these services.”

While the parties may contract for a specific rate for copy charges and messenger services, the committee concluded, absent a specific agreement to the contrary, the lawyer is “obliged to charge the client no more than the direct cost associated with the service (i.e., the actual cost of making a copy on the photocopy machine) plus a reasonable allocation of overhead expenses directly associated with the provision of the service (e.g., the salary of a photocopy machine operator).”[17]

Deferring to “our colleagues in the accounting profession”, the committee declined to comment on the proper calculation method of direct costs and what may or may not be included in allocated overhead:

“Any reasonable calculation of direct costs as well as any reasonable allocation of related overhead should pass ethical muster. On the other hand... it is impermissible for a lawyer to create an additional source of profit for the law firm beyond that which is contained in the provision of professional services themselves. The lawyer's stock in trade is the sale of legal services, not photocopy paper, tuna fish sandwiches, computer time or messenger services.” [18]

Negotiating your way through Illinois law regarding the appropriate billing and collection policies for  paralegal services can be dicey territory. It is obvious Illinois courts recognize the value of paralegal services as providing a reasonable benefit to clients which, as such, justify compensation. After all, paralegals do not cost clients additional money.  Instead, paralegals actually save clients money by doing the work of attorneys at lower billable rates.

While using a paralegal may increase the value of legal services to the client, the effectiveness of your firm, and firm income, beware the scrutiny of the court’s review of your paralegal’s fees. The distinction should be made between performing work “customarily, but not exclusively, performed by an attorney” and clerical or ministerial tasks in determining what paralegal time is recoverable as legal fees. Likewise, caution should be taken calculating the basis for in-house services for performing work which might be otherwise performed by an outside vendor.   

[1] 5 ILCS 70/1.35

[2] Illinois Rules of Professional Conduct, Rule 5.3(c).

[3] Fiorito v. Jones, 72 Ill.2d 73, 89, 377 N.E.2d 1019 (1978).

[4] Merchandise National Bank of Chicago v. Scanlon, 86 Ill. App. 3d 719, 408 N.E.2d 248 (1st Dist. 1980), citing Fiorito v. Jones, 72 Ill.2d 73, 89, 377 N.E.2d 1019 (1978).

[5] See also People v. Atkinson, 50 Ill. App. 3d 860, 867, 366 N.E.2d 94, 100 (2nd Dist.  1977) (“[I]t seems unrealistic to require that work which requires somewhat less expertise and experience must be personally performed by appointed counsel in order to be compensated. It would appear that certain delegated work in a case, always remaining the responsibility of appointed counsel and done under his supervision, when found to be economic and necessary should be compensated in some manner.”)

[6] Losurdo Brothers v. Arkin Distributing, 125 Ill. App. 3d 267, 465 N.E.2d 139.” (2nd Dist. 1984).

[7]  Missouri v. Jenkins By Agyei, 491 U.S. 274, 109 S. Ct. 2463 (1989). See also TruServ Corp. v. Ernst & Young, LLP, 376 Ill. App. 3d 218,226, 876 N.E.2d 77, 85 (1st Dist. 2007) (Paralegal fees held to be separately compensable as necessary legal services under Consumer Fraud Act.)

[8] Missouri v. Jenkins By Agyei, 491 U.S. 274, 109 S.Ct. 2463 (1989)

[9] Michigan Ave. Nat. Bank of Chicago v. Evans, Inc., 176 Ill. App. 3d 1047, 531 N.E.2d 872 (1st Dist. 1988).

[10] See also Lee v City of Chicago, 2008 WL 5377798 (N.D. Ill. 2008).(In which that court denied “non-compensable tasks including: photocopying; preparing documents for delivery; faxing; hand-delivering documents; scanning documents; entering dates into a calendar; ordering a court reporter; scheduling telephone conferences; and drafting letters to the Court…”)

[11] In re Marriage of Ahmad, 198 Ill. App. 3d 15, 555 N.E.2d 439 (2nd Dist. 1990).

[12] In re Continental Illinois Securities Litigation. 750 F. Supp. 868 (N.D. Ill. 1990).

[13] Matter of Continental Illinois Securities Litigation, 962 F.2d 566 (7th Cir.1992).

[14] Matter of Continental Illinois Securities Litigation, 962 F.2d 566 (7th Cir.1992).

[15]ABA Formal Opinion 93-379, Billing for Professional Fees, Disbursements and Other Expenses (December 6, 1993).

[16] See Commentary on Rule 1.5: (“A lawyer may seek reimbursement for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges, either by charging a reasonable amount to which the client has agreed in advance or by charging an amount that reasonably reflects the cost incurred by the lawyer.”)

[17]ABA Formal Opinion 93-379, Billing for Professional Fees, Disbursements and Other Expenses, December 6, 1993.

[18] ABA Formal Opinion 93-379 Billing for Professional Fees, Disbursements and Other Expenses, December 6, 1993. See also Susan Beck and Michael Orey,  Skaddenomics,, The American Lawyer, Vol. XIII, No. 7 (September 1991) found at (“ [T]he reference to ‘other overhead expenses’ provided a hole big enough to drive an entire back-office operation through... [W]hen things get marked up so that firms make a profit off of them, there's actually a reverse incentive to be economical. Why send something by Federal Express when you can make a fortune faxing it?”)

Anthony Abear is the proprietor of the Abear Law Office. He is a graduate of the University of Illinois at Champaign, and of DePaul University College of Law and chairs the DCBA Law Practice Management Committee.

DCBA Brief