How to ethically pass through ediscovery costs

As eDiscovery technology adoption increases, many law firms struggle with how to effectively and accurately pass these costs through to their clients. The purpose of this essential billing guide is to help managing partners, litigation attorneys, and finance professionals at law firms understand the relevant ABA rules and opinions governing client fees for ediscovery technology.

Can law firms ethically bill clients for ediscovery costs?

Yes. There is no ethical prohibition under the ABA Model Rules against billing clients for ediscovery technology costs — the same way firms already pass through court filing fees, messenger services, or copying costs. ABA Model Rule 1.5 requires only that the fee be reasonable and properly disclosed to the client, and ABA Formal Opinion 93-379 confirms that ediscovery expenses can reasonably be treated as an "in-house provision of services," similar to computer research or printing fees.

What are the three categories of pass-through costs under ABA guidance?

ABA Formal Opinion 93-379 sorts client expenses into three categories: general overhead (costs like rent or insurance that benefit all clients equally and should already be built into your fees, not billed separately), disbursements (exact payments made on a client's behalf, passed through at cost with no markup), and in-house provision of services (services like ediscovery technology, which can be billed at a reasonable rate — and may include a modest, disclosed margin).

What you'll learn from this guide:

• How to interpret the ABA Model Rules of Professional Conduct as they apply to ediscovery billing
• How the "reasonableness standard" under Rule 1.5 applies to technology costs
• How to categorize your pass-through costs correctly
• How to address the "profit question" when your allocation methodology results in a modest margin

If your law firm is currently absorbing ediscovery technology costs, it may be doing so unnecessarily. Discover how to ethically pass costs through to end clients with this free guide.