Policies on spending minimums for budgets of law firms on individual matters

Law departments that seek budgets from their outside counsel need to grapple with the threshold (or thresholds) for those budgets. They need some guidelines for what level of anticipated spending triggers a budget. Paul Roy, Director of Finance & Administration of Time Warner Cable’s Law Department, explains that his policy is that “if more than $15-20,000 per month will be spent for three months” the firm needs to submit a budget. How far out does a the budget extend? “About a quarter” or if there is a predictable path and outcome such as the filing of a motion for summary judgment. With that rule-of-thumb of amount and extent, a matter might have a budget for one quarter but not for the next.

Some law departments set their thresholds much lower. Roy feels that budget triggers like $50,000 in a year is pretty small, at $4,000 a month. With his higher threshold, in his department the amount that is covered by a budget is 5-10 percent or so for both matters and spending.

The corresponding matter budget is attached to each bill so the lawyer can see it. In Roy’s experience, no matter how carefully the firm and the responsible lawyer pore over the budget at the start of a quarter, “Circumstances always seem to change.” A benefit, nonetheless, is that for some partners if their budget is broken badly, they are more inclined to write off time. They feel a bit guilty.

At Time Warner Cable the general counsel doesn’t try to hold internal lawyers to the budgets they oversee. So many matters are very different, one-off, it is hard to develop a track record so that a proposed budget has some basis for comparison. The lawyers do feel they have a bit more grasp of data in the commercial contracts area, as they have had more experience with those kinds of matters.