Rebates from airlines to law firms and whether they should be passed through to clients

I spotted in one major law firm’s engagement letter the following language: “Any rebates paid to the firm, based upon travel volume, are used to offset the direct costs assessed us by our independent travel agency.”

Doesn’t that statement dance around the obvious question, “What if the rebates are larger than the direct costs assessed you?” An in-house manager with a more suspicious mind might inquire whether the law firm offsets the direct costs before passing them through to the client (See my post of Feb. 14, 2007: are law firms passing through rebates?; and June 15, 2005: ethical obligations of law firms to pass along savings to clients).

How does a firm allocate the rebated sums among its clients – does this give a different nuance to “most favored nation”? Does a law firm have an obligation to maximize such rebates.

Travel policies for external counsel are already contentious enough (See my post of Jan. 1, 2008: same travel policies for inside and outside counsel; Jan. 10, 2006 and Sept. 5, 2007: patterns of billing for travel time by law firms; Feb. 18, 2006: ethics of double billing travel time; July 20, 2007: save costs on airline fares; and Jan. 10, 2005: engagement letters and travel time policies.).

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