The Future of Cost Recovery

For most law libraries, the percentage of the library budget representing subscriptions to online databases has been increasing. Many of these subscriptions represent multi-year contracts and there is little flexibility in the contracts to accommodate budget cuts.

For law firm libraries, one way of alleviating the effect of the increasing cost of these databases is to pass some of it on to clients. How this is done varies amongst law firms; some pass on all online costs to clients, some charge back a percentage of costs, and some just treat them as overhead. My 2011 survey of Vancouver-area law firm libraries found that all but one charged back some proportion of costs. A 2012 survey of American law librarians found that only 4% of firms did not recover online charges.

Deciding how much should be charged back is tricky. If the database you are using is “pay as you go”, then it is straightforward to calculate the costs of the search.

With flat-fee databases, calculating the costs of the search becomes trickier. Quicklaw and Westlaw Canada tend not to allow “pay as you go” subscriptions for their core materials, making it difficult to calculate the real cost of a search. Instead they offer what are known as “notional costs”, e.g. $3.00 to pull a case on Quicklaw, $7.50 to KeyCite (note up) a case on Westlaw Canada, and so on.

Other flat-fee databases may not even provide suggested billing amounts. In these situations, law firms may develop an in-house charge-back mechanism. Charges may be based on the time spent online, the number of logins or searches, or some other mechanism. If the database provider does not provide a way of measuring database usage, there are a number of third party applications that will allow the subscriber to do so.

Given the trend towards replacing print resources with electronic resources, law firm libraries need to think about whether they should continue to recover online charges from clients. It is very rare for a client to be charged for print library materials; the only time this happens in my firm’s library is if we have to borrow materials through interlibrary loan or if we are buying a book for a file which is so specific that the book is unlikely to be used again. Why then should clients be expected to pay for electronic resources when they would not be expected to pay for the same resources in print?

In a decision last year, Fairchild v. Vancouver Coastal Health Authority, 2011 BCSC 616, the judge commented that:

[78] I am even more convinced today that the cost of computerised research is properly an item of overhead than I was in 2001 when I decided Prevette v. Cusano. In this current electronic age there are even more resources available (at no cost) for conducting legal research online than ever before (for example, there is now the CanLii system and our own court’s website — which includes the vast majority of the court’s written reasons issues since 1999, at least). Therefore absent convincing evidence that pay-per-use type of computerised legal research was a necessary adjunct of the prosecution of this case, I will not allow the claim for these amounts.

I know a number of people who would vigorously debate the judge’s perception of the number of online resources available “at no cost”. As wonderful a resource as CanLII is, it is not a substitute for Quicklaw and Westlaw Canada. (If it were, you would see fewer libraries subscribing to them rather than agonizing over whether they should provide access to both.) The simple truth is that a significant number of useful online resources are not free, but should these resources be treated as overhead or charged back to the client?

Clients can benefit from electronic resources being used instead of the print equivalent. For example, an electronic resource that makes research more efficient means that, even though clients are paying database charges, the costs are less overall since the lawyer spent less time carrying out the research. Electronic resources allow lawyers to carry out research while on the road (rather than having to wait to get back to their firm library), reducing the time taken to answer a client’s question. Being able to cut and paste relevant passages or precedents from online materials saves lawyer (or assistant) time since material does not have to be retyped.

Furthermore, not all primary material is available on free sources. For example, CanLII does not have consolidated current versions of a number of territorial legislation or a lot of older case law. It is much faster and cheaper to retrieve such materials from paid databases than work from print materials.

My suspicion is that, as law firm libraries increase the number of electronic materials available to their lawyers, they are going to have to reconsider how they charge for them. For those firms that currently recover costs from clients, the most probable outcome will be a hybrid model, whereby “library materials” will be considered overhead charges but the costs for “matter specific searches” will be recovered.

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