October 8, 2018 by Myles Megee, Owner
Networking, Insurance Contracting, and Cost Shifting
We appreciate the opportunity to network with various court reporting firms locally and around the country, but we tend to be cautious with national firms because some of them engage in the practice of insurance contracting and cost shifting, or what is sometimes called fee shifting. These court reporting firms negotiate deals with insurance companies at rates below market with the promise that they will benefit from receiving a higher volume of work.
As a believer in market principles in general, there may not be a problem with casewide discounts or perhaps even offering lower rates in exchange for higher volumes of work; however, ethical considerations should come into play if other parties noticed for depositions aren’t given the same percentage discount or, at the very least, are not charged higher rates to make up for a discount given to the taking party — cost shifting.
At Cornerstone Court Reporting, we do not engage in contracting with insurance companies to perform services at lower rates, and we never knowingly cover depositions for agencies that do. We have many clients who represent plaintiffs, and while they may not have enough work on an annual basis to warrant a volume discount, they may schedule all of their depositions with us; so we feel that it could be harmful to our relationships with our loyal clients if we offered a discount to opposing counsel that they do not receive. In cases with a large number of parties and many depositions to be taken, we have offered a case discount if all parties agree to use us for all depositions throughout the litigation.
A Personal Story About Our Experience with a National Court Reporting Agency
In the summer of 2016, we were approached by a director of operations for a large national court reporting agency. She indicated that, on average, they had 20 depositions a month in our area, and they were looking to network with a local court reporting firm to provide coverage.
We were initially excited at the possibility to grow our business; however, after doing some quick research online, we found several lawsuits which alleged that this national firm had engaged in the practice of cost shifting. In our reply to their inquiry, we shared what we had found in our research, and we never heard from them again. Below is an excerpt from our response which more fully describes our position.
“Here is our dilemma: Our clients and other attorneys see a familiar face, order a transcript, and are then confounded when they receive an invoice much higher than they would normally receive. They call us for an explanation, which we are unable to provide. We can only tell them what we would have charged had we been in control of the invoicing.”
“We truly value our local relationships, which are based on our reputation of excellent service and integrity, and we are not comfortable working in a setting where either may be called into question.”
What Can You Do About It?
Petitioners in personal injury cases are usually the ones who suffer the most from cost shifting, getting disproportionately higher bills than is otherwise customary. But there may be occasions where a company that is typically on the defense brings a cause of action, and court reporting costs may then be inappropriately shifted to the defending party.
Our advice to attorneys who are unsure if the court reporting company selected by opposing counsel has a contract with the hiring attorney or their client is to simply ask prior to the deposition taking place. Although not all court reporters are members of the National Court Reporters Association, the organization has promoted the following disclosure policy regarding contracting:
“A court reporter shall always disclose to all parties present at a deposition the existence of any direct or indirect contracting relationship with any attorney or party to the case, so that the other parties may exercise their rights under Rules 28(c), 29 and 32(d)(2) of the Federal Rules of Civil Procedure, and comparable state and local laws, to object to the taking of the deposition because of the possible disqualification of the court reporter. This disclosure shall include the identity of all principals and agents involved in the contracting group as well as a description of all services being performed by such court reporter, his or her employer, or any principal or agent of the contracting group. It is the court reporter’s obligation to make reasonable inquiries and ascertain this information before accepting any assignment.”
Although some defense counsel may be required by their clients to schedule depositions with certain court reporting companies, they may have some discretion to engage a different court reporting company on an incidental basis. So if defense counsel is agreeable, plaintiff’s counsel can depose a defense witness on the same day as one of plaintiff’s witnesses, engaging a local court reporter scheduled by the plaintiff to report for both sides.
If you find yourself in a situation where the deposition is going to move forward despite your objection, state on the record that you will object to any charges above the prevailing rate for the area.
Interestingly enough, some court reporting firms that engage in cost shifting may attempt to deflect criticism by claiming that they are adhering to standards of professional practice by offering the same services or fees to all parties on equal terms, but what it really amounts to is increased costs for parties noticed for depositions instead of the taking party. Arguably, industry fees in general have been affected as a result of cost shifting by national court reporting firms — where page rates to taking parties have remained relatively the same for years while copy prices, as a percent of what is charged to the taking attorney, have increased by about 6 percent.
If left unchallenged, it stands to reason that this practice could reduce the likelihood of smaller cases being taken on by attorneys, thereby discouraging parties from pursuing their claims.
Many states, like Virginia, have passed anticontracting legislation to address the issues that insurance contracting and cost shifting have caused. If you support such legislation where you practice, contact your state and local bar associations as well as your elected representatives to let them know.