A recent law.com story, “Suit Challenging Bills From Constantine Cannon Goes Forward” reports that the claim of a former client of Constantine Cannon that the law firm excessively billed for legal fees is moving forward.  Manhattan Supreme Court Justice Carol Edmead said that the family of Howard L. Parnes, a White Plaines, NY real estate executive had sufficiently pleaded that it had been overcharged, demanding that nearly $628,000 in “improperly earned” fees be returned.  The Parnes family hired Constantine to assist in managing the family’s assets after amassing a fortune in real estate. 

According to the judge’s opinion in Constantine Cannon LLP v. Parnes, the family alleged “several, specific examples” of unnecessary and duplicative work, but said it paid Constantine the fees before realizing the law firm “had vastly overcharged for its services”.  The Parnes family claimed Constantine Cannon charged it for unnecessary, duplicative work charging “lawyer prices” for work that could be done by nonlawyers.  For example, the Parneses said a Constantine associate spent more than eight hours preparing an IRS document, billing $300 an hour.  The Parneses argued that an accounting clerk could have done that “for a small fraction” of the charge.

A recent law.com story, “Sonnenschein Settles Fee Dispute With Ex-Client Who Lost Money With Madoff” reports that a former client of Sonnenschein Nath & Rosenthal who fell victim to Bernard Madoff has agreed to pay $650,000 to settle a fee dispute with the law firm.  The settlement is about 20 percent less than Sonnenschein had originally sought ($833,000) from Elaine Stein when it sued her in December 2009 in Sonnenschein Nath & Rosenthal v. Stein.  Stein engaged Sonnenschein after one of her sons, Stuart Stein, took control of her assets by convincing financial institutions she was incompetent. The deal to pay Sonnenschein was knocked off course in December 2008 with the implosion of Bernard Madoff’s massive Ponzi scheme.  Sonnenschein in its complaint said “significant funds of a martial trust had been invested with Madoff were lost”.

Under the settlement between Sonnenschein and Ms. Stein, the firm’s former client is to deliver $500,000 upon execution of the stipulation of the deal.  Another $150,000 would be paid to Sonnenschein upon the delivery of the opinion letter, which the firm agreed to draft.  Should Ms. Stein not pay the firm the $150,000, the firm reserved the right to go after the full $833,000 it originally sought.

Since 1985, the law firm of Knapp, Petersen & Clarke has been actively engaged in the auditing of legal and other professional billings and consulting with companies to control legal expenditures.  Their auditors are qualified as expert witnesses and provide testimony in fee arbitration and trials throughout the country.  In 1991, the firm formed KPC Legal Audit Services, Inc. (KPC Legal Audit).

KPC Legal Audit has audited bills of most of the major law firms and hundreds of other law firms in California.  They have extensive audit experience with firms throughout the country, as well as internationally.  They have performed thousands of audits involving several billion dollars in legal and other professional billings.  KPC Legal Audit consults with general counsel, as well as corporate boards, to develop and implement systems for control of outside legal expenditures.  They conduct seminars and workshops for clients, organizations, government entities, and others on legal cost containment and the effective use of legal counsel.  

KPC Legal Audit has specific procedures and standards which allow for the efficient and complete analysis of legal billings.  These procedures incorporate the individual review of legal invoices, as well as an understanding of applicable legal guidelines.  KPC Legal Audit has created and customized an audit database to allow for detailed analysis of legal fees and costs and compilation of relevant information.  Both summary information from invoices and information derived from their auditors' detailed analysis is compiled and input into the database.  The detailed analysis and breakdown of billing statements allows for scrutiny on a variety of levels dealing with issues relevant to each specific matter.

The President of KPC Legal Audit is Andre E. Jardini.  He has over 30 years of experience as a lawyer and has been actively involved in auditing legal bills since 1985.  He has tried and arbitrated numerous cases in which the predominant issue involved was the reasonableness of attorney fees and costs.  He frequently serves as a consultant and expert witness on the reasonableness of attorneys' fees.  In addition to Mr. Jardini, KPC Legal Audit is fully staffed with attorneys, auditors and assistants auditors with a combined total of over 60 years of audit experience.

A recent NLJ story, “POM Sues Hogan Lovells Over Legal Tab” reports that POM Wonderful has filed a lawsuit in District of Columbia Superior Court with accusations of “unnecessary and substandard legal services” and calling Hogan Lovells’ attorney fees “exorbitant”.  The lawsuit is in response to a breach of contract claim filed by Hogan Lovells in February over $669,265 in unpaid legal fees and expenses.  POM has taken an aggressive stance to seal any document relating to the legal fee dispute.  In fact, Superior Court Judge Judith Bartoff signed a temporary restraining order preventing The National Law Journal from publishing the name of the governmental regulatory agency before which Hogan represented POM.

POM is a subsidiary of privately held Roll International Corp.  According to court documents, Roll Vice President and General Counsel Craig Cooper signed the original fee engagement letter in December 2002, agreeing to pay for “various legal services.”  By November, the law firm and the company were at loggerheads and then POM turned to Covington & Burling to handle the regulatory matter.  Hogan wants the fee dispute case in open court in Washington, DC where the representation took place, but POM wants the fee dispute matter resolved with the confidentiality of arbitration, opting instead to have the case decided in California, where POM is headquartered and under California’s State Bar’s Mandatory Fee Arbitration Program, where under California law, a client has a statutory right to request arbitration when a fee dispute arises, and that arbitration becomes mandatory for the attorney involved in the fee dispute.

POM Wonderful is being represented by Barry Coburn of Washington’s Coburn & Coffman.

Hogan Lovells is being represented by Washington solo practitioner Randell Ogg.

Bloomberg reports that the $873.1 million in fees billed since the ongoing Lehman Brothers bankruptcy was filed in September 2008 would quadruple the annual payroll of the New York Yankees.  According to a recent filing by the SEC, 17 law firms collectively will bring in at least half that amount, with almost $396.7 million being paid out by the debtor in the largest bankruptcy in U.S. history.  Lehman’s lead counsel, Weil, Gotshal & Manges is by far the biggest earner on the matter.  The firm’s Lehman haul now stands at nearly $200.6 million.  Weil is not alone on the debtors’ side – 10 other law firms have roles advising what remains of Lehman Brothers.  Here are some of the firms and their billings on the case since September 2008, according to Lehman’s 8-K filing:

Jones Day, special counsel for Asia and domestic litigation: $30.2 million.

Curtis Mallet-Prevost, Colt & Mosle, special conflicts counsel: $18.1 million.

Bingham McCutchen, special tax counsel: $12.8 million.

McKenna Long & Aldridge, special counsel for commercial real estate lending: $3.9 million.

A recent law.com story, “Prevailing Party’s Bid for Fees Fails ‘Exacting’ Test, N.Y. Court Finds” reports that the prevailing plaintiff in Gotham Partners v. High River Limited Partnership cannot invoke an indemnification clause to recover more than $700,000 in attorney fees under an “exacting” test set by the New York Court of Appeals, a unanimous New York appellate panel ruled.  The ruling stems from Hooper Associates v. AGS Computers, which according to Justice David B. Saxe said that “for an indemnification clause to serve as an attorney’s fee provision, the provision must unequivocally be meant to cover claims between contracting parties rather than third-party claims.”  The underlying lawsuit was a contract dispute on a real estate deal between two investors.  Within three years, High River struck a deal which resulted in the merger of Hallwood Realty with another entity. 

Gotham prevailed in the lawsuit and sought to recover $737,000 it spent in attorney’s fees under the indemnification provision of its contract.  That provision said High River would hold Gotham harmless from any liabilities, including “reasonable” expenses of counsel, as a result of “any action…or failure to act” in connection with High River’s interest in Hallwood.  On appeal, Saxe noted that attorneys have been resourceful in parsing the language of indemnification clauses “with an eye to extracting the essence of a right to attorney fees for the winning side.”  But citing Hooper, Saxe characterized New York as being “distinctly inhospitable” to the use of indemnification claims as a mechanism for claiming fees in a dispute between two contracting parties.  Hooper requires that the language of an indemnification clause must be “unmistakably clear” that it covered attorney fees of the winning side of a dispute between the two parties to the original contract, he said.

Gotham was represented by Y. David Scharf, Jerome Tarnoff, and Jay R. Speyer of Morrison & Cohen.

High River was represented by Andrew J. Levander and Jonathan D. Perry of Dechert.

A recent law.com story, “O’Melveny Sues Bratz Doll Maker MGA Over $10.2 Million in Unpaid Legal Fees” reports that O’Melveny & Myers has filed a suit against MGA Entertainment seeking payment of $10.2 million in unpaid legal fees related to the company’s long-running legal dispute with Mattel over ownership of the ownership of Bratz dolls.  O’Melveny’s role representing MGA ended in 2007.  According to the complaint, O’Melveny claims that MGA entered into oral agreements that were subsequently confirmed in writing about the range of legal services the firm would provide.  For years, MGA paid O’Melveny’s legal fees, but eventually a billing dispute forced the firm to withdraw from the case.  Since that time, O’Melveny has been unable to resolve its payment issues with its former client.

The firm says MGA “claimed to be conducting fee audits” that were never provided to O’Melveny.  When one was completed, MGA just commenced a new fee inquiry, the firm says.  “Both during its representation of MGA, and for almost three years after the Court determined that it was appropriate for O’Melveny to withdraw as MGA’s counsel, O’Melveny has attempted to resolve this fee dispute with MGA outside the courtroom by direct negotiation and professional mediation,” the firm states in its complaint.  “All of those efforts have proven unsuccessful, and O’Melveny’s patience and attempts at resolution have been disregarded or exploited by MGA.”

A recent law.com story, “Insurer Hit With Fees for Balking at Defense of Mercury-Contaminated Day Care Center” reports that U.S. Liability Insurance Company must pay its insured $208,748 in legal fees.  The attorney fee award, ordered by U.S. District Judge Jerome Simandle, includes a 35 percent lodestar fee enhancement of $153,750 based largely on the risk that the insureds’ lawyer, who took the coverage case on a contingency basis, would not get paid.  The case, Baughman v. U.S. Liability Insurance Co., was risky because the carrier had a reasonable basis to refuse coverage in light of the novel issues raised – such as whether exposure to indoor mercury contamination was “traditional environmental pollution,” whether medical monitoring constituted “damages” and whether exposure to harmful substances comprises “bodily injury”-- Simandle said.

U.S. Liability did not fight the fee amount requested, but asked Simandle to exercise his discretion and refuse to award fees because it denied coverage in good faith.  Simandle refused saying the purpose of awarding fees in coverage cases is not just to deter insurers from denying coverage without a reason but also to make sure insureds get the full benefit of the coverage they bought.  The original defense fee request totaled $318,140, based on a $158,477 lodestar with a 100 percent enhancement.  In awarding them less --$208,748 – Simandle knocked more than $4,700 off the lodestar and allowed only a 35 percent enhancement.  He took 20 hours spent on legal research as excessive and another 7 hours that were duplicative.

In large, complex attorney fee disputes, clients often turn to a qualified attorney fee expert.  NALFA members are retained by some of the nation’s top law firms and insurance carriers to provide expert reports and opinions on the reasonableness of attorney fees in high-stakes attorney fee disputes.  NALFA members have enjoyed success in the court.  Here are three examples:

Attorney fee expert and NALFA member Brand Cooper of Cooper & Bruning, LLP identified nearly $2 million in unreasonable attorney fees and costs for non-prevailing defendants.  The California court agreed with Cooper’s analysis and cited his expert report and opinions several times in its ruling: “Cooper calculated that 2,798.7 hours of the total 4,937.6 hours in the case were ‘block billing’.  That is nearly 57% of the time entries.  The court will apply an across-the-board 15% reduction in requested fees (after other deductions) based on this impediment to the reasonableness review.”

Attorney fee expert and NALFA member Ken Moscaret of Moscaret Consulting, Inc. successfully testified to a Los Angeles Superior Court judge that over $9 million in fees and costs was reasonable compensation for a major Los Angeles law firm involved in handling a large, complex underlying litigation.  Among his expert opinions, Mr. Moscaret emphasized that there was a rational cost-benefit relationship between the economic value at stake in the underlying litigation versus the legal fees expended.

Attorney fee expert and NALFA member Bruce Meckler of Meckler Bulger Tilson Marick & Pearson, LLP testified (by sworn statement) regarding the reasonableness of legal fees and expenses incurred by Freeborn & Peters, LLP counsel for Brown & Brown, Inc., in Brown & Brown, Inc. v. M.Munawar Ali, Case No. 07 C 2893 in the United States District Court for the Northern District of Illinois, Eastern Division.  In rendering its decision on the reasonableness of legal fees incurred, the Court substantially adopted Mr. Meckler’s opinions.

A recent law.com story, “Novel Fee Fight Lands at Calif. Appeals Court” reports that Cotchett, Pitre & McCarthy v. Universal Paragon Corp. is set to be heard in San Francisco’s 1^st District Court of Appeal.  The case involves millions of dollars in attorney fees and a novel attorney fee agreement based not on the client’s recovery of damages but on the estimated damages the client might suffer.  One side is calling it an “ordinary fee dispute” while the other insists it raises issues about contingency agreements and arbitration that no court has ever addressed.  The case ended up before JAMS arbitrator Rebecca Westerfield, who awarded Cotchett Pitre & McCarthy about $8 million in fees based on a lower damage estimate of $50 million, which was upheld by San Francisco Superior Court Judge Peter Busch.

Because UPC didn’t want to incur hefty up-front attorney fees and the Cotchett firm was taking a financial risk on complex litigation, the two sides came up with an agreement providing for a contingency fee of 16 percent of any money recovered in the suit, plus reduced hourly rates.  It also provided that if UPC acquired the factory site owned by Ingersoll-Rand, the Cotchett firm would be paid a percentage of the amount equal to the greater of the fair market value or the amount of damages UPC estimated it would suffer for remediation cost, insurance, demolition and diminution in value.

A recent NLJ story, “Major Retailers and Tech Companies Support Netflix Over Attorney Fees” reports that Netflix’s bid for the U.S. Court of Appeals for the Federal Circuit to hold an en banc hearing on the legal standard for district court awards of attorney fees in patent cases is generating support among major technology and Internet retail companies.  Netflix, the technology companies and retailers believe that it’s too hard for defendants to recoup attorney fees when they’re hit with frivolous lawsuits.  They claim that the section of the patent code that gives district court judges the discretion to award attorney fees in exceptional cases should apply equally to defendants and plaintiffs. 

Plaintiffs can bring weak patent infringement cases without any downside, and there are very few ways for companies to prevent them, says John Vandenberg, an intellectual property litigation partner at Klarquist.  “There aren’t too many tools the courts can use to police that, but one of them is awarding attorneys’ fees in the right case,” Vandenberg said.  The retailers are frequently on the receiving end of dubious lawsuits with flimsy claims, but it costs far more to fight than settle, says Peter Brann, a partner at Brann & Isaacson.  “Because the scales are not balanced on attorneys’ fees awards, you don’t have the prospect of saying ‘If we draw the line in the sand here, maybe we can deter others,’” Brann said.

A recent law.com story, “Fee Fight Breaks Out Over Multimillion-Dollar Microsoft Case” reports that attorneys representing 23 states involved in the class action against Microsoft Corp. have filed a lawsuit over attorney fees against Roxanne Colin, the Iowa lawyer who spread-headed a $179.5 million settlement with the software company.  Colin of Des Moines negotiated the 2007 settlement that included $75 million in attorney fees that she split with attorney Richard Hagstrom and the Zelle Hoffmann law firm in Minneapolis.

The attorney fee lawsuit claims that the 23 attorneys provided advice, pleadings, and participation and prosecution in the class action case in their states, and in the Iowa case against Microsoft.  The 23 attorneys formed the group called the Microsoft Litigation Consortium and signed an agreement with Colin that called the consortium to receive 20 percent of attorney fees awarded in the case.  The lawsuit said disputes were to be resolved through arbitration.  “The attorney fees awarded to (Colin) at the conclusion of the litigation were not shared…in violation of the agreement,” the suit states.  Colin has refused to comply with the agreement and that “on multiple occasions (the consortium) has requested that (Colin) comply with the…agreement and arbitrate the dispute regarding fees.”

The St. Louis Business Journal story, “Blitz Bardgett to Share in $21M in Legal Fees in A.G. Edwards Case” reports that St. Louis based law firm Blitz Bardgett & Deutsch will share $21 million in legal fees for the five-year legal battle in the class action lawsuit against A.G. Edwards.  Three law firms served as co-lead counsel, including Stull Stull & Brody and Milberg LLP, both are expected to receive a larger portion of the attorney fees.  Seven other law firms will receive smaller amounts.  The $21 million in attorney fees would comprise 35 percent of the $60 million settlement.  Documents on how the law firms are splitting the fees are not including in the court records.

The underlying case alleged that the brokerage company inappropriately received kickbacks from “preferred mutual fund” providers.  The suit claimed the revenue-sharing arrangements amounted to a conflict of interest and breach of fiduciary duties, and that the firm should have disclosed the arrangements to its clients.  The suit claims A.G. Edwards gave bad investment advice as a result, such as telling people to hold on to certain stocks when they would have been better off selling them.

A recent WSJ News Blog story, “New York Judge Signs Off on Hefty Legal Fee” reports that a New York federal court resolved a fee dispute in a pending securities fraud class action against Comverse Technology.  The company agreed last year to pay $225 million to settle the case.  Pomerantz Haudek, the lead plaintiffs’ law firm in the case, sought 25% of the settlement, or about $56 million in legal fees.  In the Comverse case, the Pennsylvania State Employees’ Retirement System, which owned shares in the company, claimed in court papers that the 25% attorney fee request was “unreasonable”.  But a Pomerantz Haudek lawyer said the firm’s client agreed to a 25% fee and that such an amount is “well within the normative range of these types of cases.”

U.S. District Court Judge Nichoals Garaufis agreed that the 25% fee was well within the norm of “megafund” securities fraud cases.  “While it may be that a lower percentage would also be sufficient, this court will not pretend that it has the expertise necessary to divine the ideal percentage,” the judge added.  “This court is particularly unwilling to undertake an endeavor in a case where the fee award was set on the open market, and where an improperly calibrated fee would provide a disincentive to future counsel to take risks and pursue large class settlements that the SEC cannot.”

A recent article, “Workers’ Comp Code Set 15 Years in the Making” in DRI’s For the Defense, written by Toronto law professor John G. Kelly brings readers up to date on the new initiatives underway for the Uniform Task Based Management System (UTBMS) and Legal Electronic Data Exchange Standard (LEDES).  The article provides a brief history of UTBMS and LEDES.  “In 1998, Internet e-billing was emerging as the preferred method for transmitting invoice data from outside law firms to corporate clients.  This led to the development of LEDES.  It is intended to serve as a standard file format to be used by the legal industry for the electronic exchange of information.  UTBMS is digital based, making it ideal for e-billing.  It has become synonymous with LEDES supported e-billing applications.  Insurance defense litigation has emerged as the dominant user of UTBMS/LEDES/E-Billing applications with task based billing.”

“The UTBMS Workers’ Compensation Code Team has completed the development of the model code set and is in the process of validating it through a series of bill review tests and presentations.  A presentation session is scheduled for the upcoming DRI Annual Meeting.  Official rollout of the code set with the posting on the ABA website is scheduled for January 1, 2011.”

CLICK HERE for the UTBMS Litigation Code Set

CLICK HERE for the LEDES website.

Recent stories by the Denver Post and The American Lawyer report that Denver-based Qwest Communications is still trying to reach an agreement with former CEO Joe Nacchio over repayment of legal fees that the company advanced on his behalf before his insider trading conviction in April 2007.  Qwest has recovered the legal fees it paid for Nacchio between the conviction and sentencing in July 2007 and any money doled out to his trial attorney Herb Stern, for the appeal.  Nacchio has agreed to foot the bill of Maureen Mahoney, lead appellate counsel at Latham & Watkins for his appeal case.

According to Qwest’s by-laws, the company is required to advance reasonable attorney fees and expenses to current and former officers who may be involved in any criminal of civil legal proceeding stemming from their employment.  A conviction, if it holds up on appeal, allows the company to recoup those costs.  Qwest continues to cover Nacchio’s legal fees for the ongoing civil fraud lawsuit filed by the SEC and litigation related to the company’s failed joint venture, KPNQwest.  The total legal cost in Nacchio’s defense may be as high as $75 million.

A recent law.com story, “Facing Possible Sanctions, Plaintiffs Lawyer Slams Defense Lawyers’ Rates” reports that plaintiffs’ attorney Wayne A. Schaible of McCann Schaible & Wall is crying foul, saying the defense bills are excessive, that some lawyers’ hourly rates are bloated and unjustified, and that the defense team included lavished expenses that should never be in such a fee petition.  The attorney fee petition, filed by attorneys at Ballard Spahr and Akin Gump, shows that the five-lawyer defense team was billing at rates of $265 to $645 per hour and claims to have logged more than 100 hours working on the canceled trial.  Akin Gump attorney Michele A. Roberts billed at $645 per hour and her partner, Michael C. Starr, billed at $500 per hour, but the Ballard Spahr lawyers were considerably cheaper, with John B. Kearney billing at $373.50 per hour and Paul F. Jenkins and David M. Stauss each billing at $265.50 per hour.  When all five lawyers were on the clock, along with a paralegal billing at $171 per hour, the combined hourly rate was more than $2,200.  The attorney fee petition says the defense team racked up fees of more than $43,000 for the three-day trial.  Added to the grand total of $67,725 in attorney and paralegal fees is $38,783 in costs, such as hotel rooms and travel expenses for all five lawyers, $12,578 in fees for a jury consultant and more than $13,000 for an audio-visual team and equipment from Trial Technologies.

Schaible’s lawyers are taking aim at the defense fees, labeling them excessive and redundant.  Even if U.S. District Judge Mary A. McLaughlin were inclined to approve the hotel bills for the Washington lawyers, the plaintiffs team says there is no justification offered by the defense for “why local counsel at the Ballard office could not commute to the courthouse from their nearby homes, just as they commute to their daily work place [in Voorhees, NJ] or their Philadelphia office where they took depositions.”  “The hours submitted by Valero’s defense six member ‘defense team’ comprised of five different attorney and one paralegal from two different cities is clearly excessive and involves redundancies, multiplicity of tasks, and unnecessary services,” the brief says.  “Five lawyers clearly were not necessary to assist in the picking of the jury since only Mr. Kearney was actively involved in questioning jurors.  Likewise five attorneys were not necessary on the only day of testimony to witness the opening of Ms. Roberts and the direct examination of two witnesses.  Only fees of one attorney, per task, per day would comply with Section 1920’s limitation.”

On June 24, 2010, NALFA hosted the 2nd Annual L.A. Attorney Fee Conference: “It Pays To Be Reasonable” at Southwestern Law School in Los Angeles, California.  The conference featured 10 panelists covering a host of attorney fee and legal billing topics.  The program received great reviews.  Some of the comments included:

“Excellent to get a judicial perspective on attorney fee awards”

“Judge Lichtman provided valuable insight on attorney fees”

“Great topics, outstanding panelists, and a good discussion from the audience”

“I walked away from the program with a better understanding of attorney fees/legal billing issues”

The 2010 L.A. Attorney Fee Conference course book is available for purchase for only $195 plus shipping and handling.  CLICK HERE for course book order form.

To view pictures of the conference, visit our Facebook fan page! 

A recent Law.com story, “9^th Circuit Lifts Attorney Sanctions in FedEx Discrimination Case” reports that U.S. District Judge Susan Illston fined San Francisco plaintiffs lawyer Waukee McCoy $25,000 in sanctions in connection with fee petitions he submitted after winning discrimination verdicts against FedEx.  Illston turned down McCoy’s $2 million attorney fee request, calling his behavior “among the most egregious that this court has ever seen in almost 14 years on the bench.”  A 9^th Circuit panel found Illston was correct in denying McCoy’s attorney fee petitions, but she did not give McCoy a proper chance to defend himself.

The attorney fee dispute began after McCoy won jury verdicts against FedEx for workplace discrimination.  Illston appointed a special master to deal with the fee issues and FedEx accused McCoy of fabricating many of his hourly estimates.  McCoy got into deeper trouble with the special master, and Illston, after he failed to produce contemporaneous time records he had been ordered to turn over.  In addition, Illston found that the vast majority of McCoy’s fee petitions were not actually based on such time records, contrary to what McCoy had repeatedly represented in sworn declarations.  However, the 9^th Circuit also ruled that Illston was wrong to bar McCoy from resubmitting correct attorney fee applications.  “We note that in deciding whether to deny McCoy permission to refile a request for attorney’s fees, the district court may wish to consider the possible effect of such a denial on McCoy’s clients,” the panel wrote.  “It is possible that if McCoy is unable to collect statutory attorney’s fees from FedEx he may be able to collect contractual attorney’s fees from the clients.  In that event, it would be the clients rather than McCoy who would suffer the adverse consequences of McCoy’s misconduct in seeking fees.”

A recent BLT Blog story, “Lawyers in D.C. Gun Case Want $3.12 Million in Fees” reports that the lawyers who successfully challenged the District of Columbia’s handgun ban, securing a victory in the U.S. Supreme Court in 2008 are asking for more than $3.1 million in attorney fees and costs.  Alan Gura, a lead attorney for the plaintiffs in Heller v. District of Columbia, said in a motion that the fee request is a lower amount than the more than $3.5 million in fees the attorney first requested in August 2008.  The new lower amount stems from Gura’s application of the U.S. Supreme Court’s ruling in Perdue v. Kenny A.  Gura of Alexandria’s Gura & Possessky said in court papers that the high court’s decision in Perdue “provided significant new guidance regarding the issue of lodestar adjustments in exceptional cases such as this.”  The net effect of the adjustments – including one for market rates and another for “excessive delay” in payment – produces an overall lower fee request, Gura said.

The total amount sought is $3,126, 397.  Gura said three attorneys performed the bulk of the work.  The hours remain unchanged from the first motion for attorney fees: Gura, Clark Neily III, a senior attorney at the Institute for Justice and The Cato Institute’s Robert Levy, who finances the case, clocked 1,661 hours, 808.3 hours, and 595.6 hours, respectively.  Gura said that his firm does not have standard, fixed hourly rates.  Instead, Gura performs work typically on a flat-fee contingency basis.  Gura noted his hourly billing rate for Heller, before adjustment, is $589.

A recent story in The American Lawyer, “Judge Refuses to Toss Fraud Charges Against Quinn Emanuel Over Legal Fees” reports that former Quinn Emanuel client Tele Atlas sued the law firm for fraud, breach of fiduciary duty, overcharging, and legal malpractice in February 2009 alleging that Quinn Emanuel underestimated the costs it would incur in an antitrust case against rival Navteq.  Tele Atlas claims Quinn Emanuel incorrectly advised the company that it could recover its legal fees and costs, and that its estimated legal bill would come in at $4 to $5 million.  In the end, Quinn Emanuel racked up a $15 million tab.

San Francisco Superior Court judge Peter Busch denied most of Quinn Emanuel’s motion for summary judgment, concluding that there was evidence that the firm partner David Eisman had told Tele Atlas that the legal fees were recoverable.  The judge brushed aside Quinn Emanuel partner Terry Wit’s argument that the firm had told Tele Atlas that its damages claims were weak.  “Damages and attorneys’ fees are different,” Judge Busch reportedly said.  According to court records, Quinn Emanuel claims that Tele Atlas still owes the firm $2 million.  “The dispute is really over the outstanding bills” said Quinn Emanuel partner Christopher Tayback.

A recent Law.com story, “Lawyers’ Fees Slashed by $2.2 Million in Suit Over Blue Cross Claims Practices” reports that New Jersey Superior Court Judge Stephen Bernstein reduced $2.2 million from the fee award to the plaintiffs lawyers.  The underlying case, Sutter v. Horizon Blue Cross Blue Shield of New Jersey, a class action bought on behalf of doctors who alleged the giant insurer denied legitimate claims and, when it did pay, paid slowly, increasing providers’ administrative costs.  The health insurer was prepared to pay $6.5 million in legal fees to class action lawyers when the case settled, but nine doctors groups objected to the deal, remanding the case to the Essex County judge who approved the settlement in 2007.  In 2007, Bernstein found 16.7 percent contingency fee rate fell within the range of reasonable attorney fees in class actions.  The appeals court said Bernstein should have used the lodestar method.

On remand, Bernstein found that the 5,056 hours expended by the lawyers was warranted, but rejected New Jersey law firm Mazie Slater Katz & Freeman’s argument that he should consider the firm’s effective rates – its traditional recovery rates for contingency work.  He approved a blended rate of $550 per hour for work by Eric Katz and partner David Mazie and $100 per hour for work by law clerks, for a total of $2.7 million.  He added a 35 percent multiplier for the difficulty of the case and the risk the firm took pursuing it and added the $600,000 in out-of-pocket costs expended.  The total: $4.3 million.

A recent Law.com story, “More Attorneys Exploring Third-Party Litigation Funding” reports that more corporate clients are considering litigation funding to help finance their legal claims.  Third-party litigation funding is a relatively recent phenomenon in the United States, after establishing itself in Australia, then later in the United Kingdom.  Two litigation funds have in the last three years launched initial public offerings, and both are on the lookout for U.S. litigants who would allow them to finance their case in return for a portion of any settlement or judgment.  Juridica Investment Ltd, which launched in 2007, last month reported that through March it had committed almost $123 million to 15 investments in 22 cases, one of which is in New York, according to a spokesman.  Burford Capital Ltd., which went public in October, has so far invested $40 million across 10 cases, many of them international arbitrations.  Juridica and Burford are two of the largest funds dedicated solely to litigation finance.

In regulatory filings, one of Burford’s earliest investments was a trade secret theft and breach of contract matter in an undisclosed U.S. federal court that was schedule for trial last month.  Burford invested $2 million to cover the costs of getting it to trial and cover some of the outstanding legal fees.  Burford stands to receive 35 percent to 67 percent of any recovery from that lawsuit. 

A recent NLJ story, “High Court Lets Government Take Fee Awards for Clients’ Debts” reports that the U.S. Supreme Court, in an unanimous decision, ruled in Astrue v. Ratliff (No. 08-1322) that attorney fee awards under the Equal Access to Justice Act (EAJA) are payable to the client, not the attorney, and can be offset to pay a client’s debt to the federal government.  This decision will affect primarily lawyers and law clinics who successfully represent clients seeking Social Security or veterans benefits who earn attorney fee awards under EAJA.

In Astrue, Justice Clarence Thomas, writing for the Court, rejected Ratliff’s argument that language in the EAJA supported payment of attorney fees directly to the prevailing party’s attorney, thus protecting the fees from a government offset.  “We have long held that the term ‘prevailing party’ in fee statutes is a ‘term of art’ that refers to the prevailing litigant,” wrote Thomas, adding that other sections in the fee-shifting law underscore the “usual and settled” meaning of prevailing party.  Although it is true, he said that the Social Security Act makes attorney fee awards under the law directly payable to a prevailing party’s attorney, Thomas wrote, that contrasts with the EAJA and shows “that Congress knows how to make fee awards payable directly to attorneys where it desires to do so.”

In her concurrence, Justice Sotomayor expressed concern that the Court’s ruling would undermine the purpose of EAJA, whose attorney fee awards were created by Congress to reduce the financial barriers associated with challenging unreasonable government actions.  Thus, she warned, by subjecting EAJA awards to administrative offsets for litigants with debts, the Court’s ruling will inevitably make it more difficult for persons of limited means to obtain legal representation.

According to recent reports, BP’s litigation costs are expected to run in the billions.  It has been seven weeks since the oil spill in the Gulf of Mexico and there are already 6,000 lawsuits filed against BP.  A good number of the suits have been filed by Robert Gordon, chief trail lawyer at Weitz & Luxemberg, a New York law firm representing hundreds of fisherman affect by the oil spill.  But the pool of claimants is not just limited to fishermen.  Many business owners, restauranteers, shareholders, and the attorney generals of the Gulf states have filed suit as well.

Overall, the total legal cost could run in the billions for BP, especially if punitive damages are delivered in a court verdict.  A case that brings stiff punitive damages is the worst case scenario for BP, who would have to pay out claims from a general fund and keep a jury from awarding what would sure to be a multi-billion dollar verdict.

A recent NLJ story, “D.C. Circuit Rules for Winston & Strawn in Fee Dispute” reports that Winston & Strawn won its fee dispute with form client Doley Securities, Inc., which allegedly owes the firm about $85,000 in legal fees.  In April 2007, Doley Securities signed an engagement letter stating an hourly rate for partner Thomas Buchanan at $595 and partner ranges of $405 to $845 and associate ranges of $200 to $590.  Doley’s new lawyer, Claude Roxborough, a name partner at Washington’s Kimmel & Roxborough called the ranges of fees unenforceably vague and said the dispute belonged in arbitration, not in a court of law.

The D.C. Circuit said in its judgment that the fee agreement between Winston and Doley specifies the lawyers may bill “within a range of possible fees” and that Doley’s “presentment of a prior oral agreement that they would only be charged fees at the low end of the ranges is inconsistent” with the written agreement.

Lawmakers, Governor Charlie Chist, and Attorney General Bill McCollum handcuffed current and future Florida attorneys general right before the oil spill in the Gulf of Mexico started.  Six days before the Deepwater Horizon rig exploded and the wellhead a mile beneath it began gushing oil, Chist signed into law a cap on attorney fees.  The law that goes into effect July 1, 2010 caps attorney fees at $50 million in contingency cases on contract work for the Office of the Attorney General.

“You’re not going to get the best lawyers to come in on a Dream Team where you’ve capped the attorney’s fees,” said Fred Levin, the renowned Pensacola trial lawyer.  He said preparation and expert witnesses could easily run to $100 million.  McCollum’s law does provide a provision to pay “reasonable costs and expenses,” but it’s not up front.  You may recognize Levin’s name, not only because it graces the University of Florida’s School of Law, but because Levin was the linchpin in the state’s $13 billion big-tobacco settlement.  For his part of the litigation, his firm got $250 million – that’s only part of the $3 billion tobacco companies paid (separately, and without costing the state a dime in attorney fees).

A recent Law.com story, “Bankruptcy Trustee Settles With Former Rothstein Firm Lawyers Over Future Fees” reports that the trustee in the bankruptcy case of Ponzi operator Scott Rothstein’s defunct law firm has settled disputes with seven attorneys over future legal fees from cases they handled while employed at Rothstein Rosenfeldt Adler (RRA).  RRA dissolved last November following disclosures that Rothstein was running a Ponzi scheme based on phony settlement financing out of his Fort Lauderdale law office. 

The settlement agreement, submitted to U.S. Bankruptcy Judge Raymond Ray, provides for the trustee, Herbert Stettin to get a percentage of the recoveries on unresolved cases the former RRA attorneys are handling for clients in the door before Rothetein’s $1.2 billion fraud collapsed last November.  No dollar amounts are listed, but Gary Farmer, a former RRA attorney, said the total uncollected fees could exceed $10 million.

A recent Law.com story, “Disbarment Urged for Lawyer Who Billed Fake Clients” reports that the New Jersey Disciplinary Review Board (DRB) is recommending disbarment for a lawyer who manufactured fake billings for nonexistent clients, first at Fox Rothschild and then at Margolis Edelstein.  The board found that Kenneth Denti violated ethics rules against fraud by drawing a salary while pretending he had done $350,000 worth of work and submitting phony expense reports. 

According to the DRB, Denti was a contract partner at Fox Rothschild with a salary of about $200,000.  He brought work with him, or so Fox Rothschild thought when it saw time sheets he entered for clients listing services rendered.  The law firm became suspicious when he submitted no invoices for payment.  An internal Fox Rothschild investigation showed that Denti’s clients didn’t exist and he was told to leave after 14 months.   Fox Rothschild then filed a confidential grievance with the New Jersey Office of Attorney Ethics.  But because the grievance was confidential, Denti was able to continue the fraud at Margolis Edelstein.  Later, Margolis Edelstein found out Denti left Fox Rothschild under and cloud and filed its own grievance with the state.

A recent Law.com story, “Schwab Settlement to Generate $20 Million Fee for Hagens Berman” reports that U.S. District Judge William Alsup has given preliminary approval to two deals that would furnish $235 million to class members in a class action securities fraud case against Charles Schwab.  Of that $235 million, Hagens Berman will be awarded about $20 million in attorney fees: 8 percent of the $200 million set aside for federal claims, and 11 percent of the $35 million to resolve state law claims.

Led by partners Steven Berman and Reed Kathrein, the plaintiffs successfully battled Schwab’s outside counsel Morrison & Foerster over the investment company’s so-called YieldPlus plan.  Plaintiffs say Schwab violated securities law by telling investors it would only put up to 25 percent of the assets in its YeildPlus fund in any one industry.  But Schwab allegedly changed the rules midstream and concentrated more than 45 percent in mortgage-backed securities. The SEC filed briefs supporting the plaintiffs, and the company quickly agreed to settle after Alsup recently issued a series of summary judgment rulings that went against them.

A recent NLJ article, “Justices Make it Easier for Employees to Win Legal Fees in Disability Cases” reports that in a unanimous ruling, the U.S. Supreme Court held that workers suing over disability and other benefits under the federal law known as ERISA may win attorney fees and expenses if they achieve “some degree of success on the merits” of their case.  In Hardt v. Reliance Standard Life Insurance Co., the Supreme Court rejected a tougher standard imposed by the U.S. Court of Appeals for the 4^th Circuit where fee claimants must be a “prevailing party” before seeking an attorney fee award.

In the underlying case, Reliance objected to paying Hardt’s attorney fees and expenses, arguing she was not the “prevailing party” because the insurance company had agreed to pay the benefits.  Hardt incurred $58,920 in attorney fees to recover $55,250 in disability benefits.  The district court awarded attorney fees, but the 4^th Circuit reversed.  In the Supreme Court, Justice Clarence Thomas wrote that the words “prevailing party” do not appear in ERISA’s fee-award provision.  That provision, he said, “expressly grants district courts ‘discretion’ to award attorney’s fees ‘to either party’.”  Because the Court’s “prevailing party” precedents did not apply here, Thomas said a line of fee precedents that do not rely on prevailing-party status should apply, with 1983’s Ruckelshaus v. Sierra Club being the principal case.  Under Ruckelshaus, success, before a court may award attorney fees must be more than “trivial” or a “purely procedural victory”.

A recent Law.com article, “Judge: Lead Paint Companies Must Cover Own Defense Costs” reports that three paint manufactures, including Cleveland-base Sherwin Williams cannot recover money they spent defending themselves in a lawsuit.  In 1999, the state of Rhode Island became the first state to sue paint manufactures over lead-based paint.  In 2008, the state Supreme Court threw out a verdict that would have forced the three companies to spend billions of dollars to remove lead paint from homes and buildings in the state.  After throwing out the verdict, the companies asked the state to reimburse them for legal expenses.

But Superior Court Judge Michael Silverstein denied that request, saying the lawsuit was bought in good faith and focused public attention on problems associated with lead-based paint.  The judge said ordering the companies to be reimbursed could deter the state from bringing public health lawsuits in the future.  State law allows the winning side of the lawsuit to recoup legal costs, though at the judge’s discretion.  Attorney General Patrick Lynch called the judge’s decision “courageous” and said the companies’ request for reimbursement was about more than just costs.  “It was meant to intimidate and silence any attorney or jurisdiction that would dare to demand that they be accountable for the products they put into the marketplace,” Lynch said in a written statement.

A recent article in the Salt Lake Tribune, “Attorneys want $7 million in Navajo Trust Fund Case” reports that attorneys for the plaintiffs in Pelt, et. Al v. Utah seek $7 million in attorney fees and expenses.  The underlying class action, originally filed in 1991, claims the state government mismanaged the Utah Navajo Trust Fund.  The trust was established in 1933 by the federal government to manage 37.5 percent of royalties from oil wells on Utah’s portion of the Navajo Nation for San Juan County Navajos.  The case settled earlier this year for $33 million.  The attorney fees sought are 21 percent of the proposed award.

San Juan County Commissioner Lynn Stevens, who is not a Navajo, said that’s too much.  “I think that’s excessive,” Stevens said.  Brian Barnard of Salt Lake City is one of four attorneys seeking payment for work on the case over the past two decades.  “We haven’t been paid for 18 years,” Barnard said.  The normal rate for such contingency cases is 33 percent, Bernard noted.  Further, Barnard said the proposed legal bills are itemized so that plaintiffs can see exactly all the time accrued and expenses incurred since 1991.  Barnard, along with 3 other attorneys mailed notices to 11,000 Navajo beneficiaries to explain the settlement and legal bills.  Various meetings will be held in and around the reservation in the coming weeks, Barnard said, to answer plaintiffs’ questions.

A recent article, “The Beginning of the Demise of the American Rule” in the DRI’s For the Defense, written by Jodie Steinberg of Ericksen Arbuthnot in Oakland, California advises counsel to consider whether an award of attorneys’ fees though the “tort of another” doctrine might apply to their case. 

The article concludes, “Since most state courts across the nation have been willing to award attorneys’ fees as damages under the “tort of another” doctrine, counsel should consider pleading the “tort of another” doctrine as a cause of action in their lawsuits.  Especially when dealing with professional liability cases, counsel should carefully consider whether an award of attorneys’ fees through the “tort of another” doctrine might apply.  If you believe that the doctrine might apply, this will greatly impact how you evaluate a case for your client.

Lastly, give forethought to some other significant implications of pleading the “tort of another” doctrine.  First, an insurance company involved in defending a case may not consider attorneys’ fees under the doctrine covered under the terms of the applicable insurance policy.  Also, if a party seeks attorneys’ fees in a cause of action through the “tort of another” doctrine, then arguably the attorney’s billing records would become discoverable during litigation and subject to attack.  Counsel should take care in deciding whether to plead the “tort of another” doctrine and may want to agree to stipulate to post-judgment consideration by the judge to protect billing from discovery until after a trial.”

Disclaimer:  This article is provided for informational purposes only.  Before taking any action that could have legal or other important consequences, speak with a qualified professional who can provide guidance that considers your own unique circumstances.

A recent article in Insurance Journal, “Ohio Supreme Court: Attorney Fees Distinct from Punitive Damages” reports that the Ohio Supreme Court ruled that attorney fees are distinct from punitive damages and that public policy does not prevent an insurance company from covering legal fees on behalf of an insured.  In Neal-Pettit v. Lahman, Allstate Insurance argued that the automobile policy does not cover awards of attorney fees.  Allstate argued that the “attorney fee award is an element of the punitive damages award because both are made in cases of malicious conduct.”  Allstate’s policy doesn’t cover punitive damages, therefore the award for attorney fees is not covered either, the insurer reasoned.

In the underlying case, Kimberly Neal-Pettit filed suit against Linda Lahman for compensatory and punitive damages due to personal injuries sustained in a car accident.  The complaint alleges, Lehman struck Neal-Pettit’s car when she was intoxicated.  At trial, the jury returned a “verdict against Lahman for compensatory damages totaling $113,800 and punitive damages totaling $75,000.  In addition, the jury awarded attorney fees for Neal-Pettit at $46,825 and $10,085 in expenses.  After Allstate declined to pay punitive damages and attorney fees, Neal-Pettit filed suit.  The Eighth District rejected Allstate’s argument, holding that attorney fees are “conceptually distinct” from punitive damages.  The Ohio justices affirmed the lower court’s ruling, citing previous case law that established that although “an award of attorney fees may stem from an award of punitive damages, the attorney fee award itself is not an element of the punitive damages award.”

A recent Find Law article, “Caps on Attorney Fees Only Hurt the Injured” provided by Silvers, Langsam & Weitzman, P.C. in Philadelphia opines on recent debate surrounding an amendment to the health care bill that would have limited attorney fees that plaintiffs’ attorney could have collected in medical malpractice lawsuits.  In the amendment proposed by Sen. John Ensign (R-NV), attorney fees would have been limited to one-third of the first $150,000 recovered in any medical malpractice case.  If the damage award exceeded $150,000, then the attorneys’ could receive an additional one-fourth of any amount over $150,000.  For example, if the total damage award was $300,000, then the attorneys would be entitled to a total of $87,500 for their fees.

“Had this measure past, it would have done nothing more than limit the legal rights of victims of medical malpractice.  It is impossible to overstate the importance of contingency fee arrangements in personal injury cases, particularly in medical malpractice suits.  These fee arrangements allow those who otherwise would not be able to afford legal representation to still receive their day in court.  Contingency fee arrangements also allow attorneys to take on costly and risky medical malpractice actions.  It costs a lot of money and takes a lot of time to challenge big insurance companies and health care providers.  Without the possibility of receiving a fair share of the damage award, many attorneys only could afford to take on the most lucrative of the medical malpractice cases – which would limit the access of victims with less serious injuries to the legal system.”

A recent NLJ story, “Interim Attorney Fees Awarded in Consumer Fraud Suit Over Mortgage” reports that a New Jersey judge has awarded counsel fees during a pending Consumer Fraud Act suit.  Superior Court Judge Kenneth Levy made the award after granting preliminary injunctive relief for the plaintiffs, saying “the question is…can the court award counsel fees at this stage in the proceeding, and there is really no case law that’s been presented to me that says I cannot do that.”  In his motion for the pre-judgment fee award, plaintiffs lawyer Abraham Borenstein said there is precedent for interim fee awards in other fee-shifting cases though none under the applicable Consumer Fraud Act, section, N.J.S.A. 56:8-19. 

Ruling on April 23 from the bench, Levy found the preliminary injunction –based on a probability of success on the merits—was sufficient to trigger that section, which provides for fees and costs to anyone granted equitable relief under the Act.  “Although I’m not in a position to order final judgment, I think that the plaintiffs should be awarded counsel fees for at least the work that they had to do through obtaining the preliminary injunction,” the judge said in Pena v. Newell Funding, LLC, ESX-C-16-09.  Borenstein called the fee award “groundbreaking” and says it means that “litigants—who previously could not afford to initiate a lawsuit are now empowered.”

A recent NLJ story, “N.J. Supreme Court Spares Partner From Disbarment Over Fee Dispute With Firm” reports that the New Jersey Supreme Court suspended attorney David Gross for three months for not telling his law firm partners about a $50,000 bonus from a satisfied client.  The court found a lack of “clear and convincing” evidence that Gross failed to safeguard funds or knowingly misappropriated funds in violation of Rule of Professional Conduct 1.15 (a) and (b), as the Disciplinary Review Board had found.  The court’s action is significant because it seems to carve an exception to In re Siegel, 133 N.J. 162 (1993), which made misappropriation of law firm funds a ground for automatic disbarment.

In 1998, Gross, then a managing partner at Budd Larner accepted the $50,000 bonus from Keene Creditors Trust, but never informed his partners.  Gross’ secretary Claudette McCarthy testified that she was instructed by Gross to delete a letter from her computer setting up Keene payment.  In arguing before the court, Gross’ attorney, Justin Walder insisted that the firm had no right to the money.  “This was a payment over and above legal fees,” he said.  “It was intended for David Gross, not the firm.”  When Justice Roberto Rivera-Soto said that “at the very least” Gross should have told his partners, Walder agreed, saying it was a mistake.  “But he had a good-faith belief that there was no policy,” Walder added.

On May 5, 2010 the Internal Revenue Service (IRS) approved the National Association of Legal Fee Analysis (NALFA) as a 501(c)(6) federal tax-exempt organization.  According to the IRS, NALFA meets all the qualifications of a 501(c)(6) business league under the Internal Revenue Code. 

A business league, under the Internal Revenue Code, is organized around a common business interest, which the organization typically promotes.  Business leagues also seek to improve a line of business in a particular field.  NALFA meets all these provisions.

As a 501(c)(6) organization, NALFA is exempt from federal income taxes.  More importantly, as a result of NALFA’s 501(c)(6) federal tax-exempt status, membership dues and contributions to our CLE programs may be tax deductible as a business expense!!!

A recent NLJ story, “Madoff Judge Awards Another $25 Million in Fees” reports that a federal judge has awarded trustee Irving H. Picard and his team of lawyers liquidating Bernie Madoff’s investment firm $24.6 million in interim attorney fees.  Southern District of New York Bankruptcy Judge Burton Lifand awarded about $627,000 in fees to Picard and $23.9 million in fees to Baker & Hostetler for October through January 31.  All told, the judge has awarded Picard and his team about $62 million in attorney fees.

Last month, Picard reported that “notwithstanding the monumental and unprecedented task faced by the Trustee, substantial progress” has been made in “reviewing and determining customer claims.”  However, he has come under fire from many investors who have protested his “cash-in/cash-out” approach to calculating claims.  As of April 30, Picard has allowed 2,061 of 12,453 claims, and the Securities Investor Protection Act had committed some $682 million in funds to satisfy customer claims.

A recent NLJ story, “Sued Over Unpaid Legal Fees, Client Hits Squire Sanders with Malpractice Suit” reports that after suing a client for $1.2 million in unpaid legal fees, Squire Sanders & Dempsey has been hit with a legal malpractice lawsuit and is now running up its own bills by hiring an outside law firm to defend itself.  The case exemplifies why some law firms refuse to file lawsuits against clients for non-payment of fees and why law firms should keep a close eye on outstanding invoices.  The underlying litigation involves a patent case between two competing window screen manufacturers.  After spending millions in fees, the client, Armor Screen ultimately had its patent deemed invalid by the U.S. Patent and Trademark Office.

Several attorneys said they would never allow a client to get so far behind on its legal bills and keep a tight rein on accounts receivable.  Others said they would never sue a client for non-payment of fees in any case.  “Whenever an account falls 30 days past due, I get an e-mail.  Then I will send an e-mail to the client, and if he doesn’t pay we pull the plug.  I also try to screen clients effectively”, said one managing partner, who did want to be identified.  When an unpaid legal bill climbs to a range of $30,000 to $50,000, “alarm bells go off,” said the partner, who called $1.2 million “a very big number.” 

A settlement of $3.4 billion was announced this week in one of the largest class actions ever filed against the U.S. government.  The case, Cobell v. Salazar, involves a 14-year claim against the federal government over the mismanagement of Indian trust funds.  The lead plaintiffs’ attorneys, Dennis Gingold and Keith Harper seek attorney fees between $50 million and $99.9 million.  After Senator John Barrasso (R-WY) suggested there should be a $50 million cap on attorney fees and costs, Gingold said if Congress tries to reduce attorney fees, the case would revert back to litigation.

Elouise Cobell, a former treasurer of the Blackfeet Tribe of Montana defended her attorneys’ $99.9 million attorney fees, saying that would be less 3 percent of the total settlement.  She said 3 percent is a “very low percentage for attorney fees in class action lawsuits.”  “Consider that attorneys representing tribes under Indian Claims Commission Act generally received 10 percent as mandated by statute and attorneys involved in suits related to Enron received 9.5 percent,” or almost $700 million in attorney fees.

A recently New York Times expose, “Who Knew Bankruptcy Paid So Well” by Nelson D. Schwartz and Julie Creswell reports on legal fees and expenses in bankruptcy cases that have arisen as a result of the Wall Street financial crisis.  Many of these mega bankruptcy cases (i.e. Lehman Brothers, GM, Chrysler, and Washington Mutual) have produced steady revenue for law firms and consulting agencies.  In the legal invoices are the usual suspects…

$263,000 in photocopies in four months
Over $2,100 in limousine rides by one partner in one month
$364.14 in dry-cleaning
More than a week at the Sherry-Netherland hotel in Manhattan (one lawyer’s room cost $685 a night)

“The size of this case justifies the size of the fees,” says Bryan Marsal, co-founder of Alvarez & Marsal.  “The legal skill we used to sell Lehman’s North American capital markets business to Barclays saved 10,000 jobs and preserved the business itself, capturing value that otherwise would have been lost,” said Harvey Miller, a partner at Weil, Gotshal & Manges, and considered the dean of the bankruptcy bar.  Many people in the industry agree that Lehman, in particular, is a huge case that tests even the most experienced lawyers.  “Lehman is a sufficiently complicated company that it would be safe to assume that if it weren’t for equally sophisticated professionals running the Chapter 11 case, that creditors would essentially receive nothing,” says Stephen J. Lubben, a professor at Seton Hall Law School.

Recent reports by Daily Finance and the Washington Post estimate that the legal fees in defending Goldman Sachs against six private shareholder lawsuits as well as the SEC investigation could reach $100 million.  Troy Eid, a former U.S. Attorney General for Colorado says that even before a company hires a law firm, the legal bills start piling up.  A simple grand jury subpoena, done before a formal investigation gets underway, can cost $100,000 just to get documents ready, he says.  Eid, who oversaw the prosecution of Qwest Communications Chair and CEO Joe Nacchio in 2005, says “This is a tremendously big deal in terms of legal costs”.

Jon May, chairman of the White Collar Crime Section for the National Association of Criminal Defense Lawyers, couldn’t help but notice that during live Senate testimony, Goldman executives were each represented by several attorneys.  Conservative estimates place hourly rates at $550, but it’s more likely closer to $1,000.  “You have a multiple of law firms representing individuals, and all kinds of specialists”, May said.

Investment News reports that Morgan Keegan’s legal fees have skyrocketed during the past two years to $251 million.  Morgan Keegan’s legal costs are largely the result of defending itself from investor claims stemming from poorly performing bond fund that held toxic mortgage-back securities.  In 2008, the firm’s legal expenses accounted for 6% of the firm’s total revenue.  But in 2009, legal expenses doubled, accounting for 12% of the firm’s total revenue.  In all Morgan Keegan had revenue had revenue of $1.28 billion last year and spent $161 million in “professional and legal fees”.

Morgan Keegan is “potentially on the hook for tens of millions of dollars, if not more,” said Andrew Stoltmann, a plaintiff’s attorney.  He has about 15 clients suing Morgan Keegan.  Morgan Keegan faces hundred more arbitration claims from investors who bought the company’s bond funds only to see the funds lose as much as 95% of their value.  In January alone, the firm lost separate claims with awards of $2.5 million and $1.1 million.

A recent article, “Lawyer Says He Can’t Estimate Fees in Toyota MDL” reports that Dan Becnel Jr., the first attorney to submit his name for co-lead counsel of the multidistrict litigation (MDL) against Toyota Motor Corp., said in a court document that it would be impossible to predict the cost of attorney fees in the case.  Becnel filed the document to address the court’s request that attorneys applying for lead counsel status estimate possible fees.  In support of his position, Becnel cited the recent U.S. Supreme Court decision in Perdue v. Kenny A., in which the court ruled that attorney fees could be increased from a lodestar calculation, but only in extraordinary circumstances.  In the document, Becnel also suggests that time sheets should be filed monthly under seal and that an accountant audit those submissions.

The MDL involves nearly 200 federal lawsuits alleging that consumers were defrauded by Toyota or that sudden acceleration caused someone’s injuries or death.  Lawyers have until Friday to submit applications before the court’s committee.

A recent BLT Blog post, “D.C. Circuit Gets Interested in Fee Disputes” reports that the D.C. Circuit Court of Appeals currently has two fee dispute cases before it.  In D.C., bar rules generally require lawyers to arbitrate fee disputes at the client’s request before the D.C. Attorney/Client Arbitration Board.  But now, two cases are before the D.C. Circuit.  The first is a dispute between Zuckerman Spaeder and former client James Auffenberg, Jr.  The dispute centers around $843,000 in unpaid legal fees.  According to the engagement letter, Auffenberg agreed to pay partner Paula Junghans $675 per hour and an initial retainer of $100,000, which was to be replenished monthly.  The letter also lists ranges of hourly rates for each class of timekeepers at Zuckerman: Partners charged $365 to $825; associates $200 to $475; and legal assistants $145 to $265.  Auffenberg agreed to raise the retainer to $500,000, but only agreed to pay the firm a total of $1.5 million.  According to the complaint, the firm improperly exceeded that amount by $843,000.

The other fee dispute now before the D.C. Circuit pits Winston & Strawn against its former clients Harold Doley and Doley Securities.  (NALFA reported on this story in a previous blog entry)  CLICK HERE for more details.

A recent article, “Waiting Game Continues in Stanford Legal Fee Dispute” reports that a hearing to determine who will pay the attorney fees for the defense in the Stanford Ponzi scheme is set for September.  R. Allen Stanford and three other executives are accused of bilking $7 billion from investors in a massive Ponzi scheme.  The appeals court last month ruled legal fees for Stanford and the other executives must continue being paid by British insurer Lloyds of London under an insurance policy that covers such expenses.  So far, Lloyds has paid more than $9 million in legal fees for the Stanford case.  Lloyds argues that its policy doesn’t pay on charges of money laundering, which Stanford and others are accused of doing.  The dispute over the payment of legal fees is part of a civil lawsuit filed by Stanford and the executives against Lloyds and is separate from the criminal case.  Earlier this month, Harvard law professor and defense lawyer Alan Dershowitz joined Stanford’s legal team as an adviser.

A recent article, “Lehman Brothers Bankruptcy Bill Approaches $750 Million – and Counting” reports that the latest legal bill in the Lehman Brother bankruptcy is in and it’s approaching $750 million and might possibly be on it way to $1 billion, according to documents Lehman filed with the SEC.  Through January 2010, law firms had billed about $311 million of the $649 million total paid out to advisers since Lehman filed for Chapter 11 in 2008.  The biggest biller continues to be Lehman’s lead debtor counsel at Weil, Gotshal & Manges, which has billed the estate just short of $165 million.  Weil’s bill breaks down to about $300,000 a day since Lehman’s bankruptcy filing.  Other top billers include: Jenner & Block at $48.4; Milbank Tweed at $47.7 million; Jones Day at $20 million; and Curtis Mallet-Prevost Colt & Mosle at $15.8 million

On Wednesday, the U.S. Supreme Court decided the most important attorney fees cases in years: Perdue v. Kenny A. (08-970).  In a 5-4 majority opinion, the Court overturned a lodestar multiplier of $4.5 million in attorney fees.  Under federal fee-shifting statutes, judges can award enhanced attorney fees (i.e. multiplier) above the lodestar amount.  However, the court in the Georgia case did not provide “proper justification” for the [fee] enhancement.  The underlying case involved a successful class action, challenging deficiencies in Georgia’s foster care system.  The prevailing attorneys sought more than $14 million in attorney fees.  Half was based on the lodestar calculation – about 30,000 hours multiplied by the hourly rates of $200 to $495.

One the one hand, the Court ruled that a strong performance can lead to a fee enhancement, but the Court also used words like “rare” and “exceptional”.  The Court offered no test for what constitutes an “extraordinary circumstances” for a fee enhancement, only writing that “the burden of proving that a [fee] enhancement is necessary must be borne by the fee applicant…producing “specific evidence” that supports the award” and that such [fee] enhancements should be “objective and reviewable”.

Court observers, reading in-between the lines of the spare 15-page ruling, see a deep-seated skepticism about “superior performance” – unless it can be measured by hard, objective, and measurable factors.  Prevailing attorneys who provide better-than-usual performances will no doubt seek ways to quantify performance as a lodestar “entry”, rather than a lodestar “bonus”.  This may be done by increasing the hourly rate or perhaps quantifying “lawyering” into numbers.  What is clear from this ruling is that prevailing attorneys will require additional supporting evidence (i.e. expert opinion) in order to justify a fee enhancement.

A recent article, “Del. Chancery Court Awards Plaintiffs Fees Based on Defendants’ Pre-litigation Conduct” reports that Delaware Chancery judge ordered defendants to pay their opponents’ attorney fees and costs and part of their expert witness fees.  The underlying litigation dates back to 2003, involving a contested sale of a motel.  In a letter ruling in Saliba v. William Penn Partnership, Chancellor William B. Chandler III wrote “Because defendants conducted the sale in a clearly conflicted manner that resulted in a breach of fiduciary duty, I find and conclude that it would be unfair and inequitable to require plaintiffs to shoulder the costs incurred in demonstrating the unfairness of this sale process.  For that reason, I award plaintiffs all of their attorneys’ fees and the portion of costs that they have paid in connection with the court-appointed expert witness.”

Although it’s not unprecedented for the Delaware chancery court to award legal fees for egregious pre-lawsuit conduct, “it is rare,” said Francis Pileggi, a litigation partner at Philadelphia’s Fox Rothschild who isn’t involved in the case.  “Parties involved in U.S. litigation generally pay their own attorney fees unless a statute or agreement dictates otherwise or the case is a class action or a derivative case with a common fund to pay the legal costs,” Pileggi added.

A recent NLJ article, “Winston’s Fee Dispute Gets Lofty Scrunity” reports that Winston & Strawn will square off against its former client Doley Securities, Inc. in the U.S. Court of Appeals for the D.C. Circuit over an unpaid legal bill of $84,412.19.  The fee dispute rests on an April 2007 engagement letter which gave a range of hourly rates for partners, associates, and legal assistants.  The letter listed ranges of hourly rates for each class of timekeepers at the firm: partners charged $405 to $845; associates $200 to $590; and legal assistants $135 to $285.  Winston attorneys Thomas Buchanan, Michael Mancusi, and John Court logged 215.25 hours before the investigation was dropped after Doley’s deposition. 

Doley Securities argues that except for Buchanan’s fees, it only agreed to pay the lowest rate in the ranges.  Doley, represented by Claude Roxborough of Washington-based Kimmel & Roxborough, said the engagement letter “appears to be nothing more than a rate sheet.”  Doley was prepared to pay $20,000 to resolve the fee dispute, but according to Buchanan, attempts to settle “didn’t go very far”.  “It seems like a lot of strife over $84,000” said Arthur Burger who chairs Jackson & Campbell’s professional responsibility practice group in Washington.  In fact, two experienced Washington appellate lawyers estimated that taking a fee litigation case to the D.C. Circuit can easily cost $100,000 or more.

According to a recent WSJ blog post, “Minneapolis Lawyer Accused of Stealing From Clients”, Michael Margulies, a former partner at Lindquist & Vennum has agreed to be disbarred for stealing up to $2 million from a half-dozen clients by double billing and submitting false expense reports for dinners.  Margulies, who specialized in real estate law is likely to face criminal charges.  The law firm’s managing partner, Daryle Uphoff said that Margulies’ dealing went undiscovered because they were done off the firm’s books and didn’t show up in routine audits.  Apparently, Margulies established Triad, a phony business through which he funneled clients’ money.  “He was extremely cleaver”, Uphoff said.  “We are stunned, of course.  Dismayed”, Uphoff added.

A recent article, “Judge Reverses Course, Approves Contingency Fee in Staten Island Ferry Disaster Case” reports that a federal judge ruled that a Manhattan attorney is entitled to the full one-third fees for his work in securing a $18.3 million verdict in a case stemming from the 2003 Staten Island Ferry disaster.  The attorney, Evan Togan, has been fighting for nearly two years to have his one-third retainer fee agreement upheld.  “The fee in the retainer agreement is confirmed and supported by the client as one he freely agreed to and now wishes to pay in full,” the judge wrote in McMillian v. City of New York. 

But the judge also ordered the difference between the reinstated fee and the reduced fee – i.e., 13 percent of the net award, or approximately $2.7 million – to be placed in escrow for possible payment to the attorneys who oversaw the liability phase of the ferry litigation.  There is pending litigation over claims for a portion of the fee by those attorneys, the judge said.  “Their work allegedly resulted in rejection of New York City’s claim of limited liability under maritime law,” Judge Jack B. Weinstein wrote.  “The benefits of that aspect of this quasi-class action litigation allegedly accrued to hundreds of injured claimants, including the client.”

A recent NLJ article, “Law Firms Resort to Suing Their Clients to Collect Fees” reports that many law firms are reluctantly suing their former clients to collect unpaid attorney fees.  “It’s not something we do lightly,” said Julia B. Morris, managing partner of O’Connell, Flaherty & Attmore in Hartford, Connecticut.  The firm has been suing clients in court since 2008 and has 29 pending cases seeking about $523,000 in unpaid fees.  In the past two years, the firm has closed at least 11 fee dispute cases seeking about $145,000, with some claims going to trial and other settling beforehand.  Another law firm, Pullman & Comlet has six fee dispute cases seeking at least $141,000 in unpaid attorney fees.  And the Hartford office of Bingham McCutchen is seeking $764,000 in fees from a former client. 

On top of the fight over fees, there is interest that has accrued over the years that firms are trying to recover as well.  Bill Jawitz, a law firm consultant strong argues against suing former clients over fees.  “Suing clients can lead to bad publicity for the firm and often invites counter-claims from clients suing for malpractice.”  Mediation or arbitration fee dispute programs are considered the best and most cost effective way to resolve a fee dispute.

A recent blog posting “Two Firms Sue Libya for $4.9M in Legal Fees” in BLT: The Blog of the Legal Times reports that two law firms filed suit against the government of Libya, seeking more than $4.9 million in unpaid legal fees and expenses related to defense work in a slew of terrorism-related cases.  The complaint claims Libya failed to make good on a 2008 settlement in which it promised to pay about $4.9 million to Paris-based Cabinet Sefrioui and Washington-based Arman Dabiri & Associates for their work handling lawsuits accusing the country of supporting terrorist attacks, including the 1988 bombing of Pan American Flight 103 over Lockerbie, Scotland.  The 2008 settlement agreement was intended to cover “all outstanding fees and expenses” for Cabinet Sefrioui and Dabiri & Associates.

Billing attorneys should submit his/her own opinion on the amount of a reasonable attorney fee.  The attorneys in the litigation are considered “experts” on the work they did and the reasonable value of it.  However, litigating attorneys are not experts on prevailing market rates, customary law firm billing practices, billing judgment, effective litigation management practices, and a host of other factors that affect reasonable attorney fees.  Qualified attorney fee experts have years of substantive experience on reasonable attorney fees and have provided expert reports, opinions, and testimony on the reasonableness of attorney fees in a variety of cases.  An expert opinion on the reasonableness of attorney fees from a qualified fee expert can move attorney fee figures significantly. 

Not only can a fee expert point out the strengths and weaknesses of your fee invoices and billing records, but can help you settle your case.  An expert opinion on the reasonableness of attorney fees from a qualified fee expert can be the biggest asset you have in settling the case.  Only an opinion from a well-credential, qualified fee expert can make the opposing counsel tell his/her client about the chances of taking the matter further.  If the case does not settle, your fee expert can help you win at trial.  Attorneys should tell their clients about the benefits of hiring and using an expert on attorney fees early in a case and how those benefits outweigh the expense.  

Source:  Leonard Bucklin, Attorney Fee Awards: A Handbook for Attorneys

A court awarded $45,000 in attorney’s fees in an ERISA case in which the claimant recovered just $650.  In Tomasko v. Ira H. Weinstock, the U.S. Court of Appeals in Philadelphia ruled that attorney fees need not be proportional to the amount of the judgment in order to be reasonable.  Furthermore, the court observed, a considerable portion of the fees awarded in this case were incurred due to the employer’s choice to fight “tooth and nail” despite the minimal stakes involved. (Both parties were lawyers whose dispute began when one left the other’s employment to form his own practice.)  The court conceded that where an ERISA claimant achieves only a partial victory on the merits (as in this case), the attorney fee award must be reduced accordingly.  However, the record indicated that the district court did make the necessary reductions.

An article, “Jury Trials-Reasonable Attorney Fees and Expenses” in the DRI’s For the Defense written by Gene F. Zipperle and Timothy D. Martin of Martin Ogburn & Zipperle in Louisville, Kentucky raises this question.  The article concludes, “Although entitlement to attorneys’ fees may be a jury issue, most courts considering the right to a jury determination on the amount of attorneys’ fees pursuant to a contract have found the issue to be one traditionally viewed as equitable in nature and particularly appropriate for determination by the court”.

This week, NALFA registered as a 501(c)(6) tax-exempt organization with the I.R.S.  The 501(c)(6) is reserved for professional and trade organizations (associations and societies) characterized around a common business interest.  501(c)(6) organizations are business leagues specifically designed to promote and improve a particular line of business (i.e. legal fee analysis).  As a non-for-profit business league, annual membership dues and CLE sponsorship contributions may be tax deductible as a business expense, not as a charitable contribution.

L.A. Attorney Fee Litigation Conference: “It Pays To Be Reasonable”
Southwestern Law School
Los Angeles, CA
June 24, 2010
Noon-5pm

It’s back by popular demand!  NALFA is hosting the 2^nd Annual L.A. Attorney Fee Litigation Conference: “It Pays To Be Reasonable” this summer in Los Angeles.  This CLE conference is one of the nation’s most comprehensive programs on attorney fees.  Top trial lawyers, litigators, and attorney fee experts come together to network and discuss the latest issues and developments on attorney fees and legal billing.

The Chicago Tribune reports that its parent company, the Tribune Company, has amassed over $138 million in legal fees for its Chapter 11 bankruptcy protection.  That amount equals one quarter of the media company’s cash flow from last year.  According to the newspaper report, Sidley Austin, the company’s lead attorney, has billed over $25 million.  During the last 15 months, the law firm has had 160 people working on the case, who have collectively billed 4.6 years of time at an average hourly rate of $500.  The report also shows a handful of partners pulling down top hourly rates that range from $925-$965.  Included in the report, among other things, was $1.2 million billed to the Tribune Company for the time spent preparing the legal bills.

U.S. District Court Judge Alvin K. Hellerstein in Manhattan scuttled a proposed settlement of lawsuits filed by more than 10,000 Ground Zero workers seeking compensation for health problems triggered by their exposure to ash and dust spewed into the air after the 9/11 terrorist attacks.  The litigation has lasted over eight years and in the proposed settlement would have paid plaintiffs $657.5 million using money from a federally funded insurance company.  Judge Hellerstein said the settlement was not enough and he was taking “judicial control” over the settlement, according to reports by the New York Times.  Judge Hellerstein expressed concern over the attorney fees, saying the proposed one-third attorney fees would take “a very large bite” out of the settlement to go to thousand of rescue workers who braved their lives in this nation’s worst terrorist attack.

A recent NLJ article, “Former Associate Claims Sedgwick Shortchanged Her on Fee” reports that Megan Doan, a former associate at San Francisco based Sedgwick Detert Moran & Arnold sued her former employer over breach of contract, alleging the firm stiffed her out of money it owed her for bringing in a lucrative client.  The lawsuit claims that Sedgwick violated its associate fee sharing policy when it refused to pay her $32,000 for originating a commercial litigation matter from the renewable energy company UPC Solar Management, LLC.  According to the complaint, Sedgwick’s associate and special counsel fee sharing agreement called for originating attorneys to receive 10% of the collected fees with no more than 5% of the total written off.  The policy calls for fee sharing to be at the discretion of the managing partner when more than 5% of the total fees and disbursements are written off.

A recent article, “Greenberg to Repay $3.2 Million in Fees due to Ex-Partner’s Bill-Padding” reports that Greenberg Traurig agreed to pay Calumet Park, a southeastern suburb of Chicago $3.2 million for overbilling from its former government affairs partner Mark McCombs.  City attorney for Calumet Park Burt Odelson estimates that only 10 percent of the fees billed by McCombs were legitimate.  The fees date back to 2002 for McComb’s work as economic development counsel, special village attorney for investigations, and administrative hearing officer for Calumet Park.  McCombs immediately resigned from his position advising Calumet Park and was terminated by Greenberg after an internal investigation revealed the inflated legal bills.  Calumet Park Mayor Joseph DuPar said, “Greenberg Traurig made things right as it became aware of the problem.”  He added, “We believe everyone, including the law firm, was deceived by McCombs.  They are doing the right thing and helping a community that needs the help.”

The dispute over $12 million in attorney fees McGuire Woods claims it is owed for its work as plaintiff’s counsel in the Bar/Bri class action litigation has gone to the 9^th U.S. Circuit Court of Appeals.  The underlying class action alleged that Bar/Bri and its parent company West Publishing Corp. conspired with Kaplan to divide the legal testing market consumer base by reserving the LSAT market for Kaplan and the bar market for Bar/Bri.  The case eventually settled for $49 million with about 300,000 Bar/Bri test takers receiving $125.  The U.S. District Court in California eliminated all the firm’s attorney fees over an apparent conflict of interest.  McGuire Woods has received no attorney fees to date, but was granted payment for their expenses which total $1.2 million.

A recent article, “Quantum Meruit Gives N.J. Firm Clean Sweep in Fee Collection Suit” reports that a New Jersey Appellate Division court ruled recently that a New Jersey law firm, stiffed on its fees, can collect $116,000 from its corporate client.  The ruling overturned a low court that absolved four shareholders of liability.  The ruling applied the quantum meruit doctrine which requires that services were performed in good faith, that services were accepted by the person for whom they were rendered, that the plaintiff reasonably expected compensation for performing the services, and that the value of services is reasonable.  “To satisfy the element in question, it is only necessary to establish that the defendants accepted the benefit of the services; Cole Schotz was not required to show that each defendant intended to pay for the services rendered,” the appeals panel said.  The appeals court remanded the case for entry of a judgment finding the corporate and individual clients jointly and severally liable for the outstanding bill.

A recent article, “Former Client Sues Gibson Dunn Over $1.3 Million in Fees” reports that California venture capitalist Elliott Broidy has sued Gibson Dunn & Crutcher over $1.3 million in fees the firm seeks for representing him in a “pay-to-play” scheme involving his company, Markstone Capital Group, a private equity firm and New York state officials.  Broidy pleaded guilty in December to a felony count of rewarding official misconduct and admitted that he “orchestrated the investment by lavishing state officials and people connected to them with trips and gifts worth nearly $1 milion.”  In his suit, Broidy claims that any legal fee dispute should be handled in California, where his relationship with Gibson Dunn was initiated, not in New York where the conflict is set for arbitration proceedings.  Broidy, now represented by California-based Michelman & Robinson, also claims that Gibson Dunn is not entitled to any legal fees because it committed fraud by failing to obtain appropriate conflict waivers while representing him.

An recent NLJ article, “Law Firms Protest Lehman Fee Committee’s Cuts in Legal Bills” reports that three law firms (Milbank Tweed, Jones Day, and Curtis Mallet) filed papers this week objecting to cuts in their legal bills for their work in the Lehman’s bankruptcy.  Since Lehman filed for bankruptcy in September 2008, fifteen law firms have billed the Lehman Brothers estate more than $300 million in total fees and expenses.  The fee cuts were made by the Lehman’s fee committee, headed by Kenneth Feinberg, the Obama administration’s bailout pay czar.  Feinberg slashed Curtis Mallet’s $4.8 million bill for a four month period by about $178,000.  The firm protested the cuts and Feinberg agreed to put $29,000 back onto the firm’s bill.  Jones Day billed the Lehman estate $9 million over the same four month period.  Feinberg cut the Jones Day bill by $412,000 because his findings included nearly $8,000 in first-class flights when its lawyers were suppose to fly coach and the firm exceeded the $20 per person limit on overtime meals by nearly $2,500 over those four months.  Jones Day protested the cuts and Feinberg compromised with a reduction of $293,000.

NALFA would like to welcome Steven Tasher, Co-CEO and Managing Director of Wyatt Partners, LLC as the newest NALFA member.  Wyatt Partners’ expertise encompasses a program to review and audit corporate legal fees in complex litigation – a program that has been highly successful in cost savings and cost avoidance.  Additionally, the firm has developed a litigation budget and support program that has a proven track record of dramatically reducing litigation spend.

Wyatt Partners offers a comprehensive, focused, and structured program to control litigation costs that includes:

• Comprehensive evaluation of the current litigation process and costs;
• Creating fee agreements and guidelines which incorporate cost saving and methodologies;
• Establishment of a litigation planning process and monitoring system;
• Creating a dedicated Budget Group to track and trend legal spend;
• Implementing a Budget Charter committed to cost savings;
• Utilizing appropriate cost-effective technology solutions; and
• Establishing programs to review and control the cost of third party vendors.

Reuters reports that a federal appeals court ruled on Monday that insurer Lloyd's of London must pay claims related to alleged swindler Allen Stanford’s legal defense.  The article, “Court says Lloyd’s Must Pay Stanford Legal Fees” reports Stanford and three former colleagues sued Lloyd’s after the firm stopped providing coverage under a directors and officers policy citing a money laundering exclusion.  The appeals court upheld the district court’s ruling that Lloyd’s must continue to pay costs and expenses that had been submitted by Stanford and his attorneys, but the U.S. Court of Appeals for the Fifth Circuit in New Orleans sent the case back to the U.S. District Court in Houston for additional arguments on the coverage question.  “The underwriters are enjoined from refusing to advance defense costs as provided for in the D&O policy unless and until the court ‘determines in fact’ by clear and convincing evidence…” that money laundering occurred, the ruling said.

Acting on behalf of the attorney fee practice and in the interests of attorney fee jurisprudence, NALFA has filed an amicus curiae brief in the Supreme Court of California in support of the petition for review in Pipefitters v. Oakley.  The brief, written by NALFA panelist Aashish Y. Desai of Mower, Carreon & Desai, LLP in Irvine, California, expresses concern that the Courts of Appeal are conflating two distinct theories for awarding attorney fees.  Desai writes that the decision to require pre-suit settlement notification to receive attorney fees to the substantial benefit doctrine “would come as quite a surprise to most class action fee experts and would render this Court’s decision in Vasquez v. State of California, 45 Cal.4^th 243, 247 (2008) pointless.” 

Desai continues, “In California, the substantial benefit doctrine was ratified and recognized as “well established” by this Court’s analysis in Serrano v. Priest, 20 Cal.3d 25, 38 (1977).  While the private attorney’s general exception may be implicated by the common benefit rationale, it is not the same.  For example, there is no requirement that the attorney’s fees under the substantial benefit doctrine come from a separate fund, nor is there a requirement that the plaintiffs prove that they prevailed in the underlying lawsuit.  The substantial benefit theory is simply rooted on the equitable notion that if you benefit based upon someone else’s hard work, you should have to share in the costs and expense of the labor – no free riders.  This is where Oakley goes wrong.”

The Petition for Review was written by Kevin K. Green of Coughlin Stoia Geller Rudman & Robbins, LLP.

A recent article, “Court Tosses Fee Award, Saying Trustee Overpaid for Rolls Royce Defense” reported that a California appeals court has snatched away $5 million in fees from attorneys at three top law firms.  The 4^th District Court of Appeal ruled that the trail court erroneously “rubber stamped” the fee award from attorneys at Loeb & Loeb, Jones Day, and Greenberg Traurig.  The three-judge panel said that the firms’ client, Patrick Donahue, had embarked on a “spare no expense strategy” by hiring three firms at once.  The panel ruled that although the client’s strategy may have benefited him, it was questionable whether it benefitted the Donahue trust.

Regarding attorney fees that the firms amassed in defending Patrick Donahue, the appeals panel appeared skeptical. “[S]imultaneous representation by multiple law firms posed substantial risks of task padding, over-conferencing, attorney stacking and excessive research,” the panel wrote.  The judges noted that one Jones Day associate alone billed $1.5 million.  Richard Bridgford, who represented Michelle Donahue at trial, said that the defense fees were excessive.  “I’ve never understood how it benefited the trust to have three law firms representing the former trustee against my firm,” said Bridgford.

A recent article, “Legal Fees at Add to Toyota Recall Costs” reports that the Toyota recall “could cost Toyota more than $2 billion.”  The article reports at least 41 class action suits have been filed against Toyota, seeking damages for car value loss and at least 13 individual lawsuits claiming deaths and injuries caused by unwanted acceleration of vehicles.  “Toyota customers will demand cash”, said lawyer Michael Louis Kelly who has filed two such suits in California, but acknowledged “I don’t expect them to reimburse for the lost value of these cars.”  “It important to distinguish the personal injury cases from the product-disappointment or lemon cases”, said law professor Carl Tobias of the University of Richmond in Virginia.

Toyota Vice-President Mike Michels said the company did not have an estimate on the potential litigation costs.  He said the company has liability insurance, without elaborating on its extent, and that it doesn’t cover warranty costs, which were budgeted before the recalls.

A Los Angeles Superior Court judge ruled recently that over $9 million in Glaser, Weil, Fink, Jacobs, Howard & Shapiro legal fees/costs (formerly known as Christensen, Glaser) was reasonable compensation for handling large, complex underlying litigation.

Attorney fee expert and NALFA member Ken Moscaret, Esq. (who testified successfully in the Enron case in 2008) submitted expert testimony at trial in support of the reasonableness and efficiency of Glaser, Weil's multimillion-dollar fees.

Glaser Weil represented a national bank as a trustee in the underlying litigation. Certain trust beneficiaries later sued the bank, claiming the bank had paid Glaser, Weil unreasonable amounts of compensation for litigation services on behalf of the trust.

Ken Moscaret focused his expert testimony to the L.A. trial court on several "big-picture" fee issues, including the following points:

(1.) The total dollar value potentially at stake in the underlying litigation (involving a well-known waterfront shopping center in San Diego) was many times greater than the actual amount of Glaser, Weil's own fees. Mr. Moscaret opined that there was a rational cost-benefit relationship between the economic value at stake in the underlying litigation versus the legal fees expended.

(2.) Glaser, Weil had repeatedly obtained successful results and outcomes against its opponent in the underlying litigation over the 7-year pendency of the case.

(3.) The underlying litigation was extremely complex and demanding, and required very sophisticated, aggressive lawyering by Glaser, Weil against a tenacious opponent.

(4.) Glaser, Weil's bank client understood how expensive the underlying litigation would be, was kept fully informed and involved in litigation decisions by Glaser, Weil, and approved all of Glaser, Weil's fees.

(5.) Glaser, Weil took concrete, affirmative steps to handle, manage, and staff the underlying litigation in an efficient manner, and exercised billing judgment.

NALFA member and attorney fee expert Brand Cooper helped a California court identify unreasonable attorney fees and expenses in Alma Alfaro v. Nomad Village Inc. The prevailing plaintiffs were seeking over $2.5 million in fees and expenses including a 2.0 lodestar multiplier. Brand Cooper of Cooper & Bruning, LLP in Pasadena, California was retained by the non-prevailing defendants to analyze the plaintiffs' legal billing entries. In a Tentative Ruling, the court cited Brand Cooper's Expert Report & Opinion several times. The court agreed with Cooper's expert analysis and significantly reduced fees and expenses in several areas. Here are just a few:

"Cooper calculated that 2,798.7 hrs of the total 4,937.6 hours in the case were "block billing". That is nearly 57% of the time entries. The court will apply an across-the-board 15% reduction in requested fees (after other deductions) based on this impediment to the reasonableness review."

"Cooper has analyzed these entries [vague and ambiguous entries] and determined they consist of 624.10 hours or $158,872 in fees. The court will reduce the requested fees by this amount."

"Cooper identified 121.45 time and $21,485 in fees devoted to deposition scheduling. This task does not require professional services. Again, plaintiff do not respond to this assertion the court will reduce fees in this amount."

In the Final Ruling, the court award plaintiffs $600,000 in fees and $25,000 in costs, which represents a major reduction from the original $2.5 million fee application.

In a recent New York Times Blog, "When Legal Bills Become a Cause for Dispute" by Peter J. Henning, professor at Wayne State Law School reports that Lloyd's of London is now responsible for paying up to nearly $100 million for the defense of R. Allen Stanford who was charged with conspiracy, securities fraud, and money laundering at Stanford Financial Group. White collar defense is an enormous expensive to defend, requiring a "staffing with a phalanx of partners, associates, and paralegals" and "defense costs can reach the ten of millions of dollars fairly quickly."

In the Stanford case, the court rejected the Lloyd's argument it did not have to pay the costs of defending criminal and civil cases because the policy included an exclusion from coverage when the officers are charged with committing money laundering. The blog reports that the decision by U.S. District Court Judge David Hittner in Houston "is one in a growing line of cases requiring the payment of attorney's fees for corporate directors, officers, and employees accused of wrongdoing."

Too many prevailing attorneys miss discovery of good fee award evidence. The time and fees of the attorney for the losing party is discoverable to establish the fee award to the prevailing party. Read the Stastny and Blowers cases.

"Although no single factor usually controls an award of attorney fees, the fees and expenses of defense attorneys are a significant factor in deciding whether the hours worked by plaintiffs' attorneys were reasonable and necessary." Stastny v. Southern Bell Telephone & Telegraph Company, 458 F.Supp. 314, 318 (W.D. N.C. 1978). [See also significant discussion in Stastny v. Southern Bell Telephone & Telegraph Co., 77 F.R.D. 662, 663-664 (W.D.N.C.1978).]

"I am persuaded by the reasoning of Stastny.... The amount of time spent by defendants' attorneys on a particular matter may have significant bearing on the question whether plaintiff's attorney expended a reasonable time.... Of course, in deciding to adhere to Stastny, I reject the approach taken in Mirabal and Samuel [the two federal cases most often cited to deny discovery of the defending attorneys time records]... The latter cases are both premised upon considerations which do not concern whether the information plaintiff seeks to discover is relevant to her claim for attorney's fees, but which relate to the proper evidentiary weight to be accorded such information....The mere possibility that the significance of the information which plaintiff seeks to discover may be discounted ....does not, however, mean that plaintiff should be precluded from obtaining the information." Blowers v. Lawyers Cooperative Publishing Co., Inc., 526 F.Supp. 1324, 1327 (W.D. N.Y. 1981). [See also, to the same effect, Henson v. Columbus Bank and Trust Company, 770 F.2d 1566, 1675 (11th Cir. 1985)("The district court abused its discretion in denying Henson's motion to compel discovery. While the concerns noted earlier regarding the relevancy of evidence of the other side's hours and fees are still prevalent, the trial judge may consider them as going to the weight of the evidence rather than its discoverability and admissibility.")]

Source: Leonard Bucklin. Bucklin has supervised litigation in 34 states, and is the author of the compact Attorney Fee Awards: a Handbook for Lawyers.

A recent article, "Federal Judge Calls Second Circuit's Approach to Calculation of Attorney Fees ‘Condescending'" reports that faced with a remand of an attorney fee award ordering him to "apply a presumption in favor of" the prevailing fee rate for attorneys in the Eastern District, Brooklyn federal Judge Frederic Block has affirmed in Luca v. County of Nassau his earlier fee award of $400 per hour for Hempstead litigator Fredrick K. Brewington. In the decision, Block wrote "that a reasonable paying client would gladly pay $400 per hour for an attorney of Brewington's caliber."

This recent decision centers on last August's circuit decision in Simmons v. New York City Transit Authority which held that "when faced with a request for an award of higher out-of-district rates, a district court must first apply a presumption in favor of the district's own prevailing rates." The widely quoted sentence in the Simmons holding was from Judge John M. Walker who wrote that defendants "should not be required to pay for a limousine when a sedan could have done the job", suggesting that Manhattan attorneys are "limousines" and Brooklyn attorneys are "sedans".