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NJ Justices Consider Fee Request Following High-Low Settlement

April 9, 2018

A recent New Jersey Law Journal story by Michael Booth, “Justices Consider Fee Petition That Followed High-Low Settlement,” reports that the New Jersey Supreme Court is considering whether a medical malpractice plaintiff who took the rare step of seeking counsel fees under the offer-of-judgment rule, even after entering a high-low agreement that was silent on the issue, may recover such fees.

Lawyers on Monday argued over whether the plaintiff could be awarded fees over and above the $1 million “high,” a question that the Appellate Division answered in the negative.

“It’s not the plaintiffs’ burden to prove” that there was a provision in the agreement for counsel fees, said Bruce Nagel, the attorney for the plaintiff on appeal. There was no waiver of counsel fees in the settlement, said Nagel, of Nagel Rice in Roseland.

The defendant’s attorney, James Sharp, asked the court to affirm the lower court’s ruling.

“This case is settled,” said Sharp, of Schenck, Price, Smith & King in Florham Park.

In its February 2017 ruling, the Appellate Division said: “Without evidence that the parties agreed to allow plaintiff to seek amounts in excess of the high, [the plaintiff] was not entitled to any other payments.”

“Parties are always free to preserve any claim they might have pursuant to a court rule or otherwise when settling a case … but they must clearly state that intention at the time of the settlement,” Judge Garry Rothstadt wrote, joined by Judges Ellen Koblitz and Susan Reisner.

In the suit, plaintiff Ben Serico of West Caldwell claimed he was administered a colonoscopy by physician Robert Rothberg in December 2007, but two years later he was diagnosed with colon cancer that had spread to his liver. Serico died two years after his diagnosis, in December 2011, at age 62, after which his wife, Lucia Serico, continued to pursue claims that Rothberg negligently failed to treat the cancer.

The appeals court said Lucia Serico made an offer of judgment of $750,000 before trial, to which Rothberg never responded.

According to the court, settlement negotiations began in earnest during the trial, and the parties entered a high-low agreement providing for a minimum recovery of $300,000 and a maximum of $1 million. During the negotiations, neither side raised a possible fee award, or a reservation or waiver of rights, or the offer of judgement, the court said.

A jury found for the plaintiff after a two-week trial before Essex County Superior Court Judge James Rothschild Jr., and awarded $6 million, thus triggering the $1 million “high.” (The jury attributed 20 percent of damages to the decedent’s pre-existing cancer, which, absent the high-low, would have reduced the award to $4.8 million.)

Because the $1 million judgment was more than 120 percent of the previous $750,000 offer, Serico, citing Rule 4:58, moved for an award of fees and costs. Each side acknowledged that the issue hadn’t been raised at the negotiations during trial, the appeals court said.

Rothschild denied the motion. He found there was no evidence of intent to determine that Serico’s rights to a fee sanction under the rule had been preserved. He also referred to his 42 years’ experience as a civil lawyer and judge, as well as the experience of colleagues he consulted, and said high-low settlements were rarely if ever followed by fee applications under Rule 4:58, according to the court.

“By entering into the high-low agreement, plaintiff could not recover any amount beyond the ‘high’ to which she agreed because the agreement limits the total amount of defendant’s obligation to that amount,” Rothstadt wrote, adding that such agreements are “subject to traditional rules of contract interpretation.”

The panel did warn against Rothschild’s approach in the case, holding that “reliance on [his] personal experience was misplaced.”

WY Supreme Court: Billing in 15-Minute Increments Not Abusive

March 30, 2018

A recent ABA Journal story by Debra Cassens Weiss, “Billing Client in Minimum 15-Minute Increments Wasn’t Abusive, Wyoming Supreme Court Says,” reports that a law firm that routinely billed a longtime client in 15-minute increments isn’t required to reduce its legal tab, the Wyoming Supreme Court has ruled.

The court upheld a decision by the Wyoming State Bar Committee for Resolution of Fee Disputes regarding the fees charged by Daly & Sorenson, the Legal Profession Blog reports.

The law firm had no written fee agreement with Gabrielle Manigault, but it had represented her in 97 separate legal matters for more than 16 years, according to the March 27 decision.  She typically paid her bills when proceeds from her oil and gas interests and cattle sales became available.

The fee dispute centered on the law firm’s legal bills in trust litigation that originated in 2012. Daly & Sorenson lawyers had become concerned about possible malfeasance by trustees and accountants, and the firm needed to hire tax and accounting experts to review thousands of pages of documents in preparation for numerous depositions.

At the time, Manigault owed more than $71,000 in legal bills, and the law firm needed money to hire the experts. Manigault promised payment, but the money wasn’t paid. Daly & Sorenson was eventually permitted to withdraw from the litigation, and it sued for $84,500 in unpaid fees.

In a first round, the bar fee-dispute committee determined that Manigault owed the firm $64,621.05.

After an appeal and a remand, the fee-dispute committee considered whether Manigault’s bill should be reduced because of the billing in minimum 15-minute increments. The bar committee said the practice was normal for the firm, and it had used 15-minute billing in in the 97 matters it handled for Manigault. The committee found the practice wasn’t unreasonable.

Manigault had alleged on appeal that the firm likely used the 15-minute minimum billing to routinely charge her for work that took far less time to accomplish, and speculated that the firm was billing for unproductive casual conversations between attorneys and paralegals.

She pointed to Board of Professional Responsibility v. Casper, a 2014 Wyoming Supreme Court case in which a lawyer misused her 15-minute minimum billing interval.

The lawyer in Casper billed for 15 minutes every time she signed a document. She also billed 15 minutes to review a short document and then billed another 15 minutes for signing it. The Wyoming Supreme Court said the case was different.

“Nothing approaching that sort of unreasonable or abusive billing is evident on this record,” the court said.

Indeed, the law firm’s two principal lawyers had testified that they rounded down to the lower minimum time interval when billing for a task that may have bridged two intervals, the court said. They also testified that a phone conversation in itself or typing an email may have taken less time than the amount billed. But the billing took account of the time spent locating the client file, making notes and memorializing a conversation after a phone call.

The court also pointed to testimony by firm partners that off-the cuff casual office conversations about progress on a case were not billed to clients. More formal meetings were billed, however.

The lawyers’ testimony supported the decision of the fee-dispute panel, the court concluded.

Judge Questions $75M in Fees in Puerto Rico Bankruptcy

March 21, 2018

A recent Big Law Business story by Elizabeth Olson, “Judge Pushes Back Against $75M in Fees for Puerto Rico Bankruptcy,” reports that Puerto Rico’s debt reorganization is not a year old, but officials are already expressing dismay at $75 million in fees that some law, accounting, and consulting firms are charging to the taxpayer’s tab.

The court-appointed fee examiner has negotiated to pare some fees that law firms, like Paul Hastings, have lodged. This came after U .S. District Court judge Laura Taylor Swain, overseeing the island’s $70 billion plus debt proceedings, politely scolded them and suggested they figure out ways to curb legal costs.

“People in Puerto Rico cannot afford the billions of dollars in fees,” she said. Congress set up the Financial Oversight and Management Board for Puerto Rico to oversee the island’s financial restructuring, review fees and pay “reasonable compensation for actual, necessary services” and expenses.

Battling over the tangled finances of Puerto Rico, which also was battered by Hurricanes Irma and Maria after the reorganization started, is likely to last several years. Lawyers for debtors, creditors, bondholders, public employees and retirees seek to assure the best outcomes for their clients.

And it could be a bonanza for professional firms. Five law firms, which also include O’Melveny & Myers, Paul Hastings, Greenberg Traurig, Proskauer Rose and Wilkie Farr & Gallagher, filed nearly $50 million in fees out of the total fees requested by 30 law firms, consulting and financial firms.

At a hearing in San Juan earlier this month, Swain approved close to $48 million in payments, which cover a four-month period between May 3, 2017, and Sept. 30, 2017. She urged restraint, likely mindful of other major bankruptcies, like Detroit’s, where lawyers, financial consultants and others amassed $178 million in fees from the city’s restructuring.

Time and Expense

Puerto Rico’s bankruptcy likely will exceed that of Detroit, and, by some estimates, could run as high as $120 billion. Rather than calling out excessive or frivolous expenditures by firm name, fee examiner Brady Williamson, a lawyer with Wisconsin firm Godfrey & Kahn, broadly listed practices that will leave some squirming.

Williamson, who was a fee examiner in bankruptcies for Lehman Brothers and for General Motors, reviewed time and expense entries from more than 760 lawyers, financial professionals, paraprofessionals and staffs, and recommended payment – or not – over the four-month period last year.

His report, compiled earlier this year, said that the legal issues presented by Puerto Rico’s bankruptcy are “profound,” and the “financial and legal professionals working on these cases have confronted massive challenges of time and distance, analysis and advocacy, with little directly applicable precedent.”

Even so, he specified wide hourly rate differences as a factor of concern. The average hourly rate for attorneys in firms working on the bankruptcy case who are outside of Puerto Rico was just shy of $775, with the highest rate at $1,425.

The rates are more than three times the $245 average hourly rate for lawyers in firms in Puerto Rico. In his report, Williamson conceded that the hourly rates for lawyers from New York or Los Angeles were at or below the going rates for experienced Chapter 11 bankruptcy counsel in those cities.

At the outset, few firms gave rate discounts, which are common in the current overall legal market, and Williamson said he had the power to suggest such lower rates. Since then, many firms volunteered discounts, according to the fee examiner’s official spreadsheet of payments.

Too Many Lawyers

Another problem, he said, was an excess of lawyers.

“Many firms are sending too many officials to attend – by almost any standard – bankruptcy hearings,” and they have “significant hourly and travel expenses,” he said in the report.

It is “unreasonable,” he noted, “to expect compensation for 12 attorneys from a single firm to attend an omnibus hearing at which only one or two were expected to speak.”

While expenses were “relatively little when compared to the professional fees that accompany them,” Williamson said that “inappropriate expenses of any kind cannot be overlooked.” There is a need, he said, for “a great deal more care by the professionals and their clients before requesting reimbursement,” citing the example of a $50 hotel charge for personal laundry.

Some law firms have promptly addressed concerns about fees and making adjustments, he said. He mentioned O’Melveny, which represents more than one entity, but its key role is representing the commonwealth’s independent public corporation called the Puerto Rico Fiscal Agency and Financial Advisory Authority, and Greenberg Traurig, whose main responsibility is the Puerto Rico Electric Power Authority – which is approximately $20 billion in debt.

O’Melveny billed just under $10 million for its first-period fees for work for the Puerto Rico Sales Tax Financing Corporation and, after negotiated adjustments, was approved for $9.7 million. Its other billings – totaling more than $5 million – also passed the examiner’s muster. The firm gave voluntary discounts as did Greenberg Traurig, which also won approval for nearly all of its $3.4 million in fees.

Wilkie Farr & Gallagher, which also offered voluntary discounts, had about $240,000 shaved off its $4.7 million fee total. It is the bankruptcy counsel to the Official Committee of Unsecured Creditors. Also winning approval of most of its fees was Paul Hastings, counsel for the Puerto Rico at the Official Committee of Unsecured Creditors. The firm, which was also a voluntary discounter, had its $9.3 million bill receive a recommendation of a nearly $81,000 reduction.

Cost-Saving Measures Put in Place

Left unresolved at the time the examiner’s report was filed earlier this month were Proskauer Rose’s nearly $16 million in fees— with voluntary discounts—for work as bankruptcy counsel for an array of debtors. The firm had no comment.

However, its bills—and other firms that were deferred for more consideration—appear likely to be worked out before a new set of fees and expenses are filed for the second billing period, from Oct. 1, 2017, through Jan. 31, 2018.

Proskauer and each of the other law firms were emailed and telephoned by Big Law Business for the details of their fees and expenses and adjustments made. No firm agreed to discuss them.

Going forward, however, Judge Swain has decreed there will be fewer lawyers and other professionals traveling to Puerto Rico. She said, at the hearing, that lawyers speaking at hearings can travel, but the rest can listen to the hearings remotely.

In another cost-saving move, the court also said it will pay for only two lawyers per client to attend meetings or hearings unless the court decides otherwise.

How firms react to such cost-cutting measures will become public in the next set of bankruptcy billings.

NALFA Featured in ALM Article on Billing Rates

March 20, 2018

A recent Daily Business Review story by Samantha Joseph, “Spoiler Alert: Most of South Florida’s Top Law Firm Billers Are Men,” reports on gender disparity in billing rates in South Florida.   The story reads:

No one on the list is talking, but new research on billing rates speaks for itself: Most of the attorneys commanding top dollar in South Florida’s bankruptcy bar are men.

In the latest annual study of billing rates by ALM, the parent company of the Daily Business Review, only one woman appeared among the 10 highest South Florida billers: Leslie Cloyd, a Berger Singerman Boca Raton partner who represents debtors and others in complex Chapter 11 cases and workouts.

That’s no surprise to many who follow financial disparities in the industry.

“Law firms don’t want to admit it, but there is gender inequality,” said Terry Jesse, executive director of the National Association of Legal Fee Analysis, a nonprofit that undertakes fee analyses for courts and private clients. “People say, ‘We don’t do this at our law firm.’ They don’t see it, but it does come out in surveys.”

ALM researchers used federal court billing data from bankruptcy cases to compile compensation lists for attorneys and other billers in 20 U.S. jurisdictions. The top spot in this year’s South Florida data belonged to Paul Keenan, a Greenberg Traurig Miami shareholder shown charging $765 per hour to clients in the firm’s restructuring and bankruptcy practice.

At No. 2, Michael Goldberg of Akerman commands $655 per hour. Cloyd is next at $625 an hour, and is the only female attorney among the 34 lawyers in the ALM data who billed at more than $400 per hour. Her Berger Singerman colleague, Jordi Guso, showed a rate of $610 per hour.

Two Jacksonville attorneys billing $575 per hour, Guy Bennett Rubin and I. Mark Rubin, appear next on the list, trailed by David Softness of David R. Softness P.A. in Miami at $550; Peter Bernhardt of McDonald Hopkins in West Palm Beach at $530; and Jeffrey Bast of Bast Amron and Paul Singerman of Berger Singerman, each based in Miami and charging $525 per hour.

Rounding off the top 10 are Ehrenstein Charbonneau Calderin’s Robert Charbonneau and Seese P.A.’s Michael Seese, who each charge $515 for an hour’s wor

“Really Disheartening”

“Diversity is an important topic,” said Silvia Hodges Silverstein, executive director of New York-based Buying Legal Council, an international trade organization for legal procurement. “But until we had billing data that was also tracking gender, we really couldn’t say anything about it.”

Silverstein’s own research in March 2014 found similarly bleak results. At that time, she led a Sky Analytics Inc. national gender study based on $3.4 billion in corporate legal billings for 40,000 lawyers and time keepers across 3,000 law firms.

Her data uncovered “profound differences” between realized rates—the amount paid—for male and female attorneys at the same career level. Among her findings: Female associates made $27 less per hour on average than their male counterparts with similar experience.

“What was really disheartening was that you have the difference right out of law school, and it continues as women advance in their careers, even as they become equity partners,” said Silverstein, who now also lectures at Columbia Law School. “Women aren’t able to make up the difference over time. His hourly rate goes up. Hers goes up, but not as much.”

At the top of the profession, Silverstein’s research found six percent of male lawyers commanded more than $800 per hour, while only two percent of their female counterparts ever reach that rate. And no women in her data set surpassed the $1,000 hourly rate, while two percent of male lawyers did.

“The pay gap got even wider as attorneys moved up,” Silverstein said.

The good news: Silverstein found that women at small firms fared better than their counterparts in Big Law or at midsize firms. Lawyers at firms with 25 or fewer attorneys billed at the same rate for comparable work, and increased their prices at the same pace, regardless of gender.

NALFA’s Jesse attributed the difference to the “culture” at many big firms.

“There’s less gender inequality at the midsize and solo level,” he said.  “At the very large firms it’s just kind of a system. … A lot of it is task-based. Male partners are given more leadership roles in litigation, and female might be assigned lesser tasks—more research-based.”

Women’s Work

Joe Ankus, a Davie, Florida-based consultant who’s spent more than 20 years recruiting talent for law firms, said niche specialties are key when it comes to determining what attorneys can demand. He said years of specialization often separate the top billers from counterparts with lower asking rates.

“You need to be viewed as the go-to lawyer, or at least one of a handful of go-to lawyers,” said Ankus, president and founder of Ankus Consulting Inc. “The way to stay at the top: You can’t be a good practitioner. You must be excellent.”

A focus on debtor-side Chapter 11 work combined with related in and out-of-court restructuring expertise appears to have helped propel South Florida’s top female bankruptcy biller into the male-dominated top tier.

Cloyd and others named in the ALM billing data’s top 10 declined to comment or did not respond to requests. But Cloyd’s law firm profile shows her work has included serving as debtor’s counsel to Ruden McClosky in the law firm’s Chapter 11 case, representing Florida Power & Light in a Chapter 11 case filed by Gator Generating Corp., and representing tax collectors for Indian River, St. Lucie, St. John, Glades and Hendry Counties.

Beyond the realm of law firm partners like Cloyd, Silverstein’s data, which includes legal staffers as well as attorneys, showed that women were more likely than men to bill time for lower-skill tasks.

“What we found was that there were certain ‘female’ jobs and they were not necessarily strategic,” Silverstein said.

In analyzing standardized billing data using Uniform Task-Based Management System coding, Sky Analytics isolated litigation billing codes, or L-codes. It found female billers outnumbered male counterparts for codes indicating low-level tasks, such as data-processing, as opposed to administrative or investigative roles.

Plus, men staffed the majority of large projects requiring teams of at least 20 billers or timekeepers. They accounted for 93 percent of that litigation, while women shepherded smaller teams. While their male colleges handled large suits, female timekeepers made up the majority of workers assigned to 81 percent of small cases, according to the Sky research.

Silverstein’s data also showed women occupied entry-level positions, accounting for 75 percent of paralegals and 46 percent of associates, but only 22 percent of partners.

Firms “need to be mindful of how they staff matters,” Silverstein said. “Do they give women the same exposure to important matters as men?”

And even if they get the work, researchers say women face more pressure to discount their time—offering discounts on 37 percent of their bills, compared to 26 percent for men.

“Males in the legal profession are considerably more likely to bill through without any adjustments,” Silverstein said.

That’s good news, at least, for most of the South Florida attorneys on the billing list.

Opinion: End Excessive Fees in Class Action Litigation

March 19, 2018

A recent Law.com editorial by the Law Journal Editorial Board, “End Excessive Fees in Class Action Litigation,” opines on attorney fees in class action litigation.  It reads:

Final approval hearings in class action settlements, which follow preliminary approval months before, and awards of attorney’s fees often are sedentary proceedings. Not so when plaintiffs’ attorneys in In re Anthem a few weeks ago walked into a hornet’s nest in Judge Lucy Koh’s courtroom in the Western District of California seeking $38 million in fees and $2 million for disbursements. This litigation centered on a data breach of insurance provider Anthem’s computer systems releasing personal information concerning 78.8 million people, triggering more than 100 lawsuits all consolidated before Judge Koh. After two years, four lead counsel with court approval had settled the case for $115 million. Subtracting the requested $40 million for fees and disbursements and additional millions for related costs, including $23 million paid to one firm to administer the settlement, this would leave 45 percent of the putative settlement for class members, but not for cash. Instead they will receive free credit monitoring services for two years in addition to the two years of monitoring Anthem gave when it made the breach public. Counsel claimed this would be worth up to $500 million if everyone signed up, because if customers sought such coverage on their own they would pay at least $250. In fact, only 1.86 percent of class members signed up. Those not signing, if they file claims, would get all of $50, for which there is a total pot of $13 million. Anthem also agreed to conduct twice yearly adversarial simulations mimicking a malicious attacker and triple its security spending over three years, for which another $17 million is allocated. The net result of all this, according to one critic, is 65 cents per class member.

In their defense, the class action attorneys asserted that to achieve this remarkable settlement, they spent more than 78,000 hours of work, took 200 depositions and reviewed 3.8 million pages of documents, briefed class certification and successfully defeated motions to dismiss in the absence of precedent certifying a data breach class. None of this convinced  Judge Koh or made her happy. Imagine counsels’ consternation when they were greeted by Judge Koh: “I’m deeply disappointed.” “I would never have appointed you [counsel’s spokesperson and co-lead counsel] had I known you were going to pile on 53 law firms on this case.” She added: “It does bother me that 55% [of the settlement amount] would go to attorney fees and administrative costs and only 45% goes to class members.” And to emphasize her disappointment, she added: “I’m going to keep that in mind if you apply for appointment of counsel in another case with me.”

Competitive Enterprise Institute blew the whistle on this application, and rightly so. Anthem’s disclosure of the data breach triggered dozens of lawsuits all over the country. They were consolidated in Judge Koh’s court. Eight firms competed for leadership positions; she trimmed the list to the four applicants. Their steering committee originally assured her “No one other than the attorneys and firms proposed here will necessarily work on this case” but they brought 49 more firms into the case. They passed out $3.5 million in work to the four firms the court had excluded, and another $10 million to 45 other firms, and then they engaged 53 law firms. “If I thought eight was too many, what made you think I wanted 53 firms churning on this case?” Judge Koh asked. They paid 329 lawyers (100 were partners) millions of dollars, more than two dozen of whom were contract attorneys charging $300-$400 per hour to perform low-level work such as document review for which $50 per hour is the usual fee. “I would like you to find a single paying client that would have approved these types of markups in a contract attorney!” Judge Koh challenged.

The court has appointed a special master to review the fee applications and report his conclusions and recommendations for appropriate fee awards. He certainly will scrupulously review the requested fees of the more than 100 partners and two dozen contract attorney who charged $300-400 for their pedestrian work. Maybe, one commentator facetiously has suggested, “the Special Master can bring on a few $400 contract attorneys to help sort through the bills faster?” We commend Competitive Enterprise Institute and Judge Koh for a step toward restoring public confidence in the cost of the litigation process.

NALFA Podcast with Glenn Newberry

March 9, 2018

NALFA continued its podcast series with an interview with Glenn Newberry.  Glenn Newberry is the Head of Costs Unit and Legal Director at Eversheds Sutherland International LLP in London.   He is a...

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