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NALFA Releases 3 Models of Growth for Litigation Hourly Rates

August 10, 2020

NALFA conducts custom hourly rate surveys for law firms, corporate legal departments, and government agencies.  Our hourly rate surveys provide our clients with the most current and accurate hourly rates within a given geography and practice area.  Starting this year, 2020, NALFA is conducting hourly rate surveys in 5 key practice areas.  These billing rate surveys show the current average hourly rate range for both plaintiffs' and defense counsel at partner and associate levels.

NALFA has released 3 different models of growth (linear, logarithmic, and logistic) for hourly rate ranges in litigation.  These growth curves are based on the universally accepted principle that hourly rates increase with experience (i.e. partner rates are greater than associate rates).  Linear growth is consistent straight-line growth.  Generally, logarithmic growth rises sharply then levels off.  Generally, logistic (S-shaped) growth starts slowly, rises sharply, then levels off.  We did not use exponential (J-shaped) growth because an ever-increasing, very steep curve does not fit hourly rate billing economics.

“These growth models do not account for the factors that effect hourly rates such as geography, practice area, party to litigation, complexity of case, size of law firm, and economics that our surveys do,” said Terry Jesse, Executive Director of NALFA.  "Those variables were not a part of this purely mathematical exercise," Jesse emphasized.

From these growth curves, we learn 2 key concepts:

1.  Logarithmic growth seems to represent the economics of hourly rates and the career span of litigators the best.  Generally, the growth starts rapidly, then increases slower, then eventually levels off.  Here, the highest rate of billing growth takes place in early-career.

2.  Logistic growth is another model that has some appeal to the economics of hourly rates and the career span of litigators.  Generally, the growth starts slowly, then increases rapidly, then eventually levels off.  Here, the highest rate of billing growth takes place in mid-career.



The parameters of these models include the number of years continuously practicing litigation (12 data points), plotted along the x axis and hourly rate ranges (20 data points) along the y axis.  The litigation experience data sets range (less than 2 Years-35+ years) has a variance of 1 year to 5 years.  The hourly rate ranges (less than $200-over $1,200) include a variance of $50 and $100.

NALFA Quoted in Portland Business Journal

August 5, 2020

NALFA and NALFA member and attorney fee expert John D. O'Connor of O'Connor & Associates in San Francisco were quoted in Portland Business Journal.  The news article, by Elizabeth Hayes, “Former Portland Insurer’s Law Firm Asks for $184M in Legal Fees” reports on Quinn Emanuel’s attorney fee request in the health insurers Obamacare reimbursement case.  Below is a copy of the article:

Health Republic went out of business after it took a $20 million hit when the government didn't pay it in full under the risk corridors program.  In February 2016, when Lake Oswego-based Health Republic Insurance was winding down its operations, it made an audacious move.  The small Consumer Operated and Oriented Plan, which had just 15,000 customers, took on the federal government.

Health Republic filed the first of what would become multiple lawsuits brought by insurers across the U.S. over the federal “risk corridors” program.  The cases sought to require the government’s to make good on its promise to compensate health plans that lost money on Affordable Care Act plans.

The shortchanging cost Health Republic $20 million and dealt a fatal blow to the company and dozens of other insurers.  Portland-based Moda Health took an even bigger hit than Health Republic, at $250 million, and followed Health Republic’s lawsuit with one of its own. Moda's suit worked its way to the U.S. Supreme Court, which in April ruled that the government owed U.S. insurers $12 billion.

Now Health Republic’s law firm, Chicago-based Quinn Emanuel Urquhart & Sullivan LLP, is seeking $184 million in attorney fees for the 183 clients it represented in the two class action suits it filed.  Both are related to the risk corridors but didn’t go to the Supreme Court.  The firm argues, however, that it filed a first-of-its-kind lawsuit. It “did not remain idle" while the other, non-class action cases, moved forward, but submitted multiple amicus briefs focusing on the “negative economic and societal impact that would result if the government failed to honor its commitments.”  Justice Sonia Sotomayor used that reasoning in her majority opinion, saying “the government should honor its obligations.

Quinn Emanuel, which specializes in complex litigation, represented Health Republic and the other insurers in the class actions on a contingency basis, meaning it would receive a fee only if they win the cases.  Quinn Emanuel’s “stellar performance” resulted not only nearly $4 billion for its insurer clients, but 100 percent industrywide recovery, the firm argues in its 40-page motion for attorney’s fees filed last week in the U.S. Court of Federal Claims.

It is asking for 5 percent of the judgments in its two class actions, which it argues would be “one of the lowest percentage rates ever awarded to class counsel, even in cases with multi-billion-dollar recoveries, such as this.”

If approved, the amount would still be one of the largest fee requests for a single law firm in U.S history, according to the National Association of Legal Fee Analysis.  There have been much larger fee awards, including those in the Enron lawsuit, but they are generally split between multiple firms.  John O’Connor, a San Francisco attorney and attorney fee expert, said it’s hard to say if the court will approve Quinn Emanuel’s request.  The percentage is low, but the total amount would represent an unusually high multiple of the firm’s average hourly rate of around $1,000.

The firm put in about 10,000 hours, translating to an hourly average rate of $18,500, if the award is granted.  “You can’t say it’s totally ridiculous,” O’Connor said. “Nor can you say it’s a slam dunk that they should get it. The thing they have going for them is it’s such a small slice of the pie.”  Quinn Emanuel emphasizes in its brief that it and Health Republic took on a “substantial risk” in suing the government.  Stephen Swedlow, a Quinn Emanuel partner, did not respond to a request for comment.

In an ironic twist given the eventual outcome, Moda CEO Robert Gootee apparently agreed.  When former Health Republic CEO Dawn Bonder told Gootee she was going to file the lawsuit, he responded that she was “making a ‘bold’ choice and that he would not even consider doing so on behalf of Moda, as he thought the lawsuit had no chance of success,” according to Quinn Emanuel’s recent brief.

Moda spokesman Jonathan Nicholas declined to comment on the conversation.  “Moda did not have any contingency fee arrangement with our law firm,” he said. “Robert insisted from the very outset that a core, fundamental right was at issue here, and he determined that our company would go all in — and all alone – in an effort to see that our judicial system, at its highest level, could indeed right a wrong!”

NALFA Welcomes Phillip Neiman, Esq., FCIArb

July 27, 2020

The National Association of Legal Fee Analysis (NALFA) is pleased to announce that Phillip Neiman, Esq., FCIArb has been named a Fellow of the association.

Mr. Neiman, a full-time neutral with JAMS in San Francisco, specializes in the resolution of complex business and commercial disputes.  He devotes much of his practice to securities and investment-related cases, including shareholder, partnership and M&A disputes, and has substantial experience in a range of other areas, including employment, insurance, IP, real property, professional liability, personal injury and privacy tort cases, as well as fintech and cannabis sector disputes.

Prior to establishing his ADR practice in 2004, Mr. Neiman spent a decade as CEO and General Counsel of a FINRA-registered investment bank.

Mr. Neiman has extensive experience resolving attorney fee disputes, both as an arbitrator ruling on contested fee petitions and as a mediator overseeing settlement negotiations with a fee component.  He has addressed a range of complex issues in contractual and statutory fee award cases, including lodestar adjustments, prevailing party determinations in partial success and disproportionate damages cases, multiparty apportionment, privilege claims related to billing records, Daubert challenges and assertions of bad faith litigation practices, among others.   

Mr. Neiman is a Fellow of the Chartered Institute of Arbitrators.

For more on Phillip Neiman, visit https://www.jamsadr.com/Neiman/

Judge Won’t Approve Fees That Amount to $7,500 An Hour

July 24, 2020

A recent Law 360 story by Dorothy Atkins, “Judge Won’t OK Atty Fees She Says Equal $7,500 An Hour” reports that a California judge issued a tentative ruling approving Merrill Lynch's $12.5 million wage and hour deal but rejected class counsel's $3.75 million fee bid, saying the case "was not particularly complicated" and their requested award would come out to $7,500 per billable hour.  Alameda Superior Court Judge Winifred Y. Smith said she would only approve an attorney fee award of $1.25 million, which she acknowledged is "substantially less" than the requested fee bid and represents only 10% of the total settlement.

The judge reasoned that although there's "ample authority" to support a 30% benchmark for awarding fees, when she considers the number of hours that the class attorneys spent on the case and the case's complexity, a lower fee award is warranted.  Class counsel has told the judge they expect to have spent a total of 860 hours on the case by the end of it, but the judge wrote in her tentative ruling that it's more likely they will "reasonably" have spent only 500 hours working on the case.

Judge Smith added that if she were to award $3.75 million in fees, then class counsel would receive $7,500 per hour for their 500 hours of work, or at least $4,360 per hour based on their asserted 860 hours of work.  "The court will not award windfall fees at exorbitant implied hourly rates of over $4,000/hour (accepting the asserted 860 hours) or over $7,000/hour (the 500 reasonable hours)," the opinion says.

If approved, the settlement would resolve a lawsuit that Marc D. Lowe initially filed in May 2018 and amended the following September, adding Kevin McGuan as a named plaintiff.  The latest rendition of the complaint asserts six causes of action, accusing Bank of America NA's investing and wealth management division of committing a host of state labor statute violations, including failing to reimburse financial advisers for their business expenses, failing to provide accurate wage statements, and failure to pay all wages owed.

Merrill Lynch denied the allegations, but before a dispositive motion was filed, the parties entered mediation and informed the court in October 2019 that they had reached a settlement.  Under the proposed deal, roughly 1,500 class members would receive an average of $5,738, while attorneys would seek up to $3.75 million, or 30% of the settlement, in fees and up to $35,000 in costs. McGuan and Lowe would also receive a service award of $25,000 each.

NALFA Welcomes Jim Warren

July 23, 2020

NALFA welcomes Jim Warren to our membership.  Jim Warren of Carroll Warren & Parker PLLC in Jackson, Miss. is a fully qualified attorney fee expert.  Jim has an active litigation practice focused on complex commercial litigation such as insurance coverage, construction defect, professional liability, product liability, and business disputes. 

Jim has also tried and arbitrated cases in Tennessee, Oklahoma, Missouri, California, and New York, and handled matters in many other states and countries.  He is a successful neutral, having acted as mediator, arbitrator, and court-appointed special master.  As a seasoned litigator he has supervised attorneys, managed high-stakes cases, reviewed billing entries, advised on billing practices, and coordinated billing systems with outside parties.

“Jim brings a sharp analytical mind to task-based legal fee analysis.  “He has an outstanding reputation among clients, jurists, and fellow litigators.  Jim offers a strategic approach to fee, billing, and rate engagements”, said Terry Jesse, Executive Director of NALFA.  “We’re proud to welcome his talent and skill set to our membership and rate him among the nation’s top attorney fee experts," Jesse added.

For more on Jim Warren, visit https://www.cwplaw.com/team/jim-warren/.