Call Us Today
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes



Fee Cuts Sought in Caesars Chapter 11 Bankruptcy

November 30, 2015

A recent WSJ story, “Watchdog Seeks More Cuts to Caesars Professional Fees” reports that Caesars’ restricting tab is getting a little lighter. The watchdog tapped to review the millions of dollars of fees submitted in the Chapter 11 case of Caesars Entertainment Corp.’s operating unit is recommending further cuts to the first round of charges in the massive bankruptcy.

The fee committee filed an updated review of fees that requested that firms write off thousands of dollars of fee beyond what they’ve already agreed to forgo.  The fee watchdogs filed their first report in August, taking aim at meals and travel as well as overly heavy staffing, among other charges.  But when the reduced fees were presented for approval of Judge A. Benjamin Goldar in September, he called for additional review.  “I have no guidance” on a “really critical aspect” of the applications, he said—whether the fees were necessary or beneficial.

The updated report seeks to address Judge Goldgar’s concern as they pertain to seven firms, three of which work for Caesars and four of which work for two of its official creditor committees.  The creditors’ committee status means Caesars is obligated to cover their fees in addition to its own.

Four of the firms will escape without further cuts, according to the latest report.  Chief among them is Kirkland & Ellis, Caesars’ lead bankruptcy counsel, which has already been asked to cut $170,000 from the $21.4 million in fees and $762,000 in expenses Kirkland lawyers charged for work performed between Jan. 15 and May 31.  Also getting off without further cuts beyond what the committee had already recommended are KPMG, Caesars’ tax consultant; Jones Day, whose lawyers represent the committee of junior bondholders; and FTI Consulting financial adviser to the unsecured creditors’ committee.

However, three firms aren’t so lucky.  On top of the nearly $65,000 in cuts the fee committee has already requested from DLA Piper, the law firm—Caesars’ conflicts counsel—has been asked to cut another $17,300.  Proskauer Rose, the law firm representing the unsecured creditors’ committee, faces a request to cut another $101,000 beyond the $50,000 it had previously been asked to cut.  And the $10,000 in cuts suggested to G.C. Andersen Partners, the unsecured creditors’ gaming industry consultants, has now grown by another $12,000.

Western Union Lacks Standing to Challenge $40M Fee Award

November 18, 2015

A recent NLJ story, “$40.5M Fee to Plaintiffs Firms Upheld Against Western Union” reports that a federal appeals court has upheld $40.5 million in attorney fees in a settlement with the Western Union Co. over unclaimed money transfers.  The U.S. Court of Appeals for the Fifth Circuit found that Western Union, which had agreed to return an estimated $135 million in unredeemed money transfers as part of the settlement, did not have standing to sue over legal fees that came out of a class fund and not its own pockets.

“A lot of times the defendants pay the fee, or agree to pay the fee, and in that case, they have standing because the fee is coming out of their pockets.  But in this case, the defendant is not paying any of the fee,” said lead plaintiffs attorney Richard Burke, a partner at Highland Park, Illinois-based Quantum Legal who works in St. Louis, Missouri.  “That wasn’t their money. That’s the whole point of the lawsuit.”

According to the suit, filed in 2009, Western Union failed to notify customers that their transfers hadn’t been redeemed until three or more years following the transaction, during which it charged monthly administrative fees and interest.  Only about 15 percent of its customers responded to the notices and got refunds.  If Western Union got no response, the money was escheated to states as unclaimed funds.

As part of the settlement, which covers more than 1 million people, Western Union agreed to set up a fund of unredeemed money transfers.  It also reimbursed the class for interest and agreed to notify customers about unredeemed transfers within 60 to 90 days.

But Western Union challenged a request to allocate 30 percent of the fund for attorney fees.  In 2013, a federal magistrate judge found that class counsel probably only got about $19 million in interest payments and some nonmonetary relief for the class and recommended that they be entitled to less than $23 million in fees.  But U.S. District Judge John Kane in Colorado disagreed with that finding, and last year granted the original fee request.

On appeal, Western Union argued that it had standing to object because the fees would deplete a second fund in the settlement that was designed to indemnify it for anticipated threats of enforcement action from disgruntled states.  But the Tenth Circuit found that fund wasn’t set in stone and that enforcement actions by the states were speculative.

“Western Union has not demonstrated any concrete and particularized and actual or imminent injury it will suffer as a result of the district court’s approval of the attorney fee award to class counsel,” the panel wrote.

New Jersey Mulling Attorney Fees for Non-Clients in Legal Mal Cases

November 15, 2015

A recent New Jersey Law Journal story, “Justices Mulling Counsel Fees for Non-Clients in Legal Mal Cases” reports that the New Jersey Supreme Court is considering whether attorneys who are found to have committed legal malpractice can be required to pay legal fees to non-clients.

The court heard arguments in a case involving international child abduction that the plaintiff—the child’s father—successfully claimed was facilitated when the mother’s attorney have gave her the child’s passport.

If lower court rulings in favor of the father stand, family lawyer Madeline Marzano-Lesnevich and her firm, Hackensack’s Lesnevich & Marzano-Lesnevich, would be forced to pay a judgment of $992,333, which includes $158,517 for the father’s counsel fees and costs.

A ruling in the father’s favor would be an expansion of the high court’s landmark 1996 decision in Saffer v. Willoughby, in which it ruled that clients could be awarded counsel fees for their attorneys’ malpractice.  The lawyer representing Marzano-Lesnevich and the firm, Christopher Carey, urged the court to not expand on its holding Saffer.

“A lawyer does … owe a duty to a non-client and can be sued, but to now expose the attorney on top of that for attorneys’ fees is going too far,” said Carey, of Morristown’s Graham Curtin.  “This is becoming an area of law that has become a specialty because fee can now be awarded.”

Justice Barry Albin said it is clear that an attorney’s client must be made whole if he or she is the victim of malpractice.  Why, he asked, shouldn’t a non-client be put in the same position if there has been malpractice?

The New Jersey State Bar Association participated as amicus.  Its attorney, Fruqan Mouzon, urged the court not to expand Saffer.  “There has always been a strong policy against shifting attorneys’ fees,” said Mouzon, of Gibbins in Newark.  “The court deviated from that foundation 20 years ago” in Saffer.

The bar association’s position here, he said, was that there must be an attorney-client relationship before counsel fees can be awarded in malpractice cases.

Albin said “logic, fairness and public policy” suggest that non-clients should be able to recover counsel fees if they are the victims of their adversaries’ lawyers’ malpractice.

D.C. Circuit: Firm Entitled to Recover Fees in Suit to Collect Unpaid Fees

November 2, 2015

A recent NLJ story, “Law Firm Can Keep $270K Fee Award for $70K Judgement, D.C. Circuit Says,” reports that a boutique law firm in Washington can keep nearly $270,000 in legal fees after winning a $70,000 judgment against a former client, a federal appeals court in Washington ruled.

Bode & Fierberg—referred to in court paper by its former name, Bode & Grenier—represented Carroll Knight, who owned several companies in Michigan, for more than a decade.  When Knight failed to pay the firm, Bode successfully sued for breach of contract in federal district court in Washington a won a $70,000 judgment.

U.S. Magistrate Judge Deborah Robinson in Washington ruled that the firm was entitled to legal fees for its work on the breach-of-contract case under the retention letter it signed with Knight.  The U.S. Court of the Appeals for the D.C. Circuit agreed, saying Robinson was correct to apply the terms of the retention letter, and not a separate agreement between Bode and Knight, to the fee issue.

The retention letter included a requirement that Knight pay Bode’s fees for the cost of collecting overdue money from Knight and his companies, and didn’t specify which law the court should apply—D.C. law or Michigan law—in deciding a fight over fees, Brown wrote.  That meant Knight couldn’t argue Robinson should have applied Michigan law and limited Bode’s recovery.  The court reject Knight’s argument that, under Michigan law, Bode couldn’t collect legal fees for representing itself in the litigation against Knight.

Randell Ogg, a Washington solo practitioner who argued for Bode, said the D.C. Circuit’s decision “reaffirms the principle that’s established in the District that law firms can seek fee for representing themselves if there’s a basis to do so in their agreement with the client.”

Between December 2005 and January 2007, Bode accused Knight’s companies of failing to pay the full amount of legal fees they owed.  In summer 2007, the firm and Knight signed three agreements: a retention letter spelling out the terms of their future relationship; a promissory note for Knight to pay $300,00 in past fee; and a “confession of judgment” that said Bode would immediately win a judgment if Knight failed to pay the $300,00 by May 2008.

When Knight didn’t pay by May 2008, Bode secured a judgment in Michigan state court.  The firm then filed a civil lawsuit in Washington seeking $75,000 in legal fees under the retention letter.  Knight countered that it shouldn't pay any fee because Bode allegedly revealed confidential client information and the firm’s fees were unreasonable.

Robinson ruled in favor of Bode on its breach-of-contact claim after a one-day bench trial in November 2012.  She awarded the firm $70,000.  She granted Bode’s request to request to recover legal fees from Knight as the winning party in the breach-of-contract case.

Report: Top Tier Law Firm Hourly Rates Rising This Year

October 26, 2015

A recent Corporate Counsel story, “Report: Top-Tier Law Firm Rates Surged This Year” reports that law firm billing rates are surging faster than the American to Canadian dollar exchange rates this year, according to LexisNexis’ Frank Strong in his recent blog post.  “Big law billing rates grew notably—pushing a 6 percent increase in the gap between the top two tiers of law firms, by attorney headcount, from 38 percent to 44 percent,” writes Strong.  He takes the numbers from his company’s Enterprise Legal Management Trends Report.

Broken down even further, this means the largest firms, those with more than 750 lawyers, have a median rate of $711 per hour, up from $675 the previous year.  “Second tier” firms, those with 501 to 750 attorneys, didn’t see as great a rate increase from $490 to just $495.

According to the report, intellectual property and regulatory and compliance practice areas “show median partner growth about 2.9 percent during both the past year and over the previous three-year period.”  But groups such as insurance and environmental didn’t see the same increase and, in fact, grew at rates slower than litigation, real estate, employment and labor, commercial, contracts and other areas.