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Category: Fee Dispute

NJ Judge: Litigation is Just Another ‘Capitalist Enterprise’

October 7, 2019

A recent Law 360 story by Emma Cueto, “Legal Practice Just a ‘Capitalist Enterprise’, Judge Laments,” reports that a New Jersey state judge ruling on an attorney fee dispute lamented that the practice of law has been reduced to "just another capitalist enterprise," before deciding that the former attorney in a personal injury case against Verizon was not entitled to a say in the approval of a potential settlement.

In an order that was deleted for a "typographical error," according to the judge's chambers, Judge Stephen L. Petrillo said that Gregg Stone, the original attorney for a woman who was paralyzed after she was struck by a falling utility pole, would be entitled to seek compensation for the work he put in on the case but could not object if he thought the settlement fee award was too small.

First, however, Judge Petrillo expressed his displeasure that the dispute had arisen at all.  "This unfortunate fee dispute, coming as it does in the midst of seemingly final negotiations of a settlement, should resolve, with certainty, any lingering doubt that the practice of law, that storied profession of Marshall and Jefferson and Lincoln, is really now just another capitalist enterprise," he wrote in the order.

The case was brought in 2017 by Maria Meister and her husband, Peter Meister, against Verizon New Jersey Inc. and two other companies, Altice USA and PSEG Services Corp.  According to the order, Maria Meister was struck by a utility pole that fell after partially rotting through, leaving three of her limbs paralyzed.  Gregg Stone initially represented her, but two years later withdrew due to a breakdown of the attorney-client relationship, citing "incessant emails" as well as "ultimatums and non-physical threats" by Peter Meister, according to his motion.  David Mazie then took over the case, which is potentially nearing a settlement, the decision said.

Stone asked the court that he be allowed to be heard during the settlement approval process, arguing that his retainer agreement entitled him to recover a portion of the funds.  He also argued that Mazie, having taken on the case at the eleventh hour, had no incentive to ensure that any settlement properly reflected the years of effort the case involved.

Judge Petrillo, however, rejected this argument, saying that it was not supported by case law.  Stone would be allowed to petition for a cut of any attorney award based on the work he put in, the judge said, but his retainer agreement stopped being binding when he withdrew from the case, and he did not have the right to intervene in the approval process.

He also said that the whole episode did not reflect well on the legal profession.  "While lawyers may indeed make a client's life better through their advocacy and vigilant protection of that client's interests," the judge wrote, "they are uniquely able to make it seem as though they are not doing so when quarreling, as they are here, over who gets to spell out how much they should be paid from their paralyzed client's recovery and why one is more entitled to do so than another."

He later also lamented in a footnote that the attorneys seemed invested not in deciding who could represent the Meisters' interests, but rather who could have a say in how much the attorneys were paid.  Mazie told Law360 that he believed the judge's displeasure was directed solely at Stone, saying that Stone's request was not in line with the law.  "It is unfortunate that Mr. Stone fails to recognize that the only thing that is important is doing what is best for the clients, not what is best for the lawyers," Mazie said.  "The court clearly got it right here."

The order, which was issued on Wednesday, was deleted on Friday, along with an order on a discovery motion.  Judge Petrillo's chambers told Law360 that the orders were deleted because of a "typographical error" but that the substance of the orders would not be changed.  The judge had no further comment on the case, according to a member of his staff.

Hospital System Can Challenge Attorney Fees in FCA Case

October 3, 2019

A recent Law 360 story by Adam Lidgett, “Hospital Chain Can Fight FCA Atty Fees, Judge Rules,” reports that hospital giant Community Health Systems (CHS) Inc. can challenge the pursuit of attorney fees by whistleblowers in False Claims Act (FCA) lawsuits alleging improper inpatient admissions, a Tennessee federal judge has ruled, citing murky settlement language.

U.S. District Judge Marvin E. Aspen held that a settlement agreement reached by CHS — in which it agreed to pay $97.3 million plus interest to end claims in various FCA cases — doesn't bar the company from contesting whether the whistleblowers were eligible to collect attorney fees.  The judge said that the whistleblowers, or relators, were aware "or had reason to know" that CHS intended to retain its ability to fight whether the relators could collect those fees.

"Even if we found that relators did not share CHS' interpretation of their rights under the settlement agreement, the evidence ... establishes that they knew of CHS' position," the judge wrote.  "Multiple communications also show that relators had reason to know of CHS' position."

The judge was careful, however, to note that his ruling did not decide whether the whistleblowers can actually collect those fees.  The decision stood in contrast to a recommendation from U.S. Magistrate Judge Barbara D. Holmes that interpreted the agreement in favor of the whistleblowers.  One group of relators had sought $2.65 million in fees, according to that recommendation.

The ruling came on remand from the Sixth Circuit, which in November 2016 scrapped a lower court's decision that CHS waived its right to challenge the fee award.  The company's appeal at the Sixth Circuit centered on whether a sentence in the settlement agreement meant CHS could only challenge fees under a specific FCA provision dealing with the reasonableness of fees, or instead could reserve its right to such challenges on any basis.  While a Tennessee federal judge in 2015 found the former, the Sixth Circuit held that the language was ambiguous and therefore warranted a remand for further proceedings.

Article: Block Billing Helped Obscure Overcharges, Plaintiffs Allege in Suit

October 1, 2019

A recent article by Karen E. Rubin of Thompson Hine LLP in Cleveland, “Law Firm’s ‘Block Billing’ Helped Obscure Overcharges, Plaintiffs Allege in TX Federal Suit,” reports on the ethics of block billing in a federal action in Texas.  This article was posted with permission.  The article reads:

Five businesses filed suit earlier this month in a Texas federal district court against Morrison & Foerster, a 1,000+-lawyer mega-firm headquartered in San Francisco.  The case is unremarkable in most ways: on the one hand, former clients who assert wrongdoing in how the law firm handled their matters (including billing improprieties) and a less–than-desirable outcome – and on the other hand, a law firm that says “Don’t believe everything you read in a complaint, the claims are baseless and we will win.”  (MoFo told the ABA Journal last week that “[t]he complaint has no merit” and that the firm “will be vindicated.”)

What is noteworthy is one of the allegations about the firm’s billing.  The plaintiffs claim that the firm’s misdeeds include “block billing.”  By grouping multiple tasks in a single time entry, the plaintiffs allege in the complaint, Morrison & Foerster made it “impossible to determine exactly what tasks were performed and the amount of time allegedly spent for such tasks.”

Ye olde one-line fee bills

At this early stage, the allegations in the complaint remain unproven, and it can’t be known to what extent MoFo may (or may not) have sent invoices that block-billed discrete tasks.  Certainly, in days of yore it was common for law firms to send invoices summarizing the services provided.  (It was also common to see fee bills with one line: “For services rendered…” and then the dollar amount.)  In the 1980s, say, it was certainly easier to dictate a summary of the work done on a matter than it was to break out specific tasks.  (Those of us who were young and tech savvy in those bygone days would use our fancy Dictaphones™, though the senior partners would have their secretaries take dictation on a steno pad.)

Today though, most of us put our daily time charges directly into software that will spit out a list of charges for the month.  Preparing a “summary” of those charges actually requires more work than giving the client a detailed description of how much time was spent daily on what and by whom.  Why ever spend the time summarizing?

But what the plaintiffs in the case against MoFo might be alluding to is the practice of stringing together many short tasks in one running description and assigning a single combined time charge to those discrete tasks.  That can effectively obscure how much time the lawyer spent on each of those tasks – which is something clients now expect to be informed of.

Billing rules of the road

There is no ethics rule that says you may not “block bill” (though many corporate clients today have outside counsel guidelines that prohibit the practice).  But several ethics rules are broadly relevant, including your jurisdiction’s version of Model Rule 1.4(a)(3) (keeping the client reasonably informed about the matter); Model Rule 1.5(b) (communicating the basis of the fees and expenses); and Model Rule 1.5(a) (not charging an unreasonable fee).

ABA Ethic Opinion 93-79 vividly describes a number of billing no-no’s, including: billing more than one client for the same hours; billing time during travel to one client while working on another client’s matters and billing the second client as well; “continuous toil on or overstaffing a project for the purpose of churning out hours;” and marking up expenses, such as meals.  (The latter practice prompted the ABA Ethics Committee to opine colorfully that “[t]he lawyer’s stock in trade is the sale of legal services, not photocopy paper, tuna fish sandwiches, computer time or messenger services.”)

Blocking and tackling

When a client alleges misconduct against a lawyer or firm, the burden of proof is on the client.  But what we know about the tendencies of juries suggests that any lawyer should want to be in the best position possible to justify his or her fee if it is ever called into question.  We’re not playing football here – less blocking is better.

Karen E Rubin is a member of Thompson Hine’s business litigation group.  She is a former chair of the Certified Grievance Committee of the Cleveland Metropolitan Bar Association, and a member and past chair of the Ohio State Bar Association’s Ethics Committee.  She also chairs that committee’s Ethics Opinions subcommittee, and has authored several ethics opinions on behalf of the OSBA interpreting the Ohio Rules of Professional Conduct.  Karen also is an adjunct professor at Cleveland-Marshall College of Law, teaching legal ethics.

Fee Allocation Dispute in BNY Mellon Settlement Can Be Litigated

September 20, 2019

A recent Law 360 story by Chris Villani, “Atty Can Sue for Fees in BNY Mellon Settlement, Judge Rules,” reports that a dispute between Bailey & Glasser LLP, the Howard Law Firm and McTigue Law LLP over a $3 million fee following a $10 million settlement with Bank of New York Mellon Corp. sounds like a breach of contract case to a Massachusetts judge, who invited McTigue on Thursday to sue if it wanted.  Chief U.S. District Judge Patti B. Saris said that, in approving the $3.33 million fee award for the lawyers representing a class of trustees who sued BNY Mellon over alleged excessive charges, she would not resolve a long-running dispute between the lead class attorneys and a lawyer for the named plaintiff in the case.

During a hearing earlier this month in her Boston courtroom, Judge Saris heard arguments from McTigue Law that it was entitled to a 20% cut of the fee under the terms of a co-counsel agreement between McTigue, Bailey & Glasser and Howard Law.  The latter two firms said McTigue violated that pact and should not get the 20% share, and Judge Saris invited McTigue to sort the issue out through a new suit.

“McTigue Law’s motion essentially raises a breach of contract claim against lead plaintiff’s counsel,” Judge Saris wrote in a brief order.  “The court did not resolve that claim in its ruling on lead plaintiff’s motion for attorneys fees and expenses.”  Judge Saris said she would deny McTigue’s motion for a 20% cut without prejudice to a separate breach of contract suit.

The order clarified Judge Saris’ more lengthy Wednesday order giving her blessing for the fee, after which a McTigue representative told Law360 it did not believe the judge’s fee award prevented the firm from going after Bailey & Glasser and Howard Law for the cut it believes it rightfully deserves.  The class of trustees reached a settlement with BNY Mellon in March on the eve of trial, but the accord with the bank did little to stem the disagreements between two class counsel firms and Brian McTigue, the personal lawyer for class representative Ashby Henderson.

Bailey & Glasser and Howard Law told the judge in their fee request that McTigue's firm "did not benefit the class, but rather caused disruption, delay and confusion."  McTigue countered by saying he performed "significant and material work" on the case and argued his cut was agreed to in 2016, when the firms signed a contract stating he “will be apportioned 20% of the lodestar work, awarded 20% of the fees and pay 20% of the expenses in this litigation, all on an ongoing basis, as measured from the beginning of the litigation.”

Texas Court Rejects $14M Fee Request After $21M IP Verdict

September 19, 2019

A recent Law 360 story by Michael Phillis, “Texas Court Rejects $14M Fee Bid After $21M IP Verdict,” reports that a Texas federal judge said that both sides were off-base in a fight over attorney fees after a jury found an EchoStar Corp. unit liable for $21 million for infringing on a defense contractor's satellite network patent.  The court rejected both Israel-based contractor Elbit Systems' request for nearly $14 million in fees and EchoStar unit Hughes Network Systems' calculation that it should owe only about $300,000.  Elbit said the high fee award was merited because of an alleged pattern of Hughes' misconduct, while Hughes said it should only have to pay fees for litigation misconduct specifically cited in a prior court order, including allegations it ignored discovery orders.

"To avoid becoming 'a green-eyeshade accountant,' the court orders the parties to meet and confer and file a joint notice consistent with the parameters set forth in this order," U.S. District Judge Robert W. Schroeder III said.  The order knocked arguments made by both sides in their joint motion to quantify attorney fees, which was filed in July.  The judge said the diverging amounts took into account either too little or too much of the case.

Judge Schroeder said Hughes' request for a smaller fee award — based on its argument that it should only be responsible for the four "specific acts" mentioned in a prior court order — didn't consider the full extent of the litigation misconduct.  "Elbit is entitled to fees that 'bear some relation to the extent of Hughes' misconduct,'" the court said.  "And, as the court found, that misconduct was extensive — affecting more than the four specific acts of misconduct or even the 22 acts Elbit listed as examples of misconduct."

Judge Schroeder also said Elbit's request was effectively for a "full fee award," with few exceptions.  But Elbit did not demonstrate a proper connection between "its fee request and Hughes' misconduct," and that link was needed, the judge found.  "Because Elbit's conduct does not justify a full-fee award, the court would need to go through Elbit's bills line-by-line to identify the fees Hughes' misconduct caused," the order said.  And since the judge has no interest in taking on that task, he told both sides to get together and within two weeks' time file a notice explaining the fees that Hughes' misconduct caused.