Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Dispute Litigation / ADR

Law Firm Billing Tips For Good Client Relations

December 1, 2020

A recent Law 360 story by Aebra Coe, “Law Firm Billing Tips For Avoiding An Irate Client,” reports that a recent lawsuit filed against K&L Gates LLP by a client unhappy with a legal bill highlights some common pitfalls that law firms face when it comes to billing practices, but there are ways to avoid a similar situation, experts say.  The lawsuit against K&L Gates, which was filed in August by Chicora Life Center LC, accuses the firm of using several tactics to increase its bill for representing the bankrupt medical center in a Chapter 11 proceeding over a lease termination dispute.

Some of the alleged billing practices are not entirely uncommon among law firms, according to two experts who declined to comment directly on the lawsuit but provided their thoughts on client billing more generally.  The alleged practices include "block billing," where a lawyer "blocks" together a number of tasks over a set amount of hours; "hoarding," when an overqualified lawyer with a high billing rate retains work rather than passing it on to someone with a lower billing rate; and "multibilling," which occurs when multiple attorneys are tasked with performing the same work.

"All of those things mentioned have been going on for years and years.  This is not at all new," said James Wilbur, an expert on law firm billing at consulting firm Altman Weil Inc.  Regardless of how the K&L Gates suit shakes out in court, other law firms are likely looking for ways to avoid being in a similar position.  While such situations are not entirely preventable because clients can sometimes file bad-faith suits, there are steps firms can take to ensure clients are as happy as possible with a bill at the conclusion of a matter, Wilbur said.

He suggested firms rely on three things to accomplish this: technology, training and collaboration.  E-billing software can often catch double billing and block billing, he said, as well as phrases that might irk a client, like "reviewed phone notes," that may not indicate that the time spent added any value to the matter.

And that leads to training, which should be conducted at all levels on a regular basis so that any attorney or paralegal who puts together a bill is aware of best practices and is skilled in conveying the value brought to the client via the time the individual spent working, he said.  Senior attorneys billing for work that could be done by someone more junior is another beast, Wilbur said, and one that law firm management must work to dissuade by encouraging collaboration and the sharing of work.

Clients have many different rules when it comes to fees, but "no surprises" is a big one, said Toby Brown, chief practice management officer at Perkins Coie LLP.  "The bottom-line answer is more transparency.  And more real-time updates about what's going on," Brown said.  "The lawyers are uncomfortable talking about these things, and so they don't talk about them head-on."

He said lawyers and clients can often get wrapped up in the legal issues at hand, with fee issues taking a back seat.  For example, if the volume of discovery in a major case increases substantially, a conversation on cost might not always occur, but it should, he said.  Real-time sharing of information on the cost of a matter is vital, Brown said.  He said his firm has worked to incorporate the help of its project management team to flag when the scope of a matter has changed so that the attorney on the matter is aware a conversation is needed.

The firm has also implemented technology that goes beyond basic e-billing software to allow attorneys to better monitor their budget on a matter, he said.  Ultimately, according to Wilbur, having a strong relationship with a client to begin with will go a long way.

"Even in a firm that's highly ethical and has training around these issues, mistakes are going to happen. Something is going to creep through," he said.  "The first thing is you have to have a good enough relationship with the client so they know they can text or email you, pick up the phone and point out a problem in the bill, and you will deal with it without arguing."

When contacted by Law360 for comment about its case, K&L Gates described Chicora's claims as "a transparent attempt to re-litigate issues that were raised and rejected years ago through final orders in a concluded bankruptcy."  A third-party fee examiner, it said, expressly found that the fees requested by the firm were reasonable and should be recoverable, and then the bankruptcy court adopted that determination.  "We are confident the present claims also will be rejected," the firm said.

Judge Tosses Suit Seeking Coverage of Defense Fees

November 23, 2020

A recent Law 360 story by Rachel O’Brien, “Judge Nixes Suit For Crypto Co. Investor’s $728K Atty Fees,” reports that a New York federal judge tossed a lawsuit by an alleged pump-and-dump scheme mastermind asking for his attorney fees to be paid by a cryptocurrency company involved in the alleged scheme, ordering the man to pay the company's fees instead.  While Barry Honig and his business GRQ Consultants Inc. point to indemnification clauses in agreements with Riot Blockchain as proof that his legal fees should be paid, U.S. District Judge Naomi Reice Buchwald said the clauses say the opposite.

Honig, at one time the largest shareholder in Riot Blockchain, spearheaded a $27 million pump-and-dump scheme involving 10 individuals and 10 associated corporate entities, the U.S. Securities and Exchange Commission alleged in September 2018.  Honig and others, including former Teva Pharmaceutical Industries Ltd. chairman Phillip Frost and Riot Blockchain CEO John O'Rourke, manipulated stock prices in three microcap companies and left investors holding "virtually worthless shares," the SEC said.

In July 2019, Honig settled the SEC claims without admitted any wrongdoing, submitting to an injunction barring him from future violations of federal securities laws, a penny stock ban and further restrictions.  Honig was named in several other suits, including in five shareholder derivative actions which alleged Riot, its directors and officers and Honig violated securities laws, and that Honig bought stock from Riot to gain "control" over the company so he could violate the securities laws.

A February 2018 class action from shareholder Creighton Takata in New Jersey federal court alleged that Honig's purchase of securities was part of a "fraudulent scheme consisting of misrepresentations, omissions, and actions that deceived the investing public in violation of securities laws."  He called those allegations "a house of cards" in his October 2019 motion to dismiss, which was granted in April because the shareholders didn't show how the defendants violated anti-fraud provisions of federal securities law, the judge said then.

In the case tossed, Honig had argued that the security purchase agreements he entered into with Riot in 2017 to buy convertible promissory notes and common stock purchase warrants guaranteed that if Honig was a defendant in a lawsuit, Riot would pay his legal fees.  The indemnification clauses in the agreements, Honig argued in the April suit, meant Riot must pay the $728,000 attorney fees he incurred fighting securities fraud allegations by the SEC and in class actions.

Riot argued that Honig's claim fails because Riot isn't obligated to pay when the litigation is connected with actions "based upon ... any violations by [Honig] of securities laws or any conduct by [Honig] which constitutes fraud, gross negligence, willful misconduct or malfeasance by [Honig]."  But Honig said the carveout in the indemnification clause only applies to actual securities violations, and since some of the lawsuits are ongoing, he's entitled to advancement of legal costs.

Judge Reice Buchwald agreed with Riot that "the allegations of the underlying action — not the merits of the action — govern Riot's obligations."  Since it's the nature of the allegations that trigger the obligation to indemnify, the clauses clearly side with Riot, Judge Reice Buchwald said.  "If there were any ambiguity, which there is not, about when the obligation to indemnify is determined (and thus whether allegations or merits control), the next sentence of Section 4.8 confirms the court's conclusion," she said.  She pointed to the section that states if an action is brought wherein the indemnity clause might be implemented, Honig must notify Riot in writing and Riot "shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to [Honig]."

"The logic of Section 4.8's structure is apparent," the judge said.  "The first sentence informs the parties as to whether indemnification is required.  If and when those conditions are satisfied, Honig would notify Riot, which then has the option to assume the defense.  The provision presupposes that the parties can determine, prior to that notice, whether an obligation to indemnify exists."

Judge Reice Buchwald also granted Riot's motion that Honig pay its reasonable attorney fees for this action.  Scott Carlton of Paul Hastings LLP, counsel for Riot Blockchain, told Law360 in a statement, "We are pleased with the court's careful consideration in this matter, including the awarding of attorneys' fees for Riot Blockchain as the prevailing party."

Insurers Refuse to Pay $18M in Defense Fees in Experian Class Actions

November 19, 2020

A recent Law 360 story by Joanne Faulkner, “Insurers Deny Liability in Experian’s $18M Legal Fees Suit,” reports that two insurers have told a London judge they are entitled to refuse to pay Experian's $18 million claim for coverage of its U.S. legal fees in a pair of class actions over errant credit reporting because the litigation stems from deliberate data erasure by staff at the company.  Zurich Insurance PLC and a subsidiary of SCOR said Experian's policy excludes "deliberate acts" such as those that allegedly form the basis of two major class action suits in the U.S., a newly public Nov. 13 defense said, after the company sued to claw back litigation fees.

The claims made against Experian — which said it has racked up millions of dollars in liabilities and legal costs defending the suits — were for statutory damages according to the U.S. Fair Credit Reporting Act.  If Experian is liable, it is the result of a "wilful (or reckless) failure on the part of an employee or employees … to comply with the FCRA," the defense said. 

Experian says in its October High Court suit that it paid a class of more than 100,000 payday loan customers $24 million to settle a lawsuit in January brought by lead plaintiff Demeta Reyes.  A $5 million deal was reached with consumers in the so-called Smith action.  The customers said they were harmed by inaccurate reporting of their credit history.  The insurers said that Experian's alleged liability in the Reyes action arises out of the deleting of loan records —  particularly those held by an entity called Delbert Services Corp.  In the Smith action, it is connected to the re-reporting of records relating to loans held by CashCall Inc.  Experian directors were involved in the decision-making in both incidents, the insurers said.

From April 2015 through April 2016, Experian held a complex multitiered insurance "tower" consisting of a primary policy from XL Specialty Insurance Co. and several layers of excess coverage, Experian says.  Zurich and SCOR unit General Security Indemnity Co. of Arizona are each liable for half of a $20 million excess policy, which kicked in once the underlying coverage was depleted, Experian says.  So far the insurers have only paid out a slice of the $20 million excess that Experian says it is entitled to, the company alleges.

Experian is also seeking a declaration from the court that the insurers will cover financial penalties that Experian may have to pay as a result of investigations into a 2015 cyberattack.  The two insurers said that coverage is provided for regulatory fines and penalties, but Experian must prove that any sanction is "lawfully insurable."

Experian says it has run up costs of more than $32 million defending two major related class suits.  Thousands of consumers successfully argued that Experian's failure to delete certain negative information in their consumer credit reports caused them harm.

Experian says it should be able to recover $18 million in legal costs from the insurers under its third-party liability and first-party insurance policies.  The suit also name-checks an action brought by Carolyn Clark alleging the company violated the FCRA, which ended up costing Experian more than $21 million. The company says it could be entitled to an indemnity of $14.3 million from the insurers to cover the costs from that case.

Quinn Emanuel Seeks to Collect $15M in Unpaid Fees

November 18, 2020

A recent Law 360 story by Diamond Naga Siu, “Quinn Emanuel Looks to Collect $15M in Unpaid Fees,” reports that Quinn Emanuel Urquhart & Sullivan LLP urged a D.C. federal judge to confirm and enforce a $15 million arbitration award for unpaid legal fees after the Indian textile manufacturer it previously represented ignored documents to confirm the amount for more than a year.  CLC Industries Limited — formerly known as Spentex Industries Limited — used the law firm when it initiated a failed cotton investment claim against Uzbekistan in 2013 for bankrupting three cotton processing plants it invested in.

After the case was tossed, CLC Industries allegedly did not pay Quinn Emanuel its legal fees, and the firm initiated arbitration in the United States with the Judicial Arbitration and Mediation Services, Inc., or JAMS, against the textile company to receive payment.  JAMS awarded the fees in 2018, according to Quinn Emanuel's affidavit, ruling that the law firm could collect them as described under a letter of engagement the law firm and company entered ahead of the arbitration against Uzbekistan.

"More than 500 days elapsed since Respondents were served with the Petition," Quinn Emanuel wrote in its filing, referring to how long the firm's petition to confirm the award amount has been ignored.  "Petitioner respectfully requests the entry of a default against Respondents."  "Petitioner served the Petition and accompanying exhibits on Respondents by Federal Express on July 3, 2019, pursuant to Respondents' consent to service of process 'by regular mail or courier' in the Engagement Agreement," the firm added.

Quinn Emanuel said that CLC Industries received and signed for the documents at its New Delhi, India, office within the week the petition was sent.

CLC Industries opened a case in the Delhi High Court in India, asking Judge Jayant Nath to dismiss certain fees in its letter of engagement with Quinn Emanuel.  CLC and the law firm had signed the original agreement in 2013 but amended it in 2015 after they realized the case would be complex and expensive to fight, according to Judge Nath's opinion.

He ruled in favor of the law firm in May, saying that the textile company was responsible for paying Quinn Emanuel's contingency fees, which aren't permitted in India.  The judge ruled that since the letter of engagement was governed by U.S. laws, the fee arrangement was allowed.  "They have chosen to abstain themselves from the arbitration proceedings and the award has already been passed," Judge Nath wrote, referring to the award of legal fees.  "They are free to take appropriate steps as per law against the award."

Law Firms Tussle Over Share of $8.3M in Attorney Fees

October 12, 2020

A recent Law 360 story by Emillie Ruscoe, “Fee Bid is ‘Unseemly Mudslinging.’ ICO Suit Co-Counsel Says,” reports that part of a co-lead counsel team accused their counterparts of "unseemly mudslinging" in a dispute over distribution of the $8.3 million counsel fee they earned in a settlement of allegations that Swiss blockchain company Tezos Stiftung's 2017 initial coin offering violated federal securities laws.

Lawyers from Block & Leviton LLP and Hagens Berman Sobol Shapiro LLP told U.S. Magistrate Judge Joseph C. Spero to deny a September motion for counsel fees filed by attorneys from Hung G. Ta Esq. PLLC, LTL Attorneys LLP, the Restis Law Firm PC and Lite DePalma Greenberg LLC, telling the magistrate judge that the fee request "is devoted to unseemly mudslinging, inaccurate accusations of deceit, and unfounded claims of violations of the rules of professional conduct."

The Hung G. Ta Esq. PLLC-helmed attorney group filed their counsel fee request in September, asking U.S. District Judge Richard Seeborg to order Block & Leviton to put funds back into the escrow account holding $8.3 million that the plaintiffs' counsel team was awarded for its work on the case.  In a memo accompanying the counsel fee motion, the HGT Law group told Judge Seeborg that "Block & Leviton has proceeded, without HGT Law's authority, to distribute attorneys' fees to itself and several other firms with which it is aligned," asking the judge not to permit "such brazen misconduct."

HGT Law said the Block group had "proceeded to unilaterally distribute fees" so that Block & Leviton and Hagens Berman received 25% of the total fee, and 50% of the fee went to Robbins Geller, which is not docketed in the matter but was also involved in the case, according to the co-lead counsel team.  "This proposal is irrational and unreasonable," the HGT group contended, suggesting that Block & Leviton was trying to "maintain good relations with Robbins Geller and ensure favorable treatment from Robbins Geller in other cases."

Two days after the counsel fee motion was filed, court records show, Judge Seeborg referred the case to Judge Spero for resolution of the attorney fees dispute.  "This development is unwelcome, and its disposition ought not involve the intervention of this court," Judge Seeborg said in the same order vacating the Oct. 29 hearing on the motion that HGT had requested.

The Block group apologized to the court "that counsel were unable to work things out among themselves" and promised to work with the magistrate judge to resolve the issue in good faith.  "The court should not have to deal with this dispute.  It is always unseemly for lawyers to be squabbling over a multimillion-dollar award of attorneys' fees," the Block group said.

The Block group contended that HGT Law knew since December 2019 that it could expect to receive a quarter of the counsel fee.  "The [HGT Law group] never proposed a different fee allocation until after fees were awarded and sat on its hands until B&L sought to distribute the money consistent with [co-lead plaintiff] Trigon's allocation," the Block group claimed.

The Block group also said that "The Ta Group's wild accusation that 'Block & Leviton (and the other firms in the Block group) have attempted to deceive HGT Law, and have violated numerous ethical duties and guidelines of this district' is absolutely false."  The Block group also said that it "reiterates its willingness — if the Ta Group would like to withdraw its motion without prejudice — to resolve this dispute either through further informal discussions or through more formal [alternative dispute resolution] mechanisms."

Records show the parties to the case reached a $25 million cash settlement agreement in March, ending claims that the Tezos defendants held an unregistered securities offering in July 2017.  The $8.3 million counsel fee comprised a third of the settlement fund, and the attorneys who worked on the case on behalf of the proposed investor class would also get $300,000 to cover their litigation costs, according to the settlement terms.