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Category: Billing Practices

Judge Highlights Excessive Billing in Sprint Litigation

March 15, 2017

A recent Wall Street Journal story by Joe Palazzolo and Sara Randazzo, “One Lawyer, 6,905 Hours Leads to $1.5 Million Bill in Sprint Suit,” reports that, Alexander Silow, a contract lawyer for a Pennsylvania plaintiffs’ firm, clocked 6,905 hours of work on a shareholder lawsuit against former executives and directors of Sprint Corp. related to its 2005 merger with Nextel.  Averaging about 13 hours a day, Mr. Silow reviewed 48,443 documents and alone accounted for $1.5 million, more than a quarter of the requested legal fees, according to court documents.

“Unbelievable!” is how Judge James Vano in Kansas described the billing records.  And he meant it.  “It seems that the vast amount of work performed on this case was illusory, perhaps done for the purpose of inflating billable hours,” Judge Vano, who sits in Olathe, Kan., wrote in a Nov. 22 opinion.

Courts often slash what they see as excessive billing in securities and other litigation, but rarely are they so scathing, legal experts said.  Judge Vano’s ruling might have gone unnoticed but for a recent disclosure about Mr. Silow by the law firm where he worked: He was disbarred in 1987 and practiced law illegally for decades.

The revelation, contained in a February letter to Judge Vano, could ​rupture​ a settlement in the Sprint case, and provide grist for corporate groups and others that have highlighted alleged abuses in the civil-justice system, fueling current momentum for legislative change.

A Republican bill passed by the House of Representatives would make it harder to file class actions, curtailing lawyer-driven litigation that provides little benefit to shareholders and consumers, its supporters say.  Plaintiffs’ lawyers and consumer-rights advocates say the legislation would reduce access to the courts and blunt litigation that has improved corporate governance and forced companies to pull unsafe drugs and faulty products from shelves.

Courts regularly bless multimillion-dollar fee awards in recognition of the risk plaintiffs’ firms take by fronting the costs for litigation.  But fee experts said bill-padding is pervasive in class actions and shareholder suits because billing records aren’t reviewed by clients and are scrutinized only when a judge needs to approve a settlement or award fees after trial.

William G. Ross, a law professor at Samford University in Alabama who has written two books on attorney billing, said his most recent survey of lawyers showed that two-thirds were personally aware of bill-padding and more than half admitted they sometimes performed work they otherwise wouldn’t have done had they been charging a flat fee.

Mr. Silow had been working as a contract attorney for at least eight years when staffing agency Abelson Legal Search placed him at the Weiser Law Firm PC in Berwyn, Pa., in 2008, according to a Feb. 3 letter from the firm to Judge Vano.  The law firm was contacted last month by a third party it declined to name and learned that no one with Mr. Silow’s name was listed in a state database of licensed lawyers, Robert B. Weiser, co-founder of the firm, said in the letter.

Mr. Weiser said Mr. Silow presented himself to the firm as Alexander J. Silow, but “was in actuality named Jeffrey M. Silow” and confessed he had been disbarred when the firm confronted him, the letter said.  The firm has since ended its relationship with Mr. Silow and alerted authorities, it said.

Pennsylvania’s attorney discipline office confirmed Mr. Silow was disbarred in 1987 but could provide no additional information.  Mr. Silow didn’t respond to emails and calls seeking comment.  Abelson Legal Search didn’t respond to requests for comment.

Mr. Weiser said in the letter that his firm stands by the accuracy of Mr. Silow’s billing records in the Sprint lawsuit, which alleged the company directors and officers concealed problems created by the merger with Nextel.  The company posted a nearly $30 billion loss as a result of the deal.

The lawsuit sought to claw back profits from former Sprint directors and officers, who it accused of incompetence and self-dealing.  But a settlement reached last year was more modest.  Sprint agreed to changes to its corporate governance and the composition of its board of directors.

Judge Vano approved the deal in his November ruling but slashed the proposed legal fees for plaintiffs’ attorneys from $4.25 million to $450,000.  “The focus appears to have been upon an easy, cheap settlement in the first instance,” Judge Vano wrote.

The plaintiffs’ lawyers—Mr. Weiser’s firm, Florida lawyers Alison Leffew and Bruce G. Murphy and the Kansas City firm Dollar Burns & Becker LC—have appealed Judge Vano’s ruling on the fees.  They argued the results of the settlement, rather than the hours billed, justified the amount sought.

In court documents, Mr. Weiser and the other plaintiffs’ lawyers representing a Sprint shareholder said Mr. Silow’s “extensive document review” enabled them to make “well-informed decisions.”

Michael Hartleib, a Sprint shareholder who objected to the settlement, asked the Kansas appeals court last month to return the case to Judge Vano’s court so he can reconsider the deal in light of the new evidence showing Mr. Silow had no license to practice law.

NALFA: Some Class Counsel Turn to Fee Experts When Seeking Fees

February 27, 2017

Attorney fees are often a bone of contention in class actions.  In fact, upon settlement, the only disputes usually to surface center around the attorney fees.  Upon settlement approval, class counsel file somewhat self-interested fee requests with the court.  Here, even when prepared with the proper standard of care, these fee requests appear bias and self-serving.  Indeed, these self-seeking requests for fees are a source of frustration for the courts and often contested by professional fee objectors.  These internal dynamics can drag class action litigation on for years.  Recently, some class counsel have even grudgingly low-balled their fee requests to avoid this confrontation and delay in payment (see Race to the Bottom: Class Action Lawyers are Low-Balling Fee Requests).  This self-reduction in fees is short-sighted and sets a bad precedent for future class action cases.

In order to break this stalemate, some class counsel are turning to attorney fee experts.  Attorney fee experts are fully qualified expert witnesses who provide expert declarations on the reasonableness of attorney fees and expenses in underlying actions.  They are skilled litigators with subject matter expertise and are highly qualified on a range of fee and billing issues like hourly rates, billing practices, fee award factors, litigation management, and lawyering just to name a few.  A qualified, outside fee expert provides a fee-seeking attorney with an independent, unbiased, and objective analysis of the attorney fees and expenses in the underlying class action.  Fee experts can manage the entire fee application process, provide an expert report/opinion, or advise and consult on fee matters.  Some fee experts include law professors and former judges.

Hiring a qualified fee expert during the settlement phase shows the court and would-be professional fee objectors that you are taking the setting of attorney fees in a constructive and impartial manner.  Retaining a fee expert shifts the focus from an internal and rather self-assured fee analysis to an outside, objective, and peer review-driven fee analysis.  By relying on a qualified fee expert, class counsel can defuse the existing tensions within the class action and speed up the recovery of attorney fees.  What is more, courts are more likely to rule in favor of a fee analysis provided by a qualified and disinterested expert, rather than someone with a financial stake in the outcome.

NALFA Podcast Interview with Law Professor Brian Fitzpatrick

February 15, 2017

NALFA hosts a podcast series on attorney fee issues.  We talk with thought leaders, attorney fee experts, and attorney fee newsmakers who've helped shape and influence the jurisprudence of reasonable attorney fees.  NALFA interviews members, faculty, judges, law professors, in-house counsel, and others on a range of attorney fee and legal billing issues.  All NALFA Podcasts are free.

In its inaugural podcast, NALFA interviewed Brian T. Fitzpatrick, Professor of Law at Vanderbilt Law School.  The NALFA podcast with Professor Fitzpatrick focused on his seminal research on class action attorney fee awards and his study of professional fee objectors in the class action model. This podcast talked about his background, explored his research, and considered what his work means for the plaintiffs’ bar and the future of class actions. 

The podcast discussion centered around the economics of class action fee awards and the current politics in the class action world.  Professor Fitzpatrick's scholarly work on attorney fees includes, An Empirical Study of Class Action Settlements and Their Fee Awards, Do Class Action Lawyers Make Too Little? and The End of Objector Blackmail?  This research was discussed in the podcast.

"These podcasts are the perfect broadcast format to discuss attorney fee and legal billing issues," said Terry Jesse, Executive Director of NALFA.  "Professor Fitzpatrick went beyond his research and shared his personal views, the current politics at play in class actions, and even proposed a new fee calculation method for class actions.  He also talked about his future research and his plans to write a book on the subject," Jesse said.  Click on the link below to listen to the NALFA podcast:

https://soundcloud.com/thenalfa/interview-with-law-professor-brian-fitzpatrick

Judge Wants Review of Legal Bills After Inadvertent Billing Practices

February 11, 2017

A recent ABA Journal story by Debra Cassens Weiss, “Judge Wants Review of Legal Bills After Firm Reveal 9,000 Hours of ‘Inadvertent’ Double-Billed Time” reports that a federal judge in Boston is proposing the appointment of a special fee master to review the accuracy of legal bills submitted by several prominent law firms—and is suggesting the firms pay the costs of the probe.

U.S. District Judge Mark Wolf proposed in the Feb. 6 memorandum and order that up to $2 million in special fee master costs be paid from nearly $75 million in attorney fees that had been awarded to plaintiffs’ counsel in their settled suit against State Street Bank, the Boston Globe reports.  The class action had contended the bank overcharged its customers in connection with certain foreign exchange transactions.

Wolf cited a report by the Boston Globe Spotlight team that found three law firms submitted some charges for the same lawyers, often with differing hourly rates.  Some of the hourly rates listed in the legal filings were as much as 10 times more than what the lawyers generally earned, according to the newspaper’s report.

One of the firms, the Thornton Law Firm of Boston, submitted bills showing an hourly rate of $425 for staff attorneys, but one of those lawyers told the Boston Globe he was paid only $30 an hour for his work.  The Thornton firm was recently in the news as a result of a Boston Globe report that claimed partners at the firm who made Democratic campaign donations were reimbursed with law firm bonuses.

Wolf proposes that recently retired U.S. District Judge Gerald Rosen of Michigan be appointed as special fee master to review the accuracy and reliability of representations made in the legal bills, to report on whether misconduct occurred, and if so, to recommend whether the misconduct should be sanctioned.

Nine law firms shared in the legal fees.  Besides Thornton they included class-action law firms Labaton Sucharow, the lead law firm in the State Street case, and Lieff Cabraser Heimann & Bernstein.  According to the Globe, Thornton has a “lucrative partnership with Labaton Sucharow in which Thornton often finds potential legal clients for the much bigger New York firm.”

After Globe reporters contacted Labaton Sucharow for its story on the legal fees, the law firm submitted a letter to Wolf acknowledging “inadvertent errors” in written billing submissions.  Seventeen staff lawyers in Thornton’s report were also listed as staff attorneys on Labaton’s report, the letter said.  And six of the staff attorneys in Thornton’s report were also listed as staff attorneys on the report by Lieff Cabraser.

In all, the firms overbilled by about $4 million and double counted about 9,000 hours, the letter revealed.  The duplicative time has been removed, the letter said, and when differing billing rates were listed for a given staff attorney, the time will be claimed at the lower rate.

UK Judge Rules $20M Legal Bill ‘Highly Unrealistic’ in Fee Dispute Case

February 10, 2017

A recent American Lawyer story by Chris Johnson, “Dechert Client Fee Dispute to Proceed After Court Rules $20M Legal Bill ‘Highly Unrealistc’,reports that Dechert has been dealt a blow in its long-running fee dispute with a former client, with a High Court judge in the U.K. ruling that the company can proceed in its attempt to recover millions of dollars from the firm.

Eurasian Natural Resources Corporation accused Dechert of "systematic and gross overcharging" after the firm billed the London-based mining company $20.3 million for 23 months of work relating to a criminal investigation by the U.K.'s Serious Fraud Office.  The judge said that Dechert's fee estimates were "considerably awry on every occasion" and were based on "highly unrealistic" assumptions.

The dispute will now move to formal cost assessment proceedings, which an ENRC spokesman said are likely to take place early next year.  ENRC, which is being represented by London disputes boutique Signature Litigation, is disputing $14.5 million of Dechert's total fee.

The ENRC spokesman said the company was "pleased" with the ruling.  "We have always been concerned about the level of charging by Dechert, but felt unable to challenge these while our internal investigation was underway," he added.  A Dechert spokeswoman said: "We look forward now to proceeding with the costs assessment process."

The judgment also revealed that DLA Piper, which was originally hired by ENRC to work on the internal corruption probe, had estimated that its fees on the matter would come to around $500,000.

DLA's lead partner on the dispute, Neil Gerrard, took the case with him to Dechert when he joined the firm in 2011.  Dechert was subsequently fired by ENRC in April 2013, with the company initiating proceedings against the firm that fall.

In a letter to The American Lawyer last May, Dechert general counsel Arthur Newbold said that ENRC's allegations were "outrageous and unfounded."  Dechert had previously failed in two separate attempts to have the cost proceedings heard in public.  ENRC successfully argued that a public hearing could have potentially damaging consequences for the company's ongoing fraud office investigation.