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Category: Billing Practices

Judge Blasts Attorney for Wasting Time, Awards $1.6M in Fees

January 29, 2019

A recent Law 360 story by Daniel Siegal, “Judge Blasts Atty for Wasting Time, Awards $1.6M in Fees,reports that a Denver federal judge awarded a host of insurance companies nearly $1.6 million in attorneys' fees for defeating allegations that they unfairly denied coverage to homeowners, holding the plaintiffs’ attorney personally liable for most of the fees and blasting his “prolix, redundant and meandering” filings that wasted the insurers’ time.  In a 22-page ruling, U.S. District Judge John Kane granted the consolidated bid for attorneys' fees filed by dozens of defendants, including Allianz Life Insurance Co. of North America Inc., Chubb Corp. and insurance standards organization ACORD, finding that their request for about $1.6 million in fees was “fully foreseeable” and reasonable given the sprawling allegations.

“Plaintiffs initiated this litigation and were in control of its course.  There is no indication defendants’ counsel acted unreasonably or stepped outside the bounds of competent representation of their clients,” Judge Kane wrote.  “Plaintiffs cannot now complain that the fees incurred by defendants are excessive because such an inordinate number were forced to take part … They have imposed costs on virtually the entire insurance industry, and under the law, they must shoulder the result.”

Judge Kane wrote that the plaintiffs’ attorney, Josue David Hernandez of the Law Office of Josue David Hernandez, must personally bear liability for the attorneys' fees incurred by the defendants in the district court, given “his incessant filing of absurdly lengthy and legally incorrect briefs” and vexatious conduct throughout the litigation.  Some fees were incurred by the defendants on appeal, and Judge Kane asked them to file only the amount of fees that applied to the district court proceeding.

Judge Kane said he analyzed the plaintiffs' positions only to the extent that he could “extract them from the morass” of the briefing filed by Hernandez.  “I have struggled to decipher plaintiffs’ legal arguments throughout this case,” Judge Kane wrote.  “Those that pertain to the attorney fee award are no exception.”  The judge sided with the defendants’ expert witness’ testimony that the hours of legal work they expended defending the case were reasonable and necessary over the plaintiffs’ argument, which was based not an expert’s testimony but an “unreliable and bewildering” 24-factor test of Hernandez’s own concoction.

Judge Kane also noted that throughout the litigation, the plaintiffs had repeatedly made extra work for the defendants, such as filing a 40-page motion for more time to respond to the defendants’ motion to dismiss.  After the defendants filed a seven-page opposition to that motion, the plaintiffs followed with a 47-page reply brief that “illustrates a system gone mad,” the judge said.

Terence Ridley of Wheeler Trigg O’Donnell LLP, who represented First American Property and Insurance Co. and argued on behalf of all fee-seeking defendants, told Law360 that he was honored to argue the motion for the numerous insurers, saying that “the language of the order is important, and the order is important.”  Hernadez told Law360 via email that Judge Kane's ruling had failed to address key issues, including whether Colorado's attorneys fee statute was preempted by federal law, and the fact that the defendants had filed more papers and other documents in the case than the plaintiffs. 

"If one were to take the time to review the actual documents on the public record (which is something I would encourage anyone truly interested in the case to do), they would likely find that the ruling failed to include the necessary treatment of at least eight extremely significant issues raised," he said. 

Named plaintiff Dale Snyder and 17 others filed suit in June 2014, and in a 260-page amended complaint asserted 23 claims against 113 defendants, alleging a broad, multi-decade conspiracy to deny homeowners coverage of damages from floods and fires.  In January 2016, Judge Kane dismissed the suit due to the plaintiffs' failure to include a “short and plain statement of the claim showing that the pleader is entitled to relief” in the complaint.  The Tenth Circuit affirmed that ruling in May 2017 and ordered appellate attorneys' fees to be awarded to the defendants.

The case is Dale Snyder et al. v. ACORD Corporation et al., case number 1:14-cv-01736, in the U.S. District Court for the District of Colorado.

Paralegal Billing Draws Scrutiny in Sears Bankruptcy

January 25, 2019

A recent The American Lawyer story by Dan Packel, “Weil Fees in Sears Bankruptcy Shine Light on Big Billers: The Paralegals,” reports that, fees are continuing to pile up in the Sears bankruptcy, and Weil Gotshal & Manges, the storied retail giant’s lead law firm, is under the spotlight.  The firm caught the attention of the New York Post over a single paralegal’s busy month: 431 hours, billed at $405 per hour.  That’s more than 14 hours for every day of the month.  It’s also more than the billing rate for some partners at large firms.  And it tops the rate earned by a number of attorneys, including shareholders, at McAndrews, Held & Malloy, the Chicago firm handling trademark issues for Sears in the Manhattan bankruptcy case.

Paralegal Keri Grant, from Weil’s corporate department, put more hours into the bankruptcy than anyone else at the firm for the month of November, the period covered by its second monthly fee statement in the case.  Grant’s Herculean effort involved hours on weekends and Thanksgiving Day, along with 19 and a half hours on Black Friday, and led to a final bill of $174,514.50.  But Grant is only one of seven Weil paralegals who bill at over $400 an hour.  Kathleen Lee, of the business financing and restructuring group, took the top mark at $420.  And the lowest rate of the 13 paralegals billing for the matter is $240.

That puts all of the Weil paralegals in the highest billing bracket tracked by the National Association of Legal Assistants in its 2018 survey on utilization and compensation: those billing more than $215 an hour.  Twelve percent of NALA respondents fell into that range, up from 8 percent in the organization’s 2016 survey.  Still, the total billed by Weil’s paralegals in November—just over $500,000—is just a small sliver of the firm’s total November bill of over $10 million.

The majority of that bill—$5.6 million—came from over 60 associates billing at rates between $560 and $975.  Twenty-three partners and 10 of counsel attorneys, billing at between $1,600 and $1,025 an hour, combined to contribute $3.8 million in bills. Of these lawyers, business financing and restructuring partner Jacqueline Marcus has been busiest, billing just short of 225 hours for November at $1,375 per hours, for a total of $309,000.

Weil has attracted criticism in the past for its hefty bankruptcy fees.  In 2017, an Iowa judge overseeing the bankruptcy of aerospace-parts manufacturer Wellman Dynamics Corp. cut the firm’s million-dollar payment in half after calling the bill “staggering,” according to The Wall Street Journal.  But it isn’t the only firm charging Sears rates north of $1,000 an hour.

Paul Weiss is also in the mix for the debtors in the Sears case, billing a total of $2.8 million for the month.  Five partners billed between $1,455 and $1,560, with securities litigation and enforcement group co-chairwoman Susanna Buergel putting in the most work: 109 hours.  Two of the three of counsel attorneys topped that figure and earned between $1,125 and $1,160 an hour.  Collectively, these senior lawyers billed just over $1 million.  Associates at the firm, who together scraped past that figure, falling just short of $1.1 million, billed between $640 and $1,030 an hour.  The firm’s staff attorneys, paralegals and other nonlegal staff are all lumped into the same category in its filing, pulling in between $345 and $480 hourly.

Wachtell Lipton Rosen & Katz, which has spent over a decade serving as general corporate counsel to the company, also has a small slice of the bankruptcy work, billing over $463,000 from the middle of October through the end of December.  Its three partners on the job each billed at $1,400.  Partners and counsel together put in 372 of the 383 hours the firm logged over that period.  And the firm’s sole paralegal on the matter?  She put in 15 minutes at $275 an hour.

Intellectual property boutique McAndrews Held & Malloy billed a similar figure for its work on Sears’ trademarks, tallying nearly $467,000 for the same interval.  This combined a mixture of fixed-fee work for preparing and prosecuting new trademark applications and monitoring key trademarks, flat-fee work for preparation, filing and prosecution of patents around the globe, and some additional hourly work.

In its hourly billings, the firm’s most handsomely compensated attorney, shareholder Chris Winslade, charged a rate of $560.  Other partners and shareholders billed at between $332 and $464, while a patent agent and the firm’s associates billed at between $264 and $330.  The firm’s eight paralegals all billed at $184, putting them in the top quartile of the NALA findings.

UBS Balks at $3.2M in Attorney Fees in Whistleblower Action

December 12, 2018

A recent Law 360 story by John Petrick, “UBS Balks at Whistleblower Case’s $3.2M in Attys’ Fees,” reports that UBS Securities asked a New York federal judge to reject a “jaw-dropping” and “excessive” $3.2 million in attorneys' fees requested by a former analyst who won a $1 million verdict in his whistleblower trial under representation by Herbst Law PLLC and Broach & Stulberg LLP.  Attorneys for the bank argue that while the Sarbanes-Oxley Act allows for a winning party to recoup “reasonable” fees, this request is overstuffed with billable hours spent on claims that were lost at former analyst Trevor Murray's trial, duplication of work and extra time needed to make up for the attorneys’ own mistakes.

“The court should significantly reduce the amount of fees and costs that Murray’s counsel requests in order to prevent Murray’s counsel from reaping a windfall from their own limited success and inefficient, excessive work,” attorneys for UBS said in the motion.  Murray won only a “fraction” of what he sought at trial and his attorneys went after unreachable claims that a reasonable attorney would never have pursued, which prolonged the case needlessly, UBS attorneys said in the motion.

Murray won a nearly seven-year fight with the bank after he alleged he was fired in 2012 for complaining his superiors were pressuring him to falsely report better market conditions to boost UBS’ revenue numbers and impress investors.  The former analyst filed the lawsuit in February 2014, claiming UBS pressured him to skew his research to support the bank’s commercial mortgage-backed securities trading and loan origination activities, and to report better conditions in the market because that line of securities was a significant revenue source.

Murray allegedly told the bank’s head CMBS trader he was concerned certain CMBS bonds were overvalued, according to the suit.  But Murray was told not to publish anything negative about the bonds because they had been purchased by the UBS trading desk, he claimed.  He was fired shortly thereafter, just a month after receiving what he said was an excellent performance review.  UBS argued Murray was laid off as part of a mass downsizing sparked by the global financial downturn in 2011.

A jury in Manhattan awarded Murray nearly $1 million following a three-week trial, deciding he was fired for refusing to skew his research to impress investors, according to filings in the case.  The jury disagreed, however, on how long Murray would have remained at the firm, and awarded him much less than the amount of damages he was seeking.

Petitions filed last month asked for $638,950 to cover Herbst's attorneys’ fees and another $1,160.55 plus interest in costs, and $2.6 million to cover Broach & Stulberg's work in the case.  While Broach & Stulberg started out as lone counsel during several rounds of pretrial motions, Herbst “parachuted” into the case just a month before trial, applying to become lead counsel because it said it had more trial experience, according to the motion.

UBS attorneys maintained in their opposition motion that though a judge said Herbst could only assist in the case and not take over as lead counsel, for all intents and purposes, Herbst performed as if its attorneys were in fact lead counsel for the remainder of the case.

Herbst told Law360 his billable hours were reasonable and that he expects the court to think so, too.  "All of our firm’s time was spent on the Sarbanes-Oxley claim on which Mr. Murray prevailed and obtained what the jury decided was the full measure of his economic loss, special damages and compensatory damages," he said.  "Accordingly, based on UBS’s opposition, which does not attack our hourly rates and only presents picayune opposition to the hours we expended, our firm should hopefully receive a full lodestar recovery."

The case is Trevor Murray v. UBS Securities LLC et al, case number 1:14-cv-00927, in the U.S. District Court for the Southern District of New York.

U.S. Trustee Seeks More Attorney Fee Info in Sears Bankruptcy

December 7, 2018

A recent Law 360 story by Rick Archer, “US Trustee Faults Fee Info in Sears’ Request for IP Law Firm,” reports that the U.S. Trustee’s Office has asked a New York bankruptcy court to reject Sears Holding Corp.'s request to retain boutique law firm McAndrew Held & Malloy Ltd. to handle intellectual property matters unless it gets more information on what the firm will be paid.  In an objection, U.S. Trustee William Harrington said that, among other inadequacies, Sears’ request states McAndrews would receive a range of flat fees for a list of IP-related services but fails to assign specific payments to specific services.  “Accordingly, without more specific disclosure regarding the flat fee and the flat fee services, it is impossible to determine if the retention of McAndrews is reasonable,” he said.

Once one of the nation's largest retailers, Illinois-based Sears entered bankruptcy in October to reshape its physical footprint and reduce a debt load of more than $11 billion created by years of consecutive net revenue losses, store closings and unsuccessful efforts to adapt to a changing retail world.  After closing 142 of the 700 Sears and Kmart stores still in business, the company said it hopes to sell about 400 earnings-positive stores along with other potentially viable sites and assets including intellectual property while under Chapter 11 protection.

Two weeks ago, Sears applied to retain McAndrews, a Chicago-based IP firm, to handle trademark, copyright, patent and domain name issues.  The application said McAndrews has been Sears’ IP counsel for more than six years.  “By virtue of such prior engagement, McAndrews is intimately familiar with the facts and history of the company’s IP assets and coordinates the filing of IP applications in foreign jurisdictions.  The compensation proposed by McAndrews is at or below comparable rates in the IP market,” it said.

The application said Sears was proposing to pay a fixed fee of $43,750 a month, a flat fee of between $750 and $11,000 for a list of specific IP-related services, such as trademark and copyright registration, and an hourly rate for any other services.  The company also asked for permission to put $130,000 in retainers in trust to be paid to McAndrews in the event that it fails to pay any future invoices from the firm.

In his filing, Harrington said he was objecting on the grounds the application only gives the range of flat fees and does not give a specific fee for each of the specified services.  He also said the application “inexplicably” asks McAndrews be allowed to waive the requirement to file time records in six-minute increments for the fixed and flat fee services and that McAndrews had not shown why it should have a retainer in trust.

The case is In re: Sears Holding Corp, case number 7:18-bk-23538, in the U.S. Bankruptcy Court for the Southern District of New York.

$11.5M in Attorney Fees in Sears Bankruptcy…So Far

November 23, 2018

A recent American Lawyer story by Brian Baxter, “Wachtell, Weil Unveil Legal Bills, Hourly Rates for Bankrupt Sears,” reports that the two high-powered firms earned more than $11.5 million from the insolvent retail giant before its recent Chapter 11 case.  Two weeks after Sears Holdings Corp. stumbled into bankruptcy, the storied retail giant’s Chapter 11 case has revealed the cost of some of its many outside lawyers.  Weil Gotshal & Manges landed the lead role as Sears’ bankruptcy counsel once the company slipped into insolvency in the strategic locale of White Plains, New York, on Oct. 15.  In the 90 days before its Chapter 11 petition, Sears paid $10.15 million to Weil, according to a declaration filed with the bankruptcy court on Oct. 26 by Ray Schrock, co-chairman of Weil’s business finance and restructuring department.

Schrock, who joined Weil in 2014 from Kirkland & Ellis, is working with fellow New York-based bankruptcy partners Jacqueline Marcus, Garrett Fail and Sunny Singh in advising Sears.  Schrock helmed a Weil team that handled the 2015 bankruptcy of The Great Atlantic & Pacific Tea Co. Inc., a proceeding that eventually led to the demise of the grocer better known as A&P.

Earlier this year, Schrock and Weil picked up lead roles on the bankruptcies of fashion jewelry retailer Claire’s Stores Inc. and supermarket chains Tops Markets LLC and Southeastern Grocers LLC.  Singh, who made partner at Weil last year and is known for having worked day and night on a team advised on the bankruptcy of now-defunct Lehman Brothers Holdings Inc., is also involved in the Chapter 11 cases for Tops Markets and Southeastern Grocers.  Marcus, who made partner at Weil a decade ago, is another seasoned bankruptcy lawyer.

Schrock’s declaration states that Weil partners and counsel are billing Sears between $1,075 and $1,600 per hour for their services, while associates from the firm are working at hourly rates ranging from $560 to $995.  Prime Clerk LLC, a bankruptcy claims administrator started by former Weil bankruptcy partner Shar Waisman, is serving as a claims and noticing agent for Sears’ Chapter 11 case.

Wachtell Lipton Rose & Katz, which said in court papers that it has spent more than a decade serving as general corporate counsel to Sears on a variety of matters, is now seeking to serve as special bankruptcy counsel to the company.  Wachtell, whose billing practices remain a continuous subject of interest in Big Law, stated in court papers filed Monday that partners and of counsel at the firm are billing Sears between $950 to $1,400 per hour for their services, with associates working at hourly rates ranging from $500 to $925.

In the 90 days before its Chapter 11 petition, Sears paid nearly $1.4 million to Wachtell, according to a bankruptcy court filing by the firm seeking employment on behalf of the suburban Chicago-based company.  A declaration filed by Wachtell restructuring and finance of counsel Amy Wolf states that the firm has not done work for former Sears CEO Edward Lampert, who resigned from Sears earlier this month, his hedge fund ESL Investments Inc. or any of its affiliates on any matter since June 2015.

Haynes and Boone counseled Lampert’s ESL back in 2013 on the reduction of its stake in Sears, which has not turned a profit since 2010.  Former ESL general counsel William Harker, a former corporate associate at Wachtell who is now a co-founder and president of hedge fund Ashe Capital Management LP, also once worked in Sears’ office of the chairman and served on the board of directors of Sears Canada.  Wachtell advised Sears on its $11 billion merger in 2004 with Kmart Holding Corp.  The firm then helped Sears defeated a long-running class action suit stemming from that ill-fated retain industry combination.

Bankruptcy court filings show that James Bromley, a prominent bankruptcy partner at Cleary Gottlieb Steen & Hamilton in New York, is advising Lampert’s ESL in Sears’ bankruptcy case, along with fellow restructuring partner Sean O’Neal and litigation counsel Andrew Weaver.  Akin Gump financial restructuring partner Ira Dizengoff has been hired to advise an official committee of unsecured creditors in Sears’ Chapter 11 case.  DLA Piper, which Sears’ board has retained as real estate counsel, has not yet filed billing statements with the bankruptcy court.

Sears, whose general counsel is Stephen Sitley, earlier this month added former Skadden Arps corporate restructuring lawyer Alan Carr as an independent member of its board.  Carr is now a partner and CEO at Drivetrain LLC, a New York-based turnaround management firm.  Sears, which in bankruptcy has listed more than $10 billion in liabilities against $1 billion in assets, plans to close hundreds of stores in an effort to stay in business.

Law 360 Covers NALFA CLE Program

October 25, 2018

A recent Law 360 story by Bonnie Eslinger, “Excessive Attys’ Fee Bids Can Backfire, Judges Say,” reported on a NALFA CLE program hosted today, “View From the Bench: Awarding Attorney Fees in...

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