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Category: Billing Practices

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.

Judge Applies ‘Average Fee-Paying Client' Test to Fee Request

September 10, 2019

A recent Law 360 story by David Simpson, “Hagens Berman, Cohen Milstein Fee Bid Slammed By Judge,” reports that no client would stand for the “insufficient” way that Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC explained their billing in a $10 million attorney fee bid that followed a deal in an electronics price-fixing proposed class action, a California federal judge said in a fiery order.

U.S. District Judge James Donato said that the firms’ billing charts provide only an attorney’s name and an associated billing amount, with no explanation of how the billed time was used to help the proposed class members, which bought allegedly price-fixed linear resistors directly from electronics companies like Panasonic Corp.  The charts did not provide the level of detail required, the judge said, but he gave the firms a chance to refile their bid by next month.

“This approach is plainly insufficient under well-established standards,” Judge Donato said.  “No paying client would ever stand for it, and it is a disservice to the class and the court.”  The judge made clear that he is willing to award the firms attorney fees to compensate them for the risks they took and the work they did to reach the combined $50.25 million proposed deals on behalf of direct purchasers over the past year.

“But here, plaintiffs’ counsel at Cohen Milstein and Hagens Berman are in effect asking that they be paid whatever they think is fair, no questions asked,” Judge Donato said.  “That will not do.  The court will not award millions of dollars based on counsel’s and the named plaintiff’s say-so, especially when that money will be taken directly out of the hands of class members.”

The judge also thrashed a proposed order submitted by the firms, calling its “self-congratulatory” language “unwarranted and unhelpful.”  The proposed order described the firms’ results as “exceptional” and lauded the reputations of the two firms, the judge noted.  “Statements like these are better suited for firm marketing materials than they are for orders proposed for the court’s issuance,” he said.

The firms had asked for more than $1.8 million in expenses and requested a $25,000 bonus for named plaintiff Schuten Electronics, according to the fee bid.  Judge Donato said that the request for the named plaintiff bonus was “equally bereft of support.”

The president of the company “simply ‘estimates’ the hours of work he did with no time records or periods of any sort and only the vaguest of descriptions of what his work was,” the judge said.  “The court also notes that the proposed award equates to an eye-watering hourly rate of $455 for Schuten, which vastly exceeds anything the court has ever been asked to consider for a named plaintiff.”

Feds Oppose Environmental Groups Fee Request in Fracking Case

September 4, 2019

A recent Law 360 story by Michael Philliis, “Feds Slam Enviros’ Atty Fees Bid in Offshore Permit Case,” reports that the Environmental Defense Center and another group that successfully blocked fracking permits for offshore California are prematurely seeking attorney fees, inflating their billing, and seeking reimbursement for matters on which they lost, the federal government told a California federal court.  Not only did the EDC and Santa Barbara Channelkeeper ask for attorney fees before a slew of complicated issues can be hashed out on appeal, but their request also represented an inflated bid to recover money that should never be the taxpayers' obligation to pay, the government said in a brief opposing the groups' fee request.

The environmental groups' hourly rate was allegedly puffed up; they billed some duplicated hours; they wanted reimbursement on claims that had been dropped or where they had lost; and they asked for costs that weren't allowed, including more than 10,000 pages of copying that the federal government painted as outlandish, according to the brief.  And no, talking to the media isn't something the groups can charge the government for, the response said.

"It makes little sense at this time to invest more of the court's or the parties' time and effort into briefing and deciding whether an award of fees under the [Endangered Species Act] is appropriate and, if so, what the amount of any award should be," the government said, asking the court to stay the fees request.  "The myriad potential outcomes on appeal counsel against the duplication of effort inherent in addressing the issue of fees now."

In November, U.S. District Judge Philip Gutierrez blocked the federal government from approving any offshore fracking permits in the state in a consolidated case brought by environmental groups and California.  He said the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement violated the Endangered Species Act and another law in crafting an environmental assessment of a plan to allow offshore well-stimulation treatments, also known as fracking or acidizing, in the state.  The BOEM and BSEE violated the ESA by failing to consult with other parts of the government, the judge said.

The Ninth Circuit will now hear appeals and cross-appeals in the case.  Any number of decisions in that venue could impact a fee award, and the EDC and Santa Barbara Channelkeeper moved too soon in their request for money, according to the government.  The move "risks putting the court in the awkward position of having to supervise plaintiffs' repayment in the event that federal defendants prevail on appeal," the government's brief said.

The environmental groups asked for $360,263.  The government, while noting that not all the environmental groups had requested attorney fees, said if the court does decide to award fees, it should provide a maximum of $229,814.  While the environmental groups won on their ESA claims, they lost on their National Environmental Policy Act claims and should not be paid for that part of their work.  The government also said that nearly 25 of the hours requested were duplicative and represented hours when multiple attorneys conferred.

The EDC and Santa Barbara Channelkeeper submitted their request in early August.  After winning the case, they argued the ESA provides them an opportunity to collect fees and costs.  "Plaintiffs achieved the requisite degree of success on their ESA claims" to make a fee award appropriate, they argued.  They added that the request was correct and that they had reduced the amount of hours in their request to make sure it was reasonable and did a line-by-line review to ensure that the time billed wasn't inflated.

Margaret Morgan Hall, an attorney for the Environmental Defense Center, called the government's framing of the fee request "overstated and incorrect."  "We are only seeking recovery of reasonable hours spent on the litigation, after taking significant reductions of our time to avoid any potential duplication of hours.  We likewise only seek to recover reasonable costs that we are entitled to under the Endangered Species Act citizen suit provision," Hall said in an email to Law360.

Article: Making Attorney Invoices Generic, but Detailed

August 27, 2019

A recent New Jersey Law Journal article by Ursula H. Leo and Jonathan N. Frodella, “Making Attorney Invoices Generic, but Detailed” reports on law firm billing format in OPRA matters.  This article was posted with permission.

Attorney invoices to municipalities and other government agencies are subject to disclosure under the New Jersey Open Public Records Act, N.J.S.A. 47:1A-1 et seq. (OPRA).  The standard OPRA exceptions apply to these “government records,” so custodians must redact all confidential information from them before providing them to OPRA requestors.  Unfortunately, redacting invoices requires attorney review, so taxpayers often incur additional legal fees when attorney invoices are requested under OPRA.  In the private sector, attorneys are encouraged to write billing narratives that capture their work as completely as they practically can, and the use of personal identifiers and descriptions of litigation strategies is standard practice.  However, when it comes to municipal work, more detail is not always the best course, and municipal attorneys should strive to draft their bills as generically as possible while still justifying their time to their governing bodies.

A good exercise to help achieve this goal is to draft every bill as though it absolutely will be subject to an OPRA request (and this presumption is not so far-fetched).  For example, when referring to employee investigations or labor disputes, matters should be described generally and the identities of specific employees and witnesses should not be revealed.  Although it is common for labor and employment attorneys to use initials to describe individuals, this practice should also be avoided since initials often must be redacted, and even the length of redactions or simple redaction errors can jeopardize the privacy interests that custodians are charged with protecting.  Similarly, when describing legal research or other legal work, descriptions should be general and should never reveal litigation strategy.  In addition to reducing legal fees, generic billing helps reduce municipal clients’ overall liability exposure by eliminating the need to make sensitive and timely redactions.

Attorneys must discuss any proposed generic billing styles with their clients to determine acceptable practices and agree to any useful billing conventions.  Even better, municipalities can create their own standards and incorporate them into attorney engagements.  For example, the State Division of Law publishes specific guidelines for outside counsel, including a detailed section on invoice format in which the Division explicitly prohibits “[i]ncomplete or vague charge descriptions” and provides some examples of the kinds of charge descriptions it will not accept.  The Division’s standards might seem at odds with the “generic billing” we are describing, so it is important to emphasize that generic billing is not vague or incomplete billing.  Attorneys can adequately account for their time using robust, detailed billing narratives without revealing confidential information, so long as they maintain awareness of OPRA confidentiality concerns and exercise their creativity.

Ursula H. Leo and Jonathan N. Frodella are attorneys at Laddey Clark & Ryan in Sparta, where they focus their practice on government services.

Plaintiffs’ Must Produce Billing Records in NCAA $45M Fee Request

August 21, 2019

A recent Law 360 story by Dorothy Atkins, “NCAA Athletes Must Produce Billing Records in $45M Fee Ask,” reports that a California magistrate judge granted the NCAA's request for attorneys representing student-athletes to produce five years of billing records to support their bid for $45 million in fees for winning a ban on certain pay restrictions but said the cost of producing records can be added to their fees.

During a hearing in San Jose, U.S. Magistrate Judge Nathanael Cousins ordered the athletes to produce the records so that the NCAA's attorneys can review them and ensure there aren't clerical errors, double billing or charges for time the attorneys spent doing media interviews.  He said the records can be subject to a protective order if necessary and he's not waiving any attorney-client privilege.

He also acknowledged that the time and expense it takes for the athletes' counsel to produce the records might not justify the amount of money the NCAA could potentially save in reviewing the records.  However, Judge Cousins said the athletes' counsel can charge the NCAA for the work.  "That's clearly what the defense has asked for," the judge said.

The judge's ruling came at the end of a hearing on the athletes' request for $45 million in fees for securing a permanent injunction in March after a weekslong landmark antitrust bench trial that bars the NCAA from restricting student-athletes' education-related compensation.  After the decision, counsel for the athletes sought to recoup the $30 million they said they sank into the long-running litigation, plus another $15 million based on a 1.5 multiplier, in light of "the exceptional nature of the outcome," and roughly $1.3 million in costs.

During the hearing, Karen Hoffman Lent of Skadden Arps Slate Meagher & Flom LLP, who argued on behalf of the NCAA defendants, said they wouldn't object to awarding the five lead plaintiffs between $10,000 and $15,000 each.  However, she complained that the athletes' attorneys only submitted a list of attorneys and their work hours, which totaled 51,000 hours, to support their $45 million fee request.  "It's a lot of money they're asking for, with virtually no evidence or support," she said.  Lent argued that the NCAA is entitled to more details about the records so that they can review them with a "much more critical eye."

However, the athletes' counsel, Jeffrey L. Kessler of Winston & Strawn LLP, pushed back, arguing that the NCAA is trying to conduct an unfair "fishing expedition" into their billing records.  Kessler said there's no evidence that lead counsel's hourly rates are excessive or they've duplicated their work.  He said it would also be "enormously burdensome" to redact five-years worth of billing records, which he argued contains privileged work-product material.

Kessler added that if they have to produce their billing records, then the NCAA's legal counsel should also have to produce their records, which he said they don't want to do.  Kessler pointed out that approximately a dozen law firms representing the NCAA defendants have "dwarfed" the athletes in their legal fees and those firms had charged the NCAA defendants $60.7 million as of June 2018, which was months before a trial was held before U.S. District Judge Claudia Wilkin in November.  "The idea the size of [our request] warrants it is just false," Kessler said of the NCAA's demand for its billing records.

Kessler also argued that the injunction they achieved against the NCAA is an extraordinary result for athletes.  He noted that the athletes' expert, University of San Francisco professor Daniel Rascher, conservatively estimates that the injunction will provide NCAA athletes with $235 million a year in additional benefits.  Therefore, he said, a 1.5 multiplier is on the low end, considering $45 million represents 12.7% of the $235 million a year in additional benefits.