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Category: Billing Practices

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.

Fifth Circuit ‘Stunned’ Over Fee Request in FDCPA Case

November 19, 2018

A recent Texas Lawyer story by John Council, “5th Circuit ‘Stunned’ Over $130,000 Fee Request by 2 Texas Lawyers in $1,000 FDCPA Case, Awards Them Zero,” reports that the U.S. Court of Appeals for the Fifth Circuit has slammed two Texas lawyers and their client in a recent decision, writing that it was “stunned” by the trio’s $130,000 attorney fee request in connection with a $1,000 Fair Debt Collection Practices Act award concerning a $107.29 unpaid water bill.

According to the decision in Davis v. Credit Bureau of the South, Crystal Davis filed the suit in an Eastern District of Texas federal court, alleging that the debt collection agency had violated the federal debt collection law, with its fee-shifting provision, in contacting her over the water bill because it has misrepresented itself as a “credit bureau,” which it isn’t.

A U.S. magistrate judge later ruled in Davis’ favor, awarding her $1,000 in statutory damages after finding the defendant had violated federal law.  Davis later filed an opposed motion requesting $130,410 in attorney fees based on her status as a prevailing party in the litigation.  But the magistrate judge ruled against Davis and awarded her lawyers nothing, explaining that he was “stunned” by the request, noting there were duplicative and excessive fees charged by the attorneys, Jonathon Raburn and Dennis McCarty.  The magistrate judge also noted that the case was simple and on point, and the nearly 300 hours spent on the case at an hourly rate of $450 demanded by the lawyers was “excessive by orders of magnitude.”

Davis later appealed the attorney fees request to the Fifth Circuit, where it was met by equal disbelief.  “As an initial matter, we join the magistrate judge’s stunned reaction to Davis’ request for $130,000 in attorneys’ fees and concur that the record reflects neither the quality of legal work necessary for the requested hourly billing rate ($450.00 per hour), nor the quantity of work to support the 156.55 hours claimed by Jonathon Raburn and the 133.25 hours claimed by Dennis McCarty,” the Fifth Circuit wrote in a per curiam opinion.

“The pleadings filed by McCarty and Raburn, including the brief on appeal, are replete with grammatical errors, formatting issues, and improper citations, and is certainly not the caliber of work warranting such an extraordinary hourly rate,” the decision noted.  While the FDCPA gives courts little option but to award attorney fees to prevailing parties unless there are extraordinary circumstances, the Fifth Circuit agreed with the lower court that the lawyers should be awarded nothing.  The decision notes a U.S. District Court judge’s finding of bad-faith conduct on the part of Davis and her attorneys, in which he concluded that it appeared that the cause of action “was created by counsel for the purpose of generating, in counsel’s own words, an ‘incredibly high’ fee request.”

“The record suggests that McCarty and Raburn—in an attempt to receive an unwarranted and inflated award—impermissibly treated the $130,410 fee request as an ‘opening bid’ in an attempt to negotiate the attorney’s fee award,” according to the decision.  “This simply cannot be tolerated.  Bottom line: the FDCPA does not support avaricious efforts of attorneys seeking a windfall.  Because grossly excessive attorney’s fee requests directly contravene the purpose of the FDCPA, these tactics must be deterred,” the court concluded in its decision.

In a statement, McCarty and Raburn said they were disappointed in the ruling but respect the Fifth Circuit’s decision.  “We know these judges would not be in the position they are without outstanding legal careers.  However, we want to be clear that we did not file this lawsuit in bad faith.  It was over a debt collector using an illegal name that is prohibited by the FDCPA,” the lawyers said.  “We feel that it is a sad day for the consumer as this ruling may encourage debt collectors to break the law without any fear of consequence other than a statutory fine,” the statement notes.  “Because the majority of FDCPA cases do not carry damages, we feel that attorneys will be hesitant to take on these cases, which leaves the consumer exposed to bad debt collection practices.”

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 Federal Litigation”.  This live, remote, and multi-state CLE featured an all-judicial panel of sitting U.S. District Court judges.  The story reads:

A prevailing party seeking to recover legal fees should resist asking for excessive or unnecessary hours, federal judges said in a panel discussion Thursday, with one jurist noting such entries send up a red flag that makes him "skeptical of the entire application."  Speaking on a conference call organized by the National Association of Legal Fee Analysis, U.S. District Judges Virginia A. Phillips and Gene E.K. Pratter and Magistrate Judge William Matthewman all spotlighted examples of fee requests that didn't align with the U.S. Supreme Court’s opinion that fees should only be awarded for hours "reasonably expended" on a case.

Judge Phillips of the Central District of California said that judges spend substantial time combing through billing entries, adding, "Surprising things show up when you take a careful look at the bills."  Judge Pratter of the Eastern District of Pennsylvania agreed, saying the most amusing item she once found in an attorney's billing sheet was a calculation that he did 27 hours of work within one day.  It turned out the lawyer had failed to take into account the time zone changes when flying, she said.  The court's review of an attorney's fee request "sometimes requires a check on reality and then a check on Greenwich mean time," Judge Pratter said, chuckling.

Judge Matthewman of the Southern District of Florida said that lawyers shouldn't try to include excessive, redundant or unnecessary hours in their fee bid.  "That comes up constantly with me, where I will see perhaps excessive hours on reading a docket entry … or looking at the local rules, or opening mail, or doing administrative tasks, or really doing things that are unnecessary, such as preparing for a press conference, or perhaps there's a lot of client handholding in the case," Judge Matthewman said. "Things of that nature."

"Lawyers would do much better on these applications if they themselves would sort of police themselves and exclude excessive or redundant, unnecessary hours, so we see less of it or none of it, and we have more comfort in the application.  Once we start seeing a lot of these excessive and unnecessary requests for fees, it sort makes us skeptical of the entire application," the judge added.

Judge Phillips also noted that if an attorney is asking for a high hourly rate, based on his or her experience, then she's looking to see how much time the lawyer is spending on simple tasks.  "If you're entitled to a high hourly rate because of your immense experience, then you shouldn't really have to be spending a lot of time looking at the local rules of civil procedure," the judge said.

When fighting a fee request by the prevailing party, opposing counsel would do well to look for such concerns and make precise objections, Judge Matthewman said.  But avoid pejoratives, Judge Pratter suggested.  "There's no reason to call you opponent avaricious," she said.  Judge Matthewman agreed, saying those kinds of comments will hurt a party's fee request.

Attorneys seeking reimbursement of their fees also don't pay enough attention to requirements that they base their billing on reasonable, prevailing hourly rates, the judges said.  Often, attorneys don't provide enough information to justify their rates, Judge Phillips said.  "Ideally, under the case law, we should have a survey, some survey evidence, a declaration from someone who's qualified to opine on what the prevailing rate is in that community for this type of case," the judge said.  "But often I get nothing but the declaration of the party, of the attorney who's seeking the fees, saying, 'This is when I graduated and these are all the Best Lawyers awards I've ever gotten.'" 

Judge Matthewman added that it's irksome when attorneys from an expensive jurisdiction, such as New York City, come down to Florida for a case and then seek to be reimbursed for an hourly rate they would get in Manhattan.  Later in the discussion, Judge Matthewman said that when considering a fee request, he takes into consideration the quality of the attorney's work and representation.  "If you have a case where the fee applicant's attorney has been overly litigious, very difficult in the discovery process, very difficult on everything, agreeing on nothing, the court understands and knows that this increases the attorneys' fees that are incurred by both sides in the case," the judge said.  "And I think that's a factor that's taken into account."

On the flip side, an attorney who "makes the flow easy," gets rewarded by the court, he added.  Judge Phillips agreed, saying she frequently deals with top lawyers who may have high rates but get good results with "lean" hours.  "Lawyers who are really good, then, don't drop the ball on their fee petitions," Judge Pratter added.  "And lawyers who still have a ways to go somehow, miraculously, don't do so good on their fee petitions either."  The Pennsylvania judge also noted during the panel hearing that the Third Circuit guidelines direct judges to make fee reductions based on meritorious objections from the opposing party and not necessarily to rule sua sponte.

But later on in the discussion, Judge Pratter noted that there are times when the court should lean in with its own judgment, such as when there is a settlement in a class action lawsuit.  The court has a responsibility to look out for the class, she said.  "You cannot rely on the defendants to be acting as a brake on the fees," the judge said.  "The defendants come in, and they and the plaintiff's lawyers are all friendly and hugging each other about how important everybody's work was.  So that's always a flashing light for the court to become particularly attentive to its duties to the absent class members."

Ultimately, the judge said, attorneys should know that judges are not trying to be "mean-spirited" when they are scrutinizing attorney fee requests.  Nor are they jealous of the lawyers, she said.  They're just trying to carry out their duty.  "Most of us, we've been there," Judge Pratter said.  "We understand what it means to have to keep track of time.  I'll tell you, by the way, that's one of the best things about coming over to the other side, [giving] up time sheets."