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Category: Billing Record / Entries

Fee Request Reduced 90 Percent in VW Dealer Case

April 13, 2017

A recent Courthouse News story by Nicholas Iovino, “Judge Whacks 90% of Attorney Fees in VW Dealer Case,” reports that a federal judge cut more than $25 million from attorneys’ fees in a $1.2 billion settlement between Volkswagen and its U.S. dealerships.  U.S. District Judge Charles Breyer reduced the award to $2.9 million, finding a request for $28.5 million too high, given that “much of the groundwork for the settlement was laid in negotiations” for a previous deal.

Breyer lopped off $1.5 million in billable hours deemed as “hybrid time,” or hours spent negotiating both the dealership settlement and a larger, $10 billion deal for owners of 2.0-liter diesel engine vehicles.  He found that attorneys already had been compensated for those hybrid hours in a $175 million fee award approved in March.

The $2.9 million fees award is the latest Volkswagen must pay to make amends for its installation of emissions-cheating software in 11 million vehicles worldwide, including nearly 600,000 diesel-powered vehicles sold in the United States.  The defeat device software kicked in to hide emissions during tests, while allowing cars to spew up to 40 times more nitrogen oxide on the road than allowed under federal law.

Under the $1.2 billion deal approved in January, 644 U.S. dealerships will each receive an average $1.85 million to cover losses precipitated by the German automaker’s diesel-gate scandal.  Although the requested $28.5 million makes up a mere 2.8 percent of the $1.2 billion deal, granting it would allow the lawyers to pocket more than 14 times the value of hours they actually worked, Breyer wrote.

“Dealer class counsel did not expend significant additional time procuring the settlement, nor did it undertake significant additional risk, given Volkswagen’s incentive to settle quickly,” Breyer wrote in the 10-page ruling.  He cut an additional $560,000 in anticipated billable hours, finding Volkswagen has already started paying dealerships and no further hours are needed to execute the deal.

Breyer recalculated the total value of billable hours at $1.47 million and applied a 2.0-multiplier, for a total of $2.95 million to be split between two law firms.  Hagens Berman Sobol Shapiro will receive $2.3 million; Bass Sox & Mercer will get $622,000.  The judge also granted the firms $87,538 in litigation costs.

Five Fundamentals of Collecting Attorney Fees

April 3, 2017

A recent Daily Report article by Randy Evans and Shari Klevens, “5 Fundamentals of Collecting Fees,” addresses attorney fee collection.  This article was posted with permission.  The article reads:

It pays to implement an effective billing system—literally.  On the front end, having a system in place increases realization rates because it gets money in the door.  On the back end, fee disputes and related malpractice claims can be minimized, if not avoided altogether.  Knowing the fundamentals of billing and collections can make the world of difference for any law practice from both a financial and risk management perspective.  Here are five steps worth considering when implementing or revising your billing and collections processes.

Determine Fee Arrangement Before Attorney-Client Relationship Begins

Subject to market conditions and the simple economics of supply and demand, lawyers typically enjoy the ability to negotiate fees with a prospective client.  The best way to minimize problems down the road is to finalize the negotiations before the attorney-client relationship commences.  In negotiating a fee arrangement, the most significant requirement under the ethical rules is that the fee must be reasonable.  In addition, fee agreements cannot penalize a client who decides to terminate an attorney at any time.  (Notably, requiring a client to pay an attorney for the time spent on the representation prior to termination is generally not an unreasonable term.)

If the fee arrangement is not finalized until after the representation begins, the attorney and client may already be in a fiduciary relationship at that point.  Attorneys have to take care not to use information learned in the course of the attorney-client relationship to the attorney's advantage and to the client's detriment in negotiating the fee.  If a client challenges the fee later, courts and bars will look to whether the attorney took advantage of the client's need for continued representation.

That is not to say that mid-representation fee changes are impermissible.  In fact, they happen frequently, such as when an attorney's hourly rate changes due to market conditions.  This is fairly routine.  For a major fee change mid-representation, however, the attorney could recommend that the client consult with independent legal counsel regarding the amended fee arrangement.  Attorneys who advise clients on new fee arrangements during the representation that seriously alter the previous terms may be subject to heightened scrutiny.

Set Expectations

If the attorney or law practice expects to get paid on a monthly or quarterly basis, that is something that can be discussed with the client at the outset of the representation.  Similarly, if the fees are expected to be paid directly from settlement proceeds or at closing, tell the client.

Avoiding surprises is the most important risk prevention technique.  When both attorney and client have set their respective expectations (and adjusted them as appropriate), then the attorney-client relationship begins and proceeds on the same page.

Memorialize the Fee Arrangement

There has been considerable commentary regarding the implications of a "fee agreement," particularly whether written agreements extend the statute of limitations for legal malpractice claims.  However, the risks of failing to document a fee arrangement far exceed the risks of an extended statute of limitations.

A great majority of fee disputes involve the amount of the fee itself.  The simplest and most effective method for avoiding this type of dispute is simply to agree in writing to the terms of the fee arrangement and to have the client sign the document confirming the fee arrangement.

Bill Regularly

Sending out bills on a regular basis helps show the client—in close to real time—what tasks are being completed and what charges are being incurred.  Then, if the client objects to the services or has a problem with the charges, such issues can be addressed quickly.  If the attorney is not sending bills on a regular basis, however, the client may later object to the fees (even if the client would have paid the same aggregate amounts if invoiced at regular intervals).

Most attorneys will recommend informing the client what the fees are or will be well in advance of the request for payment.  For the hourly fee attorney, this means sending out bills regularly so that the client gets a sense of what the fees and costs are.  What constitutes "regular" billing will obviously differ based on the circumstances of each representation.

If there is little activity while a motion or appeal is pending, then bills might not be sent for a few months.  On the other hand, if there is significant activity, then bills might be sent on a monthly basis.

For transactional representations, providing a pre-closing preview of the closing statement with the fees is helpful.  For contingency fees, pre-settlement previews of the amount of the fees is appropriate.  If the representation involves significant out-of-pocket expenses for which the client is responsible, consider interim bills.  The key is to make sure the client understands (and accepts) what the projected fees are before they are locked in by a closing or settlement to avoid a fee dispute.

Timely Address Unpaid Bills

Unpaid bills are problems waiting to happen.  The sooner those problems are identified and resolved, the better.  While many attorneys do a good job at documenting the fee and sending the bills, they may do a poor job on the follow-up.  Rather than leave the follow-up to chance, the better approach is to set an internal deadline for following-up on outstanding bills.  This contact enables the attorney to determine if the client has any issues with the bill or whether the failure to pay is a simple oversight or intended delay.

If there are concerns or issues about the bills, then the attorney should address them.  If nonpayment is an oversight, then the contact will serve as a friendly reminder.  If it is intended delay, then the attorney and client can discuss what the limitations are and how they might be addressed.

There is no magic time for following up.  Instead, it will depend on the contours of the relationship with the client.

For attorneys and law practices that follow the steps discussed above, fee collections can be a little less daunting.  For attorneys and law practices who do not, it is never too late to put the systems in place or revise existing ones.  Your balance sheet and law license will thank you.

Randolph Evans is a partner at Dentons US in Atlanta.  He handles complex litigation matters in state and federal courts for large companies and is a frequent lecturer and author on the subjects of insurance, professional liability and ethics.  Shari L. Klevens is a partner and deputy general counsel at Dentons US in Washington and Atlanta.  She is co-chair of the global insurance sector team, a member of the firm's leadership team and is active in its women's initiative.

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.

What are Best Practice in Outside Legal Fee Analysis?

February 20, 2017

Legal fee analysis is the comprehensive review and analysis of attorney fees and costs in an outside legal matter.  Professionals who perform outside legal fee analysis include attorney fee experts, special fee masters, bankruptcy fee examiners, fee dispute mediators, and legal bill auditors.

The following best practices measures were developed over several years with input and consensus from thought leaders from across the legal fee analysis community.  These best practice measures promote values such as ethics, independence, and professional development.  These peer review driven standards help strengthen the legal fee analysis field by ensuring integrity in the process and and reliability in the results. 

This professional code of conduct is considered the professional mainstream of legal fee analysis.  All our members (i.e. fully qualified attorney fee experts, special fee masters, bankruptcy fee examiners, fee dispute mediators, and legal bill auditors) have pledged to follow Best Practices in Outside Legal Fee Analysis:

  1. Adhere to the proper standard of reasonableness.
  2. Observe a consistent and reliable methodology.
  3. Keep updated on the latest jurisprudence of reasonable attorney fees and expenses.
  4. Keep updated on the latest scholarship on reasonable attorney fees and expenses (i.e. empirical papers, studies, surveys, and reports).
  5. Participate in professional development and CLE programs on attorney fees and legal billing topics.
  6. Do not advertise false or intentionally misleading information or offer any guarantee of outcome.
  7. Do not charge on a contingency basis (i.e. based on the results obtained).
  8. Do not accept a case or client where there is an inherent conflict of interest.
  9. Keep all fee, billing, and work product information in strict confidence.
  10. Utilize technology where possible.

Please note: You don't need to be a NALFA member to follow Best Practices in Outside Legal Fee Analysis.

Attorneys Seek Sanctions in Bayer MDL Fee Dispute

February 13, 2017

A recent Law 360 story by Emily Field, “Lead Attys Want Discovery Sanctions in Bayer MDL Fee War,” reports that lead attorneys who represented farmers in litigation over Bayer’s genetically modified rice doubled down on their sanctions bid against other plaintiffs’ law firms in a fee battle in Missouri federal court, saying that the firms continue to deny the existence of certain electronic data.

The lead attorneys, who achieved a $750 million settlement for farmers claiming Bayer's genetically modified rice contaminated their crops, are seeking sanctions against Goldman Phipps PLLC and other related firms and accused them of not contributing to a common benefit fund established to cover the lead attorneys' fees and costs.

Co-lead MDL counsel Don Downing and his firm Gray Ritter & Graham, who are leading the class action suit against the other firms, said they’ve been left with little choice but to seek sanctions against the Goldman Phipps firms, given their balking at fulfilling discovery obligations despite a court order and their “flippant response” to those failures.

The Goldman Phipps firms have argued that they’ve complied with discovery regarding a database of time and billing records, and that their expert witness, Michael Brychel, handed over all existing database materials, including certain “codes” that Gray Ritter believes are missing, according to court documents.   But that’s belied by Brychel’s own declaration, which unequivocally establishes that this “coding” is stored in electronic data tables, Gray Ritter said, even though Goldman Phipps claims Gray Ritter is seeking something that doesn’t exist.

“Similarly, defendants claim that Brychel ‘did not testify that those “codes” exist in a database,’” Gray Ritter said.  “But defendants’ statement that these codes do not ‘exist in a database’ is a clear red herring, as by definition, a ‘database’ is nothing more than a collection of related data tables.”

The case dates back to 2013 when Gray Ritter sued law firms and attorneys including Goldman Phipps, lead lawyer Martin J. Phipps, two other Goldman Phipps-related firms and others for failing to pay portions of state court settlements reached with Bayer into a trust established to cover the lead attorneys' fees and costs.

Gray Ritter brought its sanctions motion on Jan. 12 against the Goldman Phipps firms and Martin Phipps, saying their failure to produce the time and billing database records was a direct violation of a December court order.  The firm asked the court to find the Goldman Phipps firms in civil contempt and to strike the testimony of Brychel.  Gray Ritter requested the immediate production of Brychel’s database with all pertinent codes and a fine of $1,000 per day for any delay after a contempt finding.

The Goldman Phipps firms have asked U.S. District Judge Catherine Perry to deny the sanctions motion and to award them $5,000 in attorneys’ fees for having to address the motion.  But Gray Ritter shot back at this request, saying Goldman Phipps has cited no legal support, and regardless, there are no facts backing the claim that the sanctions motion was frivolous.  “All plaintiffs have ever sought is the electronic data Brychel used to form his opinions in this case, in a reasonably usable electronic form,” Gray Ritter said.

The case is Downing et al. v. Goldman Phipps PLLC et al., case no. 4:13-cv-00206, in the U.S. District Court for the Eastern District of Missouri.