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Duane Morris Legal Bill Called ‘Seriously Inflated’

March 7, 2024

A recent Law.com story by Amanda O’Brien, “’Seriously Inflated’ Duane Morris Bill Highlights Risk When Big Law and Public Clients Lack Alignment”, reports that, as Duane Morris faces scrutiny over publicly obtained emails alleging that the firm delivered “seriously inflated” bills to a suburban Philadelphia school district following its investigation into allegations of rampant bullying against LGBTQ+ students, the dustup underlines how law firms’ work on behalf of public-sector clients demands a heightened level of communication.

The firm landed in the spotlight in the aftermath of a 151-page internal investigation report for the Central Bucks School District put together in April 2023 by a team led by partners Bill McSwain, the former U.S. attorney for the Eastern District of Pennsylvania, and Michael Rinaldi.  The report ultimately refuted allegations made by the American Civil Liberties Union in 2022 claiming that the school district created a hostile environment for queer students.

The investigation leading to the report took approximately six months, with the district bringing on McSwain and the firm in November 2022.  The bills referenced in the memo span from November 2022 to the end of October 2023, and outside reporting by The Philadelphia Inquirer indicates the bills, totaling around $1.1 million, were paid in December 2023. 

“One could spend countless hours picking apart this bill,” the email, authored by Edward Diasio, a partner at Montgomery County-based Wisler Pearlstine, said.  “The bottom line, from my standpoint, is that it is seriously inflated, and should be reduced considerably.”

Among the issues highlighted in the email were complaints of inefficient time management, vague time entries for hundreds of thousands of dollars of work, and an excessive number of attorneys engaged in repetitive tasks.   “The issue is that the Engagement Letter indicated two attorneys would lead the matter, and rely on help (where appropriate) at lower hourly rates,” the email raids.  “This was a good strategy in theory, but it was poorly implemented by Duane Morris.  The District should have benefitted from the efficiencies such a structure should have generated…”

“What happened, though, was that an army of attorneys was brought in and any efficiencies that could have been achieved were dramatically outweighed by the inefficiencies associated with managing such a large team and all of the internal communication and coordination that come along with that,” the memo’s introduction concludes.

Keeping the Client in Mind

According to several consultants, establishing client expectations around billing practices is a weak point, even a “lost opportunity,” for law firms. At the center of the issue, consultants said, is keeping in mind the client’s expertise when it comes to litigation or other legal matters.

“With corporate clients, often the client is an in-house lawyer. With public sector clients, you’re frequently dealing with people who aren’t lawyers,” Mantra Partner founder and CEO Marci Taylor explained.  “It’s more of an incentive to be as descriptive as possible about the nature and complexity of the task.  You’re writing knowing that there’s a high likelihood that your invoices will be made public.”

Law firm consultant Tim Corcoran also acknowledged that billing isn’t a one-size-fits all practice.  “There is quite a bit of forethought that goes into billing strategies because different circumstances call for different approaches,” Corcoran observed, contrasting in-house lawyer clients to government and public sector clients, and these also to third-party bill reviewers used by many corporate clients. 

Corcoran and consultant Stephen Ruben indicated that billing strategies and professional responsibilities change slightly according to the type of client.   “Normally if you’re dealing with a large corporation or corporations that have a lot of legal matters, they’re [used to] dealing with legal matters over time and have a greater ability to manage the relationship … they know what to ask for, they know what to expect,” Ruben explained.  “The firm has a different obligation when a law firm is dealing with people who are less experienced and sophisticated in dealing with lawyers and litigation.  Litigation is messy by nature.  One would think that when you are dealing with people who are not as experienced in litigation, you have a greater obligation to take them through the process step by step.”

And as for third-party billing reviewers, Corcoran noted that some firms take into account that reviewers might shave off some of the bill.  “It’s like the shopping trick.  Some firms will bill accordingly knowing that clients who put them through this review process will shave off some eventually,” Corcoran said.  “They may also take the exact opposite approach by only billing for the specific things enumerated … in the outside counsel guidelines, because they don’t want to risk the relationship knowing anything outside of that scope will have to be justified or defended.”

Setting Expectations Early

Law firms often fail to set client expectations on billing, Corcoran noted.  As a result, Corcoran said, it is often on clients to take the initiative and set expectations on billing for law firms.  And while some corporate clients may have the sophistication and resources to take charge here, public sector clients—with a shorter history in turning to Big Law for complex engagements—don’t have the same knowhow.  That can be a recipe for frustrations, as the Central Bucks School District’s review demonstrates.

“Failure to set or manage client expectations … is probably the greatest missed opportunity [at law firms],” said Corcoran.  “What lawyers believe is that because they cannot predict with absolute certainty how long something will take, the outcome, and what it will cost, they view it as binary, so few will provide a budget or cashflow guidance to help a client squirrel away funds.”

“It’s up to the client then to impose restrictions or guidelines or checkpoints to say ‘you need to let us know what your work in progress is, we need to be ahead of the pace of your billing,’” Corcoran continued.  “As a former CEO myself who’s managed the law department, I cared about the total amount we’ve got to budget for this … [I’d ask to] get me in the ballpark [of how much something would cost], even on a quarterly basis.”

“Few law firms do that because clients don’t ask for it,” Corcoran added.  The risk, of course, of avoiding early billing discussions is an unhappy client when the bill comes due.  “Not giving a heads-up is zero risk unless the client is unhappy … [then] the risk is that [clients] will subject the invoices to deeper scrutiny,” Corcoran said.  “The risk is you will expect one income stream and get something less than that … [and that] repeated behaviors like that can cause clients to go elsewhere.”

“Client defections are based on dissatisfaction not with the legal work but how the client is treated by the firm almost as an afterthought,” Corcoran continued. “They’re missing out on the ability to retain the client.”  Ruben suggested that firms address billing expectations early on in the relationship with a client, noting that “in generally, a good law firm will state expectations.  That’s what the retainer agreement is about.”

“It should include terms about how [the client] is going to be billed, and there should be conversations about that,” Ruben said.  “You’re dealing with people and when people are involved in a transaction, there’s often going to be a miscalculation of expectations on either side … when you have a monthly bill, issues that need to be managed more quickly come to the attention of both parties.”

Roundup MDL Lead Counsel Defend Fee Allocations

February 19, 2024

A recent Law.com story by Amanda Bronstad, “Roundup MDL Lead Counsel Defend Fee Allocations: ‘Limited Funds Available’”, reports that lawyers doling out fees in Roundup litigation stood by their decisions on how to allocate the funds, despite objections raised by other firms.

The fee committee, which is comprised of the three lead plaintiffs firms in the Roundup multidistrict litigation, allocated 81% to themselves and the rest to four other firms, including those who helped win the only bellwether trial, which ended in an $80 million verdict in 2019.  Three of those firms objected to their share of the so-called common benefit fund, which totaled $20.23 million.

Lead counsel originally had sought an order that would have granted about $800 million in common benefit fees, enough for the firms to “each afford to buy their own island,” U.S. District Judge Vince Chhabria wrote in a 2021 order significantly trimming the scope of common benefit fees in the Roundup litigation.

Several firms had objected to the original request, which they called a “money grab,” but lead counsel insisted that Bayer, which owns Monsanto, would not have entered into settlements but for their work.  In 2020, Bayer announced it planned to settle about 125,000 Roundup claims for an estimated $10.9 billion, but thousands of cases remained unsettled.

The significant reduction in the common benefit fund appeared to influence the committee’s allocation amounts.  For instance, San Francisco’s Andrus Anderson, whose partner Lori Andrus served as co-liaison counsel in the Roundup multidistrict litigation, had wanted closer to $550,000, the amount the firm actually billed, rather than the allocated $200,000, or 1% of the common benefit fees.  The committee, in a response, acknowledged that Andrus Anderson’s request was reasonable.  “But, unfortunately, the limited funds available for distribution in this litigation do not allow this to happen,” the committee wrote.

The committee members are co-lead counsel Aimee Wagstaff, of Wagstaff Law Firm in Denver; Robin Greenwald, of New York’s Weitz & Luxenberg; and David Dickens, who took over following partner Michael Miller’s 2021 death, at the Miller Firm in Orange, Virginia.  Among the fee committee members, Wagstaff Law Firm is set to receive the most, with 30%.

‘Thousands of Hours of Common Benefit Work’

Common benefit fees are used in multidistrict litigation to compensate lead counsel for costs and fees associated with discovery, trials and settlements, while preventing “free riders,” or lawyers who collect fees on cases they generate but don’t necessarily litigate.  Lawyers with related state court cases, in past years, have challenged common benefit fees, which are funded through assessments against their settlements.

Chhabria, in the Northern District of California, called common benefit fees in multidistrict litigation “totally out of control,” sending shock waves through the mass tort bar.  In his Roundup order, he excluded a large amount of the legal work, including state court cases, from being reimbursed through common benefit fees.

Los Angeles-based Wisner Baum and its predecessor, Baum Hedlund Aristei & Goldman, focused heavily on Roundup cases in California state courts, where partner R. Brent Wisner won verdicts of $289 million, in 2018, and $2 billion, in 2019.  But the firm is set to receive 10% of the fees because “no other firm contributed more to the common benefit of the MDL,” according to the committee’s response, filed on Friday.

The allocation, the committee wrote, is based on Wisner Baum’s “good faith effort” to estimate its time.  But the firm didn’t have adequate billing records that divided up the hours tied to the multidistrict litigation versus state court cases.  The fee committee, as a result, was forced to reduce Wisner Baum’s requested amount.  “Applying such a reduction is consistent with how courts typically handle attorney fee determinations for firms that have failed to submit time records,” the committee wrote.

Jennifer Moore, of Moore Law Group, based in Louisville, Kentucky, was co-lead counsel with Wagstaff in the bellwether trial, which Monsanto appealed all the way to the U.S. Supreme Court.  Moore had argued that 6% was not enough given her work in that case or the $3.4 million her firm contributed to the common benefit fund, but the fee committee countered that the Miller Firm and Weitz & Luxenberg, both lead counsel firms, also anticipate receiving less than they paid.

“Moore Law contributed to the advancement of this MDL.  There is no question about that,” the committee wrote.  “But Moore Law also greatly benefitted from the thousands of hours of common benefit work that was done before it had any involvement in this MDL.”

Another objection came from David Diamond, of Diamond Law in Tucson, Arizona, who insisted he did not rely on lead counsel’s work in his Roundup cases.  He was joined by David Bricker, of Thornton Law Firm in Beverly Hills, California.  Diamond suggested returning the money to lawyers, like them, who took their own risks.

But the committee disputed his characterization.  “Diamond Law was able to resolve 300 MDL cases without having to draft and issue general discovery, brief and argue preemption and other general dispositive motions, depose a single Monsanto employee, or retain general experts in epidemiology, toxicology, pathology, and regulatory affairs,” the committee wrote.  “With this backdrop, it is difficult to comprehend how Diamond Law can boldly declare that it received no assistance from MDL leadership.”

Former Billing Manager: Law Firm Put Legal Fees Over Clients

February 12, 2024

A recent Law 360 story by George Woolston, “Ex-Billing Manager Says NJ Firm Put Fees Over Clients”, reports that a former billing manager for the New Jersey personal injury firm Brandon J. Broderick Attorney At Law claims she was fired for insisting that the firm's clients receive the most money possible from their settlements, according to a lawsuit filed in New Jersey state court.

Monique Pruett alleged in Mercer County Superior court that she was terminated after objecting to the firm's requests that she process personal injury settlements as quickly as possible.  Pruett claimed that when she took time to ensure that medical bills and liens were properly reconciled before making settlement payments to personal injury clients and clearing medical escrow accounts, "she was told that was not her job, and her job was simply to pay the bills and get the money out of escrow," the suit claims.

Clients and medical providers would sometimes receive less money than they were owed, but the firm would tell the providers "they would be taken care of," Pruett alleges in the suit.  The difference would be made up by paying a different client less money than the client was entitled to, Pruett claimed.  "It was clear that Broderick's priority was to get the firm its fee, the medical providers their money, and the best interest of the client was not considered," the suit claims. "The client's interest was given the lowest priority, if considered at all."

She also said she was treated unfairly because she is Black.  The suit brings three causes of action under the Garden State's whistleblower and discrimination laws. Pruett is seeking compensatory damages for emotional distress, reinstatement, counsel fees and punitive damages.

Attorney Keeps $1.15M Fee Award Despite Tossing Billing Record

February 9, 2024

A recent Law 360 story by Madison Arnold, “Atlanta Atty Keeps $1.15 Fee Award Despite Tossing Notes”, reports that a Georgia state appellate court has upheld an award of $1.15 million in attorney fees to a solo-practice attorney, saying an Atlanta-based airport travel spa operator he did work for failed to show the trial court was wrong in finding the attorney didn't have to save notes about the legal services he provided.

In its ruling, a three-judge panel upheld the attorney fee award for Gebo Law LLC and its only member, Carl Gebo, who provided five years of legal services for Cordial Endeavor Concessions of Atlanta LLC.  The appellate court didn't buy Cordial's argument that the trial court erred by not giving jury instructions related to the "spoliation of evidence," meaning Gebo's tossing of his notes, among other concerns.  "But the court did not abuse its discretion in refusing to give a spoliation instruction or in refusing to allow an expert to opine on an irrelevant issue, and the jury's award was within the range of damages shown by the evidence.  So we affirm the trial court's judgment," the panel said.

Cordial was hoping to overturn the award for nearly 2,000 hours of work performed by Gebo Law, saying the attorney intentionally destroyed time records and that the award was excessive, according to the appeal Cordial filed in May.  At the heart of Cordial's appeal are the notes Gebo made detailing the date, length of time and the description of legal services he provided to the company, the panel said.  In an affidavit, Gebo said it was his normal practice to create invoices based on notes and then discard the notes afterward.

"A lawyer who fails to secure an engagement agreement, fails to communicate his hourly rate to the client, and then discards his contemporaneous time records when fee litigation is likely does not get to recover unpaid fees at the upper range of what might be considered a reasonable hourly rate," the spa operator said in May.

Gebo added that when he threw away the notes, he believed Cordial would soon be paying for his legal services since the company had confirmed a payment plan, the panel said.  That meant Gebo was not yet thinking about or anticipating any litigation, and he only filed after months of unsuccessful negotiations with the company about receiving payments, the panel said.  That turned out to be central to the panel's ruling.  In its eight-page opinion, the panel said the term "spoliation" is used to refer to the destruction of evidence that is relevant to "contemplated or pending litigation."

"Such conduct may give rise to the rebuttable presumption that the evidence would have been harmful to the spoliator.  However, in order for the injured party to pursue a remedy for spoliation, [including a jury charge on the rebuttable presumption,] the spoliating party must have been under a duty to preserve the evidence at issue," the panel said.

The panel found the trial court was within its bounds to decide that a duty to preserve notes was not triggered at the time Gebo pitched them because he used them to create invoices as part of his normal practice.  "[T]here was evidence that Gebo did not contemplate litigation when following its practice of discarding notes after memorializing them in invoices, the trial court did not abuse its discretion in denying Cordial's spoliation motion," the panel said.

The appellate court separately held that Cordial failed to show the lower court abused its discretion in approving the jury's award of $1.15 million in quantum meruit damages.  "[T]he jury did not understand that Gebo disregarded an important rule of professional responsibility and thus did not understand Gebo should be awarded recovery at the lower range of what otherwise would be a reasonable negotiated fee," Cordial said in May.

That award equals a fee rate of about $630 per hour and that rate is within the range of evidence presented at trial, with expert testimony saying the going rate should be between $500 and $800 per hour.  "[W]e cannot say that the trial court, who saw the witnesses and heard the testimony, abused its discretion in [approving the verdict]," the panel said, quoting a precedential case.

Law Firm Can’t Dismiss Bill Padding Claims in California

February 1, 2024

A recent Law 360 story by Lauren Berg, “O’Melveny Can’t SLAPP Bill-Padding Claims, Calif. Panel Says”, reports that a California appellate panel refused to strike allegations that O'Melveny & Myers LLP padded its legal bills while investigating the alleged mismanagement of funds at an apartment cooperative, saying disputes related to a firm's billing practices don't arise from activity protected by the state's anti-SLAPP statute.

In an opinion, a Second District Court of Appeal panel largely rejected O'Melveny's arguments that a Los Angeles Superior Court judge should have relied on California's anti-SLAPP statute to strike Ocean Towers Housing Corp.'s allegations that the law firm's invoices were excessive, it charged exceptionally high hourly rates and it padded its bills.  Anti-SLAPP, or anti-strategic lawsuits against public participation, laws are intended to prevent litigants from using the courts to intimidate people who are exercising their First Amendment rights.

"But disputes about the validity of an attorney's fees or billing practices do not arise from protected petitioning activity just because 'petitioning activity is part of the evidentiary landscape within which [the allegations] arose,'" the panel said.  "Instead, these allegations arise from an attorney's independent professional duties to ensure that 'fee agreements and billings "[are] fair, reasonable, and fully explained"' and to avoid charging unconscionable fees."

Ocean Towers is a cooperative housing corporation operating a beachside apartment complex in Santa Monica, and every person who buys a residential unit at the property also acquires shares of company stock, according to the opinion.  Shareholders pay monthly fees to the company in proportion to the number of shares they own.  The dispute goes all the way back to 2015, when an Ocean Towers shareholder filed a derivative lawsuit alleging board member John Spahi and others "caused Ocean Towers to incur significant expenses for [Spahi's] personal benefit," the opinion states.

The board in April 2017 put together a committee to investigate the claims, which chose O'Melveny to assist with the investigation, according to the opinion.  Under two contracts — one signed in April 2017 and the other in December 2017 — the committee would be O'Melveny's client, while Ocean Towers agreed to pay the legal bill.  By September 2017, Ocean Towers had paid $1.27 million of O'Melveny's invoices, but in December 2017, CEO Joseph Orlando told the law firm that the company's financial condition had deteriorated to the point that it wouldn't be able to pay any other fees.  O'Melveny, however, continued to perform work for the committee and charge Ocean Towers through June 2019, according to the opinion.

In March 2021, O'Melveny sued Ocean Towers to recover the unpaid balance, which is put at nearly $1.1 million, the opinion states.  Ocean Towers hit back with a cross-complaint in December 2021, alleging the law firm breached the contracts by "unethically billing" the company, charged "exceptionally high hourly rates for tasks that were unnecessarily performed by far more lawyers than were needed" and engaged in "bill padding and duplicative billing."

O'Melveny in March 2022 filed an anti-SLAPP motion to strike the cross-complaint, arguing it attacked the adequacy and scope of an investigation performed by an attorney while representing a client, the expenditure of money to prosecute an action and the circumstances around O'Melveny's retention, which it said are protected by the anti-SLAPP statute.  In June 2022, the trial court sided with Ocean Towers, finding the cross-complaint was "essentially about a fee dispute" and that "resisting what is essentially a collection action is not a SLAPP," the opinion states.

In its opinion, the three-judge appellate panel rejected O'Melveny's argument that because Ocean Towers was not technically the law firm's client — the committee was — the cross-complaint billing allegations fall under the scope of the anti-SLAPP law.  "The gravamen of Ocean Towers's claims against O'Melveny is not the petitioning activity that the firm conducted on its client's behalf; nor is Ocean Towers a third party completely uninvolved in the underlying litigation," the panel said.  "Rather, we are addressing limited allegations about fees and billing practices, made by a payor who is contractually obligated to pay the invoices generated by the law firm."

However, the panel did reverse the trial court's denial of the motion as to the allegations that target the validity of O'Melveny's client, which are based on Ocean Towers' claims that retired Judges Michael Latin and James Steele were wrongly appointed to serve on the committee, the opinion states.  The panel found the law firm has demonstrated that those claims arise from protected activity because the two judges were appointed to the committee through a court order and the Ocean Towers' board's resolution carrying out that order, according to the opinion.