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PA Justices Consider Privilege of Legal Bills in Estate Cases

February 13, 2019

A recent Law 360 story by Matt Fair, “Pa. Justices to Mull Privilege for Atty Bills in Estate Dispute,” reports that the Pennsylvania Supreme Court agreed to wade into a dispute over whether attorney-client privilege barred the release of legal bills from K&L Gates LLP and another firm as part of a case over the management of the estate of a deceased Allegheny County man.  The appeal comes as two beneficiaries of the estate pursue claims that the trustee, William H. McAleer, who is the dead man's son, had spent too much money on legal fees and other administrative costs in connection with management of the estate.

In a one-page order, the justices agreed to consider whether “the attorney-client privilege and work product doctrines protect communications between a trustee and counsel from discovery by beneficiaries when the communications arose in the context of adversarial proceedings between the trustees and beneficiaries.”

According to court records, McAleer has been acting as trustee of an estate established by his father, William K. McAleer, in November 2012.  But after the son filed an accounting of the estate a little less than a year after his father’s May 2013 death, court records say his stepbrothers, Michael and Stephen Lange, filed objections and sought additional information related to two bank accounts.

In response, court records say that McAleer tapped K&L Gates for legal assistance to back up counsel from Julian Gray Associates who was already representing him.  After a second accounting of the estate, court records say the Langes claimed that McAleer had been paying excess trustee and attorney fees in connection with management of the trust.  When the Langes sought billing statements for all attorney fees, however, McAleer turned over redacted copies.

An Allegheny County trial judge eventually ordered McAleer to turn over unredacted copies of the bills, which led to an appeal to the state’s Superior Court.  The Superior Court ultimately quashed the appeal in June after finding that the trial judge’s order compelling discovery could not be challenged independently before the case was resolved in its entirety.  While issues of attorney-client privilege and work product protections are often allowed to be appealed even before a case is resolved, the Superior Court noted that McAleer had only raised questions about privilege during oral argument before a trial judge on whether to compel discovery of the billing records.

“Our review of the record reflects that, prior to the trial court’s order compelling [McAleer] to produce the discovery documents in question, [he] did not provide any facts to support his attempt to invoke the attorney-client privilege and work-product doctrine protections,” the Superior Court said.

The case is In re: the Estate of William K. McAleer, case number 6 WAP 2019, before the Pennsylvania Supreme Court.

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.

Article: Attorney Fee Collection Suits Bring Mixed Results

December 4, 2018

A recent New York Law Journal article by Christine Simmons, “Collection Lawsuits Bring Mixed Results in Law Firms; Quest for Fees,” reports on attorney fee collection lawsuits by law firms.  The article reads:

It’s the time of year when may law firm managers are fretting about collections—and maybe even thinking of taking clients to court over unpaid bills.  But while suing ex-clients to recover legal fees has become increasingly common, recent court decisions show that such lawsuits can be a gamble.

Take two recent cases, one brought by Arent Fox and another by Windels Marx Lane & Mittendorf.  In the Windels Marx case, a Manhattan judge wound up sanctioning the firm for its lawsuit—potentially a substantial penalty—prompting Windels Marx to file a notice of appeal.  Arent Fox, meanwhile, saw its breach of conflict claims dismissed against two of three defendants it targeted in a breach of contract suit over fees.  While law firms often do obtain judgments against former clients in collection suits, the rulings show that success is hardly guaranteed, even when the firms are sophisticated business litigators.

Windels Marx was seeking $380,833 in unpaid legal fees in its collection suit against several entities in Manhattan Supreme Court.  The midsize law firm in New York had defended a housing entity and a former officer in a civil lawsuit over control of several housing development fund corporations.  Those funds own and manage residential real estate in West Harlem that is rented out to low-income tenants, according to court papers.  Windels Marx, in court papers, said it was also retained to advise in multiple government investigations.

Windels Marx withdrew from the civil case and then sued its former client and the related housing development funds that it was adverse to in the underlying case, seeking unpaid fees.  Ultimately, Manhattan Supreme Court Justice Gerald Lebovits granted summary judgment to the four housing development fund entities sued by Windels Marx.

Knocking out the breach of contract claim against the four funds, the judge took issue with the fact that the officer who signed the firm’s retainer agreement, Joednee Copeland, was not authorized to retain the firm on behalf of the funds.  Copeland was previously president of the entity, formerly represented by Windels Marx, that had sought to control the four housing development funds.

The firm’s “billing records show that, at the time that plaintiff drafted the agreement, it knew that Copeland had been terminated from her position,” said Lebovits, in decision posted Nov. 7.  In denying Windels Marx’s other claims against the four housing development funds, Lebovits said the law firm’s invoices showed work adverse to the interests of the housing development funds.

Lebovits granted only a default judgment of $380,833 for Windels Max against the entity that retained the firm and did not respond to the suit.  It’s not clear whether that entity is still active or has assets to cover the judgment.  Copeland, the president of the entity who signed the firm’s retainer agreement, has been criminally charged in Manhattan Supreme Court under felony counts, according to court records.

In allowing the housing development funds to pursue fees against Windels Marx, the judge said the funds’ “request for sanctions, in the form of payment of their attorney fees, incurred in defending this action … is amply justified, not merely by the lack of merit in [Windel Marx’s] complaint, but by [the law firm’s] attempt to collect attorney fees for work directly adverse to defendants’ interests.”  The judge referred the decision on the amount of fees to a special referee.

William Fried, a Herrick Feinstein partner who represented the housing development funds pro bono, said his firm spent between $50,000 and $100,000 on the case.  “We’re going to be seeking every dime that we spent,” he said.  “We’re pleased with the judge’s decision. We thought the lawsuit never had any merit from day one,” Fried said.  Windels Marx filed a notice of appeal Thursday, stating in court documents that attorneys’ fees were not warranted because Herrick Feinstein worked on a pro bono basis.

In the Arent Fox matter, the law firm saw a mixed result in a recent court ruling, holding on to some claims against an ex-client.  The firm sued three car dealership entities, JDN AA, LLC; Subaru 46 LLC; and DCN Automotive LLC, seeking $278,128 in legal fees.  The firm had represented JDN AA in a lawsuit against Volkswagen Group of America, Inc. challenging the attempted termination of JDN AA’s Audi dealership, according to court documents.

The ex-clients sought to dismiss Arent Fox’s claim for breach of contract, claiming the firm did not allege there was an executed retainer agreement between the parties.  They argued that the March 2014 “engagement agreement” was with only one of the defendants, JDN AA, and was not signed, and that a 2015 “conflict waiver” letter did not involve all defendants and related to one specific engagement.

In a decision last month, Manhattan Supreme Court Justice Joel M. Cohen knocked out a breach of contract claim against two of the three defendants. Cohen said two defendants, Subaru 46 LLC and DCN Automotive LLC, are not referenced by name in any of the engagement documents submitted by Arent Fox.  Nor did Arent Fox submit any evidence that describes the terms of any alleged contract between Arent Fox and either of those entities, the judge said.  Cohen, in his November decision, called the firm’s allegations against the two entities “conclusory.”

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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