Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Billing Record / Entries

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.”

Some Oppose 5 Percent Attorney Fee Set-Aside in Pelvic Mesh MDL

November 30, 2018

A recent Legal Intelligencer story by Max Mitchell, “Pelvic Mesh Trial Lawyer Slams MDL Settlements as ‘Puny’ Opposing Leadership’s Fee Petition,” reports that as the pelvic mesh MDL has begun to settle, attorneys on the leadership committee have asked the federal court overseeing the litigation’s massive inventory to set aside 5 percent of the awards for common benefit fees and expenses.  With the settlements already topping $7 billion, that means more than $360 million is set to distributed among the firms.

However, at least two firms are opposing the request, with one saying the hold-back amount is far too much.  Attorneys with Philadelphia-based Kline & Specter filed a response opposing the 5 percent set-aside request.  The highly critical filing contends that the federal cases have settled for “puny” amounts compared to the multimillion-dollar verdicts juries have been willing to award both in state and federal courts.  “The leaders in this litigation did the worst possible thing to the detriment of all plaintiff mesh victims and their attorneys: they settled their inventories way too cheaply, making it difficult for other attorneys to settle their cases reasonably,” attorney Shanin Specter said in the filing.

According to the filing, the average award for the tens of thousands of cases that have settled is about $40,000, while the average award for the cases that have gone to trial is about $9.8 million.  Specter’s firm took a leading role in several pelvic mesh cases that were tried in Philadelphia state court, including winning a $57 million verdict last year.  In the filing, Specter suggests that the set-aside amount be halved from the leadership committee’s request.

The firm’s filing also faults the leadership team with taking too many cases to effectively handle, saying the “discounted settlements were driven by the sheer enormity of the number of claims” and the “inability” of the lawyers to fully work up their inventories.  “It’s been an open secret in this litigation that the ‘leadership’ took too many cases to effectively litigate themselves.  By doing so and by not associating other lawyers to help discover and try their cases, they were forced to settle,” Specter said in the filing.  “This wasn’t bad for ‘leadership’ because a large number of small fees on small settlements is still a large number.  But it mistreated the women they represent. And it mistreated the other plaintiff’s counsel who were stuck behind this low bar set by the leadership.”

Andrus Wagstaff in Colorado also filed a notice of intent to oppose the petition for the 5 percent set aside.  The notice did not outline the crux of the firm’s objection, but the notice did say that it hired Blank Rome attorney Andrew Williamson to represent the firm in the dispute.  Georgia attorney Henry Garrard of Blasingame, Burch, Garrard & Ashley, who is chairman of the fee and compensation committee, said he plans to file a response, and declined to comment further, other than saying, “There is a lot to the story that’s not in their objection.”

The pelvic mesh MDL consists of seven separate consolidated litigations against some of the largest medical product manufacturers in the country.  According to federal records, the litigation topped out at nearly 107,000 claims, and, as of Nov. 15, the seven consolidated litigations have an inventory of 37,299.

On Nov. 12, Garrard filed the petition requesting the 5 percent award.  According to the petition, 94 law firms submitted more than 900,000 hours of time, and the committee has recognized nearly 680,000 of those hours as contributing toward the litigation’s common benefit.  The petition also noted that the current value of the settlements is roughly $7.25 billion, and the total amount for settlements is expected to be around $11 billion.  With the requested 5 percent set aside, that would make the total amount expected for the common benefit fund to reach $550 million.

The response from Kline & Specter, however, said the MDL leadership failed to secure a global settlement, and that the petition largely ignores the work done in the state court litigation that benefited the federal MDL, such as obtaining the verdicts, which, the filing said, weakened the defendants’ position and drove settlements.  “Given the paltry recoveries for the injured women in this successful-in-the-courtroom, surrender-at-the-settlement-table mass tort, it is more equitable for the common benefit fee to be half of the requested amount and to remit their proportionate share of these saved funds to the injured women,” Specter said in the filing.

$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.

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...

Read Full Post