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Fee Dispute Litigation Moves Forward with Firm that Skipped Retainer, Invoices

February 7, 2018

A recent New York Law Journal story by Jason Grant, “Client Fee Suit Continues Against Nassau County Law Firm That Skipped Retainer Invoices,” reports that a Nassau County law firm that failed to provide its client with a written retainer agreement or an accounting of time spent working on his case will continue to face a lawsuit alleging that the firm owes him thousands of dollars in never-earned fees.

An Appellate Division, First Department, panel ruled that the lawsuit, claiming breach of an oral agreement, launched by physician Alan Dubrow against his former lawyers at Herman & Beinin must go forward and not be dismissed.

Dubrow has sued the boutique firm for what he calls the “unearned portion” of a $176,500 retainer he paid to the firm near the start of his employment discrimination action, according to the panel. The exact amount of money he wants returned was not specified by the court.

“In context of an attorney-client relationship, the attorney bears the burden of showing that the parties’ fee agreement was fair, reasonable, and fully known and understood by plaintiff,” the unanimous panel wrote.

The panel simultaneously dispensed with Herman & Beinin’s argument that Dubrow’s breach claim was barred by the “voluntary payment doctrine.” The court wrote that, “while defendants assert that plaintiff voluntarily made payments to compensate them for their services, they have not established that plaintiff had full knowledge of the relevant facts, such as the number of hours spent by defendants in connection with their representation of him. Nor did they submit any evidence to show that the amount of plaintiff’s payments was fair and reasonably related to the value of services rendered.”

On Tuesday, Herman & Beinin’s Mark Herman, who described himself as having more than 35 years of litigation experience, said that while he “respects” the First Department’s decision, he believes the panel “failed to appreciate the fact that Dubrow didn’t want a retainer.”

“There was never a retainer because he didn’t want a retainer. We’d be happy to give him a retainer,” Herman said by phone, adding that “every quarter [we took in payments from Dubrow] was earned.”

“I’m not in the business of taking money and not doing services for it. That’s wrong,” Herman said. He added that as the case progresses, his firm intends to provide an itemization of the time it billed when representing Dubrow in what he said was an age discrimination lawsuit lodged by the nephrologist after being dismissed by Beth Israel Medical Center.

But the panel, composed of Justices Sallie Manzanet-Daniels, Judith Gische, Peter Tom, Ellen Gesmer and Anil Singh, wrote in the Jan. 25 decision that Herman & Beinin had “not conclusively refute[d] plaintiff’s allegations,” and therefore its motion to dismiss had been properly denied by Manhattan Supreme Court Justice Ellen Coin.

The justices also took the Bellmore, Long Island, law firm to task for not providing Dubrow with more information about the lawyer-client relationship, and the billing and services performed. “It is undisputed that defendants never provided plaintiff with a written agreement, as required under 22 NYCRR 1215.1, and failed to provide plaintiff with written billing statements, as required by 22 NYCRR 1210.1(4),” the panel wrote in Dubrow v. Herman & Beinin, 651605/16.

“Nor does defendants’ contention that plaintiff never questioned their legal fees until the underlying matter was dismissed on summary judgment warrant dismissal,” the court continued. “Plaintiff alleges that defendants promised to return any balance at the resolution of the underlying action, and his attempts to obtain an accounting after dismissal of the action are in line with this alleged understanding.”

Jonathan Strauss, the lawyer for Dubrow, said that while it has been hard to pin down the exact amount of money owed to his client, because he “still doesn’t have a breakdown” of the services rendered by Herman & Beinin, “it’s nowhere near 176,500.”

“It’s much more of a nominal amount,” he said, while contending that Dubrow had paid Herman & Beinin the large retainer in advance of a trial or appeal, but that his discrimination action never went to trial because it was dismissed.

Strauss, a solo practitioner in Manhattan, also said that he has asked for punitive damages against the law firm, “because I think a New York County jury may look at this and find outrageous conduct in it.”

“If jurors believe the worse [about Herman & Beinin and the firm’s motives], they could decide to send the bar a message” by awarding high punitive damages, he said. Then, after pausing, he said of the entire episode and lawsuit, “It’s disturbing that it has had to come to this.”

New York Lawyer Censured for Falsifying Billing Records

January 11, 2018

A recent New York Law Journal by Jason Grant, “Manhattan Lawyer Censured for Falsifying Time Records, Even Though Clients Unscathed” reports that a Manhattan lawyer has been publicly censured for adding 94.8 hours of fabricated billing to his law firm’s internal records, in an effort to look busy to his partners, even though he removed the false entries before the bills went out to clients.

A unanimous Appellate Division, First Department, panel censured lawyer Jeffrey Leighton, while noting that the Attorney Grievance Committee and Leighton had stipulated to the punishment, even though there is apparently no precedent for a censure when the clients aren’t cheated.  The panel also noted, under mitigating factors weighing against a harsher punishment, that Leighton, a 34-year veteran lawyer, had lost his partnership at his firm because he’d padded the bills.

“The [First Department Attorney Grievance] Committee found no precedent for any public censure for falsifying time records where clients were not harmed,” the panel wrote, adding, “Disciplinary cases involving false or over-billing that have resulted in public discipline involved more egregious conduct in which the clients were directly impacted by the misconduct.”

However, the panel also pointed out that “the Committee and [Leighton] agree that public censure is appropriate because he engaged in this conduct for a period of over two years, he is a senior attorney with extensive experience, and although he did not intend to financially benefit or over-bill his clients, he intended to and did ‘deceive his colleagues and his firm about how busy he was.’”

Leighton was admitted in the Second Judicial Department in 1983, according to the panel, which consisted of Justices David Friedman, Marcy Kahn, Ellen Gesmer, Cynthia Kern and Peter Moulton.  He had an office in the First Judicial Department at all relevant times, and the committee and Leighton stipulated that between March 2012 and September 2013 he’d engaged in a pattern of making fake internal firm billing entries, the panel wrote in the Jan. 4 decision.

In mitigation of the punishment, the panel pointed out in Matter of Jeffrey Leighton, 2018 NY Slip Op 00089, that Leighton had never previously been the subject of a disciplinary investigation, that he cooperated with the committee, and that he’d “expressed genuine remorse and embarrassment.”

NALFA: Serial Class Action Objectors Not Qualified in Attorney Fee Analysis

January 5, 2018

A recent The Recorder story by Amanda Bronstad, “$38M Fee Request in Anthem Data Breach Settlement Under Scrutiny” reports that an objection says the fee request, which is 33 percent of the $115 million settlement, was “outrageous on its face” and should be closer to $13.8 million.

A prospective class member has objected to the Anthem data breach settlement, specifically criticizing a fee request of nearly $38 million, and planning to ask that a special master investigate the case for potential over-billing.

Class action critic Ted Frank, of the Competitive Enterprise Institute’s Center for Class Action Fairness, filed the objection on Dec. 29 on behalf of Adam Schulman, who is an attorney at his Washington D.C. organization.  The objection said the fee request, which is 33 percent of the $115 million settlement  was “outrageous on its face” and should be closer to $13.8 million.  He particularly targeted the average $360 per hour rate for contract attorneys submitted by four lead plaintiffs firms, one of which is San Francisco’s Lieff Cabraser Heimann & Bernstein.  A special master in Boston is investigating Lieff Cabraser, along with two other law firms, for potential over-billing for staff attorneys in a $74.5 million fee request over securities class action settlements with State Street.  The special master’s report is due in March.  Frank said he planned to file a motion on Thursday asking that a special master be appointed in the Anthem case.

He wants a special master to look into “the same thing they’re investigating in State Street, which is why this billing happened and whether it’s appropriate and whether there was an attempt to mislead the court.”  He also questioned why 49 other firms not appointed by the court stood to earn a total of $13.6 million in fees and “whether there were side agreements to back scratch or trade favors in other MDLs to get work in this MDL.”

U.S. District Judge Lucy Koh, who trimmed the number of plaintiffs firms appointed to lead the Anthem case, has scheduled a Feb. 1 hearing for final approval of the settlement in San Jose, California.  Two other objections were filed on Dec. 29 that also challenged the fee request, among other things.  Class counsel is expected to respond to the objections by Jan. 25.

Eve Cervantez, of San Francisco’s Altshuler Berzon, who is co-lead counsel in the case along with Andrew Friedman of Cohen Milstein Sellers & Toll in Washington D.C., wrote in an email: “The three professional objectors made the same typical, boilerplate objections we often see in consumer class actions, and neglected the true value of the settlement to the class—protection of their personal data both by mandated improvements to Anthem’s cybersecurity to prevent future hacks, and by credit monitoring to prevent misuse of their personal data by the hackers that stole it.”

In the Anthem case, Koh preliminarily approved the settlement in August.  The deal provides two years of credit monitoring and identity protection services to more than 78 million people whose personal information was compromised in 2015.  It also provides a $15 million fund to pay costs that class members were forced to pay due to the breach, such as credit monitoring services and falsified tax returns.

In motions filed last month, the four lead plaintiffs firms defended their fee request as adequate compensation for obtaining the largest data breach settlement in history.  The case involved “massive discovery” and “complicated factual and legal research,” they wrote.  It also was “extraordinarily risky,” given that many data breach cases have been dismissed.  The fees also were reasonable given the total lodestar—or the amount billed multiplied by the hourly rate—was $37.8 million.  The hourly billing rates of partners were between $400 to $970—rates that Koh has approved in prior cases.

“There is no true comparator to this groundbreaking settlement,” Cervantez wrote.  “Other data breach cases have not resulted in common funds that come close to $115 million, nor have they included the comprehensive cybersecurity improvements mandated by this settlement, coupled with a major, quantifiable investment in cybersecurity.”

The other two objections, one filed by solo practitioners John Pentz in Massachusetts and Benjamin Nutley in California, and the other by a trio of law firms from Missouri and Colorado, raise additional concerns over the cash value of the settlement, a proposed $597,500 in incentive payments to 29 lead plaintiffs and a request on both sides to seal portions of the deal—in particular, the amount of money Anthem has agreed to spend on cybersecurity in the future.

Koh has slashed fee requests in past cases, some involving the same plaintiffs firms.  Last year, she cut fees in a $150 million settlement involving the poaching of animators at DreamWorks and The Walt Disney Co. to $13.8 million after finding the original $31.5 million request to be “unreasonably high.”  In that case, Koh relied on the billing records, concluding that the U.S. Court of Appeals for the Ninth Circuit’s 25 percent benchmark in class action settlements would result in a windfall to the three plaintiffs firms, which included Cohen Milstein.

Indiana Appeals Court: Attorney Fee Records Not Protected or Confidential

December 26, 2017

A recent TheIndianaLawyer.com, by Olivia Covington, “COA: Attorney Fee Records Not Protected or Confidential” reports that an Indiana trial court did not err by denying a motion to quash a request for the production of attorney fee records because such records are not protected by attorney-client privilege or the Fifth Amendment, the Indiana Court of Appeals ruled.

After Diyee Boulangger allegedly over-reported her hours and hourly rate during her three years of employment with Ohio Valley Eye Institute, P.C., her former employer filed a conversion, theft, theft by false impression, fraud and forgery complaint against Boulangger.  The state also filed criminal charges against Boulangger, but dismissed them without prejudice in February 2016.

The eye institute then moved for summary judgment in June 2015, but Boulangger responded with an affidavit from her attorney, David A. Guerrettaz, claiming the Evansville police Department had continued to investigate her even after the criminal charges were dropped.  Thus, Guerrettaz argued his client could not present facts in response to the summary judgment motion without violating her Fifth Amendment right against self-incrimination.

The Vanderburgh Superior Court eventually granted summary judgment to OVEI and awarded it a nearly $519,000 judgment, plus costs and post-judgment interest.  OVEI then moved for the trial court to order Boulangger to appear in court to testify to any non-exempt property to could be applied toward the judgment.

The eye institute also served Guerrettaz’s law firm with a non-party request for production of documents and subpoena duces tecum, seeking “(c)opies of any and all check and/or wire transfers received…for legal fees paid for (Boulangger’s) representation.”  Boulangger responded with a motion to quash, arguing the requested documents were protected by attorney-client privilege and her Fifth Amendment rights against self-incrimination.

The trial court disagreed and ordered the firm to produce the requested documents, so Boulangger filed an interlocutory appeal in Divee Boulangger v. Ohio Valley Eye Institute, PC.  The Indiana Court of Appeals upheld the trial court’s order, concluding the documents in question were not protected communications. 

Specifically, Judge Rudolph Pyle rejected Boulangger’s request for an “incrimination” exception to the rule that a client’s attorney fees are not protected by attorney-client privilege.  Drawing on precedent from in cases such as Hueck v. State, 590 N.E.2d 581, 584 (Ind. Ct. App. 1992) and Matter of Witnesses Before the Special March 1980 Grand Jury, 729 F.2d 489 (7th Cir. 1984), Pyle wrote the requested information – which included the source and amount of fees Boulangger paid – was neither confidential nor protected by attorney-client privilege.

Similarly, precedent in Fisher v. United States, 425 U.S. 391 (1976), defeated Boulangger’s Fifth Amendment argument because “the Supreme Court held that the Fifth Amendment did not preclude compelled disclosure of information from a third party such as a defendant’s attorney,” Pyle said.

Billing Misconduct Leads to 2 Year Suspension for Georgia Attorney

December 18, 2017

A recent Law.com, by Mike Scarcella and Kristen Rasmussen, “Barnes & Thornburg Partner Suspended for 2 Years for Billing Misconduct” reports that a Barnes & Thornburg partner in Atlanta who faced possible disbarment for fraudulently billing a corporate client tens of thousands of dollars instead will be suspended for two years, the Georgia Supreme Court says.  John F. Meyers was a Seyfath Shaw labor and employment partner at the time of the professional conduct violations.

John F. Meyers, a member of the Georgia bar since 1983, is a labor and employment partner in Barnes & Thornburg’s Atlanta office.  He joined the firm in 2012 from Seyfarth Shaw.  Barnes & Thornburg removed Meyers’ biography from the firm’s website after the discipline was announced.

Barnes & Thornburg said in a statement: “The conduct underlying the complaint against Mr. Meyers occurred before he joined [the firm].  We are committed to providing the best possible service to our clients and, above all, this includes the highest standards of ethical and professional conduct.”

Meyers, then at Seyfarth Shaw, ran afoul of ethics rules through his relationship with a lawyer named Michael L. DiTano, formerly an in-house counsel at the New Jersey-based manufacturer J.M. Huber Corp.  The privately held company was a client of Seyfarth Shaw, and DiTano was the contact person for the law firm on the account.

DiTano told Meyers that Huber allowed him to do outside legal work—for his own clients—as long as those services were performed on personal time and posed no conflict to the interests of the company, according to the Georgia Supreme Court’s discipline order.

Several Seyfarth Shaw lawyers, including Meyers, beginning in 2011 provided legal services for some of DiTano’s outside, personal clients.  But Seyfarth Shaw ran into trouble trying to collect fees on some matters, the Georgia Supreme Court said.

“When difficulties arose in collecting the fees for those services from the in-house counsel’s personal clients, the amounts due were rolled into the bills sent to the law firm’s corporate client, with the descriptions of the work that had been performed edited to eliminate information that would make clear that the work was not performed directly for the corporate client,” according to the Georgia Supreme Court’s order.

Huber fired DiTano in 2012 after it discovered the billing scheme.  DiTano, who had worked at the company for more than a decade, in 2013 voluntarily surrendered his Georgia bar license.

Meyers, who is also a member of the Florida bar, resigned from Seyfarth Shaw around the time he was confronted about the altered bills that had been submitted to Huber.

In the disciplinary proceeding in Georgia, he denied participating in any scheme to defraud Huber.  Meyers claimed DiTano duped him by saying the billing procedure was acceptable because the services would ultimately benefit Huber.

“Our position is that John Meyers is an honest guy that did what lawyers in that position do,” Meyers’s lawyer, Lester Tate, said during a November 2015 hearing before a special master, David Anthony LaMalva.  “And our defense in this case … is actual innocence.  This is not a technical defense.  This is a case where John had been dealing with an inside general counsel for a long period of time and he did what the inside general counsel told him to do.”

LaMalva found Meyers violated various Georgia bar rules, including one that forbids an attorney from making a material misrepresentation of fact.  LaMalva, finding Meyers complicit in the billing scheme, recommended disbarment.  A review panel later concluded that disbarment was too harsh.  The Georgia Supreme Court agreed.

“This court agrees that a two-year suspension from the practice of law is a sufficient sanction for Meyers’ conduct in this case,” the state justices wrote in their unanimous decision.

Meyers paid Seyfarth Shaw about $95,300—an amount that included improper billings paid by Huber and other bills that the company had not paid, according to the Georgia Supreme Court.