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Judge Trims DC Hourly Rates in Employment Cases in Pennsylvania

September 21, 2018

A recent Legal Intelligencer story by Max Mitchell, “Judge Trims ‘DC Rates’ in Pittsburgh Employment Case, but Lawyers Still Land More than $2.2M in Fees,” reports that attorneys from Washington, D.C., may not have secured all of the fees they were seeking, but they are still set to receive more than $2 million for handling a series of employment lawsuits in the U.S. District Court for the Western District of Pennsylvania.  U.S. District Judge Mark Kearney awarded $2.26 million in attorney fees to attorneys from D.C.-based Williams & Connolly and Pittsburgh-based The Employment Rights Group who handled the case Mozingo v. Oil States Energy Services.  The litigation stems from claims by oil and gas workers that they were cheated out of overtime pay.

The employees’ attorneys had asked the court to award $2.43 million for the litigation, which started out with lawsuits for 29 separate employees.  According to Kearney, attorney Zachary Warren, the lead lawyer for the plaintiffs, started his representation of the employees while working at The Employment Rights Group in Pittsburgh, but, after he joined Williams & Connolly, Warren continued to lead the litigation, and brought on four colleagues from the Washington firm to help him handle the litigation.

Although Kearney granted much of the attorneys’ fee request, he declined to apply the hourly billing rates common to the D.C. area, and instead said billing rates more common to the Pittsburgh area would apply.  “We cannot simply accept Washington billing rates as being reasonable in Pittsburgh,” Kearney said.  “The employees’ counsel do not offer evidence allowing us to make this leap.  Exercising considerable discretion, we base the reasonableness of hourly rates upon blended rates for attorneys in this community.”

According to Kearney, the lawsuit began after 29 employees of Oil States Energy Services LLC opted out of a 2015 class action settlement in Texas.  The plaintiffs, which consisted of frac hands, grease operators and crane operators, contended that the energy company misclassified them as exempt from overtime laws.  The 29 plaintiffs, who filed suit in the Western District in early 2015, hired Pittsburgh lawyers from The Employment Rights Group, and the defendants hired attorneys from Texas.

Kearney said 14 plaintiffs settled their cases in mid-2016, and soon after Warren left The Employment Rights Group to join Williams & Connolly.  Warren remained on the case, and brought four colleagues from the D.C. firm to help continue the litigation.  The cases were eventually tried in two groups, and juries found in favor of the employees in both.

Regarding the request for fees, Kearney said the $375 hourly rate that Warren requested was “fair and reasonable.”  However, Kearney declined to apply higher rates for the attorneys from D.C., and said the hourly rate for partners should be $500, the rate for associates should be $300 and the rate for summer associates should be $145.

Although the energy company raised numerous additional challenges, Kearney dismissed much of those, saying instead that the court was “far more skeptical of vague time entries often imbedded in block billing, or billing by several lawyers on the same task.”  As a result, Kearney ended up deducting nearly $30,000 from the request for “vague entries.”

Third Circuit: No Attorney Fees After ‘Outrageously Excessive’ Fee Request

September 12, 2018

A recent Legal Intelligencer story by PJ D’Annunzio, “3rd Circ.: Judge Was Right to Award Nothing After ‘Outrageously Excessive’ $1M Fee Request, reports that a federal appeals court has upheld the denial of a $1 million fee request by a Scranton attorney in an auto insurance case that produced a verdict almost a tenth of the requested legal compensation.  In its denial, the U.S. Court of Appeals for the Third Circuit, joining other circuit courts, also held that it is within a judge’s discretion to award no attorney fees at all, especially if the fee request is deemed “outrageously excessive.”

The ruling stems from plaintiff Bernie Clemens’ bad-faith case against New York Central Mutual Fire Insurance over its handling of his auto accident case.  The claims went before a jury and ended with a $100,000 punitive damages award.  The defendants had settled Clemens’ uninsured motorist claim for $25,000.

The case was handled by Mike Pisanchyn of the Pisanchyn Law Firm in Scranton.  After the case was resolved, Pisanchyn asked the court to award the seven-figure fee amount.  However, U.S. District Judge Malachy Mannion of the Middle District of Pennsylvania was taken aback by the sheer size of the number—so much so that he awarded Pisanchyn and his firm nothing and referred Pisanchyn for disciplinary review.

Reached for comment, Pisanchyn disagreed that his firm’s fee request was excessive.  “In essence, despite us obtaining a $100,000 award on a zero written offer case while we represented the plaintiff over eight to nine years of litigation, the court has determined the plaintiff’s attorney should be awarded nothing,” he said in an email.  “However, we do take comfort in the fact that our clients have been compensated and are extremely happy with our representation of them through this almost decade of litigation.”

James Haggerty of Haggerty, Goldberg, Schleifer & Kupersmith in Philadelphia represented Clemens on appeal.  “The decision is important in that it addresses an issue regarding the award of counsel fees which had not heretofore been considered by the Third Circuit,” Haggerty said, “The court issued a well-reasoned and well written opinion, finding that the district court did not abuse its discretion in refusing to award counsel fees to trial counsel following his successful recovery of bad faith damages from the defendant insurer.”

Mannion’s 100-page opinion went line-by-line through the request, slashing billed fees he deemed vague, duplicative and excessive.  Mannion also took issue with how the firm recreated its timesheets, saying that, while recreating timesheets is allowable if the attorneys did not make them contemporaneously, a number of the entries appeared to be based on guesswork.

The Third Circuit agreed with Mannion’s handling of the request, which found that Pisanchyn and his firm were entitled to recover only 13 percent of the fees they asked for.  “In light of that substantial reduction, the district court deemed Clemens’s request ‘outrageously excessive’ and exercised its discretion to award no fee whatsoever,” Third Circuit Judge Joseph Greenaway wrote for the panel, which also included Judges Luis Felipe Restrepo and Stephanos Bibas.

“Although it was unusual, we cannot say that this decision was an abuse of discretion,” Greenaway added.  ”Review of the record and the district court’s comprehensive opinion makes clear that denial of a fee award was entirely appropriate under the circumstances of this case.  Counsel’s success at trial notwithstanding, the fee petition was severely deficient in numerous ways.”  Mannion had said one of the most “egregious” requests included billing 562 hours for trial preparation, with the plaintiffs attorneys entering between 20 and 22 hours per day on some days.  The Third Circuit examined that figure in detail.

“All the more troubling is the fact that counsel’s (supposedly) hard work did not appear to pay off at trial.  As the district court explained, counsel had ‘to be repeatedly admonished for not being prepared because he was obviously unfamiliar with the Federal Rules of Evidence, the Federal Rules of Civil Procedure and the rulings of th[e] court,” Greenaway said.  “Given counsel’s subpar performance and the vagueness and excessiveness of the time entries, the district court did not abuse its discretion in disallowing all 562 hours.”

Greenaway continued, “Aside from the problems with the hours billed for individual tasks, counsel also neglected their burden of showing that their requested hourly rates were reasonable in light of the prevailing rates ‘in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.’”

Article: Deal with Billing Issues Mid-Year to Avoid Year-End Rush

August 29, 2018

A recent Daily Report article by Shari L. Klevens and Alanna Clair, “Yes, It’s Still Only August, But You Can Avoid the Year-End Rush on Billing Issues, reports on the fundamentals of effective fee collections.  This article was posted with permission.  The article reads:

Issuing bills and collecting fees can be a challenging task for many attorneys.  Some find it difficult to give billing issues the attention they need, given the demands of their law practice.  Often, attorneys may feel tempted to ignore billing issues until the year-end collections push.  However, by only focusing on billing at one time during the year, attorneys (and firms) may end up leaving earned fees on the table or could otherwise miss red flags that could indicate other problems with the representation.

Thus, many firms will encourage their attorneys to take a serious look at outstanding invoices, work in progress fees and overdue accounts prior to the year-end push.  Although December may be the appropriate time for the final push, summer can be the time to reinforce the fundamentals for effective fee collections.

Are Bills Being Paid?

Assuming that bills are sent regularly, if a client is not paying its invoices regularly or in full, this time of year can be a helpful time to investigate.  Waiting until December may leave the firm with fewer options and little time to deal with unpaid bills.  Clients have many options for how and when they pay bills.  Some clients review amounts or even appeal the invoices before paying.  Others may regularly let bills accumulate and pay them in full quarterly.  However, the failure of a client to pay over an extended period of time can indicate a problem, either with the client’s ability to pay, or, in some circumstances, with the relationship.

If bills are remaining unpaid, many attorneys will investigate to try to identify the source of the delay.  For example, the bills might have been sent to the wrong person or, it could be that the firm or the invoices are not in the client’s system.  On the other hand, it could be that a client is receiving the bills, but nonetheless is refusing to pay some or all of them.  When this happens, there are several potential explanations.

Some clients refuse to pay because they dispute the amount of the bill.  In such a circumstance, the attorney may choose to engage in some frank discussions regarding the work performed and anticipated future work and billings.  Getting everyone on the same page about both the amount of work a matter requires and the cost of that work is important to avoid even bigger disputes down the road.  The attorney may choose to discount or write-off amounts—as a client service issue—if the amounts exceed what was expected.

However, if the client is refusing to pay because the client is dissatisfied with the quality of work, then additional steps may be helpful.  Typically, ignoring such dissatisfaction does not make the issue go away and can get worse with time.  Most firms in this situation will confront the issues directly to determine whether the client is unfairly refusing to pay or if there is a more serious quality issue.

Most often, fee disputes reflect misunderstanding about what work the attorneys are doing and what costs are associated with that work.  If a client does not understand a bill or thinks they are being overcharged, it might be because the bill does not provide enough detail or because it is hard to read.  The solution could be as simple as revising billing entries so they provide more information.  Unfortunately, sometimes nonpayment means the client simply does not have the financial resources to pay.  It is always better to find that out sooner rather than later.

Are Bills Being Sent?

In taking inventory of accounts receivable and work in progress fees, law practices can also review whether their invoices are being sent on a regular basis.  Whether fees are being paid can be directly impacted by whether attorneys are getting their bills out with regularity.

Failing to send bills regularly can have direct and practical impact on the attorney-client relationship.  If bills are not sent regularly, sending an invoice that encompasses several months of work can come as an unpleasant surprise to a client.  A client may even begin to question the work that has already been completed if irregular bills suggest that the representation is unusually expensive.  Typically, an effective way to avoid that surprise is to ensure invoicing is timely.  Monthly, digestible bills reduce the risk of a fee dispute and increase the chances of prompt payment.  Regular invoices also help educate and confirm for clients what tasks are being completed in the matter.

In addition to ensuring good client relations, regular bills avoid the risk that the firm or practice has a substantial amount of fees invested before learning that it has a client problem or an objection to payment.  With frequent, regular bills, nonpayment or fee disputes typically involve a much smaller amount than disputes resulting from a single bill covering six months or a year of legal fees and expenses.  Issuing bills in regular (and therefore smaller) amounts reduce the risk of a dramatic hit to the bottom line if there is a dispute.

With all that said, one of the most important reasons for monthly or regular billing is to address one of the most common reasons why clients do not pay: they never received an invoice.  Systematic billing in regular intervals ensures that crucial step for getting paid by ensuring that bills are sent.

Billing is one way of informing the client of the work being done and the time being spent on their case.  By assessing billing issues at mid-year, attorneys can reduce the stress of the year-end collections crunch.

Article by Shari Klevens and Alanna Clair of Dentons US LLP, reprinted with permission of ALM Media Properties, LLC.  Shari L. Klevens is a partner at Dentons US in Atlanta and Washington and serves on the firm’s U.S. board of directors.  She represents and advises lawyers and insurers on complex claims and is co-chair of Dentons’ global insurance sector team.

Alanna Clair is a partner at Dentons US in Washington and focuses on professional liability and insurance defense.  Shari and Alanna are co-authors of “The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance” and the upcoming 2019 edition of “Georgia Legal Malpractice Law.”

Judge Slashes Attorney Fees in Anthem Data Breach Class Action

August 17, 2018

A recent story in The Recorder by Amanda Bronstad, “Federal Judge Approves Anthem Data Breach Case, Slashes Attorney Fees,” reports that after chastising plaintiffs lawyers in the Anthem data breach settlement for their excessive billing, a federal judge has awarded them $31.05 million and approved the $115 million deal.  In a order, U.S. District Judge Lucy Koh of the Northern District of California approved the fees after concluding that the results were “exceptional.”

Koh had hired a special master to review the billing records submitted by plaintiffs lawyers, who asked for $38 million for their work on the case.  The special master had recommended cutting more than $9 million based largely on the billable hours, but Koh based her decision on a percentage of the fund—about 27 percent.  Although still a reduction from the original request, the award is higher than the special master’s recommendation and the U.S. Court of Appeals for the Ninth Circuit’s 25 percent benchmark.

“Here, based on the court’s familiarity with the case, the choice of a percentage does not strike the court as arbitrary or unconnected from the performed work in a way that would create a windfall for class counsel,” Koh wrote.  Also, Koh approved the settlement, the largest ever in a data breach case.

As to the fee order, he noted that Koh didn’t adopt all of the special master’s findings.  “We’re pleased that the judge saw to go with a benchmark,” he said.  “Obviously, we’d like more.  We always want more.  We’ve asked for more.  But I didn’t read the tea leaves one way or the other.  We didn’t know what to expect.  I think she spent her time, gave a well-reasoned opinion for the final order and judgment and, on the fees, as well.”

Koh brought in a special master in February after telling the four lead plaintiffs lawyers she was “deeply disappointed” in their decision to bring in 49 additional law firms on the case.  The special master, retired Santa Clara County Superior Court Judge James Kleinberg, now at JAMS, proposed a 10 percent cut to the billable hours and suggested that the contract attorney rates, which averaged $360 per hour, be set at $156 instead.  Plaintiffs lawyers continued to press for their initial request, while Frank’s objector thought the award should have been closer to 15 percent of the fund.

In this week’s order, Koh continued to have reservations about the rates billed for contract attorneys—remarking “how striking the markup is”—and set an hourly rate at $240.  She also agreed that the hours were “almost necessarily excessive,” particularly given that there were 53 law firms on the case.  She found that was especially true with hours billed for depositions and settlement.  She cut that amount by 13 percent.

She approved a fee award that is more than the Ninth Circuit’s benchmark, however, citing the “novel legal issues and technical subject matter” and the risks inherent in a data breach case.  She noted that while the fee percentages were higher in data breach settlements with Home Depot and Target, those cases also included claims by financial institutions that skewed the compensation to consumers.  She also approved more than $2.1 million in costs and expenses and nearly $600,000 in service awards to 105 named plaintiffs.

In her approval of the settlement, Koh found that amendments in April resolved her concerns about potential money left over from a $15 million fund in the settlement earmarked for out-of-pocket costs.  The original settlement called for $3.3 million going to cy pres organizations, but the amendments said two organizations, the Center for Education and Research in Information Assurance and Security at Purdue University and the Electronic Frontier Foundation, would receive no more than about $417,000.

Expert Report on Attorney Fees Called “Wholly Unmoored”

July 2, 2018

A recent American Law story by Scott Flaherty, “Report Railing Against Lawyers’ Conduct in State Street Case ‘Unmoored,’ Says Labaton,” reports that a newly unsealed special master’s report accuses the law firm Labaton Sucharow and its co-counsel of deliberately misleading the court about how it distributed the legal fees from a $300 million settlement with State Street Corp., prompting Labaton Sucharow to call the master’s analysis “wholly unmoored” from legal precedent and professional conduct rules.

The report recommends Labaton Sucharow return as much as $8.1 million of its share of a $75 million fee award to the class, and says Garrett Bradley, lead partner at the Thornton Law Firm in Boston, should pay up to $1 million in fines.  Labaton Sucharow is one of three plaintiffs firms, along with Thornton and Lieff Cabraser Heimann & Bernstein, that served as lead counsel in a securities case against State Street that settled in 2016 for $300 million.  U.S. District Judge Mark Wolf in Boston initially approved a plaintiffs legal fee award of $75 million in that case, but later appointed a special master—retired federal Judge Gerald Rosen—to review the fees after an article in The Boston Globe raised questions about potential double counting of hours.

The Globe had previously published an exposé detailing the political donation habits of lawyers at Thornton, and followed that with an examination of the fee request in the State Street case.  In light of the Globe’s reporting, the plaintiffs firms admitted in 2017 to double-counting some hours put in by “staff attorneys” who were paid on an hourly basis and worked temporarily for the three firms, primarily doing document review.  Although they described those mistakes as inadvertent and argued that they shouldn’t affect the $75 million fee award, the plaintiffs firms initially agreed to pay $2 million to fund the special master’s investigation.

However, the probe ended up stretching out for about a year and costing nearly $4 million, according to court records.  At the end of it, the special master issued a 377-page report that was kept confidential while the parties to the case proposed that sections be redacted.  The long-awaited public version of the report, penned by Rosen and released on Thursday, walks through a litany of conduct that the special master viewed as “questionable.”

Rosen detailed the double-counting issues that the firms had already acknowledged.  But he also trained his eye on money that Labaton Sucharow paid to a Texas-based lawyer named Damon Chargois, who helped the firm secure an Arkansas state teachers’ pension fund as an institutional investor client.  The Arkansas pension fund ultimately served as lead plaintiff in the State Street securities case.

According to Rosen’s report, Labaton Sucharow paid Chargois—who had connections to the Arkansas pension fund, but didn’t actually work on the State Street case—roughly $4.1 million under a referral agreement, but failed to disclose the payment to the court, other members of the settlement class and even its co-counsel in the case.  “By not disclosing the intended payment of $4.1 million to Chargois, Sucharow and Labaton kept the court in the dark and denied it the very information it needed in order to determine how much of the settlement funds should go to counsel, and which counsel, and how much,” Rosen wrote.

Rosen also criticized Labaton for its responses to the special master investigation, itself.  Instead of expressing remorse for any potential misconduct, Rosen wrote, the firm responded with a “phalanx of experts, who together with Labaton, have erected a wall of legalistic and formalistic excuses and blame-shifting.  “Although Labaton certainly has a right to present its best case,” the special master continued, “some acknowledgment of the potential harm this conduct has caused to class members, co-counsel and the court would have been not only appropriate, but expected.”

Ultimately, after describing the mistakes made by the firms in how they counted hours ahead of their fee request and citing the undisclosed Chargois referral fee, Rosen recommended that the three firms pay back a little more than $4 million to the class to correct for the double-counting issues.  He also suggested imposing a sanction of $400,000 to $1 million against the Thornton firm, a reduction of the billing rates for contract lawyers that worked on the case—an amount totaling about $2.42 million that would also be returned to the class—and he recommended that Labaton Sucharow be required to pay $4.1 million in connection with the Chargois referral deal.  Some $3.4 million of that would go to lawyers involved in a parallel Employee Retirement Income Security Act case, who were dragged into the special master investigation but weren’t faulted for any conduct, while the remaining $700,000 would go back to the State Street investor class members.  But Rosen also concluded that, despite his concerns, no Labaton Sucharow lawyers should be recommended for professional discipline.

Labaton Sucharow quickly issued a stern response to the special master’s findings.  The firm, represented by Joan Lukey of Choate Hall & Stewart, filed a formal set of objections in court and released a lengthy statement Friday describing the master’s report as “wholly unmoored from the relevant law and the actual facts.  “The master could have concluded his endless and costly investigation long ago once he verified that the double-counting was, indeed, inadvertent,” the firm said.  “Instead, he opted to go down the rabbit hole chasing the scent of an ‘improper’ referral payment because he believed it should have been disclosed to the court.  In doing so, he elected not to act as a neutral fact-finder (as was his stated charge) but rather as an adversary seeking to impugn Labaton and customer class counsel for making a referral payment that was entirely legal, ethical and appropriate under Massachusetts law.  Judge Rosen may be offended by a ‘bare referral’ fee—one where the referring attorney does not have to do any work in order to receive the referral fee, but it is the law in Massachusetts.”