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Category: Billing Record / Entries

$6.2M Fee Award in Virgin Airline Wage Class Action

January 21, 2020

A recent Law 360 story by Vin Gurrieri, “Attys Behind $77M Virgin Wage Win Sought $13M Get $6M,” reports that lawyers for Virgin America flight attendants who recently won $77 million over claims the airline stiffed workers on pay and rest breaks were awarded nearly $6 million in fees by a California federal judge, which was about half the amount they had requested.  U.S. District Judge Jon Tigar awarded $5.7 million to attorneys representing a class of flight attendants led by named plaintiff Julia Bernstein who alleged that Virgin America Inc. flouted California labor laws by not paying them for all hours worked, including pay for overtime, and denying them state-mandated meal and rest breaks.

After having largely granted the flight attendants' bid for summary judgment, Judge Tigar a year ago awarded the flight attendants $77 million in damages.  The airline has since challenged the award to the Ninth Circuit, an appeal that is still pending.  In the meantime, Judge Tigar issued an order finding that the class members' legal representatives were due almost $6 million in fees and an additional $251,000 in court-related expenses.  That number, however, fell short of the approximately $13 million in fees and expenses the lawyers had sought.

Judge Tigar agreed with Virgin that class counsel didn't provide enough detail about certain declared hours and sided with the company in its objection to certain categories, like one labeled "other," that were billed in blocks.  "Virgin takes issue with plaintiffs' use of an 'Other' category, which accounts for 148.1 hours of the fee request," the judge said on the latter issue.  "Given that plaintiffs neglected to identify even representative examples of the types of tasks included, the court cannot award fees for those hours.  The court therefore excludes all 148.1 hours from the fee request."

The judge also shaved the billing rates of several attorneys representing the class but rejected Virgin's arguments that the class members' failure to win on certain claims warranted a significant reduction in fees awarded, leading him to arrive at the $5.7 million figure.  "Ultimately, the court finds that the hours expended were reasonable in light of the overall success achieved, and agrees that success was exceptional," Judge Tigar said.

Article: Ten Ways That Outside Counsel May Hide Overbilling

January 16, 2020

A recent Corporate Counsel article by Ryan Loro, “10 Ways That Outside Counsel Disguise Overbilling,” reports on overbilling from outside counsel.  This article was posted with permission.  The article reads:

Legal invoices can be overwhelming and nearly impossible to understand. The task of sifting through line after line of attorney time entries from outside counsel is time consuming, and more times than not, in-house legal and accounting teams may miss billing errors. Despite the complexity of legal invoices, there are ways to spot overbilling if you know what you are looking for.

According to recent industry research, large companies with big legal departments go over budget by about 37% every single year. Why do they go over budget? A big reason is overbilling from the outside law firms they hire to do work for them.

It’s become such an issue that entire companies have been formed to help businesses analyze and help organizations manage their legal spend. That’s right, lawyers sometimes pad their billable time—and there is now a growing industry to ensure that businesses pay a fair amount for their legal services.

Here are the top 10 ways law firms can hide overbilling:

Block Billing. Block billing is when a lawyer enters multiple tasks under one time period, without separating the time each task took. Here is an example from an actual time entry reviewed by SIB Legal Bill Review:

7.6 Hours: Telephone call with client regarding assignment of rents; review lease agreement of [company]; draft agreement; emails with opposing counsel; revise agreement accordingly.

Block billing obscures the value to the client and the reasonableness of the charges for a given task. If you don’t know how long it took to draft the contract (because drafting the contract is one of five tasks within a 7.6-hour block of time), you can’t tell if the charge for drafting the contract is reasonable. One study by the California Bar Association concluded that block billing increases the time charged by an average of 23%.

Intra-Office Communications. Intra-office communications is when multiple attorneys within the same firm discuss the client’s matter with each other or seek advice from a colleague about a legal issue. One of the major selling points for larger law firms is that they have a breadth of knowledge in specialized subjects. But when a lawyer seeks a colleague’s advice, the client should not have to pay for one attorney to educate another—just have the specialist handle that part of the matter.

Higher-Rate Staff Used Inappropriately. Sometimes lawyers will do work that is more appropriate for a lower-rate attorney or a paralegal. For example, if a partner’s rate is $900/hour and they perform a task that, more than likely is work that a second-year associate attorney who’s rate is $300/hour should be doing, the client will be paying an additional $600 per hour.

Excessive Time. This is the most common complaint of clients, yet has historically been the easiest for law firms to justify. Many clients have a “feeling” that a certain task took too long, but cannot explain why. SIB Legal Bill Review explains in detail the reasons a law firm should reconsider specific charges on an invoice. Here is an example:

The law firm charged 5.1 hours for work on a confidentiality agreement where opposing counsel had already provided a comprehensive draft agreement for comment and markup. This time is excessive. We propose the charge be revised to a total of 2.5 hours: 2.0 for analysis and markup of the draft agreement, and 0.5 for negotiation of points with opposing counsel.

Junior Lawyer Training. Law firms have been known to charge clients for a junior lawyer’s on-the-job training. We believe that the law firm carries the financial responsibility for training its lawyers; it is for the law firm’s long-term benefit. On an invoice we reviewed, one law firm actually charged $1,084 to the client for a junior lawyer’s time to “investigate how to file an appeal.” Of course, there is a point in the junior lawyer’s career when they need to learn how to file an appeal, but the client should not have been asked to pay for that training.

Inadequate Description. When a lawyer does not adequately describe his activity, there is no way for the client to determine if that activity added value for the client or if the charges for that activity are reasonable. Attorneys are paid to be precise in their language. It is not unreasonable to require lawyers to accurately describe how they spent their time and the client’s money. More problematic, inadequately described time can be camouflaging the fact that the attorney invented the time entry to fill his time card or increase the bill. Here is an example of a real time entry:

Attention to licensing files and review of licenses and leases; attention to pro-forma license transfer structure; additional review of proposed structure; attention to fees and timing relevant to pro-forma and non-pro forma assignment; address related licensing matter.

At first glance, it appears that this associate has done a lot of work for the client. But notice that the task descriptions are all nebulous: “attention to … ; analysis of … ;” and so on. In this particular time entry, no actual work product was produced. The client has no way of knowing what value was delivered because of this inadequate description.

Over-staffing a Given Task. Many times, a law firm will over-staff a task, using three attorneys for something that should have only taken one. More often than not, the time for all three attorneys is billed to the client. Defending a deposition and arguing a discovery motion are usually one-lawyer tasks and should be billed as such.

Duplicative Work. Duplicative work is an issue that occurs when one attorney will charge for the same task in more than one billing period, or two attorneys will charge for the same task in the same billing period. Here is our response to an instance of duplicative work:

Junior lawyer charged 25.1 hours ($6,149.50) to draft motion for summary judgment. Senior lawyer charged 14.6 hours ($4,844) to draft the same motion at a later date.

In this particular case, the client did not receive 39.7 hours of work. If the law firm decided to push a motion for summary judgment draft onto a junior lawyer, only to have it rewritten by a senior lawyer, this is not the responsibility of the client.

In fact, according to a study conducted by Samford University Law School in 2007, 48.2% of lawyers believed double billing was ethical, which was up nearly 13% from 10 years prior. It would not be surprising to learn that 12 years removed from the study that the percentage of lawyers who believe double billing is ethical and acceptable has exceeded the 50% mark.

Administrative Tasks. Sometimes law firms will charge attorney or paralegal rates for tasks that could and should be done by administrative staff. The client should not pay $300 an hour for filing a court document. That type of task should be done by a legal secretary at no charge, as part of the firm’s overhead costs.

Discrepancies Between Time Entries. A simple mistake that happens more often than you would think is when two lawyers attend the same meeting but charge different amounts of time for doing so. Another example in discrepancies between time entries occurs when one lawyer charges for an in-office task when another time entry shows she was not in the office that day. The variations of discrepant time entries are many, but the conclusion is singular: one of the time entries is probably inaccurate.

Analyzing the line item charges on legal bills is no small task. The analysis itself is 60% experience in legal practice, 30% psychology, and 10% mechanics and mathematics. Unfortunately for many businesses, computers can only assist in the last and smallest category. Then, when the analysis is done, someone has to negotiate with the billing attorney to convince him that certain charges are unreasonable and should be removed from the bill.

All of this is a daunting task. There is hope for businesses who fear they are being overcharged. Even if you don’t have the resources inside your organization, these functions can be outsourced. Legal bill review services help to increase efficiency and take the burden away from in-house teams and businesses so that they can focus on their work. Finding a legal bill review service that analyzes every line item of all of your invoice every single month is an important and efficient way to help reduce your organization’s legal spend with outside counsel.

Ryan Loro is the president of SIB Legal Bill Review.

Fee Allocation Dispute in Antitrust Case in Seventh Circuit

January 15, 2020

A recent Law 360 story by Celeste Bott, “Attys Spar Over Fees From Antitrust Row at 7th Circ.,” reports that a Seventh Circuit panel took issue with an attorney’s arguments that the allocation of attorney fees from an underlying case should have been settled in arbitration and that Cozen O'Connor wasn’t entitled to its share of a $4 million deal for representing that attorney in the fee dispute.  Judges Amy J. St. Eve, Diane P. Wood and Ilana Rovner said attorney Michael Needle appeared to waive arbitration, noting that he didn’t move to compel it and had previously stated that the district court was the proper forum to resolve all claims in a dispute over a $4.2 million settlement fund.

“How can you come in and argue now there’s no jurisdiction because it should have gone to arbitration, when you argued the opposite in the district court?” Judge St. Eve asked.  The panel heard argument in two related cases, both stemming from a Racketeer Influenced and Corrupt Organizations Act case alleging that International Profit Associates Inc. and its affiliates bilked small businesses into buying expensive but useless consulting.

Needle and Merle L. Royce were co-counsel on a contingent fee basis representing 16 plaintiffs in the RICO case, and in 2013 obtained a $4.2 million settlement, then disagreed over the fees for their work, according to court documents.  Cozen O'Connor represented Needle in the fee dispute and later sought a lien to get paid.

After the settlement, Royce said the fees should be limited to one-third of the settlement proceeds, while Needle sought a much larger sum of $2.5 million, according to briefs in the case.  In 2015, Royce filed an interpleader complaint to determine how the fees should be allocated, and a lower court ruled that the pair were entitled to one-third of the settlement, with 60% to Needle and 40% to Royce.  Needle argued on appeal that the fee dispute should have been decided in arbitration under a binding mediation provision in the fee agreement.  That provision means there’s no jurisdiction to proceed, said Frank C. Fusco, arguing for Needle.

The judges pushed back on that argument and against Needle’s assertion that he was wrongfully sanctioned for asking for an extension that was ultimately granted.  They said he waited “until the last minute” and that the district court had the right to grant him extra time yet still find his actions sanctionable.

Alan R. Borlack of Bailey Borlack Nadelhoffer & Carroll, arguing for Royce, said the sanctions were warranted, noting that even the lower-court judge had said he had “never encountered” anyone so “unrelentingly obstructionist” as Needle in more than six decades of practicing law.  Needle had asked for the added time allegedly because he had failed to file time sheets and was seeking a transcript from a status hearing, Borlack said.

“These were disingenuous reasons for an extension,” Borlack said.  “This case goes to whether a district court can have control of a courtroom so it can administer justice.”  And in the Cozen O'Connor appeal, Fusco told the panel the firm was wrongfully granted a lien because the fee agreement didn’t provide for compensation if the firm withdraws, and that the firm’s work didn’t help Needle recover funds.

Attorneys Must Show Work in $23M Fee Request

January 3, 2020

A recent Law 360 story by Mike LaSusa, “Attys Must Show Work for $23M in American Realty Deal,” reports that a New York federal judge pointed to a lack of billing records as he held off approving nearly $23 million in attorney fees requested by derivative plaintiffs in a case revolving around allegedly shady accounting practices at the real estate business formerly known as American Realty Capital Properties. 

U.S. District Judge Alvin K. Hellerstein issued a two-page order directing the parties seeking $22,920,000 in fees and $594,882 in expenses to file billing records and other relevant information with the court by Jan. 10.  "Unless derivative plaintiffs' counsel provides contemporaneous and detailed billing records showing services they performed in each particular aspect of the case and showing disbursements, their claim for attorneys' fees will not be recognized," Judge Hellerstein said.

The derivative plaintiffs had requested the multimillion-dollar attorney fee sum in mid-December after getting preliminary approval for a settlement agreement tied to a related $1 billion deal aimed at ending a class action centering on the ARCP accounting.  In their fee request, the derivative plaintiffs argued that the terms of the class action settlement provided benefits worth at least $286.5 million to ARCP’s successor, Vereit Inc., in addition to saving the company a significant chunk of change that would otherwise be spent on ongoing litigation.

The derivative plaintiffs called the deal "an exceptional settlement" for Vereit and its shareholders, and pointed out that the $23 million sum they’re seeking represents only 8% of the $286.5 million figure.  But Vereit fired back, highlighting the lack of billing records that should have accompanied the fee bid.  The company also called the request "entirely unreasonable," and said that "class plaintiffs took the lead in all material respects in litigating the coordinated actions."  "Proper evaluation of derivative counsel’s contributions to the resolution of these cases reveals that their fee request represents a significant overreach," Vereit said.  "For the entirety of this action, derivative counsel were able to piggy-back off the work of others."

Jones Day Says Pharma Client Owes $5.3M in Legal Bills

December 30, 2019

A recent Law 360 story by Hailey Konnath, “Jones Day Says Pharma Client Owes $5.3M in Legal Bills,” reports that Jones Day sued a pharmaceutical company in New York state court, claiming the former client has refused to pay nearly $5.3 million in legal bills it racked up while the firm defended it in two patent disputes.  According to the complaint, Serenity Pharmaceuticals LLC researches and develops patented pharmaceuticals to address urinary conditions.  The company tapped Jones Day to represent it and several affiliated companies in a pair of patent lawsuits over antidiuretic products in 2017, the firm said.

Jones Day "zealously represented" the company in both suits, dedicating nearly a dozen attorneys and staff and spending more than 15,000 hours working the cases, the firm said.  And up until December 2018, Serenity paid its bills in full, it said.  But starting that month, the company stopped paying, and now it owes nearly $5.3 million in fees and costs, according to the complaint.

"Serenity has never disputed that it owes this sum in full," Jones Day said. "Because Serenity still has not paid what it owes, Serenity is in breach of the engagement agreement and Jones Day now brings this action."  Serenity confirmed Jones Day's billing arrangement, including its attorneys' hourly rates, in an engagement agreement dated July 2017, the firm said. 

Following the agreement, Jones Day represented Serenity through "complex fact and expert discovery and extensive motion practice," including the successful defense of two summary judgment motions, the filing of a motion to dismiss, a preliminary injunction hearing, a bench trial, post-trial briefings and appellate proceedings, the firm said.

"Defendants often praised Jones Day for its work related to the representation," the complaint said.  And throughout its representation, the firm regularly sent detailed billing statements to Serenity and its CEO, Dr. Samuel Herschkowitz, Jones Day said.  On top of not paying Jones Day, Serenity owes third-party service providers — including experts, a trial graphics vendor, a document management vendor and court reporters — almost $468,000, the firm said.

Jones Day said it spent six months meeting, emailing and speaking on the phone with the company, trying to reach an agreement regarding payment.  But over the course of those meetings, emails and phone calls, "Serenity declined to provide payment for the overdue Jones Day legal fees," it said.  The firm said it asked to withdraw from one of the cases, but was told such a move would be impractical given a trial that began in July.  Since then, the firm continued its "uninterrupted representation," though it informed the company it would not be representing it in an upcoming appeal, per the complaint.

Three Places Overbilling May Be Lurking

December 2, 2019

A recent Law 360 article by Andrew Strickler, “3 Places Overbilling May Be Lurking,” reports on overbilling.  The article reads: By most accounts, the wild ol’ days of lawyer invoicing —...

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