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Category: Billing Record / Entries

Judge Highlights Excessive Billing in Sprint Litigation

March 15, 2017

A recent Wall Street Journal story by Joe Palazzolo and Sara Randazzo, “One Lawyer, 6,905 Hours Leads to $1.5 Million Bill in Sprint Suit,” reports that, Alexander Silow, a contract lawyer for a Pennsylvania plaintiffs’ firm, clocked 6,905 hours of work on a shareholder lawsuit against former executives and directors of Sprint Corp. related to its 2005 merger with Nextel.  Averaging about 13 hours a day, Mr. Silow reviewed 48,443 documents and alone accounted for $1.5 million, more than a quarter of the requested legal fees, according to court documents.

“Unbelievable!” is how Judge James Vano in Kansas described the billing records.  And he meant it.  “It seems that the vast amount of work performed on this case was illusory, perhaps done for the purpose of inflating billable hours,” Judge Vano, who sits in Olathe, Kan., wrote in a Nov. 22 opinion.

Courts often slash what they see as excessive billing in securities and other litigation, but rarely are they so scathing, legal experts said.  Judge Vano’s ruling might have gone unnoticed but for a recent disclosure about Mr. Silow by the law firm where he worked: He was disbarred in 1987 and practiced law illegally for decades.

The revelation, contained in a February letter to Judge Vano, could ​rupture​ a settlement in the Sprint case, and provide grist for corporate groups and others that have highlighted alleged abuses in the civil-justice system, fueling current momentum for legislative change.

A Republican bill passed by the House of Representatives would make it harder to file class actions, curtailing lawyer-driven litigation that provides little benefit to shareholders and consumers, its supporters say.  Plaintiffs’ lawyers and consumer-rights advocates say the legislation would reduce access to the courts and blunt litigation that has improved corporate governance and forced companies to pull unsafe drugs and faulty products from shelves.

Courts regularly bless multimillion-dollar fee awards in recognition of the risk plaintiffs’ firms take by fronting the costs for litigation.  But fee experts said bill-padding is pervasive in class actions and shareholder suits because billing records aren’t reviewed by clients and are scrutinized only when a judge needs to approve a settlement or award fees after trial.

William G. Ross, a law professor at Samford University in Alabama who has written two books on attorney billing, said his most recent survey of lawyers showed that two-thirds were personally aware of bill-padding and more than half admitted they sometimes performed work they otherwise wouldn’t have done had they been charging a flat fee.

Mr. Silow had been working as a contract attorney for at least eight years when staffing agency Abelson Legal Search placed him at the Weiser Law Firm PC in Berwyn, Pa., in 2008, according to a Feb. 3 letter from the firm to Judge Vano.  The law firm was contacted last month by a third party it declined to name and learned that no one with Mr. Silow’s name was listed in a state database of licensed lawyers, Robert B. Weiser, co-founder of the firm, said in the letter.

Mr. Weiser said Mr. Silow presented himself to the firm as Alexander J. Silow, but “was in actuality named Jeffrey M. Silow” and confessed he had been disbarred when the firm confronted him, the letter said.  The firm has since ended its relationship with Mr. Silow and alerted authorities, it said.

Pennsylvania’s attorney discipline office confirmed Mr. Silow was disbarred in 1987 but could provide no additional information.  Mr. Silow didn’t respond to emails and calls seeking comment.  Abelson Legal Search didn’t respond to requests for comment.

Mr. Weiser said in the letter that his firm stands by the accuracy of Mr. Silow’s billing records in the Sprint lawsuit, which alleged the company directors and officers concealed problems created by the merger with Nextel.  The company posted a nearly $30 billion loss as a result of the deal.

The lawsuit sought to claw back profits from former Sprint directors and officers, who it accused of incompetence and self-dealing.  But a settlement reached last year was more modest.  Sprint agreed to changes to its corporate governance and the composition of its board of directors.

Judge Vano approved the deal in his November ruling but slashed the proposed legal fees for plaintiffs’ attorneys from $4.25 million to $450,000.  “The focus appears to have been upon an easy, cheap settlement in the first instance,” Judge Vano wrote.

The plaintiffs’ lawyers—Mr. Weiser’s firm, Florida lawyers Alison Leffew and Bruce G. Murphy and the Kansas City firm Dollar Burns & Becker LC—have appealed Judge Vano’s ruling on the fees.  They argued the results of the settlement, rather than the hours billed, justified the amount sought.

In court documents, Mr. Weiser and the other plaintiffs’ lawyers representing a Sprint shareholder said Mr. Silow’s “extensive document review” enabled them to make “well-informed decisions.”

Michael Hartleib, a Sprint shareholder who objected to the settlement, asked the Kansas appeals court last month to return the case to Judge Vano’s court so he can reconsider the deal in light of the new evidence showing Mr. Silow had no license to practice law.

What are Best Practice in Legal Fee Analysis?

February 20, 2017

Legal fee analysis is the comprehensive review and analysis of attorney fees and costs in an outside legal matter.  Professionals who perform outside legal fee analysis include attorney fee experts, special fee masters, bankruptcy fee examiners, fee dispute mediators, and legal bill auditors.

The following best practices measures were developed over several years with input and consensus from thought leaders from across the legal fee analysis community.  These best practice measures promote values such as ethics, independence, and professional development.  These peer review driven standards help strengthen the legal fee analysis field by ensuring integrity in the process and and reliability in the results. 

This professional code of conduct is considered the professional mainstream of legal fee analysis.  All our members (i.e. fully qualified attorney fee experts, special fee masters, bankruptcy fee examiners, fee dispute mediators, and legal bill auditors) have pledged to follow Best Practices in Legal Fee Analysis:

  1. Adhere to the proper standard of reasonableness.
  2. Observe a consistent and reliable methodology.
  3. Keep updated on the latest jurisprudence of reasonable attorney fees and expenses.
  4. Keep updated on the latest scholarship on reasonable attorney fees and expenses (i.e. empirical papers, studies, surveys, and reports).
  5. Participate in professional development and CLE programs on attorney fees and legal billing topics.
  6. Do not advertise false or intentionally misleading information or offer any guarantee of outcome.
  7. Do not charge on a contingency basis (i.e. based on the results obtained).
  8. Do not accept a case or client where there is an inherent conflict of interest.
  9. Keep all fee, billing, and work product information in strict confidence.
  10. Utilize technology where possible.

Please note: You don't need to be a NALFA member to follow Best Practices in Legal Fee Analysis.

Attorneys Seek Sanctions in Bayer MDL Fee Dispute

February 13, 2017

A recent Law 360 story by Emily Field, “Lead Attys Want Discovery Sanctions in Bayer MDL Fee War,” reports that lead attorneys who represented farmers in litigation over Bayer’s genetically modified rice doubled down on their sanctions bid against other plaintiffs’ law firms in a fee battle in Missouri federal court, saying that the firms continue to deny the existence of certain electronic data.

The lead attorneys, who achieved a $750 million settlement for farmers claiming Bayer's genetically modified rice contaminated their crops, are seeking sanctions against Goldman Phipps PLLC and other related firms and accused them of not contributing to a common benefit fund established to cover the lead attorneys' fees and costs.

Co-lead MDL counsel Don Downing and his firm Gray Ritter & Graham, who are leading the class action suit against the other firms, said they’ve been left with little choice but to seek sanctions against the Goldman Phipps firms, given their balking at fulfilling discovery obligations despite a court order and their “flippant response” to those failures.

The Goldman Phipps firms have argued that they’ve complied with discovery regarding a database of time and billing records, and that their expert witness, Michael Brychel, handed over all existing database materials, including certain “codes” that Gray Ritter believes are missing, according to court documents.   But that’s belied by Brychel’s own declaration, which unequivocally establishes that this “coding” is stored in electronic data tables, Gray Ritter said, even though Goldman Phipps claims Gray Ritter is seeking something that doesn’t exist.

“Similarly, defendants claim that Brychel ‘did not testify that those “codes” exist in a database,’” Gray Ritter said.  “But defendants’ statement that these codes do not ‘exist in a database’ is a clear red herring, as by definition, a ‘database’ is nothing more than a collection of related data tables.”

The case dates back to 2013 when Gray Ritter sued law firms and attorneys including Goldman Phipps, lead lawyer Martin J. Phipps, two other Goldman Phipps-related firms and others for failing to pay portions of state court settlements reached with Bayer into a trust established to cover the lead attorneys' fees and costs.

Gray Ritter brought its sanctions motion on Jan. 12 against the Goldman Phipps firms and Martin Phipps, saying their failure to produce the time and billing database records was a direct violation of a December court order.  The firm asked the court to find the Goldman Phipps firms in civil contempt and to strike the testimony of Brychel.  Gray Ritter requested the immediate production of Brychel’s database with all pertinent codes and a fine of $1,000 per day for any delay after a contempt finding.

The Goldman Phipps firms have asked U.S. District Judge Catherine Perry to deny the sanctions motion and to award them $5,000 in attorneys’ fees for having to address the motion.  But Gray Ritter shot back at this request, saying Goldman Phipps has cited no legal support, and regardless, there are no facts backing the claim that the sanctions motion was frivolous.  “All plaintiffs have ever sought is the electronic data Brychel used to form his opinions in this case, in a reasonably usable electronic form,” Gray Ritter said.

The case is Downing et al. v. Goldman Phipps PLLC et al., case no. 4:13-cv-00206, in the U.S. District Court for the Eastern District of Missouri.

Judge Wants Review of Legal Bills After Inadvertent Billing Practices

February 11, 2017

A recent ABA Journal story by Debra Cassens Weiss, “Judge Wants Review of Legal Bills After Firm Reveal 9,000 Hours of ‘Inadvertent’ Double-Billed Time” reports that a federal judge in Boston is proposing the appointment of a special fee master to review the accuracy of legal bills submitted by several prominent law firms—and is suggesting the firms pay the costs of the probe.

U.S. District Judge Mark Wolf proposed in the Feb. 6 memorandum and order that up to $2 million in special fee master costs be paid from nearly $75 million in attorney fees that had been awarded to plaintiffs’ counsel in their settled suit against State Street Bank, the Boston Globe reports.  The class action had contended the bank overcharged its customers in connection with certain foreign exchange transactions.

Wolf cited a report by the Boston Globe Spotlight team that found three law firms submitted some charges for the same lawyers, often with differing hourly rates.  Some of the hourly rates listed in the legal filings were as much as 10 times more than what the lawyers generally earned, according to the newspaper’s report.

One of the firms, the Thornton Law Firm of Boston, submitted bills showing an hourly rate of $425 for staff attorneys, but one of those lawyers told the Boston Globe he was paid only $30 an hour for his work.  The Thornton firm was recently in the news as a result of a Boston Globe report that claimed partners at the firm who made Democratic campaign donations were reimbursed with law firm bonuses.

Wolf proposes that recently retired U.S. District Judge Gerald Rosen of Michigan be appointed as special fee master to review the accuracy and reliability of representations made in the legal bills, to report on whether misconduct occurred, and if so, to recommend whether the misconduct should be sanctioned.

Nine law firms shared in the legal fees.  Besides Thornton they included class-action law firms Labaton Sucharow, the lead law firm in the State Street case, and Lieff Cabraser Heimann & Bernstein.  According to the Globe, Thornton has a “lucrative partnership with Labaton Sucharow in which Thornton often finds potential legal clients for the much bigger New York firm.”

After Globe reporters contacted Labaton Sucharow for its story on the legal fees, the law firm submitted a letter to Wolf acknowledging “inadvertent errors” in written billing submissions.  Seventeen staff lawyers in Thornton’s report were also listed as staff attorneys on Labaton’s report, the letter said.  And six of the staff attorneys in Thornton’s report were also listed as staff attorneys on the report by Lieff Cabraser.

In all, the firms overbilled by about $4 million and double counted about 9,000 hours, the letter revealed.  The duplicative time has been removed, the letter said, and when differing billing rates were listed for a given staff attorney, the time will be claimed at the lower rate.

UK Judge Rules $20M Legal Bill ‘Highly Unrealistic’ in Fee Dispute Case

February 10, 2017

A recent American Lawyer story by Chris Johnson, “Dechert Client Fee Dispute to Proceed After Court Rules $20M Legal Bill ‘Highly Unrealistc’,reports that Dechert has been dealt a blow in its long-running fee dispute with a former client, with a High Court judge in the U.K. ruling that the company can proceed in its attempt to recover millions of dollars from the firm.

Eurasian Natural Resources Corporation accused Dechert of "systematic and gross overcharging" after the firm billed the London-based mining company $20.3 million for 23 months of work relating to a criminal investigation by the U.K.'s Serious Fraud Office.  The judge said that Dechert's fee estimates were "considerably awry on every occasion" and were based on "highly unrealistic" assumptions.

The dispute will now move to formal cost assessment proceedings, which an ENRC spokesman said are likely to take place early next year.  ENRC, which is being represented by London disputes boutique Signature Litigation, is disputing $14.5 million of Dechert's total fee.

The ENRC spokesman said the company was "pleased" with the ruling.  "We have always been concerned about the level of charging by Dechert, but felt unable to challenge these while our internal investigation was underway," he added.  A Dechert spokeswoman said: "We look forward now to proceeding with the costs assessment process."

The judgment also revealed that DLA Piper, which was originally hired by ENRC to work on the internal corruption probe, had estimated that its fees on the matter would come to around $500,000.

DLA's lead partner on the dispute, Neil Gerrard, took the case with him to Dechert when he joined the firm in 2011.  Dechert was subsequently fired by ENRC in April 2013, with the company initiating proceedings against the firm that fall.

In a letter to The American Lawyer last May, Dechert general counsel Arthur Newbold said that ENRC's allegations were "outrageous and unfounded."  Dechert had previously failed in two separate attempts to have the cost proceedings heard in public.  ENRC successfully argued that a public hearing could have potentially damaging consequences for the company's ongoing fraud office investigation.