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Category: Billing Rate Survey

Federal Circuit Considers How Fee Ruling Can Deny Access to Justice

March 25, 2019

A recent Law 360 story by Anne Cullen, “DC Circ. Dissects Attorney Fee Ruling That Stoked Access Fears,” reports that a D.C. Circuit panel has raised concerns with a survey of lawyers’ rates that a lower court used to pare millions from an attorney fee award in a decision that legal aid and public interest groups fear may undercut their fee awards and ultimately reduce the number of clients they can take on.  The dispute hinges on a new attorney fee matrix put forward by the government that is based on a survey of hourly rates billed by lawyers throughout Washington, D.C., Maryland, Virginia and West Virginia who practice in various legal arenas, including in litigation, wills, bankruptcy cases and real estate closings, among other practices.

A D.C. district court relied on that matrix two years ago to shave just under $3 million from the nearly $10 million in fees and costs a class requested to pay their attorneys after winning a long-running case against the nation’s capital over violations of federal and local disability laws.  D.C. had championed the new data, as it argued the government’s updated rates provide a more reliable and accurate measure of the current market, while the iteration the class prefers is three decades old.

In the class’ appeal, it told the D.C. Circuit that complex litigation attorneys in D.C. shouldn’t be paid from a dataset that includes non-litigation lawyers hailing from more rural areas that charge far less hourly.  And more than a dozen nonprofits that rely on fee-shifting to support their caseloads — including the National Women’s Law Center, AARP and the Animal Legal Defense Fund — lodged their support for the class’ challenge, as they said in an amicus brief that awarding below-market rates curbs the number of clients a public interest organization can afford to represent.

At oral arguments last week, the panel also voiced concerns with the survey’s widely cast net, as Judge Merrick Garland said he couldn’t understand why a lower court would use a broad sweep of rates to pay a set of complex litigation lawyers based out of D.C. whose hourly rates would differ significantly from others included in the survey.  “If you have a dataset that intentionally includes rates that are neither complex nor District of Columbia, I don’t understand how we can give any weight at all to that dataset,” Judge Garland remarked.

And Judge David Tatel echoed his colleague’s thoughts.  “It can’t be that by including huge numbers of lawyers that are not in district and legal work that’s not only not complex but not litigation, that that could conceivably average out to something that’s useful to us,” he said.

The suit originated in 2005 when parents of then-preschool-aged children challenged D.C.’s failure to provide special education services for their kids.  After they won, they asked for $9.8 million to pay their counsel for more than a decade of work, but the lower court ultimately trimmed the fees and costs to $6.9 million to align with averages from the survey.

Assistant Attorney General Lucy Pittman argued for the district in the hearing, and she conceded that the data spans a range of legal specialties, including wills and estates, where attorneys’ rates would clock in on the lower end of the pay scale.  And the judges highlighted the fact that the data includes lawyers’ hourly rates in rural parts of Maryland, Virginia and West Virginia, which would also pull the average down.  But Pittman argued that the bankruptcy attorneys’ fees were also factored in, and as they lie on the other end of the spectrum, she said they balance out the average.

However, Judge Garland said two wrongs don't make a right.  “You don’t get a statistically correct [result] by taking wrong numbers on one side and wrong numbers on the other, and hope that just randomly, or by accident, they average out to something useful,” he said.

The U.S. also waded into the battle to support the district, as U.S. Department of Justice attorney Charles W. Scarborough argued at the hearing that the data isn’t perfect, but emphasized it’s a “reasonable effort” and a “statistically reliable way” to update the decades-old matrix.

Judge Tatel jumped in to say he understands the government's push to set out a fresh data set — which he said is clearly “brand new” and “much more up to date” — however, he’s still not certain it’s useful here.  “The question is, is the data relevant?” he asked.

Legal Fees in Puerto Rico Bankruptcy Under Review

March 13, 2019

A recent Caribbean Business story by Eva Llorens Velez, “Legal Fees in Puerto Rico Bankruptcy Drop,” reports that the examiner of fees charged by lawyers and professionals in Puerto Rico’s bankruptcy said fees have dropped to $71 million for the June to September period compared with the previous four-month period.  Fee examiner Brady C. Williamson resubmitted to the court a proposed order imposing additional standards to collect fees.  He also proposed an order setting procedures for interim compensation, all of which he said could be tackled in the omnibus hearing set for April.

At the Dec. 19, 2018, omnibus hearing, the court denied without prejudice the fee examiner’s motion to impose additional presumptive standards.  The new proposal incorporates comments from professionals.  However, it maintained a 5 percent a year limit on rate increases for partners/shareholders and a 7 percent-a-year presumptive limit on “step,” or seniority, increases for associates.

Through the interim period that ended in September, firms subject to the Puerto Rico Oversight, Management and Economic Stability Act’s (Promesa) fee-review process have requested more than $306 million in total interim compensation, at least $5.9 million of the total attributable solely to rate increases, Williamson said.  “That is the amount requested to date that, with or without specific client and Court approval, is the direct result of increases in the hourly rates charged at the outset of each professional’s engagement,” he explained.

Through the third interim period (February through May 2018), the collective and cumulative rate increases totaled almost $4 million.  While the 2018 cost increases for the 50 largest firms exceeded 7 percent, according to a Citi report, Williamson said the goal is not to try to regulate professional revenue or profit, but to suggest boundaries for prospective hourly rate increases that comply with Promesa’s reasonableness standards and seek to manage both the immediate and long-term impact on the cost of the proceedings.

At the December hearing, the court noted the “unique situation” presented to professionals by these proceedings, asking the fee examiner to reconsider the initial rate increase recommendations and noting a 2 percent annual rate of inflation in New York, where most of the law firms are located.

The fee examiner said the Feb. 15 decision by the U.S. Court of Appeals involving the composition of the Promesa-established fiscal oversight board for the island “does not conclude that constitutional litigation, nor have all of its consequences yet been felt or appreciated,” and that he “already has engaged professionals on the continuing need to avoid duplicative efforts with further appeals or related activity involving the legislative and executive branches of the federal or Commonwealth governments.”

Williamson also said a particular difficulty inherent in Promesa’s Title III structure, given the board’s role as debtor representative, has been identifying the “client” of each financial adviser.  For example, Deloitte Financial Advisory Services and Ernst & Young LLP are both financial advisers to the commonwealth, with Ernst & Young LLP reporting to the board and Deloitte FAS reporting to Puerto Rico’s Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym).  Many financial professionals, whether working for a flat fee or an hourly fee, provide advice on one or more aspects of a debtor’s finances.  However, for example, Ankura Consulting Group is the financial adviser to the Puerto Rico Electric Power Authority and no other debtor.

Federal Judge: Midwest Lawyers, Stuck with Midwest Rates

August 6, 2018

A recent American Lawyer story by Scott Flaherty, “Midwest Lawyers, Stuck with Midwest Rates, Federal Judge Tells Arent Fox,” reports that a lateral move to a firm with roots in a more expensive city doesn’t mean a judge is going to award that lawyer a bump in attorney fees in litigation, even if some of the work then gets done in that pricier hub, a recent court ruling shows.

Ruling on a fee request by Arent Fox after a $130,000 settlement with the U.S. government on behalf of a group of Florida landowners, U.S. Court of Federal Claims Judge Patricia Campbell-Smith held that the firm deserves attorney fees based on the St. Louis market rates the lead attorney initially charged while working out of St. Louis-based Lathrop Gage’s headquarters.  She rejected the argument that he should earn the higher rates charged by Washington, D.C.-based Arent Fox after the lawyer switched to that firm’s St. Louis office.  Arent Fox had sought more than $1.1 million in fees plus more than $14,000 in costs.  As the judge explained in her opinion, the fee issue arose in a “rails to trails” lawsuit that dates back to 2009.

A team from Lathrop Gage, led by Mark “Thor” Hearne II, served as plaintiffs lawyers in the suit, representing a group of Florida landholders whose property included railway tracks formerly used by CSX Transportation Inc.  CSX stopped using the railroad lines in 2004, and soon after, a federal agency proposed to set aside a strip of land near the tracks for recreational trails.  The landowners alleged that amounted to an unlawful seizure of their land and sought compensation, according to court documents.

Shortly after the suit was filed, Hearne and his team moved to the Arent Fox, still working primarily from that firm’s St. Louis outpost.  The litigation started as a putative class action, but was winnowed down to a smaller case with some 14 landholder plaintiffs.  Following a summary judgment ruling in the government’s favor, the case was narrowed further to claims from three plaintiffs.  In 2013, the two sides struck the $130,000 settlement.

Since then, they’ve been litigating Arent Fox’s potential fees in light of a settlement in favor of its clients.  The firm has argued for an award based on current market rates in Washington, D.C., while the government has urged lower St. Louis rates, adjusted to take account of the years in which the work was actually performed.  Campbell-Smith awarded $14,362 in costs to Arent Fox.  But her ruling, made public on Aug. 1, faults the firm’s fee request for $1.1 million in part because it relied on the legal market rates in Washington, D.C.—where the firm is based and the federal claims litigation took place.

Instead, the judge ruled, most of the lawyers’ work happened in St. Louis, and since there’s a significant difference between billing rates in Washington and St. Louis, the St. Louis rates should win out.  To illustrate the differences in billing rates between the two cities, Campbell-Smith pointed to the proposed hourly rate for the lead partner in the case, Hearne.  Arent Fox sought an hourly rate of $826 for Hearne, while the likely St. Louis market rate would be more like $504 per hour for a partner with Hearne’s amount of experience, the judge wrote.

Campbell-Smith detailed several reductions she would impose when figuring out what to award Arent Fox in the case, according to her decision.  Still, she didn’t set a final fee award, concluding that the firm and the government needed to provide more information about the average St. Louis market rates for lawyers at different seniority levels, as laid out in billing rate surveys conducted by the publication “Missouri Lawyers Weekly.”

The Federal Claims judge also sided with the government on another key issue related to Arent Fox’s fee request—whether the award should be based on current or historical market rates for legal services.  “The attorney billing rates shall be calculated based on the average hourly rates as reflected in the ‘Missouri Lawyers Weekly’ surveys, and shall be awarded historically,” Campbell-Smith wrote.

Law’s $1,000-Plus Hourly Rate Club

July 23, 2018

A recent Wall Street Journal story by Vanessa O’Connell, “Big Law’s $1,000-Plus an Hour Club,” reports that leading attorneys in the U.S. are asking as much as $1,250 an hour, significantly more than in previous years, taking advantage of big clients' willingness to pay top dollar for certain types of services.  A few pioneers had raised their fees to more than $1,000 an hour about five years ago, at the peak of the economic boom.  But after the recession hit, many of the rest of the industry's elite were hesitant, until recently, to charge more than $990 an hour.

While companies have cut legal budgets and continue to push for hourly discounts and capped-fee deals with their law firms, many of them have shown they won't skimp on some kinds of legal advice, especially in high-stakes situations or when they think a star attorney might resolve their problem faster and more efficiently than a lesser-known talent.  Harvey Miller, a bankruptcy partner at New York-based Weil, Gotshal & Manges, said his firm had an "artificial constraint" limiting top partners' hourly fee because "$1,000 an hour is a lot of money."  It got rid of the cap after studying filings that showed other lawyers surpassing that barrier by about $50.

Today Mr. Miller and some other lawyers at Weil Gotshal ask as much as $1,045 an hour.  "The underlying principle is if you can get it, get it," he said.  "Not many attorneys can command four figures hourly, and I do have trouble swallowing that," said Thomas L. Sager, general counsel at chemical maker DuPont Co. Still, he added, DuPont pays more than $1,000 an hour to a "select few," particularly for mergers-and-acquisitions advice.

Janine Dascenzo, associate general counsel of General Electric Co. said that her company is willing to pay what it must when it needs a lawyer with "unique" expertise.  "We'll keep paying them a lot of money, because they're worth that," she added.  Industrywide, attorneys in finance-related practices such as M&A, bankruptcy law and taxes, tend to command a premium to their peers in other specialties.

One of the priciest attorneys over the past year, according to court filings, has been Kirk A. Radke, whose specialty at Kirkland & Ellis LLP in New York is advising clients on leveraged buyouts and forming private-equity funds.  As of early 2010, Mr. Radke, whose clients include private-equity firm Avista Capital Partners, had an hourly fee of $1,250.  Mr. Radke and Kirkland & Ellis declined to comment, as did Avista Capital.

Such rates are contributing to inflation across the $100 billion-a-year global corporate-law industry as the slow economic recovery has left many law firms struggling to finance the hefty pay packages they award their stars.  Since most law partners bill roughly 2,000 hours, those asking $1,100 hourly will bring in $2.2 million, a few million short of the $3 million or $4 million in annual compensation star attorneys get at many big firms.

To help fill the gap, the firms rely on the profit they often reap on the work of junior attorneys, or associates.  Dozens of associates at a time can work on a single case, and some firms bill as much as $700 an hour for their time, according to Valeo Partners, a Washington consulting firm that maintains a database of hourly legal rates in fields such as litigation, corporate law and intellectual property.  That strategy can fuel tensions with clients. "We are much less willing to pay an army of associates at the ever-increasing rate," said GE's Ms. Dascenzo.

"Plenty of clients say to me, 'I don't have any problems with your rate,' " said William F. Nelson, a Washington-based tax partner at Bingham McCutchen, who commands $1,095 an hour, up from $1,065 last year.  "But there is price pressure for associates, especially junior lawyers.  A small but growing number of top lawyers are using other arrangements in place of hourly billing.  David Boies, chairman of Boies, Schiller & Flexner and a prominent trial lawyer, charges $960 an hour, a spokeswoman for the firm said.  But just a third of his time is devoted to matters that are billed hourly.  More often his deals with clients involve alternatives such as pegging fees to his success, she said.

More typically, big law firms' managing partners dictate hourly rates annually, often studying what their rivals charge, according to disclosures in their attorney-fee filings in corporate-bankruptcy cases, which provide a rare public peek at the industry.  Such cases involve more than just bankruptcy lawyers; they frequently draw in a range of attorneys, including specialists in such areas as taxes, product liability and environmental and intellectual-property law.

This year, top litigators at Morgan, Lewis & Bockius LLP, a Philadelphia-based firm, are asking as much as $1,200 an hour.  A spokeswoman for the firm said "less than 1% of our partners are at rates of $1,000 or more."  Gregory B. Craig, a former counsel to the Obama White House who joined Skadden, Arps, Slate, Meagher & Flom LLP a year ago as a Washington-based litigation partner, is asking $1,065 an hour, according to a court filing last month.

M&A lawyer John M. Reiss, from White & Case in New York, started billing $1,100 an hour last year.  "Some clients do focus on the hourly rate, but in the end what really matters is their total cost and whether they got a fair price," said Mr. Reiss.  In recent years, pressure from clients for discounts has made it increasingly difficult for law firms to increase their lawyers' fees across the board.  Hourly rates for partners rose by an average 3% in 2009 and 2010, and 2.3% this year, compared with an 8% increase in 2008, according to Hildebrandt Baker Robbins.  The average law-firm partner now asks $635 an hour and bills $575, the firm said.  But a small group of attorneys in some specialties command significantly more.

Nearly 2.9% of partners at a group of 24 large U.S. and British law firms asked for $1,000 an hour or more in U.S. cases last year, up from 1.5% in 2009, according to Valeo.  London-based lawyers have tended to charge higher per-hour rates than their U.S.-based counterparts.  However, London attorneys typically don't bill as many hours on a case as do U.S. attorneys, some lawyers say.

NALFA Featured in ALM Article on Billing Rates

March 20, 2018

A recent Daily Business Review story by Samantha Joseph, “Spoiler Alert: Most of South Florida’s Top Law Firm Billers Are Men,” reports on gender disparity in billing rates in South Florida.   The story reads:

No one on the list is talking, but new research on billing rates speaks for itself: Most of the attorneys commanding top dollar in South Florida’s bankruptcy bar are men.

In the latest annual study of billing rates by ALM, the parent company of the Daily Business Review, only one woman appeared among the 10 highest South Florida billers: Leslie Cloyd, a Berger Singerman Boca Raton partner who represents debtors and others in complex Chapter 11 cases and workouts.

That’s no surprise to many who follow financial disparities in the industry.

“Law firms don’t want to admit it, but there is gender inequality,” said Terry Jesse, executive director of the National Association of Legal Fee Analysis, a nonprofit that undertakes fee analyses for courts and private clients. “People say, ‘We don’t do this at our law firm.’ They don’t see it, but it does come out in surveys.”

ALM researchers used federal court billing data from bankruptcy cases to compile compensation lists for attorneys and other billers in 20 U.S. jurisdictions. The top spot in this year’s South Florida data belonged to Paul Keenan, a Greenberg Traurig Miami shareholder shown charging $765 per hour to clients in the firm’s restructuring and bankruptcy practice.

At No. 2, Michael Goldberg of Akerman commands $655 per hour. Cloyd is next at $625 an hour, and is the only female attorney among the 34 lawyers in the ALM data who billed at more than $400 per hour. Her Berger Singerman colleague, Jordi Guso, showed a rate of $610 per hour.

Two Jacksonville attorneys billing $575 per hour, Guy Bennett Rubin and I. Mark Rubin, appear next on the list, trailed by David Softness of David R. Softness P.A. in Miami at $550; Peter Bernhardt of McDonald Hopkins in West Palm Beach at $530; and Jeffrey Bast of Bast Amron and Paul Singerman of Berger Singerman, each based in Miami and charging $525 per hour.

Rounding off the top 10 are Ehrenstein Charbonneau Calderin’s Robert Charbonneau and Seese P.A.’s Michael Seese, who each charge $515 for an hour’s wor

“Really Disheartening”

“Diversity is an important topic,” said Silvia Hodges Silverstein, executive director of New York-based Buying Legal Council, an international trade organization for legal procurement. “But until we had billing data that was also tracking gender, we really couldn’t say anything about it.”

Silverstein’s own research in March 2014 found similarly bleak results. At that time, she led a Sky Analytics Inc. national gender study based on $3.4 billion in corporate legal billings for 40,000 lawyers and time keepers across 3,000 law firms.

Her data uncovered “profound differences” between realized rates—the amount paid—for male and female attorneys at the same career level. Among her findings: Female associates made $27 less per hour on average than their male counterparts with similar experience.

“What was really disheartening was that you have the difference right out of law school, and it continues as women advance in their careers, even as they become equity partners,” said Silverstein, who now also lectures at Columbia Law School. “Women aren’t able to make up the difference over time. His hourly rate goes up. Hers goes up, but not as much.”

At the top of the profession, Silverstein’s research found six percent of male lawyers commanded more than $800 per hour, while only two percent of their female counterparts ever reach that rate. And no women in her data set surpassed the $1,000 hourly rate, while two percent of male lawyers did.

“The pay gap got even wider as attorneys moved up,” Silverstein said.

The good news: Silverstein found that women at small firms fared better than their counterparts in Big Law or at midsize firms. Lawyers at firms with 25 or fewer attorneys billed at the same rate for comparable work, and increased their prices at the same pace, regardless of gender.

NALFA’s Jesse attributed the difference to the “culture” at many big firms.

“There’s less gender inequality at the midsize and solo level,” he said.  “At the very large firms it’s just kind of a system. … A lot of it is task-based. Male partners are given more leadership roles in litigation, and female might be assigned lesser tasks—more research-based.”

Women’s Work

Joe Ankus, a Davie, Florida-based consultant who’s spent more than 20 years recruiting talent for law firms, said niche specialties are key when it comes to determining what attorneys can demand. He said years of specialization often separate the top billers from counterparts with lower asking rates.

“You need to be viewed as the go-to lawyer, or at least one of a handful of go-to lawyers,” said Ankus, president and founder of Ankus Consulting Inc. “The way to stay at the top: You can’t be a good practitioner. You must be excellent.”

A focus on debtor-side Chapter 11 work combined with related in and out-of-court restructuring expertise appears to have helped propel South Florida’s top female bankruptcy biller into the male-dominated top tier.

Cloyd and others named in the ALM billing data’s top 10 declined to comment or did not respond to requests. But Cloyd’s law firm profile shows her work has included serving as debtor’s counsel to Ruden McClosky in the law firm’s Chapter 11 case, representing Florida Power & Light in a Chapter 11 case filed by Gator Generating Corp., and representing tax collectors for Indian River, St. Lucie, St. John, Glades and Hendry Counties.

Beyond the realm of law firm partners like Cloyd, Silverstein’s data, which includes legal staffers as well as attorneys, showed that women were more likely than men to bill time for lower-skill tasks.

“What we found was that there were certain ‘female’ jobs and they were not necessarily strategic,” Silverstein said.

In analyzing standardized billing data using Uniform Task-Based Management System coding, Sky Analytics isolated litigation billing codes, or L-codes. It found female billers outnumbered male counterparts for codes indicating low-level tasks, such as data-processing, as opposed to administrative or investigative roles.

Plus, men staffed the majority of large projects requiring teams of at least 20 billers or timekeepers. They accounted for 93 percent of that litigation, while women shepherded smaller teams. While their male colleges handled large suits, female timekeepers made up the majority of workers assigned to 81 percent of small cases, according to the Sky research.

Silverstein’s data also showed women occupied entry-level positions, accounting for 75 percent of paralegals and 46 percent of associates, but only 22 percent of partners.

Firms “need to be mindful of how they staff matters,” Silverstein said. “Do they give women the same exposure to important matters as men?”

And even if they get the work, researchers say women face more pressure to discount their time—offering discounts on 37 percent of their bills, compared to 26 percent for men.

“Males in the legal profession are considerably more likely to bill through without any adjustments,” Silverstein said.

That’s good news, at least, for most of the South Florida attorneys on the billing list.

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