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Category: Fee Data / Analytics

Demand Grows for Hourly Rate Data in Big Bankruptcy

May 26, 2020

A recent Legaltech News story by Rhys Dipshan, “Reorg Launches New Database to Bring Big Data Analytics to Bankruptcy Fees” reports that the recession is already choosing its winners and losers: The once-strong appetite for M&A work is increasingly being replaced by a growing demand in bankruptcy services.  And due to efforts started in advance of the current economy, some in the legal tech space are looking to capitalize on this new opportunity.

Financial intelligence provider Reorg has announced the launch of its Legal Billing Rates Database, which aims to provide corporations and law firms with benchmarks regarding outside counsel’s bankruptcy fees.  The goal is to help general counsel and other corporate officers make informed bankruptcy hiring decisions, as well as help law firms competitively set their rates.

Darby Green, Reorg’s senior director of product, strategy and innovation, explained that the database pulls interim, monthly, and final fee applications from U.S. Bankruptcy Court dockets in the Southern District of New York and the District of Delaware, which she called the “preeminent jurisdictions for these types of large Chapter 11 [bankruptcy cases].”  She noted that “the attorneys involved in these [cases] come from all over … and also fee examiners expect that from jurisdiction to jurisdiction you’re not changing your fee, so it can become a good place to get an overall sense of what these fees look like.”

To be sure, while demand for bankruptcy services has grown in recent weeks, the new database was not built in response to the current market.  “When you build a data science-driven tool, it actually takes a very long time to do; we’ve been working on this behind closed doors for more than a year,” Green said.

She added that the development was “really a time-consuming process” given the need to structure docket data that was obtained via PACER.  For example, “even something as simple as figuring the department [took time].  Since every law firm is structured a little bit differently, you’re not going to necessarily find ‘bankruptcy lawyers’ at every firm, you might find ‘restructuring,’ you might find ‘financial insolvency,’ etc.”

Of course, Reorg is far from the only company offering legal spend or bankruptcy analytics, with LexisNexis, Bloomberg, Wolters Kluwer, Bodhala and Brightflag, among others, competing in the market.  What’s more, legal research providers such as Fastcase and Casetext are also planning on expanding their bankruptcy analytics and services.

Green, however, believes that where Reorg stands out is in its sole focus on bankruptcy fees.  “Our understanding is that we are the only company that is applying machine learning and this type of analysis to bankruptcy dockets.  There are a lot of providers looking at district court dockets, but what is unique about us is that because we’re so focused on the high yield and stress and distress markets that we are really embedded in bankruptcy dockets, and that provides an advantage,” she said.

Judge Won’t Destroy Hourly Rate & Attorney Fee Data

April 22, 2020

A recent Law 360 story by Andrew Stricker, “King & Spalding Denied Destruction of Fee Docs in FOIA Case, reports that a federal judge in Washington, D.C. refused to grant a request from King & Spalding LLP to "turn back the clock" and destroy court records that included the firm's billing rates and other fee data.  Partially denying a recent motion from the law firm in a Freedom of Information Act case with the federal government, U.S. District Judge Amit P. Mehta also said he would not order officials at the U.S. Department of Health and Human Services and the Department of Justice to destroy or return copies of the documents they were served.

King & Spalding "asks the court to turn back the clock and treat the sealed material as if [the firm] had never intentionally placed it on the court's docket," Judge Mehta said.  "That the court cannot do."  The decision springs from the firm's attempt to cloak the billing rates of King & Spalding lawyers who sued the HHS and DOJ after the agencies refused to hand over information related to an investigation into medical implant manufacturer Abiomed, a King & Spalding client.

After winning the FOIA case, King & Spalding petitioned for attorney fees early this year, and attached sealed exhibits containing billing rates and information about the work the firm had done to support the fee motion.  But on April 8, one day after Judge Mehta said it was "untoward" of the firm to keep the information out of the public domain as it sought federal dollars, the firm moved to withdraw its fee motion as well as the sealed exhibits.  The firm's motion also requested a court order for its clerk and the government to "destroy all copies of the sealed exhibits in their possession."

The defense opposed the request, telling the court that it was unaware of any authority requiring them "to destroy copies of non-privileged documents that, upon service on the government, became part of a government system of records."  In his decision, Judge Mehta agreed that the firm had offered no justification for destroying the records, despite its citation of a New York federal court decision about courts' inherent powers over their own processes to prevent injustices.

King & Spalding "does not assert that defendants must destroy or return their service copy to prevent abuse, oppression or injustice," the judge said.  "Indeed, it seems that plaintiff's demand for relief is premised on little more than its mistrust of defendant's continued retention of the records.  But that is not a sufficient reason."

While Judge Mehta had previously ruled that the fee exhibits could not remain sealed, he reasoned that the firm's about-face on the fee request "changes that calculus[.]"  "Although the court continues to believe that the likelihood of competitive harm is low if the exhibits were made public, that factor does not override the absence of any genuine public interest in their unsealing," he wrote.

King & Spalding filed FOIA requests in 2016 seeking correspondence within the government about Abiomed.  The agencies dragged their feet for years and cost the firm "hundreds of thousands of dollars" in fees and costs in the ensuing litigation, which the government ultimately lost at summary judgement, according to the firm's Feb 3 fee motion.

ALM Media Cites NALFA Hourly Rate Survey

March 11, 2020

ALM Media Properties LLC covers a recent NALFA survey, The 2020 Class Action Hourly Rate Survey in its recent Critical Mass newsletter, Critical Mass: Coronavirus Cancels MDL Program at Duke Law, Where Professor's Death Has Shocked the Mass Torts Bar. A Survey Probes Hourly Rates in Class Actions, On Both Sides,” by Amanda Bronstad.  The ALM newsletter sites NALFA’s class action hourly rate survey data.  The newsletter reads:

In Class Actions, Do Defense or Plaintiffs Lawyers Charge More?

Attorney fees in class actions are a hot topic, with both sides of the “v” often remarking that the other charges higher rates.  Turns out, they’re about the same.  That’s according to the National Association of Legal Fee Analysis, which released a first-ever survey this month about the hourly rates that class action lawyers charge.

For the 2020 Class Action Hourly Rate Survey, NALFA emailed “hundreds of thousands” of attorneys, in the nation’s 16 largest legal markets over a two-month period, according to Terry Jesse, NALFA’s executive director.

The findings: 95% of all class actions fall within the $200-$1,200 hourly rate range for both defense and plaintiffs’ counsel at partner and associate levels.  Partners for 20 years or more, on both sides, charged between $801 and $900 per hour, while partners with 16 to 19 years of practice charged hourly rates of $701 to $800 for plaintiffs and $601 to $700 for defendants.

Jesse told me:

“We thought that plaintiffs rates would be higher because they’re taking on more risk than defense lawyers are.  We assumed, yes, plaintiff rates would be higher.  We were surprised that defense rates were keeping pace with the plaintiffs’ rates, at both the partner and associate level.”

Survey: Class Action Defense Rates Keep Pace with Plaintiffs’ Rates in 2020

March 4, 2020

Defense rates keep pace with plaintiffs’ rates in class action litigation at partner and associate levels in 2020.  That’s just one of the findings from a recent survey, The 2020 Class Action Hourly Rate Survey, conducted by the National Association of Legal Fee Analysis (NALFA).  This billing rate survey, conducted via email over a two month period, asked class action litigators from the nation’s 16 largest legal markets if their current regular hourly rate falls within a given range.

The NALFA survey shows that 95 percent of all class actions fall within the $200-$1,200 hourly rate range for both defense and plaintiffs’ counsel at partner and associate levels.  In short, only 5 percent of class action hourly rates are less than $200 and over $1,200.  Thus, nearly all class action hourly rates fall within a $1,000 hourly rate statistical variance.

This survey is the first in a series of hourly rate surveys that NALFA will be conducting in specific practice areas in 2020.  NALFA also conducts custom hourly rate surveys for clients such as law firms, corporate legal departments, and government agencies.  NALFA surveys provide the most accurate and current hourly rate ranges within a given geography and practice area.

“This survey data may be the nation’s first and only quantitative class action hourly rate data of its kind,” said Terry Jesse, NALFA Executive Director.  With more class action hourly rate data to follow, here are some of the top-level findings from NALFA’s 2020 Class Action Hourly Rate Survey:

Article: Some Litigation Too Complex for AI Attorney Fee Predictions

March 2, 2020

A recent Law 360 article by Paul Aloe, “Discrimination Cases Are Too Complex For AI Fee Prediction,” responses to another Law 360 article, “Legal Prediction is Demanding But Not Impossible.”  This article was posted with permission.  The article reads:

A recent Law360 guest article by Joseph Avery criticizing the New Jersey Supreme Court’s opinion in Lisa Balducci v. Brian M. Cige shows a profound misunderstanding of the opinion and the nature of hourly fee retainers.  The article overlooks that even with artificial intelligence, an experienced litigator cannot safely predict the hourly fee of a litigated case.

That is especially so with respect to cases under the New Jersey Law Against Discrimination, or NJLAD, with which Balducci v. Cige dealt.  Those cases are often highly charged and emotional — and the length and work required is very difficult to predict.

Some cases resolve quickly, many after protracted litigation.  The New Jersey Supreme Court was entirely correct that predicting the cost and length of a new case is "a difficult, if not impossible, task" and thus lawyers are not obligated to provide a calculation of the entire fee that will be incurred at the outset of the litigation.

The decision itself recites factors that make that so, including whether the cases is settled or tried, "the nature and length of the discovery process, the number of depositions conducted and expert witnesses retained, the overall complexity of the litigation, and many other factors."

The opinion in Balducci v. Cige makes complete sense in the context of which it was decided.  This was a NJLAD case, and the courts below found that the attorney had assured the client that she would not have to pay the hourly rate, even though the retainer said otherwise.

There is also an indication in the decision that the attorney admitted padding his invoices.  When the client became dissatisfied with the attorney, and exercised her right to terminate the attorney, the attorney then presented her with a bill for $270,791, which she likely had no means to pay.

This of course is not the typical hourly arrangement, where a client receives a regular invoice, calculated on the hours expended, and pays that invoices as the litigation progresses.  In that situation, if the client chooses to terminate the lawyer, the client is free to do so.  In this case, the billing contradicted the oral assurances that the fee would be paid by the client, which undermined her right to change attorneys.

Discrimination cases are very different than the typical hourly fee arrangement.  Discrimination cases are often brought with the expectation that the fee will be paid by the defendants, either as part of a settlement or at trial, which appears to be the situation in this case, even though the actual retainer agreement said otherwise.

Of course, NJLAD cases present special circumstances that do need to be considered.  While it is often the case that the attorney receives his or her fee from the defendants as part of a settlement or judgment, that is not always the case.

The case can be lost at trial, the plaintiff might decide to no longer pursue the case, the court might award some but not all of the fees incurred, the plaintiff might win a judgment that includes fees, but the defendants might go bankrupt or otherwise be unable to pay it.  Although New Jersey Rule of Professional Conduct 1.5(b) only provides "[w]hen the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated in writing to the client before or within a reasonable time after commencing the representation," it is entirely appropriate that the retainer agreement in a NJLAD case spell out exactly when and under what circumstances a client may personally have to pay the fees.

Some situations where fees are not recovered may be the fault of neither the lawyer nor the client.  For example, where the defendant goes bankrupt rather than paying a judgment.  Other situations may be more complicated, as when the client loses the ultimate case, which could be the result of the client not being credible, the handling of the case by the attorney, or both.  These situations are not easy to spell out, but it is important at the outset for the lawyer and the client to have an understanding of who is bearing this risk.

Balducci v. Cige, however, presents a particularly important ethical issue, because the client was exercising her right to terminate counsel.  The rules of professional ethics afford clients the unfettered right to discharge counsel, but in this case, it seems the retainer was used in such a fashion as to undermine that right.

Of course, there are situations where a client, just before receiving a settlement, might choose to terminate the attorney.  Another factor is that where the client discharges the attorney, but continues the case, and ultimately receives an attorney fee award, the award would presumably compensate both the old and the new attorney.  A still further situation may be where a client, having commenced a NJLAD case, decides to no longer pursue it.  These types of cases in particular are difficult cases for the plaintiff.

The defense is often able to suggest that the underlying problem was with the plaintiff, not the defendant, and even where that is not the defense, since the NJLAD deals with unlawful discrimination, the pursuit of the case may be very painful for the plaintiff.  Clients of course should be free to discontinue suits, but the discontinuance leaves the attorney without a fee.

Again, if the client were regularly paying an hourly fee that decision would be entirely up to the client.  But where the parties have agreed that the fee will be paid by the defendants, the parties need to consider what occurs if the client decides to discontinue the suit.

All of these are difficult issues.  The New Jersey Supreme Court wisely directed the appointment of an ad hoc committee to address the ethical issues raised in its decision.  In the NJLAD situation, many of those ethical issues are difficult and complex.  Requiring attorneys to use artificial intelligence to make predictions is rightfully not endorsed, and deemed nearly impossible, by the court.

Paul Aloe is a partner at Kudman Trachten Aloe LLP in New York, NY.