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Category: Hourly Rates

Law Firm Billing Tips For Good Client Relations

December 1, 2020

A recent Law 360 story by Aebra Coe, “Law Firm Billing Tips For Avoiding An Irate Client,” reports that a recent lawsuit filed against K&L Gates LLP by a client unhappy with a legal bill highlights some common pitfalls that law firms face when it comes to billing practices, but there are ways to avoid a similar situation, experts say.  The lawsuit against K&L Gates, which was filed in August by Chicora Life Center LC, accuses the firm of using several tactics to increase its bill for representing the bankrupt medical center in a Chapter 11 proceeding over a lease termination dispute.

Some of the alleged billing practices are not entirely uncommon among law firms, according to two experts who declined to comment directly on the lawsuit but provided their thoughts on client billing more generally.  The alleged practices include "block billing," where a lawyer "blocks" together a number of tasks over a set amount of hours; "hoarding," when an overqualified lawyer with a high billing rate retains work rather than passing it on to someone with a lower billing rate; and "multibilling," which occurs when multiple attorneys are tasked with performing the same work.

"All of those things mentioned have been going on for years and years.  This is not at all new," said James Wilbur, an expert on law firm billing at consulting firm Altman Weil Inc.  Regardless of how the K&L Gates suit shakes out in court, other law firms are likely looking for ways to avoid being in a similar position.  While such situations are not entirely preventable because clients can sometimes file bad-faith suits, there are steps firms can take to ensure clients are as happy as possible with a bill at the conclusion of a matter, Wilbur said.

He suggested firms rely on three things to accomplish this: technology, training and collaboration.  E-billing software can often catch double billing and block billing, he said, as well as phrases that might irk a client, like "reviewed phone notes," that may not indicate that the time spent added any value to the matter.

And that leads to training, which should be conducted at all levels on a regular basis so that any attorney or paralegal who puts together a bill is aware of best practices and is skilled in conveying the value brought to the client via the time the individual spent working, he said.  Senior attorneys billing for work that could be done by someone more junior is another beast, Wilbur said, and one that law firm management must work to dissuade by encouraging collaboration and the sharing of work.

Clients have many different rules when it comes to fees, but "no surprises" is a big one, said Toby Brown, chief practice management officer at Perkins Coie LLP.  "The bottom-line answer is more transparency.  And more real-time updates about what's going on," Brown said.  "The lawyers are uncomfortable talking about these things, and so they don't talk about them head-on."

He said lawyers and clients can often get wrapped up in the legal issues at hand, with fee issues taking a back seat.  For example, if the volume of discovery in a major case increases substantially, a conversation on cost might not always occur, but it should, he said.  Real-time sharing of information on the cost of a matter is vital, Brown said.  He said his firm has worked to incorporate the help of its project management team to flag when the scope of a matter has changed so that the attorney on the matter is aware a conversation is needed.

The firm has also implemented technology that goes beyond basic e-billing software to allow attorneys to better monitor their budget on a matter, he said.  Ultimately, according to Wilbur, having a strong relationship with a client to begin with will go a long way.

"Even in a firm that's highly ethical and has training around these issues, mistakes are going to happen. Something is going to creep through," he said.  "The first thing is you have to have a good enough relationship with the client so they know they can text or email you, pick up the phone and point out a problem in the bill, and you will deal with it without arguing."

When contacted by Law360 for comment about its case, K&L Gates described Chicora's claims as "a transparent attempt to re-litigate issues that were raised and rejected years ago through final orders in a concluded bankruptcy."  A third-party fee examiner, it said, expressly found that the fees requested by the firm were reasonable and should be recoverable, and then the bankruptcy court adopted that determination.  "We are confident the present claims also will be rejected," the firm said.

Demand for Contingency Fees Grows Amid Pandemic

November 30, 2020

A recent Law.com story by Dan Roe, “Demand for Contingency Fees in Business Litigation Grows Amid Pandemic,” reports that contingency fees are not only confined to personal injury matters.  In the midst of the recession and pandemic, some firms are increasingly taking on contingency fee matters in business litigation and commercial cases.  Business owners who don’t have the cash on hand to front litigation costs are turning to law firms that work on contingency and are willing to absorb case costs, say firm leaders, who report a rise in contingency fee inquiries since the beginning of the pandemic.

Morgan & Morgan is one of the largest personal injury firms in the country, but it also has a 24-lawyer group dedicated to business disputes.  William B. Lewis, the firm’s business trial group co-managing partner, said the practice has seen a 20% to 25% increase in contingency cases — the only type they do — since the pandemic began.  The firm recently hired an associate out of law school to join the group and plans to hire three or four additional attorneys in the next six months.

The cost of hiring an hourly law firm or trying a case can exceed the cash positions of many businesses with legitimate disputes, said Lewis in an interview.  “Trying a case can cost almost as much as everything leading up to it,” Lewis said.  “Even in a two year litigation cycle, it could be $300,000 in attorney’s fees to try a case.  There are pressure points for folks to settle even if they have a valid, strong claim.  We allow clients to try cases because they don’t have to pay huge amounts to get cases in front of a jury.”

Commercial litigation boutique Cain & Skarnulis in Austin, Texas, is also taking an increased number of cases on contingency.  “There are some good business contingency fee cases coming,” founding partner Steve Skarnulis said in an interview.  “I’d estimate that over the last six months we’ve seen inquiries for at least twice as many contingent fee cases and have probably taken 25% more than we normally would.”

And in New York, the commercial litigation boutique The Stolper Group is also seeing more contingency fee questions than usual.  “There’s definitely been an uptick in inquiries,” founding partner Michael Stolper said in an interview.  “Those who do commercial contingency have to be very selective in cases so I wouldn’t say we’re doing more or less than before, but there have been a lot more inquiries now during the pandemic.”

Financial hardship and disputes that stem from it are driving demand for contingency fee arrangements, firm leaders say.  “We’ve had investment loss cases, securities cases where brokers mismanage money and dump everything into an account after the pandemic when they didn’t have the authorization from the client to do so, an uptick in legal malpractice, and real estate commission cases,” Lewis said about the type of matters Morgan & Morgan has handled on contingency.

The firm’s business trial group is also representing community associations in construction defect claims because of the high costs involved in litigating and the fact that community associations hesitate to shift those costs onto their members, Lewis said.  At Cain & Skarnulis, landlords are turning to the litigation firm to handle disputes with commercial tenants on a contingency fee basis, Skarnulis said.

Firms that specialize in commercial contingency may offer a number of fee arrangements, based on the details of the case.  Tiered fee arrangements such as those at Morgan & Morgan’s business trial group may charge 25% to 35% for an early resolution, whereas a more time-consuming trial may net the firm 35% to 45% of a judgment.  Other firms engage in hybrid arrangements, where attorneys charge a reduced hourly rate and a smaller percentage of a recovery.

Clients may look to firms to absorb case costs as well.  Court costs and associated fees such as electronic document management can cost in the hundreds of thousands of dollars, Lewis said, so firms may also agree to front those costs in exchange for a higher percentage of the recovery.

Big Law firms may not be promoting contingency arrangements, but that doesn’t mean they aren’t doing them, said Davie, Florida-based legal consultant Joe Ankus.  “I do think some of largest firms in the world will take on a contingency case if they believe at the outset the odds of recovery or settlement justify taking the risk,” he said.  “Twenty-five years ago, that wouldn’t have happened at Am Law 100 firms.  Now, people have adjusted to the new normal.”  The prospect of collecting significant damages against a major corporate defendant — and the possibility of punitive damages — may entice large firms that have historically abstained from contingency cases, he added.

Meanwhile, Skarnulis said he’s seeing traditional plaintiff’s firms — more adept at selecting contingency cases than hourly firms — get involved in contingency business litigation, as well as mid-size firms that specialize in commercial litigation.

The 18-attorney Miami litigation boutique Podhurst Orseck is handling contingency cases related to the pandemic, such as business interruption cases against insurance companies.  “It’s a huge financial and time commitment, putting our resources into claims on a complete risk basis,” partner Steven Marks said in an October interview.  “On the opposite side, if we’re successful, it’s very good for the firm.”

Marks said the firm’s historical contingency revenues make up 70% to 80% of the firm’s total revenue, while comprising about 50% of cases.  Overall, the economic downturn from COVID-19 has accelerated an ongoing trend, paved by personal injury firms, to extend the realm of contingency work, said Ankus.  “If you were to talk to me 25 years ago and say, ‘Joe, how many law firms are doing contingency work?’ I’d have told you none or less than 5%,” he said.  “Today, the number has exponentially increased to where many firms, more often than not, will readily take on a contingency matter.”

DC Judge Slams DOJ’s Fee Agreement with Arnold & Porter

November 24, 2020

A recent Law 360 story by Hailey Konnath, “DC Judge Slams DOJ’s $212K Fee Payment to Arnold & Porter,” reports that a District of Columbia federal judge criticized a deal in which the Trump administration will pay Arnold & Porter more than $212,000 in legal fees to resolve a battle over expedited traveler security clearance programs, calling the fees excessive and the government's conduct "embarrassing."

The U.S. Department of Homeland Security in August backed down from its defense of the policy barring New Yorkers from enrolling in some of U.S. Customs and Border Protection's Trusted Traveler Programs, including Global Entry, SENTRI, NEXUS and FAST.  The government also admitted that it violated the Administrative Procedure Act's rulemaking process in instituting the policy and admitted that it made "inaccurate or misleading statements" about the policy.

As part of the agreement ending the case, DHS said it would not stop New Yorkers from participating in Global Entry or other traveler programs on the basis of the state's refusal to provide the federal government with access to the New York State Department of Motor Vehicles' records, according to the settlement.  The government also agreed to cover the plaintiffs' counsel's fees.  To be clear, the parties don't need court approval to move forward with their agreement, U.S. District Judge Richard J. Leon noted in the order.  However, the government and Arnold & Porter were seeking a court order incorporating the deal into a final order of dismissal.

Judge Leon declined to do so, saying that while the other provisions of the agreement are fair and reasonable, "I am quite concerned, and have been from the outset, about the reasonableness of the amount of attorney fees agreed to by the parties."  In particular, the judge knocked the U.S. Department of Justice for not requesting the actual billing records from Arnold & Porter.  Those records show that eight total attorneys billed time on the case, a number of attorneys that he deemed "entirely unnecessary to the needs of the case."  The DOJ also chose not to suggest that attorney fees be calculated according to anything other than the firm's standard corporate rates, Judge Leon said.

Had the DOJ pushed for using rates established in the U.S. Attorney's Office's Laffey Matrix — and only covered the fees for four attorneys — the fee award would be just $82,562, he said.  "The court believes the Department of Justice should have been more aggressive in protecting the public fisc," the judge said.

Judge Lean added that "[p]erhaps, however, it is not so surprising that they weren't in this case.  After all, it is not every day the Department of Justice and their clients have to confess to written and oral misrepresentations on the record in a high profile case!"  It appears that Arnold & Porter — "unfortunately at the taxpayer expense" — simply capitalized on the government's desire to put the matter to rest as quickly as possible, he said in the order.  Judge Leon said he hopes that in the future, the DOJ's leadership will take the necessary steps to ensure that attorney fees it agrees to are indeed fair and reasonable.

As far as the conclusion of the Global Entry case, Judge Leon said the parties have two options: they can file a stipulation of dismissal or they can reduce the fees portion of their deal and get it incorporated into his final order of dismissal.  "The parties have made it clear to the court that their settlement agreement does not require judicial approval and is in fact self-executing," he said. "Fine."

He added, "Negotiating an agreement in a pro bono case that bypasses judicial approval and requires defendants to pay in excess of $200,000 in attorney fees might warrant a tip of the proverbial cap from fellow practitioners, but it is irrelevant to a judicial analysis of whether to incorporate the parties' agreement into an order of dismissal."

Stanton Jones, one of the Arnold & Porter attorneys on the case, told Law360 that it was "illegal for the federal government to try to deny Global Entry to New Yorkers in retaliation for its refusal to participate in immigration enforcement."  In a statement provided to Law360, Jones added that "all fees recovered in this case will be contributed to the Arnold & Porter Foundation, a tax-exempt private foundation that provides scholarships to minority law students, funds fellowships for recent law school graduates at tax-exempt organizations, and awards grants to other charitable and educational organizations."

Ninth Circuit Clarifies Fee Calculation Method in Class Coupon Settlements

November 11, 2020

A recent Law 360 story by Dave Simpson, “9th Circ. Nixes $14.8M Atty Fees in Dishwasher Defect Deal,” reports that the Ninth Circuit sent back a lower court's approval of $14.8 million in fees for the attorneys representing a class of millions of owners of allegedly defective Sears and Whirlpool dishwashers, ordering it to determine the value of the settlement, which provides coupons to much of the class.

In a unanimous, published decision penned by U.S. Circuit Judge Kenneth K. Lee, the panel said that while U.S. District Judge Fernando M. Olguin was right to approve the California federal court settlement, the attorney fees were off-base.  He shouldn't have used a lodestar-only calculation, or a calculation based on attorneys' hours worked and their rates, for the coupon portion of the settlement, the panel said.  The judge should have, instead, attempted to determine the value of the coupons and based the attorney fees on that calculation, the panel said.  They remanded the approval of the attorney fees and ordered the judge to recalculate.

Further, it said, the judge was wrong to multiply the attorneys' lodestar by 1.68, disagreeing with, among other things, the judge's lauding of the settlement as "impressive."  "While observing that the parties' respective valuations of the settlement ranged from $4,220,000 to $116,700,000, the court declined to determine where in that spectrum the actual value fell," the panel said.  "Given this enormous spread, without at least estimating the settlement value, the court could not have conducted the necessary evaluation between 'the extent of success and the amount of the fee award.'"

In the case of California residents David and Bach-Tuyet Brown, their KitchenAid dishwasher overheated while they were sleeping in April 2010, filling the house with smoke and causing them to spend $70,000 to replace the entire kitchen and to lose an additional $3,000 in rental income as a result of having to vacate the property for three weeks, according to the complaint.

In September 2015, the parties reached a proposed settlement that was open-ended and involved several elements for owners, court records show. If a person had already had to repair their unit, they would get $200, or more if they saved their repair receipt showing they paid more to have it fixed, according to the deal.  And Sears and Whirlpool also agreed to repair dishwashers that weren't even part of the class but also had fire problems, according to filings in the case.

In August 2016, the lawyers duked it out in court over whether the $15 million fee request baked into the settlement up for final approval was too much. Attorneys for Sears and Whirlpool said that the plaintiffs' attorneys had worked hard, but deserved a fee award of $2 million to $3 million.  The requested amount, the defendants said, would dwarf the benefits received by the class.  The class lawyers fought back, saying the potential value of the uncapped deal was enormous and may cover between 15% and 20% of all U.S. households.

In October 2016, Judge Olguin shut down arguments by Sears Holdings Corp. and Whirlpool Corp. that attorneys at the five firms that worked to litigate the case and reach a deal last year over the allegedly defective washers were asking too much, finding that the arrangement the lawyers reached for the class — cash payments to owners of Kenmore, KitchenAid and Whirlpool home dishwashers to cover repairs or rebates toward buying a new model, plus some insurance-like deals and other protections — was highly beneficial.

The panel quickly shot down the attorneys' arguments that the Class Action Fairness Act is preempted by corresponding state law, noting that the plain language of CAFA makes clear that its attorney fees provisions top any state laws and apply to all federal court class actions.  "Indeed, it would be highly incongruous for Congress to expand federal jurisdiction for class action lawsuits based on diversity jurisdiction, but then in the same statute prevent CAFA's attorney's fee provisions from applying in those diversity jurisdiction-based cases," it said.

The panel then pointed out that precedent mandates the use of a percentage-of-value calculation for any "portion" an award "attributable to the award of the coupons."  The court's decision to use a lodestar calculation for the coupon portion of the deal was, therefore, an error, the panel found.  The panel also shot down the plaintiff attorneys' argument that the settlement provides a "rebate" rather than a "coupon."  It is a coupon, "despite the settlement agreement's refusal to use that term," the panel said.

"To use the 'rebate,' class members must spend hundreds of out-of-pocket dollars to purchase a new dishwasher," the panel said.  "And the rebates expire in 120 days, a third of the useful life of the [credits].  Given that a dishwasher typically lasts at least several years, most consumers likely will not redeem their coupons within 120 days."

Finally, the panel turned to the 1.68 lodestar multiplier, finding that the judge wrongly included the value of the coupon portion of the settlement in determining the 1.68 multiplier for the lodestar value, and also several of its reasons for enhancing the attorney fees cannot be justified, the panel said.  The judge was wrong, for instance, to find that the case was "undesirable" for attorneys to pursue, noting that this very notion is undercut by the fact that five different law firms pursued the claims for many years.

"If the mere fact that the defendants are 'large corporations' were sufficient, then most class action fee awards would automatically qualify for enhancement — contrary to the rule that multipliers are for 'rare and exceptional circumstances,'" the panel said.  "In practice, deep pockets often create an incentive to sue, particularly in the class action context."

The district court had said that the wide gap between the parties' estimated valuations for the deal meant that any attempt to determine a value of the deal "would be imprecise to the point of uselessness."  The panel ordered the court to attempt to determine a value for the deal and to consider whether, as Whirlpool argues, a negative multiplier should apply to the attorney fees.

"It becomes even more critical to crosscheck the lodestar valuation if the parties present widely divergent settlement valuation estimates," the panel said.  "It may admittedly be difficult to determine that amount with precision, but courts must try to do so to ensure the fees are not excessive."

Full Eleventh Circuit Urged to Buck Ban on Class Incentive Awards

October 28, 2020

A recent Law 360 story by Allison Grande, “Full 11th Circ. Urged to Buck Ban on Class Incentive Awards,” reports that the full Eleventh Circuit is being pressed to review a panel decision in a dispute over a $1.4 million robocall settlement that found class representatives can't recover routine incentive awards, with the lead plaintiff arguing that this categorical ban would hobble class action litigation and an objector to the deal taking issue with the calculation of class counsel's fees.

Lead plaintiff Charles Johnson and objector Jenna Dickenson in separate petitions filed seized on differing rationales in attempting to convince the appellate court to reconsider a panel ruling handed down last month that directed the lower court to revisit its approval of the contested class action settlement in a dispute accusing medical debt collector NPAS Solutions LLC of violating the Telephone Consumer Protection Act.

In a divided decision, the panel concluded that a pair of U.S. Supreme Court rulings from the 1880s prohibited Johnson from being awarded $6,000 for his role in the litigation and that the district court had failed to provide a sufficient explanation for signing off on the deal or class counsel's request to recover 30% of the settlement fund.

Johnson argued that the panel's clearly incorrect decision to categorically prohibit the common practice of awarding incentive payments to named plaintiffs established a precedent that not only conflicted with every other circuit but also upended long-standing class action practice.

"No court in the last century has ever held that incentive awards are categorically impermissible," Johnson argued.  "That incentive awards are a universally accepted practice provides ample reason for the full court to consider whether such an established aspect of class-action settlements should be held per se unlawful."

Contending that the panel's decision "effects a sea change in class action practice," Johnson stressed the importance of incentive awards in encouraging plaintiffs to step forward to lead lawsuits that enable redress for widespread harm that's "inflicted in small increments" on a large group of individuals that aren't willing or able to bring claims separately.

 "If few plaintiffs would suffer litigation for the hope of a tiny recovery, fewer still would do so for the same possible award alongside the added burdens — including, potentially, paying a defendant's costs — and fiduciary responsibilities that attend litigating on behalf of a class," Johnson argued.  "Incentive payments help attract class representatives willing to shoulder those burdens."

Johnson urged the full Eleventh Circuit to order the parties to provide "full, targeted briefing" on this "vital issue," noting that the parties have barely addressed the topic to date since courts have repeatedly approved incentive awards without incident.  He also argued that the more than century-old Supreme Court cases on which the panel relied to buck this trend "provide no authority" for its novel conclusion.  "The panel majority broke from all other circuits and remade the landscape of class-action litigation on the premise that Supreme Court precedent so required," Johnson added.  "That precedent — if it applies — requires nothing of the sort."

Dickenson, who was the lone objector to the TCPA deal and appealed its approval to the Eleventh Circuit, asserted in her own brief that the full appellate should take a look at the case to clarify the appropriate standard for calculating attorney fees in such disputes.  While the panel held that the lower court hadn't provided enough information about why the fee request was reasonable, it backed the method of calculating and awarding fees as a percentage of the settlement fund, concluding that an Eleventh Circuit case from 1991 that endorsed this practice was still "good law."

Dickenson argued that this holding conflicts with Supreme Court precedent, most notably its 2010 holding in Perdue v. Kenny A. ex rel. Winn, which "directly repudiated" the use of the factors relied on by the Eleventh Circuit and directed lower courts "to recognize a strong presumption that attorneys' unenhanced lodestars — i.e., their hourly rates times the hours expended — provide them a reasonable fee that is sufficient both to attract capable counsel and to equitably compensate them."

Therefore, it's imperative for the full Eleventh Circuit to step in to clearly announce whether lower courts should award class counsel fees based on attorneys' actual time and billings or as a percentage of the common class settlement fund, according to Dickenson.  "Attorney's fees are a critical issue in class-action litigation, and uniform rules governing their calculation are a matter of overriding national importance," Dickenson argued.