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Category: Hours Billled

Class Counsel Seek $18.5M in Fees in LIBOR MDL

November 3, 2020

A recent Law 360 story by Dean Seal, “Class Atty Seek $18.5M in Fees for Libor Deal with 7 Banks,” reports that counsel for a class of bondholders asked a New York federal judge for an $18.5 million fee award for having negotiated settlements with seven financial giants accused of rigging the London Interbank Offered Rate (LIBOR).  Attorneys from Morris and Morris LLC Counselors At Law and Weinstein Kitchenoff & Asher LLC put the request before the court while seeking final approval for $68.6 million worth of settlements with JPMorgan Chase, Bank of America, RBS, Barclays, HSBC, UBS and Citibank.

According to the filings, class counsel has spent 34,743 hours representing the bondholders in their class action, which is part of sprawling multidistrict litigation launched over alleged rate-rigging coordinated by the world's largest financial institutions.  "Class counsel made this investment in vigorously litigating the bondholder action over more than eight years, with no assurance either of payment for their services or recoupment of their out-of-pocket litigation expenses," the bondholder attorneys said.

The bondholders' suit is one of many filed in connection with Barclays Bank PLC's 2012 admittance that it had been one of a number of banks lying about the interest rates it actually expected to pay in order to artificially influence Libor.  Investors contend the major financial institutions deliberately low-balled their submissions in the Libor rate-setting process to manipulate the benchmark.  As a result, the banks raked in hundreds of millions, and perhaps even billions, of dollars in ill-gotten gains, according to case filings.

Ellen Gelboim and Linda Zacher led the class of bondholders who owned U.S. dollar Libor-based debt securities between Aug. 1, 2007, and May 31, 2010.  Their highly complex antitrust action had already seen more than one dismissal, multiple appeals and even a trip to the U.S. Supreme Court by the time they announced settlements with Barclays, UBS AG and HSBC Bank PLC in 2017.

Under those deals, which received preliminary approval in July 2017, Barclays agreed to pay $7.1 million, UBS would contribute $17.9 million and HSBC would hand over $11.1 million.  Another deal that received preliminary approval in December 2018 stipulates that Citi will pay over $7 million to resolve bondholder claims.

Then last April, the bondholders announced three more settlements with JPMorgan Chase, Bank of America and Royal Bank of Scotland Group PLC that would recover a combined $25.5 million for the bondholder class.  The filings show that JPMorgan and BofA would each pay $6.25 million while RBS would turn over $13 million.  "Continuing to litigate against the settling defendants would likely last many years with the potential of no recovery for the bondholder class, and require the expenditure of significant resources of the court and the investment of hundreds if not thousands of hours of time and large sums of money," the bondholder class said.

Class counsel are asking for a 28% cut of the overall settlement fund net of roughly $2.5 million in expenses, resulting in a fee request of just over $18.5 million, along with another $817,237 in unreimbursed fees.  They noted that the settlements had been reached despite the fact that the bondholders' claims are currently dismissed and would rely on "an unpredictable appeal" to get reinstatement.

Article: Five Cost-Cutting Strategies for Corporate Legal Departments

October 22, 2020

A recent Law.com article by Nathan Wenzel of SimpleLegal Inc., “5 Cost-Cutting Strategies For Corporate Legal Department,” reports on legal cost measures for corporate legal departments.  This article was posted with permission.  The article reads:

Corporate legal departments have long been focused on reducing legal spending.  The emphasis on cost-cutting has only increased in 2020 as the economic uncertainties of the pandemic have caused companies to scrutinize expenses across the board.

According to a recent report from the Corporate Legal Operations Consortium, 61 cents of every dollar spent on legal costs in 2020 goes to external legal costs — a 15-cent increase from 2018.  This uptick, combined with the year's novel challenges, has many legal departments looking for new ways to control legal expenses beyond reviewing line items, which has proven to be ineffective for many companies.

While there's been a lot of chatter in the industry about the need to switch to fixed fees or alternative fee arrangements to reduce costs, these shifts have been slow to take hold.  They're also difficult to measure if we retain a focus on the billable hour.

When clients ask firms for fixed fees but also request the hours worked so they "know that the fixed fee was the right price," then we haven't really made the change to fixed fees.  It is a difficult transition and one that will take time.  We should always push toward better alignment of price and value, but we need to balance near-term realities with long-term goals.

In the near term, we need to control costs — even if that only means focusing on hourly rates.  In the long term, we need to align the work to the right types of providers at the right price, where price has very little connection to hourly rates.  No one wants to buy time.  We want outcomes, not hours.

To solve for both the short-term and long-term goals, we start with data.  Analyzing and reducing your legal spending start with asking yourself the following questions:

What am I spending now, on what and with which providers?
How does my current spending compare to past spending?
How am I allocating my legal work?
What metrics am I using to measure cost control?
Are there other cost considerations I'm overlooking?

1.  Understand where you are now.

The first step of implementing a change is to understand the current state. Reducing legal spending first requires knowing where you are right now.  This means not only keeping up with the total dollar figure of your spending, but how much you're spending in each practice area and with which law firms or providers.

Don't forget to also investigate the work you currently perform in-house.  With an understanding of outside legal spend and in-house legal work, you will have the current picture of how you allocate the demand for legal services from the business to the supply of legal services you have available.  With this deeper insight, you'll start to see where you can actually have an impact on spending.

Without this data, you risk investing time into an area that looks compelling but won't create real savings.  For example, reducing money spent on compliance may seem like a good idea because the partners at your primary firm have very high billing rates.  But if only 5% of your annual spending goes toward compliance work or if the primary compliance firm effectively leverages associates and paralegals, your efforts won't translate into real savings for the business.

When you track data and analyze legal spending details from your e-billing system, you'll be better equipped to start a real conversation about reductions.  You can identify the practice areas and firms where your efforts will create real returns.

2.  Compare now to where you used to be.

Your business is not static.  It's important to understand where you are today, but it is even more important to understand how things change over time. After you determine where you're spending your money today, you need to compare those numbers to what you were doing last year or the last time you negotiated rates and pricing.

You may have a reliable history of sending work to a single attorney or team at a firm. You may have increased the amount of work sent to a particular firm or in a particular practice area.  If you used to send $2 million worth of business to a firm and now spend $5 million with that firm, that's a powerful position for starting rate and price negotiations.

Additionally, if your team uses multiple firms for similar work, you may benefit from consolidating that work with fewer preferred firms.  Larger companies may go through a formal panel selection process annually or every few years.  A preferred panel is a great tool to provide the best legal services to the business at the best price if you have the team and time to implement this type of program.  But you can still achieve the benefits of allocating work to fewer firms without a full preferred panel program.

You don't always know what the demand for legal services will be from year to year.  But if your data shows that you have a history of allocating work among several firms, ask those firms what they would be willing to do to earn a greater share of that work.

3. Understand how you're allocating work.

After you have an understanding of the dollar value of your legal spending, you need to know how you're allocating different types of work, to whom and why. How you're assigning your legal work certainly depends on finding the provider with the right expertise but should be equally dependent on its business impact and complexity.

Your high-impact, high-complexity work probably belongs with the more expensive firms.  An example of a high-impact matter could be a large litigation that threatens the balance sheet of the company.  Or it might be a patent for the core technology driving your business.  In either case, you might choose to work with the very best money can buy.

Every year the legal press makes a big deal about high billable rates for eye-catching headlines.  But for your highest-impact and highest-complexity work, those firms and lawyers are probably a bargain at twice the price.  You're buying outcomes, not hours.

Too many companies simply send the rest of their work along with their high-impact work without stopping to see if smaller matters would be better handled by a lower-cost provider.  There are a variety of suppliers beyond the Am Law 100, such as specialty firms, alternative legal service providers, nonlegal consultants and your in-house team.

Your low-impact, low-complexity work probably doesn't need to go to the premier firms.  Specialty firms, alternative legal service providers, consultants and solo practitioners may not have massive staff and unlimited support resources, but they can still provide high-quality work at a fraction of the price.

You may also have high-impact but routine work where speed and a deep understanding of business issues are important.  The most common example here is commercial contracts.

For customer contracts, any delay in reviewing costs the company revenue. An extensive back-and-forth over mundane legal minutiae could cause your company to miss a quarter's revenue target.  In-house teams will have a better understanding of business priorities and can better deliver the right kind of legal work with speed at the right price.

When you satisfy your demand with the right mix of supply, the potential for savings is much greater than through rate discounts alone.  Allocating work based on impact and complexity provides far greater cost savings than a 10% rate reduction when the right provider is already half the price.

4. Use the right metrics.

You can't manage what you can't measure.  You get what you incentivize.  These two classic business statements tell us that we need to measure savings with the right metrics.

How are you measuring cost savings today?  Is it through average hourly rates?  Adjustments to bills based on guidelines?  If you measure discounts on rates to determine savings, you're going to focus on high hourly rate firms that discount their hour rates.  But is that really saving your company any money?

Achieving savings by reallocating work rather than by negotiating rate discounts definitely makes sense.  But with the wrong metrics it is harder for the C-suite to understand what you've accomplished.  If you measure and report savings only as the discount on standard rates, the reallocation effort appears to have achieved nothing.  In fact, if the work was moved in-house or to a provider with a lower but not discounted rate, it may appear that you have lost savings because you won't have a discount to report.

In fact, with the wrong metrics, if you were to implement a routing tool for automated nondisclosure agreement review, it might appear to be a driver of cost even if it created hard dollar savings from external counsel and soft dollar savings — i.e., efficiencies — from allowing in-house counsel to spend time on high-impact, high-complexity work.  With the right metrics, you can show the true return on these investments.

To demonstrate the full value of the savings and quality initiatives, you might need to use new metrics.  I am certainly not advocating for cherry-picking data or choosing vanity metrics.  To the contrary, the right metrics will actually make more sense to the business, the CEO and the board.

Legal expense as a percentage of revenue has been promoted in Association of Corporate Counsel benchmarking studies and Altman Weil Inc. surveys. It is well understood and trusted by chief financial officers and CEOs.

Whichever metrics are used to measure legal cost controls, just remember that you get what you incentivize.  If you're going to achieve cost savings, you need to use the right metrics to incentivize your team and showcase results.

5. Monitor compliance with your billing guidelines, consider automation of certain legal tasks and standardize workflows.

The preceding four steps are the critical actions that build on each other to significantly trim legal spending.  It's a journey.  You don't need to take all the steps all at once to achieve results.  Alongside those major considerations, there are a couple other things to keep in mind to run alongside those longer-term initiatives.

The first is billing guidelines.  Your billing guidelines let your firms know what it means to be a good legal partner to your department and a good business partner to your company.

Guidelines often devolve into rules about copy charges and not billing excessively for underqualified people — things your firms probably already do on their own to better serve their clients.  You should always be monitoring compliance with your billing guidelines and enforcing timekeeper rates, but it is important to remember that ensuring that your firms only bill for work in accordance with your guidelines isn't actual savings — it only prevents overcharging.

Another way to reduce legal costs and improve response time is to automate low-complexity, low-impact legal tasks and standardize workflows.  Automation of basic document review by artificially intelligent contract review tools can be a big time and money saver.  As an example, nondisclosure agreements are high-volume but typically low-impact documents that can be reviewed with the help of AI-enabled tools.

In addition to automation, standardized playbooks designed by the legal team to give other departments a checklist of items to review can also help improve turnaround time and reduce costs.  For example, a sourcing manager in a procurement department could be given a checklist of five or six specific business and legal terms to review before sending to the legal team.

Automation and standardization improve speed of delivery and reduce cost of delivery for the business.

The Path to Lower Legal Spending

It's time to shift the perspective on cost reduction beyond hourly rates and copy charges.  As legal departments, you need to look at where you are now, how that compares to the past, how you're allocating your work and whether you're using the right legal spending metrics to achieve real savings.  These steps with effective legal billing guidelines, automation and standardization provide the foundation to match your company's demand for legal services to the right legal service providers to trim your spending while improving delivery.

Nathan Wenzel is co-founder at SimpleLegal Inc.

Court Resolves $4M Attorney Fee Dispute with Law Firms

October 1, 2020

A recent Law.com story by Raychel Lean, “Court Chides Morgan & Morgan as Holland & Knight Prevails in $4 Million Attorney Fee Dispute,” reports that a federal breach of contract lawsuit which saw Holland & Knight litigators take on Morgan & Morgan came to a head when U.S. District Judge K. Michael Moore awarded more than $4.1 million in fees and costs to one side and just $550,000 to the other.  Now more than seven years in, the litigation itself has proved more costly for the plaintiffs than the actual judgment it obtained.

The dispute began in 2013, when the plaintiffs — Miami construction companies Architectural Ingenieria Siglo XXI LLC and Sun Land & RGITC LLC — sued over a failed irrigation construction contract worth $51.8 million.  Their lawsuit accused the Dominican Republic and its water resource agency, Instituto Nacional De Recursos Hidraulicos, or INDRHI, of breaching its contract by terminating the deal under force majeure, citing financial hardship.

And though the defendants were initially slapped with a $50 million default judgment for failing to respond, that was reversed when it retained Holland & Knight attorneys, who argued service hadn’t been properly handled.  Then, an eight-day bench trial resulted in a comparatively low $576,000 judgment against the water resource agency, while the Dominican Republic was absolved of liability.

Both sides moved for prevailing party fees and costs.  And after a report from U.S. Magistrate Judge Honorable Chris M. McAliley, Moore found plaintiff AIS was entitled to fees from the water resource agency; the Dominican Republic was entitled to fees from both plaintiffs; and the water resource agency was entitled to fees from plaintiff Sun Land.  In the order, Moore adopted McAliley’s findings on how much each side could recover.  And it was good news for defense attorneys Gregory Baldwin, Eduardo Ramos and Ilene Pabian of Holland & Knight’s Miami office, who’d sought more than $3.6 million in fees, along with $629,450 in non-taxable costs and $33,000 in taxable costs.

Though the plaintiffs argued those numbers were unreasonably high and moved for a 50% to 75% reduction, Moore approved the magistrate’s 15% haircut instead, shaving $144,600 off their fees.  It was a satisfying result for a case that Baldwin said “took a lot of patience, a lot of dedication and a great deal of time.”  “We’re very pleased and satisfied with the result.  We think, overall, it’s a just and fair result,” Baldwin said.  “The Dominican Republic was completely vindicated, and INDRHI received a damages award against it in an amount that we think was reasonable.”

But the ruling was bad news for plaintiff AIS, which sought $2.7 million in fees under a 2.5x contingency fee multiplier, and asked for $438,203 in nontaxable costs.  But Moore only awarded about $248,000 in fees and $302,000 in nontaxable costs — thanks to a bruising 75% reduction in fees recommended by the magistrate.

McAiley’s report levied some criticism at Morgan & Morgan, which “substantially frustrated the court’s task of working through the issues.”  The report said the firm caused extra work and delay by failing to initially disclose certain fee information, demonstrated a “lack of care” in its filings, kept unreliable records and had mixed some non-recoverable appellate costs up with trial costs.

“Obvious examples include the several entries where single timekeepers claim to have worked nearly, or more than, 24 hours in one day,” McAiley’s report said. “For instance, Morgan & Morgan maintains that one of its attorneys worked 32.7 hours in one day.”  McAiley denied Morgan & Morgan’s request for a fee multiplier and reduced its fees by 10% for failure to keep proper time records, 15% for block billing and 50% after factoring in the plaintiffs’ “very limited success” in the underlying case.  But they argued the reduction was “too much given the significant amount of work it took to litigate this case,” according to the ruling.

Moore said he wasn’t swayed by the plaintiff’s objections.  “Here, in objecting to the 75% fee reduction, plaintiffs fail to identify any factual finding in the R&R to which plaintiffs object,” Moore’s ruling said. “Rather, plaintiffs take issue with Magistrate Judge McAliley’s reasoning by arguing not that plaintiffs accurately recorded their hours worked and avoided block billing, but that the hours requested were reasonable and their success was greater in context than Magistrate Judge McAliley found it to be.”

The plaintiffs team also requested $237,400 to cover work performed by GrayRobinson.  But Moore rejected that, accepting McAiley’s finding that the retainer agreement said Morgan & Morgan was obligated to pay GrayRobinson, not that the client was

Bankruptcy Attorneys Seek Fees From GM Ignition MDL Fee Fund

September 28, 2020

A recent Law 360 story by Vince Sullivan, “Goodwin Seeks $1.5M for Work on GM Ignition Litigation,” reports that Goodwin Procter bankruptcy attorneys representing the co-lead plaintiffs in multidistrict litigation against General Motors over faulty ignition switches said that they should be paid $1.5 million from a counsel fee fund created in a proposed $120 million settlement with the carmaker in New York federal court.  Goodwin Procter LLP said in an application for payment of its fees that it represented three co-lead plaintiffs as bankruptcy counsel in the MDL over the ignition switches and created tens of millions of dollars in value in the litigation by successfully arguing on behalf of the claimants in the bankruptcy case of Old GM.

The carmaker filed for bankruptcy in 2009 and sold its assets that year to an entity called New GM, but issues with the faulty ignition switches — which could allow keys to slip out of the ignition and shut off the car while driving — didn't arise until five years after the sale.

Goodwin Procter said it worked to resolve issues allowing for claims to be made against both the bankruptcy estate of Old GM as well as New GM, including questions of successor liability for the restructured company.  The rulings in the bankruptcy court paved the way for claims in the MDL for personal injury and wrongful death as well as a class action lodged by economic loss plaintiffs to reach the $120 million settlement earlier this year.

That settlement created a $34.5 million fund to cover the fees of counsel working on behalf of the class, and Goodwin Procter said it is entitled to receive payment of its $1.5 million in fees from that fund despite not serving as class counsel.

"Goodwin comes forward at this time to seek payment because the co-leads have not provided guidance to Goodwin on the timing or procedures for payment of Goodwin's fees and expenses," the motion said.  "The settlement agreement is clearly a watershed event in the MDL and heralds the culmination of years of work performed by many lawyers and law firms, including both law firms that served the three co-leads as designated bankruptcy counsel."

The firm said its fee request is based on about 1,800 hours of work on the cases from August 2014 through January 2017 at a blended rate of $823 per hour.  This work provided a common benefit for all claimants in the MDL and the economic loss class action, the motion said.  One of the co-lead plaintiffs in the MDL — Robert Hilliard — began paying the firm's fees and expenses in February 2017, and Goodwin is not seeking recovery for any of those amounts.

Under the terms of the settlement agreement, GM will contribute up to $70 million into a common fund for the drivers, and the trust connected to the company's 2009 bankruptcy will contribute up to $50 million.  The deal ends claims from drivers who said their vehicles sank in value over recalls related to the ignition switch defects.

GM previously paid more than $1 billion to settle other civil and criminal cases arising from the ignition-switch defects.  More than 100 deaths have been attributed to the design flaw, and GM initiated an extensive recall of the affected cars in 2014.  The litigation, which was consolidated into an MDL in June 2014, alleges that many GM cars were outfitted with faulty ignition switches, which could cause keys to slip out of position and disable brakes and air bags.

U.S. District Judge Jesse Furman of New York, who is overseeing the MDL, granted preliminary approval of the settlement in April, but final approval has not yet been granted.  The preliminary approval set Monday as the deadline for fee and expense applications from counsel, prompting Goodwin to file its motion.

$11M in Attorney Fees Sought in BRF Food Fraud Class Action

September 21, 2020

A recent Law 360 story by Emilie Ruscoe, “Robbins Geller Seeks $11M in Fees for BRF ‘Food Fraud’ Suit,” reports that a Robbins Geller Rudman & Dowd LLP counsel team wants a little under a third of the $40 million settlement they earned for a proposed class of investors who had accused Brazilian meat and food processing giant BRF SA of fraud and bribery, the firm told a New York federal judge.  In a Sept. 18 memorandum laying out its request for attorney fees, litigation expenses and an award for lead plaintiff the City of Birmingham Retirement and Relief System, the four-lawyer Robbins Geller legal team told U.S. District Judge P. Kevin Castel that the firm seeks 27.5%, or $11 million, of the settlement total.

The firm also asked for $94,821.84 to reimburse the expenses they incurred fighting the case, and said the institutional investor lead plaintiff should get "a modest award of $2,889.15" for its work representing the proposed class.  "The settlement is an outstanding result for the class given the serious obstacles to recovery; the numerous credible defenses to liability and damages that defendants have articulated, the fact that the court might have accepted defendants' arguments at the motion-to-dismiss stage, the difficulty in obtaining documentary and deposition evidence from Brazil, and the recovery relative to the amount of estimated recoverable damages suffered by the class," the plaintiffs' counsel told Judge Castel.  The firm added that over two years, its team spent 3,200 hours working the case.

BRF and its shareholders told the court in May they had reached the multimillion-dollar settlement after a little more than a month of negotiations. According to the settlement terms, the company and some of its executives, who are also named in the suit, "have denied, and continue to deny, any and all of the claims alleged in the litigation, including any allegations of fault, liability, wrongdoing, or damages whatsoever."

The investors' suit launched in March 2018, and in the most recent version of the allegations, filed in November 2019, the investors accused the company of engaging "in an unprecedented and massive case of food fraud."  The shareholders alleged that the the trading price of the company's American depositary receipts fell by $0.99, or 7.73%, in March 2017 following the arrest of several BRF employees and "numerous public officials" in connection with a yearslong investigation by Brazilian authorities called "Operação Carne Fraca," or "Operation Weak Flesh."