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Category: Legal Bills / Legal Costs

Insurer on Hook for Failing to Pay $4M in Legal Fees in Email Scanning Case

October 19, 2018

A recent Corporate Counsel story by Ian Lopez, “Insurer on Hook for Failing to Foot Yahoo’s $4M Outside Counsel Bill in Email Scanning Case,” reports that a federal judge in California has ruled that Yahoo’s insurer failed to defend and indemnify the company by refusing to foot $4 million in outside counsel fees from litigation over the tech company’s practice of scanning user emails for advertising purposes. 

In an order on motions for summary judgment, U.S. District Judge Edward Davila of the Northern District of California wrote Yahoo was “largely correct” in assuming legal fees incurred in a consolidated 2016 class action were covered under a “personal injury” policy purchased from National Union.  The insurer had argued Yahoo’s costs didn’t fit within the policy’s definition of a personal injury as damages accrued via the “oral or written publication … of material that violates a person’s right to privacy,” a view that Davila said is “incorrect.”

Settled in 2016, the consolidated case is one of three over which the liabilities under Yahoo’s National Union policies were in debate.  The other two, class actions undertaken in Marin County Superior Court and San Jose District Court in 2012, accused Yahoo of having “wiretapped … or eavesdropped upon and recorded” emails between class members, all Yahoo account holders, and other users of the company’s email services.  These actions, plaintiffs alleged, were invasions of the California Invasion of Privacy Act.

“The key finding was that [Yahoo was] not only scanning these emails, but they were sharing that private information with others for profit so that their privacy was not only violated, but it was considered personal injury because it was published to a third party,” said Joshua Bevitz, a Newmeyer & Dillion partner not affiliated with the case.

Yet Davila granted National Union’s motions that it didn’t breach the duty to indemnify in costs associated with the earlier two class actions, given the suits ended in voluntary dismissals and without any evidence of resulting payments from Yahoo.  Davila wrote that because Yahoo was never “legally obligated” to pay damages under the two earlier lawsuits, National Union couldn’t have breached its duty to indemnify under the personal injury policy.  So why bother pursuing the matter in later litigation?  Especially because, as Bevitz puts it, “someone spent a lot of money on attorney fees to get [litigation] to this point.”

Michigan Has Paid $35M in Defense Fees in Flint Water Crisis

September 4, 2018

A recent Crain’s Detroit Business story by Chad Livengood, “Flint Water Legal Bills Could Top $34.5 Million,” reports that three years after lead was discovered in Flint's water, there's no end in sight for the legal bills the state is paying private law firms to represent state officials in civil litigation and criminal prosecutions.  Private attorneys representing state health director Nick Lyon have billed taxpayers more than $1.6 million to defend a high-ranking member of Gov. Rick Snyder's cabinet facing involuntary manslaughter charges stemming from Flint's water crisis — and his trial date hasn't even been set yet.

That number is only a small part of amount the state has spent on Flint water crisis-related legal bills.  Through mid-August, the state had spent $26.5 million, while three state departments have current capacity in contracts to make that total top $34.5 million, according to public records compiled by Crain's.  Three days after a Genesee County judge ordered Lyon to stand trial last month for the suspected water-related deaths of two elderly Flint-area men, the state's Administrative Board increased the contract for Lyon's primary defense attorneys at the Grand Rapids firm Willey & Chamberlain by $1 million to $2.75 million.

The state Department of Health and Human Services, which Lyon remains in charge of while facing prosecution, has additional contracts of $400,000 each with two other law firms working to keep him out of prison — Bursch Law PLLC in Caledonia and Chartier & Nyamfukudza PLC in Lansing.

The $3.55 million budgeted for Lyon's criminal defense in a high-stakes and politically tinged criminal case brought by Attorney General Bill Schuette is seen by longtime Lansing observers as an unprecedented expense of taxpayer money.  Lyon's legal bills alone over three fiscal years exceed what Genesee County spends annually for defense attorneys who represent indigent residents.

"It's unheard of. It's beyond exorbitant," said William Whitbeck, a retired Court of Appeals judge who was paid nearly $300,000 by Schuette to evaluate charges leveled by a special prosecutor.  "If you or I were to commit a crime or even be charged with committing a crime, we'd pay our own way.  There's no reason in God's green earth why a similarly situated citizen who happens to be a state employee should be treated differently."

Schuette, the Republican nominee for governor, has run up some big bills himself in pursuit of criminal convictions of state officials he says are culpable for Flint's tainted water.  To date, Schuette's investigation, run by the Royal Oak law firm of attorney Todd Flood, has spent $6.9 million.  The Legislature has approved an additional $3.1 million for the prosecutions over the next 13 months.

Three years have passed since elevated levels of toxic lead were discovered in the city's drinking water, and, despite deep distrust from residents, public health officials have since declared the Vehicle City's tap water safe to drink again.  But there's no end in sight for the legal recriminations from the crisis that are keeping some private attorneys in Michigan busy.

Not a single trial from Schuette's litany of charges against 15 current and former local and state officials has begun, with Lyon just getting bound over for trial two weeks ago in Genesee County Circuit Court after a laborious 11-month preliminary examination in district court.

Gov. Rick Snyder's administration has spent at least $13.75 million to date on private attorneys hired to produce some 2 million pages of records for Schuette and Flood's investigation and represent the governor and at least 30 state employees in the criminal probe and subsequent court proceedings, state records show.

Richard McLellan, a Lansing attorney and ally of Lyon, said the outgoing Republican governor is "doing the right thing" using taxpayer money to defend "his people" in court.  "Yeah, it costs money.  But what is the cost of maybe going to prison for 15 years for something you didn't do?" McLellan said, referencing the prison sentence Lyon faces for involuntary manslaughter. "... What's Snyder supposed to do? Say, 'Oh, it's too much. You're just going to have to be on your own.'"

NJ Court: Attorneys Must Advise Clients of Billing Options in Fee-Shifting Litigation

August 30, 2018

A recent New Jersey Law Journal story by Michael Booth, “Lawyers Must Advise Clients of Other Options Before Billing Hourly on Fee-Shifting Case, Court Says,” reports that a New Jersey appeals court voided a retainer agreement between a lawyer and his longtime friend, saying he did not properly disclose hourly fees he would be charging for representing her in a discrimination case.  The three-judge Appellate Division panel, in a published ruling, said Somerville solo Brian Cige did not adequately explain the arrangement, which provided for an hourly billing rate and litigation costs, to his client, Lisa Balducci.

The panel said lawyers who wish to charge hourly fees for work on discrimination or other fee-shifting cases must explain to their clients that there are other competent counsel who will accept those cases on a contingency basis, and who also will advance any litigation costs.

“Ethically then, must an attorney whose fee for undertaking an LAD case that includes an hourly rate component explain both the consequences on a recovery and the ability of other competent counsel likely willing to undertake the same representation based on a fee without an hourly component?  We conclude the answer is yes,” Appellate Division Judge William Nugent said.

The lawsuit filed by Balducci claimed she never fully reviewed the retainer agreement offered by Cige but was shocked when she began receiving bills for hourly services and costs, which included a $1 fee for reviewing incoming emails and sending responses, the court said.  Balducci eventually fired Cige and hired another attorney to represent her and her son in a Law Against Discrimination claim.  The decision didn’t reveal the details of that matter,

Nugent, writing for the court, said a Somerset County Assignment Judge Yolanda Ciccone properly found that Cige violated his professional responsibility to explain the agreement’s material terms to Balducci so that she could reach an informed decision as to whether to retain him.  Thus the retainer agreement was void.  “The hearing recording in this case includes adequate, substantial, credible evidence support the court’s decision,” said Nugent.  Judges Carmen Alvarez and Richard Geiger joined in the ruling.  “There is no dearth of competent counsel attorneys willing to litigate LAD and other fee-shifting cases that do not include an hourly component.

Balducci retained Cige in September 2012 to represent her and her child in the LAD case.  Cige presented her with what he said was a standard retainer agreement stating he could charge up to $7,500 up front, plus $450 an hour.  Balducci signed the agreement despite having “concerns,” according to the decision.  Balducci began complaining when she began receiving bills from Cige for hourly services plus expenses.  He told Balducci to not worry about the bills, because he was using them for purposes of a future fee petition he would demand at the conclusion of what he believed was a successful case.

“We are friends,” Balducci, in depositions, quoted Cige as saying, according to the decision.  “I was at your wedding.  I would never do this to you.  Ignore that.  Don’t worry about.  It is standard info.”  Balducci also complained that she was devoting her time to preparing for depositions while Cige was away attending chess tournaments, the ruling said.  Balducci fired Cige after she complained that it would be impossible for her to advance tens of thousands of dollar for expert witnesses.  Balducci filed a lawsuit against Cige, and he filed a counterclaim seeking more than $286,000 in fees for work he already had done.

“The trial court properly found the agreement was unenforceable and void,” Nugent said.  “There is no dearth of competent, civic-minded attorneys willing to litigate LAD and other statutory fee-shifting cases under fee agreements that do not include an hourly component.  The number of such cases litigated in our trial courts and reported in the case law evidence this, as does—at least as to numbers—advertising on television and radio, in telephone books and newspapers, and on billboards and other media,” Nugent wrote, noting that Balducci’s current counsel in the LAD case is not charging hourly fees.

Article: Deal with Billing Issues Mid-Year to Avoid Year-End Rush

August 29, 2018

A recent Daily Report article by Shari L. Klevens and Alanna Clair, “Yes, It’s Still Only August, But You Can Avoid the Year-End Rush on Billing Issues, reports on the fundamentals of effective fee collections.  This article was posted with permission.  The article reads:

Issuing bills and collecting fees can be a challenging task for many attorneys.  Some find it difficult to give billing issues the attention they need, given the demands of their law practice.  Often, attorneys may feel tempted to ignore billing issues until the year-end collections push.  However, by only focusing on billing at one time during the year, attorneys (and firms) may end up leaving earned fees on the table or could otherwise miss red flags that could indicate other problems with the representation.

Thus, many firms will encourage their attorneys to take a serious look at outstanding invoices, work in progress fees and overdue accounts prior to the year-end push.  Although December may be the appropriate time for the final push, summer can be the time to reinforce the fundamentals for effective fee collections.

Are Bills Being Paid?

Assuming that bills are sent regularly, if a client is not paying its invoices regularly or in full, this time of year can be a helpful time to investigate.  Waiting until December may leave the firm with fewer options and little time to deal with unpaid bills.  Clients have many options for how and when they pay bills.  Some clients review amounts or even appeal the invoices before paying.  Others may regularly let bills accumulate and pay them in full quarterly.  However, the failure of a client to pay over an extended period of time can indicate a problem, either with the client’s ability to pay, or, in some circumstances, with the relationship.

If bills are remaining unpaid, many attorneys will investigate to try to identify the source of the delay.  For example, the bills might have been sent to the wrong person or, it could be that the firm or the invoices are not in the client’s system.  On the other hand, it could be that a client is receiving the bills, but nonetheless is refusing to pay some or all of them.  When this happens, there are several potential explanations.

Some clients refuse to pay because they dispute the amount of the bill.  In such a circumstance, the attorney may choose to engage in some frank discussions regarding the work performed and anticipated future work and billings.  Getting everyone on the same page about both the amount of work a matter requires and the cost of that work is important to avoid even bigger disputes down the road.  The attorney may choose to discount or write-off amounts—as a client service issue—if the amounts exceed what was expected.

However, if the client is refusing to pay because the client is dissatisfied with the quality of work, then additional steps may be helpful.  Typically, ignoring such dissatisfaction does not make the issue go away and can get worse with time.  Most firms in this situation will confront the issues directly to determine whether the client is unfairly refusing to pay or if there is a more serious quality issue.

Most often, fee disputes reflect misunderstanding about what work the attorneys are doing and what costs are associated with that work.  If a client does not understand a bill or thinks they are being overcharged, it might be because the bill does not provide enough detail or because it is hard to read.  The solution could be as simple as revising billing entries so they provide more information.  Unfortunately, sometimes nonpayment means the client simply does not have the financial resources to pay.  It is always better to find that out sooner rather than later.

Are Bills Being Sent?

In taking inventory of accounts receivable and work in progress fees, law practices can also review whether their invoices are being sent on a regular basis.  Whether fees are being paid can be directly impacted by whether attorneys are getting their bills out with regularity.

Failing to send bills regularly can have direct and practical impact on the attorney-client relationship.  If bills are not sent regularly, sending an invoice that encompasses several months of work can come as an unpleasant surprise to a client.  A client may even begin to question the work that has already been completed if irregular bills suggest that the representation is unusually expensive.  Typically, an effective way to avoid that surprise is to ensure invoicing is timely.  Monthly, digestible bills reduce the risk of a fee dispute and increase the chances of prompt payment.  Regular invoices also help educate and confirm for clients what tasks are being completed in the matter.

In addition to ensuring good client relations, regular bills avoid the risk that the firm or practice has a substantial amount of fees invested before learning that it has a client problem or an objection to payment.  With frequent, regular bills, nonpayment or fee disputes typically involve a much smaller amount than disputes resulting from a single bill covering six months or a year of legal fees and expenses.  Issuing bills in regular (and therefore smaller) amounts reduce the risk of a dramatic hit to the bottom line if there is a dispute.

With all that said, one of the most important reasons for monthly or regular billing is to address one of the most common reasons why clients do not pay: they never received an invoice.  Systematic billing in regular intervals ensures that crucial step for getting paid by ensuring that bills are sent.

Billing is one way of informing the client of the work being done and the time being spent on their case.  By assessing billing issues at mid-year, attorneys can reduce the stress of the year-end collections crunch.

Article by Shari Klevens and Alanna Clair of Dentons US LLP, reprinted with permission of ALM Media Properties, LLC.  Shari L. Klevens is a partner at Dentons US in Atlanta and Washington and serves on the firm’s U.S. board of directors.  She represents and advises lawyers and insurers on complex claims and is co-chair of Dentons’ global insurance sector team.

Alanna Clair is a partner at Dentons US in Washington and focuses on professional liability and insurance defense.  Shari and Alanna are co-authors of “The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance” and the upcoming 2019 edition of “Georgia Legal Malpractice Law.”

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.

Bitcoin for Legal Fees?

December 21, 2017

A recent Law.com story, by Ben Hancock, “What’s Next: Blockchain and Justice; Net Neutrality Fights Brews; Bitcoin for Legal Fees,” reports that the skyrocketing prices for crypto-currencies...

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