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Category: Legal Bills / Legal Costs

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 are making for some interesting legal battles, but they also present another novel question to lawyers: What if my client wants to pay my legal fees in Bitcoin?  In an op-ed, Kaufman Dolowich & Voluck attorney Ian Anderson walks through the ethical and practical considerations of that question — and notes that Bitcoin isn’t treated by the IRS as legal tender.

“Like the country lawyer accepting a bushel of apples for drafting a will, payment in Bitcoin is payment in property,” Anderson writes.  He also notes that payment in crypto-currency raises money laundering concerns, and that if the value of the token goes to zero, it could put the client and attorney in conflict.

Takeaway: “Some attorneys believe … that such flexible payment models attract new clients.  But for cases with minimal fees or attorneys who are not tech-savvy, receiving payment in Bitcoin may be more trouble than it’s worth.”

Court Ordered Attorney and Client to Pay Opposing Counsel

November 6, 2017

A recent Daily Business Review story by Samantha Joseph, “Attorney and Client Ordered to Pay Opposing Counsel Over Frivolous Lawsuit,” reports that the litigation in Palm Beach County alone has cost about $4,000, with a mounting legal bill of about $20,000 for the Broward case.  A state appellate court sanctioned Palm Beach attorney Guillermo J. Farinas, holding him personally responsible for half of an attorney fee award against his client.

Florida’s Fourth District Court of Appeal held Farinas and client Joseph Manzaro equally liable for “frivolous and completely meritless” filings in a child custody case that jumped from Broward to Palm Beach County.  It remanded the case to the lower court with instructions to divide the opposing side’s attorneys fees between Farinas and Manzaro, then took the additional step of making an allowance for future litigation expenses.

“If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee,” the court ordered.  It was an unusual sanction, but ethics lawyer Andrew Berman has seen it employed with growing frequency as judges order attorneys to explain why courts shouldn’t sanction them along with their clients.

“Appellate courts have become frustrated with frivolous appeals and motions,” said Berman, senior partner at Young Berman Karpf & Gonzalez in Miami and Fort Lauderdale, who was not involved in the litigation.  “It’s done as a method to dissuade people from taking frivolous positions.”

Court records show Farinas turned to the Palm Beach Circuit in 2016 to file a complaint for relief from a 2012 agreed final order from Broward County, claiming extrinsic fraud and lack of personal jurisdiction.  Litigants typically have a one-year window to seek to set aside an order, with exceptions for fraud, mistakes and other causes under Florida Rule of Civil Procedure 1.540(b).

Farinas’ filings suggest he anticipated two hurdles: a potential deadline impediment and the leap from one county—which still maintained jurisdiction—to another.  To mitigate these, he brought the fraud claim and pitched his Palm Beach filing as an independent action.  But the appellate court rejected both strategies, citing precedent requiring litigants to raise fraud claims in the original court.

“The appellant has had multiple opportunities to raise the issues presented in his complaint to the Broward Circuit Court and, in fact, has done so,” Judge Jeffrey T. Kuntz wrote in a unanimous decision with Judges Carole Taylor and Dorian Damoorgian.  “His attempt at filing a new lawsuit in a different circuit, after those prior attempts were rejected and while other new attempts still remain pending in the Broward Circuit Court, is completely devoid of merit.”

NALFA’s Fee Dispute Mediation Program Achieves 86% Success Rate

July 19, 2017

NALFA’s Fee Dispute Mediation Program is the nation’s only program devoted exclusively to resolving attorney-client fee disputes.  NALFA’s Fee Dispute Mediation Program recently reached an achievement:  Since the program began, NALFA’s Fee Dispute Mediation Program has achieved an 86% success rate—parties who mediate in a session are resolved six out of every seven times.  This rate is significantly higher than most bar-administered fee dispute programs.  NALFA has settled over $5 million in disputed attorney fees between parties in over 40 cases.  The cases were brought by corporate clients and law firms ranging from fee disputes of $32,000 to $975,000 from across the U.S.  One fee dispute case was from the UK.

Attorney fee disputes are the result of a breakdown in the attorney-client relationship.  This breakdown may be a misunderstanding in the fee agreement or confusion over the law firm billing records.  Whatever the cause, mediation is the quickest, simplest, and most cost-effective way to resolve these attorney fee disputes.  NALFA fee dispute program is a private mediation service specifically designed to resolve attorney fee disputes of all types and sizes.

NALFA's fee dispute mediators are uniquely qualified to resolve fee disputes between parties in a cost effective and confidential manner.  These fee dispute mediators are trained neutrals who understand the underlying issues in fee and billing dispute matters.  Our fee dispute mediators are highly knowledgeable on reasonable attorney fees and proper legal billing practices.  They understand the array of issues in fee dispute cases such as fee agreements, hourly rates, billing practices and attorney fee ethics.

Unburden by bar association rules, NALFA provides parties with a mediation process that is flexibility, responsive and cost-effective.  Parties control when and where the mediation will occur, who will serve as the mediator, and whether they will accept a settlement offer.  Unlike most bar-administered programs, NALFA stays with the fee dispute case as long as necessary to bring it to a resolution.

"Our 86% success rate belongs to the outstanding work of our members, some of the nation's top rated fee dispute mediators," said Terry Jesse, Executive Director of NALFA.  "Their understanding of fee issues and their mediation skills are the reason we're celebrating this achievement," Jesse concluded.

Former Enron Unit Failed to Justify Fee Request

June 29, 2017

A recent Law 360 story by Natalie Olivo, “Nigeria Knocks Ex-Enron Unit’s Fee Bid in $21M Award Row,” reports that a former Enron subsidiary has failed to justify its request for hundreds of thousands of dollars in legal fees for the solo practitioner who netted the company confirmation of a contract breach arbitral win against the Nigerian government now topping $21 million, the country told a D.C. federal court.

In pushing for the fees this month, Enron Nigeria Power Holding Ltd. — sold off by Enron in the wake of its 2001 scandal and collapse — said the $276,752.64 in attorneys’ fees and $4,025.69 in costs was well-earned by Texas attorney Kenneth R. Barrett, who overcame stiff opposition from experienced opposing counsel who put up a complex legal defense.  Legal fees are appropriate, ENPH said, in part because Nigeria refused to abide by the underlying award and because the underlying agreement requires compensation by “the party resisting enforcement.”

But the Nigerian government pushed back, arguing that instead of using the Washington, D.C., rate to calculate his fees, Barrett should have used the lower rate of Houston, Texas, because that was mainly where he worked.  In addition, the government said, while Barrett has nearly three decades of legal experience, he has not provided any evidence to show that he has experience regarding international arbitration award disputes with foreign governments.

“The fact that plaintiffs’ counsel has been licensed as an attorney for almost 30 years, does not necessarily translate to 30 years [of] experience in every area of law,” Nigeria said.  “Plaintiffs’ counsel has not shown that he has the requisite experience and reputation in international arbitration enforcement to justify the billing rate and hours spent on this matter.”

ENPH’s total award was up to more than $21.2 million after a D.C. federal judge added on exchange rate fluctuations and interest in April.  The International Chamber of Commerce arbitration award of $11 million plus fees had already been confirmed, and in December the D.C. Circuit also rejected Nigeria’s appeal of that ruling.

Nigeria had argued that it could cancel its deal with ENPH because of then-parent company Enron Corp.’s accounting scandal, and said enforcing the award would endorse fraudulent conduct and conflict with U.S. public policy, despite ENPH rebuttals that Nigeria failed to provide any evidence of wrongdoing on the subsidiary's part.

But the D.C. Circuit noted the courts’ tendency to defer to arbitration.  It also found that while the public policy issue of award enforcement was a question for the courts, interpreting the agreement between Nigeria and ENPH was a question for the ICC.  The panel also remarked that Nigeria began trying to back out of the deal in 1999 out of apparent economic convenience — before the Enron scandal broke.  As of the April judgment Nigeria still had not paid any of the award to ENPH.

ENPH in March asked the court for the $18.7 million in award and award interest as well as for exchange rate consideration and post-award/prejudgment interest on legal fees and arbitration costs.  The final judgment confirmed the $18.7 million and added $1.1 million based on ENPH arbitration legal fees and costs — converted from pounds at the November 2012 rate — along with $870,000 for ICC fees and $529,000 in prejudgment interest.

ENPH followed up with the court this month, noting that due to an “oversight,” prejudgment interest should actually be about $33,000 more.  The company first sought compensation for its legal costs late last month, asking for more than $630,000 total when combining its U.S. and United Kingdom court enforcement efforts.

In a June 3 brief, ENPH argued the rates charged by Barrett are reasonable, with the attorney having performed work both as lawyer and legal assistant.  For the attorney work, Barrett charged between $770 and $820 an hour, while he charged between $175 and $185 an hour for legal assistant efforts, for a total of 413.57 hours in all.

Hitting back against ENPH’s fee request, the Nigerian government said Barrett should actually be using the average Houston rate for comparable attorneys of about $300 an hour for attorney work and about $127 per hour for legal assistance efforts.  During the four years of the dispute, ENPH’s counsel made only two trips to Washington, D.C., the government said, one for mediation and the other for oral arguments before the circuit court.

The government also argued Barrett’s fee request should be reduced due to its documentation.  “The plaintiffs’ counsel in the matter has presented invoices rife with serial or blocked bill entries that impermissibly intermix time spent on multiple activities,” Nigeria said.  “It renders the task of determining how much time plaintiffs’ counsel reasonably spent on particular activities difficult.”

The case is Enron Nigeria Power Holding Ltd. v. Federal Republic of Nigeria, case number 1:13-cv-01106, in the U.S. District Court for the District of Columbia.

New Algorithm for Attorney Fees in Real Estate Law

June 13, 2017

A recent Daily Business Review by Samantha Joseph, “Client Balking at Attorney Fees? K&L Gates Has an Algorithm for It” reports on a new algorithm for attorney fees in real estate law.  The article reads:

It won’t work for less predictable practice areas, but real estate lawyers at K&L Gates have an unconventional model for billing: An algorithm that prices each element of a deal to avoid sticker shock in a slowing market.

Critics say up-front pricing is risky in a sector where tough negotiations, permit hurdles, municipal demands and unexpected barriers to complex deals could leave the firm on the losing end of such arrangements.  But K&L’s goal is simple: Avoid situations where cost-conscious clients balk at their bill.

“A cautious client wants to tie down every cost to the extent that he possibly can,” K&L Gates commercial transactions and finance attorney Douglas Stanford said.  “Out-of-control fees became a problem.  A lot of these clients are now asking for very firm fee caps or fixed-fee proposals in writing.  And we are obliging.”

The firm’s detailed worksheet includes hundreds of fields, specifying fees for joint ventures, portfolios, due diligence, title and survey work, leasing and building management, documents for buying and selling real estate, loan documentation and specialized tasks such as U.S. income tax analysis and structuring for foreign clients.  It then identifies which professionals will handle each portion of the deal and subdivides the categories to spell out each task involved, provide a blended hourly rate per task, targeted hourly rate, potential high rate, estimated fee and potential maximum.

Obviously, it emphasizes detail.  For instance, the fee proposal for a customer seeking title and survey work includes 15 line items including title commitment, high-liability approval, boundary surveys, flood certification, municipal lien and assessment report, Uniform Commercial Code search, pro forma title insurance policy, insured-closing services, proof of satisfaction of mortgage, termination of Uniform Commercial Code financing statements, title affidavits, and title insurance policies for owners and mortgagees.

“We’re not cutting fees.  We are trying to make a better business of accurately estimating what our fees will be.  With our experience we know what certain kinds of deals will cost.  We have a system where we study the deal, identify what kinds of issues will arise and then price those issues,” Stanford said.  “In the same way you might find a health insurance company trying to price to the cost of a broken leg, we price each part of a real estate deal.”

The strategy has worked for K&L Gates, which strengthened its reputation as a major real estate practice by guiding Naples-based FTE Networks Inc.’s $75 million acquisition this year of construction management firm Benchmark Builders Inc.  But as the real estate cycles slips past its peak, attorneys say clients grow increasingly cautious.

“Even given the complexity, you know what it’s going to take and can come up with at least a price range,” Stanford said.  “We take a risk that the number is going to stay right there, and we stick with it.  We don’t go back later on and re-trade or renegotiate a deal already agreed to.”  The problem, though, is that real estate deals are hard to handicap, observers say.

“Until you end up going into the weeds … you don’t really know what’s going on on the other side,” Stroock & Stroock & Lavan real estate practice group partner Ira K. Teicher said.  “You never really know going in where you’ll find problems.”

Teicher found such problems on a recent deal with 80 exceptions to title for a property at the center of what initially promised to be a simple transaction.  He typically expects seven to 15 exceptions to title on average commercial properties — including utility easements, restrictive covenants and mortgages — which might be addressed to facilitate real estate trades.  But finding dozens forced Stroock to ramp up the time its attorneys and staff needed to devote to the deal.

“You can always estimate the norm, but once you’re outside the norm … it opens up Pandora’s box,” Teicher said.  K&L Gates’ algorithm is not the first time a real estate practice has taken an innovative approach to billing.

In 2015, prominent foreclosure defense counsel Thomas Ice disrupted the status quo with an innovation on the delivery of legal services.  His Royal Palm Beach-based firm, Ice Legal, launched LegalYou, an online portal to offer free and low-cost legal services, including packages with per-minute prices.

“Just like any other kind of business, lawyers need to leverage technology, streamline operations and diversify their product offerings to bring prices back in line with the market,” Ice said at the time of the launch.

K&L Gates suggests the time is right for its algorithm when retailers with shrinking brick-and-mortar operations demand less real estate and the luxury condominium market cools.  “The (price) negotiations happen going in,” Stanford said.  “We agree on a real number going into a deal rather than arguing about it on the end.”

When Someone Else Pays the Legal Bills

March 7, 2017

A recent CEBblog article by Julie Brook, “When Someone Else Is Paying Your Fees,” writes about when a third party pays some of all of your legal fees in California.  This article was posted with...

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