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Category: Legal Bills / Legal Costs

Judge Approves Plaintiffs’ Fee Award, Citing Defense Fees

April 3, 2020

A recent Law 360 story by Dorothy Atkins, “Judge Oks $4.7M Atty Award, Citing Opponent’s Legal Bill,” reports that a California federal judge reduced a $50.4 million antitrust judgment against a Chinese telescope maker by $3.1 million, but awarded the rival plaintiff's counsel $4.7 million in fees and costs, pointing to the fact that Sheppard Mullin's defense bill was roughly twice the amount.  In a 29-page order, U.S. District Judge Edward J. Davila said Sheppard Mullin Richter & Hampton LLP has billed Ningbo Sunny Electronic Co. Ltd. more than $9 million to defend against Orion Telescopes & Binoculars's price-fixing claims.  That is approximately double the amount that Orion's counsel at BraunHagey & Borden LLP seeks in its post-trial fee bid, the judge said.

"The court finds that this disparity in billing between the two firms is strong evidence that BHB's bills and costs are reasonable," the order says.  The ruling is the latest in an antitrust lawsuit that the California-based Orion filed against Ningbo Sunny and other telescope makers in 2016, alleging that they conspired to fix the consumer telescope market.

After a six-week trial, a jury in November hit Ningbo Sunny with $16.8 million in antitrust damages, which were later trebled for a total judgment of $50.4 million, payable to Orion.  But in post-trial motions, Ningbo Sunny asked Judge Davila for a new trial or alternatively to slash damages from the judgment by more than $12 million to account for settlements from other companies and profits from its supply agreements.

Meanwhile, Orion's counsel asked Judge Davila to award nearly $5 million in attorneys' fees and costs and to sanction Ningbo Sunny and its chairman, Peter Ni, for falsely stating under oath that Ningbo Sunny wouldn't transfer assets to China while post-trial motions were pending.  After a hearing on the motions in March, Judge Davila hit Ningbo Sunny and Ni with sanctions.  The judge also denied Ningbo Sunny's request for a new trial and its alternative request for judgment as a matter of law.

Additionally, the judge wouldn't alter the judgment based on Orion's purported profits from supply agreements, concluding that Ningbo Sunny relied on an inadmissible expert report and "failed to carry its burden" to prove Orion made millions off of its supply agreements.  However, Judge Davila agreed in part with Ningbo Sunny's arguments that the judgment should be altered due to certain settlements and assets it required, and deducted $3.1 million from the $50.4 million judgment.

Additionally, the judge awarded Orion $4.7 million in attorney fees and costs for an amended judgement totaling $52 million.  The judge said BraunHagey & Borden's hourly rates, which range from $425 to $795, are reasonable and in line with rates that have been approved in other cases, particularly since this case was complex and hard-fought.

The judge also rejected Ningbo Sunny's arguments that the fee bid should be rejected altogether since the firm didn't submit its billing records for review.  "The court finds that significant difference in bills between the two law firms indicates that the claimed hours are reasonable under the circumstances, so the court may rely on Hagey's declaration — which was made and signed under penalty of perjury — without reviewing contemporaneous billing records," the order says.

Client Says Law Firm Can’t Collect Attorney Fee ‘Windfall’

March 31, 2020

A recent Law 360 story by Lauraann Wood, “Gaming Co. Says Jackson Lewis Can’t Collect Fee ‘Windfall’,” reports that a now-closed gaming terminal company has said that an Illinois state judge should vacate a $328,000 judgment against it and prevent Jackson Lewis PC from collecting a "windfall" of attorney fees based on a legally unenforceable engagement letter and unsupported charges.

LZ Entertainment LLC said on that the judgment entered against it in an underlying malpractice suit requires it to pay the New York-based firm $134,000 in purportedly unpaid attorney fees and $194,000 in service charges it was never legally entitled to seek or recover.  The entertainment company says the court should vacate the judgment and let it fight the charges, arguing that the order is rooted in a "self-serving" engagement letter it never received and charges the firm can't support with invoice documentation.  LZ Entertainment also claims it didn't know its prior counsel hadn't responded to the underlying summary judgment request that resulted in the judgment's entry.

LZ claims that after Jane McFetridge, now the firm's Chicago office principal, told company manager Stefen Lippitz that Jackson Lewis' work could cost "as much as $80,000," it agreed to let the firm defend it in a June 2014 lawsuit over an employee who worked for a rival.  The company says Jackson Lewis began performing legal work on its behalf that June, but the firm never sent it an engagement letter and didn't send out its first invoice until two months later.

Lippitz received a copy of the engagement letter in December 2014, "well after" the firm's engagement and litigation in the rival's lawsuit had ended, according to the petition.  The firm purportedly sent the letter through physical mail, even though all of the parties' correspondence had been through email, according to the petition.  "Critically and surprisingly," LZ claims, the firm's engagement letter included a provision stating that the firm would assume its terms were acceptable unless the company responded in writing to the contrary.

"Attempting to bind a client to the terms of an engagement letter without the client executing the letter is unusual and problematic, to say the very least," the company said.  LZ also said Jackson Lewis had already billed it for more than $130,000 by the time it received its first invoice in August 2014.  That invoice reflected a purported prior balance of more than $61,000, but "it would make no sense for there to be a prior balance" if that was the firm's first invoice since its June 2014 engagement, LZ said.

Jackson Lewis produced a copy of its July 2014 invoice in February, while responding to an investigation that LZ launched after receiving the firm's citation to discover assets, according to the petition. That invoice reflected a $61,000 balance for attorney fees and disbursements incurred for the month of June 2014, but the firm "could not provide any evidence whatsoever demonstrating that Jackson Lewis ever sent the July 2014 Invoice to LZ," the company claimed.  "Indeed, LZ never received the July 2014 invoice from Jackson Lewis," the company said.

The company said the invoices for its June 2014 and July 2014 fees also "raise more questions about what actual services were performed, as there are multiple entries by the same attorneys for the same days on both invoices."  And because Jackson Lewis never sent LZ its July invoice, the company never got the opportunity to "pump the brakes" on the fees the firm was assessing, the petition argued.

Jackson Lewis sought payment of the fees LZ allegedly owed as a counterclaim in a malpractice suit relating to a revenue share agreement it helped the company enter with its rival, Accel Entertainment Gaming LLC.  The firm didn't attach the July 2014 invoice to a summary judgment bid it renewed on that claim in March 2019, submitting only its August 2014 bill and various other invoices reflecting "service charges," according to the petition.

Technology Alone is Not the Answer to Outside Fee Guidelines

February 14, 2020

A recent American Lawyer story by Dan Packel, “‘Technology Alone Is Not the Answer’ Wilmer Revisits Outside Counsel Guidelines,” reports that the number of outside counsel guidelines that attorneys and administrators at Wilmer Cutler Pickering Hale and Dorr have to juggle is striking.  In total, the firm is sitting on approximately 1,000 documents, after receiving, in 2019 alone, roughly 260 new retainer agreements or updates to existing guidelines that stipulate what clients expect from the attorneys they are hiring. 

Wilmer isn’t the only law firm dealing with heightened standards from corporate clients about what they’ll pay for and what they won’t.  A recent study from timekeeping technology company Bellefield and the Association of Legal Administrators estimated the cost of compliance with these guidelines at nearly $4 million annually for some firms.  “There are a lot of process failures out there,” said Kyle Liepelt, who was named Wilmer’s first dedicated outside counsel guidelines administrator in February 2018.  “Technology alone is not the answer.”

When Wilmer began the process of reevaluating how it dealt with these guidelines in 2017, leaders found that—unlike the majority of the firms responding to the Bellefield and ALA survey—it was over-complying with guidelines.  Instead of losing money through rejected bills, convoluted appeals and write-downs, attorneys were being overly cautious in their billing.

“We couldn’t arm our partners to the nuances of these client differences,” said Steve Smith, the firm’s director of matter management services, describing a problem of “excessive diligence.”  “That impact, both in time and money, to communicate the complexity around outside counsel guidelines, that’s time that we should have been spending adding real value to our clients,” he continued. 

Following an initial workshop, one of Wilmer’s first steps was to create the centralized administrator position held by Liepelt, who spent the previous five years as a conflicts specialist in the firm’s new business department.  Each set of new guidelines goes directly to him, and he’s responsible for reviewing their terms, looping in the relationship partner and the billing partners on a given matter.

Room For Negotiations

These conversations aren’t just to circulate the substance of what clients are demanding.  Wilmer is not afraid to push back on terms that the firm would prefer not to agree to.  Liepelt said that his conversations within the industry showed that’s not always the case elsewhere.  “A lot of firms often receive them and that’s it, there’s no real discussion about them.  They may post them, so people can see them, but there’s no discussion on substance,” he said. 

According to the Bellefield and ALA survey, 23% of firms make no effort to share guidelines with attorneys, while 24% simply post them on the firm’s intranet.  While 52% share guidelines via email, the survey did not capture whether this is the prelude to a wider discussion, let alone to a response to the client.  But Liepelt said that the reaction is generally positive. At the very least, clients appreciate that the firm is carefully considering the guidelines.

“When it comes to the recommendations that we give, it’s a mixed bag.  Some say, ‘This is what it is, and we want you to follow it,’” he said “Other times there’s a negotiation back and forth and we arrive somewhere in the middle.”  Liepelt will often handle these conversations with the client, particularly if the attorneys don’t want to get involved.  “Discussion can be a burden on attorneys,” he said.  “I try to relieve them of any potential conflict.”

Into The Database

If these conversations illustrate the human side of the process, the technical side takes the forefront once any negotiations are finished.  The Wilmer team looked to a database to help solve the problem of scale, teaming with a vendor that had its own outside counsel guidelines solution and using the underlying workflow and source code to built their own unique design.  Each client’s guidelines are broken down into a data record with component terms highlighted, and attorneys and staff can search for terms and easily access the source documents.

Smith gave the example of different clients specifying what personnel can and can’t be used.  Some bar paralegals, others rule out first-year associates, still others place caps on each category for a given matter.  “We can surface those,” he said.  “We have a standardized process to review them very quickly.”

When updated versions of guidelines roll in, Liepelt can turn to the database to identify what’s changed, then rapidly point out the differences to the partners involved.  When looking at intranet profiles for the firm’s attorneys, he and others can follow links to see what outside counsel guidelines apply to each matter they’re working on, guiding conversations about matter efficiency.  And, in the unlikely event of a data breach, the firm can quickly pull up the list of clients that need to be notified within 24 hours.

A Bellwether for the Relationship

One year into the new system, the feedback, from both inside and outside the firm, has been overwhelmingly positive, according to Smith and Liepelt.  Partners appreciate having an internal point person to whom they can direct their inquiries and concerns, while staff have the information at their disposal to do pre-bill auditing.  Turnaround time with clients has decreased by 25%.

“The delays are less on our side and more on their side,” Leipelt said. “We’re much more responsive than we were, and that leads to better relationships.”  Beyond that, the new system offers a selling point when it comes to marketing the firm.  “There’s not an RFP that we see these days that doesn’t specifically ask us what are the firm’s capabilities in innovation and improving processes,” Smith said. “How we handle outside counsel guidelines is a bellwether for our stewardship of their financial resources.”

Article: Ten Ways That Outside Counsel May Hide Overbilling

January 16, 2020

A recent Corporate Counsel article by Ryan Loro, “10 Ways That Outside Counsel Disguise Overbilling,” reports on overbilling from outside counsel.  This article was posted with permission.  The article reads:

Legal invoices can be overwhelming and nearly impossible to understand. The task of sifting through line after line of attorney time entries from outside counsel is time consuming, and more times than not, in-house legal and accounting teams may miss billing errors. Despite the complexity of legal invoices, there are ways to spot overbilling if you know what you are looking for.

According to recent industry research, large companies with big legal departments go over budget by about 37% every single year. Why do they go over budget? A big reason is overbilling from the outside law firms they hire to do work for them.

It’s become such an issue that entire companies have been formed to help businesses analyze and help organizations manage their legal spend. That’s right, lawyers sometimes pad their billable time—and there is now a growing industry to ensure that businesses pay a fair amount for their legal services.

Here are the top 10 ways law firms can hide overbilling:

Block Billing. Block billing is when a lawyer enters multiple tasks under one time period, without separating the time each task took. Here is an example from an actual time entry reviewed by SIB Legal Bill Review:

7.6 Hours: Telephone call with client regarding assignment of rents; review lease agreement of [company]; draft agreement; emails with opposing counsel; revise agreement accordingly.

Block billing obscures the value to the client and the reasonableness of the charges for a given task. If you don’t know how long it took to draft the contract (because drafting the contract is one of five tasks within a 7.6-hour block of time), you can’t tell if the charge for drafting the contract is reasonable. One study by the California Bar Association concluded that block billing increases the time charged by an average of 23%.

Intra-Office Communications. Intra-office communications is when multiple attorneys within the same firm discuss the client’s matter with each other or seek advice from a colleague about a legal issue. One of the major selling points for larger law firms is that they have a breadth of knowledge in specialized subjects. But when a lawyer seeks a colleague’s advice, the client should not have to pay for one attorney to educate another—just have the specialist handle that part of the matter.

Higher-Rate Staff Used Inappropriately. Sometimes lawyers will do work that is more appropriate for a lower-rate attorney or a paralegal. For example, if a partner’s rate is $900/hour and they perform a task that, more than likely is work that a second-year associate attorney who’s rate is $300/hour should be doing, the client will be paying an additional $600 per hour.

Excessive Time. This is the most common complaint of clients, yet has historically been the easiest for law firms to justify. Many clients have a “feeling” that a certain task took too long, but cannot explain why. SIB Legal Bill Review explains in detail the reasons a law firm should reconsider specific charges on an invoice. Here is an example:

The law firm charged 5.1 hours for work on a confidentiality agreement where opposing counsel had already provided a comprehensive draft agreement for comment and markup. This time is excessive. We propose the charge be revised to a total of 2.5 hours: 2.0 for analysis and markup of the draft agreement, and 0.5 for negotiation of points with opposing counsel.

Junior Lawyer Training. Law firms have been known to charge clients for a junior lawyer’s on-the-job training. We believe that the law firm carries the financial responsibility for training its lawyers; it is for the law firm’s long-term benefit. On an invoice we reviewed, one law firm actually charged $1,084 to the client for a junior lawyer’s time to “investigate how to file an appeal.” Of course, there is a point in the junior lawyer’s career when they need to learn how to file an appeal, but the client should not have been asked to pay for that training.

Inadequate Description. When a lawyer does not adequately describe his activity, there is no way for the client to determine if that activity added value for the client or if the charges for that activity are reasonable. Attorneys are paid to be precise in their language. It is not unreasonable to require lawyers to accurately describe how they spent their time and the client’s money. More problematic, inadequately described time can be camouflaging the fact that the attorney invented the time entry to fill his time card or increase the bill. Here is an example of a real time entry:

Attention to licensing files and review of licenses and leases; attention to pro-forma license transfer structure; additional review of proposed structure; attention to fees and timing relevant to pro-forma and non-pro forma assignment; address related licensing matter.

At first glance, it appears that this associate has done a lot of work for the client. But notice that the task descriptions are all nebulous: “attention to … ; analysis of … ;” and so on. In this particular time entry, no actual work product was produced. The client has no way of knowing what value was delivered because of this inadequate description.

Over-staffing a Given Task. Many times, a law firm will over-staff a task, using three attorneys for something that should have only taken one. More often than not, the time for all three attorneys is billed to the client. Defending a deposition and arguing a discovery motion are usually one-lawyer tasks and should be billed as such.

Duplicative Work. Duplicative work is an issue that occurs when one attorney will charge for the same task in more than one billing period, or two attorneys will charge for the same task in the same billing period. Here is our response to an instance of duplicative work:

Junior lawyer charged 25.1 hours ($6,149.50) to draft motion for summary judgment. Senior lawyer charged 14.6 hours ($4,844) to draft the same motion at a later date.

In this particular case, the client did not receive 39.7 hours of work. If the law firm decided to push a motion for summary judgment draft onto a junior lawyer, only to have it rewritten by a senior lawyer, this is not the responsibility of the client.

In fact, according to a study conducted by Samford University Law School in 2007, 48.2% of lawyers believed double billing was ethical, which was up nearly 13% from 10 years prior. It would not be surprising to learn that 12 years removed from the study that the percentage of lawyers who believe double billing is ethical and acceptable has exceeded the 50% mark.

Administrative Tasks. Sometimes law firms will charge attorney or paralegal rates for tasks that could and should be done by administrative staff. The client should not pay $300 an hour for filing a court document. That type of task should be done by a legal secretary at no charge, as part of the firm’s overhead costs.

Discrepancies Between Time Entries. A simple mistake that happens more often than you would think is when two lawyers attend the same meeting but charge different amounts of time for doing so. Another example in discrepancies between time entries occurs when one lawyer charges for an in-office task when another time entry shows she was not in the office that day. The variations of discrepant time entries are many, but the conclusion is singular: one of the time entries is probably inaccurate.

Analyzing the line item charges on legal bills is no small task. The analysis itself is 60% experience in legal practice, 30% psychology, and 10% mechanics and mathematics. Unfortunately for many businesses, computers can only assist in the last and smallest category. Then, when the analysis is done, someone has to negotiate with the billing attorney to convince him that certain charges are unreasonable and should be removed from the bill.

All of this is a daunting task. There is hope for businesses who fear they are being overcharged. Even if you don’t have the resources inside your organization, these functions can be outsourced. Legal bill review services help to increase efficiency and take the burden away from in-house teams and businesses so that they can focus on their work. Finding a legal bill review service that analyzes every line item of all of your invoice every single month is an important and efficient way to help reduce your organization’s legal spend with outside counsel.

Ryan Loro is the president of SIB Legal Bill Review.

One Law Firm’s Fee Collection Nightmare

January 1, 2020

A recent Law.com article by Jack Newsham, “The Dog Ate My Legal Bills: One Law Firm’s Collection Nightmare,” reports on one law firm effort to collect unpaid legal fees.  The article reads:

No one goes into the practice of law dreaming of chasing down clients for unpaid legal bills.  But that’s what dominated discussions in the past year between New York firm Kent, Beatty & Gordon and former client Theodore B. Owen, according to a lawsuit the firm filed Tuesday against Owen, seeking nearly $190,000 in legal fees.

While many law firms have sued clients for unpaid fees, the firm’s collection suit stands out for its lengthy documentation of all the excuses that Owen allegedly used.  Owen is an esports businessman whose legal tussles with his landlady landed on Page Six. 

“Owen … represented on various occasions that Owen (a) was selling bitcoin, (b) had received a large inheritance check, (c) sold ‘offshore assets’ and (d) sold a $5,000,000 investment so as to make all of his payables current,” said the firm’s suit, filed in Manhattan Supreme Court.

The firm went on to list a chronology of Owen’s alleged excuses that stretched on for two pages.  According to the firm, Owen or someone at his company, Dead Waltons LLC, gave the following excuses over the course of 2019:

On Jan. 16, “if the money is not already there, it should be tomorrow.”
On the morning of Jan. 29, “Your money should arrive today.”
On the evening of Jan. 29, “It should be there.”
On Saturday, Feb. 2, “Friday.”
On Thursday, Feb. 7, “I said Friday.”
On Feb. 11, “Jack, you get paid this week.”
On Feb. 23, “Listen I have money … no games just settle down.”
On Mar. 1, “Thanks it will be done.”
On Mar. 25, “Money … will go out tomorrow am.”
In response to an April 10 email, “Please be a little more patient.”
In an April 16 email, “destroying my reputation is not the way to go about getting this resolved. I am going to oay [sic] you.”
Upon being confronted with a $100,000 invoice May 1, “Tuesday I can make a dent … it won’t be all of it but a nice dent.”

“Notwithstanding these and many, many other promises made by Owen … each and every one of the above-referenced dates passed without even partial payment from defendants,” the suit said.  Jonathon Warner of the firm Warner & Scheuerman, who replaced Kent Beatty in one of Owen’s lawsuits, said Monday afternoon that he’d ask his client if he wanted to comment.  Nothing was heard as of press time Tuesday.

Three Places Overbilling May Be Lurking

December 2, 2019

A recent Law 360 article by Andrew Strickler, “3 Places Overbilling May Be Lurking,” reports on overbilling.  The article reads: By most accounts, the wild ol’ days of lawyer invoicing —...

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