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Category: Legal Bills / Legal Costs

Texas Companies Spend Record Legal Fees in 2017

May 4, 2018

A recent Texas Lawbook story by Mark Curriden, “Texas Companies Paid Record Legal Fees in 2017,” reports that Texas companies paid law firms that represent them a record-setting amount of money in 2017 and an increasing percentage of those legal fees are going to national law firms that have recently opened offices in Houston, Dallas and Austin.

Exclusive new financial data collected by The Texas Lawbook shows that the 50 largest corporate law firms operating in Texas – nearly all of them with offices in Houston – employed essentially the same number of lawyers in 2017 as they did in 2016 and 2015, but those law firms are charging higher rates and making considerably more money.

Nearly two-dozen law firms in Texas, led by Houston-based Vinson & Elkins and national firms Kirkland & Ellis and Winston & Strawn, generated record high revenues last year as a result of them routinely charging corporate clients $1,000 an hour or more.

At the same time, several large Texas legacy law firms are struggling for survival or at least seek stability.  "The Texas corporate legal market is experiencing dramatic changes and these changes are expensive," said Chicago law firm consultant Kent Zimmerman. "The numbers confirm that the rich law firms are getting richer and some long-time Texas law firms are getting left behind."

Legal industry analysts say the most important statistic in The Texas Lawbook data is the fact that revenue per lawyer at 14 law firms operating in Houston now exceed $1 million a year – an amount previously achieved by the most elite and expensive national firms. Only two of the 14 firms – V&E and Baker Botts – are headquartered in Texas.

"The formula for success is simple," Zimmerman said. "The law firms that pay the most get the best lawyers. The best lawyers get the best clients and the best work. The best clients pay the highest rates and generate the best revenues. And then you can use those revenues to pay the best lawyers and the cycle starts over again."

The 50 largest legal practices in the state generated $5.65 billion in revenues from their lawyers who office in the state – a 2.4 percent increase from 2016.

But the data also shows that elite national law firms that have opened offices in Houston and Dallas during the past few years are growing considerably faster than law firms headquartered in Texas and that growth is mostly at the expense of locally based firms.

Two excellent examples are Chicago-based Kirkland & Ellis and New York-based Simpson Thacher & Bartlett.

Kirkland opened its Houston office in April 2014, but it now has more than 130 lawyers and generated an estimated $187 million in revenues in 2017, making it the 11th largest legal operation in Texas.

Simpson Thacher, which debuted in Houston in 2011, has witnessed significant growth the past three years – from $25.6 million in revenues in 2015 to $47 million in 2017, an 83.6 percent jump.

The Texas Lawbook analysis of the exclusive data involving the 50 largest corporate law firms operating in Texas shows that:

  • Nearly 40 percent of the 7,000 corporate lawyers in Texas are now employed by law firms headquartered outside of the state;
  • The Texas offices of national law firms generated $2.57 billion in 2017 – a 38 percent increase from just two years ago;
  • By contrast, lawyers for Texas-based law firms brought in $3.1 billion in revenue in 2017, which is the same amount as the previous two years; and
  • Thirty-three of the top 50 law firms by revenue generated from their Texas offices were based outside of the state – up from three of the top 50 just seven years ago.

To be sure, large Texas legacy law firms – V&E, Baker Botts, Bracewell and Locke Lord, for example – still generate billions of dollars in combined revenues, employ thousands of lawyers and still do a huge majority of the legal work for businesses in Texas. Many of them are experiencing tremendous financial success.

The Texas Lawbook obtained the financial data from interviews with law firm leaders, law partners who recently departed the firms and legal industry analysts. Only one law firm – Houston-based Susman Godfrey – refused to provide any kind of statistics to The Texas Lawbook.

The 2017 data shows that Houston-based V&E is now the largest legal operation in Texas by revenue. V&E lawyers in Austin, Dallas and Houston brought in an estimated $484 million – a 6.6 percent increase over 2016 and a 15.5 percent jump from 2015.

"We had a truly fabulous year – a record year," said V&E Chairman Mark Kelly. "Demand was up, which was good. We have 112 summer associates coming in. So, we are ramping up for another great year and for expansion."

While national law firms have raided V&E for scores of lawyers during the past seven years, legal industry analysts say that V&E has also benefited from the national invasion in one simple way: the elite national law firms with dramatically higher rates provided cover to V&E to significantly increase the rates it charges clients.

Most Texas-based law firms decided to use their lower hourly rates as a marketing tool to retain business. But V&E, according to legal consultants, took the opposite approach.

"The challenge for law firms is attracting and keeping the best legal talent," Kelly said. "For law firms with revenues less than $1 million per lawyer, it will be tough for them to compete. We want the high-end work and that means we need the top talent."

Lawyers in the Texas offices of Baker Botts had $378 million in 2017 revenues for its Texas offices.

Haynes and Boone and Jackson Walker are two Texas-based law firms that increased their lawyer head count and their revenues at their Texas offices.

Haynes and Boone increased its Texas revenues to $272 million, which is 15.3 percent higher than in 2015. Jackson Walker's revenues hit $249 million in 2017, which is a 12.6 percent jump from two years earlier.

"2017 was our best year ever," said Haynes and Boone managing partner Tim Powers. "We saw strong performances across the board and we benefited from our clients doing some really great things.

"We are cautiously optimistic about 2018," Powers said. "The tax reform law will hopefully drive significant investment in Texas and infrastructure legislation could mean good work in the next year. But a trade war could have a devastating impact."

Thirteen law firms have seen their revenues in Texas grow by 20 percent or more from 2015 to 2017. All but one – Houston-based Gray Reed – is headquartered outside the state.

Gray Reed, which has 140 lawyers in Houston and Dallas, has seen its revenues grow from $50.4 million in 2015 to $65.7 million last year – a 30.5 percent jump.

"We've had three consecutive years of record revenues," said Gray Reed managing partner J. Cary Gray, who added that the firm has no interest in growing outside of Texas or merging with another firm. "There are certain legal services that people and businesses need handled by high quality lawyers, but they don't want to pay $1,000 an hour for it. That is our sweet spot."

WY Supreme Court: Billing in 15-Minute Increments Not Abusive

March 30, 2018

A recent ABA Journal story by Debra Cassens Weiss, “Billing Client in Minimum 15-Minute Increments Wasn’t Abusive, Wyoming Supreme Court Says,” reports that a law firm that routinely billed a longtime client in 15-minute increments isn’t required to reduce its legal tab, the Wyoming Supreme Court has ruled.

The court upheld a decision by the Wyoming State Bar Committee for Resolution of Fee Disputes regarding the fees charged by Daly & Sorenson, the Legal Profession Blog reports.

The law firm had no written fee agreement with Gabrielle Manigault, but it had represented her in 97 separate legal matters for more than 16 years, according to the March 27 decision.  She typically paid her bills when proceeds from her oil and gas interests and cattle sales became available.

The fee dispute centered on the law firm’s legal bills in trust litigation that originated in 2012. Daly & Sorenson lawyers had become concerned about possible malfeasance by trustees and accountants, and the firm needed to hire tax and accounting experts to review thousands of pages of documents in preparation for numerous depositions.

At the time, Manigault owed more than $71,000 in legal bills, and the law firm needed money to hire the experts. Manigault promised payment, but the money wasn’t paid. Daly & Sorenson was eventually permitted to withdraw from the litigation, and it sued for $84,500 in unpaid fees.

In a first round, the bar fee-dispute committee determined that Manigault owed the firm $64,621.05.

After an appeal and a remand, the fee-dispute committee considered whether Manigault’s bill should be reduced because of the billing in minimum 15-minute increments. The bar committee said the practice was normal for the firm, and it had used 15-minute billing in in the 97 matters it handled for Manigault. The committee found the practice wasn’t unreasonable.

Manigault had alleged on appeal that the firm likely used the 15-minute minimum billing to routinely charge her for work that took far less time to accomplish, and speculated that the firm was billing for unproductive casual conversations between attorneys and paralegals.

She pointed to Board of Professional Responsibility v. Casper, a 2014 Wyoming Supreme Court case in which a lawyer misused her 15-minute minimum billing interval.

The lawyer in Casper billed for 15 minutes every time she signed a document. She also billed 15 minutes to review a short document and then billed another 15 minutes for signing it. The Wyoming Supreme Court said the case was different.

“Nothing approaching that sort of unreasonable or abusive billing is evident on this record,” the court said.

Indeed, the law firm’s two principal lawyers had testified that they rounded down to the lower minimum time interval when billing for a task that may have bridged two intervals, the court said. They also testified that a phone conversation in itself or typing an email may have taken less time than the amount billed. But the billing took account of the time spent locating the client file, making notes and memorializing a conversation after a phone call.

The court also pointed to testimony by firm partners that off-the cuff casual office conversations about progress on a case were not billed to clients. More formal meetings were billed, however.

The lawyers’ testimony supported the decision of the fee-dispute panel, the court concluded.

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.