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Class Counsel Earn $24M in Fees for Clean Coal Investors

February 11, 2021

A recent Law 360 story by Morgan Conley, “Attys for Southern Co. ‘Clean Coal’ Investors Get $24M”, reports that a Georgia federal judge approved just over $24 million in fees to attorneys for a class of Southern Co. investors accusing the company of misleading them about a botched plan to build a "clean coal" plant in Mississippi, trimming the initial request by about $2.1 million.

In an order granting the attorney fees, U.S. District Judge William M. Ray said the unusually good recovery in the settlement warrants a greater than average take-home for lead counsel from Robbins Geller Rudman & Dowd LLP.  But, the court declined to grant class counsel's full request for a 30% share of the $87.5 million settlement fund because, while the recovery for the class is "commendable," the litigation was settled early enough that class counsel didn't stomach "the riskier stages of litigation."

"Being able to achieve such a favorable recovery so early in the litigation suggests that a continued successful pursuit of the litigation could have yielded an even more favorable result for plaintiffs," Judge Ray said.  "That favorable result would then necessarily lead to an increase in the percentage of attorneys' fees.  The court, based upon the totality of the factors, is thus satisfied that 27.5% adequately reflects the impressive results of this case."

According to the court, reasonable attorney fees are usually pegged at around 20% to a quarter of the settlement fund, which the court preliminarily approved in October.  The court said that although class counsel said a study of attorney fee awards in the Eleventh Circuit put the median amount at 33%, that figure factors in a wide range of settlement sizes and a "closer inspection of the study reveals a more nuanced result."

"Because class action attorney fee percentages vary widely based upon the size of the settlement, it would be more insightful to look at settlements with a larger fund," the judge said.  "The same study points out that the average fee percentage is 22.3% when considering only cases with a settlement fund greater than $67.5 million."  Judge Ray said he is confident awarding the attorneys slightly above that average will continue to "incentivize high-caliber and vigorous representation" without awarding attorneys with an unnecessarily large payday.

Southern Co. agreed in September to pay $87.5 million to settle claims it misled shareholders about bungled plans to build a "clean coal" power plant in Kemper County, Mississippi — a project the company eventually admitted would cost almost three times more than originally budgeted and would never actually operate as a "clean coal" plant.

The settlement agreement makes up about 16% to 28% of what the class stood to receive in a best-case scenario if litigation continued to play out, according to the opinion.  Judge Ray said his rationale for not granting counsel's full 30% fee request is partially based on the risks of further litigation not being fully realized.

One potential threat surfaced when Southern Co. appealed the class' certification to the Eleventh Circuit.  But when the settlement deal was reached, no briefs had been filed in the appeal, which was stayed during the negotiations.  Class counsel argued the certification challenge posed significant risks to the litigation and supported a higher fee award.

Judge Ray disagreed, saying it might be a different story if the circuit court appeal had gone active and class counsel had overcome the appeal.  Or, if the class had defeated a summary judgment bid, the heightened stakes would have been fodder for a high fee award argument, the court said.  But since the litigation never reached such a stage, the upper end of the counsel's fee request isn't justifiable, Judge Ray said.

NALFA Releases 2020 Average Hourly Rates in Litigation

February 9, 2021

NALFA recently completed its 2020 Litigation Hourly Rate Survey.  This billing rate survey was conducted via email over the last few months.  Over 2,000 civil litigators from across the U.S. participated in this hourly rate survey.  Survey participants included litigators (plaintiff and defense) from partner to associate levels from large law firms to solo shops.  With exactly 2,465 survey participants answering 8 rate questions, we have 19,720 rate data points to analyze.

We are working on tabulating all the hourly rate data points and analyzing and comparing hourly rate data sets.  The full survey report with findings will be available for purchase soon.  This survey report will be free for survey participants, members, faculty, and fellows.  Below are the 2020 approximate average hourly rates for defense and plaintiffs in regular/routine litigation and complex litigation:


"From these national averages, we see that plaintiffs' rates are, on average, $20 an hour higher than defense rates in both regular and complex litigation.  Both plaintiffs' and defense rates rise $30 and hour, on average, from regular to complex litigation.  Also, the variance between litigation sides and litigation type only spans $50 an hour at most, on average," said Terry Jesse, Executive Director of NALFA in Chicago.

Defense Firms and Clients Can Boast About Attorney Fee Wins

January 25, 2021

A recent Law.com story by Christine Simmons, “Both Law Firms and Clients Can Boast About Fee Wins,” reports that, several organizations have reported that, despite the Am Law 200’s worst fears, the legal industry enjoyed growth in 2020.  Citi Private Bank Law Firm Group and Hildebrandt Consulting have projected mid-single digit growth in revenue and mid to high single digit growth in profits. 

Last year, large firms managed to raise rate about 5%, according to James Jones, a senior fellow at the Georgetown Law Center on Ethics and the Legal Profession.  That’s remarkable considering the chaotic and depressing environment of 2020, and even more remarkable that the average annual rate increase for firms since 2008 has been about 3%.

But weren’t general counsel in cost control mode?  After all, according to survey data collected in June 2020 from 223 corporate legal departments, 89% of respondents said controlling outside counsel costs was a high priority.  So what gives?  How could law firms push through high rates at a time of such fee pressure?

Reconciling legal departments’ pressing need to cut costs with law firms’ revenue, profit and rate growth in 2020 requires a closer look at law firm segmentation, sector performance and the trajectory of the year.  But in the legal industry, 2020 is also a story about demand and the benefits of close cooperation on fee agreements, allowing both law firms and legal departments to have some bragging rights.

The Conversation

The lucrative year extended up and down the Am Law 100 and likely into the Second Hundred, but it came at different client relations strategies.  For the elite, rate and fee pressure was so little they could give out double bonuses to associates without billable hour requirements.  Wall Street firms and the Am Law 20 saw the benefit of ‘fight to quality” during an unpredictable year in business.  Meanwhile, some law firms did work with their clients on a mix of fee strategies and arrangements, to the benefit of both.

For instance, at Akerman, ranked No. 88 in the Am Law 100 last year, CEO Scott Meyers said collections remained steady last year, although Akerman worked with its clients to help them meet their own budgets while paying their legal bills.  “We’re close to our clients,” he said.  “We reached out to each one to understand, ‘what’s your financial position?  What’s your cash position?  What can you do, what can’t you do?’”  At the end of the financial year, the firm said it had a 6.5% increase in gross revenue in 2020.

Fee pressure, of course, depends on the industry.  And those with insurance industry clients and municipal clients are among those seeing the most discount pressure.  Mark Thompson, president and CEO of Marshall Dennehey Warner Coleman & Goggin, said while the firm’s hospital clients have returned to their pre-COVID payment rates, the firms’ base of municipal government clients haven’t yet returned to pre-COVID fee arrangements as a result of financial distress. “That is going to remain a problem going forward,” Thompson said in a Dec. 22 article. 

But nearly all sectors saw pressure in the beginning of the pandemic. At General Motors, the automaker reached out to the 19 firms on its panel of “strategic legal partners.” The second quarter presented an enormous, worrisome question mark, and the automaker—like so many businesses of all sizes—was looking to preserve cash.

GM general counsel Craig Glidden said the company didn’t know what would happen in the auto markets, which meant asking firms for help. And those firms stepped up, agreeing to deferred billing and alternative fee arrangements to relieve some of the company’s pressure.

The Significance

Yes, law departments are seeking high cost savings.  The 2021 Report on the State of the Legal Market from Thomson Reuters and Georgetown Law said spending on outside counsel did, in fact, decrease in the second and third quarters of 2020.  The report said 81% of legal departments found that general enforcement of billing guidelines, including reductions of invoice fees and expenses, was the most effective way to keep billing down.  Meanwhile, 53% of respondents requested standard discounts; 49% of respondents reduced timekeeper rate increases; and 45% used volume discounts.

At the same time work, the report shows that the average daily demand for law firm services per lawyer, based on billable hours, increased in the second half of the year, picking up in November to almost match the previous two year average.  So what happened to the portrait of the general counsel scrutinizing every line item and grilling firms about rate increase and discounts?

That picture is becoming increasingly faint.  Instead, the portrait emerging from 2020 is one of cooperation and demand.  Clients rushed to law firms for urgent legal advice during the pandemic, including counseling for workplace laws, PPP loans, restructuring and data security concerns.  Secondly, the circumstances from the pandemic gave rise to conversations about pricing, driving both sides of the law firm-client relationship to seek common ground—both in the form of tried-and-true alternative fee arrangements and those that reflect a more innovative approach.

Law firms have some leverage.  Just because a client wants a discount doesn’t mean a firm has to provide it.  “Clients understand the difficulty of onboarding new external counsel,” says McKinsey & Co. senior partner Alex D’Amico.  “There’s a real cost to bringing on a new firm.”

Defense Rates Expected to Rise at Lower Pace in 2021

January 15, 2021

A recent Legal Intelligencer story by Andrew Maloney, “Rate Pressure and Rising Expenses Are Expected to Challenger Firms in 2021,” reports that law firms may have weathered the COVID-19 financial storm last year, but firm leaders and legal observers say economic pressures could bear down again in 2021, including increased expenses, rate pressure and cash-strapped clients.

Big Law likely won’t be able to count on government loans this time , either.  Overall, firms and analysts are optimistic about business this year.  Firms mostly said they expect a return to some version of normalcy by the second or third quarter of the year, according to a report this week from Thomson Reuters and Georgetown Law’s Center on Ethics and the Legal Profession.

At the same time, the pandemic “is likely to continue to pose economic challenges for law firms” this year, the report said, even as vaccines are being distributed en masse.  “First, it is not clear that the same tools used by firms to address the crisis since March will be as readily available in 2021.  Some law firms may well not enter the new year with the same cash cushions they had from 2019,” the report stated.  It notes many firms used the pandemic to increase billing and collections efforts, and as a consequence, may not have as much on-hand heading into this year as usual.

In addition, there’s growing concern about the ability to raise rates this year, while corporate legal departments, with 2021 budget goals, are looking for areas to trim.  ”It may be harder to implement the same level of rate increases at the end of 2020 that firms enjoyed at the end of 2019,” the authors added.

James Jones, a senior fellow at the Georgetown Law Center on Ethics and the Legal Profession and lead author of the report, said he was “dubious” firms could boost rates at the same level they did last year—about 5%.  The average annual rate increase for firms since 2008 has been about 3%, he said.

Jones also pointed to a recent Thomson Reuters survey of more than 200 legal departments that found about 89% said holding down outside counsel costs was one of their highest priorities for 2021.  He noted that corporations have significantly increased personnel whose job is to oversee outside counsel agreements.  According to Reuters’ Legal Department Operations Index, about 57% of companies had people in those roles in 2019. In 2020 that number shot up to 81%.  “So, given the economic uncertainties and enormous pressure that companies are under, I would be surprised if they sit still for a 5% increase,” Jones said in an interview.

Joshua Lorentz, a partner at Dinsmore & Shohl who chairs the firm’s finance committee, said the firm ended 2020 “on a solid note” and expects 2021 to be a “net gain” for business.  But he said one wrinkle to the budgeting process this year is figuring out where to set rates, as clients try to forecast how much COVID-19 will alter their bottom lines again.  “I don’t know that a majority of companies are asking for discounts, but perhaps discounts for new work, COVID discounts. For some clients, we’re willing to lean into that,” Lorentz said.

He said the firm is evaluating which clients needed breaks in 2020 and having discussions about their projections for 2021.  ”And with all that information, we’re able to see who needs us to lean in, who appears to be weathering the COVID situation.  Then we try to budget conservatively on top of that,” he said.  As an example of that conservative budgeting approach, Lorentz said Dinsmore is preparing this year’s numbers as if expenses such as conferences and business travel will still go forward as they would in a pre-pandemic year.

“And if it ends up that things get canceled in February and March and in the summer, then it’s additional profit for the partnership and the attorneys,” he said.  “But if we don’t budget for it, and things suddenly get clear, it’s tough to go find the money.”

Rising Expenses

The Georgetown and Thomson Reuters report noted that “almost all firms” significantly reduced costs by being more efficient about physical office space, staffing, in-person meetings and business travel in 2020, and such drastic changes could amount to a “tipping point” that permanently alters how firms do business.

Lathrop GPM could be one of those firms. Managing partner Cameron Garrison said this week that while he hopes to have a firmwide return to in-person work later this year, “I do expect that our typical work week may look very different once we return to the office.”  He said in an email that’s a result of the firm likely continuing to leverage remote work options for its staff.

At the same time, for many firms, the savings created through remote work and reduced travel are likely a one-time deal.  “I think the challenge that we’re going to have in 2021 is the very sharp expense reductions that we saw when we went into lockdown.  Those expense reductions—they’re not going to repeat, and we’re going to see our expense numbers rising again,” said Michael McKenney, managing director of Citi Private Bank’s Law Firm Group.  “So that margin expansion that we saw is unlikely to repeat.”

However, McKenney said many firms are “very, very strong” in terms of how much cash they have on-hand entering 2021.  He noted rate increases have been “very steady” since the financial crisis of 2008, and there are plenty of signs COVID-19 won’t hamstring the market this year the way it did in 2020.  “The outlook, particularly if vaccine distribution is handled better than it has been initially, is for a fairly vigorous rebound in a level of activity,” McKenney said, noting that some of the most leveraged practices that were hit hard almost a year ago are starting to come back.

“We saw corporate M&A shut down, capital markets activity was reduced, litigation was hampered because it was very hard to take depositions.  Juries were not sitting,” he said.  “Those things have begun to reopen, and people are doing them very successfully virtually.  Corporate M&A is back up, capital markets is back up, so many of our leverageable practices—practices that generate strong hours—are coming back.”  Garrison, the Lathrop firm leader, said the long-term economic and societal effects of COVID-19 are still unknown.  But one area that could pick up as a result of economic pain in the short term is pro bono.

“While not an economic challenge, I also believe that firms will be challenged with increased pro bono requests due to an increase in people facing financial hardship,” he said.  “We are very focused on balancing the pro bono time we can offer to support our communities while increasing the support that we add to our clients.”

NALFA Releases The 2020 Litigation Hourly Rate Survey Totals

December 18, 2020

NALFA recently completed its 2020 Litigation Hourly Rate Survey.  This billing rate survey was conducted via email over the last few months.  Over 2,000 civil litigators from across the U.S. participated in this hourly rate survey.  Survey participants included litigators (plaintiff and defense) from partner to associate levels from large law firms to solo shops.  With exactly 2,465 survey participants answering 8 rate questions, we have 19,720 rate data points to analyze.

Below is a link with the overall survey totals.  We are working on tabulating all the hourly rate data points and analyzing and comparing hourly rate data sets.  The full survey report with findings will be available for purchase soon.  This survey report will be free for survey participants, members, faculty, and fellows.

Survey Totals: The 2020 Litigation Hourly Rate (PDF)

If you have any questions or comments on this or any of our hourly rate surveys, please contact NALFA Executive Director, Terry Jesse at terry@thenalfa.org.