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Former Client Questions Law Firm’s Billing Rate in Fee Dispute

March 23, 2021 | Posted in : Attorney-Client Relationship, Billing Practices, Ethics & Professional Responsibility, Fee Agreement, Fee Collection, Fee Discovery / Disclosure, Fee Dispute, Fee Dispute Litigation / ADR, Hourly Rates, Legal Malpractice

A recent Law 360 story by Nick Muscavage, “Coffee Co. Tries To Turn Up Heat on Sills Cummins in Fee Dispute,” reports that Sills Cummis & Gross PC is facing amended claims of legal malpractice in a years-long case for allegedly misleading a New Jersey-based coffee company about its fee rate.  The Newark-based law firm originally filed a complaint in New Jersey Superior Court against Two Rivers Coffee LLC in 2017 to collect on portions of an $85,181 legal bill the firm claims the coffee company owes for 262 days of work.

Two Rivers, however, responded by filing a malpractice counterclaim against Sills Cummis, alleging the firm regularly failed to follow the coffee company's instructions, failed to communicate properly with the company and inflated its fees.  On March 12, Two Rivers filed a motion seeking to amend its answer and bolster its counterclaims against Sills Cummis.  "From the outset, Sills did not honor these billing rates and, in its purported invoices, charged Two Rivers in excess of what its purported engagement letter allowed," Two Rivers claimed in its motion.

"Our bills for professional services are based on hourly billing rates.  A different billing rate is applicable to each attorney depending upon that attorney's experience and area of expertise," Sills Cummis explained in its engagement letter, according to an exhibit.  "The firm's hourly rates for members working on this matter will be $500 and $375 for associates and $125 for paralegals. These hourly rates change annually each October 1."

But Two Rivers claims it wasn't charged at the promised rates.  Sills' first purported invoice to Two Rivers, dated March 10, 2015, and covering January 2015, billed Two Rivers $595 and $525 per hour for two members and $465 per hour for an associate, according to the motion.  In March of that same year, Sills Cummis invoiced Two Rivers $525 for a member fee, according to the motion.  The alleged overbilling did not come to Two Rivers' attention until it was going through discovery, according to the motion.

The "overcharging scheme" involved Sills Cummis "invoicing Two Rivers at hourly rates in excess of the rates set forth in the purported engagement letter," Two Rivers claimed in its motion.  The alleged overbilling "is based on documents that have always been in Sills' control — its own purported engagement letter and its own purported invoices," the coffee company said.

Sills has always known, or at least should have known, what it agreed to charge and what it in fact did charge, Two Rivers contended.  Because the documents in question are in the possession of Sills Cummis, Two Rivers believes it will be difficult for the law firm to argue against the coffee company's claims.  Discovery, Two Rivers said, would have no impact on the files already in possession of the firm.

"This outcome is all the more fair when one considers that it is based on evidence that has always been in the possession of Sills, rather than in the possession of Two Rivers or a third party," Two Rivers claimed in its motion.  "There is no credible way for Sills to argue that this amendment constitutes any unfair surprise or prejudice to Sills.  To the contrary, it is more likely that Sills has known all along that it charged excessive hourly rates and chose to keep that knowledge to itself until Two Rivers brought it up."

Two Rivers is claiming Sills Cummis committed legal malpractice by willfully breaching its fiduciary duty and damaging the coffee company.  It is seeking compensatory and punitive damages against the law firm in amounts to be determined at trial.