A recent New York Law Journal story, “Judge Slashes $10M in Fees Over Firm’s Use of Temporary Associates,” reports that criticizing a plaintiffs firm for hiring temporary associates for routine document review—but billing as if normal staff associates did the work—a New York federal judge has cut $10.3 million off a fee request in a settlement of a mortgage-backed securities case against Bank of America Corp.

Ruling on Dec. 27, U.S. District Judge William Pauley III in Manhattan signed off on a $335 million settlement between Bank of America and a certified class of investors.  The deal's approval came in a five-year-old case that accused the bank of misleading investors about its financial exposure related to demands that the bank repurchase residential mortgage-backed securities it had sold.

But while the judge found that the settlement deserved approval, he took issue with a request for $51.6 million in fees by plaintiffs lawyers at Pennsylvania-based Barrack, Rodos & Bacine.  After questioning the hourly rates that the firm ascribed to a group of temporary lawyers who worked on the case, the judge awarded Barrack $41.3 million in fees.

"Hiring a group of temporary associates and billing them out at more than $350 per hour for work that is typically the domain of contract attorneys or paralegals seems excessive," the judge wrote.

Barrack had hired 16 lawyers in 2013 and 2014 to work exclusively on the Bank of America case, according to Pauley.  While the firm hired those lawyers as full-time associates, and offered for them to take part in the firm's health and retirement plans, the judge said that none of the lawyers has remained with the firm.  As a group, the lawyers stayed with Barrack for an average of about a year, although at least a few of them stayed for just one month.

Law firms often farm out low-level document work to temporary or contract lawyers, as Pauley noted in his opinion.  But in Barrack's case, the judge found that it didn't make sense to charge as much for the temporary lawyers' work as the firm would for its regular associates.

"Delegating the legwork of complex litigation (such as routine document review) to less-costly associates or temporary contract attorneys is common practice, and it is not this court's place to dictate law firm structure or workflow," the judge wrote.  "What is troublesome, however, is Barrack's practice of 'gear[ing] up' for discovery by hiring a large group of temporary 'associates' and billing them at the firm's standard rates for what this court must assume was first-cut document review."

In light of those findings, Pauley decided to trim the attorney fee award by more than $10 million.  The judge wrote that the fees could be collected once 75 percent of the $335 million settlement has been distributed.

The judge also signed off, in full, on expenses that Barrack detailed in connection with the settlement—Pauley awarded roughly $1.4 million in litigation expenses to Barrack and a little more than $130,000 in expenses for the lead plaintiff in the case, the retirement plan for Pennsylvania's public school employees.