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Judge Slashes 80 Percent of Attorney Fees in Bitcoin Case

March 17, 2020 | Posted in : Expenses / Costs, Fee Award, Fee Reduction, Fee Request, Hourly Rates / Hourly Billing

A recent Law 360 story by Deal Seal, “Judge Slashes 80% of Atty Fees Owed by Bitcoin ‘Inventor’,” reports that a Florida federal judge said that attorneys for an estate suing self-proclaimed bitcoin inventor Craig Wright are seeking fees in a sanctions dispute that far exceed the norm in Palm Beach.  Invoking former House Speaker Tip O’Neill’s phrase that “all politics is local,” U.S. Magistrate Judge Bruce Reinhart said “so, too, with attorney’s fees” before granting Roche Cyrulnik Freedman LLP and Boies Schiller Flexner LLP a total of $113,760 for work performed while trying to get Wright to comply with court orders.

Those attorneys, representing the estate of Wright’s former business partner in a suit over what could be billions of dollars worth of bitcoin and intellectual property, had requested $592,558, but Judge Reinhart cut some billable hours and slashed hourly rates for the Miami- and New York-based lawyers, who’d sought hourly rates between $610 and $1,050.  “I find all these rates to be excessive,” the judge said. “I am personally familiar with the hourly rates charged by the top civil litigators in Palm Beach County. Those rates range between $600 and $700 per hour.”

The reduced award comes after Judge Reinhart granted sanctions against Wright for “continued non-compliance” with court orders that required he provide information about his bitcoin holdings in the suit, in which the estate of the late David Kleiman claims Wright sought to seize bitcoin owned by Kleiman following his death.

Wright has called the suit a shakedown and said the complaint is based on speculation and motivated by greed.  He says Ira Kleiman, who sued on behalf of the estate, tried to mine his brother's hard drives after his death only to find that any possible fortune hidden therein was encrypted and out of reach.  The judge’s sanctions order awarded attorney fees and costs to the Kleiman estate for work done trying to compel Wright’s compliance, but the estate got an extension on putting in a formal motion after the parties said they'd reached a settlement agreement in principle.

Settlement talks have since faltered, leading Kleiman to file a motion in November for fees and expenses that include a digital forensics expert who could allegedly show Wright was lying about having transferred all of his bitcoin to a blind trust.  Wright called the fee request “egregious” last December, arguing that the lawyers requested hourly rates that far exceeded the prevailing market rate and failed to adequately explain how they spent the more than 700 hours they claim they did filing two motions and preparing for an evidentiary hearing.

The $900 and $690 rates sought by two Roche Cyrulnik Freedman attorneys and $1,050 and $610 rates sought by two Boies Schiller Flexner attorneys were higher than the rates typically charged by South Florida attorneys practicing sophisticated commercial litigation and thereby unreasonable, the judge said, awarding each lawyer a rate that was between 50% and 64% of what they asked for.

Judge Reinhart also took time cutting billable hours for work that he found to be excessive, not well specified, took an unreasonable amount of time or did not relate directly with the motions and evidentiary hearing at issue in the sanctions dispute.  The judge’s order brings the total attorney fees owed by Wright to Kleiman’s counsel down to $113,760 and cuts an expense award from $66,023 to $52,040, with the judge finding that it was difficult to assess fees for the digital forensics expert used by Kleiman “because no information was provided regarding his hourly rate or how he spent his time.”