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Judge Wants Skadden Affidavit on Fees and Billing Practices

March 4, 2021 | Posted in : Billing Judgment, Billing Practices, Billing Record / Entries, Defense Fees / Costs, Ethics & Professional Responsibility, Expenses / Costs, Fee Discovery / Fee Disclosure, Fee Dispute, Fees & Judicial Discretion, Fees for Fees / Fees on Fees, Fees in Transactional Matters, Hourly Rates, Legal Bills / Legal Costs

A recent Law 360 story by Jeff Montgomery, “Chancery Wants Skadden Affidavit in TransPerfect Fee Fight,” reports that Delaware's chancellor ordered Skadden to submit an affidavit attesting to the accuracy and reasonableness of custodian fees recently charged to TransPerfect Global Inc., saying it was in the interest of ending billing battles stemming from a rancorous court-ordered sale of the business.  Chancellor Andre G. Bouchard gave Skadden Arps Slate Meagher & Flom LLP and custodian Robert B. Pincus a week to submit the information after a half-day argument on three pending issues in the case.  Among them was a motion by Pincus for a discharge from his custodian's role with indemnification and nondisparagement protections, among other terms, opposed by TransPerfect and co-founder Philip R. Shawe.

Also at issue were claims by TransPerfect that Skadden had charged excessive and unsupportable fees on a range of matters, including "fees on fees" billings for Pincus' and Skadden's defense against fee claims, as well as a TransPerfect motion to block Pincus and Skadden from recovering fees for a contempt action.  While taking the overall issues, including Pincus' discharge, under advisement, the chancellor also directed Skadden to provide support in its affidavit for more than $200,000 in billings for what were alleged by TransPerfect to be "the administrative work" of sending a bill.

"Is it typical? I'm not aware of it happening," the chancellor said.  "I'm talking about [billing for] the actual generation of an invoice and, if you will, running that bill.  Give it thought.  If it's your position that it's ordinary and that it would be billed to a client ordinarily and permissibly, so attest" in the affidavit.  "If you want to carve that out. It might be prudent to do so."

Pincus was appointed custodian of TransPerfect after its two co-founders, Shawe and Elizabeth Elting, had a falling-out and could not agree on how to manage the company.  In May 2018, the Delaware Supreme Court affirmed the chancellor's February 2018 ruling that allowed Shawe to buy Elting's 50% stake in the company.  Chancellor Bouchard had also determined that Pincus' impartiality wasn't compromised by threats of litigation made against him by Elting or by Shawe's alleged interference in the sale process.

During the arguments, Jennifer C. Voss of Skadden, counsel to Pincus, said the expenses had been prompted by TransPerfect's and Shawe's actions, and were handled with the same diligence and efficiency as that given to all of Skadden's clients, at rates consistent with its practice.  "Mr. Shawe is an adjudicated serial litigator," Voss told the court while arguing for Pincus' discharge.  "Now, years out from closing [on the TransPerfect sale], he has filed a barrage of baseless, unprovoked attacks against Mr. Pincus and Skadden.  These attacks are meant to coerce Mr. Pincus. He has not succeeded, but they're also meant to harass him and his advisers."

Voss said TransPerfect and Shawe "weaponized access to billing statements" for a "punitive and protracted campaign of fee warfare," despite Pincus' right to recover costs as custodian and for litigation in disputes with TransPerfect and Shawe in the years after the sale.  Much of the dispute related to the custodian's authority to bill TransPerfect for the costs of responses to or defenses for challenges raised by the company and Shawe.

During the hearing, David B. Goldstein of Rabinowitz Boudin Standard Krinsky & Lieberman PC, counsel to Shawe, described the billing arrangements as a "fee merry-go-round," with filings by TransPerfect and Shawe generating billings from the custodian, objections to the bills and new bills for addressing the objections.  "The sale of TransPerfect Global closed almost three years ago," Goldstein said.  "At that point, TransPerfect had already been ordered to pay Skadden almost $13 million, and another $31 million to [Pincus'] handpicked advisers."

Fee and other disputes since then have pushed the total to $14 million for Skadden and $45 million for advisers, Goldstein said, with additional billings pending.  "Our position is these fees are really excessive," Goldstein said, arguing that the process appeared to have become a "billing frenzy" without end.  "I'm not telling the court or suggesting that Skadden should get zero," he said.  But "if they got nothing else, they would have gotten far more than a reasonable amount of fees."

Voss disputed TransPerfect's calculations of the billings and costs of the case, and said expenses had been driven by TransPerfect's and Shawe's frivolous arguments, haphazard and mistaken filings, and pressures for expedited court proceedings.  One billing alone, Voss noted, was answered with 100 pages of objections.