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Archive: 2016

Settlement Offer Irrelevant to Setting of Attorney Fees

December 29, 2016

A recent Metropolitan News story, “Settlement Offer Irrelevant to Setting of Attorney Fees,” reports that ta California Court of Appeals reversed an attorney fee award of $72,000 because the judge took into account the amount of the cross-defendant’s settlement offer, also $72,000.

The client, cross-complainant Dependable Highway Express, Inc., had gained a judgment for $3,096.94 for freight and delivery charges which the shipper, plaintiff and cross-defendant TSE Worldwide Press, refused to pay, instead suing Dependable for damages based on late delivery of yearbooks to New York.  TSE eventually dismissed its action, with prejudice.

Dependable’s lawyer, David E.R. Woolley (who also represented the client on appeal), sought attorney fees of $110,999.40, based on a contractual provision for fees to the prevailing party.  The time he said he devoted to the case included time spent in connection with the defense of TSE’s action on the complaint, explaining that the rival actions were intertwined.

Los Angeles Superior Court Judge Gregory W. Alarcon said, in his order awarding $72,000:

“Defendant appeared in court on February 24, 2015, the original trial date, and pursuant to code, should have been prepared to begin trial.  Though the case was trailed until March 23, 2015, counsel did not need to conduct any further trial preparation at this time….Defendant claims that he has continued to expend fees in the amount of $26,408.18.  This increase in fees is unreasonable considering trial preparation should have been completed on February 24, 2015.”

Alarcon also said that Dependable had offered to settle the case for $72,000, an offer TSA spurned.  He remarked that the amount of the offer “is persuasive in informing the Court as to the value Defendant puts on his time.”

On appeal, TSE asserted that the amount of the settlement offer was an irrelevant factor. Div. Four of the Los Angeles-based appeals court, in an unpublished opinion by Justice Nora Manella, agreed. She wrote:

“In its order, the court made no reference to the trial or pre-trial proceedings, or to the character or reasonableness of the work performed by counsel.  Its only findings were that the $72,000 settlement offer represented a good indication of ‘the value [respondent’s attorney] puts on his time,’ and that the amounts incurred after February 24, 2015 were ‘unreasonable.’ 

Although the court observed that its award of $72,000 represented 160 hours of work compensated at a rate of $450 per hour, it did not state that it found 160 hours to be a reasonable amount of time for an attorney to have billed during the litigation or $450 to be a reasonable hourly fee.  As the court’s explanation relied on the final settlement offer, rather than on the amount of work the court determined was reasonably performed by respondent’s counsel, and did not indicate whether pursuit of the cross-complaint was inextricably intertwined with defending against the complaint, the order must be reversed.”

The matter was remanded for a re-setting of fees.  The case is TSE Worldwide Press v. Dependable Highway Express, B269747.

Agency Defends $1B in Fees in Contingency Deal

December 28, 2016

A recent Credit Union Times story, “Metsger Defends $1 Billion in Contingency Legal Fees,” reports that, defending the agency’s legal fees, National Credit Union Administration (NCUA) Chairman Rick Metsger said that efforts to recover damages associated with the failed corporate credit unions likely would have failed if the board refused to pay legal bills on a contingency basis.

That arrangement has cost the agency slightly more than $1 billion—leaving the agency with some $3.1 billion in recoveries after the fees and expenses were paid.  The legal fees were paid to two law firms-- Korein Tillery and Kellogg and Huber, Hansen, Todd, Evans & Figel.

In a letter last month, Rep. Mick Mulvaney (R-S.C.) told Metsger that the NCUA’s budget was increasing too quickly and he raised additional questions about the agency’s legal fee arrangement.  President-elect Donald Trump recently announced he intends to nominate Mulvaney—who has been a critic of NCUA management times—as the director of the Office of Management and Budget.

In his letter to Metsger, Mulvaney said that he is concerned about the NCUA’s “persistent failure to control expenses,” adding that the agency’s budget has continued to “balloon.”  He also said a more prudent decision about legal fees might have saved the agency billions of dollars.

In response, Metsger said that the NCUA has a fiduciary and legal responsibility to seek damages from the Wall Street firms whose sale of investments in faulty residential mortgage-backed securities resulted in the downfall of corporate credit unions.

“In hindsight, it is hard to see how NCUA could have brought these cases at all without the contingency fee arrangement,” Metsger wrote.  The legal battles have allowed the agency to repay all the money borrowed as part of the Temporary Corporate Stabilization Fund.

Metsger said the contingency fee arrangement insulated credit unions from paying the cost of litigation if the suits were unsuccessful.  “The litigation has been every bit as complex and contentious as we had anticipated,” he wrote.

NALFA 2016 Year in Review

December 26, 2016

NALFA had another successful year.  The following is a list of major accomplishments of NALFA in 2016:

  • NALFA Offers a Certificate in Reasonable Attorney Fees, the Nation’s First and Only Certificate of its Kind.
  • NALFA Hosted 7 CLE Programs on Attorney Fees and Legal Billing Topics, accounting for 15 hours of CLE programming. Faculty included 21 panelists (including 6 Sitting U.S. District Court Judges). 180 attorneys from across the U.S. registered for these programs.
  • NALFA Names Nation’s Top Attorney Fee Experts of 2016
  • NALFA Names Nation’s Top Legal Bill Review Programs of 2016
  • NALFA Names Nation’s Top Fee Dispute Mediators of 2016
  • NALFA Names Nation’s Top Bankruptcy Fee Examiners of 2016
  • NALFA’s Fee Dispute Mediation Program achieves an 86% resolution rate – parties who mediate in a session are resolved six out of seven times.
  • NALFA Promulgated Best Practices in Legal Fee Analysis
  • NALFA Reported on Key Cases and Important Articles on Attorney Fee and Legal Billing Matters throughout the year in its New Blog.
  • NALFA Expands to Include International Members. Building a relationship with the UK’s Association of Costs Lawyers (ACL)
  • NALFA Spotlight Featured Members in Blog Posts and Emails

Florida State Senator Seeks to Limit Attorney Fee Entitlement

December 23, 2016

A recent Florida Record story, “State Senator Makes Second Attempt to Limit Attorney’s Fees,” reports that State Senator Greg Steube (R-Sarasota) gave action to the old adage “If at first you don’t succeed…” when he refiled Senate Bill 80.

SB 80 is intended to provide greater discretion to judges, who preside over public-records cases, on the amounts and types of attorney’s fees that can be awarded.  The version of SB 80 Steube filed was a revised version of one he filed in the last legislative session, when he was a state representative.  That version of the bill passed the Senate, but stalled in the House.

According to floridapolitics.com, the current law states that judges “shall award attorney’s fees” in these cases.  SB 80 makes a key change to the current legislation by amending the current language to “may award attorney’s fees.”

Organizations like the Florida League of Cities have advocated for providing judges with this decision-making power, believing that the change will refocus the number of lawsuits against public officials.  With the elimination of guaranteed fees for attorneys, people may not be as quick to file suit against a public official when an honest, clerical mistake has been made.

On the other side of the argument are organizations like the First Amendment Foundation, which argue that passage of the bill may have negative consequences, such as in cases that involve local governments that purposefully refuse to honor public-records requests.

“This bill seeks to impose a new burden on the right to obtain attorneys fees when a citizen is required to file a lawsuit to view public records," Lawrence G. Walters, an attorney at Walters Law Group, told the Florida Record.  "The attorney's-fee entitlement under existing law is an important element of the public-records regime because it creates an incentive for state agencies to keep government records open to the public.”

Steube told the Bradenton Herald that this change is necessary to curtail those who are looking to work the system.  There have been cases in the past where an individual files one public-records request after another with an agency.  This cycle continues until it becomes an impossibility for the agency to fulfill those requests in a “reasonable amount of time.”  The filer then moves forward with a lawsuit.

Walters wonders about the long-reaching effects of the bill should it pass into law.  “If the bill passes, it may well serve as a model for other states looking to mitigate the consequences for failing to honor certain public-records requests,” he said.

“By requiring a written demand for records before attorneys fees can be awarded, noncompliant state agencies will not face any meaningful consequence if they refuse to provide access to public records upon verbal request," Walters said.  "This may encourage certain officials or agencies to treat verbal requests as less important."

Things to Consider Before Suing a Client Over Unpaid Fees

December 22, 2016

A recent The Recorder article, “Things to Think About Before Suing a Client Over Past-Due Bills,” by Randy Evans and Sheri Klevens considers suing clients over past due legal bills.  The article reads:

For several years, demand for law firm services has remained largely flat.  Consequently, firms have sought to capture additional market share and have adapted their economic practices to ensure viability.

In addition to strategic firm management decisions and rate increases, firms are also focusing their efforts on managing and collecting receivables.  Historically, firms have avoided suing clients for unpaid legal fees, leaving them uncollected, and for good reason—work was abundant and productivity consistently trended higher.  Other reasons governing this decision were unfavorable press, exposed business practices and increased costs.

But stagnation in the legal industry means that firms of all sizes and locations have been more willing to take on these risks to get paid.  When working to collect receivables, the challenge is to avoid reaching the point when suing the client is the only remaining option.  This involves following some simple but important steps.

Send Invoices Early and Frequently

Billing is simultaneously one of the least enjoyable aspects of a law practice and one of the most important.  Good billing practices benefit client relationships because most clients prefer to know early and often how much they owe and for what.  Moreover, the California Rules of Professional Conduct require attorneys to keep clients reasonably informed about developments relating to the representation, which arguably encompasses fees rendered for legal services. See Rule 3-500.

The single most preventable basis for a fee dispute is untimely billing where sizable bills are sent late (and even after the matter has been resolved).  On the other hand, regular, monthly billing is easier to digest than one big bill at the end.  Additionally, bills sent while there is a higher possibility of success are more palatable than those sent after a loss.  As a result, the most effective method for collection begins with creating and sending invoices early and regularly.

Pursue Non-payments

Non-payments rarely resolve themselves with the passage of time.  Instead, the outstanding fees inevitably become the focus of every conversation, meeting and written communication.  Left unaddressed, non-payment can evolve into claims.

Effective collection techniques typically involve use of a diary system that provides routine reports on when payments are received and when they are not.  Bills older than 60 days require attention and follow-up, while those older than 90 days require action.

Determining why a client has not paid a bill is an important step in the collection process.  There are four common reasons a client has not paid a bill.  The first is an unintentional oversight—the bill was lost or misfiled, the client reassigned the responsibility for accounts payable to a different person, or there was a computer or system processing error.  In these situations, the goal should be for a quick follow-up to remedy any minor issues to allow for payment.

Second, the client may have an administrative issue with the bill.  For example, the rate charged or number of hours worked on a project might be higher than the client and the firm agreed.  Perhaps the statements for services rendered do not comply with agreed billing procedures.  More often than not, the problem is resolvable and may be addressed before creating an issue for future invoices.

Third, a client may have insufficient funds to pay the bill.  When faced with this situation, many attorneys will evaluate the likelihood of getting paid, the impact of never getting paid, and the significance of the lawyer-client relationship.  This evaluation involves far less risk when conducted before the receivable has grown from a manageable write-off to a potentially debilitating bad debt.

If the law firm decides that it cannot continue without payment, it needs to communicate that decision to the client promptly.  If the client offers no acceptable alternatives, then the firm may seek to withdraw from the representation in accordance with the applicable rules and laws.

Finally, some clients are simply dissatisfied with the work performed or the value of the services billed.  When that happens, attorneys and law firms have to consider the options for resolving the fee dispute.

Resolve the Dispute

When a fee dispute arises, there are three options to consider before resorting to litigation.

An informal meeting between the client and the firm can yield good results.  It also can help to involve an attorney other than the one whose services are at issue for this discussion.  The challenge is to eliminate personal emotions so that a business solution is possible.  In the end, a good business decision will weigh the costs and risks against the likelihood and amount of recovery.

In some situations, informal discussions regarding outstanding fees are just too difficult for the law firm and the client to discuss in a productive way on their own.  When those situations occur, mediators can bridge the communication gap and save both parties fees, expenses and time.  Absent a client who is set on bringing an action for legal malpractice, the most common law firm response is to propose mediation before filing an action for attorney fees.

Finally, there is arbitration.  California has a Mandatory Fee Arbitration Code, under which the Mandatory Fee Arbitration Program (MFA) is administered to provide informal, confidential and relatively low-cost fee dispute arbitrations. MFA arbitration is mandatory for the lawyer if the client requests arbitration.

This service is beneficial for attorneys because it does not involve a counterclaim for legal malpractice, although the arbitrator can reduce an award if he or she believes the malpractice reduced the value of the attorney's services.  The decision to pursue fee arbitration, whether binding or nonbinding, is often considered before bringing an action for attorney fees and could be addressed in the fee agreement.

Carefully Consider Litigation

Deciding whether to sue a client for unpaid fees requires a careful balance of risks and rewards.  Although litigation is sometimes inevitable, the decision to sue is one not to be made precipitously.

In California, attorneys sometimes wait until after the statute of limitations for legal malpractice has expired to demand payment of unpaid fees because the time to sue for breach of contract is generally much longer than the time to sue for malpractice.  Nonetheless, by following these simple steps in the collection process, firms may be able to avoid having to reach that decision.

Loser Pays Court Rule First of a Kind

December 21, 2016

A recent Spokesman Review story, “'Loser Pay' Rule in Idaho Court System Could Make Justice Available Only to Those With Deep Pockets,” reports that the Idaho Supreme Court has launched the...

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Report: Hourly Billing Still Commonplace

December 16, 2016

A recent Corporate Counsel story, “The Billable Hour Just Won’t Die, Report Finds,” reports that, while alternative fee arrangements are gaining popularity, data recently collected by the...

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