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Billing Rates at Issue in Bankruptcy Matter

September 17, 2020 | Posted in : Bankruptcy Fees / Expenses, Ethics & Professional Responsibility, Expenses / Costs, Fee Award Factors, Fee Dispute, Hourly Rates, Legal Malpractice, Practice Area: Bankruptcy / Restructuring

A recent Daily Business Review story by Michael Mora, “Carlton Fields Billing Rates in Spotlight as Firm Battle for About $80,000 in Attorney Fees” reports that Carlton Fields is demanding tens of thousands in fees to prepare several partners for a series of depositions.  The problem?  The other side argues the lawyers are merely fact witnesses, entitled under federal rules only to a maximum $40 daily witness fee for depositions.  It’s the latest issue in a malpractice suit that has dogged the firm, and garnered widespread attention.

Jan L. Jacobowitz, the director of the professional responsibility and ethics program at the University of Miami Law School, said the fee determination is complicated, because it is a bankruptcy case with a creditor trustee adversely pleading against the debtor’s former counsel.

The dispute is between Carlton Fields and Dan Stermer, the court-appointed creditor trustee pursuing claims against people or entities responsible for ATIF’s demise. The litigation is pending in the U.S. Bankruptcy Court for the Middle District of Florida.

Carlton Fields attorneys and former ATIF counsel mentioned in the litigation include Steven Dupré, Nathaniel l. Doliner and William G. Giltinan, shareholders in the Tampa office, as well as Marty J. Solomon, who is now a partner at Awerbach | Cohn in Clearwater.

Dupré, a whose professional biography describes him as a seasoned business trial lawyer and Carlton Fields shareholder with more than four decades of experience, billed about $73,000 for nearly 88 hours at his standard hourly billing rate of $830.  Doliner — who specializes in mergers and acquisitions, corporate law, corporate governance and joint ventures — sought compensation for five hours at $820 an hour.  Solomon sought 3.5 hours at $735 an hour. And Giltinan, who chairs the firm’s intellectual property practice, sought about two hours’ pay at $620 an hour.

In total, Carlton Fields billed the ATIF bankruptcy estate around $80,700.  Bob Jarvis, a professor of law at Nova Southeastern University, said based upon his review of the motion, the argument made by Carlton Fields is overreaching, and the court will likely reject it.

However, Dennis P. Waggoner, a partner at Hill Ward Henderson and outside counsel for Carlton Fields, justified the deposition fees, citing the Federal Rules of Civil Procedure, which governs discovery from a non-party.  “It specifically authorizes the court to impose as a sanction lost earnings or reasonable attorney fees against the subpoenaing party, who does not take reasonable steps to avoid imposing an undue burden for the party being subpoenaed here,” Waggoner said.  Now, it will be up to U.S. Bankruptcy Court Chief Judge Caryl E. Delano to decide whether to award those fees to Carlton Fields.

Thomas M. Messana, a partner at Messana P.A. in Fort Lauderdale who is representing the creditor trustee, said the relief the Carlton Fields lawyers have sought should not be granted for three reasons.  Messana argued that when Carlton Fields received the Rule 30(b)(6) subpoena, the law firm had an obligation to choose a person with sufficient knowledge about the topics listed.  Instead of doing that, Messana claimed the representative the firm selected required nearly 90 hours to educate himself, and then later wrongly required the party seeking testimony to pay for it, which is contrary to the Federal Rules of Civil Procedure.

The trustee’s counsel also argued the U.S. Code fixes witness fees for a fact witness to attend a deposition at $40 per day.  And since the plaintiff called for fact witnesses, not court-appointed experts, it should not cover the difference between the hourly rate and the amount designated by the U.S. Code.

Plus, according to the creditor trustee, Carlton Fields’ actions resulted in the plaintiff having to incur the cost and expense of taking four depositions, instead of one Rule 30(b)(6) deposition. Messana said Carlton Fields’ request to have the plaintiff cover those fees are invalid.

Jarvis believes the trustee’s objection is well-founded.  “Clearly, there is a difference between a fact witness and an expert witness,” Jarvis said.  “And just because the fact witness is a lawyer does not mean that the witness is entitled to his or her normal billing rate.”