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Category: Attorney-Client Relationship

Quinn Emanuel Defends Billing Practices, Expenses

May 5, 2021

A recent Law 360 story by Rachel Schart, “MiMedx Slams Quinn Emanuel Fees As 2 Other Firms Settle,” reports that MiMedx has accused Quinn Emanuel of seeking unreasonable fees, including for lawyers' luxury hotel stays and fine dining, as part of the cost of defending two former company executives who were convicted of securities fraud.  The allegation, in court papers, comes after the life sciences company settled claims with two other law firms seeking payment of fees as part of the same dispute.

Quinn Emanuel Urquhart & Sullivan LLP, Freshfields Bruckhaus Deringer LLP and Kobre & Kim LLP initially filed suit in New York state court on April 15 alleging MiMedx Group Inc. shirked its obligations to indemnify the firms' clients, company President William Taylor and ex-CEO Parker "Pete" Petit.  Both men were sentenced to a year in prison in February after being convicted of one of two counts each at trial.

Freshfields and Kobre & Kim said in court filings that they had settled their claims against MiMedx.  Without disclosing the terms, the firms wrote in similar notices that their "claims in this proceeding do not make, and never were intended to make, a charge of deception against MiMedx or its general counsel, Butch Hulse, and that the filed action in this matter was a good faith fee dispute, which now has been swiftly and amicably resolved."

But Quinn Emanuel has yet to drop its claims in the lawsuit, and MiMedx took aim at the law firm in an answer filed in a related Florida state court legal fee dispute with the former executives.  In response to the men's counterclaims seeking additional fees to appeal their convictions, MiMedx accused Quinn Emanuel of overbilling Petit and Taylor and then unfairly attempting to collect from the company.

"Quinn Emanuel will have to explain its billing and expense practices," MiMedx wrote.  "These include staffing its trial team with over ten professionals, mostly from out-of-town despite having a large New York office within a few miles of the courthouse; staying in a luxury boutique hotel; having meals catered by a Michelin-starred chef (and supplementing them with separate orders of crab legs and sushi to boot); and charging MiMedx tens if not hundreds of thousands of dollars on a 'last-minute' motion to adjourn the trial that the court found 'border[ed] on the frivolous.'"

MiMedx said Quinn Emanuel has refused to provide it with invoices for its expenses in the case, and that it and the other criminal defense firms have already been paid more than $18 million for their work defending the former executives.  MiMedx's counsel told Law360 that the company has indemnified its former executives where required, but that the law firms can't force it to pay unwarranted fees.  "The company has been reasonable.  It paid pursuant to the indemnity," said Louis M. Solomon of Reed Smith LLP.  "It always reserved the right to make sure that the fees were reasonable, and even now with the convictions in place, we're not obliged to advance any more costs."

Quinn Emanuel's in-house counsel defended the firm's billing practices to Law360.  "Quinn Emanuel tried this case during the pandemic and achieved an acquittal for its client on the most serious count," Marc Greenwald, who is representing the law firm in the New York case, said.  "Quinn Emanuel expects to get paid at the rates that MiMedx agreed, and our work was outstanding.  All the charges were appropriate and reasonable."

MiMedx lodged its Florida state court claims against Petit and Taylor in January seeking permission to stop indemnifying the former executives upon sentencing, as well as reimbursement for millions of dollars in already paid fees.  Petit and Taylor fired back with counterclaims soon after they were sentenced, arguing in April that the company must continue indemnifying them in the upcoming appeal.  Quinn Emanuel, Freshfields and Kobre & Kim filed their separate New York state court suit in April, alleging that MiMedx has violated its contractual duty to pay Petit and Taylor's criminal defense costs.

Article: When Are Outside Fee Experts Required to Prove Attorney Fees?

April 21, 2021

A recent Daily Business Review article by Jonathan Mann, "Appellate Brief: When Expert Testimony is Required to Obtain an Award of Attorney Fees," reports on whether a party seeking an award of attorney fees needs an expert witness to testify in support of the reasonableness of fees requested in Florida.  This article was posted with permission.  The article reads:

Whether a party seeking an award of attorney fees needs an expert witness to testify in support of the reasonableness of the fees requested has been the subject of much discussion and many written legal opinions in Florida.  The answer depends on the type of case, against whom fees are being sought, and in what area of the state the case is proceeding.

The general rule is that a party seeking an award of attorney fees from the other party to litigation must introduce the testimony of an expert witness in support of the request.  Family law proceedings under Chapter 61 are a notable exception, as the statute expressly provides that expert testimony of a fee witness is unnecessary to seek an award of attorney’s fees from the other side in proceedings under that chapter.  The general rule requiring expert testimony appears to hold true when seeking fees in the same proceeding pursuant to a charging lien.  See, Roshkind v. Machiela, 45 So.3d 480 (Fla. 4th DCA 2010).  But things are more uncertain when an attorney seeks unpaid attorney fees from the attorney’s own client or former client.

The Fourth DCA held in Valentin Rodriguez v. Altomare, 261 So. 3d 590 (Fla. 4th DCA 2018) that expert fee witness testimony was unnecessary in a separate breach of contract suit by an attorney against his former client.  The attorney sued his former client for unpaid legal fees under a flat fee contract in a criminal case.  Notably, the case involved a flat fee arrangement.  The former client did not dispute the amount of the fee, and had even acknowledged the debt by executing a promissory note for the unpaid balance.

The Fourth DCA recently reaffirmed and clarified its position on the issue of the necessity of expert fee witness testimony in separate breach of contract actions in Ramblewood East Condominium Association v. Kaye Bender Rembaum, 294 So. 3d 923 (Fla. 4th DCA 2020).  Robin Bresky assisted in presenting oral argument for the appellee before the Fourth DCA in the Ramblewood appeal, and the appellee successfully defended the award of attorney fees.  In that case, the Fourth DCA relied upon Rodriguez in affirming an award of attorney fees for a law firm that filed a separate breach of contract action to collect unpaid attorney fees even though the firm did not present expert testimony as to the reasonableness of fees.  The fee agreement at issue in Ramblewood was not a flat fee like the one in Rodriguez.

The Third DCA also recently followed Rodriguez in Law Offices of Granoff & Kessler v. Glass, 305 So. 3d 345 (Fla. 3d DCA 2020). In Granoff, a law firm sued its former client for unpaid attorney fees incurred in a dissolution of marriage proceeding by bringing a separate breach of contract claim against the former client under the attorney-client fee agreement.  The Third DCA held that expert fee witness testimony is not necessary when an attorney files a separate breach of contract suit as long as the attorney testifies regarding the fees and submits the billing invoices into evidence.  The court noted that in such a case, the fees are sought from a former client who agreed to pay them rather than an adverse party who did not.

In so ruling, the Third DCA certified conflict with Snow v. Harlan Bakeries, 932 So. 2d 411 (Fla. 2d DCA 2006) and the case went to the Florida Supreme Court.  The Granoff & Kessler case was fully briefed and awaiting disposition in the Florida Supreme Court until March 26.  However, on that date the Supreme Court entered an order determining that it should decline to exercise jurisdiction.

As a result, the apparent split that currently exists among Florida DCAs on the issue of whether an attorney pursuing fees from a former client in a separate proceeding must introduce the testimony of an expert fee witness remains.  Thus, whether a party seeking attorney fees requires diligent attention to the facts and circumstances of the particular situation.  For now, it appears that expert fee witness testimony is unnecessary to pursue attorney fees in a separate action in the circuit courts within the Third and Fourth Districts, whereas the opposite is true in the Second and Fifth Districts.  The answer is unclear in the First District, but the cautious practitioner would always be wise to introduce such testimony in support of the request for attorney fees to avoid any possibility of a challenge on such grounds on appeal.

Jonathan Mann is a senior associate at Bresky Law.  Prior to joining the firm, Mann worked as a judicial staff attorney to Judge George A. Shahood at Florida’s Fourth District Court of Appeal.  In this role, Mann managed civil and criminal appeals and gained extensive experience in the appellate process and procedural rules.

Novel Ruling: Law Firm Awarded $10M in Fees After Withdrawing in NJ

April 17, 2021

A recent New Jersey Law Journal story by Charles Toutant, “Novel Holding in New Jersey: Law Firm Awarded $10M After Withdrawing From Case,” reports that a New Jersey judge has awarded $10 million to the law firm of Kirsch, Gelband & Stone in a fee dispute stemming from a $125 million personal injury settlement of a suit by a lawyer who was left paralyzed by a falling utility pole.  Although Kirsch Gelband was ultimately replaced by another firm, it had a key role in developing evidence that yielded such a large settlement, Essex County Superior Court Judge Thomas Vena said.

The ruling, giving a law firm that withdrew from representation a share of successor counsel’s legal fees, based on its contribution toward the recovery, is a novel holding in New Jersey, Vena said.  The ruling gives Kirsch Gelband a 40% cut of the $25 million awarded to its successor in the case, Mazie Slater Katz & Freeman.

Justifiable withdrawal

The case stems from a 2017 accident in which Maria Moser Meister was left paralyzed and brain damaged after a deteriorating utility pole fell on her on a street in Union City.  At the time of the accident, Meister was general counsel for finance firm Milberg Factors in New York, and previously had been an associate at Simpson Thacher & Bartlett.  David Mazie of Mazie Slater obtained the $125 million settlement in May 2020, calling it the largest settlement in New Jersey history.

Vena found that Kirsch Gelband’s Gregg Alan Stone had a stormy relationship with Meister’s husband, Peter, who would contact him at all hours. Finding that Stone had a justifiable cause to withdraw, the judge found that Kirsch Gelband was entitled to a calculation of how much of the fee the firm deserves.

Vena concluded that “the nature of and deterioration of the attorney/client relationship, exhibited throughout the hearing, justified Mr. Stone’s good-faith belief that the representation could not ethically be continued.” Vena said a “balancing of predecessor and successor contribution” was needed to decide Stone’s cut of the fees.  Bruce Nagel of Nagel Rice, who represents Kirsch Gelband, says that “in view of Mr. Mazie’s position that Kirsch Gelband was entitled to zero, we are extremely pleased with the $10 million award.”

But additional proceedings are underway between Mazie Slater and Kirsch Gelband.  Nagel and Mazie have a long history of acrimony.  The two are former law partners who frequently face each other as litigation adversaries.  Their rancor dates back to when Mazie split with Nagel to start his own firm in 2006. Mazie took cases with him that led to disputes over counsel fees.

Nagel said evidence in the case supported his claim, raised in a separate suit pending against Mazie Slater by Kirsch Gelband, that Mazie provided false information to Meister in order to get the case.  Mazie called that claim “nonsensical.”

Nagel also said he was filing an additional motion in the Verizon case to vacate a deal between Mazie and Philip Rosenbach, a lawyer who handled the case before Stone, in which Mazie purchased the other lawyer’s right to receive a referral fee from Kirsch Gelband.  Such a deal is “highly unethical and highly improper,” Nagel said.  But Mazie said Rosenbach “chose to resolve his claim for that one-third referral fee by settling with us rather than being embroiled in this frivolous litigation,” and added that there’s “nothing unethical about it.”

Under Economic Pressure, More Firms Sue Clients for Unpaid Fees

April 13, 2021

A recent Legal Intelligencer story by Justin Henry, “Under Economic Pressure, Large Firms May Increasing Sue Clients for Nonpayment,” reports that economic pressures accelerated by the COVID-19 pandemic have forced many law firms into difficult conversations with clients, as they aim to balance flexibility during an economic downturn with their own budgetary constraints. In some instances, the challenge is leading to lawsuits.  Over the last 12 months since the onset of the pandemic, Am Law 200 firms including Blank Rome, Buchanan Ingersoll & Rooney, Armstrong Teasdale and Baker McKenzie, among others, have sued clients for allegedly unpaid legal fees, court filings show.

Attorneys who represent law firms in collections disputes say firms are wary to sue clients over unpaid fees because it potentially leaves them vulnerable to counterclaims of legal malpractice.  They say law firms see litigation as a last resort, especially during an economic downturn when flexibility in collections can be key to maintaining solid client relationships.  But law firms are also on alert for exploitation by clients citing the economic tribulation of the last 12 months as a pretext to avoid costs, attorneys say.  Industry leaders also said a large portion of these claims by law firms don’t show up on the public record because the services contracts include an arbitration provision for settling fee disputes.

“As firms become billion-dollar-plus big businesses, they tend to be run more like big billion-dollar-plus businesses,” said Ronald Minkoff, a litigation group partner at Frankfurt Kurnit Klein & Selz, who represents law firms in fee collections disputes.  “If they feel that a client is taking advantage of them, they’re much more willing to call the client to account for that.”

Last summer, according to court filings, Buchanan found itself with $2.7 million in outstanding legal fees from Best Medical International, a medical device company that retained Buchanan for patent litigation against alleged infringers in which Buchanan was victorious.  The fee is now the subject of ongoing litigation in the U.S. District Court for the Western District of Pennsylvania.

“Our cash flow difficulties do indeed continue to make it difficult to pay the Buchanan legal bill which now approaches $2.8 million,” said James Brady, Best Medical’s in-house counsel, in a May 11, 2020, email to Buchanan CEO Joe Dougherty, that was included in court documents.  “We will do everything we can to achieve a reasonable settlement with Varian and Elekta so your firm can be fairly compensated.  We appreciate your willingness to continue the forbearance on any collection efforts and we are hopeful a successful plan will be forthcoming soon.”

Court documents also included a May 12 email reply, in which Dougherty told Brady the firm’s board is “growing impatient with my forbearance on initiating collection efforts.”  Dougherty added Buchanan “is not immune from cash flow challenges these days, and the $2.7 million owed is very significant to us.”  Buchanan has annual revenue around $300 million, according to the most recent ALM data for the firm.

Best Medical took the firm to court in July, alleging it had breached fiduciary duties by failing to provide monthly estimates as promised in their initial contract, which the firm denies.  Court records show Best Medical failed to pay monthly payments from Sept. 23, 2019, through Feb. 11, 2020, citing the opposing parties’ request to stay proceedings and postponing a potential settlement.  Buchanan declined to comment for this story.

Armstrong Teasdale on March 17 filed a complaint in the U.S. District Court for the Eastern District of Missouri against former clients, who the firm had represented in multiple lawsuits and in various arbitrations before the American Arbitration Association from October 2018 to October 2020. The suit alleges that the clients owe more than $3.5 million to the firm, plus a 9% annual interest rate.  That amount is equal to 2.3% of the firm’s 2020 revenue of $149.2 million.

In its complaint, Armstrong states the former clients paid legal bills invoiced through July 2019, but alleges that legal bills remain unpaid from then until September 2020, when the clients informed Armstrong they were retaining new counsel.  Armstrong Teasdale declined to comment for this story.  Blank Rome in a Jan. 8 complaint, filed in the Superior Court of the District of Columbia, claimed former clients Joseph Gurwicz and GR Ventures of New Jersey have outstanding legal fees for the firm’s services connected to preparing and filing a provisional patent application.

As of the date of filing, more than 100 invoices dated from Nov. 8, 2017, through Nov. 6, 2019, remain either partially or fully unpaid, the firm alleges.  Of the $485,563 in legal costs incurred by Blank Rome on behalf of their client, the firm claims $187,860.85 have yet to be paid in full.  In addition, Blank Rome said it’s owed an annual accrued interest rate of 6%, bumping the total amount of the firm’s claim to just over $211,000.

Last week the firm opted to withdraw from the case. Blank Rome declined to comment for this story.  In another case, related to a five-figure fee, Baker McKenzie sued former client Catherine Brentzel in June 2020 in D.C. Superior Court.  Last month, the court entered judgment in the amount of $77,325.88 in the law firm’s favor, court records show.

Minkoff said there had been a stigma attached to firms using the court to induce payments from clients, because it might signal poor client relationship management on the part of the law firm.  But that has taken a back seat in recent years due to revenue pressures and stagnant demand, which have been ramped up by the COVID-19 pandemic, he said.

“There were businesses and law firms who were affected by the pandemic in a negative way, and that increased the pressure in these situations,” Minkoff said.  “The Big Law numbers were not usually affected, particularly at the top levels, but the pressures that existed before the pandemic existed during the pandemic and will exist after the pandemic.”  Minkoff said the industry may be in for a rise in the volume of fee collections disputes between firms and their clients, mirroring the uptick that occurred in the mid-2010s.

“Partners are under pressure to bring in as much money as they can, and that has led to more aggressive behavior in terms of fee collections and those kinds of disputes,” Minkoff said.  He added that the rise in fee collections litigation coincides with firm protectionism in partnership agreements.

Expense-related pressures fall on the side of clients, who are sometimes surprised by high litigation fees and prefer to wait for a result to pay.  “The firms are more aggressive, they have more tools at their disposal to get paid, they’re more willing to litigate to get paid, especially if it’s a sort of one-off arrangement,” Minkoff said.  “Clients are faced with this kind of sticker shock.”

Akerman litigation partner Philip Touitou said law firms are even more focused on collections during the pandemic.  He said the crisis has “changed the dynamic” between clients struggling to make payments and law firms, who work to balance accommodations for struggling clients with their own financial pressures to make budget.  Touitou added that flexible fee structures are “here to stay” as law firms work to avoid potential fee disputes from the outset of a client engagement.

“I think the pandemic has only accelerated that effort,” Touitou said. He added that as firms reevaluate their costs after working remotely and cutting travel expenses to zero, they “may be in a better position to offer more flexible [fee] structures.”  “I think the benefits of law firm cost consciousness will work to the benefits of clients,” he said.

Fee Dispute Sent to Arbitration Despite Illegal Fee Clause

March 31, 2021

A recent Law 360 story by Carolina Bolado, “Atty-Client Spat Sent To Arbitration Despite Illegal Fee Clause, reports that a Florida state appeals court ruled that a woman's suit against her former attorney for erroneously wiring funds to a hacker's account number is subject to an arbitration clause in their retention agreement, even though a fee-shifting provision in the agreement was deemed invalid.  Florida's Third District Court of Appeal said that the arbitration clause in the agreement between Valeria Sessa and Natalie Lemos of Leinoff & Lemos PA is valid, and that it unambiguously covers Sessa's tort claims against her former attorney for sending half of her divorce settlement to a hacker's bank account.

Sessa had argued that the disputes subject to the arbitration clause in the agreement are limited to claims of fee disputes and legal malpractice, not generalized tort claims like hers, but the appeals court disagreed.  "The duty Lemos owed to Sessa, and allegedly breached by Lemos, is simply not the type of duty generally owed to others besides the contracting parties," the appeals court said. "It is, rather, a duty 'created by the parties' unique contractual relationship.'"

The agreement also included a severability provision, which the appeals court said allowed it to divorce the enforceable arbitration clause from the invalid provisions that require the client to advance any arbitration costs in the event of a dispute and to pay for the firm's attorney fees and costs.  The appeals court said Florida lawyers are barred from agreements with clients that prospectively limit their liability for malpractice.

"While the subject provisions in the arbitration clause are certainly not the type of exculpatory clauses expressly prohibited by the rule, in practice the two provisions erect a significant barrier to a client seeking recourse against her lawyer," the Third District said.  Sessa hired Lemos in June 2018 to represent her in her divorce.  In 2019, Sessa and her ex-husband negotiated a settlement that required him to make two lump-sum payments to her, according to the opinion.

The first payment was made directly to Sessa's brokerage account, but the second was made to Lemos' trust account so that she could deduct any outstanding fees and costs before wiring the balance to Sessa, according to the opinion.  But someone hacked into either Sessa's or Lemos' email accounts, and Lemos received fraudulent wiring instructions. She wired the balance of the second payment to a phony bank account and the money was never recovered.  Sessa then filed a lawsuit and Lemos asked for the court to compel arbitration. The trial court denied that request after finding that the arbitration clause was ambiguous and unenforceable because of the invalid fee-shifting provisions in the agreement.