A recent Law.com by Maria Dinzeo, “Law Firm Partner Hourly Rates Rose Last Year at Biggest Clip in at Least a Decade,” reports that hourly rates for law firm partners jumped 4.5% in 2022, driven in part by law firms’ fears of profitability losses from inflation and a drop in M&A activity, according to a report from LexisNexis CounselLink.  The report, based on $52 billion in legal spending across 420,000 timekeepers and 1.4 million legal matters, says that annual percentage increase was the largest since CounselLink put out its first report in 2013.

The largest portion of corporate spending went to partners at the 50 largest firms, those with 750 lawyers or more, where the average partner billed at a 46% higher rate than the next tier of firms with 501-750 lawyers.  The 50 largest law firms also saw their market share swell to 47.3%, particularly in regulatory and compliance, mergers and acquisitions and financial matters, where the 50 largest firms consumed 55% of legal billing in 2022.

“There’s all this increased regulatory pressure going on out there.  And who do you want to handle this stuff?  You’re gonna go to the firms that you think had the most insight into this and that’s going to be the big firms,” said report author Kris Satkunas, director of strategic consulting for CounselLink.  She also recently took a preliminary peak at this year’s numbers, and partner rates are on track to rise 5.4%, an even bigger increase than the 2022 record.  Those rates rose 3.4% in 2021 and 3.5% in 2020.

“It’s a very big leap compared to where we have been running for the last 10 years.  But that number will change.  Will it go up or down?  I don’t know,” she said.  “But that’s where things stand today through the first four months of the year.”  Satkunas noted that 25% of partners had increases of over 10% last year.  She said some legal departments also reported seeing double-digit rate increases.  The hikes could be attributed to firms beginning to feel the effects of inflation and less demand for certain types of work.  “I think there’s some fear about being able to hit profitability,” she said.

M&A activity also declined in 2022 after hitting an all-time high in 2020, experts say, when high demand for M&A work, with accompanying litigation, tax, real estate and intellectual property issues, gave firms more work than they could handle.  “M&A was the gift that kept on giving in 2020 and 2021,” said law firm consultant Kent Zimmermann of the Zeughauser Group.  “The massive demand for talent led to a big rate increase and that caused some firms to pull away a lot relative to their peers on profitability and talent advantage.”  Even though M&A work has slowed, Zimmermann said firms are still vying to attract the “best” lawyers as a path toward profitability.

“Even though demand is soft, that rate lever is still important,” he said.  “If there is any recession, it’s looking like it’s going to be short and shallow, so law firms are thinking.  We need to plan two to four years ahead.  We can’t under-do it on the rate increases.  It’s a big driver of our ability to enhance profitability and compete and attract the best lawyers.”

Some firms raised rates twice over the span of 12 months to keep up.  “The internal messaging was we need to pay to be competitive in the market for associates and their pay is going up,” Zimmermann said.  “You need the best and brightest associates and this is what it takes.”

If law firms have only two levers to profitability- raising rates or drumming up more work— raising rates is the easier of the two, Satkunas said.  “Typically, they are more comfortable raising rates.  It’s actually easier to raise rates and go find new customers or find new new work,” she said.  Though alternative-fee arrangements have grown more popular in recent years, this year’s report notes that their adoption remains largely unchanged, and represented 6.3% of total legal billings in 2022, according to the CounselLink report.

“At the end of the day, I believe that most corporate counsel are just more comfortable negotiating an hourly rate discount than being creative.  It’s easier to negotiate a rate than it is to have to think about, what’s the value of this matter, what am I willing to pay for the outcome I want?” Satkunas said.  “I’m disappointed and I really would love to see a real meaningful uptick in the use of AFA’s but it just hasn’t happened.”

A recent Law 360 by Gina Kim, “Joint Juice Maker Rips Class Attys’ ‘Overstated’ $8.3M Fee Bid,” reports that Premier Nutrition asked a California federal judge to cut $2.4 million from class counsel's "bloated and unreasonable" $8.3 million fee request in litigation over allegedly misleading advertising claims about its Joint Juice, citing block billing, overstaffing, lavish hotel stays and fringe expenses for "boba and coffee runs dating back to 2013."  In a 33-page opposition, Premier Nutrition's attorney Steven E. Swaney of Venable LLP accused class counsel, except for Iredale & Yoo, of presenting to the court "a bloated and unreasonable application asking this court to award $8,274,516" in combined fees, expenses and costs.

Premier argued the lodestar calculation of the two other class counsel firms, Blood Hurst & O'Reardon and Lynch Carpenter "betray a lack of 'billing judgment,'" as they propose a fee award that doesn't approximate what a paying client is willing to approve.  Their lodestar calculation is "massively overstated" since it includes time spent for other related Joint Juice class actions, Premier argued, pointing out the plaintiffs only prevailed in one of 11 related cases but are now submitting a fee bid as if they prevailed on all of them.

Excluding Eugene Iredale and Grace June of Iredale & Yoo, Premier complained that Blood Hurst and Lynch Carpenter's billing records are riddled with inefficiencies, including "top-heavy administration of work," block billing, billing in quarter-hour increments, overstaffing, nontravel work billing and other things.  Examples include Blood Hurst lawyers billing 24 or more hours per day and submitting several duplicative entries on a single day, staffing six lawyers on the trial, "two of whom sat passively in the gallery of the courtroom" and charging $575 per hour for a contract attorney, Craig Straub, doing document review, the opposition states.

"As explained in the declaration of Premier's fee expert Steven Tasher, a 40% across-the-board percentage reduction to BHO's and Lynch Carpenter's lodestar is warranted to account for these inefficiencies," Premier said.  "The total lodestar for class counsel should be reduced to $2,406,809.  This constitutes approximately 29% of the judgment amount, which aligns with the Ninth Circuit's 25% benchmark for reasonable fees."

Premier balked at class counsel's suggestion for the court to apply a multiplier to pump their fee award if their lodestar is reduced, and also took issue with their "extravagant expenses" that it said warrants an across-the-board cut in their claimed charges.

"Class counsel also seek reimbursement from Premier for every sundry or fringe expense they encountered over this decade-long litigation, including boba and coffee runs dating back to 2013," the opposition states. "Class counsel even tries to bill Premier for hundreds of dollars in laundry expenses incurred during trial — even though they apparently traveled back home to San Diego that same day."

The opposition references defense's expert, Tasher, who reviewed the billing entries and opined the class counsel's requests costs also reveal "a 'spare no expense' approach" to the case along with double billing and "phantom charges."  "In my opinion, while the dollar value for many of these items may seem small, they reflect a big attitude of no cost being too great to throw onto the bill and eat, drink and be merry on someone else's dime," Tasher wrote.  "No paying client would tolerate class counsel's lifestyle expenses or lavishness."

Premier said that Blood Hurst and Lynch Carpenter's proposed lodestar figure was grossly inflated and warrants dramatic cuts across the board, arguing that the firms can't include time spent on class representative depositions in other related actions in their calculation.  Blood Hurst's proposed lodestar also includes nearly 1,000 hours for trial prep spent in Mullins, which Premier said should be removed since the Mullins trial never occurred.  It's inappropriate for Blood Hurst to get 100% of the fees for work common to the related cases based on the successful outcome of just one case, the opposition states.

Premier also sought a 40% cut to Blood Hurst's remaining lodestar account for several deficiencies in their billing practices, noting that  the firm's Timothy Blood and Thomas Joseph O'Reardon billed for work done in 2013 at their current hourly rate, which is significantly higher.

While Blood, partner Paula Brown and Straub billed 1,000 hours for trial prep, Blood was the only one who had an active role at trial, and O'Reardon and Straub "sat passively in the gallery," Premier alleged.  Premier also accused Straub and O'Reardon of billing extra hours after trial each day and erroneously adding entries that exceed 24 hours a day "or are obvious duplicates," totaling $62,207.50.

Premier also attacked Lynch Carpenter's fee bid of $392,392.50, arguing the billed work was entirely spent on Mullins.  The fee should be apportioned among the related cases and then cut by 40% due to excessive time and top-heavy administration work, Premier said.  That should leave Lynch Carpenter with $20,842.77.  "As an initial matter, in what can only be described as a shocking act of chutzpah, Mr. Carpenter — who has not worked on these cases since 2020 — includes in his fee petition 13.7 hours to fly to San Francisco to observe one day of trial on May 25, 2022," the opposition states.

Nor should class counsel recover fees and deposition costs for experts that weren't used in the Montera suit, Premier said.  Furthermore, several charges from the two firms weren't only lavish and extravagant, but also "purely wasteful," Tasher said.

"Each of these issues is exacerbated by the level of staffing," Tasher wrote. "Had the trial been staffed with attorneys Iredale, Jun and Blood, (the three attorneys who actually appeared on the record to try the case), the expenses would also have been much more modest.  However, given the excessive staffing (and related trial expenses) of attorneys [Todd] Carpenter, O'Reardon and Straub, the costs grew exponentially, considering the additional flights, Uber/taxi charges, meals/alcohol, and snacks brought about by these three additional timekeepers (essentially double the trial team.)"

A recent Law.com by Riley Brennan, “Nearly $700K in Attorney Fees and Costs Awarded Following $8M Judgment in Wrongful Incarceration Case,” reports that, following an $8 million civil rights judgment his favor, a former Massachusetts prisoner and his Chicago-based counsel were awarded an additional $743,395.87 in attorney fees and costs.  U.S. District Judge Timothy S. Hillman of the District of Massachusetts partially granted and partially denied a former prisoner’s motion for attorney fees and costs, awarding the plaintiff $675,194.88 in fees and $68,200.99 in costs in an April 7 opinion.

The case originated from plaintiff Natale Cosenza’s Section 1983 action, which alleged constitutional claims against various defendants, including the city of Worcester and multiple Worcester police officers, “stemming from his conviction and 16-year incarceration for armed burglary.”

 A jury ultimately found two of the defendants—Kerry Hazelhurst and John Doherty—liable for violations of plaintiff’s civil rights and awarded $8 million in compensatory damages and $30,000 in punitive damages.  Cosenza then moved for the awarding of attorney fees and costs, with defendants arguing against the proposed rates, billing, hours, and costs.  Hillman determined that most of the billing was appropriate, with the majority of the plaintiff’s attorneys’ rates being reasonably allocated.  However, there were three exceptions.

According to Hillman, “three partners spent a significant amount of time drafting motions, work that is typically done by associates and reviewed by partners.  Those three partners will be reimbursed at the mid-level associate rate of $300 for those hours.  Similarly, work on the ministerial portions of fee petitions is reimbursed at a reasonable paralegal rate of $100 an hour.”

Further, Hillman determined from the three attorneys’ descriptions that “only one described their work as legal,” and thus only that attorney’s hours should be “reimbursed at the associate rate, as there are substantive legal issues raised in the fee petition.  The other attorneys will be reimbursed at a paralegal rate for those hours.”

Plaintiff’s also requested for reimbursement of the services of an investigator, which defendants argued against, finding “that there should be no reimbursement for the services of an investigator where the case ultimately turned on the evidentiary record from the original criminal case.”  However, the court didn’t agree.

According to Hillman, the defendants failed to cite any case law for their argument.  Additionally, it did not strike the court as “unreasonable to hire an investigator in a case where the plaintiff’s allegations were that the police lied and destroyed evidence, even if the plaintiff is unable to point to a specific piece of evidence the investigator discovered that was introduced at trial.”  Thus the court, in factoring the investigator’s travel costs to serve defendants and conduct her investigation, determined $100 an hour was a reasonable rate.

In terms of the plaintiff’s counsel’s hours, defendants argued that the case was severely overstaffed, and that two attorneys would have been sufficient.  According to the court, this assertion was on the theory that the case as the case was defended by two attorneys, two attorneys was sufficient for plaintiffs.

“First, reasonable staffing for bringing and prosecuting a civil rights case is not identical to reasonable staffing for defending a civil rights case.  Apart from the normal burden of proof the plaintiffs must shoulder, they must overcome qualified immunity and evidentiary hurdles. But more importantly, the defendants’ objection to facing down 11 opposing attorneys is misleading,” said Hillman.

Hillman disagreed with the defendants’ assertion, highlighting that five of the total eleven attorneys requested minimal hours.  The remaining attorneys, that requested substantial hours, “were split into pre-trial and trial teams of three attorneys each.  Thus, at any given time in the litigation, plaintiff had three counsel and defendants had two—given the structural differences noted above, not an unreasonable staffing discrepancy.”

A similar structure was set up amongst the counsel’s paralegals, leading the court to conclude that a reduction for overstaffing was not warranted.  The court also rejected the defendants’ argument “that because their counsel worked 536 hours between May 4, 2022, and February 13, 2023, and the plaintiff’s counsel worked 770 hours during that time period, the time spent by defendants’ counsel is reasonable and a 30% reduction is in order.”

“Defendants cite no case law to support this position, which would allow an across-the-board reduction for a discrepancy in hours that is not even reflective of the total time spent on the case nor, in the court’s view, particularly egregious,” said Hillman.  “The relevance of that time period is also unclear to this court.  This court does not find a reduction for overbilling warranted on that ground.”

Defendants’ assertion that the time spent “getting attorneys up-to-speed on the case or discussing and strategizing about the case are not billable and request a 10% reduction,” was also rejected by Hillman, who didn’t find the “conferencing” hours for such a complex case unreasonable.  However, the plaintiff’s request for a 50% increase for their success was rejected.  “This was an unusual case, but this court does not find it justifies an increase.  And while this court recognizes the skill of plaintiffs’ counsel, that is reflected in the lodestar,” said Hillman .

The court also rejected the defendants’ counterargument, that due to the plaintiff’s “mixed success,” a 50% decrease was appropriate.  The court rejected the defendants’ theory that a downward variance was appropriate as the plaintiff achieved “nominal success,” finding that an $8 million judgment wasn’t merely considered a “nominal” success.

“Still, the plaintiff’s losses along the way must be accounted for,” determined the court.  “The plaintiff’s counsel did not delineate what they were working on in their fee petition.  That means a blanket reduction is necessary if the claims are not severable.”

“The legal theories and facts in this litigation are neither wholly severable nor so overlapping that they are incapable of independent analysis,” Hillman continued.  “The failure to intervene and malicious prosecution legal theories, for instance, largely overlap factually and overlap to some extent legally with the conspiracy claims insofar as they are all somewhat parasitic on a due process violation.  The doctrine of qualified immunity permeated this litigation, and while this court analyzed it claim-by-claim, it would be difficult for plaintiff’s counsel to separate research done on the doctrine in that way.  That said, although the underlying alleged facts were all of a similar type—they all supported allegations that plaintiff’s conviction was the result of the bad actions of law enforcement—they were all distinct from each other.”

The court issued a 20% reduction for pretrial work and a 5% reduction for post-trial work, to account for the “minor losses” plaintiff suffered after summary judgment.  Thus, the plaintiff’s fees, after the 25% reduction, and after applying the local Worcester rates and reductions for mixed success and overbilling, is reduced from $1,766,002.50 to $675,194.88.

In regards to the plaintiff’s cost requests of $86,605.41 under 28 U.S.C. § 1920 and 42 U.S.C. § 1988, defendants objected “to costs on several broad grounds, requesting an 80% reduction” without citing any case law.

The court rejected “defendants’ across-the-board reduction,” examining their objections in turn.  The defendants pointed to what they described as plaintiffs counsel’s “remarkable” travel costs, including repeated flights “back and forth from Chicago, railway travel, hotel, car rental and other costs for client meetings, ‘investigation,’ and deposition preparation.”

According to the court, a Chicago law firm incurring travel costs to litigate in Worcester isn’t remarkable, but the “out-of-state law firms must justify out-of-state costs by showing that no similar in-state services exist.”

“Plaintiff’s counsel argues Loevy & Loevy is a specialized firm that specializes in wrongful incarceration cases, but this court finds that plaintiff could have found comparable representation in Boston,” Hillman said.  “Therefore, only travel costs from Boston to Worcester are justified.”  Therefore, Hillman said, a reduction of $15,858.06 in travel costs was appropriate.

The court also deducted $1,001.36 for the plaintiff’s counsel using a rental car for the week of the trial to go from their hotel to the courthouse, after concluding that “a taxi or ride-share service would cost an average of $40 a day, and so over a six-day trial transportation should have cost them $240.”

Costs were further reduced by $1,145, after defendants alleged that the deposition costs were duplicative, as plaintiffs had requested costs the recordings of depositions and the transcripts.  The court determined that for at least one of the witnesses the video deposition was shown at trial, and the costs of the other video recordings were deducted.  $400 in costs were deducted as not all of the plaintiff’s attorneys granted pro hac vice filed motions or argued in the court, in response to defendants objection to all ten of the attorneys receiving reimbursement for pro hac vice admission.

Thus, after “reducing out-of-state costs ($15,858.06), the car rental ($1,001.36), recordings of depositions ($1,145), and excessive pro hac vice applications ($400), this Court finds $68,200.99 in costs proper,” the plaintiff was awarded a total of $743,395.87 in fees and costs.

A recent Law 360 story by Hayley Fowler, “Shook Hardy Fee Bid Defense Pans ‘Massive’ Vivint Trial Team,” reports that Shook Hardy & Bacon LLP attorneys have doubled down on their $3 million fee bid after nabbing a $189 million jury verdict against Vivint Smart Home Inc., quipping its staff of three and corresponding rates were far more reasonable than the smart home security company's use of five law firms and a "massive trial team."

Shook Hardy, representing CPI Security Systems Inc. in a trademark infringement suit in which Vivint was found to have tricked customers into switching home security providers, fired back at Vivint's attempts to whittle down the attorney fee award in a reply brief.  The law firm said the fees it's seeking are both reasonable given its staffing model and relevant to the claims on which CPI succeeded under the Lanham Act and North Carolina's Unfair and Deceptive Trade Practices Act.

In attacking the fee bid, Vivint had accused Shook Hardy of charging excessive hourly rates and overusing partners for work that could have been done by associates.  But Shook Hardy said that CPI was represented for the duration of the suit by just three partners, whose hourly billing rates were at or below the average for western North Carolina.  "These allegations are startlingly ironic in light of Vivint's four-partner-per-deposition staffing model, Vivint's massive trial team, and the rates Vivint's own lawyers charge in commercial litigation matters," the reply brief states.

CPI first filed its request for $3 million in attorney fees earlier this month, noting that Vivint was found to have willfully engaged in a deceptive trade practice and didn't try to settle the case until the trial was well underway.  In its response, Vivint asked the court to delay ruling on the motion until after its own motion for a new trial is addressed.  If the award is granted, the fees should be significantly reduced, the smart home security company has argued, saying CPI failed to distinguish on which claims it's seeking to recover fees.

Vivint also slammed how CPI classified its billing rates and corresponding time entries, as well as its request to recover fees associated with a delay in the trial date.  But Shook Hardy countered that all of the work it performed leading up to and during the trial related to CPI's trademark and unfair business practices claims, under which the prevailing party can recover attorney fees. It also argued the billing entries were "adequately detailed."

The firm similarly rebuffed Vivint's criticism of its staffing model as "vague," saying in its reply brief that its smaller legal team was far more efficient than the five law firms working for Vivint, "one of which is one of the top five largest law firms in the country."  Finally, Shook Hardy said the work it did preparing for the original trial date last year was used for the actual trial in February, noting it was "careful to preserve work product to ensure that it would not need to be recreated."

A recent Law 360 story by Collin Krabbe, “Wis. Judge Awards Attys $2.7M in Fees Over $1M Settlement,” reports that a Wisconsin federal judge has awarded attorneys a dollar figure for fees and costs that is more than double the amount of a $1.05 million settlement negotiated to resolve claims by residents of the town of Superior who had to evacuate their homes following a 2018 explosion at a nearby refinery owned by Husky Energy Inc.

U.S. District Judge William M. Conley said in an opinion that Zimmerman Reed LLP will receive $2.7 million in fees and costs, reducing the fees requested by 25%, in the suit against Husky Oil Operations Ltd. and Superior Refining Company LLC. Still, the judge noted the defendants' perceived aggressive litigation tactics "at virtually every turn in this case."

"Taking into account theJu degree of counsel's success in achieving a class settlement, the time spent on unsuccessful claims and theories, and excessive fees driven by defendants' aggressive tactics, therefore, the court concludes that a reduction of 25% in fees is appropriate," the judge noted.  Zimmerman Reed submitted billing records reflecting 6,251 hours of work with hourly rates ranging from $350 to $845 for attorneys and $200 to $315 for paralegals, for a grand total of $3,151,017 in attorney fees and $359,948 in costs, according to the order.

But the judge reduced the fee amount to $2.3 million, noting that the settlement award was "significantly less" than plaintiffs initially sought.  Less than a third of the potential class ultimately submitted claims, and under the settlement, each class member got around $167.23 — not including "offsets for earlier, voluntary reimbursements by defendants," the order said.  The $1.05 million settlement was given final approval last year in a suit that stems from an explosion at a refinery in Superior on April 26, 2018, which caused a fire that allegedly created a risk of hydrogen fluoride being released and potentially harming residents.

In ruling on fees and costs, Judge Conley took issue with compensation for time spent on unsuccessful claims and legal theories.  "From the court's own review, plaintiffs appear to have billed at least several hundred hours relating to claims and theories that were unsuccessful, particularly in developing its unsuccessful classwide damages theory and in opposing defendants' successful motion for summary judgment," Judge Conley's order said.  "However, it is not possible to determine precisely how many of plaintiffs' 6,251 hours were allocated to successful versus unsuccessful claims," according to Judge Conley.

Finally, the judge said a review of the fees incurred by defendants reflect total fees of about $4 million, which is roughly $1 million more than Zimmerman Reed was asking to be awarded.  The judge added that "this substantially larger fee paid is certainly consistent with this court's perception of the aggressive litigation tactics by defendants at virtually every turn in this case."

The judge also disregarded the defendants' argument that Zimmerman Reed's rates were unreasonable.  Zimmerman Reed Partner Gordon Rudd told Law360 that "this was an extremely hard-fought case.  The litigation involved residents who were forced to evacuate their homes due to a refinery fire and explosion in Superior, Wisconsin.  Both Husky Oil Operations and Superior Refining Company aggressively litigated the case and aggressively challenged the attorneys' fees being requested by the homeowners."

"We are pleased with the result that the homeowners achieved and with the Court's recognition that scorched earth litigation strategies by companies can result in the award of increased fees and costs incurred by plaintiffs in responding to these tactics," Rudd added.  The judge also disregarded the contention that class counsel agreed in contingency fee contracts to accept only 33% of any recovery acquired in litigation, noting that Zimmerman Reed's retainer agreements with individually named plaintiffs had separate fee clauses for "individual and class recovery."

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