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Category: Billing Record / Entries

Article: What is a Legal Fee Audit?

October 7, 2021

A recent article by Jacqueline Vinaccia of Vanst Law LLP in San Diego “What is a Legal Fee Audit?,” reports on legal fee audits.  This article was posted with permission.  The article reads:

Attorneys usually bill clients by the hour, in six minute increments (because those six minutes equal one tenth of an hour: 0.1).  Those hours are multiplied by the attorney’s hourly rate to determine the attorney’s fee.  There is another aspect of attorney billing that is not as well known, but equally important — legal fee auditing.  During an audit, a legal fee auditor reviews billing records to determine if hourly billing errors or inefficiencies occurred, and deducts unreasonable or unnecessary fees and costs.

Both the law and legal ethics restrict attorneys from billing clients fees that are unreasonable or unnecessary to the advancement of the client’s legal objectives.  This can include analysis of the reasonableness of the billing rate charged by attorneys.  Legal fee audits are used by consumers of legal services, including businesses, large insurance companies, cities, public and governmental agencies, and individual clients.  Legal fee audits can be necessary when there is a dispute between an attorney and client; when the losing party in a lawsuit is required to pay all or part of the prevailing party’s legal fees in litigation; when an insurance company is required to pay a portion of legal fees, or when some issues in a lawsuit allow recovery of  attorneys’ fees and when other issues do not (an allocation of fees). 

In an audit, the auditor interviews the client, and reviews invoices sent to the client in conjunction with legal case materials to identify all fees and costs reasonable and necessary to the advancement of the client’s legal objectives, and potentially deduct those that are not.  The auditor also reviews all invoices to identify any potential accounting errors and assure that time and expenses are billed accurately.  The auditor may also be asked to determine if the rate charged by the attorney is appropriate.

The legal fee auditor can be an invaluable asset to parties in deciding whether to file or settle a lawsuit, and to the courts charged with issuing attorneys’ fee awards.  The court is unlikely to take the time to review individual invoice entries to perform a proper allocation of recoverable and non-recoverable fees leaving the parties with the court’s “best approximation” of what the allocation should be.  The fee audit provides the court and the parties with the basis for which to allocate and appropriately award reasonable and necessary fees. 

Audits are considered a litigation best practice and a risk management tool and can save clients substantial amounts of money in unnecessary fees.  It has been my experience, over the past two decades of fee auditing, that early fee auditing can identify and correct areas of concern in billing practices and avoid larger disputes in litigation later.  In many cases, I have assisted clients and counsel in reaching agreement on proper billing practices and setting litigation cost expectations. 

In other cases, I have been asked by both plaintiffs and defendants to review attorneys’ fees and costs incurred and provide the parties and the court with my expert opinion regarding the total attorneys’ fees and costs were reasonably and necessarily incurred to pursue the client's legal objectives.  While the court does not always agree with my analysis of fees and costs incurred, it is usually assisted in its decision by the presentation of the audit report and presentation of expert testimony on the issues.

Jacqueline Vinaccia is a San Diego trial attorney, litigator, and national fee auditor expert, and a partner at Vanst Law LLP.  Her practice focuses on business and real estate litigation, general tort liability, insurance litigation and coverage, construction disputes, toxic torts, and municipal litigation.  Her attorney fee analyses have been cited by the U.S. District Court for Northern California and Western Washington, several California Superior Courts, as well as various other state courts and arbitrators throughout the United States.  She has published and presented extensively on the topic of attorney fee invoicing, including presentations to the National Association of Legal Fee Association (NALFA), and is considered one of the nation’s top fee experts by NALFA.

Gibson Dunn Under Fire for Billing Practices

September 23, 2021

A recent Law 360 story by Rose Krebs, “Gibson Dunn Under Fire For Billing in Landmark Theatres Suit,” reports that Gibson Dunn & Crutcher LLP and Ross Aronstam & Moritz LLP have been accused of problematic billing in a Delaware Chancery Court suit over a price adjustment dispute that followed the 2018 sale of Landmark Theatres to billionaire real estate developer's Charles S. Cohen's theatrical production and distribution company.

In a brief, Cohen Exhibition Company LLC told Vice Chancellor Paul A. Fioravanti Jr. that a request by Gibson Dunn and Ross Aronstam to have the buyer reimburse roughly $840,000 of the sellers' legal costs and expenses should be reduced by no less than about $396,000.  A lesser-than-sought amount should be awarded, in part, due to the firms' "failure to support the hourly billing rates" included in the fee motion, the brief says.

The sellers, Roma Landmark Theaters LLC and MCC Entertainment LLC, which are represented by the two law firms, told the court in August that buyer Cohen Exhibition Company should have to pay costs and expenses they incurred litigating a battle over post-closing adjustments that ended up being largely decided in their favor.

But Cohen raised issues with the billing.  "Both the Ross Aronstam and Gibson Dunn invoices contain significant redactions of time entries," Cohen said in Tuesday's filing.  "The redactions are particularly problematic insofar as they not only completely obscure the services performed ... but also because they even obscure the timekeeper and amount of time spent."  Cohen argues that due to the redacted information it is "completely impossible" for the court to assess the reasonableness of certain invoices.

The company also pointed to "excessively high charges for Westlaw research, in one month totaling over $20,000 alone" in Gibson Dunn's bills.  The online legal research service "offers attorneys a plan with unlimited access to Delaware cases, statutes, and briefs at a flat monthly fee," according to Cohen. Granting those fees would effectively mean Cohen paying for "Gibson Dunn's overhead in maintaining a legal research account with Westlaw," the company said.

Cohen additionally took aim at what it described as the "high hourly rates billed by the attorneys at Gibson Dunn."  "Here, plaintiffs' attorneys have not provided any proof as to what their customary billing rates are for comparable matters," the brief said, highlighting one rate of up to $1,645 per hour.  "Nor have they provided any evidence as to each attorney's background and years of experience to support the respective claimed rates."  Cohen also protested what it said was the firms' request for reimbursement for "preparing and litigating" an unsuccessful motion to dismiss counterclaims lodged by the buyer in the litigation.

Roma and MCC said in court papers that an arbitration decision went in their favor, entitling them "to receive nearly all of the escrowed funds." Thus, they argued they are entitled to reimbursement for costs and expenses, especially since alleged legal posturing by the buyer led to a delay in escrow funds being turned over.  The Chancery Court confirmed the arbitration decision and the seller plaintiffs were awarded roughly $2.6 million plus additional interest and other costs, according to the motion, which added, "The fee award sought here is fair and reasonable in light of these positive results."

Article: Eleventh Circuit’s New Standard for Attorney Fees in ADA Cases...at Gas Stations

September 3, 2021

A recent article by David Raizman and Paul J. De Boe, “Eleventh Circuit of Appeals Creates New Standard for Standing in Title III Cases Against Gas Stations,” reports on a recent ruling on ADA litigation in the Eleventh Circuit Court of Appeals.  This article was posted with permission.  The article reads:

For years, Scott Dinin was one of South Florida’s most prolific filers of Title III of the Americans with Disabilities Act (ADA) cases.  His run ended two years ago, when, after obtaining default judgments against two gas stations on behalf of his client, Alexander Johnson, Dinin submitted a request for attorneys’ fees whose billing entries caught the attention of Judge Paul Huck of the U.S. District Court for the Southern District of Florida.  Judge Huck’s investigation into the matter brought to light a systematic practice of filing frivolous claims, knowingly misrepresenting the time counted as billable, making misrepresentations to the court, and improperly sharing attorneys’ fees with clients.  In his August 2019 order awarding extensive sanctions, Judge Huck described Dinin’s and Johnson’s operation as “an illicit joint enterprise … to dishonestly line their pockets with attorney’s fees from hapless defendants under the sanctimonious guise of serving the interests of the disabled community.”

Judge Huck’s sanctions included:

dismissal with prejudice of Johnson’s ADA and Florida Civil Rights Act claims;

disgorgement of improperly obtained settlement funds from 26 “gas pump cases”;

additional penalties of $59,900 against Dinin and $6,000 against Johnson; and

an injunction preventing Johnson and Dinin “from filing any future ADA complaints without first obtaining the court’s written permission.”

Judge Huck’s order corroborated and confirmed the suspicions of many in South Florida’s business and legal communities about questionable practices of some plaintiffs and their lawyers in Title III access litigation.  Johnson and Dinin appealed, and on August 17, 2021, the Eleventh Circuit Court of Appeals dismissed Dinin’s appeal and affirmed the district court’s order imposing sanctions on Johnson.

The Eleventh Circuit Dilutes Standing Requirements

While the court’s affirmance of sanctions has drawn the most interest, practitioners may want to note the court’s holding regarding standing in Title III cases brought against gas stations and similar Title III defendants that are not “destination-type establishments like hotels, hospitals, or restaurants.”  The court held that standing could be established without showing a “definite intention to visit” the specific establishment “in the future,” as would be required if the defendant were a supermarket or a “destination-type establishment.”  The court reasoned that gas stations are “visited on an as-needed basis, often based on convenience, proximity, or price on a given day,” and “cars are mobile and must be serviced wherever they happen to be at the time gas is needed.”  Therefore, standing exists if “[Johnson] regularly travels in the vicinity of the particular gas station.”

As the concurring opinion pointed out, the majority opinion did not cite any support for “water[ing] down the constitutional minimum for standing.”  All the same, practitioners may want to take note of this important holding when defending cases brought against gas stations or non-destination-type establishments.

David Raizman is nationally known for his disability rights practice, specifically for his work under Title III of the Americans with Disabilities Act.  In 2012, he was recognized by the Los Angeles Daily Journal as one of the top labor and employment attorneys in California and has been recognized multiple times as a Southern California Super Lawyer.

Paul De Boe is an associate attorney in the Miami office of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.  His practice focuses in the area of employment litigation including claims of discrimination, harassment, retaliation, wage and hour, and family and medical leave law violations.  Mr. De Boe also counsels and defends clients in claims brought pursuant to Title III of the Americans with Disabilities Act involving brick and mortar locations as well as website accessibility, and state and federal consumer protection laws.

Insurer Overpaid Policyholder’s Attorney Fees, Judge Finds

August 25, 2021

A recent Law 360 story by Daphne Zhang, “Insurer Overpaid For Policyholder’s Legal Bills, Judge Finds,” reports that a New York federal judge said that an insurer's decision to stop paying a GoPro accessory maker's attorney fees was reasonable, finding the policyholder's defense counsel billed administrative work at partner rates and logged excessive working hours.  U.S. District Judge Mae D'Agostino denied 360Heros Inc.'s motion for summary judgment against Main Street America Assurance Co., saying the carrier's payment of more than $2 million in attorney fees fully satisfied its defense obligations.

The judge sided with Main Street in finding that 360Hero's defense counsel, Gauntlett & Associates, repeatedly charged "unreasonable and excessive" legal fees in an underlying patent infringement suit with GoPro.  The camera company sued 360Heros alleging the harness maker used its copyrighted pictures and infringed two of its trademarks.  The suit was settled in May 2018. 360Heros sued Main Street in 2017 after the insurer stopped paying for its defense costs.

"Based on Gauntlett's repeated practice of billing excessive, redundant or otherwise unnecessary hours the court finds that a 15% reduction in Gauntlett's fees is warranted," the judge said.  According to the order, a Main Street attorney found in 2017 that the insurer overpaid for defense costs after retroactively reviewing the payment history.  Main Street subsequently stopped paying the policyholder's legal bills, which 360Hero claimed violated its insurance policy.  "The amount of unpaid fees is significantly less than the amount that the court finds were reasonably expended," Judge D'Agostino found, saying that Main Street was fully entitled not to pay because the defense counsel overcharged on legal bills.

Some of Gauntlett's invoices were billed without any tasks designated to a paralegal, the judge pointed out, and the firm repeatedly charged administrative work at partner rates. Gauntlett also charged full rates for travel, which should have been billed at half of their hourly rates, Judge D'Agostino said.  "For travel to a one-day out-of-town settlement conference, [one Gauntlett attorney] billed for $418.48 in meals," she said.

Law Firm Wants Attorney Fee Dispute in Arbitration

August 18, 2021

A recent Law 360 story by Caroline Simson, “King & Spalding Says Fee Fight Must Be Arbitrated”, reports that King & Spalding is urging a Texas court to force a former client to arbitrate allegations that the firm fraudulently colluded with Burford Capital to maximize fees while representing him ​​in a treaty claim​ against Vietnam, pointing to an arbitration clause in the underlying fee agreement.  Fighting back against Trinh Vinh Binh's arguments earlier this month that the clause is inapplicable because the firm didn't sign the funding agreement with Burford, King & Spalding argued in a brief that the clause is broad enough to encompass the dispute.

Binh, who's accused the firm and two of its international arbitration partners in Houston of making a "mockery of the fiduciary obligations an attorney owes to their clients," told the court that the funding agreement doesn't contain any reference to King & Spalding.  In fact, the firm had already inked a deal with him that laid out all the terms of their relationship and did not include an arbitration clause, he said.

But the firm pointed in its brief to the wording of the clause, noting that it applies to "any controversy or claim" that is "relat[ed] to" the funding agreement.  The clause also applies to "any other transaction document," which includes a "counsel letter" through which Binh instructed the firm to distribute any arbitration proceeds in accordance with the funding agreement, according to the brief.  "Plaintiff cannot reasonably dispute that his claims 'relate to' the [funding agreement] and the counsel letter," according to the brief, which notes that Binh is seeking damages based on the firm's alleged failure to allocate the arbitration proceeds in compliance with the funding agreement.

"While plaintiff attempts to characterize these claims as arising out of the engagement agreement, that agreement does not address the allocation of arbitration proceeds," the firm continued. "The terms cited in the petition were set forth in the [funding agreement] and 'agreed to' by defendants through the counsel letter, bringing those claims squarely within the ambit of the [funding agreement]'s arbitration agreement."

Counsel for Binh declined to comment, saying they will file a response with the court.  Binh sued King & Spalding and two of its partners, Reggie R. Smith and Craig S. Miles, in June, alleging they made a "mockery of the fiduciary obligations an attorney owes to their clients" by "colluding" with litigation funder Burford to take more of the arbitration proceeds than Binh had agreed to.

The law firm had represented Binh in a treaty claim against Vietnam over the confiscation of certain real estate that ended in a $45 million award against the country in 2019.  In the arbitration, filed in 2015, Binh accused the country of improperly taking several valuable properties he says were worth an estimated $214 million.  Under their deal, the law firm agreed to hold back 30% of billings for fees and defer the payment of those amounts until work had concluded in the arbitration.

At the same time, Binh entered into a funding agreement with Burford Capital with a $4.678 million spending cap, according to the suit.  Binh claims that King & Spalding told him the firm could complete the arbitration work within that cap.  But by May 2016, the firm had already billed and been paid some $1.9 million, leaving about $1.8 million after initial costs and expenses had been paid out.  Binh alleges that at that point the firm, "motivated by securing continued, guaranteed immediate payment of their fees, colluded with Burford" to contrive a scheme to increase the amount potentially owed by Binh by increasing the cap on King & Spalding's legal fees and, consequently, increasing Burford's potential entitlement to an increased return.

Binh says that the way the agreement worked was that the more King & Spalding billed against the cap amount in legal spending, the more he was at risk of paying a so-called success return, to be paid if he prevailed in the arbitration.  The success return was to be split between King & Spalding and Burford based on the relative portion of their investments in the arbitration, Binh said.  Binh alleges that King & Spalding tried to make him agree to increase the cap on expenditures for legal fees — and potentially, provide more of a return for Burford — but that he refused.  Thereafter, Burford and the law firm allegedly executed a side agreement between themselves.

In addition to accusing King & Spalding of breaching its fiduciary duty, Binh's lawsuit includes claims for negligence if the overpayment of fees was due to a mistake, as well as claims of misrepresentation and fraud.  He also accuses the firm of negligence after the tribunal in the case against Vietnam rejected an expert report the firm provided stating that Binh's property was worth some $214 million.  The tribunal instead awarded $45.4 million.