Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes


News Blog

Category: Block Billing

Courts Call Upon Fee Examiners in Large Chapter 11 Cases

May 6, 2024

A recent Law.com story by Dan Roe, “Nickel and Dimed: Fee Examiners More Common Amid Rise in Contentious”, reports that, within weeks of being ordered by the U.S. Court of Appeals for the Third Circuit to appoint an independent examiner to the bankruptcy of fraudulent cryptocurrency exchange FTX, U.S. Bankruptcy Judge John Dorsey of the District of Delaware issued a related order of his own.  Starting in early February, Dorsey ordered the appointment of fee examiners in all Chapter 11 cases before him where assets and/or liabilities exceeded $50 million—the threshold for “larger Chapter 11 cases,” according to the Office of the U.S. Trustee.

While the U.S. Trustee Program provides for the use of fee examiners in such cases, examiners aren’t required and frequently aren’t appointed in pre-packaged bankruptcies and cases that aren’t particularly contentious.  However, a rise in bankruptcies involving fraud and mass tort litigation is causing more bankruptcy lawyers to face scrutiny over their billing practices.  “Fee examiners have become more prevalent recently because of very significant bankruptcy cases seeking recompense for alleged abuses,” said J. Scott Bovitz, a Los Angeles attorney who represents fee examiner Nancy Rapoport in bankruptcy court.

For instance, fee examiners have lopped six- and seven-figure amounts off of recent cryptocurrency bankruptcies such as Celsius, Voyager and BlockFi as well as recent bankruptcies involving tort claims such as Boy Scouts of America, fire protection company Kidde-Fenwal and LTL Management, a company formed to divert Johnson & Johnson’s tort liability over cancer attributed to the company’s talcum powder.  In their assessments of Big Law bills, fee examiners look for duplicate and redundant tasks, block or “lumped” billing, vague time entries, staffing inefficiencies, excessive expenses and more.

“I always tell professionals that my goal is not to reduce anyone’s fees because everyone did everything perfectly,” said Robert Keach, a fee examiner and the co-chair of the bankruptcy practice at Maine law firm Bernstein Shur.  “I haven’t found that case yet.”  According to Keach, most fee examinations end up taking 5% to 7% off of a legal bill, although some recent cases have been higher. In July, Dorsey cut roughly $1 million in fees off Pillsbury Winthrop Shaw Pittman’s $6 million tab for its work restructuring a California luxury hotel owner.  “It is not the Court’s job to piece together entries and try to make sense of them.  Each entry must be capable of evaluation on its own.  Many of Pillsbury’s entries are not,” Dorsey wrote.

Fee examiners also come at a cost to the estate, although Keach noted that the costs of examining fees are almost always offset by the reduction of professional fees resulting from examiners’ work.  In a December fee application for the BlockFi bankruptcy, examiner Elise Frejka, a New York-based solo practitioner, requested a total of $168,500 for 269 hours of work billed at an hourly rate of $675.

The biggest reductions in recent fee examinations sometimes came from firms that billed smaller amounts than those of debtor’s counsel. Representing debtor Kidde-Fenwal, Sullivan & Cromwell agreed to roughly $100,000 in fee reductions for vague and repetitive time entries and potentially unnecessary attendance levels at board meetings and on calls.

However, while Sullivan & Cromwell billed roughly $9 million in the bankruptcy, Brown Rudnick lost even more money to the fee examiner despite billing less than $6 million representing the creditors committee.  The firm was docked for vague time entries, “certain junior associate time,” potential duplication and overlap of tasks, unnecessary attendance levels and other miscellaneous issues with time entries.

Rapoport, a fee examiner and a professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas, said she doesn’t believe law firms are intentionally inflating their fees so much as not exercising adequate billing judgment.  “What I do see is a combination of two problems: bad billing hygiene, such as block-billing, vague entries, and rounded hours, which is often improved after a few conversations with a fee examiner, and the use of more senior billers to do more junior work than they should be doing,” Rapoport said.  “I also find that the weekly ‘all hands on deck’ meetings need to be able to justify why each professional is in the room.”

In other recent bankruptcies, law firms escaped with 100% of their fees intact, although such firms had already offered discounts for time spent preparing fee applications and “transitory” timekeepers who billed less than five hours in a given month.  In the BlockFi bankruptcy, Kirkland & Ellis made out with 99.9% of its fees intact, while the examiner granted the full requested amounts to Cole Schotz and Haynes and Boone.

Yuga Labs to Receive $7M in Attorney Fees and Costs

January 29, 2024

A recent Law 360 story by Aislinn Keely, “Bored Ape NFT Copycats Owe Yuga Labs $7M in Atty Fees", reports that the artists accused of ripping off the Bored Ape Yacht Club non-fungible token collection have been ordered to pay creator Yuga Labs more than $7 million in attorney fees and costs, despite their concerns that Yuga's counsel at Fenwick & West LLP overbilled in the case.

In an order, U.S. District Judge John F. Walter awarded Yuga Labs just shy of $7 million in fees and an additional $300,000 for the costs associated with three experts deposed during the case, adopting the recommendation from Special Master Margaret M. Morrow.  The figure eclipses the $1.6 million in damages awarded to Yuga Labs when artists Ryder Ripps and Jeremy Cahen were found to have infringed Yuga Labs' flagship NFT collection.

Ripps and Cahen agreed to the fees to wrap up the case, but noted they may raise qualms about the fees on appeal.  "The parties seek to avoid further litigation concerning the amount of Yuga Labs' fee award, and defendants seek to preserve their objections to the amount of the fee award ... for purposes of appeal," the order says.

In a November joint statement to Morrow, Yuga Labs reported that its attorney fees were more than $12.6 million, and additional $500,000 in costs and expert witness fees, but said it would only seek $7.5 million in fees and roughly $300,000 in costs.  It doubled back to the $12 million figure when it couldn't find common ground with Ripps and Cahen, who said a reasonable total award would be $455,000.  In their objection, Ripps and Cahen argued that Yuga Labs' counsel at Fenwick maintains billing practices that "artificially increased hours, resulting in unreasonable fees."

They argued that the more than 14,000 hours billed over the two-year dispute is more than 20 times greater than comparable cases in the district, and that Fenwick used practices including duplicative time entries, where more than one attorney billed for efforts on the same task, and block billing, which bills multiple tasks in one billing entry.

The duo also argued that the hourly rates of $1,290 for a partner, $1,135 for a counsel, $1,030 for a fifth-year associate, $780 for a first-year associate and $515 for a paralegal are much higher compared to those charged by other attorneys in the Central District of California.

But Morrow found the Central District of California has approved rates in the general range of those billed by Fenwick, and while the firm's figures are high, they fell within the top end of the report referenced by Ripps and Cahen.  She did, however, recommend that the court adjust the paralegal rates down to $450 for 2022 and $500 for 2023.

While she didn't take issue with the block billing practices of the Fenwick attorneys, she did note that many of the descriptions in the time records related to duplicative billing were "so vague that it is difficult to discern what tasks were being performed or how they advanced the case," recommending a 45% reduction of fees from $12.6 million to the $6.9 million the court ultimately adopted.

In their December objection, Ripps and Cahen also claimed Yuga Labs racked up billable hours by litigating the case "in an unreasonable way," including unproductive settlement discussions, increasing its damages demand ahead of trial and a "frivolous" motion for sanctions.

"Yuga, a four-billion dollar company fueled by its animosity towards Mr. Ripps and Mr. Cahen, retained a huge litigation team at an expensive firm to wage a yearlong scorched earth litigation campaign against them," they said in the objection.  On the flip side, Yuga Labs argued the pair's own litigation strategy needlessly complicated and dragged out the case by repeatedly attempting to relitigate issues the court rejected.

Companies Question Legal Bill in Pension Debt Suit

December 6, 2023

A recent Law 360 story by Emily Brill, “Cos. Question Union’s $123K Atty Bill in Pension Debt Suit”, reports that two cruise ship contractors questioned a union pension fund's request for $123,000 in attorney fees and costs in Louisiana federal court after the fund won a $2.8 million debt fight with the companies, calling "excessive" the hours the fund said its attorneys spent on the lawsuit.  United Stevedoring of America Inc. and American Guard Services Inc. said that they "believe that 529 hours is excessive for what (to union counsel, at least) is a routine and oft-repeated litigation."

The companies are challenging a request for about $123,000 filed by the New Orleans Employers International Longshoremen's Association Pension Fund after it won a withdrawal liability dispute with USA and AGS this month.  U.S. District Judge Ivan Lemelle ruled that USA incurred $2.8 million in withdrawal liability debt to the fund after ceasing pension contributions on behalf of union-represented longshoremen two years ago. USA withdrew from the fund after losing its cargo-loading contract with Carnival Cruise Lines in March 2021, according to the fund's lawsuit.

Judge Lemelle also ruled that AGS must pay the debt if USA cannot, as the companies were jointly owned as of March 2021.  Judge Lemelle issued his decision in early November, and the fund filed its request for attorney fees and costs Nov. 17.  USA and AGS said that they saw a few areas where the number of billable hours charged by the fund's attorneys could be trimmed, including time spent responding to discovery requests.

"Plaintiffs' counsel recorded some 25 hours over a 4–5-month period beginning in January 2023, for responding to defendants' discovery," USA and AGS said.  "Defendants acknowledge that the discovery process can be time-consuming, but plaintiffs produced nothing in discovery that was not previously produced in the initial disclosures or as exhibits to the complaint."

The companies said they are also concerned about the fund's failure to identify the timekeeper it used to tally up billable hours, saying it "prevents defendants or the court from evaluating the timekeeper's skill and experience to determine the reasonableness of the rate charged."  "No less problematic is plaintiffs' counsels' use of 'block-billing' throughout the application," the companies continued, referring to a "disfavored" timekeeping practice in which attorneys do not list how much time they spent on specific tasks.

"The failure to itemize the time by task precludes defendants (or the court) from evaluating the reasonableness of the time committed to each enumerated task and thus prevents defendants from effectively challenging the amount of time committed by counsel to the matter," USA and AGS said.  The fund claimed it owes about $115,000 to its attorneys and $8,400 to its actuary for their work on the withdrawal liability dispute.  The attorneys litigated the suit, while the actuary supplied an expert witness, the fund said.  In its complaint, filed Aug. 8, 2022, the fund requested that AGS and USA foot the bill for its attorney fees and costs if the fund won the suit.

Judge: $1700 Hourly Rate for the Richmond, VA Market is Unrealistic

November 24, 2023

A recent Law.com story by Allison Dunn, “Judge Rejects Quinn Emanuel’s $1700 Hourly Rate Request, Slashing Fees for Virginia Settlement By Nearly 80%”, reports that a federal judge in Virginia drastically reduced Quinn Emanuel attorneys’ requested fees related to enforcing a $6 million settlement agreement they successfully obtained for a client over a fraud scheme involving the Model Tobacco Building in Richmond, Virginia.  Some of the rates requested by Quinn Emanuel—$1,690 per hour for a lead partner or $1,385 per hour for associates—were unrealistic for the Richmond market in the present case, the court found.

Quinn Emanuel attorneys based out of Washington, D.C., who served as plaintiffs’ counsel, sought prejudgment interest at a rate of 6%, as well as $236,641.18 attorney fees and costs relating to enforcing a $6 million settlement agreement between the plaintiffs, SS Richmond and MK Richmond, against Christopher A. Harrison, the owner and manager of several entities including, The C.A. Harrison Cos., CAH Model Tobacco and the McKenzie Blake Development Co.  Under the settlement agreement, the Harrison defendants were obligated to pay the $6 million payment by June 8, but the plaintiffs maintain that they have failed to do so, according to the district court’s opinion.

The plaintiffs had accused the defendants of “‘a pattern of bank fraud, wire fraud, mail fraud and money laundering in an effort to seize control and interest in a project to purchase and refurbish’” the Model Tobacco Building, which previously served as a factory for the United States Tobacco Co.  Harrison’s counsel from midsize firms Mahdavi Bacon Halfhill & Young, as well as Fraim & Fiorella, opposed the plaintiffs’ request.  The defendants argue that the plaintiffs failed to establish the reasonableness for such hourly rates.

The judge agreed in part with the plaintiffs that, in addition to the prejudgment interest, they were also entitled to attorney fees and costs, but Novak also sided with the defendants in finding Quinn Emanuel’s more than $1,000-per-hour rates for both partners and associates in post-settlement motions were ”not reasonable in accordance with the Court’s prior decisions and the Richmond legal market,” the opinion said.  Considering the reasonable rates for attorneys in Richmond with comparable skills, experience, reputation, as well as other factors, Novak reduced Quinn Emanuel’s total fee award to $50,380.

“Our client is focused on the Model Tobacco project.  As to fees, we don’t agree with everything the judge wrote, but Judge Novak obviously took the time to write a thoughtful opinion,” said George R. A. Doumar, an attorney with Mahdavi Bacon, representing the defendants.  “The local market dictates hourly rates awarded, and Quinn Emanuel was seeking rates far higher than I’ve encountered for fee awards in Virginia courts.  The lawyers I see day in and day out are billing at much lower rates.  The judge also seemed to be aware of law firm billing practices such as block billing and multiple reviews, and took that into account.”

Novak concluded that a rate of $650 for the lead partner and $400 for associates was a reasonable rate based 12 factors such as time and labor expended; the novelty and difficulty of the questions raised; the customary fee for like work; the amount in controversy and the results obtained; the experience, reputation, and ability of the attorney; attorney fee awards in similar cases and more.

“Here, Plaintiffs have failed to rebut the presumption that the hourly rates should be derived from the community in which the court sits. While Plaintiffs argue that this case has factual connections to Washington, D.C., and that the underlying case involved ‘complicated, high-stakes claims in financial fraud and RICO claims,’ … they present no evidence that a local attorney could not have provided competent representation,” Novak wrote, citing Rehabilitation Association of Virginia, Inc. v. Metcalf (1998).  “Because Plaintiffs have not made the requisite showing to apply out-of-town rates, the Court will consider the proper market from which to determine reasonable hourly rates as the market where the Court sits—Richmond, Virginia.”

The plaintiffs failed to file any affidavits from other law firms regarding “the prevailing market rates in Richmond for similar work,” and said Quinn Emanuel proffered no cases concerning fee awards within the district, Novak held.  Additionally, the law firm cited a news article from Law.com publication The American Lawyer titled, “What $1,000 an Hour Gets You in the AM 200 Today.”  The judge, however, said the article didn’t weigh in the law firm’s favor since it “cut against the reasonableness of the Plaintiff’s requested fees.”

In one of the cases cited by the plaintiffs, Proofpoint v. Vade Secure, a 2020 opinion by the U.S. District Court for the Northern District of California, the requested hourly rates ranged from $590 to $675 per hour for associates, and $880 to $915 per hour for more senior attorneys, the opinion said.

“Here, in contrast, Plaintiffs charged $1,305 per hour (Paul Henderson) and $1,385 per hour (Nicholas Inns) for the associates who performed most of the work and $1,690 per hour (Keith H. Forst) for the lead partner. … Even after accounting for inflation and the 15 percent discount applied here, Proofpoint does not support the hourly rates requested in this case,” Novak wrote, further concluding no fee would be awarded for paralegal work because the plaintiffs failed to present evidence of the customary rates billed in Richmond.  Novak concluded that the majority of the plaintiffs’ expenses were reasonable and included them in the award, bringing the total to $51,271.86 in fees and costs.

Deep Attorney Fee Cuts, Judge Citing Billing Deficiencies

November 21, 2023

A recent Law 360 story by Dorothy Atkins, “’Alcon’s $1.2M Sanctions Fee Bid For Its MoFo Attys Slashed”, reports that a New York federal judge slashed Alcon Vision's $1.17 million fee request for its attorneys at Morrison Foerster LLP after securing sanctions against Lens.com over its bad faith counterclaims in a trademark dispute, instead awarding $227,000 after finding "glaring deficiencies" in the fee request.  In a 20-page opinion, U.S. District Judge Nina Gershon rejected Alcon Vision LLC's seven-figure request for attorney fees due to the numerous deficiencies and lack of supporting documentation provided by its legal team at Morrison Foerster.

Instead, the judge reduced the fee request as proposed by Lens.com, and she gave the company and its counsel 60 days to pay the fee award.  The sanctions award and fight over fees is the latest development in hotly contested intellectual property litigation that Texas-based Alcon, which was once owned by Novartis AG, kicked off in January 2018.  Alcon accused Las Vegas-based rival Lens.com of selling its trademarked products without permission and with outdated packaging in New York.

Lens.com hit back with antitrust counterclaims in February 2019, claiming Alcon was attacking it just to "ingratiate itself" with eye care providers that would "reward" Alcon by prescribing their customers its lenses.  But in July 2022, the judge slapped Lens.com Inc. and its attorneys with sanctions for filing bad faith counterclaims.  The judge found that the website's counterclaims served no legitimate purpose and were filed to "harass, and cause delay, expense and vexation to Alcon."  The judge ordered Lens.com and its counsel to pay Alcon's costs and attorney fees "caused by its bad faith and vexatious filing and maintaining" of its counterclaims, as well as fees arising from Lens.com's refusal to produce discovery.

The judge also called Lens.com's counterclaims in the dispute "problematic from the start," and ordered Alcon "to file an affidavit setting forth the costs and attorneys' fees for which I have found Lens.com and its counsel jointly and severally liable."  In response, Alcon's lead counsel of Morrison Foerster filed a seven-page declaration seeking $1.17 million in attorney fees for approximately 1,700 hours of work on behalf of 14 attorneys, including partners and associates, and four paralegals.

But Lens.com fired back, arguing that the fee request is excessive, unsupported and doesn't include time records or invoices.  Lens.com also argued that the declaration improperly seeks a single blended rate for its attorneys and an unidentified "standard hourly rate" for its paralegals, rather than the prevailing rate in the district, among other purported deficiencies.  Lens.com argued that it shouldn't have to pay anything in fees due to the legally deficient fee bid, but at most, Alcon should only be entitled to $227,000 in fees.

Judge Gershon mostly sided with Lens.com on the matter.  Her order noted that Morrison Foerster's declaration had "no supporting documentation and little detail" to support the fee calculation.  She rejected Alcon's assumption in the declaration that it is entitled to recover fees that it already paid to Morrison Foerster in connection with the sanctioned conduct, regardless of whether those fees were reasonable.  The judge concluded that ultimately Alcon's fee bid has "glaring deficiencies," including "vague" billing entries, and hundreds of hours of work invoiced in impermissible block billing, or lumping multiple distinct tasks into a single billing entry.

"Here, Alcon has not even attempted to justify, let alone sufficiently justified, as reasonable the hours or rates sought," the order says.  Although the judge noted that she could deny the fee request in its entirety due to the declaration's lack of support, she declined to do so.  However, she also refused to let Alcon submit additional support for its fee request, because the company didn't request permission to supplement the record, and it would require another round of briefing.

Instead, Judge Gershon agreed to adopt Lens.com's proposal to reduce the billable hours across the board by 62.4% and use a blended hourly rate of $355 for all attorneys and paralegals.  "Lens.com's proposal is well within the range of percentage reductions other courts have applied to requested hours for similar fee application deficiencies," the judge wrote, citing a New York federal judge's decision to slash a fee request by 80% earlier this year in Williamsburg Climbing Gym Co. v. Ronit Realty LLC.