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Category: Block Billing

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.

Block Billing Reduces Fee Award in Personal Injury Case

May 14, 2021

A recent Law 360 story by Mike Curley, “After ‘Block Billing’ and ‘Paper Dump,’, Attys Net Only $786K” reports that an Arizona federal judge has awarded $786,472 to attorneys representing a man who suffered additional injuries after a fall when his insurer delayed approving surgery, down from the requested $1.04 million as a result of "block billing," a "paper dump" and other failures in their request for fees.  U.S. District Judge Susan M. Brnovich also denied Greg Jarman's request for $74,000 in expenses from American Family Insurance Co. in its entirety, saying he failed to itemize the costs and the court will not "do the hard work for him" in separating out items like clothes for one attorney and a hotel room for another.

Jarman's request for fees comes after a jury in September awarded him $4.5 million over delays in care for injuries stemming from an on-the-job fall in 2015.  The court later reduced the verdict to $2.8 million.  Jarman, who had worked at electrical company Efficient Electric Inc. for more than 10 years before his injury, experienced a severe fall on July 25, 2015, according to court documents, and a couple of weeks later he went to the hospital and was diagnosed with a shoulder sprain and put on limited activity.  Jarman's neurologist on Oct. 6 of that year recommended cervical decompression surgery, after his orthopedic surgeon called his case "urgent."

American Family wanted its own doctor, Dr. John Beghin, to examine Jarman before approving the surgery, and he agreed on Nov. 5, 2015, that surgery was necessary.  The surgery was performed five days later, and Jarman said the delay caused cognitive injuries.  In the order, Judge Brnovich reduced the total fee for several reasons, starting with Jarman's failure to comply with court rules requiring his counsel to confer with American Family's on the fees before submitting his request.

While the judge did not accept American Family's argument that Jarman isn't entitled to fees at all, she did reduce them still further, saying that there is a particularly egregious case of block billing in this case, with one of the attorneys attributing hundreds of hours of work to single line items, leaving the court unable to determine how much time was spent on specific tasks.

The request also does not contain an affidavit as to the tasks that support staff at the firms took on during the case, so the court is unable to determine if the rates for their work are reasonable, the judge wrote, adding some entries from support staff are clerical in nature.  Jarman also failed to produce evidence that his attorneys' fee rates are reasonable, the judge wrote, further warranting a reduction to the fee.  The attorney fees request also includes entry for work done relating only to dismissed defendants, the judge added

Law Firm Billing Tips For Good Client Relations

December 1, 2020

A recent Law 360 story by Aebra Coe, “Law Firm Billing Tips For Avoiding An Irate Client,” reports that a recent lawsuit filed against K&L Gates LLP by a client unhappy with a legal bill highlights some common pitfalls that law firms face when it comes to billing practices, but there are ways to avoid a similar situation, experts say.  The lawsuit against K&L Gates, which was filed in August by Chicora Life Center LC, accuses the firm of using several tactics to increase its bill for representing the bankrupt medical center in a Chapter 11 proceeding over a lease termination dispute.

Some of the alleged billing practices are not entirely uncommon among law firms, according to two experts who declined to comment directly on the lawsuit but provided their thoughts on client billing more generally.  The alleged practices include "block billing," where a lawyer "blocks" together a number of tasks over a set amount of hours; "hoarding," when an overqualified lawyer with a high billing rate retains work rather than passing it on to someone with a lower billing rate; and "multibilling," which occurs when multiple attorneys are tasked with performing the same work.

"All of those things mentioned have been going on for years and years.  This is not at all new," said James Wilbur, an expert on law firm billing at consulting firm Altman Weil Inc.  Regardless of how the K&L Gates suit shakes out in court, other law firms are likely looking for ways to avoid being in a similar position.  While such situations are not entirely preventable because clients can sometimes file bad-faith suits, there are steps firms can take to ensure clients are as happy as possible with a bill at the conclusion of a matter, Wilbur said.

He suggested firms rely on three things to accomplish this: technology, training and collaboration.  E-billing software can often catch double billing and block billing, he said, as well as phrases that might irk a client, like "reviewed phone notes," that may not indicate that the time spent added any value to the matter.

And that leads to training, which should be conducted at all levels on a regular basis so that any attorney or paralegal who puts together a bill is aware of best practices and is skilled in conveying the value brought to the client via the time the individual spent working, he said.  Senior attorneys billing for work that could be done by someone more junior is another beast, Wilbur said, and one that law firm management must work to dissuade by encouraging collaboration and the sharing of work.

Clients have many different rules when it comes to fees, but "no surprises" is a big one, said Toby Brown, chief practice management officer at Perkins Coie LLP.  "The bottom-line answer is more transparency.  And more real-time updates about what's going on," Brown said.  "The lawyers are uncomfortable talking about these things, and so they don't talk about them head-on."

He said lawyers and clients can often get wrapped up in the legal issues at hand, with fee issues taking a back seat.  For example, if the volume of discovery in a major case increases substantially, a conversation on cost might not always occur, but it should, he said.  Real-time sharing of information on the cost of a matter is vital, Brown said.  He said his firm has worked to incorporate the help of its project management team to flag when the scope of a matter has changed so that the attorney on the matter is aware a conversation is needed.

The firm has also implemented technology that goes beyond basic e-billing software to allow attorneys to better monitor their budget on a matter, he said.  Ultimately, according to Wilbur, having a strong relationship with a client to begin with will go a long way.

"Even in a firm that's highly ethical and has training around these issues, mistakes are going to happen. Something is going to creep through," he said.  "The first thing is you have to have a good enough relationship with the client so they know they can text or email you, pick up the phone and point out a problem in the bill, and you will deal with it without arguing."

When contacted by Law360 for comment about its case, K&L Gates described Chicora's claims as "a transparent attempt to re-litigate issues that were raised and rejected years ago through final orders in a concluded bankruptcy."  A third-party fee examiner, it said, expressly found that the fees requested by the firm were reasonable and should be recoverable, and then the bankruptcy court adopted that determination.  "We are confident the present claims also will be rejected," the firm said.

Court Resolves $4M Attorney Fee Dispute with Law Firms

October 1, 2020

A recent Law.com story by Raychel Lean, “Court Chides Morgan & Morgan as Holland & Knight Prevails in $4 Million Attorney Fee Dispute,” reports that a federal breach of contract lawsuit which saw Holland & Knight litigators take on Morgan & Morgan came to a head when U.S. District Judge K. Michael Moore awarded more than $4.1 million in fees and costs to one side and just $550,000 to the other.  Now more than seven years in, the litigation itself has proved more costly for the plaintiffs than the actual judgment it obtained.

The dispute began in 2013, when the plaintiffs — Miami construction companies Architectural Ingenieria Siglo XXI LLC and Sun Land & RGITC LLC — sued over a failed irrigation construction contract worth $51.8 million.  Their lawsuit accused the Dominican Republic and its water resource agency, Instituto Nacional De Recursos Hidraulicos, or INDRHI, of breaching its contract by terminating the deal under force majeure, citing financial hardship.

And though the defendants were initially slapped with a $50 million default judgment for failing to respond, that was reversed when it retained Holland & Knight attorneys, who argued service hadn’t been properly handled.  Then, an eight-day bench trial resulted in a comparatively low $576,000 judgment against the water resource agency, while the Dominican Republic was absolved of liability.

Both sides moved for prevailing party fees and costs.  And after a report from U.S. Magistrate Judge Honorable Chris M. McAliley, Moore found plaintiff AIS was entitled to fees from the water resource agency; the Dominican Republic was entitled to fees from both plaintiffs; and the water resource agency was entitled to fees from plaintiff Sun Land.  In the order, Moore adopted McAliley’s findings on how much each side could recover.  And it was good news for defense attorneys Gregory Baldwin, Eduardo Ramos and Ilene Pabian of Holland & Knight’s Miami office, who’d sought more than $3.6 million in fees, along with $629,450 in non-taxable costs and $33,000 in taxable costs.

Though the plaintiffs argued those numbers were unreasonably high and moved for a 50% to 75% reduction, Moore approved the magistrate’s 15% haircut instead, shaving $144,600 off their fees.  It was a satisfying result for a case that Baldwin said “took a lot of patience, a lot of dedication and a great deal of time.”  “We’re very pleased and satisfied with the result.  We think, overall, it’s a just and fair result,” Baldwin said.  “The Dominican Republic was completely vindicated, and INDRHI received a damages award against it in an amount that we think was reasonable.”

But the ruling was bad news for plaintiff AIS, which sought $2.7 million in fees under a 2.5x contingency fee multiplier, and asked for $438,203 in nontaxable costs.  But Moore only awarded about $248,000 in fees and $302,000 in nontaxable costs — thanks to a bruising 75% reduction in fees recommended by the magistrate.

McAiley’s report levied some criticism at Morgan & Morgan, which “substantially frustrated the court’s task of working through the issues.”  The report said the firm caused extra work and delay by failing to initially disclose certain fee information, demonstrated a “lack of care” in its filings, kept unreliable records and had mixed some non-recoverable appellate costs up with trial costs.

“Obvious examples include the several entries where single timekeepers claim to have worked nearly, or more than, 24 hours in one day,” McAiley’s report said. “For instance, Morgan & Morgan maintains that one of its attorneys worked 32.7 hours in one day.”  McAiley denied Morgan & Morgan’s request for a fee multiplier and reduced its fees by 10% for failure to keep proper time records, 15% for block billing and 50% after factoring in the plaintiffs’ “very limited success” in the underlying case.  But they argued the reduction was “too much given the significant amount of work it took to litigate this case,” according to the ruling.

Moore said he wasn’t swayed by the plaintiff’s objections.  “Here, in objecting to the 75% fee reduction, plaintiffs fail to identify any factual finding in the R&R to which plaintiffs object,” Moore’s ruling said. “Rather, plaintiffs take issue with Magistrate Judge McAliley’s reasoning by arguing not that plaintiffs accurately recorded their hours worked and avoided block billing, but that the hours requested were reasonable and their success was greater in context than Magistrate Judge McAliley found it to be.”

The plaintiffs team also requested $237,400 to cover work performed by GrayRobinson.  But Moore rejected that, accepting McAiley’s finding that the retainer agreement said Morgan & Morgan was obligated to pay GrayRobinson, not that the client was

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA