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Category: Defense Fees / Costs

Small Law Firm Accused of Overbilling in Bribery Case

June 19, 2021

A recent Law 360 story by Kevin Penton, “Cognizant Says Firm Overbilled It In Ex-CLO’s Bribery Case,” reports that a small New York law firm is facing allegations that it overbilled Cognizant Technology Solutions Corp. for representing the technology consulting company's former chief legal officer in several underlying cases related to an alleged foreign bribery scheme.  Jeremy Bohrer and his namesake firm charged Cognizant $23.3 million for representing Steven Schwartz from January 2019 to last April, outpacing co-counsel Paul Weiss Rifkind Wharton & Garrison LLP's nearly $20 million bill for the same period, despite the smaller firm lacking expertise in white collar defense and having a total of four lawyers, according to the complaint by the company in the Southern District of New York.

The complaint says that Bohrer and his firm, Bohrer PLLC, charged Cognizant a 600% markup for document reviews conducted by contract attorneys, that the attorney hired vendors in which he has an ownership stake to work on the Schwartz cases without disclosing the conflict, and that Cognizant was charged millions of dollars for work that was either not performed as invoiced or that was performed at a fraction of the cost of what was billed, according to the complaint.

Cognizant told the court that it was contractually obligated to pay Bohrer and his firm after Schwartz retained them in July 2018 to work together with Paul Weiss — and later Gibbons PC — on several related matters connected to the alleged scheme.  But Cognizant has balked at the fees charged by Bohrer and his firm, noting that they are nearly double the $13 million that Jones Day and a smaller firm charged Cognizant for representing Gordon Coburn, the company's former president and Schwartz's co-defendant in the criminal proceeding.

"Defendants' conduct is unethical, unconscionable, criminal, and has caused Cognizant significant harm," the complaint read.  "Even though Cognizant was contractually required to advance fees and costs for Schwartz's defense, Bohrer and Bohrer PLLC took advantage of that obligation in the extreme."

Federal prosecutors in February 2019 accused Schwartz and Coburn of conspiracy and multiple Foreign Corrupt Practices Act violations for allegedly approving a $2 million bribe to secure a construction permit for the IT company's campus in Chennai, India, in 2014.

Cognizant wants the Southern District of New York to order Bohrer and his firm to repay all the money they have charged the company, according to Wednesday's complaint. The company is also seeking punitive damages, pre- and post-judgment interest, and its attorney fees and costs, according to the complaint.

In a statement, Bohrer blasted the legal action.  "This is a malicious lawsuit filled with outrageous and false allegations and represents another attempt to interfere with Mr. Schwartz's defense against a prosecution that should never have been brought," Bohrer said in a statement.  "Bohrer PLLC is honored to represent Steven Schwartz and will remain focused on his defense."

Six Flags Wants Insurer to Cover $2.89M in Attorney Fees

May 19, 2021

A recent Texas Lawyer story by Angela Morris, “Six Flags Wants Insurer Travelers Casualty to Cover $2.89 Million in Attorney Fees, reports that the Texas-based theme park filed new litigation seeking to force its insurance company to reimburse millions of dollars in attorney fees that it paid to some of the nation’s largest law firms—like Kirkland & Ellis and Perkins Coie.  In the new federal court lawsuit in Dallas, Six Flags Entertainment Corp. has alleged that its insurer, Travelers Casualty and Surety Co. of America, has wrongfully denied the park its insurance coverage for attorney fees and legal expenses.

Six Flags spent the money to defend itself from a probe by the U.S. Securities and Exchange Commission into its business dealings in China, and from a class action and shareholder litigation related to the China dealings.  Six Flags operates 26 parks in the U.S., Mexico and Canada, including four parks each in California and Texas, and two parks each in Georgia, New Jersey and New York, according to its website.

But COVID-19 has hit Six Flags hard: $82 million revenue in the first quarter of 2021 represents a 38% drop compared to the same time period in 2019, according to the company’s most recent performance report.  The park’s legal troubles started in February 2020 with the SEC subpoena, according to the complaint in Six Flags Entertainment Corp v. Travelers Casualty and Surety Co. of America, filed in the U.S. District Court for the Northern District of Texas.

Six Flags had to pay more than $2.5 million in fees to law firms Kirkland & Ellis, Lionbridge, Parker Lynch and Fayer Gipson to defend itself against the subpoena, which asked for information about a partnership with a Chinese real estate developer regarding Six Flags parks in China, and a negative $15 million revenue adjustment.  Insurance coverages for directors and officers and for organizational liability should have covered the company’s legal expenses, the complaint said.

Also in February 2020, two securities class-action complaints were filed against the company and two former executives over the same partnership and negative revenue adjustment.  Substantively the same allegations arose in shareholder derivative lawsuits in federal and state courts against the company, executives and board members, said the complaint.  Six Flags had to spend more than $290,000 in fees for lawyers at Perkins Coie to represent two company executives who were defendants in a class action, since there could be a conflict if the same attorneys represented the company and those individuals.

According to a search of federal court records on PACER, plaintiffs filed three shareholder derivative lawsuits that were consolidated into one case, and U.S. District Judge Mark Pittman on April 28 granted a motion to dismiss by Six Flags in the case, In Re Six Flags Entertainment Corp. Derivative Litigation. The defendants—Six Flags’ executives and board members—were represented by Kirkland & Ellis lawyers Jeremy Fielding of Dallas, and New York-based Daniel Cellucci, Sandra Goldstein and Stefan Atkinson.  Pittman on March 3 granted Six Flags’ motion to dismiss in a consolidated class action matter, according to an opinion and order in that case, Electrical Workers Pension Fund v. Six Flags Entertainment Corp.  Those defendants–Six Flags and two executives–had the same Kirkland & Ellis attorneys, said PACER.

In a different case—unrelated to the Chinese Six Flags parks–Six Flags had told its insurance company about a “crucial event matter” dealing with a potential proxy fight with a shareholder. Six Flags tapped Kirkland & Ellis to represent it, and the matter eventually reached an amicable agreement, said the complaint.  Six Flags incurred more than $100,000 in legal fees for this outcome, and the complaint alleged that Travelers has refused coverage.

Aside from these legal actions, the complaint alleged that at other times, Travelers has tried to recharacterize and reallocate legal fees and expenses, that should have been covered by insurance. It alleged the insurer looked to lessen exposure and to decrease policy benefits paid to Six Flags.

The theme park company is suing its insurer for breach of contract, violation of a Texas insurance law that requires prompt and fair payment of claims, and breach of the duty of good faith and fair dealing.  Six Flags has asked the court for a declaratory judgment that finds the Travelers policy should cover attorney fees and legal expenses.  In addition to recovering those amounts from Travelers, it wants to be paid back for the legal fees it is spending to sue the insurance company, said the complaint.

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.

Judge Wants Skadden Affidavit on Fees and Billing Practices

March 4, 2021

A recent Law 360 story by Jeff Montgomery, “Chancery Wants Skadden Affidavit in TransPerfect Fee Fight,” reports that Delaware's chancellor ordered Skadden to submit an affidavit attesting to the accuracy and reasonableness of custodian fees recently charged to TransPerfect Global Inc., saying it was in the interest of ending billing battles stemming from a rancorous court-ordered sale of the business.  Chancellor Andre G. Bouchard gave Skadden Arps Slate Meagher & Flom LLP and custodian Robert B. Pincus a week to submit the information after a half-day argument on three pending issues in the case.  Among them was a motion by Pincus for a discharge from his custodian's role with indemnification and nondisparagement protections, among other terms, opposed by TransPerfect and co-founder Philip R. Shawe.

Also at issue were claims by TransPerfect that Skadden had charged excessive and unsupportable fees on a range of matters, including "fees on fees" billings for Pincus' and Skadden's defense against fee claims, as well as a TransPerfect motion to block Pincus and Skadden from recovering fees for a contempt action.  While taking the overall issues, including Pincus' discharge, under advisement, the chancellor also directed Skadden to provide support in its affidavit for more than $200,000 in billings for what were alleged by TransPerfect to be "the administrative work" of sending a bill.

"Is it typical? I'm not aware of it happening," the chancellor said.  "I'm talking about [billing for] the actual generation of an invoice and, if you will, running that bill.  Give it thought.  If it's your position that it's ordinary and that it would be billed to a client ordinarily and permissibly, so attest" in the affidavit.  "If you want to carve that out. It might be prudent to do so."

Pincus was appointed custodian of TransPerfect after its two co-founders, Shawe and Elizabeth Elting, had a falling-out and could not agree on how to manage the company.  In May 2018, the Delaware Supreme Court affirmed the chancellor's February 2018 ruling that allowed Shawe to buy Elting's 50% stake in the company.  Chancellor Bouchard had also determined that Pincus' impartiality wasn't compromised by threats of litigation made against him by Elting or by Shawe's alleged interference in the sale process.

During the arguments, Jennifer C. Voss of Skadden, counsel to Pincus, said the expenses had been prompted by TransPerfect's and Shawe's actions, and were handled with the same diligence and efficiency as that given to all of Skadden's clients, at rates consistent with its practice.  "Mr. Shawe is an adjudicated serial litigator," Voss told the court while arguing for Pincus' discharge.  "Now, years out from closing [on the TransPerfect sale], he has filed a barrage of baseless, unprovoked attacks against Mr. Pincus and Skadden.  These attacks are meant to coerce Mr. Pincus. He has not succeeded, but they're also meant to harass him and his advisers."

Voss said TransPerfect and Shawe "weaponized access to billing statements" for a "punitive and protracted campaign of fee warfare," despite Pincus' right to recover costs as custodian and for litigation in disputes with TransPerfect and Shawe in the years after the sale.  Much of the dispute related to the custodian's authority to bill TransPerfect for the costs of responses to or defenses for challenges raised by the company and Shawe.

During the hearing, David B. Goldstein of Rabinowitz Boudin Standard Krinsky & Lieberman PC, counsel to Shawe, described the billing arrangements as a "fee merry-go-round," with filings by TransPerfect and Shawe generating billings from the custodian, objections to the bills and new bills for addressing the objections.  "The sale of TransPerfect Global closed almost three years ago," Goldstein said.  "At that point, TransPerfect had already been ordered to pay Skadden almost $13 million, and another $31 million to [Pincus'] handpicked advisers."

Fee and other disputes since then have pushed the total to $14 million for Skadden and $45 million for advisers, Goldstein said, with additional billings pending.  "Our position is these fees are really excessive," Goldstein said, arguing that the process appeared to have become a "billing frenzy" without end.  "I'm not telling the court or suggesting that Skadden should get zero," he said.  But "if they got nothing else, they would have gotten far more than a reasonable amount of fees."

Voss disputed TransPerfect's calculations of the billings and costs of the case, and said expenses had been driven by TransPerfect's and Shawe's frivolous arguments, haphazard and mistaken filings, and pressures for expedited court proceedings.  One billing alone, Voss noted, was answered with 100 pages of objections.

Nelson Mullins Discloses Hourly Rates in Patent Fee Request

March 1, 2021

A recent Law.com story by Mike Scarcella, “Denied a Seal, Nelson Mullins Reveals Rates in Fee Petition in Patent Suit,” reports that, for at least the second time in the span of a year a federal trial judge refused to let a major U.S. law firm keep hourly rates and other billing-related information secret as part of an effort in court to squeeze legal fees from an opponent.

Denied its bid for secrecy, one of the firms, Nelson Mullins Riley & Scarborough, last week resubmitted its attorney fee petition fully unredacted in the U.S. District Court for the Western District of North Carolina.  The other firm, King & Spalding, abandoned an effort last year in Washington’s federal trial court after a judge said he would unseal supporting records showing hourly rates if the firm wanted to press its fee request.

Nelson Mullins sought $292,340 from a private plaintiff who filed patent claims against the motorsports company Simpson Performance Products and an engineer there.  The law firm won a key ruling in early February, but the court, just one day after the fee petition was filed, denied the request.  King & Spalding had sought $665,000 from the U.S. Department of Health and Human Services after successfully obtaining records in a federal Freedom of Information Act lawsuit.

Specific hourly billing rates and other internal records about fees generally are not things that law firms and lawyers are eager to discuss out in the open.  Indeed, both Nelson Mullins and King & Spalding had argued hourly rates and other billing documents were sensitive business records that should be kept confidential.  Still, information about billing often becomes public as a matter of routine in any number of settings, including in bankruptcy filings, certain types of litigation and in some law firm contracts with government clients.

A bankruptcy case in the U.S. District Court for the Northern District of Texas recently showed hourly rates for Kirkland & Ellis partners to be between $1,085 and $1,895, and associates’ hourly rates between $625 and $1,195.  In California, a federal judge last month ordered legal fees to be paid to a team from Gibson, Dunn & Crutcher that successfully represented Rachel Maddow as a defendant in a defamation case.  Gibson Dunn partner Theodore Boutrous Jr., prominent for his First Amendment advocacy, was shown as billing $1,525 hourly last year.

Nelson Mullins “asks the court to seal the amount of attorneys’ fees being requested—the very substance of the relief that it is seeking from the court—along with how it calculated the fees (counsel’s hourly rates and the time expended during their representation),” U.S. District Judge Kenneth Bell wrote in a Feb. 24 order.  “Thus, the effect of a request to seal this information is tantamount to a request to issue a secret order, as the court could not even grant much less fully discuss the merits of [the legal fee] request without disclosing the amount of fees requested along with counsel’s hourly fees, etc.”

In the King & Spalding matter, U.S. District Judge Amit Mehta said “the records that plaintiff asks to keep under seal go to the very heart of what is before the court: questions concerning the reasonableness of plaintiff’s counsel’s hourly rates and the reasonableness of the time they expended on this matter.”

Both judges declined the invitation to seal the law firms’ hourly rates and other records.  In the case involving King & Spalding, the firm dropped its move to get fees after Mehta said he would unseal rate information if the firm moved forward.  Those details remained sealed.  “Once a matter is brought before a court for resolution, it is no longer solely the parties’ case, but also the public’s case,” wrote Bell, a former McGuireWoods partner who’d spent more than 10 years in the firm’s Charlotte office before joining the bench in 2019.

Bell said that “except in very limited circumstances, the court’s business must be conducted openly, with public access guaranteed to instill confidence in the fairness of the proceedings and inform the public about the law.” He added: “[B]y choosing to seek attorneys’ fees in an open court, Simpson must necessarily disclose the amount of the award it seeks and the underlying basis for its fees.”  To “avoid any surprise,” Bell said he would allow Nelson Mullins to withdraw its motion for legal fees or refile it in an unredacted form.  That firm submitted 85 pages of arguments, declarations and billing records to back its request for fees.

“The rates charged by defendants’ counsel were well within, if not below, the range typically charged for complex litigation in North Carolina,” wrote Charlotte-based Nelson Mullins partner Craig Killen, who said he billed at $425 hourly for the case.  Another partner, Robert McWilliams, billed at $405 on the case.  Three associates billed at hourly rates between $320 and $345, according to the law firm’s motion for fees.

In arguing for fees, the Nelson Mullins team trumpeted the “unusual questions” raised during the patent litigation.  “This case was pending over two years and proceeded through the extended period of discovery,” Killen wrote in a court filing.  Nelson Mullins said its request for fees “is made with some reluctance because Simpson has no interest in ‘punishing’ an individual plaintiff.”  But, the law firm said in its court filing, “much of the expense incurred by the defense could have been avoided if plaintiff had not pressed unreasonable and objectively baseless positions.”

On the day after refusing to allow Nelson Mullins to file its billing records under seal, Bell, the trial judge, rejected the firm’s request.  “In the exercise of its discretion, the court does not find this case to be exceptional,” Bell wrote in an order last week.  “While the court determined that defendants were fully entitled to summary judgment (and to be clear does not intend by this decision to indicate that it has any uncertainty over that conclusion), defendants have not shown that plaintiff pursued her claims frivolously, for an improper purpose or in bad faith.”