Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Hourly Rates

ABA Journal Covers NALFA’s Annual Hourly Rate Survey

July 19, 2024

A recent ABA Journal story, “This City Has the Highest Billing Rates for Litigators, Survey Shows,” by Amanda Robert reports on NALFA’s 2023 Litigation Hourly Rate Survey & Report.  The story reads:

Litigators in the national’s capital outpaced all other litigators on billing rates in 2023, according to a recent survey from the National Association of Legal Fee Analysis.

A quarter of full-time litigators in Washington, D.C., who responded to the survey reported billing rates of $951 to more than $1,300, which is the highest tier tracked by the association. In comparison, only 13% of litigators fell into the highest tier in San Francisco, the city with the second highest billing rates last year.

“It’s top [litigation] billing city, and it’ll probably be so for the next several years,” Terry Jesse, executive director of the National Association of Legal Fee Analysis, told Law.com.  “I mean, no one comes close to Washington in terms of billing and litigation.”

More than 24,000 litigators in 24 cities participated in the National Association of Legal Fee Analysis’ annual survey of hourly billing rates, according to Law.com.

More than 2,000 litigators from D.C. responded to the survey. Nearly 200 of them reported billing rates of at least $1,201 an hour, Law.com says.

In addition to those in the highest tier, 51% of D.C. litigators reported billing rates between $701 and $950. Another 22% reported billing rates between $451 and $700.

Jesse told Law.com that the large presence of large law firms in D.C., and higher starting salaries for associates could be two factors influencing the city’s high billing rates.

NLJ Covers NALFA’s Annual Litigation Hourly Rate Survey

July 12, 2024

A recent NLJ story by Abigail Adcox, “DC Litigators Outpaced All Other Cities on Billing Rates in 2023” reports on NALFA’s 2023 Litigation Hourly Rate Survey & Report.  The story reads:

Washington, D.C., ranked as the city with the highest billing rates for litigation in 2023, according to a new survey from the National Association of Legal Fee Analysis.

A quarter of survey respondents in D.C., which included full-time equivalent litigators, both defense and plaintiffs counsel, fell within the highest tier, tier 4, with billing rates in the range of $951 to over $1,300, the highest percentage out of the 24 cities tracked.

Comparatively, in San Francisco, which had the second highest litigation billing rates last year, only 13% of respondents fell in tier 4, according to the survey.

“It’s top [litigation] billing city, and it’ll probably be so for the next several years. I mean, no one comes close to Washington in terms of billing and litigation,” said Terry Jesse, executive director of the National Association of Legal Fee Analysis, a nonprofit that undertakes fee analyses for courts and private clients.

A little over 2,000 attorneys in D.C. responded to the survey, including litigators practicing at large law firms, midsized law firms and solo practitioners. Overall, roughly 24,000 litigators participated in the survey across the U.S.

In D.C., of the 2,000 respondents, 101 reported billing rates between $1,201 to $1,300 and 97 reported billing rates over $1,300.

Overall, 2% of D.C. litigators fell within tier 1 billing rates (less than $450); 22% fell within tier 2 billing rates ($451-$700); and 51% fell within tier 3 rates ($701-$950).

Jesse indicated that the large presence of major law firms in D.C. was likely one reason for the region’s high billing rates. And the small percentage of billers in tier one may be attributed to higher associate starting salaries.

“Starting salaries have gone up. And thus there’s a correlation between compensation and rates. So what I think is going on is that first-year associates are starting their rates higher, more on the second tier,” said Jesse.

Overall in 2023, billing rate increases and demand helped D.C. firms end the year with a strong financial performance.

Average billing rates in the D.C. region rose 8.8% compared with the industry average of 8.3%, according to Wells Fargo’s Legal Specialty Group’s year-end survey results. Those results included eight firms headquartered in the D.C. region. That came as demand picked up in litigation and regulatory practices in the region.

Billing rate hikes aren’t expected to slow down in the near-future either. A recent survey showed that 86% of large firms in the U.S. and U.K. expect to increase billing rates over the next 12 months, with nearly a fifth of respondents expecting them to increase between 41% and 60%, according to reporting from The American Lawyer.

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.

Judge Needs More Data in $57M Antitrust Fee Request

March 27, 2024

A recent Law 360 story by Celeste Bott, “Ill. Judge Needs More Info To OK $57M Chicken Antitrust Fee”, reports that an Illinois federal judge overseeing a sprawling antitrust litigation against broiler chicken producers said he couldn't rule on class counsel's renewed bid for a $57 million attorney fee award thrown out by the Seventh Circuit last year without more information on one of the firm's graduated fee arrangements in a similar 2015 antitrust case, which wasn't disclosed in the first go-around.

U.S. District Judge Thomas Durkin said during a remote hearing that he wanted more briefing from the both plaintiffs' firms — Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC — and from class objector John Andren as to what effect the 2015 case has had in assessing the attorney fee award in the $181 million deal for chicken buyers.

In the earlier case, Cohen Milstein took on some of the nation's largest investment banks while representing the Public School Teachers' Pension and Retirement Fund of Chicago, a sophisticated plaintiff which negotiated attorney fees ex ante, or ahead of case resolution.

In that case, the plaintiff adopted a graduated scale.  If the same scale were to be used in the chicken case, class counsel estimated they would be entitled to $44 million for the $181 million settlement, or roughly 26%.  But the counsel argued they would have negotiated a higher rate in the broiler chicken case because it doesn't involve a trillion-dollar financial market.

Andren, meanwhile, said Judge Durkin should apply a similar fee schedule agreed to by Chicago Teachers, which entail fee brackets that decline both by the size of the settlement and by the stage of settlement.

"The latter is as important as the former, because sophisticated plaintiffs realize that trials are expensive and risky," Andren said in his opposition to the firms' renewed bid for a $57 million fee award in the chicken case.  "To align the incentives of class and counsel, attorneys need to receive a larger share of the recovery for more procedurally-advanced settlements and verdicts. This cannot occur when relatively early settlements are paid at 33%."  Judge Durkin also noted Tuesday that both are large, complex antitrust cases with many defendants and astronomical damages.  "There's enough similarities where I want to hear from both sides," he said.

The law firms, however, have contended "there is an ocean" between the size of the potential recovery, and potential fee awards, in both cases, and noted that in the chicken case, they represent indirect purchasers, which increases the risk relative to the banking cases.

"Indirect purchasers face defendant attacks that direct purchasers do not, and these attacks increase the chance of waking away with nothing.  And even though they take on this additional risk, the total damages indirect purchasers can recover based on state law claims is about half of what direct purchasers can recover for their federal claims," the firms said in a renewed fee motion filed in September 2023.

In that motion, they argued the court applied the correct methodology for determining fees the first time and came to the correct conclusion in awarding just over 33% of the settlement fund.  "Not only does the original award align with other awards in this specific case, it also aligns with the best available data on negotiated rates in antitrust cases," the class counsel said.  The fee award is back for reconsideration by Judge Durkin after the Seventh Circuit held last year that he failed to adequately consider bids made by class counsel in auctions in other cases and fee awards in different circuits.

Andren had taken issue with the roughly one-third cut of the settlement that Hagens Berman and Cohen Milstein were to receive in a deal the firms had struck with Fieldale Farms Corp., Peco Foods Inc., George's Inc., Tyson Foods Inc., Pilgrim's Pride Corp. and Mar-Jac Poultry.

Private plaintiffs began suing the nation's largest broiler-chicken producers in September 2016, claiming the producers coordinated and limited chicken production to raise prices and exchanged detailed information about capacity, sales volume and other data through statistical research compiler Agri Stats Inc.

The settlements at issue in this appeal were reached with Tyson for $99 million, Pilgrim's for $75.5 million, Peco for $1.9 million, George's for $1.9 million, Fieldale for $1.7 million and Mar-Jac for $1 million.  The agreements were awarded final approval by a district judge in December 2021.

A three-judge Seventh Circuit panel complimented the lower court in August 2023 for its "fine job of shepherding" the complex litigation, but said it made a mistake when it discounted bids made by one of the two firms serving as class counsel in other cases because the proposals had declining fee scale award structures.

Andren had also argued that the lower court should have taken into account that class counsel frequently did work in Ninth Circuit district courts, which employ a lower 25% "benchmark" for presumptively reasonable attorney fees.  The Seventh Circuit panel agreed the Illinois district judge shouldn't have categorically assigned less weight to Ninth Circuit cases in which counsel was awarded fees under a mega-fund rule.  In addition to vacating the fee award, the panel remanded the matter for "greater explanation and consideration" of the factors it laid out, noting it expressed no preference as to the amount or structure of the award, just the need for further review.

$5B Alternative Fee Proposal in Tesla Case Tests Chancery

March 20, 2024

A recent Law 360 story by Jeff Montgomery, “Epic Tesla Fee Bid May Blaze Extraordinary Chancery Path”, reports that an unprecedented $5 billion-plus stock-based fee award sought by class attorneys who recently short-circuited Tesla CEO Elon Musk's 12-step, $51 billion compensation package has set up an equally unprecedented test for Delaware Court of Chancery fee guidelines and a potential award one law expert described as "dynastic wealth."

Class attorneys who have battled Tesla's compensation scheme for Musk since mid-2018 last week sought more than 11% of the 266,947,208 Tesla shares freed up Jan. 30, when Chancellor Kathaleen St. J. McCormick ordered rescission of the options that Tesla's board awarded to Musk in an all-stock compensation plan.  The value had been estimated initially at $5.6 billion, but would fluctuate with the value of Tesla's stock.

While the process of seeking a stock fee award instead of cash is not unprecedented, it is an unusual posture for Delaware Chancery litigation, and its scale is likely to reopen what were once considered settled questions over counsel risks, rewards, and just how much attorneys can command for corporate benefit fees, experts told Law360.

"Given the order of magnitude here, I suspect that the case will not set any records in terms of percentage of the recovery awarded to the plaintiffs attorneys, but in absolute terms it'll still amount to dynastic wealth," said University of Connecticut School of Law professor Minor Myers. He described the fee as "destined to be epic, if only because it involves the invalidation of a pay package that was itself comically large."

Chancellor McCormick put the fee in play with an order rescinding Musk's 12-tranche, all-stock compensation plan Jan. 30, after a week-long trial in November 2022.  The ruling cited disclosure failures, murky terms, conflicted director architects and Musk's own conflicted influence in Tesla's creation of an Everest-sized mount of fast-triggering stock options.

"Plaintiff won complete recission of the largest pay package ever issued," the fee motion, filed last week, said.  "Our research demonstrates that the court's decree of recission, conservatively valued, was the largest compensatory award in the history of American jurisprudence by multiples," driven by "the gargantuan size of the tort underlying this action."

But class attorneys are seeking an equally gargantuan fee, even after departing from calculation customs that Vice Chancellor J. Travis Laster stressed last year in declining to apply a size reduction to a nearly 27%, $267 million award to stockholders who challenged a Dell Technolgies stock swap in 2018.  In his fee ruling, the vice chancellor said the calls to reduce the Dell fee conflicted with court efforts to reward attorneys for going deeper into litigation and taking greater risks in pursuit of legitimate claims.

"Of course, everyone involved will try to fit this into an existing framework, but the reality is that a $5.6 billion fee award is staggeringly high, whatever factors are considered," said Lyman P.Q. Johnson, Robert O. Bentley professor of law, emeritus, at Washington and Lee School of Law.  "I think Chancellor McCormick will find a way to go a fair bit lower, while still providing the attorneys with a very high award of some amount."  Johnson added: "The shock of Musk's compensation, undone by the chancellor, is unlikely to be followed by what many would regard as a shockingly high $5.6 billion fee award."

Vice Chancellor Laster's most recent big fee ruling established, pending appeal, a $266.7 million fee last year for attorneys who secured a $1 billion settlement for minority stockholders who sued over a $23.9 million Dell Technologies stock swap in 2018.

In Dell, the vice chancellor rejected investor arguments that large "mega-fund" settlements justified throttling back on fee payouts because customary fee percentages can produce massive, windfall payouts.  Instead, Vice Chancellor Laster defended the use of customary, variable percentages, including 15% to 25% shares of awards for settlements after "meaningful litigation and motion practice" and up to 33% post-trial.  He also acknowledged the tension between successful plaintiffs' counsel seeking appropriate compensation and large investors working to minimize carve-outs from court awards.

In Tesla, class attorneys, wary of blowback over big recoveries borne of typical fee ratios, acknowledged the Dell ruling's guidance, but also pointed to an earlier ruling that produced the current largest court-approved fee, a $304 million award approved in 2011 by then-Chancellor Leo E. Strine and upheld by Delaware's Supreme Court a year later.

That decision required Grupo Mexico to return to Southern Peru Copper Corp. nearly $1.3 billion worth of Southern Peru stock — rather than cash — after finding that Southern Copper had been coerced by a conflicted, controlling stockholder into overpaying for a Grupo Mexico mine in 2005.  With pre- and post-judgment interest, the award reached more than $2 billion, with class attorneys awarded 15%, or $304 million, for fees and expenses.

Tesla class attorneys referenced the 15% fee carve-out approved in Southern Peru, but adjusted even that percentage downward — to just over 11% — to reflect value added by the absence of a holding period for any award of Tesla shares before they could be sold.  Case costs included more than $13.6 million in attorney fees and more than $1.1 million in expenses during the multi-year Chancery action.  Requested fees would equal a $288,888 hourly rate that the fee motion said was justified by the case's complexity, results and attorney skill levels, among other factors.

Jill E. Fisch, Saul A. Fox distinguished professor of business law at the University of Pennsylvania Carey Law School, said use of stock for attorney fees was once "kind of frowned upon," but is not unprecedented.  "They are repeat players" in Delaware's courts, Fisch said of the attorney teams that prevailed in the Tesla case.  "They want credibility before the court.  The numbers, I think, reflect the benefit and risk of this kind of litigation, and traditionally, Chancery Court has acknowledged those risks."

The suit, led by stockholder Richard Tornetta, branded Musk's compensation package as unprecedented and unfair, noting that Musk had already qualified for some $20 billion in awards by the time the suit was filed, "making him one of the richest men on Earth" at the time.  It alleged in part that he relied on two in-house Tesla attorneys for work on the plan before the board's conflicted compensation committee took up the issue.

Ann M. Lipton, the Michael M. Fleishman associate professor in business law and entrepreneurship at Tulane University Law School and associate dean, pointed to another Tesla- and Musk-related case to illustrate the risks stockholder attorneys take.

Last year, after about seven years of litigation, Delaware's Supreme Court upheld a post-trial dismissal of a suit filed by stockholders of rooftop solar venture SolarCity, seeking damages tied to Tesla's $2.6 billion purchase of the company, for which Musk was CEO and also held a big share of company stock.

At one point during the case, the SolarCity stockholders suggested a damage award amounting to a $13 billion giveback of Tesla stock Musk received for his SolarCity shares. Dismissal of the case and rejection of class claims, however, wiped out class attorneys' hopes for a share of a big award.

In the more-recent scuttling of Musk's Tesla stock awards, Lipton said, shareholders benefited from the stock award cancelations by being dramatically less diluted in their holdings.  "That the attorneys are asking for a little bit of dilution" through their fee, "but far less than the shareholders would otherwise have suffered, seems like a real benefit that was provided, from a financial point of view."

Lipton said she was not familiar enough with the current Tesla fee motion to comment on the percentage sought, but cited the enormous risk and stockholder counsel loss in SolarCity and said that "attorneys deserve to be compensated" when they prevail.

University of Michigan Law School professor Gabriel Rauterberg said the fee bid in Tesla appears excessive, despite the importance of fee as a motivator.  "It seems to me extremely implausible that an award this large is necessary to provide the right incentives, given that plaintiffs attorneys' fixed costs for investigating lawsuits, conducting research, and prosecuting cases can be significant but not on this scale," Rauterberg said.  "It seems like a windfall to me. You can give the attorneys a large award, while still falling short of billions."

Counsel for the Tesla stockholders have pointed out that Delaware's Supreme Court has in the past declined to replace the current fee approach with declining percentages.  "Under Delaware law, the unprecedented size of the benefit conferred does not alter plaintiff's counsel's entitlement to 33% of that benefit," attorneys for the Tesla stockholders wrote.  They also pointed to voluntary concessions reducing the total ask to around 11%, with features that reduce the cost to the company.

Some of the sting felt by Tesla, the brief indicated, could be taken away by federal tax law terms that will make 21% of the fee award cash tax-deductible, reducing the post-tax fee award cost from $5.63 billion to $4.45 billion.  State corporate income tax and payroll tax deductions and allowances also could offset the share payout.

UConn's Myers said the Tesla stockholder attorneys won a landmark victory and "deserve to be compensated handsomely" for taking a risky case through trial, while also predicting that the court will "take a hard look at the magnitude of the benefit actually achieved here — that may be a figure in some dispute."  The case nevertheless also stands as an example of "how the Delaware system effectively harnesses the efforts of folks like the plaintiffs attorneys to generate powerful incentives for good governance at public companies," Myers said.