Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes


News Blog

Category: UK / International

Former Client Accuses Davis Polk of ‘Excessive’ Billing Rates

August 25, 2023

A recent Law 360 story by Emily Johnson, “Davis Polk Blasted Over Fees Bid For Paul Hastings Work”, reports that U.S.-based Chinese nationals — whose suit accusing Paul Hastings LLP of not registering as a foreign agent was dismissed earlier this month — called a request from the defendants' legal team at Davis Polk & Wardwell LLP for more than $327,000 in attorney fees "grossly excessive" and unreasonable.

Tao An and other Chinese nationals argued that Davis Polk attorneys' request is not rational, because "in essence … the entirety of their handling" consisted of arguing a motion to dismiss and a motion for sanctions, according to the plaintiff's brief filed.  After their suit was tossed, the plaintiffs were sanctioned on Aug. 2 and ordered to pay attorney fees for the defendants.

"If the relief they sought in their motions was so obviously warranted to be in their favor, as they argued, it simply should not have taken in excess of $300,000 in legal fees to accomplish," the plaintiffs said. "The rates applied are also unreasonable, the number of attorneys was excessive, and the amount of hours spent were excessive.  If the court is to award fees, it is respectfully requested that the amount be reasonable.  The amount sought is clearly not reasonable."

U.S. District Judge Valerie Caproni dismissed the suit brought by the plaintiffs earlier this month, finding that the plaintiffs didn't provide any facts to support their claim that Paul Hastings' representation of Jinshang Bank, which is controlled and operated by the Chinese Communist Party, qualified the firm as an agent of a foreign principal under the Foreign Agents Registration Act, or FARA.  The judge found that the case, filed in November, was part of a harassment campaign against Paul Hastings and one of its former attorneys, Luc A. Despins.

After finding that the suit was frivolous, Judge Caproni ordered the plaintiffs to pay the defendants' attorney fees.  The plaintiffs pushed back on exhibits submitted by Davis Polk of other firms' billable hours, arguing that billable hours in bankruptcy cases in the Southern District of New York are not relevant to show reasonable fees for this case, saying, "Practice in bankruptcy court is a much more specialized and heavily detailed practice than the instant matter."

"Those cases are vastly different, and vastly more complicated, than the instant case," the plaintiffs said.  In their motion for attorney fees filed Aug. 11, the defendants showed that other firms — Weil Gotshal & Manges LLP, Latham & Watkins LLP, Simpson Thacher & Bartlett LLP, Skadden Arps Slate Meagher & Flom LLP and White & Case LLP — charged anywhere from $1,250 to $2,230 for an hour of a partner's time.  The defendants also showed ranges for counsel and associates at these firms.

In the motion for attorney fees, Greg D. Andres of Davis Polk said that he served as lead counsel in this suit, leveraging his expertise as co-head of the firm's white collar defense and investigations practice and 20 years of litigation experience that includes handling FARA matters.  Andres said he was among the prosecutors assigned to Special Counsel Robert Mueller's prosecution of Paul Manafort, who was handed a 73-month prison sentence in 2019 after he pled guilty to failing to register as a foreign agent, among other charges.

"My standard hourly billing rate for 2022 was $1,990 in 2022, and $2,200 as of January 1, 2023," Andres said.  "Paul Hastings was charged a discounted hourly rate for my work related to this action of $1,592 in 2022 and $1,760 as of January 1, 2023."  The plaintiffs argued that the standard for reasonable attorney fees should be an hourly rate considering that a client would want to spend the "minimum necessary to litigate the case effectively."

"The defendants, of course, may choose whomever they wish to represent them, but that does not make defendant's counsel's hourly rates 'reasonable,'" the plaintiffs said.  "Pursuant to this honorable court's order, and indeed controlling law on the subject, calls for any award to be based on a 'reasonable attorney's fee', it would be an outright abuse of discretion, a distortion of justice, and an outright violation of controlling law, to rely on the defendants' bankruptcy case rates to provide any guidance to calculate a 'reasonable fee' in this matter."

The plaintiffs said that Davis Polk's exhibits submitted are "unsupported hearsay" and include vague descriptions of time spent on litigating this suit.  The plaintiffs cast doubt on why the defendants' legal team included five lawyers and three legal assistants.  "This begs the question why so many people were needed to work on the case — other than to artificially inflate their legal bills," the plaintiffs said.  The plaintiffs also said the firm's exhibits are "unreliable due to excessive block billing and over billing, two practices that go against legal billing best practices."

Fee Award Cut in Defective Toilet Settlement to $1.9M

April 10, 2023

A recent Law 360 story by Emily Sawicki, “Fee Award for Defective Toilet Settlement Plunges to $1.95M,” reports that a Texas federal judge has awarded $1.95 million to attorneys representing U.S. consumers in cross-border class action settlements over allegedly defective toilets, following a Fifth Circuit decision last year tanking a $4.3 million fee award in the litigation.  The ruling comes after a divided Fifth Circuit panel ruled in January 2022 that U.S. District Judge Amos L. Mazzant had abused his discretion when he declined to wade into whether the hours attorneys at Carpenter & Schumacher PC spent litigating ultimately unsuccessful consumer claims could be lopped off the lodestar.

"The Fifth Circuit determined that the court should have made specific factual findings regarding plaintiffs' overall success and only awarded attorneys' fees for time spent on successful claims as part of the court's lodestar calculation," Judge Mazzant wrote in the order.  Plano, Texas-based Carpenter & Schumacher PC initially asked to pocket $12 million from settlements between two classes of consumers and Porcelana Corona De Mexico, a toilet manufacturer accused of producing defective toilets whose tank flaws caused property damage.

In the 2018 and 2019 settlements — encompassing two separate class actions against the Monterrey, Mexico-based Porcelana and its predecessor, Sanitarios Lamosa — class members were offered up to $300 to replace defective toilet tanks and, for some claimants, up to $4,000 for property damage resulting from the alleged defect, according to court documents.  Following the settlements, in April 2020, Judge Mazzant cut down Carpenter & Schumacher's eight-figure settlement fee request to $4.3 million, after finding it would be inappropriate to add a multiplier as work performed on the case was adequately included in the lodestar total.

In its ruling last January, however, the Fifth Circuit upended the fee award and kicked the case back to the Eastern District of Texas to make a new lodestar calculation that distinguished between work spent on successful versus unsuccessful claims.  The circuit court told Judge Mazzant to "address the 'common core of facts' and 'common legal theories' sufficiently so that no fees are awarded on unsuccessful theories."

"Consider the amount of damages and non-monetary relief sought compared to what was actually received by the Class," the Fifth Circuit further instructed Judge Mazzant.  That direction proved difficult, Judge Mazzant said, because plaintiffs "did not, at any point, enumerate a specific monetary amount sought in their complaints."

By way of determining success, Judge Mazzant compared the total number of toilet tank models that had alleged defects, with the total number included in the settlement to determine how successful plaintiffs were in securing relief.  That number came to a success rate of 22%.  BiHowever, Judge Mazzant said that number alone does not "fully encompass the complex nature of plaintiffs' success in this case."

The judge approved an overall lodestar fee reduction of 55% based on "the court's factual findings, analysis of the results obtained, and additional review of class counsel's contemporaneous billing records."  When it came to adjusting the remaining lodestar based on the 12 Johnson factors — established in 1974 by the Fifth Circuit in Johnson v. Georgia Highway Express  — Judge Mazzant determined there was no more reason to enhance or reduce the lodestar since the last time the judge took up the fee request in 2020, and did not adjust the lodestar.

Judge Mazzant acknowledged that "[p]laintiffs recovered on only a handful of the claims that they brought" and, on Friday, signed off on a final fee award of $1,950,277.28.  An accompanying litigation expense request of $371,354.98 was not included in the defendants' appeal to the Fifth Circuit and was not addressed by the appeals court; therefore, Judge Mazzant granted a motion by Carpenter & Schumacher to retain the full litigation pot, bringing the firm's total payout to $2,321,632.26.

IBA Panel: Narrow The Gender Hourly Billing Rate Gap in Law

November 4, 2022

A recent Law 360 story by Carolina Bolado, “Start With Fixing Gender Billable Rate Gap, IBA Panel Says” reports that law firms looking to retain their female talent need to start by narrowing the billable rate gap, which experts at the International Bar Association conference in Miami called the "Rosetta Stone" of the gender gap issue.  At an IBA panel on how to keep women in the profession, Michael Ellenhorn, CEO of Decipher, a data intelligence firm focused on the lateral legal market, said the data show women routinely bill more hours than their male counterparts but recover less money for that work.  Addressing this gap in billable rates is where firms need to start, he said.

"It's the baseline where this problem can be solved," Ellenhorn said.  "At a minimum, women partners need to be compensated and remunerated at the same rate as their male counterparts.  From an objective standpoint, that is one way we can move the ball down the pitch."  The panelists, a global group gathered together at the IBA conference to discuss the gender inequality problem, said part of the issue is that many managing partners don't even realize that there is a problem.

Hilarie Bass, the former co-president of Greenberg Traurig LLP who now runs the Bass Institute for Diversity and Inclusion, said that a study conducted during her tenure as American Bar Association president in 2017-2018 found that 91% of law firm leaders believe they are advocates of gender diversity.  The study found three-quarters of leaders believe that they are completely objective and committed to elevating women to equity partner status and that they are successful in retaining women.

But the female respondents to the survey did not agree.  A majority of women in the survey said they were overlooked for advancement and were compensated at a lower level than comparable male colleagues, Bass said.  Many also felt they were treated as a token representative for diversity, which Bass said is becoming more of an issue as clients demand diverse legal teams.  Bass said women reported being brought in to pitch the client but being sidelined not long afterward.

Ellenhorn said firms need to start by measuring data, in particular the comparison between average realized rates for male and female partners and how the firm apportions origination credit.  "It's very simple to do," Ellenhorn said.  "Those two data points will get you a long way to understanding what the mix is in each of your firms."  He added that his group has found that men tend to over-forecast their books of business and then underperform, while women in general under-forecast and overperform.  Firms need to stop penalizing women for doing this, not just in the lateral market but during firms' business and budget planning processes, he said.

Ellenhorn said his organization has looked at thousands of lateral partner questionnaires, which are forms lawyers fill out when they move from one firm to another.  He said that while women make up just one-fifth of equity partners, they make up 31% of lateral partner moves.  "You start to scratch your head a little bit about what is going on in the market," Ellenhorn said.  And unlike their male counterparts, women depart and oftentimes within the data set they don't show up somewhere else. In the last two years in the U.S., that's about 8,000 women partners who have likely disappeared from the profession."

UK Authorities May Feel Sting From ‘Loser Pays’ Ruling

May 27, 2022

A recent Law 360 story by Christopher Crosby, “Authorities May Feel The Sting From Loser Pays Ruling” reports that the U.K. Supreme Court opened the door to public authorities being forced to pay defendants' costs from failed enforcement actions, but attorneys say it is too soon to know whether that risk will deter agencies from bringing cutting-edge cases.  Britain's highest court has ruled that the Competition and Markets Authority might have to cover the legal costs of drugmaker Pfizer and a distributor, Flynn Pharma, after the watchdog's market abuse case against the two companies fell short.

Britain's highest court ruled, in a unanimous 55-page decision handed down, that costs could follow a failed enforcement action because there is no automatic presumption that authorities do not pay for legal fees when they lose cases.  Businesses and trade organizations have applauded the development, which they say will help defendants with small budgets recover their legal fees if they can prove that an enforcement case was groundless.

But the ruling, written by Justice Vivien Rose, does not mean that regulators will always be on the hook for costs — that issue will be determined by the trial court or tribunal on a case-by-case basis.  But the justices said the Court of Appeal was wrong to assume that costs automatically have a chilling effect on regulators in every case.  "The Court of Appeal had created an unhelpful precedent, which puts a potential appellant in the unenviable position of being forced to pay the CMA's legal costs if their appeal failed yet prevented them recovering their own legal costs if their appeal succeeded," Robert Vidal, a competition partner at Pinsent Masons LLP, said.

The competition watchdog fined the drug companies £84.2 million ($106 million at today's rates) in 2016. A three-year investigation had concluded the companies had overcharged the National Health Service for the anti-epilepsy drug phenytoin sodium.  But the Competition Appeal Tribunal found errors in the regulator's analysis in 2020 and ordered it to reassess the fairness of the prices.  Those findings were upheld by the Court of Appeal.  The tribunal then ordered the CMA to pay part of Flynn and Pfizer's multimillion-pound costs after concluding that the default position in cases involving regulators was that the loser bears the burden of costs.

Although the losing side in litigation usually pays the winner's costs, the Court of Appeal disagreed with the tribunal.  The appellate court ruled in 2019 that the "starting position" is that public agencies should not be made to pay for trying to do their job — even if they are unsuccessful in court.  Overturning the lower court's findings, the justices said the Court of Appeal was wrong to overturn the Competition Markets Authority's costs ruling and instructed that there would be no order about costs.

The appellate court had looked at a line of cases beginning with Bradford Metropolitan District Council v. Booth in 2000 and found that the starting assumption for courts was that all public bodies are protected from costs when they lose a case.  Justice Rose said that, even though those cases created a strong preference against deterring regulators, it cannot be assumed that every case involving every regulator carries that risk.

In the case of the CMA, the watchdog can offset its litigation costs against the penalties it imposes, the Supreme Court said.  The competition authority incurred £2 million in legal costs during the last year, which it covered with £56.7 million in penalties handed out, justices noted.  Justice Rose said the "way that the functions of the CMA are funded dispels any plausible concern that its conduct will be influenced by the risk of adverse costs orders."

Robert Vidal said that the CMA "already has all the financial and legal resources of the state behind it, so it was difficult to understand why the Court of Appeal felt it needed to provide the CMA with an additional advantage on exposure to legal costs."  Stijn Huijts, a former CMA director and partner at Geradin Partners, said that it was a "bridge too far" for justices to accept that a public body like the CMA should be shielded from adverse cost awards.

"It's important to recognize that this doesn't mean all costs of litigants like Pfizer will fall to the CMA from now on," Huijts said.  "Nevertheless, the CMA will be in a position where it will need to challenge costs claimed in individual cases and, in most cases that it loses, it will at least need to pay part of the litigants' costs from public money."  Sophie Lawrance, a Bristows partner who acted for two pharmaceutical groups in the CMA case, said the issue was of particular concern to companies active in the pharmaceutical industry, which may have been discouraged against appealing future infringement decisions by the watchdog.

In the last year the CMA has fined several drugmakers in complex medication-pricing cases, finding in February that the cost for anti-nausea medication and thyroid medication was excessive.  In one case, Advanz Pharma Corp. and two private equity firms, Hg and Cinven, have asked the Competition Appeal Tribunal to annul a £100 million ($126 million) fine over Liothyronine tablets, which are used to treat thyroid hormone deficiency.

Drugmaker Allergan and four other pharmaceutical companies are also appealing against a record £260 million fine from the competition watchdog for allegedly abusing their market dominance over an adrenal drug.  Lawrence said that the Supreme Court's decision "ensures that meritorious appeals — which can result in crucial guidance for the sector as a whole — are not deterred."

The Supreme Court Justices highlighted the fact that costs have not prevented the CMA from investigating large companies such as Google and Apple.  The regulator is looking into whether their duopoly on the "mobile ecosystem" threatens competition for digital services, setting up potential enforcement actions.  "Whether this will have a chilling effect on the CMA will in reality probably depend on how it fares in a number of high-profile cases making their way through the courts now, and in investigations against digital giants like Apple and Google," Huijts said.  "Win most of those, and this chapter will be easily forgotten. Lose the majority, and the watchdog may grow more timid."

Brown Rudnick Accused of $22M in Overbilling

February 25, 2022

A recent Reuters story by David Thomas, “Ex-Client Wans $22 mln From Brown Rudnick, Saying Lawyers Overbilled” reports that an Austrian multinational construction company went on the offensive in a fee dispute with U.S. law firm Brown Rudnick, claiming the firm routinely overbilled it and demanding $22 million.  Brown Rudnick sued Christof Industries Global GmbH in September, alleging the industrial plant builder owed $8 million in attorney fees and interest from an international arbitration over a failed construction project.

But the law firm racked up more than $6 million in fees after promising in writing to not exceed a $2 million fee estimate, Christof alleged in its countersuit, filed in Boston federal court.  The law firm improperly overbilled, Christof alleged, saying one attorney billed more than $145,000 for 231 hours preparing to examine one witness.  The law firm billed more than 40 hours for assembling binders, the company said.

"In a number of time entries that verge on satire, Brown Rudnick attorneys even billed for drafting and corresponding about a proposal for their 'binder compilation strategy,'" Christof said in its suit.

The dispute stems from Brown Rudnick's work arbitrating a conflict arising from a Christof subsidiary's work as a contractor during the construction of a fiberboard production plant in South Carolina.  Christof said it signed an agreement with the firm so that its legal costs would not exceed $40,000 a month, plus a $200,000 retainer up front.  But it said Brown Rudnick billed more than $250,000, not including the retainer, just in its first month.

A panel awarded Christof more than $24.5 million in damages in the underlying arbitration, which was offset by about $20 million in advanced contract payments the company had received.  The final award was for $6.68 million.