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Category: Legal Bills / Legal 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."

NRA Agrees To Pay Creditors’ Chapter 11 Fees

May 15, 2021

A recent Law 360 story by Vince Sullivan, “NRA Reaches Deal To Pay Creditors’ Ch. 11 Fees” reports that days after the National Rifle Association's Chapter 11 case was dismissed, the organization told a Texas bankruptcy judge that it had reached an agreement with the official committee of unsecured creditors to handle payments of professional fees.  During a status conference requested by the committee, its attorney Louis Strubeck Jr. of Norton Rose Fulbright said the committee had pending fee applications in the case and would likely have at least a further request for payment of professional fees, which are typically paid for by the debtor in a Chapter 11 case.

Since the case was dismissed via an order from U.S. Bankruptcy Judge Harlin D. Hale, Strubeck said he wanted to present the situation to the court to be sure it was being handled properly.  "We wanted to make sure there was full transparency around this," Strubeck said.  "We didn't want to agree to anything that wasn't going to be discussed with the court to make sure we weren't doing something differently."  After the dismissal order came down, Strubeck said he engaged in discussions with Patrick J. Neligan Jr. of Nelligan LLP, the NRA's bankruptcy counsel, to figure out how to move forward.

At the hearing, Nelligan said he was of the legal opinion that once the Chapter 11 dismissal order was issued, the bankruptcy court relinquished its jurisdiction over the parties and restored them to their prebankruptcy circumstances.  That means, he said, that the NRA would treat any invoices from the committee's professionals incurred before the dismissal as it would treat any other unsecured obligation.

"The impact of a dismissal ... is that as we put the entities into their prebankruptcy positions, we need to go forward with payment of the unsecured creditors on their prep claims," Nelligan said.  "The NRA is preparing to make those payments.  Out of an abundance of caution we have not gone forward with those payments until this status conference."  Any disputes among the parties about any invoices will be resolved as they normally would as if the bankruptcy had never occurred, Nelligan said.

The dismissal also restores the parties to their prebankruptcy standing with regard to the litigation in which the NRA is involved, Nelligan said.  As he understands it, the case brought by the New York attorney general seeking to dissolve the organization will continue uninterrupted in New York state court, he said.  The NRA's litigation against its former media consulting firm Ackerman McQueen will also resume in Texas state court, he said.

Attorneys for NRA board member Phillip Journey — whose motion seeking the appointment of an examiner in the Chapter 11 case was denied — said their client is considering whether to appeal the denial of his motion, or whether to pursue an administrative expense claim against the NRA for the fees incurred in litigating the examiner and dismissal motions.

Ackerman McQueen attorneys also said they were exploring whether the dismissal of the Chapter 11 case for a lack of good faith in making the bankruptcy filing could give rise to the shifting of legal fees.  After taking some time to consider the issues, Judge Hale said he wouldn't be altering his dismissal order to retain jurisdiction over the fee issues, saying he trusted the parties and their counsel to resolve any disputes professionally and amicably.

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.

Under Economic Pressure, More Firms Sue Clients for Unpaid Fees

April 13, 2021

A recent Legal Intelligencer story by Justin Henry, “Under Economic Pressure, Large Firms May Increasing Sue Clients for Nonpayment,” reports that economic pressures accelerated by the COVID-19 pandemic have forced many law firms into difficult conversations with clients, as they aim to balance flexibility during an economic downturn with their own budgetary constraints. In some instances, the challenge is leading to lawsuits.  Over the last 12 months since the onset of the pandemic, Am Law 200 firms including Blank Rome, Buchanan Ingersoll & Rooney, Armstrong Teasdale and Baker McKenzie, among others, have sued clients for allegedly unpaid legal fees, court filings show.

Attorneys who represent law firms in collections disputes say firms are wary to sue clients over unpaid fees because it potentially leaves them vulnerable to counterclaims of legal malpractice.  They say law firms see litigation as a last resort, especially during an economic downturn when flexibility in collections can be key to maintaining solid client relationships.  But law firms are also on alert for exploitation by clients citing the economic tribulation of the last 12 months as a pretext to avoid costs, attorneys say.  Industry leaders also said a large portion of these claims by law firms don’t show up on the public record because the services contracts include an arbitration provision for settling fee disputes.

“As firms become billion-dollar-plus big businesses, they tend to be run more like big billion-dollar-plus businesses,” said Ronald Minkoff, a litigation group partner at Frankfurt Kurnit Klein & Selz, who represents law firms in fee collections disputes.  “If they feel that a client is taking advantage of them, they’re much more willing to call the client to account for that.”

Last summer, according to court filings, Buchanan found itself with $2.7 million in outstanding legal fees from Best Medical International, a medical device company that retained Buchanan for patent litigation against alleged infringers in which Buchanan was victorious.  The fee is now the subject of ongoing litigation in the U.S. District Court for the Western District of Pennsylvania.

“Our cash flow difficulties do indeed continue to make it difficult to pay the Buchanan legal bill which now approaches $2.8 million,” said James Brady, Best Medical’s in-house counsel, in a May 11, 2020, email to Buchanan CEO Joe Dougherty, that was included in court documents.  “We will do everything we can to achieve a reasonable settlement with Varian and Elekta so your firm can be fairly compensated.  We appreciate your willingness to continue the forbearance on any collection efforts and we are hopeful a successful plan will be forthcoming soon.”

Court documents also included a May 12 email reply, in which Dougherty told Brady the firm’s board is “growing impatient with my forbearance on initiating collection efforts.”  Dougherty added Buchanan “is not immune from cash flow challenges these days, and the $2.7 million owed is very significant to us.”  Buchanan has annual revenue around $300 million, according to the most recent ALM data for the firm.

Best Medical took the firm to court in July, alleging it had breached fiduciary duties by failing to provide monthly estimates as promised in their initial contract, which the firm denies.  Court records show Best Medical failed to pay monthly payments from Sept. 23, 2019, through Feb. 11, 2020, citing the opposing parties’ request to stay proceedings and postponing a potential settlement.  Buchanan declined to comment for this story.

Armstrong Teasdale on March 17 filed a complaint in the U.S. District Court for the Eastern District of Missouri against former clients, who the firm had represented in multiple lawsuits and in various arbitrations before the American Arbitration Association from October 2018 to October 2020. The suit alleges that the clients owe more than $3.5 million to the firm, plus a 9% annual interest rate.  That amount is equal to 2.3% of the firm’s 2020 revenue of $149.2 million.

In its complaint, Armstrong states the former clients paid legal bills invoiced through July 2019, but alleges that legal bills remain unpaid from then until September 2020, when the clients informed Armstrong they were retaining new counsel.  Armstrong Teasdale declined to comment for this story.  Blank Rome in a Jan. 8 complaint, filed in the Superior Court of the District of Columbia, claimed former clients Joseph Gurwicz and GR Ventures of New Jersey have outstanding legal fees for the firm’s services connected to preparing and filing a provisional patent application.

As of the date of filing, more than 100 invoices dated from Nov. 8, 2017, through Nov. 6, 2019, remain either partially or fully unpaid, the firm alleges.  Of the $485,563 in legal costs incurred by Blank Rome on behalf of their client, the firm claims $187,860.85 have yet to be paid in full.  In addition, Blank Rome said it’s owed an annual accrued interest rate of 6%, bumping the total amount of the firm’s claim to just over $211,000.

Last week the firm opted to withdraw from the case. Blank Rome declined to comment for this story.  In another case, related to a five-figure fee, Baker McKenzie sued former client Catherine Brentzel in June 2020 in D.C. Superior Court.  Last month, the court entered judgment in the amount of $77,325.88 in the law firm’s favor, court records show.

Minkoff said there had been a stigma attached to firms using the court to induce payments from clients, because it might signal poor client relationship management on the part of the law firm.  But that has taken a back seat in recent years due to revenue pressures and stagnant demand, which have been ramped up by the COVID-19 pandemic, he said.

“There were businesses and law firms who were affected by the pandemic in a negative way, and that increased the pressure in these situations,” Minkoff said.  “The Big Law numbers were not usually affected, particularly at the top levels, but the pressures that existed before the pandemic existed during the pandemic and will exist after the pandemic.”  Minkoff said the industry may be in for a rise in the volume of fee collections disputes between firms and their clients, mirroring the uptick that occurred in the mid-2010s.

“Partners are under pressure to bring in as much money as they can, and that has led to more aggressive behavior in terms of fee collections and those kinds of disputes,” Minkoff said.  He added that the rise in fee collections litigation coincides with firm protectionism in partnership agreements.

Expense-related pressures fall on the side of clients, who are sometimes surprised by high litigation fees and prefer to wait for a result to pay.  “The firms are more aggressive, they have more tools at their disposal to get paid, they’re more willing to litigate to get paid, especially if it’s a sort of one-off arrangement,” Minkoff said.  “Clients are faced with this kind of sticker shock.”

Akerman litigation partner Philip Touitou said law firms are even more focused on collections during the pandemic.  He said the crisis has “changed the dynamic” between clients struggling to make payments and law firms, who work to balance accommodations for struggling clients with their own financial pressures to make budget.  Touitou added that flexible fee structures are “here to stay” as law firms work to avoid potential fee disputes from the outset of a client engagement.

“I think the pandemic has only accelerated that effort,” Touitou said. He added that as firms reevaluate their costs after working remotely and cutting travel expenses to zero, they “may be in a better position to offer more flexible [fee] structures.”  “I think the benefits of law firm cost consciousness will work to the benefits of clients,” he said.

Judge Orders Attorney Fee Dispute to Arbitration

March 9, 2021

A recent Law 360 story by Emma Whitford, “Atty Must Arbitrate Fee Dispute With Racehorse Trader,” reports that a California judge ordered an attorney to arbitrate her dispute with a U.K. racehorse auctioneer company, her former client, over fees allegedly due when she represented the company accusing a financier of failing to pay for a racehorse.  Attorney Diana Courteau of California claimed in her April complaint that Tattersalls Ltd., the racehorse company, failed to pay her $73,255.34 for the months of February and March 2020, after firing her that March.  The six-claim complaint also accused Tattersalls and Bracher Rawlins LLP, the company's English counsel, of fraud and intentional misrepresentation.

But Tattersalls and Bracher Rawlins pushed back with a motion to dismiss, pointing to an arbitration provision in their contract with Courteau and claiming that she failed to give them proper notice under the California Mandatory Fee Arbitration Act, which lays out rules for the handling of attorney-client fee disputes.  "Here, it is undisputed that [the] plaintiff did not provide the mandatory notice form to defendants," U.S. District Judge Dolly M. Gee ruled, adding that the case will be stayed while arbitration goes forward.

"Moreover," Judge Gee added, "the agreement between plaintiff and Tattersalls contains a broad arbitration provision governing the very dispute at issue."  Specifically, a "dispute over legal bills that alleges breach of contract and related claims."  Courteau had argued that Bracher Rawlins could not compel her to arbitrate because the firm is not a signatory to her agreement with Tattersalls.  But Judge Gee disagreed, saying that Bracher Rawlins will be part of the arbitration as an "agent" of Tattersalls.

It is "well settled that a nonsignatory may compel a signatory to arbitrate based on agency principles," Judge Gee wrote, adding that Bracher Rawlins "was only in a position to direct or authorize plaintiff to perform legal work for Tattersalls in its capacity as Tattersalls' agent."  The order is just the latest development in the litigious fallout of Tattersalls' working relationship with Courteau, who represented the company in various matters from 2011 until March of last year.

Last June, in the case Courteau worked for Tattersalls until they fired her, U.S. District Judge Karen S. Crawford ordered Courteau to pay $31,772.62 in sanctions to defendants Gerald Wiener and his entity Finance California Inc., court records show.  The sanctions covered attorney fees for a two-day deposition last January in which the court found that Courteau coached the witness, as well as the cost of preparing the sanctions motion, court records show.

Wiener and Finance California had also sought termination sanctions, a serious sanction that would have ended the case, for Courteau's alleged "abusive" and "hardball" tactics.  But Judge Crawford denied that motion, saying the "worst of this conduct has been addressed" and "monetary sanctions have been imposed which should be enough to deter future misconduct."  Courteau has yet to pay the sanctions, court records show.  Attorneys for Wiener filed a notice of lien in the instant suit on Jan. 15.

In a Feb. 4 declaration to the court, Courteau urged Judge Gee to proceed with a trial for her fee dispute or, in the alternative, send the case to "global mediation" along with the Wiener case, which is currently on appeal to the Ninth Circuit.  "Plaintiff is willing to stipulate (notwithstanding meritorious grounds for appeal) that ... the $31,772,62 (sanctions) can be paid from fees owed by defendants," Courteau wrote.