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Category: Staffing Issues

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."

Judge Waits on Attorney Fees in Pinterest Settlement

June 9, 2022

A recent Law 360 story by Dave Simpson, “Alsup To Wait and See on Atty Fees in Pinterest Deal” reports that U.S. District Judge William Alsup gave final approval to a deal to end derivative claims alleging Pinterest fostered a culture of race and sex discrimination, approving $2.5 million in attorney fees rather than the $5.37 million requested, with the possibility for more after two years of compliance monitoring.

The judge expressed concerns that the settlement, which involves the creation of a $50 million workplace reform budget, could "prove to be mainly aesthetic," noting that many of the reforms lauded in the deal are already in place and that the defendants are not bound to actually pay up.

"The settlement includes a commitment, for example, to not enforce NDAs, but does not require directly informing employees who signed NDAs that they may speak freely about their experiences," Judge Alsup's order said.  "Counsel also repeatedly tout that Pinterest has allocated a 'budget' of $50 million over 10 years to carry out the reforms. But a budget is not a fund.  The money is not already appropriated or in a bank account."

Attorneys had requested $5.37 million in fees, but Judge Alsup cut the total to $2.5 million, with a chance for more in two years.  "Counsel want all of their fees now and to walk away, saying that they've achieved a benefit merely by reaching an agreement for future non-pecuniary reforms spread out over ten years," Judge Alsup said.  "This is a recurring problem in derivative shareholder actions."

Judge Alsup noted that, after he raised this issue at a past hearing, the attorneys agreed to stay on for another two years to monitor compliance.  He called this "helpful" but worried about the remaining eight "unpoliced" years.  The parties were not able to agree on any additional monitoring, he noted.

"Nonetheless, this order accepts the parties' proposal to have plaintiffs' counsel monitor compliance for two years," the judge said.  "Therefore, a portion of the attorney's fee award will be postponed and paid out after we see how much benefit really flows from the settlement over that time."  The plaintiffs' counsel had claimed a lodestar short of $2.7 million and sought a doubling multiplier. Judge Alsup called the lodestar "too high for the amount of work done" and knocked it down to $2.5 million.

"While counsel negotiated the settlement, much of the difficult work of gaining Pinterest's acknowledgment of the problem and establishing a plausible framework for achievable reforms was already accomplished through the special committee's efforts," he said. "The special committee, for example, interviewed 350 Pinterest employees. Derivative counsel interviewed only sixteen."

Further, Judge Alsup pointed to the work done by 21 attorneys from four law firms, calling it "too many timekeepers."  "More effort should have been made to streamline the representation," he said.  During a hearing in January, Judge Alsup repeatedly said he was concerned the deal was merely a "cosmetic settlement" and that the attorneys would "all go off into the sunset" with attorney fees, with nothing meaningful coming of the settlement.

Despite his misgivings, the judge agreed to preliminarily sign off on it in February, but told the lawyers they could expect payout of their fee in installments, as counsel provide reports on "progress accomplishing the goals of the settlement agreement."  At the time, Judge Alsup also called class counsel's suggested $5.37 million fee request "disproportionate."

Quinn Emanuel Client Hit With Attorney Fees in IP Action

May 5, 2022

A recent Law 360 story by Andrew Karpan, “Quinn Emanuel Client Hit With $160K In Fees In IP Fight” reports that a China-based client of Quinn Emanuel Urquhart & Sullivan LLP was ordered to cough up over $160,000 in legal fees after its defense in a copyright case ran afoul of California's anti-SLAPP statute.  The amount that Northern District of California Judge Edward Chen ultimately arrived at was about $12,000 less than the final fee request from lawyers at the small San Francisco firm Tyz Law Group PC after they beat a dismissal bid in a copyright suit they leveled on behalf of Moonbug Entertainment. Moonbug is the company behind the children's educational brand CoComelon, which runs popular shows on YouTube and Netflix.

The suit accuses a Fuzhou City-based company called BabyBus (Fujian) Network Technology Co. Ltd. of building "its Super JoJo YouTube business by blatantly copying CoComelon."  BabyBus' lawyers at Quinn Emanuel responded last September with allegations that Moonbug's lawyers had been "using baseless [Digital Millennium Copyright Act] notices to effectively shut down BabyBus' lawful, competitive business."  DMCA notices are sent to companies like YouTube to ask them to take down content that infringes someone's copyright.

The legal fight is ongoing.  But Judge Chen had rejected outright BabyBus' contention that the way Moonbug pursued its case against BabyBus violated certain state laws, such as Section 17200 of the California Business & Professions Code.  This defense was legally hopeless, Judge Chen wrote last year: "No amendment can cure the fact that the state law counterclaims are preempted by the Copyright Act."

"Moonbug estimated it spent 'roughly' 324 hours in total, accounting for both compensable and non-compensable time spent on the joint motions to dismiss and strike," Judge Chen wrote.  According to the decision, the Moonbug lawyers had initially offered to settle the dispute over their legal bills for the whole effort for $96,152. BabyBus offered to pay just $15,580 instead.

The Moonbug lawyers then asked the court for $155,620 in fees but, in a later filing in the matter last year,  they beefed the number up to $173,553.  The new figure included an additional $17,933 in what the company's lawyers called "reasonable fees-on-fees" that were "not accounted for in its original fees-on-fees request," referring to legal work done in connection with the fee motion.  Judge Chen told BayBus to pay out $161,683.

"Moonbug's request for fees on fees is not unreasonable," Judge Chen decided.  He also rejected an argument from the BabyBus team that Tyz Law had deliberately overstaffed its legal response in order to collect more in fees.  "Moonbug's use of five attorneys of various levels of experience on its anti-SLAPP motions is nothing out of the ordinary," the ruling read.  The ruling did, however, trim out a little over 10 hours of work that Tyz Law had attached to the motion "for unnecessary work on a reply brief."

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.

Article: What is a Legal Fee Audit?

October 7, 2021

A recent article by Jacqueline Vinaccia of Vanst Law LLP in San Diego “What is a Legal Fee Audit?,” reports on legal fee audits.  This article was posted with permission.  The article reads:

Attorneys usually bill clients by the hour, in six minute increments (because those six minutes equal one tenth of an hour: 0.1).  Those hours are multiplied by the attorney’s hourly rate to determine the attorney’s fee.  There is another aspect of attorney billing that is not as well known, but equally important — legal fee auditing.  During an audit, a legal fee auditor reviews billing records to determine if hourly billing errors or inefficiencies occurred, and deducts unreasonable or unnecessary fees and costs.

Both the law and legal ethics restrict attorneys from billing clients fees that are unreasonable or unnecessary to the advancement of the client’s legal objectives.  This can include analysis of the reasonableness of the billing rate charged by attorneys.  Legal fee audits are used by consumers of legal services, including businesses, large insurance companies, cities, public and governmental agencies, and individual clients.  Legal fee audits can be necessary when there is a dispute between an attorney and client; when the losing party in a lawsuit is required to pay all or part of the prevailing party’s legal fees in litigation; when an insurance company is required to pay a portion of legal fees, or when some issues in a lawsuit allow recovery of  attorneys’ fees and when other issues do not (an allocation of fees). 

In an audit, the auditor interviews the client, and reviews invoices sent to the client in conjunction with legal case materials to identify all fees and costs reasonable and necessary to the advancement of the client’s legal objectives, and potentially deduct those that are not.  The auditor also reviews all invoices to identify any potential accounting errors and assure that time and expenses are billed accurately.  The auditor may also be asked to determine if the rate charged by the attorney is appropriate.

The legal fee auditor can be an invaluable asset to parties in deciding whether to file or settle a lawsuit, and to the courts charged with issuing attorneys’ fee awards.  The court is unlikely to take the time to review individual invoice entries to perform a proper allocation of recoverable and non-recoverable fees leaving the parties with the court’s “best approximation” of what the allocation should be.  The fee audit provides the court and the parties with the basis for which to allocate and appropriately award reasonable and necessary fees. 

Audits are considered a litigation best practice and a risk management tool and can save clients substantial amounts of money in unnecessary fees.  It has been my experience, over the past two decades of fee auditing, that early fee auditing can identify and correct areas of concern in billing practices and avoid larger disputes in litigation later.  In many cases, I have assisted clients and counsel in reaching agreement on proper billing practices and setting litigation cost expectations. 

In other cases, I have been asked by both plaintiffs and defendants to review attorneys’ fees and costs incurred and provide the parties and the court with my expert opinion regarding the total attorneys’ fees and costs were reasonably and necessarily incurred to pursue the client's legal objectives.  While the court does not always agree with my analysis of fees and costs incurred, it is usually assisted in its decision by the presentation of the audit report and presentation of expert testimony on the issues.

Jacqueline Vinaccia is a San Diego trial attorney, litigator, and national fee auditor expert, and a partner at Vanst Law LLP.  Her practice focuses on business and real estate litigation, general tort liability, insurance litigation and coverage, construction disputes, toxic torts, and municipal litigation.  Her attorney fee analyses have been cited by the U.S. District Court for Northern California and Western Washington, several California Superior Courts, as well as various other state courts and arbitrators throughout the United States.  She has published and presented extensively on the topic of attorney fee invoicing, including presentations to the National Association of Legal Fee Association (NALFA), and is considered one of the nation’s top fee experts by NALFA.