A recent Law 360 story by Brian Steele, “McCarter & English Client Didn’t Notice Rate Hikes, Jury Hears”, reports that a dietary supplement company founder battling McCarter & English LLP over a $2 million legal bill admitted to a Connecticut federal jury that he didn't thoroughly read the firm's invoices, but also refuted the firm's claim that he was verbally informed about the rate hikes at the heart of his counterclaim.
On the third day of testimony in a Hartford trial, Jarrow Formulas Inc. owner Jarrow Rogovin said that he was responsible for reviewing and approving payment on the company's legal bills, including those that were generated after Caudill Seed & Warehouse Co. filed a lawsuit in Kentucky in 2013 for misappropriation of trade secrets. But he said that he did not read those monthly bills past the first page, with one exception, because the thought of the legal action and its potentially devastating consequences made him "sick."
"I didn't do a good job" reviewing the bills before paying them, Rogovin said. He added that he did not notice when rates for two partners rose months after the start of the case, or that prior bills were reissued with higher rates.
McCarter & English, which has offices in Hartford and Stamford, is seeking more than $2 million in unpaid legal bills, mostly from the final five invoices related to the lawsuit filed in Kentucky federal court. Jarrow countersued for allegedly improper billing practices and claimed that its attorneys botched the case, which ended in 2019 with an adverse verdict for Jarrow and $2.4 million in damages.
Rogovin, a Los Angeles resident, testified that several of the legal team's decisions caused his namesake company to lose the lawsuit and he "repeatedly" conveyed his concerns to McCarter & English attorneys, including partner Mark D. Giarratana. He said the attorneys declined to pursue certain third-party subpoenas and depose the owner of the plaintiff, Caudill, about a disputed claim that it had spent $5 million and 23 years on research and development related to a broccoli-based product at issue in the case.
"They didn't do their job. They committed malpractice," Rogovin said, prompting U.S. District Judge Michael Shea to instruct the jury that only an expert witness can draw that conclusion. Judge Shea said the testimony could be used to illustrate Rogovin's state of mind when deciding not to pay outstanding bills after the trial.
On direct examination, defense attorney James E. Heavey asked if Rogovin conducted a line-by-line review of legal bills before authorizing payment. Rogovin said no, and that he was the only one at Jarrow responsible for reviewing the relevant bills when they came in. "I looked at the front, the amount of money, and I was sick to my stomach about what was going on," he said when asked about his review process during cross-examination. "I read the front, I saw what it was and I signed off."
Giarratana previously testified that the firm accidentally billed for his and fellow partner Eric Grondahl's services at the start of the case at an outdated rate, and when he discovered the mistake, the firm reissued three out of five monthly invoices. But the firm also submitted all five invoices, showing the higher rate, to Jarrow's insurer as part of a failed effort to secure coverage. Rogovin said that the attempt to obtain payment from the insurer at the higher rate was "unethical" and Jarrow did not know about it. If he had been aware, Rogovin said, he would have been "very disapproving."
McCarter & English chief financial officer Jacqueline Bosma testified Monday that when the firm reissued the bills to Jarrow, it applied a credit for payment that had been received on one invoice already, according to a review of accounting records. She said the reissued bills were paid at discounts near the end of the fiscal year. She was hired as a controller at the firm in 2016.
When the rates rose, they were then frozen for the length of the lawsuit in accordance with Giarratana's policy, even when, Bosma said, the standard rate for each attorney continued to climb. The freeze allowed Jarrow to save more than $500,000 on fees for Giarratana and Grondahl, she said, and even though attorney Thomas J. Rechen's rate rose in 2016 when the firm noticed it was charging an outdated figure, it also froze, amounting to a total savings to Jarrow of more than $200,000. Heavey said there was no evidence that Jarrow agreed to the rate increases, but Bosma reiterated Giarratana's prior testimony that paying 70 of the bills without complaint signified an agreement.
Rogovin testified that he was not aware of a credit and the company never received a refund. He said that he "probably had some kind of vague idea" of what the attorneys were charging per hour, but he did not know that the rates rose several months into the trial, or that McCarter reissued the previous months' bills at higher rates for Giarratana and Grondahl. Rogovin denied Giarratana's testimony that he had told Rogovin of the rate changes in three phone calls.
"What would be the point of telling me three times?" Rogovin said. "If it were three times, I'd certainly remember it." He said that if he had known the rates were going up, he would not have agreed to pay them and would have sought advice from the company's CFO.
Rogovin said that since he first retained Giarratana in 1996, when Giarratana worked for a different firm, he had only caught two errors on his legal bills, and one of them appeared on the first page. Defense attorneys showed that on at least one bill related to the Kentucky litigation, the attorneys' hourly rates were shown on page 32.
Under questioning from plaintiffs' attorney Louis R. Pepe, Rogovin said he found an error on one bill related to the Kentucky case when he noticed that a particular line item described work on a separate legal matter McCarter & English was handling. Pepe said the only way he could have noticed the error on page 5 was by conducting a line-by-line review, allegedly contradicting his prior testimony. Rogovin disagreed that he had contradicted himself on the stand or in his deposition, but Judge Shea stopped him from reading the transcript of his deposition out loud and Pepe moved on.
Pepe asserted that there was a decades-long "pattern and practice" whereby Giarratana and ultimately other McCarter partners' rates would rise without prior written notice, Rogovin and Giarratana would not discuss it, and Rogovin would simply settle up, sometimes with a discount if the bills were still outstanding as the end of the fiscal year approached.
Rogovin said he founded Jarrow in 1977 and the company started manufacturing its own product lines in 2002. He and Giarratana signed an engagement letter in 1996 that notified Rogovin that hourly rates could rise "from time to time," and Rogovin said that he read and understood that letter. Even though Giarratana's standard rate climbed over the years and he moved firms, landing at McCarter & English through a merger in 2003, Rogovin said they did not sign a new written agreement that contemplated fees.