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In-House Counsel Can and Should Collect Attorney Fees

August 21, 2017 | Posted in : Article / Book, Billing Record / Entries, Fee Agreement, Fee Award, Fee Award Factors, Fee Entitlement / Recoverability, Fee Jurisprudence, Fee Request, Fee Scholarship, Fee Statute, Hourly Rates, Lodestar, Prevailing Party Issues

A recent Corporate Counsel article by Daniel K. Wiig, “In-House Counsel Can and Should Collect Attorney Fees,” writes about attorney fee entitlement for in-house counsel work.  This article was posted with permission.  The article reads:

When weighing his post-Senate career options, then-U.S. Sen. Howard "Buck" McKeon rejected an offer from a prominent law firm, opting not to "live his life in six-minute increments."  Indeed, it is with fair certainty to state a top reason lawyers in private practice transition to in-house is to escape the billable hour.  And while the imminent death of the billable hour may have been highly exaggerated (again and again), it remains the predominate metric for private-practice attorneys handling commercial work to track their time and collect fees.

Numerous reports suggest the in-house lawyer is "rising," with companies opting to retain more and more legal work within their law departments, and decreasing the amount of work they disseminate to outside counsel.  Sources cite various reasons from cost to the intimate knowledge in-house lawyers possess regarding their employer vis-à-vis outside counsel.  Whatever the genesis, it reasons that in-house lawyers morphing into the role traditionally held by outside lawyers should assume all such components of the role, which, when possible, can include recovering attorney fees for actual legal work performed, as noted in Video Cinema Films v. Cable News Network, (S.D.N.Y. March 30, 2003), (S.D.N.Y. Feb. 3, 2004), and other federal and state courts.

Recovering attorney fees is that extra win for the victorious litigant, whether provided by statute or governed by contract.  It leaves the client's bank account intact (at least partially) and gives the prevailing attorney additional gloating rights.  For the in-house lawyer, recovering attorney fees can also occasionally turn the legal department from a cost center to a quasi-profit center.  In-house lawyers can and should collect attorney fees.

To be clear, recovering attorney fees is not available for in-house lawyers functioning in the traditional role of overseeing outside counsel's work.  As noted in Kevin RA v. Orange Village, (N.D. Ohio May 4, 2017), a court will not award fees to in-house lawyers that are redundant, i.e., those which reflect work performed by outside counsel.  Indeed, when in-house counsel is the advisee of litigation status rather than drafter of the motion or attends the settlement conference as one with authority to settle rather than to advocate more advantageous settlement terms, she functions as the client rather than lawyer, of which attorney fee are unavailable.

Unlike their counterparts in private practice, in-house counsel do not have set billing rates, although an exception may exist if internal policies permit the legal department to invoice the department that generated the legal matter.  Even in such a situation, as with law firm billing rates, the actual fees/rates are considered by the court but not determinative in awarding fees, as noted in Tallitsch v. Child Support Services, 926 P2d. 143 (Colo. App. 1996).  In determining what constitutes an appropriate and reasonable attorney fee award, courts frequently apply the "reasonably presumptive fee" or the "lodestar" method.  Under the lodestar method, as explained in Earth Flag v. Alamo Flag, 154 F.Supp.2d 663 (S.D.N.Y. 2001), fees are determined by "multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate."

Reasonableness is a question of fact for the trial court.  In determining a reasonable hourly rate, federal courts look to those reflected in the federal district in which they sit, while state courts consider the prevailing rates in their respective city and geographical area.  Courts will also consider other factors such as the complexity of the case, the level of expertise required to litigate the matter, and the fees clients in similar situations would be willing to pay outside counsel in determining the appropriate hourly rate for the in-house lawyer.  Determining whether the tasks performed by the in-house lawyer were reasonable is left to the court's discretion.

Recognizing legal departments do not necessary operate in lockstep fashion as a law firm, courts will consider the "blended" rate in the lodestar calculation.  Here, a court will combine or "blend" the reasonable rates for associates, partners, counsel and paralegals in their locale to devise the appropriate hourly rate for the in-house lawyer.  The premise is in-house lawyers generally take on less defined roles in litigating a matter than their counterparts in private practice, performing a combination of litigation tasks that may be more clearly delineated among law firm staff.

In order to successfully receive an award of attorney fees, the in-house lawyer must maintain a record akin to a law firm's billing sheet of her time spent on the matter, as reflected in Cruz v. Local Union No. 3 of International Brotherhood of Electrical Workers, 34 F.3d 1148 (2d Cir. 1994).  Consequently, an excel spreadsheet, or similar document, enumerating the time and task, with as much detail as possible, is required to sustain a court's scrutiny in looking for tasks that were "excessive, redundant or otherwise unnecessary," as noted in Clayton v. Steinagal, (D. Utah Dec. 19, 2012).  Moreover, the in-house attorneys who worked on the matter must execute affidavits attesting to the accuracy of their time records, and include the same in their moving papers.

As the legal profession changes and corporate legal departments retain more of their work, in-house should take advantage of statutory or contractual attorney fees provisions, notably for the litigation they handle internally.  In so doing, the in-house lawyer may find a number of benefits, such as approval to commence litigation that they may have otherwise shied away from because of the possibility to recoup attorney fees and the benefit of essentially obtaining payment for the legal work performed.

Daniel K. Wiig is in-house counsel to Municipal Credit Union in New York, where he assists in the day-to-day management of the legal affairs of the nearly $3 billion financial institution.  He is also an adjunct law professor at St. John's University School of Law.  Wiig successfully moved for in-house attorney fees in Municipal Credit Union v. Queens Auto Mall, 126 F. Supp. 3d 290 (E.D.N.Y. 2015).