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K&L Gates Accused of Padding Bill in Chapter 11 Case

August 25, 2020 | Posted in : Bankruptcy Fees / Expenses, Billing Practices, Billing Record / Entries, Ethics & Professional Responsibility, Fee Dispute, Fee Dispute Litigation / ADR, Hourly Billing, Hourly Rates, Lawyering, Legal Bills / Legal Costs, Legal Malpractice, Litigation Management, Practice Area: Bankruptcy / Restructuring

A recent Law 360 story by Xiumei Dong, “K&L Gates Accused of Padding Health Center’s Legal Bills” reports that a Layton, Utah, health center is accusing K&L Gates LLP in a lawsuit of engaging in multiple deceptive billing practices while working for the health center, resulting in about $1.6 million in legal fees between May 2016 and October 2016.  In the complaint filed in Utah federal court, Chicora Life Center LC, a subsidiary of Chicora Garden Holdings, claimed that K&L Gates used several tactics to increase its billing for representing the bankrupt medical center in a Chapter 11 proceeding against the County of Charleston over a lease termination dispute.

Chicora Life is managed solely by Douglas Durbano, a Utah lawyer and developer. According to the complaint, Chicora Life and K&L Gates have agreed that it would use Durbano Law Firm for the majority of the legal services.  Meanwhile, K&L Gates acts as local counsel for the Chapter 11 proceedings.  "Notwithstanding the arrangement between Durbano Law and K&L, K&L's billing records show substantially more time billed for the very documents that Durbano Law initially drafted, with only minimal changes to the papers to show for it," the complaint alleged.

The suit accuses K&L Gates of engaging multiple deceptive billing practices, including "block billing," where a lawyer "blocks" together a number of tasks over a set amount of hours; "hoarding," when an overqualified lawyer with a high billing rate retains work rather than passing it onto someone with a lower billing rate; and "multi-billing," which occurs when multiple attorneys are tasked with performing the same task.  "These excessive and deceptive billing practices resulted in K&L billing approximately $1.6 million dollars in legal fees between May 2016 through October 2016," the suit says.

Chicora Life hired K&L Gates on May 31, 2016. In the complaint, the company said it had an "amicable and cooperative" relationship with K&L Gates when attorney Richard Farrier Jr. was the lead counsel at the firm for the matter.  But the relationship soured following the death of Farrier in March 2017, and Russel Abrams resumed his role.  Abrams left K&L Gates to start law firm Abrams LawWorks LLC in July 2020.

"Following Mr. Abrams' involvement in the proceedings in April 2017, K&L intensified its deceptive billing practices— billing no less than $100,000 in legal fees each month and as much as $354,434.28 in August alone," it claimed. 

By the time the county proposed a "cramdown plan" in which the county would purchase Chicora Life's property to satisfy its obligations to creditors, K&L Gates had accrued over $1 million in legal fees against Chicora Life, according to the suit, which says that K&L had shown a particular interest in the cramdown plan because it was Chicora Life's creditor — and therefore an adversary to Chicora Life.  The lawsuit levels claims of breach of contract, attorney malpractice and breach of fiduciary duty, fraudulent billing, and knowingly aiding and abetting Chicora Life's breach of fiduciary duties.