Friday, September 22, 2017

Mitigation Reduces Sanction For Billing Misconduct

The Louisiana Supreme Court sanctioned an attorney for billing misconduct described in the court's order

By way of background, respondent joined the law firm of Liskow & Lewis (“the firm”) as an associate attorney in 1998. After his promotion to shareholder in 2005, respondent served as the firm’s hiring partner and head of recruiting. He also chaired the firm’s diversity committee as the firm’s first minority recruiting and retention partner. In 2012, respondent was elected to the firm’s board of directors and served as the board’s junior director through April 2015.

As a member of the firm, respondent generally billed on an hourly basis but sometimes worked on cases on a contingency basis. The firm’s policy set hourly billing targets for shareholders at 1,800 billable hours annually. These billing targets were one of several factors taken into consideration for annual salary increases, discretionary bonuses, and promotion within the firm.

In November 2015, the firm’s compensation committee noted that respondent’s “fee bill credit,” which is a measure of collections attributable to an attorney’s recorded billable time, seemed low. Therefore, the committee inquired into the status of certain files for which respondent had recorded significant billable time. This inquiry led to the discovery that, between 2012 and 2015, respondent had recorded billing entries on a contingency fee case that had been dismissed in October 2012. Because this particular case was an unsuccessful contingency fee matter, the falsely billed hours were not billed to the client or submitted to any court for approval. The committee found two other files containing entries that had not been billed to clients.

The firm presented these preliminary findings to respondent on November 9, 2015. At that meeting, respondent acknowledged and apologized for his misconduct and assured the firm that his actions had not impacted any of the firm’s clients. Respondent informed the firm about other files in which he had recorded false or inflated time or in which he created false receivables that were never billed to clients. With respondent’s assistance and cooperation, the firm conducted a full investigation in order to assess whether his conduct had impacted any of the firm’s clients. Upon completion of the investigation, the firm confirmed that respondent’s conduct did not adversely impact any clients.

The firm identified seven files containing, in part, false entries or receivables. Regarding the contingency fee file that was dismissed in October 2012, the firm discovered false entries totaling 52.25 hours in 2012, false entries totaling 385 hours in 2013, false entries totaling 270 hours in 2014, and false entries totaling 376 hours in 2015. In three other cases, respondent recorded false and inflated entries totaling $91,544.50; he then prepared and reported the bills to the firm’s accounting office, but the bills were never sent to the clients. In three additional cases, respondent recorded false and inflated entries that were written off without the preparation of bills and were not billed to the clients. In total, respondent submitted 428 entries that the firm classified as “certainly false” and an additional 220 entries that the firm classified as “reasonably certain” to be “false or inflated.”

Between 2012 and 2014, respondent received merit bonuses totaling $85,000. The firm concluded that respondent would most likely have received some or all of these merit bonuses even without the false inflation of his billable hours.

Respondent indicated he engaged in this misconduct because he was concerned that his accurate billable hours, when coupled with an insufficient book of business, were not commensurate with his leadership position in the firm. He denied that he engaged in the misconduct out of a desire for discretionary bonuses or any other monetary gain.

On November 22, 2015, respondent voluntarily submitted his letter of resignation to the firm, effective November 30, 2015. He also voluntarily renounced his entire termination bonus, which totaled approximately $85,000, owed to him for his share of the firm’s accounts receivable. The firm determined that this renunciation likely exceeded any losses the firm incurred as a result of respondent’s conduct.

The motivation was apparently not financial as the hearing committee found

Respondent received a discretionary bonus from the firm’s compensation committee for 2012, 2013, and 2014. Scott Perkins, the firm’s executive director, testified that even when he subtracted all potentially false time entries, respondent still met and exceeded his billing targets in each of these years. The testimony  confirmed that respondent dedicated an extraordinary amount of hours annually during the relevant time period as a member of the firm’s board of directors, as board secretary, as chair of the diversity committee, as a member of the hiring committee, as a firm liaison to Judge Zainey’s homeless program, and as chair of a number of ad hoc committees appointed by the firm’s president. Mr. Brown testified that respondent’s extraordinary firm involvement and leadership was sufficient to warrant a merit bonus. He further confirmed that respondent’s extraordinary efforts in firm management alone would have merited him a bonus. While the testimony of Mr. Brown and Mr. Angelico supports the conclusion that respondent would have been eligible for merit bonuses, the testimony also supports the conclusion that not all of the merit bonuses would have been paid to respondent had his hours been accurately recorded.

Sanction

Turning to the issue of an appropriate sanction, we find that respondent’s conduct involved a long and repetitive pattern of dishonesty. As such, the lengthy thirty-month suspension sought by the ODC is clearly appropriate. However, there are significant mitigating circumstances present, including respondent’s voluntary resignation from the firm and his renunciation of his entire termination bonus. These factors, coupled with the lack of harm to respondent’s clients and the firm, justify the deferral of all but twelve months of the suspension.

 The attorney was suspended on an interim basis since December 2015.  

Thus, unless I am mistaken, the functional effect of this order is to reinstate him from the interim suspension as he has served more than the year. (Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2017/09/the-louisiana-supreme-court-sanctioned-an-attorney-for-billing-misconduct-turning-to-the-issue-of-an-appropriate-sanction-w.html

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