Legal Profession Blog

Non-Compliance With New York Retainer Filing Requirement May Negate Fee Claims

The New York Appellate Division for the First Judicial Department recently held that the failure to timely file a retainer agreement, as required by law, is generally fatal to a claim for attorneys fees between lawyers:

With one exception, the motion court properly granted defendants summary judgment to the extent indicated in this fee dispute between attorneys, where plaintiffs failed to file retainer statements in compliance with Rules of the Appellate Division, First Department (22 NYCRR) § a prerequisite to receipt of compensation for legal services" (Rabinowitz v Cousins, 219 AD2d 487, 488 [1995]). Plaintiffs' belated filing of several of the subject retainer statements was insufficient to preserve their right to recover legal fees. Indeed, the record shows that these statements were only filed in response to defendants' motion for summary judgment and plaintiffs did not seek permission to file the statements nunc pro tunc. Nor did plaintiffs offer a reasonable excuse for their failure to timely file (compare Matter of Abreu, 168 Misc 2d 229, 234 [1996]).

However, with respect to the first cause of action relating to the Brooks case, the record indisputably shows that plaintiff Fishkin filed a retainer statement on October 31, 1994, which was 18 months after he was retained, but only seven days after defendants belatedly filed their own retainer statement in the same matter. While the motion court may have been confused by Fishkin's later nunc pro tunc filing of an amended retainer statement in June 2006, we find that, taken together, Fishkin's initial 1994 filing and his 2006 nunc pro tunc filing create a triable issue as to whether there was sufficient compliance with 22 NYCRR 603.7(a)(3) to permit this action to proceed.

(Mike Frisch)

Starbucks Closure List

On the assumption that this relates to billable hours and law practice for many many people, I link the searchable list of Starbucks closures, to be found at the Huffington Post.  [Alan Childress]

Fee Premium Agreement Unenforceable

The New York Appellate Division for the First Judicial Department held that a provision in a fee agreement for a premium and an oral agreement was unenforceable:

The subject "Premium Fee" clause in the parties' retainer agreement provides: "We reserve the right to discuss with you at the conclusion of your matter your payment of a reasonable additional fee to us, in excess of the actual time and disbursements, for exceptional results achieved, time expended, responsiveness accorded, or complexity involved in your case. However, no such fee will be charged to you without your consent." The clause does not satisfy the plain language and specificity requirements of 22 NYCRR 1400.3(8), and defendant's oral agreement to pay plaintiff a premium fee of $150,000 is unenforceable.

An interesting concurring opinion:

I agree that the premium fee clause in issue lacks the specificity required by 22 NYCRR 1400.3(8) because it fails to advise the client beforehand how such fee was to be calculated (e.g., a flat amount or possibly a fixed percentage or a limited range of percentage of the total hourly charges incurred). However, I write separately to emphasize that, to the extent that our affirmance might possibly be construed as a criticism of the proposed bonus agreement, no negative connotation should be read into our decision, particularly where it was left to the client's sole discretion to agree or disagree that a premium fee or bonus was warranted. Indeed, given the ongoing debate regarding the efficacy of hourly charges (see e.g. Turow, THE [*2]BILLABLE HOUR MUST DIE It Rewards Inefficiency. It Makes Clients Suspicious. And It May Be Unethical, 93 ABA 32, [August 2007]), such premium fee or bonus arrangements, when fairly negotiated and properly drafted, should be met with approval by the courts. Attorneys, and particularly matrimonial attorneys, should be encouraged, as much as it is possible within their power, to facilitate the expeditious resolution of marital disputes, whether by negotiation and settlement, mediation, or, when all else fails, litigation.

(Mike Frisch)

A 40 Hour Day

The Illinois ARDC has filed a complaint alleging dishonest billing practices against an attorney who represented indigent respondents in juvenile justice and child protection matters. For the first half of 2006, the accused allegedly sought payments totaling $350,000, claiming he had worked over 20 hours a day on 90 different days. Many days he claimed to have worked more than 24 hours in a single day-- with the most "productive" day being March 15, 2005--a 40 hour day that included 14.5 hours of in-court time. Beware the Ides of March. (Mike Frisch)

No Excess Fee

An attorney who entered into a contract with the public defender to handle a post-conviction matter sought a fee in excess of the agreed-upon amount of $1,500. The public defender appealed the order granting the excess fee. The Iowa Supreme Court reversed, concluding that the contractual agreement limited the fee. The lower court did not have the authority to order the public defender to pay more than the amount set forth in the contract. (Mike Frisch)

Young Lawyers: What Do You Want to Be When You Grow Up? (And Can You Repay the Loans?)

Posted by Jeff Lipshaw

I have, in the past, expressed some disdain toward the victimology advocated in some quarters over the plight of very highly paid young Big Law lawyers.  The only thing yet that has given me pause to reconsider the fervency of that belief is the troubling and puzzling issue why one would incur up to $100,000 in student loan debt without at least some shot at one of those pricey jobs that would provide the basis for repaying the loan.  Nevertheless, my sense is that the Golden (or at least Silver or Bronze) Handcuffs might well be as effective as the debt in tying one to an unsatisfying career in Big Law, but that's merely reflecting my own experience.  The bigger concern is what happens to people who don't get those kinds of jobs, but incur that kind of debt.

Notwithstanding the economic pressures from whatever source, I think we have to acknowledge, however, some personal accountability for what we want to be when we grow up.  On that score, the February 2008 edition of the ABA Journal, freshly delivered to the mailboxes here in Suite 250, has an interesting pair of juxtaposed articles.  One is an excerpt from Making Waves and Riding the Currents, the memoir of Charles Halpern (left), who left the relative security of Arnold & Porter in the 60s to found the Center for Law and Social Policy, and later became the first dean of the CUNY School of Law.  The excerpt describes his decision to leave Arnold & Porter and its lifestyle (although, notably, the question of being saddled with debt does not come up).  The other is a description of a week in the life of Stephen Susman (right), the founder partner of Houston's Susman, Godfrey, and a big-time Big Law lawyer (albeit an entrepreneurial one), replete with early morning personal training and dog walking in Central Park, breakfasts with George Soros, benefits, fancy lunches and dinners at posh NYC restaurants, conference calls, and prep sessions for pending hearings in which he will be up against David Boies.

Do these stories reflect the polar extremes of what we want to be when we grow up?  Is the idea of personal autonomy and accountability - that either career is achievable - a myth that collapses in the face of the present economic reality facing most of today's law students?

Billable Hours

Here's a link to an interesting piece in this month's edition of the California Bar Journal on the effect of billable hour requirements on the legal profession.  (Mike Frisch)

Are BigLaw Firms Deciding to 'Lowball' Holiday Bonuses This Year?

The ABA Journal has this story on the phenomenon, which if it picks up would be quite a retreat from what the firms announced just a month ago with "extra" bonuses.  If so, it just turned the extra ones into "earlier" ones.  But it may be that the latest bonuses will be honored, just pegged more to performance than they had in the past.  [Alan Childress]

"Ambitious, Arrogant, And Overly Driven"

It seems like this may be a day of interesting bar discipline cases. The Illinois Review Board issued a recommendation in a case involving billing misconduct by an attorney in an insurance defense firm. The firm had a minimum billing requirement of 900 hours per six months that gradually increased to 2100 hours per year. The attorney worked ungodly hours--in the office at 6:15 am and returning home at 8 pm or after. He worked every Saturday and Sunday, taking two or three vacations in over 13 years. Needless to say, he met the firm's billing requirements.

Nonetheless, the attorney billed triple time for three cases heard together, billed for court appearences he did not make, depositions he did not attend and other services he had not performed. When discovered, he resigned from the firm and self-reported to the bar. The fraud involved at least $28,000, which the firm refunded to the overcharged clients.

Why did this happen? According to the board:

" Adams testified that his misconduct arose out of his desire to achieve, rather than being motivated by financial gain. Adams stated that he had been ambitious, arrogant, and overly driven and that he thought he had to be 'the number one guy.' He perceived the number of hours billed as the way to achieve. Adams recognized that his behavior was wrong and accepted sole responsibility for his misconduct. He testified that this type of behavior was limited to billing at Williams, Montgomery and did not extend into other aspects of his life

Adams also testified that he had come to understand that being number one was not the key and that being good was much more satisfying. He had learned from the lawyers with whom he shared space that the important thing was not to nickel and dime clients or sneak an hour here or there, but to help people. Adams testified that that was what he was trying to do in his current practice. "

The Board recommends a suspension of 5 1/2 months. A dissent would impose a one year suspension. (Mike Frisch)

Looking for Meaning in Cambridge on Thanksgiving Morning

Posted by Jeff Lipshaw

I wondered this Thanksgiving morning whether there is a blog where the pharmacists who staff the 24 hour CVS in Porter Square (where I filled a prescription), or the baristas who open the Mass. Ave. Starbucks at 6:00 a.m. (where I got some coffee), or the people who work at Kohl's and will be at their stations at 4:30 a.m. tomorrow morning, or the people who drive the T trains all day on the holidays can bitch and moan about their lot in life.  I happened to be reading Paul Gowder's blog post over at Law and Letters about the travails of being an exploited young lawyer, and thought I'd note a couple things.

1.  The "corporate serf" thing or the big firm/do-gooder dichotomy for graduates of the elite schools is just plain wrong.  Thirty years ago, I made a life style decision NOT to go to work at a law firm in New York, opting instead for less money and more lifestyle in Detroit.  That option still exists.

2.  With all the ink spilled about the likely fate of the vast majority of law students, why do they keep going to law school?  Maybe the ones who don't see themselves as victims just don't write about it.

3.  There's an article in the New York Times this morning about the perks that the big law firms offer to their associates in the competitive market for talent.  The list that follows is taken verbatim from the article:  candied apples on everyone's desk from the "happiness committee," milkshakes from Potbelly Sandwich Works, concierge services (pick up theater and sports tickets, dry cleaning, car repair, etc.), top off bonuses, sabbaticals, mortgage guarantees, subsidies for buying hybrid cars, on-site tailoring, personal issues coach and psychotherapists, wine parties (tuna tartare, baby lamb chops), dinner delivered from the Palm Restaurant (on a silver tray), yoga classes, nap rooms, child care, and emergency nanny services.

I return to my thoughts from yesterday about futility.  Very few people in the world are lucky enough to find meaning for their lives in their work.  If you are looking for meaning in your life, and doing your job as a lawyer has as much meaning to you as filling an order for a quad soy latte with extra foam, then you either have to look for meaning elsewhere, or deal with the same cognitive gap of futility in squeezing meaning out of something that is not meaningful.  But lawyers at least have a chance.

When my daughter was born over twenty-three years ago, as we were still basking in the miracle of having created this baby, I remarked to the obstetrician in Ann Arbor (who was about to leave for a post-doc at Duke) how amazing it must be to see babies born every day.  His response was interesting.  He said that the physical act of giving birth had, to him, become routine; the magic and the meaning was in the connection with the people who were his patients.

Practicing law probably falls somewhere between making espressos and delivering babies, but the point is that there's no guarantee that work will make our lives seem important to us, and we need to deal with that either by changing the work or finding another place for meaning.

Happy Thanksgiving!

Pay The Ticket

North Carolina has a statute that allows a trial court to order a defendant insurance company to pay the attorneys fees of an insured plaintiff where the recovery is less than $10,000 and the court concludes that the insurer has engaged in an "unwarranted refusal" to pay the claim. The North Carolina Court of Appeals upheld a trial court order requiring the insurer to pay $25,000 to plaintiff's lawyer under the statute. (Mike Frisch)

Private Payment Permissible

A lawyer retained by the personal representative of a decedent's estate sent monthly bills to the client but did not seek payment, as his retainer agreement provided that he would wait until probate was completed. He would then seek payment from estate funds. The personal representative later discharged the lawyer and paid him out of her own funds. When probate was completed, the trial judge ordered the lawyer to return 25% of the fee because he had been paid without obtaining prior court approval.

The D.C. Courts of Appeals reversed the trial court. Prior approval is required only when the lawyer is paid from estate funds.The applicable statute cannot limit private payment without court supervision as a contrary holding "would abridge the right of competent adults to enter into otherwise-lawful economic transactions with other competent adults..." The court vacated an opinion it had previously issued in the case. (MIke Frisch)

As Rich As Rockefeller

A dispute over, among other things, payment of legal fees in settling the estate of Carolyn Rockefeller was the subject of a decision from the New York Third Department. While it was "a fairly simple estate and the counsel fees were much larger than would be expected" the executor did not breach her fiduciary duty in paying the fees: "[e]very estate decision produced animosity and strife...it is understandable that the estate's counsel were actively and thoroughly involved in every aspect of the estate throughout the course of the estate's administration, thus increasing the legal expenses." However, the court held that it was improper for the executor to pay counsel fees to her former divorce lawyer out of estate funds, as such payments did not benefit the estate. (Mike Frisch)

Recapturing Time

We just received a comment seeking advice on the proper method for billing for review of 500+ emails in connection with an estate matter. The problem is that the reviews have taken place over a period of time without recording the time as it was expended. I have linked to an advisory opinion of the California Bar that gives some guidance regarding appropriate methods of hourly rate billing (or, at least, explains how arbitrators identify improper methods of bill padding). I would welcome the input of readers in answering the question. My own advice is to devise a fair method of computing the overall time and carefully explaining the calculation method in the final bill. Far better to acknowledge that the calculation is not based on records made at the time than to be accused of misrepresentation in connection with the bill. Note that the question comes from a non-lawyer who clearly wishes to do the right thing. (Mike Frisch)

Illinois Clarifies Ownership Of Advanced Fees

The Illinois Supreme Court issued an opinion exploring the issue whether advanced fee payments are property of the lawyer on receipt. The case involved a claim by an adversary of the law firm's client that the fees remained the client's property and thus subject to attachment. The court held that the agreement between the client and the firm controlled, and that the fees were the firm's property. The Illinois ARDC web site provides a summary of the opinion with a link to the decision.

Absence Of Retainer Agreement No Bar To Fee Recovery

The New York Second Judicial Department affirmed a judgment awarding a law firm unpaid fees in an action against a former client. The defense based on the absence of a written retainer agreement was rejected because the representation had commenced before New York adopted a rule required a writing setting forth the fee agreement. (Mike Frisch)

Disbarred Lawyer Barred From Collecting Fees

A disbarred lawyer who had referred six client matters to a law firm sued that firm for breach of contract and unjust enrichment when the firm failed to honor an agreement to share fees from the referred cases. The New York First Judicial Department ordered the complaint dismissed. The disbarred attorney may not recover fees based on the referral agreement. Any amount sought by a disbarred lawyer on a quantum meruit theory must be fixed by court order after notice to the client. Bacause the disbarred lawyer was never counsel of record in the referred cases, he had no basis to assert a charging lien. Thus, there is no viable theory of recovery in the matter.(Mike Frisch)

Unearned Fee Ordered Returned

A recent decision of the Michigan Attorney Discipline Board concludes that a lawyer engaged in ethical misconduct by charging a $4,000 "non-refundable" fee in a domestic relations case and refusing to refund the unearned portion when discharged shortly thereafter. The opinion collects the cases on this issue from around the country and concludes that the Michigan "law and ethics opinions in this area have afforded something less than coherent guidance." Thus, the attorney was ordered to return the unearned fee and no sanction was imposed. (Mike Frisch)

Attorneys' Fee Award Upheld

A corporation that publishes a car modification magazine hired a person to sell advertising space. The employee executed a confidentiality and non-competetion agreement with a fee shifting/indemnification clause. The employee was terminated and the corporation filed suit  against him for disclosing confidential information.

A Delaware Chancellor found that the employee had breached the agreement and that the  corporation was entitled the full legal fees and costs. On appeal, the Delaware Supreme Court affirmed the fee award. Although the corporation achieved "limited trial success ...[the employee's] refusal to cooperate at every stage of the proceedings outweighed [the corporation's] limited trial success and contributed significantly to the excessive number of hours [the corporation] spent litigating the case." The Chancellor properly considered the factors listed in Rule 1.5 and did not abuse his discretion in awarding the full amount of fees and expenses. (Mike Frisch)

$1,000/hour? Nero has become managing partner and is fiddling away....

Posted by Nancy Rapoport

Jeff's post on this latest rate increase points out that some lawyers are worth $1,000/hour or more, but the group of lawyers that can justify that rate is a much smaller pool than the group of lawyers charging (or about to charge) that rate.  And that high rate is efficient only if the lawyer charging it is doing those tasks that use his or her specialized expertise.  The problem, of course, is that the rate doesn't distinguish between "review file" and "develop brand-new legal theory that saves the day."  And then there's the copycat issue, where lawyers who think that they're worth $1,000/hour want to increase their rates just to stay in the game.

I found Steve Susman's comment about his hourly rate most interesting: 

Plaintiffs['] trial lawyers often bill on a contingency-fee basis, earning a share of a settlement or verdict -- an amount that can dwarf top rates. "It represents an opportunity cost when I am working by the hour," says Mr. Susman, who last year raised his hourly fee to $1,100. He did it in part, he says, "to discourage anyone hiring me on that basis."

That reason I can understand, and I set my own consulting rate very high (but not $1,000/hour high!) for the same reason.  How many of the law firms increasing their rates to the new four-digit high spend much time calculating their "value added" part of the equation?  I'll bet that, instead, they're just trying to make ends meet, given the still-increasing overhead caused by high associate salaries, and of course there's always the ego problem (he charges $X, therefore I will, too).  Other folks (including here, here, and here) have been noticing the increasing disconnect between fees and value.  Something's going to give, and soon--and Nero's new rates are speeding it along.

$1,000-Per-Hour

Posted by Jeff Lipshaw

The Wall Street Journal leads the Marketplace section today with an article on the impending crossing of the $1,000 per hour rate for some of the top lawyers in some of the top New York City law firms, like antitrust guru (and former director of the FTC Bureau of Competition) Kevin Arquit (right) at Simpson Thatcher.

To me, it's just a number.  As a GC, I was far more interested in total budgets and value-propositions than the hourly rate.  So I could see ponying up an ungodly hourly rate for the certain few (like Kevin or his counterpart at Weil Gotshal, the handsome and debonair Steve Newborn) who could bring value to bear (Brackett Denniston III, the GC of General Electric allows as he has done the same).  I scratch my head more at paying a litigator that much for two reasons:  it piles up quickly, and I can only imagine a very few "bet the company" cases that would warrant fees at that level.  Indeed, one of our strategies within the company was to bid out important but not mission critical work to high quality lawyers at non-financial center firms.  As an example, we pushed much of our national products liability litigation to the Butler Snow firm in Jackson, Mississippi.

But the psychological impact of barriers like this - 1,000 internals on the Dow, the millionth customer, 75,000 discrete hits on SiteMeter - are interesting.

Ethics of Alternatives to Billable Hours

Posted by Alan Childress

Lots of law blogs have bemoaned billable hours and the ethical implications of this payment system.  On our blog, and her own, Nancy Rapoport has nicely raised such issues for a while now.  Jeff and Mike have chimed in from time to time.  Now David Giacalone at his f/k/a blog here is asking to move the debate beyond billables and into the ethics and practicalities of the alternatives.  And he has a good round-up of and links to various blogs currently replying to Scott Turow's recent polemic on the subject in August's ABA Journal.

Fee Sharing With Contract Lawyers

A contract attorney may receive "additional compensation in the form of discretionary bonuses or a share of firm-wide net profits." However, such an agreement may implicate the "division of fee" ethics rules, according to a recent informal opinion of the Washington State Bar Association. (Mike Frisch)

No Fee For Disbarred Attorney

May a disbarred lawyer sue a former client for allegedly unpaid fees and recover? No, according to a recent decision of the Connecticut Supreme Court. The disciplinary case was not disclosed to the client even though charges were filed shortly after the representation commenced. The client found out from a friend. The trial court concluded that the lawyer had been paid more than the value of services rendered and that "disbarment did not constitute a valid legal defense for the [lawyer's] inability to perform further..." The court concluded that the lawyer's inability to complete the legal services was not excusable but rather the lawyer's fault. (Mike Frisch)

Excessive Fee

A Massachusetts lawyer gave a free estate planning seminar at a seniors center that was attended by about 50 people. A widow who had not revised her will after the death of her husband arranged to meet with the attorney. She paid a flat fee of $7,500 for a revision of her estate plan. The fee was deemed an excessive fee for the work, consisting mostly of generating computer documents. The client decided that the attorney had not provided the help she had wanted and sought a refund. The attorney suggested arbitration. Eventually, the lawyer refunded half of the fee. However, the lawyer improperly sought and obtained the client's waiver of any claims against him.

The lawyer agreed to a suspension of three months. The balance of the fee, with interest, was repaid during the course of the bar discipline case. (Mike Frisch)

Disputed Fee Claims

The United States District Court for the District of Columbia denied cross-motions for summary judgment in a matter where several law firms had brought an action against the FDIC regarding the agency's decisions on fee payments. The law firms had represented shareholders of Benjamin Franklin Savings & Loan in a shareholder derivative suit and class action after FDIC had been appointed as the receiver for the bank. The IRS asserted a claim for an "amount [that] far exceeded the surplus of the receivership." The firms represented the shareholders in the tax case. The matter was settled for $50 million and FDIC agreed to pay attorney's fees.

Unsatisfied with the fee payments, the firms filed suit. The court denied summary judgment to the firms, holding that the fee payments were not based on a prevailing party status: "Rather, the FDIC's payments here are part of an overall agreement reached amongst the parties and the United States to settle the tax case." FDIC was not entitled to summary judment because it  "has not provided any evidence to justify its lodestar calculations for payments to plaintiffs." Without an evidentiary basis to evaluate the fee payments, "the Court cannot conduct a de novo review of the FDIC's payment decisions." (Mike Frisch)

Vague Allegations

Two plaintiffs who had retained a law firm filed a class action against the retained attorney, his firm and the firm's directors. The allegation was that the clients had been overbilled for legal services. The Court of Appeal of Louisiana, Third Circuit affirmed the trial court finding that the charges were impermissibly vague as to the firm and the individual directors: "requiring the defendants to produce files, billing statements, and client contracts in these circumstances and for this type of broad allegation would essentially require those defendants to sustain the burder of disproving the case brought against them." Dismissal against the responsible lawyer was deemed premature. (Mike Frisch)

If I Were A Carpenter...

...and you were a lawyer, what issues might arise?

A law firm hired carpenters to build a second-story apartment for a lawyer above his firm's law offices. Cost: $39, 000. A lawyer in the firm (the father of the attorney for whom the apartment had been built) represented the carpenters in an unrelated legal matter. The firm billed over $12,000 for legal services and offered to waive the fees in exchange for a waiver of the $39, 000 invoice. Trouble was that the fee invoice "had charged...for over twenty hours that were not itemized or otherwise accounted for." The carpenters filed a complaint with the attorney dispute resolution committee and obtained a mechanic's lien to attach real estate and fixtures at the firm. On appeal of a directed verdict for the law firm, the New Hampshire Supreme Court reversed and remanded :"a rational juror could find that the [defendant law firm] attempted to deceive the plaintiffs by inflating the legal bill...and using the inflated amount to bargain with the plaintiffs." (Mike Frisch)

Honesty In Billing

An attorney in South Carolina was indicted on 30 counts of mail fraud. He had charged fees "at the direction of an officer of an insurance company for which [he] did defense work...time and charges to several of the company's files on which the time billed had not been spent." He was placed on interim suspension after the indictment but the criminal charges were dismissed. He initially contended that there had been no ethical misconduct because he was following the client's directions and had not billed for work that he had not performed. The South Carolina Supreme Court accepted his admission that he had violated Rule 1.5 (fees) and imposed a six-month suspension retroactive to the interim suspension. The court concluded that bills for legal services must be truthful and accurate even if the client representative directs otherwise (he was fired for paying fictitious claims and later convicted of criminal offenses unrelated to this case).

Controverted Claim

The Alaska Supreme Court held that it was error to deny the payment of attorney's fee higher than the statutory minimum in a workers compensation case. The employee had been injured carrying a 60 pound battery. After dealing with the compensation claim pro se, he was injured again in an auto accident. He decided to retain counsel due to the complications caused by the accident case. He was then involved in a second auto accident. The court held, contrary to superior court's conclusions below, that the workers compensation board properly found that the claims were "controverted" in some respects and that payment of fees could exceed the minimum. The case was remanded to the board for determination of appropriate legal fees. (Mike Frisch)

Fee Caps In Contingency Cases

An illegal fee should be per se unreasonable under Rule 1.5. In response to a request to intervene from the Indiana Trial Lawyers Association("ITLA"), the Indiana Supreme Court issued an opinion clarifying an earlier agreed disposition in a disciplinary case that reprimanded an attorney who had charged in excess of a 15% statutory maximum in a medical malpractice case. The court states that an attorney and client may contract for a fee that in effect exceeds the 15% without running afoul of the ethical rule. The court notes the importance of a client's freedom to hire competent counsel.

A concurring opinion notes that "[i]t is far from clear that [this opinion]  represents the best policy for determining unreasonable fees at the interesection of Rule 1.5 and the medical malpractice statute" and that the majority was engaging in rulemaking in the context of a stipulated discipline case.  However, the opinion further notes that the concerns of ITLA were well substantiated and that the defense bar had not objected. (Mike Frisch)

Twice Burned

A lawyer who overbilled two elderly and vulnerable sisters by "continuing to perform legal work to collect money that had been stolen...by their former attorney despite the unlikelihood that he would recover enough funds to justify his fees" was disciplined by the Ohio Supreme Court. The first lawyer had misappropriated over $800,000 in assets. The lawyer here padded his bills with "unnecessary and repetitive tasks." The court rejected the proposed sanction of public reprimand. Rather, the court ordered a six month suspension followed by probation, a requirement that the attorney notify probate courts of the discipline in future cases and payment of $50,000 restitution.

Why did the Ohio Board of Commissioners on Grievances & Discipline conclude that suspension was too harsh for taking advantage of vulnerable clients?  I suppose that volunteer Boards just have a hard time accepting that it is possible to overcharge a client. Fortunately, the court has the ultimate authority and responsibility to consider the public interest and the integrity of the profession. (Mike Frisch)

Which Came First: The Guilt or the Billable Hours?

I have only "billed hours" for about twenty months in the last fifteen years (my short stint as "of counsel" in my old law firm between corporate jobs), but my shpilkes today remind once again of the age-old question:  do Type A people create billable hour guilt, or does billable hour guilt create Type A people?  Back in my younger lawyering days, I always knew that if I took a two-week vacation, it was going to cost me (this is going to sound quaint, but it was a midwestern large firm in the 1980s) about 70 billable hours.  (Aside:  one of the primary benefits of going in-house, particularly in the automotive business, was NOT reduction in hours or more control over schedule; I worked longer and harder in-house than I ever did in the law firm, but that's a whole 'nother story.  No, the best thing was that the entire automotive industry shut down between Christmas and New Year's Day, and not only did you not have to worry about not billing hours, but when you got back in the office, by and large, there was very little waiting for you that hadn't been there when you left.)

So here it is May 15, I'm back home in Indiana (they should make a song out of that idea), I can't grade exams because they won't get here until tomorrow at the earliest, but I feel like I should be doing something productive.  I can no longer remember if this predated my thirteen plus years (1979-1992, the Wonder Years, when you grow to 90% of your adult income) as a billable hour producer.  Maybe it's a genetic predisposition that is triggered by environmental factors.

[Jeff Lipshaw]

* Acknowledgment to lawsandlaugh.com for the cartoon.  I just discovered the site.  It looks like fun. 

Form Over Substance

The Iowa Supreme Court denied compensation in excess of the $1000 statuatory maximum to an attorney who was appointed as guardian ad litem to a juvenile in a child-in-need of assistance proceeding. The attorney's claim for excess compensation was filed untimely and denied on that basis by the public defender. The juvenile court ordered the public defender to pay over $2000 on a theory of quantum meruit. The public defender then petitioned for review. The Supreme Court disagreed with the juvenile court, although it expressed appreciation for the lawyer's services and had no doubt that a timely petition for excess payment would have been granted. (Mike Frisch)

Secret Settlement Deal Condemned

The Florida Supreme Court decided a disciplinary case today that rejected a referee's report that proposed a public reprimand, probation and denying the Bar's request for fee forfeiture. Rather, the court suspended the lawyer for two years and ordered disgorgement of the fee to the Clients' Security Fund. A related case decided today rejected a proposed 60 day suspension and imposed disbarment against another firm lawyer who was the lead actor in the misconduct.

The lawyers were shareholders in a firm that represented 20 clients who sought to sue DuPont for damages allegedly caused from Benlate, a fungicide "suspected of causing severe crop damage and..recalled from the market in March 1991." Four firm lawyers were charged with misconduct involving entering into a secret agreement with DuPont for their own financial benefit. DuPont agreed to pay the firm almost $6.5 million in exchange for an agreement not to pursue future claims and "for the firm to possibly perform future work for DuPont on an hourly basis." The court held that disgorgement was an appropriate remedy for a prohibited fee.

The D.C. Bar prosecuted a similar case a few years ago that is cited by  the Florida court. I wonder if any disciplinary action is contemplated against the DuPont lawyer/lawyers who made the offer. (Mike Frisch)

Gift for the Legal Profession? Billable Hour Clocks

Although Nancy Rapoport writes on the demise of the billable hour in the legal profession of The Future, there are still some pockets left of its occasional use.  One webplace, The Billable Hour, sells traditional-style analog watches and clocks -- but divided by tenths of an hour rather than five-minute increments.  They also sell law-related gifts and humorous greeting cards.  The timepieces do look like lovely gifts for your Lawyer Loved Ones (that almost sounds oxymoronic), but really I don't think they are all that practical.  Could become like giving Black's Law Dictionary to an aspiring lawyer: they may not use it much but it is traditional.  Better than a tie or pen for Mother's Day or Father's Day. 

More to the point, my tip for hiring a lawyer is to avoid any that really has trouble calculating tenths of an hour in their heads.  Especially while being hopelessly distracted by the admittedly arbitrary and capricious norm that their regular clock draws a line every five minutes.  [Alan Childress]

Impermissible Contingent Fee Provision

The Washington State Bar Association has issued a recent informal opinion concluding that it is impermissible for a lawyer to include a provision in a contingent fee case that obligates the client to pay litigation expenses advanced by the lawyer if the client rejects a reasonable offer of settlement. The opinion views such a provision as a violation of the otherwise unrestricted authority of the client to accept or reject an offer embodied in Rule 1.2(b). (Mike Frisch)

Class Action Attorneys' Fees Award Is Judicially Sealed--From The Lawyers

Posted by Alan Childress
In an unusual move, a federal district judge in a class action settlement against Shell (for too much sulfur in the gas) divided up the plaintiffs' class attorney fees (aggregated at $6.8 million for 79 lawyers) -- then sealed the order from everyone including most of the attorneys involved.  They were told their own fee award but ordered -- subject to sanctions -- not to reveal their share to the others.  The Times-Picayune story (via Nola.com) is Judge keeps attorney pay secret, then seals reason for ruling, and it is linked and discussed on an interesting blog post by Brian Privor called Sunbock for Lawyers.  Brian writes, "Apparently the lawyers can't be trusted not to sue each other if they find out someone got a bigger slice of pie than they did."

Loyola ethics professor Dane Ciolino brought a motion to open the distribution to the public, but it was denied. The newspaper story quotes him:  "Keeping the fee information closed to public view, Ciolino said, 'suggests to the public at large that lawyers in high-profile, class action cases have something to hide.' "  Ciolino intends to appeal Judge Ivan Lemelle's ruling to the Fifth Circuit.

N.Y. Firm Ordered to Return Fees Due to Unethical Conflict Between Clients

Law.com's New York Law Journal has this story and cautionary tale about the Wilson Elser firm and its conflict between two insurance-company clients, N.Y. Judge Orders Wilson Elser to Disgorge Fees Over Ethics Breach.  The court actually granted summary judgment to plaintiffs, a relative rarity. 

Here it was on a fiduciary duty claim, while other claims (such as malpractice) were permitted to continue to trial.  The remedy for the fiduciary breach was to return over $3 million in fees. 

[Alan Childress]

Indictment Alleges NOLA Attorney Stole Tens of Millions From Clients and Firm

Posted by Alan Childress

The ABA Journal has this Friday e-Report on federal charges filed against New Orleans attorney James Perdigao, alleging billing bilking of clients and also diversion of legitimate client payments from the firm Adams & Reese.  The scheme sounds like one out of the ending to the movie version of The Firm, minus the mob but including client overbilling and the charge of mail fraud.  (Ed Harris: "Mail fraud?!!  Tom Cruise: "Studied it for the bar exam.")  Perdigao actually is alleged to have diverted mail from a subsystem, which would sound like actual mail fraud to even non-lawyers.

Here, 59 various counts in all, but still his maximum sentence would be merely 1,023 years.  That is not nearly enough, since obviously he may serve those quite quickly at his present billing rate (stealing the old joke with the lawyer facing St. Peter at Pearly Gates who must be as old as Methuselah according to timesheets).  Need to make it 1,120 or more, I figure.

Like with all alleged embezzlers, suspicion started that one day he skipped work (a temp sent a routine billing inquiry to accounting instead of him).  First rule of embezzling: there is no  Fight Club  No Days Off.  Even his his heavy hourly billing was not enough to prevent that one day of absence to cover his tracks.

The law firm "reported Perdigao to the U.S. attorney’s office and the Louisiana State Bar Association’s Office of Disciplinary Counsel. In 2004, Perdigao was suspended from the practice of law on an interim basis."  One legal ethics lawyer in Louisiana is quoted as saying, “He’s obviously in trouble now, and if any of this is true, I’m sure the state ethics system is watching him like a hawk.” Hmm. What would Mike Frisch say?  Maybe they should do more than just watch him, like a hawk or any other sighted animal (though maybe they are, slowly, like a slow-seeing hawk).

Screed or Scholarship?

Posted by Jeff Lipshaw

Several weeks ago, I posted some thoughts (not positive!) about The Destruction of Young Lawyers, by Douglas Litowitz, which had gotten so