Sanction Reduced In Overbilling Case

A justice of the Massachusetts Supreme Judicial Court reduced the sanction proposed by the Board of Bar Overseers from two years to a six-month suspension in a matter involving allegations of overbilling and dishonesty

In 2011, the respondent joined Saul Ewing Arnstein & Lehr LLP (the firm) as an income partner. In that position, the respondent received a set annual salary; her annual salary in 2014 was approximately $700,000, not including end-of-year bonuses.

At the beginning of 2015 , the respondent became an equity partner at the firm; this position also was referred to as a "percentage partner. " The firm paid equity partners and income partners differently. Equity partners were placed in a compensation "band" that was set in accordance with the firm ' s projected budget; because the firm set its budget conservatively, the firm commonly exceeded its annual anticipated revenue by approximately fifteen to twenty percent. Accordingly, in January of each year, equity partners expected to receive additional income in the form of a percentage of the firm's end-of-year profits, in addition to any discretionary bonuses.

Upon becoming an equity partner, the respondent was placed in a salary "tier" of $575,000. Beyond this base salary, she expected to earn a bonus and a percentage of the firm's annual profits, if the firm met or exceeded its anticipated income. Therefore, as an equity partner, a greater proportion of the respondent's take-home pay depended upon generating income for the firm.

In December of 2015 , the respondent called the firm 's chief financial officer (CFO) to ask various questions related to her billing rates and statistics for the year. During the course of this conversation, it became apparent that the amount of time reflected as billed by the respondent in the firm's time management system was less than the actual amount brought in by the respondent; the respondent came to understand that this was because she was adding time to her bills that was not being captured elsewhere in the system.

The attorney left the firm after issues of possible overbilling were uncovered

After the respondent left the firm, the general counsel continued his investigation into her billing practices. On May 5, 2016, the firm filed a complaint against the respondent  with the board. In June, 2016, after further internal investigation, the firm decided to return funds to or to issue credits to several of the respondents' clients, in an amount totaling approximately $260,000.  This overall amount reflected time the firm believed the respondent had over-billed. The firm returned or credited these funds along with accompanying letters informing clients that the firm had conducted an internal audit, and had concluded that certain bills submitted by the respondent were higher than they should have been. The letters did not explain why the firm believed that the clients had been overbilled.

After receiving these letters, all but one of the respondent's clients (who was in the midst of settlement negotiations spearheaded by one of the associates assigned to the respondent's matters) followed her to her new firm. One client offered to use the refunded money to take the respondent and her partner on a trip with him. When the respondent declined, the client used the funds to throw a party for his staff and invited the respondent to attend.

Bar Counsel filed charges

Much of the testimony presented to the hearing committee centered on the respondent's billing practices; the respondent conceded that her billing practices were inadequate, careless, rushed, and error-prone, and that her time records were almost always entered into the firm's billing system days or weeks after the work had been performed. She maintained, however, that her method of modifying time entries at a subsequent stage in the billing process was known to the firm's billing staff in its Philadelphia office where the entries were made, and not contrary to any firm policy at that time...

Overall, the hearing committee concluded that the respondent added approximately 450 hours of time to her and her associates' hours from March, 2015, through November, 2015, adding approximately eight to ten hours per week to previously entered time. The fees collected beyond the amount initially billed on the draft bills totaled approximately $218,000 for 2015. The hearing committee found that the hours added to draft bills increased throughout the year, and were added in round, large numbers such as one hour.

And

On seven occasions, the respondent billed clients for work related to depositions that she did not attend. She clarified in testimony before the hearing committee that her narrative references to a "deposition" did not necessarily mean that she had attended the deposition; in some instances, she testified that she billed for calling into a deposition or doing work related to a deposition remotely, such as reviewing an associate's deposition outline, discussing the outline and planned strategy with the associate, or speaking with experts for technical depositions.

The hearing committee majority recommended a year a day suspension;  a dissent would have imposed a public reprimand.

The Board

In a written decision issued in December, 2018, the board stated that it adopted the hearing committee's findings of fact and conclusions of law, albeit that the board then rejected a number of the hearing committee's specific findings and factors in aggravation. The board concluded that the respondent's conduct was intentionally dishonest, rather than careless.

Justice Gaziano

I agree with the respondent that the large number of hours she reported in 2015 is not substantial evidence that all or even most of the 450 hours at issue in this case were fraudulently billed, and the vast majority of the hearing committee's decision relied on the sheer number of hours; it had details of only a limited number of other instances, particularly including seven of the eighty-four depositions the respondent billed during that period...

I do not conclude that substantial evidence supports a finding that the respondent necessarily over-billed clients intentionally for all or substantially all of the hours for which the firm refunded fees or credited to clients; it, too, apparently relied heavily on the sheer volume of modifications to the draft bills in reaching its determination that all modifications must have been false.

Client happiness is not dispositive

A fee for work not performed logically constitutes a fee outside the scope of what an attorney reasonably may charge a client. That said, I again note that this case is unique in featuring clients who have been happy with the respondent's work and with the fees charged in highly complex matters, which are, in some instances, far lower than their prior counsel, and that they remain satisfied with her work and the results received, as well as with the amounts of the fees charged.

Sanction

The hearing committee and board improperly determined that the respondent's failure to recognize the impropriety of her conduct and express remorse constituted an aggravating factor in this case. This was error. A respondent must be permitted to defend herself against the allegations made against her, and to present an alternate explanation for her conduct. Here, the respondent pointed to her exceptionally high workload, her longstanding (inadequate) billing practices, at several different firms, and an illness in the family as several factors helping to explain why she employed careless billing for these clients. The respondent did not admit to deceiving a client, and instead presented compelling arguments as to why her conduct should not be seen as intentionally deceptive. It would be unjust to penalize the respondent for mounting a strong defense.

Accordingly, a judgment shall enter suspending the respondent for a period of six months.

(Mike Frisch)