Friday, August 31, 2018

New Jersey Has "No Dearth Of Competent, Civic-Minded Attorneys"

A case summary of the New Jersey Appellate Division

The court holds that if an attorney charges clients in LAD and other fee-shifting cases a fee based in whole or in part on an hourly rate, the attorney is ethically obligated to: disclose that the hourly rate-based fee could approach or exceed the client's recovery; provide examples of hourly rate-based fees in similar types of cases; and inform the client that other competent counsel represent clients in similar cases solely on a contingent fee basis.

Similarly, counsel who require clients to advance costs are ethically obligated to provide information about litigation costs such as deposition and expert fees, and provide examples of what costs have totaled in similar types of cases. An attorney is also ethically obligated to inform the client that other competent counsel who represent clients in similar cases advance litigation costs.

Details from the decision

Defendant, Brian M. Cige, an attorney, appeals from two Law Division orders. The orders declared unenforceable and void his retainer agreement (the "Agreement") with plaintiff, Lisa Balducci, a client he represented in a claim seeking damages under the New Jersey Law Against Discrimination ("LAD"), N.J.S.A. 10:5-1 to -49. The orders also dismissed his counterclaim for fees and costs. The trial court permitted defendant to recover for his services based on the doctrine of quantum meruit.

The trial court found defendant violated his professional responsibility to explain the Agreement's material terms to plaintiff so that she could make an informed decision about retaining him. The trial court's factual and credibility findings have ample support on the plenary hearing record. Defendant did not explain the effect his "greater three fee agreement" would have on any recovery, inform plaintiff of alternatives to such an agreement, or give plaintiff any indication of the tens of thousands of dollars in expenses she would have to pay as the case progressed. Hence we affirm.

The court quoted the lengthy agreement in full

The parties disputed the circumstances under which plaintiff signed the Agreement. According to plaintiff, defendant did not explain the terms of the Agreement. Rather, he told her, "[t]his is a standard agreement for a case like [this]." Plaintiff, who had worked for attorneys and who now operated her own business, "quickly glanced at it and . . . had a concern." She said to defendant, "Brian, this says that I am going to be responsible at the end if we lose the case." He said she would not. He told her the language concerning his hourly rate was standard for a LAD case like this. He said: "We are friends. I was at your wedding. I would never do this to you. Ignore that. Don't worry about it. It is standard information." Plaintiff signed it, because she trusted him, he was a friend, and she believed him.

The attorney recalled the circumstances quite differently while the client's child corroborated her testimony.

After the client discharged him, he asserted a lien that impaired a consent resolution of the underlying matter.

The court

There is no dearth of competent, civic-minded attorneys willing to litigate LAD and other statutory fee-shifting cases under fee agreements that do not include an hourly component. The number of such cases litigated in our trial courts and reported in the case law evidence this, as does — at least as to numbers — advertising on television and radio, in telephone books and newspapers, and on billboards and other media. Indeed, the firm currently representing plaintiff in the LAD action has a fee agreement without an hourly component.

Ethically then, must an attorney whose fee for undertaking a LAD case that includes an hourly rate component explain both the consequences on a recovery and the availability of other competent counsel likely willing to undertake the same representation based on a fee without an hourly component? We conclude the answer is yes.

...We do not find the Agreement in this case unenforceable because of the problematic nature of the three fee provisions. We do find the Agreement unenforceable because, as the trial court found, defendant did not adequately inform plaintiff about the ramifications. 


In summary, we conclude that if an attorney's fee in a LAD or statutory fee-shifting case is based in whole or in part on an hourly rate, then the attorney is ethically obligated to inform the client of the ramifications. The attorney must inform the client that if the case becomes complex and protracted, the hourly rate-based fee the client is responsible to pay can approach or even exceed his or her recovery. Further, the attorney must inform the client other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component, and might also advance costs. The attorney should provide examples of how much hourly fees have totaled in similar cases, or if the attorney has no such experience with similar cases — in which case consideration should be given to referring the case to a certified civil trial attorney — how much hourly fees have totaled in the same types of cases found in case law.

Similarly, if the client is required to advance costs, the  attorney must provide the client with approximate costs resulting from things such as depositions and expert fees, and must give examples of such costs in similar cases. The attorney must disclose other competent counsel who represent clients in similar cases advance litigation costs...

The fee agreement in this case is ambiguous and to some extent illusory. Defendant failed to discharge his ethical obligation to explain the terms of the agreement, their implications, and alternatives to the agreement, so the client could make an informed decision regarding his representation. The trial court did not err by so finding.

(Mike Frisch)

August 31, 2018 in Billable Hours | Permalink | Comments (0)

Sunday, July 8, 2018

No Thanks For Not Sharing

The New York Appellate Division for the Second Judicial Department affirmed the dismissal of a breach of contract claim

With respect to the merits of the appeal, Judiciary Law § 491 prohibits any person, partnership, or corporation from sharing any fee or compensation charged or received by an attorney-at-law, in consideration of having placed in the hands of such attorney-at-law a claim or demand of any kind (see Judiciary Law § 491[1]; Matter of Ungar v Matarazzo Blumberg & Assoc., 260 AD2d 485, 486). Violation of this section is punishable as a misdemeanor (see Judiciary Law § 491[2];  Matter of D’Emic, 111 AD3d 158).

Under the purported fee-sharing agreement, the plaintiffs would provide the defendant attorneys with proprietary information regarding potential clients, investigate claims, interview potential plaintiffs, and otherwise assist with litigation. In exchange, the defendant attorneys would pay the plaintiffs 20% of their fee for each case. This purported fee-sharing agreement whereby the plaintiffs attempt to recover from the defendant attorneys is illegal, and the plaintiffs are proscribed from seeking the assistance of the courts in enforcing it (see Bonilla v Rotter, 36 AD3d 534, 535; Prins v Itkowitz & Gottlieb, 279 AD2d 274; Matter of Ungar v Matarazzo Blumberg & Assoc., 260 AD2d at 486). The plaintiffs’ contention that they are entitled to equitable relief is without merit, since the contract was criminal in nature and not merely prohibited by statute (cf. Katz v Zuckermann, 119 AD2d 732, 733).

The Supreme Court order explains the claim. 

Defendant Sirota & Sirota, LP, a law firm located at 125 Beach 128th Street, Belle Harbor, New York, engages in litigation. Defendant Howard Sirota, acting on behalf of himself and the other defendants, entered into an agreement with plaintiff Corporate Surveys whereby the latter provided the defendants with proprietary information pertaining to potential clients, investigated claims, interviewed potential plaintiffs, and otherwise provided the defendants with assistance in securities litigation.

In exchange for the services of Corporate Surveys, the defendants promised to pay twenty (20%) percent of the law firm's fee on a case. Corporate Surveys provided services to the defendants on hundreds of cases during the course of their business relationship. Without the specialized knowledge and efforts of Corporate Surveys, the defendants would not have been able to begin many of the lawsuits that they prosecuted over twenty-three years.

The defendants utilized the services of Corporate Surveys in connection with a lawsuit filed in the federal court for the Southern District of New York, entitled Richard Hirsch v., Inc., which was subsequently consolidated with other cases and recaptioned In Re: Initial Public Offering Securities Litigation.

The services provided by Corporate Surveys resulted in the federal court's appointment of defendant Sirota & Sirota as one of the lead counsel in the class action litigation. The federal court ultimately awarded defendant Sirota & Sirota attorney's fees in the amount of $12,067,377.96. However, the defendants refused to pay Corporate Surveys its twenty (20) per cent share of the fees.

The plaintiffs brought this action seeking to recover twenty (20%) percent of the $12,067,377.96 fee awarded by the federal court. According to the plaintiffs: "It was not until Defendants' continued refusal to make payment to Plaintiffs upon the final resolution of the Priceline Litigation that Plaintiffs were made aware the long-standing agreement between Plaintiffs and Defendants was prohibited by both the New York and Florida Bar Rules." (Complaint, ¶74.)

There are courts that decline to permit lawyers to argue against enforcing illegal contracts that they have entered into on public policy grounds. (Mike Frisch)

July 8, 2018 in Billable Hours | Permalink | Comments (0)

Thursday, June 7, 2018

Law Firm's Suit Against Former Client For Fraud Revived

The District of Columbia Court of Appeals has held that a law firm's fraud claim against a former client for alleged misrepresentations  regarding fee payments survives the resolution of the unpaid fees awarded by the Bar's Attorney Client Arbitration Board ("ACAB").

 Appellant Ludwig & Robinson PLLC ("L&R" or "the law firm") appeals from the Superior Court‘s dismissal of its claims alleging fraud and conspiracy by defendants/appellees BiotechPharma, LLC ("BTP"), BTP‘s wholly-owned subsidiary Converting Biophile Laboratories, Inc ('CBL"), BTP‘s principal Raouf Guirguis (together, the "BTP defendants"), and Martin Kalin (alleged to be a BTP lender "who has held himself out" as BTP‘s "Executive Vice President." For the reasons set out below, we reverse and remand.

 L&R‘s complaint alleges that in 2011, BTP engaged the law firm‘s services to provide the company with "advice and representation regarding cross-border intellectual property claims." The engagement, which entailed extensive motions practice in the Eastern District of Virginia (the "Rocket Docket") and elsewhere as well as depositions and interviews "across the country and overseas," began after Kalin contacted L&R seeking representation for the company. 

There were a series of retainer agreements as unpaid bills mounted.

On January 31, 2013, after attempts to collect payment proved unsuccessful, L&R brought suit in the Superior Court, suing BTP for breach of contract (Count I); CBL and Guirguis for breach of guarantee (Count II); each of the BTP defendants for "Failure to Pay Accounts Stated" (Count III); and all defendants for fraud (Count IV), and conspiracy (Count V). The complaint alleges that as of June 5, 2012, BTP had incurred but failed to pay hourly fees of $1,233,683.08, a "success fee' of $358,659.96, and expenses of $196,605.67, for a total of $1,788,948.71.

The court

Here, the L&R-BTP relationship was an open-ended engagement; i.e., it had no fixed termination date. L&R‘s complaint alleges that the law firm reserved the right to "move to withdraw absent payment" and threatened to invoke that right when confronting Guirguis and Kalin about BTP‘s failure to pay billed amounts. The complaint further alleges that during those conversations, BTP (through Guirguis) and Kalin induced L&R to continue providing legal services to BTP under modified engagement letters, and thus not to withdraw, through false statements about payment sources available to pay the law firm‘s bills (e.g., CBL‘s purported credit line) and through omissions about "the fact and magnitude of liens" against BTP, loans by Kalin to BTP, and BTP‘s level of "indebtedness." In the context of these alleged transactions, the defendants/appellees had a duty independent of the subsequent modified engagement letters to "state truly"what "they told the law firm and also not to suppress or conceal any facts within [their] knowledge which would materially qualify those [representations] stated."

The scope of the ACAB authority 

Under the rules of then ACAB, that body‘s jurisdiction is limited to disputes "about the fee paid, charged, or claimed for legal services." D.C. Bar Att‘y-Client Arb. Bd. R. 3 (b). In addition, the Superior Court did not find, and none of the parties has argued that, Kalin is a privy of any of the BTP defendants such that he could be bound by the ACAB decision to which the BTP defendants were subject. For those reasons, the ACAB arbitration decision did not have res judicata effect as to L&R‘s claims sounding in fraudulent inducement and civil conspiracy against the BTP defendants, and likewise is not a res judicata bar with respect to any claim against Kalin.


In this case, the amount L&R billed BTP for legal services under the second modified engagement letter is some measure of what the law firm could have earned if the lawyers involved had withdrawn from representing BTP and taken on work for another or other clients. As L&R has suggested, its damages (if any) in this regard were likely "up to" rather than equivalent to the billed $1.8 million, because that amount was billed for what L&R has asserted was "round-the-clock work" and also because it included a success fee ($358,659.96) that the law firm would not necessarily have earned through other engagements, as well as expenses ($196,605.67, for, inter alia, "depositions and interviews across the country and overseas") the law firm would not necessarily have incurred in representing other clients. Whatever L&R might be able to prove in the way of "damages . . . up to the claimed 1.8 million dollars," the point we make here is that L&R‘s inclusion of a prayer to recover such an amount as damages for alleged fraudulent inducement does not necessarily require a conclusion that the law firm is attempting to recharacterize a contract claim as a fraud claim, or is merely trying to obtain the benefit of its bargain under its contract with BTP.  Though monetarily equivalent to L&R‘s claimed damages for breach of contract, the law firm‘s prayer in Counts IV and V for approximately $1.8 million in damages may have a different basis and may pertain to damages that are not compensable under contract principles.

Associate Judge Thompson authored the opinion. (Mike Frisch)

June 7, 2018 in Billable Hours, Clients | Permalink | Comments (1)

Wednesday, June 6, 2018

For What It's Worth

The Minnesota Supreme Court affirmed but modified a remand decision of the Court of Appeals.

This case requires us to clarify the proper method for calculating the quantum meruit value of an attorney’s services when a client terminates the contingent-fee agreement before a matter concludes. Respondent API, Inc. Asbestos Settlement Trust (API Trust), retained appellant Faricy Law Firm, P.A. (Faricy), under a contingent-fee agreement to assist with asbestos litigation. Faricy represented the predecessor to API Trust and then API Trust for about 10 years and was involved in pursuing several claims. Two months before settling a claim upon which Faricy had worked, API Trust discharged Faricy.

Minnesota law prohibits a discharged contingent-fee lawyer from receiving the contingent fee as a contract remedy, instead allowing recovery only of the reasonable value of services under a theory of quantum meruit. See In re Petition for Distribution of Attorney’s Fees Between Stowman Law Firm, P.A., 870 N.W.2d 755, 761 (Minn. 2015); Lawler v. Dunn, 176 N.W. 989, 990 (Minn. 1920). The district court concluded that Faricy had failed to prove the value of the services that it had provided and dismissed Faricy’s attempt to recover a portion of API Trust’s settlement funds. The court of appeals reversed and remanded, concluding that the district court had applied the wrong test for determining quantum meruit. It provided a set of factors for the district court to consider on remand. Faricy seeks review on the issue of whether the contingent-fee agreement can be considered as a factor when determining the reasonable value of services in quantum meruit, and API Trust seeks cross-review regarding the amount of evidence required to prove quantum meruit. We granted review on both issues.

 The law

A discharged attorney may file a lien to recover attorney fees. Minn. Stat. § 481.13, subd. 1(a)–(c). But a discharged attorney may not sue for breach of contract damages because the client always has an implied right to terminate the attorney-client relationship...

We conclude that district courts should use the following factors to determine the quantum meruit value of a discharged contingent-fee attorney’s services:

(1) time and labor required;
(2) nature and difficulty of the responsibility assumed;
(3) amount involved and the results obtained;
(4) fees customarily charged for similar legal services;
(5) experience, reputation, and ability of counsel;
(6) fee arrangement existing between counsel and the client;
(7) contributions of others; and
(8) timing of the termination.

We have chosen these factors because they combine considerations that we have previously applied to determine the value of an attorney’s services in other contexts with concerns that are specific to the context of a discharged contingent-fee attorney.


Because we have clarified that the calculation of a quantum-meruit award includes considering the “fee arrangement existing between counsel and client,” we agree with the court of appeals that a remand is necessary so that the district court may consider the contingent-fee agreement between Faricy and API Trust, in addition to the other relevant factors that we have identified. The fee agreement “is merely one factor, among a host of others that the district court is to consider in awarding reasonable attorney fees.” See Green, 826 N.W.2d at 538.

(Mike Frisch)

June 6, 2018 in Billable Hours | Permalink | Comments (0)

Wednesday, April 11, 2018

Time To Pay

The Vermont Supreme Court held that an attorney suing for fees had established entitlement to summary judgment

 the record indicates the following undisputed facts. Defendant’s mother died in 2011, and defendant hired plaintiff to represent him in the probate case and other related actions. At the time of her death, defendant’s mother was the sole owner of the Ski Inn. Defendant and his sister were joint beneficiaries of the residue of their mother’s estate, which included the Ski Inn. Defendant wanted to continue operating the inn; his sister, the Executrix of the Estate, believed the inn should be sold because it was operating at a loss and in violation of a state fire safety closure order. probate court granted a license to sell the inn. Defendant, represented by plaintiff, tried to avoid the sale of the inn by repeatedly but unsuccessfully challenging the license to sell. Defendant, represented by plaintiff, also challenged through Vermont Rule of Civil Procedure 75 an order from the State Department of Fire Safety closing down the inn. In December 2012, the trial court dismissed the Rule 75 action and held defendant in contempt for continuing to operate the inn.

Defendant and the Estate then entered into a settlement agreement. Under the agreement, in exchange for a blanket waiver of claims against his sister and the Estate, defendant was given ninety days in which to purchase the inn. The agreement provided for the sale of the property if defendant did not timely exercise his right to purchase it. Defendant did not timely purchase the property and it was sold to a third-party in 2013. In January 2014, following several more months of dispute in the Estate focused on the accounting of sale proceeds and the calculation of the beneficiaries’ distributive shares, plaintiff withdrew as defendant’s attorney. Defendant subsequently appealed from the Probate Division’s Amended Final Decree of Distribution, and in a November 2016 order, the trial court granted judgment as a matter of law to the Estate, upholding the Amended Final Decree. Among other things, the court rejected defendant’s argument that the settlement agreement was invalid because he entered it under "economic duress." Although defendant filed a notice of appeal from this ruling, the appeal was dismissed on the merits due to defendant’s failure to file a brief as ordered.

The court

 We reject defendant’s related assertion that Stevens had in fact been paid in the form of security interests to secure his attorney fee obligation by the time of his withdrawal, and thus,  could not have withdrawn for lack of payment. The fee agreements defendant signed with plaintiff called for monthly billing, authorized interest on overdue balances at the rate of one percent per month, and affirmed counsel’s right to withdraw, subject to court approval, if defendant did not pay according to the terms of the agreements. The promissory note defendant signed in connection with his past due attorney’s fees and the partial assignment of his distributive share do not on their face purport to supplant the parties’ rights and obligations pursuant to the underlying fee agreements.

(Mike Frisch) 

April 11, 2018 in Billable Hours | Permalink | Comments (0)

Lien On Thee

The New York Appellate Division for the First Judicial Department held that a law firm had a lien after withdrawing

Order, Supreme Court, New York County (Erika M. Edwards, J.), entered April 25, 2017, which denied the petition to enforce a charging lien, with prejudice, unanimously reversed, on the law, without costs and the petition granted to the extent that the matter is remanded for a hearing and determination of the reasonableness of petitioner's claim for unpaid fees for legal services rendered.

The record demonstrates that petitioner had good cause to seek to withdraw from representation of Ms. Wylomanska (see Bok v Werner, 9 AD3d 318 [1st Dept 2004]; Bankers Trust Co. v Hogan, 187 AD2d 305 [1st Dept 1992]; Kiernan v Kiernan, 233 AD2d 867 [4th Dept 1996]). The irreconcilable differences between client and counsel as to litigation strategies and choices to be made, as well as Ms. Wylomanska's placing of restrictions on petitioner's communications with her and her expressed lack of trust and confidence that petitioner would represent her interests competently, establish a deterioration of the attorney/client relationship that significantly undermined petitioner's ability to represent Ms. Wylomanska effectively. Petitioner is therefore entitled to recover for services rendered on the basis of quantum meruit (Bok v Werner, 9 AD3d 318), to be determined at a hearing (see Sharbat v Law Offs. of Michael B. Wolk, P.C., 121 AD3d 426 [1st Dept 2014]; Bankers Trust Co. v Hogan, 187 AD2d at 305).

(Mike Frisch)

April 11, 2018 in Billable Hours | Permalink | Comments (0)

Tuesday, March 27, 2018

15 Minute Increments OK In Wyoming

The Wyoming Supreme Court affirmed a favorable decision for a law firm in a fee dispute.

The court concluded that the law firm's 15 minute minimum increments for charges to the client were not unreasonable under the circumstances

For more than sixteen years, Manigault retained Daly & Sorenson to represent her in ninety-seven separate legal matters ranging from land and oil and gas transactions to ranching, domestic relations, and criminal matters. She typically paid her bills and any accrued interest when proceeds from her oil and gas interests and cattle sales became available.

In late 2012, she retained the firm with respect to one of the matters that gave birth to the present case. Manigault’s mother sued her to collect on two separate promissory notes on which she owed nearly three million dollars, and to collect accumulated interest, late fees, and attorney fees.

The case ultimately settled when Manigault agreed to confess judgment in favor of her mother (notwithstanding her initial position that the money received from her mother was a gift), and in exchange her mother agreed to forgive the entire debt and write off the loss on her taxes. Manigault paid the law firm roughly thirty percent of what it billed in that case, leaving an unpaid balance of approximately $13,116.33.

Earlier in 2012, she retained Daly & Sorenson for what the parties call “the trust litigation.” It involved the large estate of Manigault’s father and its complex distribution through numerous family trusts and family partnerships and his will. Although she and her son were beneficiaries of those trusts, they were controlled by her stepmother, brother, and several attorneys and financial planners. Moreover, they were created and situated in several states and involved far-flung assets worth hundreds of millions of dollars. The trusts’ corpora included stock in publishing companies, holdings in various media outlets, plantations and historic pre-revolution homes in South Carolina, and ranchlands in Wyoming and Montana.

The bills accrued and the law firm sued. A  hearing was conducted by the Wyoming State Bar Committee for Resolution of Fee Disputes

the panel found that the hourly rates charged by Daly & Sorenson were reasonable, and that since 1997 it had represented Manigault in many legal matters without a written agreement. The absence of such an agreement led the panel to deduct interest and fees for long distance phone calls from the amount it found due the firm. It also deducted charges for the preparation of two motions which benefited the law firm but not Manigault, as well as charges for clerical work it determined were improperly billed at paralegal rates. Finally, it also deducted for a single instance of accidental double billing, and it concluded that Manigault owed the firm $64,621.05 after all of these adjustments.

The client appealed and the court had remanded to the panel

On February 18, 2016, the panel determined in its second decision that Daly & Sorenson billed Manigault according to minimum increments of fifteen minutes, that such was its normal practice, and that this had been the practice it had employed with Manigault in ninety-seven separate matters over several years. It also determined that the firm’s use of those increments was not unreasonable.

With respect to billing for certain information exchanges between a firm attorney and another attorney or paralegal employed by the firm, the panel determined that this was likewise the law firm’s normal practice, that it had been employed throughout its long history of representing Manigault, and that it was not unreasonable. The panel’s consequent decision to deduct nothing further from the amount owed to the law firm led to a second petition for judicial review filed on March 25, 2016.

In this appeal

Manigault accuses the law firm of using fifteen-minute minimum billing intervals to routinely charge her for that interval when the specified work took far less time to accomplish, and of billing for unproductive casual conversations between attorneys and paralegals which did not advance her cases. The record indicates, however, that of the eight factors addressed in Rule 1.5(a), only one received more than a cursory mention by the parties, and only that factor seems to have survived as contested throughout the process of judicial review. That factor is the nature and length of the law firm’s professional relationship with Manigault, and the billing practices during that time. She did not rely on that factor to prove her accusations. Instead, she relied principally upon attorney expert testimony that unfavorable inferences could possibly be drawn from a number of billing entries. She did not account for the fact that other inferences were equally possible. On the other hand, members of the law firm testified about its longstanding billing practices, and the adherence to these practices during its relationship with Manigault.

The testimony of the attorneys supported to result

When we accord proper deference to the panel’s allocation of the weight and assessment of the credibility of the testimony presented to it, we are compelled to conclude that the testimony from the attorneys of Daly & Sorenson provided a sufficient and reasonable basis for the panel’s decision. Therefore, its conclusion that Manigault should receive no further reduction relating to the firm’s fifteen-minute minimum billing practice or billing for substantive and necessary intraoffice communications was supported by substantial evidence.

(Mike Frisch)

March 27, 2018 in Billable Hours | Permalink | Comments (0)

Monday, February 5, 2018

Too Late To Assert Arbitration Provision Was Unethical

The defendant in a suit for payment of legal fees waived its right to object to arbitration, according to a decision of the Vermont Supreme Court.

The critical question in this case is whether a party who participates extensively and without objection in an arbitration proceeding for nearly seven months prior to the actual arbitration hearing waives an objection to the validity of the arbitration agreement. Lesley Adams, William Adams, and Adams Construction VT, LLC (collectively Adams Construction) appeal the trial court’s denial of their application to vacate an arbitration award in favor of Russell Barr and the Barr Law Group (collectively Barr Law Group) and against Adams Construction. Because we conclude that Adams Construction waived its challenge to the validity of the arbitration agreement, we affirm.

After participating fully in the arbitration

On October 4, 2016, one week before the beginning of the scheduled three-day hearing, Adams Construction filed an objection to arbitration and a motion to dismiss the arbitration proceeding. Adams Construction argued, for the first time, that the arbitration provision in Adams Construction’s fee agreement with Barr Law Group was unenforceable. Adams Construction cited legal authority from Vermont and across the country suggesting that an attorney’s fiduciary duty and ethical obligations require that the lawyer take certain steps to ensure that a client’s consent to a pre-dispute, binding arbitration agreement is fully informed. These steps may include fully disclosing the risks of binding, pre-dispute arbitration clauses, identifying the legal rights a client forgoes in signing such an agreement, and giving the client a chance to consult with independent counsel before signing the agreement. Adams Construction alleged that nobody from Barr Law Group explained the legal implications of the arbitration agreement to Mr.
or Ms. Adams before or after they signed it, or advised them to get independent legal advice before signing the fee agreement. Nor did Barr Law Group explain to Adams Construction that the Vermont Bar Association provides a free arbitration service for resolution of attorney-client fee disputes. For these reasons, Adams Construction contended that the arbitration agreement was invalid and sought dismissal of the arbitration proceeding.

After losing the arbitration on all counts, an appeal was taken

We are persuaded by our own reasoning in Joder Building Corporation, as well as by those courts that have concluded that at some point prior to the actual arbitration hearing a party who participates in an arbitration proceeding without objecting to the validity of the arbitration agreement may waive the ability to make that objection...

We need not locate the line in this case, or define with precision the range of the trial court’s discretion; in this case, Adams Construction’s participation in the selection of arbitrators, filing of an answer and counterclaims, and active participation in extensive discovery and motion practice over a period of nearly six months was more than sufficient to give rise to a waiver. Our requirement of timely objections to arbitration jurisdiction was designed to avoid unnecessary investments in time and resources of exactly these types.

(Mike Frisch)

February 5, 2018 in Billable Hours, Clients | Permalink | Comments (0)

Saturday, January 27, 2018

Does Estate Pay Legal Fees In Defending Guardian's Proposed Removal?

The South Dakota Supreme Court reversed and remanded a denied request to have an estate pay legal fees incurred by the guardian.

The question on appeal is whether a guardian’s attorney fees should be paid from a protected person’s estate when the fees were incurred in responding to pleadings to remove the guardian and to move the protected person to an assisted living facility. We reverse the circuit court’s denial of fees and remand to determine whether the fees were reasonable in amount and necessarily incurred in the administration of the guardianship.

The guardianship involved these players

Martin Bachand suffered a head injury in 2006. His son Michael Bachand was appointed guardian in 2007 and conservator in 2008. Notwithstanding the guardianship, Martin continued to live with his significant other and caregiver, Beverly Sears.

Michael and Martin began having disagreements, and Michael suffered a stroke in 2010, which required him to resign. A settlement agreement was reached under which Sears replaced Michael as guardian and Lyndell Petersen became Martin’s conservator.

Michael sought to remove Sears and retained a law firm

The attorney services included matters such as reviewing the entire nine-year-old case file, having property appraised, having Martin and his living conditions evaluated, conducting depositions, researching issues, and drafting court documents in response to Michael’s motion and petition. Following extensive preparation, a two-day hearing was scheduled. Although the parties and counsel appeared at the courthouse prepared to try the matter, the court urged the parties to confer and consider a settlement. The parties conferred and settled both disputes at the courthouse. Sears agreed to step down as guardian but Martin would not be moved to a facility. He would remain in Sears’s care in her home.

Sears incurred nearly $20,000 in fees and sought payment from the estate

Sears argues the fees were reasonable in amount and necessary for her, as Martin’s guardian, to respond to Michael’s petition and motion. She contends that as the court-appointed guardian, she had a duty to respond with particularity. In her view, she should not have to personally pay her attorneys when the purpose of their services was to gather evidence and prepare for a hearing that concerned the guardianship. She also contends that a number of attorney services related to necessary guardianship administration such as reviewing the file, preparing guardianship reports, obtaining evaluations of Martin and his living conditions, participating in depositions, and responding to subpoenas.

Appellees, however, argue that the services were not necessarily incurred and that the fees were not reasonable in amount. With respect to necessity, they contend these proceedings were necessary only because Sears failed to fulfill her duties as Martin’s guardian. They also contend that Sears obtained the services solely to preserve her status as guardian and personally benefit from household-expense payments incidental to the guardianship. Michael separately contends Sears misused her authority and failed to follow court orders.

The trial court denied any fees for Sears and thus

Findings of fact and conclusions of law are also necessary in this kind of case. After all, Sears may be entitled to some fees.

First, she appears to have prevailed on Michael’s motion to move Martin to an assisted living facility. On appeal, Sears argues that this was a resolution that Michael wanted and it was resolved in part upon an evaluation of a court-appointed therapist that was obtained during these proceedings. Second, we find it difficult to generally envision a situation in which the preparation of the guardianship report would not be necessary in the administration of the guardianship. Third, even Appellees concede that as guardian, Sears had a right to legal counsel. But we also acknowledge Appellees’ contention that Sears was either unwilling or unable to exercise her duties as a guardian. They also contend that Sears misused the guardianship trust. These contentions highlight our appellate dilemma. Without a resolution of factual matters relating to these conflicting claims, we are unable to meaningfully review the circuit court’s decision. We reverse and remand for the circuit court to address the parties’ conflicting claims and determine whether Sears’s attorney services were necessarily incurred in the administration of the guardianship and whether the fees were reasonable in amount.

(Mike Frisch)

January 27, 2018 in Billable Hours | Permalink | Comments (0)

Thursday, October 12, 2017

"Self-Serving Accounting"

The New York Appellate Division for the First Judicial Department unanimously modified an order dismissing a complaint against a law firm for return of paid fees

In March 2013, plaintiff Anna Gleyzerman was arrested on drug and drug-related charges. She entered into a retainer agreement with defendants to cover certain legal services for a flat fee (the first retainer). The following month, the District Attorney's Office filed an indictment against Anna, and in July 2013, following a nine-month-long wiretap investigation, it filed a superseding indictment against her. Anna's mother, plaintiff Tatyana Gleyzerman, then entered into a retainer agreement with defendants to secure defendant Gershfeld's appearance at Anna's arraignment on the superseding indictment for a flat fee (the second retainer). Tatyana subsequently entered into another retainer agreement with defendants to secure certain services in connection with the superseding indictment for an additional flat fee (the third retainer). In or about October 2013, after defendants had performed a substantial amount of work on Anna's behalf and had negotiated a favorable plea deal for her (albeit not as favorable as the one she ultimately accepted), plaintiffs terminated defendants' services and demanded a refund of unearned fees.

Defendants failed to demonstrate conclusively that the value of the services they rendered in connection with the first and third retainers equals or exceeds the fees that plaintiffs paid. Their self-serving accounting, which identified the number of hours spent on tasks but not the dates on which the work was done and the time spent on each of those dates, does not constitute irrefutable, documentary evidence that no unearned fees remain. However, defendants demonstrated that no unearned fees remain under the second retainer, which provided that the flat fee would cover "only the superseding arraignment appearance" (caps and boldface deleted); Gershfeld appeared with Anna on that arraignment.

Other claims were deemed properly dismissed. (Mike Frisch) 

October 12, 2017 in Billable Hours | Permalink | Comments (0)

Friday, August 25, 2017

No Discharge For Cause Where Commendable Efforts Were the Reason

The Kentucky Supreme Court reversed a circuit court's rejection of a law firm's claim of fee entitlement in  personal injury matter where the client (or his mother, who apparently did most of the interacting with the firm) had discharged counsel prior to completion of the matter.

The client had discharged counsel after expressing dissatisfaction with the handling of PIP payments. The circuit court found that the discharge was for cause and denied quantum meruit compensation.

The court here held that the PIP payments were properly handled, discharge was not for cause and the firm was entitled to payment for its efforts.

[The law firm's] spearheading [the clients] benefits disbursement was completely aboveboard. Indeed, the practice seems almost integral to fully servicing a motor-vehicle personal-injury client's needs - it should be commended and encouraged, not punished.

The court further stated that the result was not affected by the possibility that the PIP claim situation was not adequately communicated to the client.

Rather, ethics rules "guide" but do not "govern" the issue before it. (Mike Frisch)

August 25, 2017 in Billable Hours | Permalink | Comments (0)

Wednesday, August 2, 2017

Thanks For Sharing

An agreement to share legal fees between two law firms is enforceable according to an opinion of the New York Appellate Division for the Second Judicial Department.

The facts

The defendant, Davis, Saperstein & Salomon, P.C., represented Jorge Angamarca in a personal injury action (hereinafter the Angamarca action) in the Supreme Court, New York County, against, among others, Jefferson Townhouses, LLC (hereinafter Jefferson), the owner of the property where Angamarca was injured in a construction-related accident. Jefferson was insured by Imperium Insurance Company, formerly known as Delos Insurance Company, formerly known as Sirius America Insurance Company(hereinafter Imperium), and Imperium retained the law firm of Wilson, Elser, Moskowitz, Edelman & Dicker LLP (hereinafter Wilson Elser) to defend Jefferson in the Angamarca action. Following the entry of a judgment after a jury trial in the Angamarca action in favor of Angamarca and against Jefferson, Jefferson appealed and Angamarca cross-appealed to the Appellate Division, First Judicial Department. While that appeal was pending, Marc Saperstein, a partner of the defendant, contacted Bruce Yukelson, a partner of the plaintiff, Wolfe & Yukelson, PLLC, and Jefferson’s corporate attorney, to propose that Jefferson assign to Angamarca Jefferson’s claims against Imperium for bad faith and against Wilson Elser for legal malpractice relating to their failure to offer the policy limits in settlement of the Angamarca action. On November 23, 2009, the defendant sent the plaintiff a written fee-sharing agreement whereby the plaintiff would receive a fee “to assist with the prosecution of those claims.” On January 28, 2010, Jefferson assigned to Angamarca its claims against Imperium and Wilson Elser for failing to settle the Angamarca action for the limits of both policies by executing an assignment agreement. The assignment agreement included a covenant by Angamarca that he would not execute the excess portion of the judgment against Jefferson. By decision and order entered June 21, 2011, the Appellate Division, First Department, modified the judgment by vacating the awards for past and future pain and suffering, and directing a new trial on damages for past and future pain and suffering unless Jefferson stipulated to increase the awards for those damages (Angamarca v New York City Partnership Hous. Dev. Fund, Inc., 87 AD3d 206). Although Jefferson was granted leave to appeal to the Court of Appeals, on November 30, 2011, Angamarca and Imperium, on its own behalf and on behalf of Jefferson, settled the Angamarca action. The settlement included the settlement of the claims that were the subject of the fee-sharing agreement.

Summary judgment goes to the plaintiff

the defendant, which is bound by the same Rules of Professional Conduct (22 NYCRR 1200.0) as the plaintiff, cannot be heard to argue that the fee-sharing agreement and the obligations thereunder must be voided on ethical grounds, when it freely agreed to be bound by, and received the benefit of, the same agreement, particularly since there is no indication that the client was in any way deceived or misled.

(Mike Frisch)

August 2, 2017 in Billable Hours | Permalink | Comments (0)

Thursday, July 20, 2017

No Laughing Man: Unjust Enrichment Claims Reinstated

The District of Columbia Court of Appeals reinstated unjust enrichment claims against an international law firm, holding that the trial court erred in concluding the claims were time-barred as a matter of law.

We summarize the facts as they are stated in appellant‟s complaint. Appellees Kilpatrick Townsend, an international law firm, and Gingold, a sole practitioner, represented the Native American plaintiffs in Cobell v. Salazar, a class action lawsuit against the United States Department of the Interior for mismanagement of trust funds. In December 2009, the Cobell plaintiffs and the plaintiffs in a separate class action lawsuit against the United States Department of Agriculture concerning past discrimination against black farmers, Pigford v. Vilsack, reached a joint settlement agreement with the Government. Appellant, who was then President of the National Black Farmers Association, became involved in Pigford by lobbying for minority farmers who had missed an earlier filing deadline to be compensated under a consent decree. A second lawsuit was filed on behalf of these late-filers, and through the efforts of appellant and many others, was eventually combined with the other Cobell and Pigford litigants into a joint settlement agreement. The settlement agreement compensating the Cobell and Pigford plaintiffs required funding by a congressional appropriation. 

On March 5, 2010, John Loving, a government relations advisor at Kilpatrick Townsend, contacted appellant and requested his assistance in lobbying for the passage of the Claims Resolution Act (CRA), the funding bill for the Cobell and Pigford plaintiffs. Mr. Loving “asked [appellant] to use his extensive contacts . . . to drum up the necessary support for the . . . legislation.” Appellant and Mr. Loving did not discuss appellant‟s fees or any specific tasks to be performed. Appellant also spoke with Geoffrey Rempel, an accountant the Cobell plaintiffs hired, in order to coordinate lobbying efforts.

Soon thereafter, on June 1, 2010, appellant met Messrs. Rempel and Gingold for lunch at the Laughing Man Tavern, a pub in the District of Columbia. Appellant‟s complaint states that:

 [During that lunch at the Laughing Man Tavern, appellant] specifically told both Defendant Gingold and Mr. Rempel that he expected to be paid for this efforts to secure funding for the Cobell settlement. In response, Defendant Gingold encouraged [appellant] to continue working with and for Defendants. Defendant Gingold never indicated to [appellant] at any time at the restaurant, or at any subsequent time thereafter, that [appellant] would not be compensated for his efforts. . . . Every time [appellant] raised issues of compensation or the amount of such compensation, Defendant Gingold always indicated to him that compensation should not concern him — clearly indicating to [appellant] that payment would be forthcoming. Indeed, according to Defendant Gingold, the issue of payment was not whether [appellant] would be compensated, but when Eloise Cobell would focus on the amount of compensation for him. (emphasis omitted).

After the lunch meeting, appellant continued to lobby for passage of the CRA, which President Obama signed into law on December 8, 2010. The complaint alleged no further communications between appellant and appellees after the bill was signed.

The statute of limitations issues are for the jury on remand

At an appropriate point during those proceedings, and unless other developments arise that obviate the need to do so, the trial court shall have the jury make findings of fact as to the time after appellant last rendered services by which he should reasonably be deemed to have demanded payment for his services, plus the reasonable time thereafter within which appellees should have responded to said demand, and thus determine when appellant‟s cause of action for unjust enrichment accrued. The trial court can then
determine whether appellant filed his complaint within the applicable limitations period for unjust enrichment claims.

Thus the holding

we (1) affirm the trial court‟s dismissal of appellant‟s claim for breach of an implied-in-fact contract against Gingold as time-barred; (2) affirm the trial court‟s determination that appellant failed to state a claim for breach of an implied-in-fact contract against Kilpatrick Townsend; (3) vacate the trial court‟s dismissal of appellant‟s claims for unjust enrichment against both appellees as time-barred; and (5) remand for further proceedings consistent with this opinion.

Judge McLeese would reinstate and remand on all the asserted claims.

Cision PR Newswire covered the litigation by carrying a statement from Appellant's counsel. (Mike Frisch)

July 20, 2017 in Billable Hours | Permalink | Comments (0)

Tuesday, July 18, 2017

Agreement Created Fee Shift

An opinion of the Maryland Court of Appeals is summarized in the court's headnote

Maryland follows the common law American Rule, which states that, generally, a prevailing party is not awarded attorney’s fees. Maryland law draws a distinction between the recovery of attorney’s fees incurred in defending against a third-party claim and those expended in prosecuting a claim against the indemnitor.

There are four exceptions to the American Rule where a prevailing party may be awarded attorney’s fees, including that the parties have an agreement to that effect. The scope of
indemnification is a matter of contract interpretation, where a court looks to the terms of the contract to decide whether the parties agreed expressly that attorney’s fees would be  recoverable in a first-party action.

The contract between the parties in this case, specifically Article 19, provides expressly for the payment of “attorney’s fees;” and it ties payment of those fees expressly to an action for “breach” of the contract. Therefore, the Easement Agreement contains sufficient language to authorize first-party fee shifting, and subsequently White Flint is entitled to recover attorney’s fees.

The dispute involves a construction project in the heart of downtown Bethesda. White Flint - which leased to a restaurant and children's dance studio - sought and secured indemnification for damage caused in building over their properties.

Bainbridge, an entity formed by the Bainbridge Companies to manage the construction and operation of a new 17-story high rise apartment building in Bethesda, owns the property immediately adjacent to 4904 and 4909 Fairmont Avenue (“the Fairmont Properties”). Located on the Fairmont Properties were two one-story concrete buildings owned by White Flint that were leased to a restaurant and a children’s dance studio. Bainbridge engaged sub-contractor Turner to build the 17-story apartment building on its property for an estimated cost of $45,000,000. The construction project required excavation of a 50-foot-deep hole on the property, to be held open by steel cables protruding under and onto White Flint’s property to prevent soil and sub-surface structures from moving toward or into the excavation area. Bainbridge sought an easement from White Flint for access to the space “under, over, across and on the Fairmont Properties.” Bainbridge also wanted additional easements to swing a crane and extend scaffolding above the Fairmont properties.

During the Project’s excavation stage, White Flint’s experts detected damage to White Flint’s Property, alerted Bainbridge to the damage, and asked for assurances that the damage would be remedied. White Flint claimed that Bainbridge and its contractors did not drill the holes properly for the steel beams, resulting in soil loss beneath the Fairmont Properties, and that pile-drivers were used instead of drills to install the steel beams, in contravention of the express language of the Agreement. White Flint complained that the use of the pile-driver caused the buildings to shake, causing additional damage and soil movement underneath the buildings. By February 2012, the owner of the children’s dance studio on White Flint’s property reported seeing numerous cracks in the walls, that she feared a roof collapse on her students, and that many parents would not bring their children to class until she received assurances by Montgomery County that the building was safe. 

As you might imagine, litigation ensued.


The Agreement here is closer to the surety contract in Atlantic than the truck rental lease in Nova Research. Bainbridge and White Flint designed the agreement to ensure that Bainbridge, and not White Flint, carried all of the risk from the construction work; otherwise, White Flint had no incentive to support Bainbridge’s plans. Thus, the parties designed Article 19 to ensure that White Flint would be made whole if Bainbridge breached the agreement, which supports first-party fee shifting...

We hold that the Agreement contains express provisions that authorized first-party fee shifting, and subsequently White Flint is entitled to attorney’s fees.

Judge Raker authored the opinion. (Mike Frisch)


July 18, 2017 in Billable Hours | Permalink | Comments (0)

Monday, July 10, 2017

Vermont Opines On Legal Fees In Structured Settlement Payout

The Vermont Supreme Court reversed  a trial court's denial of  legal fees in a structured settlement payout

Petitioner Stevens Law Office appeals a trial court decision denying assignment of a future structured settlement payment from a fund administered by Symetra Assigned Benefits Service Company for legal services rendered by petitioner on behalf of beneficiary Shane Larock. We reverse and remand so that the trial court can conduct the best interest analysis required by statute before determining whether to deny or approve assignment of a structured settlement payment.

Shane Larock retained petitioner to represent him in a child in need of care or supervision (CHINS) proceeding which he expected to follow the birth of his daughter in early 2016. As payment, petitioner asked Larock for a $16,000 nonrefundable retainer which would be paid through assignment of that sum from a $125,000 structured settlement payment due to Larock in 2022. Under this arrangement, the structured settlement payment issuer, Symetra Assigned Benefits Service Company, would pay petitioner $16,000 directly when the 2022 periodic payment became due under the original terms of the settlement. Larock agreed to the fee arrangement and the assignment.

The trial court asked Bar Counsel to opine on the ethics of the nonrefundable retainer and denied enforcement.

The court looked to state law on structured settlements

As structured settlements became more prevalent during the late twentieth century, a new industry arose dedicated to trading in future periodic structured settlement payments. In this secondary market, beneficiaries due future payments through a structured settlement—payees—trade some or all of their future-payment rights to a third party in exchange for a discounted presently payable lump sum. Beginning with Illinois in 1997, a perceived need to protect settlement beneficiaries in these transactions, which have come to be called “factoring transactions,” precipitated a wave of state legislation governing this secondary market. Hindert & Ulman, supra, at 20...

The takeaway from the preceding discussion is that a trial court must engage in the best-interest analysis called for by state and federal statute before either approving or denying a transfer of future structured settlement payment rights. Neither state nor federal statute distinguishes between a transfer of the kind at issue here and a true factoring transaction, wherein a payee transfers future payment rights to a third party in return for a discounted lump sum presently payable to the payee. Thus, the same best-interest analysis is required before approving a factoring transaction or a transfer such as the one here—wherein payee Larock would directly transfer a portion of his future payment rights to petitioner without changing the future payment date and in exchange for legal representation.

The case was remanded for the application of the above factors. (Mike Frisch)

July 10, 2017 in Billable Hours | Permalink | Comments (0)

Tuesday, May 30, 2017

"Steep Overbilling Ought To Come At A Steep Price"

The United States Court of Appeals for the District of Columbia Circuit remanded a dispute over fee-shifting in a case where a law firm that collected on student loans got sued

In order to pursue a Master’s degree in Computer Graphics, Demetra Baylor (“Appellant”) took out six student loans. Several years after her graduation, Mitchell Rubenstein & Associates, P.C. (“Appellee”) came calling to collect. At the heart of this case are a number of inconsistencies in letters that Appellee sent Appellant over the course of several months regarding her loans and the amounts that she owed on them, as well as Appellee’s failure to direct all of its communications to Appellant’s attorney after she retained counsel. In response, Appellant filed suit on December 17, 2013, alleging that Appellee had violated the Fair Debt Collection Practices Act (“FDCPA”), the District of Columbia Consumer Protections Procedures Act (“CPPA”), and the District of Columbia Debt Collection Law (“DCDCL”), statutes which target abusive debt collection and improper trade practices. See 15 U.S.C. § 1692(e); D.C. CODE §§ 28-3904, -3814.

Over the course of the next few years, the parties engaged in what the District Court termed a “particularly striking expenditure of effort and resources,” generating “excessive, repetitive, and unnecessarily sharp pleadings.” Order, Dkt. No. 41, at 2. Nonetheless, all of Appellant’s statutory claims were eventually resolved. Appellant accepted Appellee’s offer of judgment regarding her FDCPA claim and the District Court, with the aid of a Magistrate Judge, determined the attorney’s fees to which she was entitled for this success. Appellee, meanwhile, prevailed in its Motion to Dismiss all of Appellant’s CPPA claims and some of her DCDCL claims, the remainder of which were rejected when the District Court subsequently granted Appellee’s Motion for Summary Judgment.

A number of orders from this “clutter[ed]…docket” are challenged on appeal. Id. First, the parties dispute the District Court’s decision to adopt a Magistrate Judge’s recommendation that Appellant receive approximately twenty percent of the attorney’s fees that she requested. Second, Appellant asserts that the District Court erred in finding that Appellee’s conduct does not fall within the aegis of the CPPA. Third, Appellant also contends that the District Court abused its discretion in failing to credit her objections to a different Magistrate Judge’s denial of her Motion to Compel the disclosure of communications between Appellee and an agent of Appellant’s creditor on the grounds that these documents were protected by attorney-client privilege. Appellant additionally disputes the District Court’s refusal to award her attorney’s fees for her efforts in litigating this issue. Finally, Appellant argues that the District Court improperly granted Appellee’s Motion for Summary Judgment on her DCDCL claims. On this last point, Appellant contends that the District Court failed to appropriately account for evidence demonstrating that Appellee had “willfully violated” the DCDCL and was therefore subject to liability under the statute.

We do not reach the question of whether the District Court abused its discretion in awarding Appellant only a percentage of the attorney’s fees she sought in connection with her FDCPA claim. In addressing this issue, the District Court relied on the standard set forth in Local Civil Rule 72.2 in finding that the Magistrate Judge’s proposed disposition was not “clearly erroneous or contrary to law.” This was error. Federal Rules of Civil Procedure 54(d)(2)(D) and 72(b)(3) foreclose the District Court from using a “clearly erroneous or contrary to law” standard when evaluating a Magistrate Judge’s proposed disposition of a fee request. The correct standard of review is de novo. We therefore reverse and remand to allow the trial judge to reconsider this matter in the first instance applying de novo review to assess the Magistrate Judge’s recommendation. We affirm all of the remaining Orders challenged on appeal.

Circuit Judge Henderson concurred with harsh words over the fee request

It is a time-honored bargaining tactic: make an unreasonable opening offer in an effort to “anchor” the ensuing give-and - take to an artificially high (or low) range of prices. Russell Korobkin, Aspirations and Settlement, 88 CORNELL L. REV. 1, 32 (2002). Even if the offer has no basis in reality and is rejected out of hand, it may for psychological reasons yield an artificially high (or low) final price. Id. at 32 & nn.151-53 (citing evidence that people “often begin [a negotiation] with a reference value . . . and then adjust from that point to arrive at their final determination,” even if starting point does “not bear a rational relationship to the item subject to valuation”). That may be fine for selling a car or conducting a business negotiation. But a request for attorney’s fees is not a negotiation.

Federal fee-shifting statutes typically authorize the recovery of a reasonable attorney’s fee. If a party seeks more than that—making an excessive demand in hopes that the award, although short of the demand, will be artificially high— a district court can impose a sanction to deter future violations and to protect the integrity of its proceedings. In particular, the court has discretion to deny an award altogether or “impose a lesser sanction, such as awarding a fee below what a ‘reasonable’ fee would have been.” Envtl. Defense Fund, Inc. v. Reilly, 1 F.3d 1254, 1258 (D.C. Cir. 1993).

I say all this because Radi Dennis, counsel for plaintiff Demetra Baylor, made what I consider a grossly excessive fee request. In Baylor’s name, Dennis sought a total of $221,155 for her work on Baylor’s $1,001 settlement and on the fee request itself.  The $221,155 demand was more than five times the $41,990 that a magistrate judge determined to be reasonable. Reviewing for clear error, the district court overruled objections from both sides and awarded Baylor $41,990. The Court today holds, and I agree, that a remand is in order because the district court erred by not reviewing the magistrate’s recommendation de novo. The Court is careful not to dictate the outcome on remand, and rightly so because of the district court’s discretion in fee matters, I write separately only because, on reviewing the fee order, I am uncertain whether the district court recognizes just how broad its discretion is. On the extreme facts of this case—and because Dennis is a repeat offender, see Jones v. Dufek, 830 F.3d 523, 529 & n.6 (D.C. Cir. 2016) (affirming denial of excessive fee request Dennis made on behalf of another client)—I believe the court’s discretion includes awarding a fee substantially below an otherwise reasonable one. (citations to record omitted)...

Indeed, I do not think it would be an abuse of discretion to award Dennis the same amount she won for Baylor: $1,001. Steep overbilling ought to come at a steep price.

Senior Judge Edwards authored the opinion. (Mike Frisch)

May 30, 2017 in Billable Hours | Permalink | Comments (1)

Tuesday, April 4, 2017

A Dollar Is Enough For 18 Months Of Representation

An unpublished decision of the North Carolina Court of Appeals

The Law Firm of Michael A. DeMayo (“Plaintiff”) appeals from the trial court’s 7 April 2016 order awarding it one dollar in attorneys’ fees from Schwaba Law Firm (“Defendant”) as a result of Plaintiff’s legal services rendered on behalf of a client of Defendant’s. On appeal, Plaintiff argues that the trial court erred in determining that the value of Plaintiff’s services was only one dollar. After careful review, we affirm.

The client retained plaintiff to represent him in a personal injury case on a 1/3 contingency basis. The retainer further provided:

The fee agreement further provided that in the event Beaver terminated his contract with Plaintiff after an insurance carrier had made an offer of settlement, Beaver “would be responsible for 95% of Plaintiff’s award had a settlement been reached.”

Notably (practice pointer here), the plaintiff did not keep track of hours devoted to the case

[Client] Beaver’s case was assigned to Wendy Davis, a paralegal working for Plaintiff, and her work was supervised by Michael A. DeMayo, an attorney. Plaintiff’s employees worked on Beaver’s case from December 2011 to June 2013. Although Plaintiff did not keep a record of the amount of time each attorney or paralegal spoke to or contacted the client, Beaver’s file “had 232 ‘touches’ [representing] the number of times the file was handled for any purpose.”

The client rejected a settlement offer of $85,000 and terminated plaintiff's services. 

He retained defendant and accepted $100,000 in settlement.

Plaintiff demanded 95% pursuant to the retainer agreement. Defendant refused to pay anything. 

Litigation ensued

In the present case, Plaintiff argues that the trial court erred in awarding Plaintiff only one dollar...

Plaintiff’s sole argument is that the trial court erred in calculating the amount of fees to which it was entitled based on the theory of quantum meruit. However, Plaintiff does not argue that the trial court failed to properly articulate the factors set out in Guess. Nor does it contend that any specific finding of fact made by the trial court was unsupported by competent evidence. Instead, Plaintiff makes a blanket assertion that the trial court “ignored competent evidence of record upon which it could have assigned a value to Plaintiff’s services based upon a percentage allocation of the contingency fee.”...

Of particular significance is Plaintiff’s failure to specifically challenge Finding of Fact No. 38. In that finding — as quoted above — the trial court determined that Plaintiff had “offered this Court no means to determine an amount of award pursuant to quantum meruit.”

Thus, in light of the fact that the trial court used the appropriate factors in evaluating Plaintiff’s quantum meruit claim and that Plaintiff has failed to specifically challenge any of the court’s findings of fact, we cannot say that the trial court abused its discretion in awarding Plaintiff the sum of one dollar.

(Mike Frisch)

April 4, 2017 in Billable Hours | Permalink | Comments (0)

Wednesday, March 29, 2017

The Burdens Of Law Firm Leadership

The Louisiana Attorney Disciplinary Board recommends a one-year suspension of an attorney who engaged in billing falsehoods over a three-year period.

As a member of a law firm, the Respondent generally billed on an hourly basis but on rare occasions had the opportunity to work on some cases on a contingency basis. The firm policy was to set hourly billing targets for attorneys with the firm at 1800 billable hours annually. Meeting or exceeding the annual billing targets established by the firm were factors taken into consideration for annual salary increases, bonuses, and/or promotion within the firm. 

From in or around 2012 through November 7, 2015, the Respondent internally recorded time entries and created receivables that were in part false and/or inflated. The Respondent self-reported his misconduct to the Office of Disciplinary Counsel by correspondence dated November 25, 2015. The Respondent’s law firm also reported Respondent’s conduct to ODC pursuant to the provisions of Rule 8.3(a).

The law firm reported to the Office of Disciplinary Counsel that its internal investigation was able to conclusively demonstrate that the Respondent submitted 428 entries which were classified as “certainly false” and an additional 220 entries that were “ reasonably certain to be false or inflated”. The Respondent’s conduct reflects violations of Rule 8.4(c) (conduct involving dishonesty, fraud, deceit and misrepresentation), and Rule 8.4(a) (violating or attempting to violate the Rules of Professional Conduct).

The attorney joined his firm in 1998 and rose to a leadership position.

The hearing committee was somewhat sympathetic

Finding Respondent’s testimony to be credible, it determined that Respondent engaged in misconduct due to his concerns that his accurate billable hour numbers were not commensurate with his leadership position within the firm, rather than any desire for direct financial gain. He submitted false and inflated billing for the purpose of making himself look good to enhance his opportunities for leadership positions and to ultimately become managing partner of the firm. As a member of the Board of Directors, the Respondent saw first-hand and on a monthly basis the extraordinary billable time and business dollars generated by key leaders of the firm. When his practice began to decline, Respondent gave in to his own internal pressures. He began to submit time on a dismissed contingency fee matter, and eventually on six other matters, in an effort to make himself look better “on paper” each month.

The Respondent received a discretionary bonus from the firm’s compensation committee for 2012, 2013, and 2014. While the testimony established that the legitimate hours billed by Respondent met and exceeded his billing targets in each of these years, he nonetheless fabricated billing entries.  The parties stipulated that due to his many contributions at the firm during that time period, the firm hypothesized that it was highly likely that Respondent would have received all or some of those merit bonuses even without the false inflation of his billable hours.  Still, the Committee recognized that testimony from firm members also supported the conclusion that the full amounts of the merit bonuses may not have been paid to the Respondent had his hours been accurately recorded.

He receives credit for time served on an interim suspension.

Pamela Carter concurred with reservations

One year suspension is inadequate in this matter where lawyer dishonesty is clear and unequivocal. There was continual intent on the part of Mr. Wallace for a period of three years. The firm’s investigation and conclusions that Mr. Wallace’s false entries were “reasonably certain” to be of a false nature is very telling. It is my opinion that the Board’s recommendation should also require that Mr. Wallace apply for reinstatement. There is no question that Mr. Wallace’s dishonesty was purposeful, calculated, done knowingly and intentional. Mr. Wallace deliberately inflated the amount of time recorded for the purpose of presenting to clients bills which reflected undisclosed premiums. Not discussed is the information in the record regarding Mr. Wallace’s violation of his supervisory duties, as a member of the firm (partner), and as a billing partner, even though the factual record is replete with evidence that he violated these rules. Mr. Wallace served as the firm's hiring partner, and was the head of recruiting.

Linda Bizzarro dissented

I don't believe a suspension of one year is sufficient to address the admitted, multiple instances of misconduct in this matter. Considering the number of false or inflated billing entries (428 confirmed, 200 "reasonably certain" to be false), the length of time Respondent repeated the intentional misconduct (3 years), and the amount of money involved in the scheme ($91,544 in false billing, $85,000 of bonus money voluntarily renounced), a one year suspension is inadequate. In my opinion the Board should adopt the Hearing Committee's sanction recommendation of one year and one day, which would require the Respondent to apply for reinstatement.

(Mike Frisch)

March 29, 2017 in Bar Discipline & Process, Billable Hours, Law Firms | Permalink | Comments (0)

Friday, March 24, 2017

No Right For Firms To Accept Outside Investments

An opinion issued today by the United States Court of Appeals for the Second Circuit

Plaintiffs‐Appellants Jacoby & Meyers, LLP, a limited liability law partnership,  and Jacoby & Meyers USA II, PLLC, a related professional limited liability company  (together, “plaintiffs” or “the J&M Firms”), challenge the constitutionality of a collection  of New York regulations and laws that together prevent for‐profit law firms from  accepting capital investment from non‐lawyers. The J&M Firms allege that, if they were allowed to accept outside investment, they would be able to—and would—improve their infrastructure and efficiency and as a result reduce their fees and serve more clients, including clients who might otherwise be unable to afford their services. By impeding them from reaching this goal, the J&M Firms contend, the state has unconstitutionally infringed their rights as lawyers to associate with clients and to access the courts—rights that are grounded, they argue, in the First Amendment. The District Court (Kaplan, J.) dismissed the complaint, concluding that the J&M Firms failed to state a claim for violation of any constitutional right and that, even if such rights as they claim were to be recognized, the challenged regulations withstand scrutiny because they are rationally related to a legitimate state interest. We agree that under prevailing law the J&M Firms do not enjoy a First Amendment right to association or petition as representatives of their clients’ interests; and that, even if they do allege some plausible entitlement, the challenged regulations do not impermissibly infringe upon any such rights. We therefore AFFIRM the District Court’s judgment.  

Through a set of prohibitions of long standing in New York and similar to those widely prevalent in the fifty states and the District of Columbia, the State of New York prohibits non‐attorneys from investing in law firms. See generally N.Y. State Bar Ass’n, Report of the Task Force on Nonlawyer Ownership, reprinted at 76 Alb. L. Rev. 865 (2013) (“NYSBA Report”). The prohibition is generally seen as helping to ensure the independence and ethical conduct of lawyers. See id. at 876‐77. Plaintiffs‐Appellants  Jacoby & Meyers, LLP, a limited liability partnership (the “LLP”), and Jacoby & Meyers USA II, PLLC, a related professional limited liability company (the “PLLC”; together,  “plaintiffs” or the “J&M Firms”) bring a putative class action challenging New York’s rules, regulations, and statutes prohibiting such investments. The infusions of additional capital that the regulations now prevent, they declare, would enable the J&M Firms to improve the quality of the legal services that they offer and at the same time to reduce their fees, expanding their ability to serve needy clients. They assert that, were they able to do so, they would act on that ability in the interests of such potential clients. Because the laws currently restrict their ability to accomplish those goals, they maintain, he state regime unlawfully interferes with their rights as lawyers to associate with clients and to access the courts—rights they see as grounded in the First Amendment.

Circuit Judge Susan Carney affirmed the district court disposition. (Mike Frisch)

March 24, 2017 in Billable Hours, Law & Business, Law Firms | Permalink | Comments (0)

Friday, March 10, 2017

Unethical Agreement Enforceable Against Attorney In D.C.

A memorandum opinion issued by Judge John Bates of the United States District Court for the District of Columbia denies a defendant attorney's motion to dismiss and addresses an unresolved issue of D.C. law with respect to fee-sharing agreements with non-attorneys

Allan Gerson, the defendant and an attorney, contracted with Zvi Shtauber, the plaintiff, for Shtauber to provide services to assist Gerson in a lawsuit. Their contract specified a fee-sharing arrangement, where Gerson would share with Shtauber a portion of any contingency fee he earned from the lawsuit. Shtauber alleges that Gerson failed to pay, and now sues for enforcement of that contract, or alternatively for recovery in quantum meruit, and for a declaratory judgment that he is entitled to a portion of Gerson’s fees in the future. Gerson moves to dismiss, arguing that the contract is unenforceable as contrary to public policy because a fee-sharing contract between a lawyer and a non lawyer violates the D.C. Rules of Professional Conduct, and that Shtauber cannot pursue a claim for quantum meruit when there is a contract between the parties. The Court will deny Gerson’s motion.

The court notes that many facts were not in dispute

In 2004, Gerson explored the possibility of suing Arab Bank and other financial institutions “on behalf of victims of genocide and terrorism in Israel and in territories administered by the Palestinian Authority.” Id. Gerson hired Shtauber to assist in the lawsuit. Id. ¶ 6. Shtauber, a resident of Israel, has experience in relevant fields of national security and has served as both the Foreign Policy Advisor to the Israeli Prime Minister and as Israel’s Ambassador to the United Kingdom. Id. Shtauber connected Gerson to an Israeli attorney, David Mena, to help litigate the case against Arab Bank, and provided additional “consulting services” in connection with Gerson’s suit. Id. ¶ 7. 

As to fee sharing

Gerson argues that the fee sharing arrangement is forbidden by the D.C. Rules of Professional Conduct (“Rules”) in effect at the time, and therefore is unenforceable as against public policy. Shtauber responds that the Agreement is not contrary to the Rules, but even if it is, it’s still enforceable.

The Agreement was signed in 2005. At the time, Rule 5.4(a) of the D.C. Rules of Professional Conduct stated: “A lawyer or law firm shall not share legal fees with a nonlawyer” and then provided four exceptions.  See also D.C. Code § 11-2501 (attorneys admitted to the D.C. bar are subject to the Rules). The first two exceptions concern payments to an attorney’s estate after death. The third exception states a “lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit sharing arrangement.” Rule 5.4(a)(3). The fourth states that fee sharing “is permitted in a partnership or other form of organization” that meets specified requirements, as laid out in Rule 5.4(b), for a nonlawyer to exercise managerial authority over the firm or have a financial interest in the firm. Id. 5.4(a)(4)...

Rule 5.4(a) clearly prohibits the fee sharing arrangement described here. The Agreement between Shtauber and Gerson states that “Dr. Shtauber’s fees under this Agreement shall be 20% of any and all contingent legal fees” due to the Gerson Group for claimants referred to them by Mena. Agreement ¶ 4. In addition to this arrangement being forbidden by the plain language of Rule 5.4(a), the D.C. Bar has issued an ethics opinion explicitly stating that “[a] payment by a lawyer to another person for the referral of legal business, which is contingent on the lawyer’s receipt of fees from the referred legal business and is tied to the amount of those fees” constitutes fee sharing that is prohibited by Rule 5.4(a). See D.C. Legal Ethics Op. 286 (1998). This does not describe the exact situation here: Shtauber is not being paid directly for referring clients, rather he is being paid a contingent fee with respect to clients referred to Gerson by another attorney, Mena. Nonetheless, Shtauber is being paid “for the referral of legal business” (through an intermediary) that is “contingent on [Gerson’s] receipt of fees from the referred legal business and is tied to the amount of those fees.” Thus the Agreement is likely covered by Ethics Opinion 286, in addition to being forbidden by the plain language Rule 5.4(a).

But the agreement is enforceable

This case raises an open question of District of Columbia law. In light of existing D.C. Court of Appeals precedent, this Court believes that although the Agreement violates the D.C. Rules of Professional Conduct, it is nonetheless enforceable in this particular instance. Moreover Shtauber may seek recovery in quantum meruit as an alternative to damages on the contract. 

The Bar ethics opinion cited is linked here. (Mike Frisch)

March 10, 2017 in Bar Discipline & Process, Billable Hours, Current Affairs | Permalink | Comments (0)