Whether a $1,000 an Hour for a Lawyer is Reasonable Depends on Whether You Need a Cadillac Escalade or a Honda Civic

“[T]he Court’s review of Sheppard Mullin’s bills suggests that the Beastie Boys opted to pay for, and received, the Cadillac Escalade, not the Honda Civic.” Beastie Boys v. Monster Energy Co., 112 F. Supp. 3d 31  (Dist. Court, SD New York 2015).

A D.C. lawyer recently asked me if I thought $1,000 an hour for a lawyer was reasonable. Being a lawyer myself, I gave him a lawyerly answer that “it depends.”

I’ve written posts before in this blog about $1,000 and even $2,000 an hour lawyers.  As I stated in one of those prior posts, an “expert” who consults on litigation management issues with corporations (who are the ones who mainly hire the $1,000 and $2,000 an hour lawyers) told me that lower rates are actually viewed as a negative by large corporations. Apparently very good $500 an hour lawyers are not looked at in the same favorable way that mediocre $1,000 lawyers are simply based upon their hourly billing rates.

But what corporations (or high net worth individuals) pay their lawyers is their business. Where it becomes someone else’s business is when that someone else is asked to pay for another’s lawyers’ bills such as in the Beastie Boys case. There the court did what every other court does when asked to decide on appropriate hourly rates or whether the work performed during the course of a representation was appropriate, they look to what was “reasonable” to do under the circumstances.

And notwithstanding the “vanity” factor of using $1,000 (or $2,000) an hour lawyers versus using $500 an hour (or cheaper) lawyers, I will concede there are those cases when using $1,000 or even $2,000 an hour lawyers is the reasonable thing to do. Such a case might be the so-called “bet the company” type of case where an adverse verdict could have catastrophic consequences for a company.

But even in a “bet the company” type of case, it really is not so much a matter of a firm’s hourly rates as it is the overall capacity of the firm in terms of depth and breadth to be able to competently handle the case.  Would it surprise anyone to know that larger firms (with higher billing rates) generally have more capacity to handle the larger and more complex cases than do smaller boutique firms (with lower billing rates)?

But as the old saying goes, “saying something is so doesn’t make it so.” That is, just saying you have a “bet the company” or some other type of complex case is not enough. You must to be able to adequately demonstrate to a court why it was that you chose a firm with higher billing rates and opted “to pay for a limousine when a sedan could have done the job.”  See Simmons v. New York City Transit Authority, 575 F.3d 170 (2d Cir. 2009)

Finally, as I have stated before, I find it amusing, if not ironic that many in the corporate legal community are at the forefront of the movement to move from hourly fee agreements to alternative fee agreements as if using AFAs will magically lower their legal costs.   I have a message for those in the corporate legal community who are pushing AFAs as a way to save on legal costs:   just do a better job in finding those firms that can produce a good result for less money. And, oh yes, do a better job in auditing your legal bills before you pay them!

 

Why Insureds May Win COVID-19 Claims Coverage Cases.

Media reports are that many businesses and non-profits are looking to their insurers for “business interruption” and other coverages due to the COVID-19 pandemic. At first blush, it would appear that these claims for coverage face an uphill battle based upon what might be termed clear policy language (specially manuscripted policies notwithstanding).

But it would be premature for the insurance industry to declare victory on the coverage issues. For if history is any guide, policyholders may win most of the coverage cases.

Mr prediction is based on the insurance industry’s experience in litigating various policy issues for environmental claims coverage 30 years ago. As a former Director of Environmental Claim for two insurers during the environmental claims coverage wars, I witnessed first hand how clear and otherwise unambiguous policy language did not save the insurance industry by and large from having to provide coverage for environmental claims and their massive clean-up costs. Continue reading

It’s Deja Vu All Over Again As COVID-19 Presents Law Firms With Same Financial Issues Faced During The Great Recession

With almost daily report of law firm layoffs and/or reductions in compensation, it looks like the COVIS-19 pandemic is going to have the same effect on the financial health of the legal industry as did the Great Recession in 2007-2009.  And if what happened in the Great Recession is any indicator, law firm clients will need to scrutinize more closely their legal bills.

One reason for closer scrutiny is because of what happened in the Great Recession with regards to staffing cuts. In the Great Recession, the support staff rather than attorneys bore the brunt of law firm cutbacks. This was because law firms were reluctant to let go of the attorney talent they worked so hard to attract and invested so much to develop. So the only other place to turn for savings in a labor intensive business is to support staff.

As I have blogged about before, cutting back support staff and increasing the ratio of attorneys to support staff will save law firms money. But, it also almost invariably means increased costs for law firm clients. Continue reading

How To Discuss Fee Bill Issues With Your Lawyer – Part IV: The Nuclear Option

[This is the fourth and final post in a series of posts on how to discuss and resolve fee bill disputes with your lawyer. If you have not done so already, it is a good idea to read the first three posts in this series.]

Invariably, whenever I write a post about a lawyer getting disciplined for an ethics violation involving fee billing, I will get emails. Mostly from individuals with comments or questions about lawyer discipline. And so it was that after my post about an lawyer who got a six month suspension for overbilling, I received emails from individuals with questions on the disciplinary process for lawyers.

Some of the most frequent questions I am asked are how to go about filing a complaint (and if a lawyer is needed to file the complaint), will the disciplinary agency get my money back or get my lawyer to answer my questions (or do whatever it is they want the lawyer to do), and can my lawyer retaliate against me (or file a suit against me for slander) if my complaint is dismissed? So with this the fourth and final post in this series, I would like to answer these questions and share the basics of filing a disciplinary complaint against a lawyer. Continue reading

How To Discuss Fee Bill Issues With Your Lawyer – Part III

[This is the third post in a series on how to discuss fee bill disputes with your lawyer. If you have not done so already, it is a good idea to read the first two posts in this series as they detail steps that should be taken before getting to the point where the additional steps outlined in the post should be considered.]

In my last post in this series, I ended with the assumption that communications with your lawyer and/or the firm’s managing partner or other partners in the firm failed to resolve the billing issues.  In this post I will discuss what additional steps may be taken to resolve the billing issues once direct communication has not worked or has broken down. Continue reading

Overbilling Lawyer Gets Support From Her Overbilled Clients

Making the rounds of legal publications last month was a story about an attorney in MA who was suspended for 6 months for overbilling her clients by 450 hours. According to the facts set out in IN RE: DOREEN ZANKOWSKI , the attorney claimed to have worked an incredible 3,893 hours in one year. This included 3,173 billable and 720 non-billable hours.

And according the Opinion, in addition to inflating her own hours, the time billed to clients by associates who worked under her was also inflated. However, there was no word in the Opinion as to what was done with the associates who were aware that their time was being inflated.

In reading the unusually long 42 page Opinion, something strange caught my eye. Continue reading

Googling To Find Out If Your Attorney Uses Form Documents

In a prior blog post entitled “The ‘Does Anyone Have A Form That I Could Use’ Practice Section,” I poked gentle fun at a state bar practice section I belong to because most of the posts on the section listserve were from attorneys asking other attorneys if anyone had a particular form document that the inquiring attorney could use. Due to the volume of such requests, I had found it both amusing as well as telling that an awful lot of what attorneys do in most any practice area has to do with using forms.

And it seems that you no longer have to ask a fellow attorney for a form. You can just Google the name of a Motion or other type of legal document and you often will find a form. I have done this countless number times when reviewing legal bills from attorneys throughout the U.S.

Recently I had occasion to look up a Notice of Motion and Motion to Compel Testimony and Production of Documents in California. I suspected that the document the attorney billed 2 hours to prepare was a form document. So I Googled it, and sure enough I was taken to a form document. This form document not only had the basic form Notice and Motion, but it also had the argument for the attorney to use in support of the Motion including the supporting case authority. Comparing the attorney’s Motion with the form Motion, I could see that 90% of what was in the attorney’s Motion was in the form Motion. And the 10% the attorney had added did not take 2 hours. Continue reading

E-billing “Rules Engines:” They Work All of the Time Some of the Time

I’m going to write about something that many attorneys whose clients require them to submit their legal bills through e-billing programs already know. E-billing rules engines supposedly programmed to automatically spot and take deductions in legal invoices for violations of a company’s billing guidelines often do not work as advertised.

And when I say e-billing rules engines do not often work “as advertised,” I am talking about how e-billing companies promote the use of their rules engines.  As one e-billing company puts it on their website, “[Name of rules engine] automatically reviews, validates, flags, and adjusts line-item invoice charges to comply with billing guidelines.”

Wow! No human involvement needed. Just push a few buttons and sit back and reap the savings. Sounds incredible doesn’t it? Continue reading