Legal Commentary

spotlight on greedy lawyers

By David A. Giacalone

?As recently as 1963, Everett Hughes wrote that the central feature of professionalism was a doctrine of credat emptor??let the buyer trust??rather than the commercial maxim of caveat emptor??let the buyer beware.? Society counts on the law, and on lawyers as its servants, to spread such feelings of trust through the community. Instead, too often, we help weaken them.?

- from Living the Law, Chapt 1. of Sol Linowitz?s The Betrayed Profession (1994), reprinted here (DCBA Brief, June 1999)

Thank goodness for especially greedy lawyers in high-profile lawsuits.  Judges reviewing their bloated bills occasionally make it into the industry press and give us the opportunity to remind lawyers that we really do have a ban on unreasonable fees and expense charges — we can’t agree on them, charge then, or collect them.   We also get to remind clients that “buyer be wary” is still a good idea in the 21st Century, no matter how saintly their lawyers may claim to be.  Here are a few recent matters that deserve the spotlight:

Coughlin Stoia follows Coke’s Lead: You’d think a law firm whose most famous partner had recently been imprisoned for shady practices that obstructed justice, would keep a modest posture when asking for fees in a major class action suit — especially in a case that accused the defendant of artificially inflating numbers to increase share prices.  Instead, as class counsel in Carpenters Health & Welfare Fund v. The Coca-Cola Co., No. 1:00-cv-2838 (N.D. Ga.), the Coughlin Stoia law firm sought fees valued at 26.04 percent of the $137.5 million settlement with Coca-Cola over stockholder fraud  — about $35,805,000 — as well as more than $7 million in expenses and interest.   Their request led U.S. District Court Judge Willis B. Hunt to worry that the requested fees amount to “a windfall rather than just compensation for class counsel’s hard work and risk.” See “Class Lawyers Against Coke Get More Than $31.5 Million: Judge cuts request from nearly $43 million” (Law.com/Fulton County Daily Report, November 21, 2008); and see Law and More (Nov. 21, 2008)

Judge Hunt, as reported at Law.com, “ultimately reduced percentage fees requested by counsel for the shareholders from 26.04 percent to 21 percent. He also trimmed more than $4 million from the lawyers’ submitted expenses.”  Here are some of the cuts Judge Hunt decided he needed to make:

• Class counsel claimed to have billed over 47,000 hours in the 8-year case, and their average hourly fee amounted to over $750 per hour.  Judge Hunt decided that such fees were “at the very high end of typical Atlanta rates” and needed to be reduced
• Moreover, the law firm claimed that only 1,411.74 hours were billed by the 11 associates assigned to the case whose hourly rates were $350 or less. Like the rest of us, Judge Hunt found it surprising that “only six percent of the work performed in this matter was of the type that could be performed by lower-level associates.”
• In disallowing more than $4 million in expenses claimed by Coughlin Stoia, Judge Hunt said that “Coughlin has not established that the amount claimed represent out-of-pocket expenses rather than what they would bill a client as an additional source of profit.”  For example, the judge disallowed about $94,000 claimed as an online legal research expens, saying, “the research service is a tool, much like a computer or a pen, and this Court considers the use of such a service part of a firm’s overhead.”
• Judge Hunt also slashed claimed travel expenses.  In addition to outlandish requests for travel abroad, Couglin Stoia wanted to be paid an average of $1,365.95 per person per night for domestic travel. Although he did not begrudge the lawyers’ high-end accommodations, Judge Hunt concluded that the members of the class should not have to finance such a lifestyle.  He found that “a client could reasonably expect to pay $300 per night for his attorney’s food and lodging on domestic trips, and that is the level at which this Court will reimburse Coughlin for its travel.”

How About Working for Those Millions? A month ago, at oral argument on the appeal of in Lawrence v. Miller (see our prior post), the judges of the New York Court of Appeals signalled that they might not be quite as nonchalant as the appellate-level judges and the contingency fee bar over the $43 million dollars sought by the Graubard Miller law firm from an 80-year-old widow for about 4 months’ work.  According to a lengthy article in New York Law Journal, ?N.Y. High Court Skeptical of $40 Million Payoff From Contingency Fee Deal? (Oct. 24, 2008; via Overlawyered.com):

?Members of the court appeared skeptical during an hour of oral arguments about the size of the fee and several questioned the propriety of Graubard Miller seeking to collect the entire amount.?

NYLJ notes, for example, that ?Judge Robert S. Smith echoed several of his colleagues when he wondered whether a legitimate contingency agreement, ?where it works out so favorably to the lawyer, where it is so much money for so little work,? could be considered unconscionable.?

“You never anticipated anything like this,” he told [Graubard Miller's lawyer Mark] Zauderer. “You anticipated a much smaller amount, much more work, much higher risk of recovery. This was a complete surprise. Are you still entitled to take 40 percent of a $100 million surprise?”

Similarly, an exasperated Chief Judge Judith S. Kaye repeatedly asked the firm’s lawyers to defend the fee — wondering what precisely the firm’s attorneys had done from January to May 2005 to justify the $40 million fee.  When Graubard’s counsel replied, “It had to do with skill and negotiating strategy and bluffing . . .  It had to do with a whole lot of factors,” and gave no further details, Chief Judge Kaye said:

“You’re not even giving us a clue. All you’re saying is ’skill’ and ‘risk.’ “

Prof. Yabut says: “Oh my, do you really mean there’s supposed to be a relationship between the risk taken and/or the amount of work you actually perform and the fee you collect?  A lawyer can’t just say, “a contract’s a contract?”  Who knew?

the mountain moon
gives the blossom thief
light

.. by Kobayashi Issa, translated by David G. Lanoue

Travel MultiTasking-MultiBilling: Finally, the refusal of a bankruptcy judge to pay a lawyer more than half the firm’s hourly fee for travel time (see In re Babcock & Wilson) inspired a discussion over at Legal Ethics Forum this past week on “Travel TIme and Billing.”  The comment section at the LEF post is not lunchtime reading for the sqeamish consumer advocate.  You’ll find lawyers justifying charging not just full hourly fees when traveling (which is commonplace), but double-dipping by charging the original client for travel time even if work is done for a different client, who is fully-billed for that time.  One lawyer doggedly wants to be paid both by the hour and by some “value” calculus, arguing that his work for the second client in no way diminished the value of his work for the first client (assuming, we suppose, that he was neither less prepared nor more-tired due to working for Client #2).  It caused me to chime in with this comment:

Full post as published by f/k/a . . . on November 21, 2008 (boomark / email).