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JGT v. Ashbritt

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(Volume 1, Issue 26)

In 2011, a United States District Court Judge reduced an application for attorneys’ fees by over $2.2 million. This case involved the confirmation of an arbitration award which included payment of a percentage of the $3.1 million incurred in legal fees. After reviewing the “documentary backup” and finding inflated hourly rates and excessive and unreasonable hours, the court reduced the arbitration award by 70%.

The first example of “manifest error” observed by the court involved fees for work performed by two employees which amounted to over $20,000.  On the billing records these employees were not designated as paralegals, associates or partners. In response to this fee matter, they were identified as “a visiting foreign lawyer” and “a lawyer from Germany,” hired to perform legal work on this case during the summer of 2008. Since these employees were not admitted to the New York State Bar they could not bill as attorneys.  The court noted that absent any evidence of their admittance, they could only charge the prevailing hourly rate of legal interns or assistants in the District.  Billing at an attorney rate was unethical and manifest error. As a result, the court found a 30% reduction in the inflated fees to be appropriate.

The second instance of improper billing constituted “excessive, redundant, or otherwise unnecessary” fees which should not be awarded.  The billing documents presented to the court did not identify any of the work performed.  Under these circumstances the amount of duplicative or excessively billed hours is nearly impossible to discern.  However, the court was able to ascertain from the vague documentation that counsel sought to be compensated for more than 5,600 hours for an arbitration that lasted approximately 39 months. This claim equates to counsel devoting 7 hours a day, 5 days a week to this one matter. The court found that even with the vague and inadequate recordation of the work performed, the amount of attorneys’ fees sought was excessive. In order to bar hours that were excessive, and therefore unreasonable, the court reduced the claimed fees by 40%.

Implications for Legal Billing: As demonstrated by the facts in the above case, engaging in unethical billing practices can lead to a hefty reduction in claimed fees. In order to protect against attorney misconduct, legal bills should be carefully analyzed with respect to the individual performing the task, the time expended, and to ensure there is a thorough, accurate description of the work.  Attorneys should only bill at the prevailing hourly rate for others with comparable experience and skill in the relevant geographic location. Clearly, lawyers not admitted to practice in the jurisdiction cannot bill at the same hourly rate as an admitted partner or associate. In addition, any employee rendering services to a matter should provide adequate documentation so that a court can determine if the amount of time spent on a task is reasonable. Legal bills not in compliance with these basic billing practices represent a lack of billing judgment and are not entirely compensable.

*Szczepanek v. Dabek, 2011 WL 846193 (E.D.N.Y. 2011). Full copies of court decisions may be available through counsel or through various Internet links or paid services.

By Maria Miglino

JGT v. Ashbritt

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(Volume 1, Issue 25)

Pursuant to a subcontract agreement, the defendants, as prevailing parties in an action commenced against them, filed an application for reimbursement of attorneys’ fees and costs.  The defendants were represented by three law firms, all of which submitted billing records to support the fee request.  The defendants’ fee application requested approximately $230,000 in attorneys’ fees. The court significantly reduced this request, only awarding the defendants $58,826.16 in attorneys’ fees and costs.

The court first considered whether the defendants’ attorneys exercised billing judgment by writing off any “unproductive, excessive or redundant hours.”  The court found that a “considerable duplication of effort” existed in the billing records. In particular, the court identified four entries for participation in a conference call among the attorneys. As a result, the plaintiff was billed over $900 for this telephone conference.  Moreover, the hours recorded by each attorney for this phone call were inconsistent, making it “impossible for the court to determine the actual time attributable to the call.” As a result, the court eliminated the duplicative hours from the fee request.

The court further reduced the hours to account for time spent by attorneys performing paralegal functions. The court indicated that tasks such as investigation and compilation of facts and statistics can be performed by non-lawyers. Of course, a lawyer may perform tasks that do not require an attorney’s skill and knowledge. However, he or she should not be compensated at an attorney’s hourly rate for performing such tasks. Rather, the time spent on these tasks should be billed at a paralegal’s hourly rate.  Accordingly, the court concluded that 36.85 attorney hours should only be compensated at a paralegal rate. 

Furthermore, in deciding the costs for which the defendants should be reimbursed, the court stated that “overhead costs, or the normal expenses of doing business, are not reimbursable.”   Accordingly, the court disallowed costs for postage, messenger services, and fax transmissions. 

Implications for Legal Billing: Where multiple attorneys work on a case, duplication of tasks must be prevented.  Duplication can occur in instances where multiple attorneys work on the same task or, as this case demonstrates, where multiple attorneys attend the same meeting. If more than one attorney attends an interoffice meeting, only one attorney may bill the client for his or her time. The time spent by the other attorneys must be written off.  To do otherwise demonstrates a lack of billing judgment.

Attorneys should also reduce hourly rates where time is spent performing non-legal work. It is inappropriate to charge an attorney’s hourly rate for a task that does not require an attorney’s skill. If the task is one which a paralegal would typically perform, it should be charged at a paralegal rate. This is true even where an attorney performs the work. As noted by the court, “the dollar value of work performed is not enhanced just because a lawyer does it.”

Moreover, an attorney should not be reimbursed for overhead expenses. As indicated above, overhead expenses include postage, messenger and fax transmission charges.  These expenses are generally included in an attorney’s overhead cost. Therefore, an attorney is compensated for these costs through the hourly rate charged to the client.

*JGT v. Ashbritt, 2011 WL 1323410 (S.D. Miss. 2011). Full copies of court decisions may be available through counsel or through various Internet links or paid services.

By Laura R. Bugdin

Wade v. Colaner

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(Volume 1, Issue 24)

In Wade v. Colaner, the plaintiff sought $435,982.50 in attorneys’ fees for work performed by his pretrial and trial counsel in connection with a section 1983 lawsuit brought against a state trooper. After conducting a review of the billing records, the court only awarded the plaintiff approximately $189,000 of the requested attorneys’ fees. 

The plaintiff’s pre-trial counsel’s fee was reduced by more than half, deducting approximately $73,000 in fees. Contributing to this reduction was counsel’s use of fifteen minute billing increments and vague billing entries. Addressing counsel’s use of quarter-hour billing increments, the court stated that where the use of fifteen minute increments inflates the fees sought, a reduction is appropriate. The court identified numerous entries where the use of quarter-hour increments resulted in an unreasonable fee. For example, the plaintiff’s counsel billed three-quarters of an hour for leaving a voicemail message.

The court also reduced time for vagueness. The defendant objected to tasks described as “review file,” “org file,” and “review docs.” The court agreed with the defendant’s objections, finding that such entries are “too vague to allow for fee reimbursement.” Without additional information, the court could not determine whether such tasks were reasonable or in furtherance of the plaintiff’s case. As a result, the court deducted all vague entries from the fee request. In addition to the foregoing, the court reduced nearly nine hours for time spent in connection with media relations, finding that this type of work is typically performed at the attorney’s own expense.

Implications for Legal Billing: Quarter-hour billing increments are still used by some law firms and attorneys when billing clients. As demonstrated by this decision, some courts are reluctant to reimburse attorneys’ fees billed in this method. Fifteen minute increments can quickly inflate an attorney’s fee. For example, reviewing an email that may have taken five minutes is billed at fifteen minutes. This type of practice is clearly unreasonable and results in an excessive fee. Tenth-of-an-hour increments are more frequently used among lawyers. Billing in tenth-of-an-hour increments more accurately reflects the time actually spent performing a task. 

The use of vague descriptions in billing entries generally warrants a reduction in an attorney’s fee. This is especially true where is it completely unclear as to what task was performed by the attorney or staff.  Inadequate task descriptions make it impossible for the client or the court to determine the reasonableness of the time spent on a particular task. Moreover, vague task descriptions make it difficult to determine whether such tasks were either relevant or necessary to the case. An adequate entry would include the names of the documents that were reviewed so that a reasonable person could determine why the review was necessary. Additionally, the subject matter and  names of all participants of telephone conversations, emails, or correspondence should also be included in a time entry. The more detail that is provided, the more accurately the fee can be assessed for its reasonableness.

 

*Wade v. Colaner, 2010 WL 5479625 (D.N.J. 2010). Full copies of court decisions may be available through counsel or through various Internet links or paid services.

By Laura R. Bugdin

In re Great Atlantic

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(Volume 1, Issue 9)

Great Atlantic and Pacific Tea Company, Inc. is one of the nation’s first supermarket chains. On December 12, 2010, A&P filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court in the Southern District of New York. Sterling Analytics Group, a legal cost consulting firm, has reviewed some of the legal bills incurred as a result of A&P’s bankruptcy filing, totaling $863,572.36. From this audit, Sterling Analytics found $411,069.07, or 47.60% of the total billings, represented objectionable charges.

Vague Billing Entries: “Where billing records are vague, a reduction in fees is appropriate.” Green v. City of New York, 2009 WL 3088419 at 6 (E.D.N.Y. 2009). Vague billing is generally impermissible because it prevents both the client and the court from adequately understanding what work was performed by the attorney and whether the charges reasonably reflect the work described. A&P’s billings contained $49,349.00 in “vague” billing charges. For example, one such charge was “review status of items for court tomorrow.”

Multiple Attorneys at Meetings: A&P was charged $181,911.00, or 21.06% of the total objectionable charges, for the presence of multiple attorneys at meetings. This practice is generally unfair to the client because it results in the client being charged multiple times for work that can be performed by one attorney. Usually, only one attorney is needed at depositions, hearings and outside conferences. “In situations where more than one attorney attends a hearing or conference, there must be a showing that each attorney contributed to the hearing or conference.” In re New Boston Coke Corp., 299 B.R. 432, 445 (Bankr. E.D. Mich. 2003).

Attorney Overqualified for Task:  A client should be billed based on an hourly rate appropriate to the task being performed, not based on who is performing the task. “Regardless of whether work is performed by an attorney: Clerical work…should be compensated at a different rate from legal work.” Nationalist Movement v. Town of Jena, 2009 WL 840221 at 4 (W.D.La. 2009). The charges that represented attorneys’ billing who were overqualified for the task totaled $41,428.00. Items such as “retrieve new filings from A&P docket” should not have been billed at attorney rates.

Overhead: A lawyer may not separately charge for general office overhead expenses unless the client has agreed in advance to such charges in the retainer agreement. A&P was charged for overhead items such as “Westlaw” and “meals & entertainment,” among other charges. These charges constituted 4.3% of the total objectionable charges, or $37,160.07. See Ringcentral, Inc v. Quimby, 711 F. Supp.2d 1048, 1066 (N.D. Cal. 2010) (“The Court considers legal research fees, such as Westlaw fees, to be overhead and not properly considered costs that may be awarded”).

Billing for Long Days: Sterling Analytics found objectionable charges representing long billing days totaling $30,833.00. Billing double digit hours in one day, or for a period of days, is questionable and usually excessive. See Allen v. City of Los Angeles, 1995 WL 433720 at *8 (C.D. Cal. 1995) (“The court may reduce as excessive…claims of having worked an inordinate number of hours in a single day”). When an attorney bills such a high amount of hours it is unlikely that the attorney actually spent that entire amount of time performing the task or tasks described.

Billing for Billing: “Most lawyers do not bill their fee-paying clients for hours spent preparing bills.” Shorter v. Valley Bank & Trust Co., 678 F.Supp. 714, 725 (N.D. Ill. 1988). A&P was charged $17,550.50 for billing tasks, including “review December daynotes”. A client should not be billed for time spent maintaining or creating billing records, or for reviewing or discussing such records.

Overstaffing: “Using multiple attorneys in a simple case…poses the serious potential…for duplication of work or overstaffing.” Tucker v. City of New York, 704 F.Supp.2d 347, 355 (S.D.N.Y. 2010). The client should not have to pay for the work of multiple attorneys or paralegals where such work could be completed by one or a few. Charges for overstaffing totaled $42,728.50, or 4.95% of the total objectionable charges. For example, A&P was billed for three separate people to review one motion.

* In re The Great Atlantic & Pacific Tea Company, Inc., et al.

By Rachel Troiano

S.A. v. Patterson

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(Volume 1, Issue 23)

In a recent case, plaintiff moved for attorney’s fees and costs in the amount of $120,784.86 after prevailing in an action under the Individuals with Disabilities Education Act. After reviewing the billing records, the court determined that the plaintiff should only be awarded $65,803.50 in fees and costs. Overstaffing and block-billing contributed to the court’s determination to reduce the fee request by more than 45%.

In determining whether the hours expended by the plaintiff’s attorneys were excessive, duplicative, and unnecessary, the court first considered the staffing practices of the plaintiff’s attorneys in this case. The defendant argued that the use of three attorneys, one law clerk, and one paralegal was excessive and unreasonable. In particular, the defendant objected to the attendance of more than one attorney at a due process hearing. In response, the plaintiff argued that the attendance of more than one attorney was necessary for taking notes and keeping track of admitted evidence. However, the court found the plaintiff’s argument unpersuasive, stating that this time resulted in overstaffing. Furthermore, the court found that note taking is essentially a clerical function, stating that a paralegal or clerk could have completed this task at a lower hourly rate. As a result, the court deducted 21.6 hours from the fee request. 

The defendant also argued that the billing records contained block-billed attorney and paralegal time. The court’s review of the billing records revealed a number of entries that provided no indication as to how much time was spent on each particular task. Moreover, because the entries were identified by rate rather than by person, the court could not distinguish the time expended by the law clerk from the time expended by the paralegal. Since the law clerk and paralegal billed at the same hourly rate, the court could not ascertain whether certain tasks were completed by one person or multiple people. For example, the court identified 12.4 hours that were spent “gathering documents.” Because the billing records failed to identify the timekeeper by name, it was impossible for the court to determine whether the hours spent on this task “were performed by the same person or were performed by different people whose work overlapped and duplicated what another had already done.” Based on the lack of information provided, the court determined that the entries appeared duplicative and unnecessary. To account for block-billed and inadequately detailed time entries, the court deducted 65.6 hours from the fee request. 

Implications for Legal Billing: The attendance of more than one attorney at a court hearing must be justified. In other words, it must be demonstrated that the attendance of an additional attorney is necessary to the case. Clearly, the attendance of an additional attorney to perform clerical functions at a hearing cannot be justified. A law clerk or paralegal, billing at a lower hourly rate can easily perform such tasks. The unnecessary attendance of an additional attorney at a court hearing constitutes overstaffing and results in an excessive fee request. 

In order to constitute a reasonable fee, billing entries must be adequately detailed. As a result, the time spent on each particular task must be provided. Block-billed time entries, i.e., entries that lump together time spent on multiple tasks, are not sufficient. Moreover, the name of the timekeeper must also be provided. A determination as to whether time was reasonably expended cannot be made where the person performing the task is not identified. Obviously, the actual task being performed must be sufficiently detailed as to enable the client to determine exactly what task was performed, who performed the task and for what purpose it was performed. Anything less than the foregoing will be grounds for reduction of the fee or elimination of the inadequately described hours.

* S.A. v. Patterson Joint Unified School District, 2010 WL 3069204 (E.D. Cal. 2010). Full copies of court decisions may be available through counsel or through various Internet links or paid services.

By Laura R. Bugdin

Illinois Central v. Harried

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(Volume 1, Issue 22)

A district court in Mississippi determined that a law firm failed to exercise billing judgment when preparing a record of its client’s legal fees, and as a result, reduced the firm’s billable hours. After initially reviewing the law firm’s billing records, the court noted that the firm’s records were poorly organized in that they only contained each attorney’s daily time entries, while failing to provide any summaries that totaled the number of hours accumulated either by an individual attorney or any monthly totals. Instead, the firm only provided the final number of hours performed by all of the attorneys and paralegals for the full duration of the case. This would require the court to add up each individual time entry, spread out over hundreds of pages, in order to verify that the total number of hours billed for was correct.

After performing a general review of the firm’s legal bills, the court discovered an absence of billing judgment. The court defined billing judgment as an attorney’s writing off of hours that are unproductive, excessive or redundant. The court noted one such lapse when it found two attorneys billing time for reviewing the exact same document or attending the same deposition. The court deemed these entries to be redundant and further stated that the firm showed a lack of billing judgment. In addition, the court determined that there were multiple billing entries that were excessive in the amount of time spent performing the tasks described. The court cited an example of a paralegal who billed a half hour to review a docket sheet in order to determine the status of a motion. This entry alone appeared excessive, but then the same paralegal later recorded a full hour to again check the docket sheet for the status of the same motion. The court eventually reduced the law firm’s total billing hours from 5,731.7 hours to 3,000 hours, citing the firm’s lack of billing judgment as one of its primary reasons.

Implications for Legal Billing: It is immediately evident from this case that law firms can use both excessive and redundant billing methods to increase their clients’ legal bills. By assigning multiple attorneys to perform the same task, a law firm may try to bill the client twice for work that could have reasonably been performed by one person. In the example that the court used, multiple attorneys were billing the client for reviewing the same exact document. This could be an attempt at overstaffing, which can occur when a firm assigns extra attorneys to review work that was originally created by another attorney in the firm. Even if one attorney found something that another attorney missed, the firm would show a lack of billing judgment by charging the client for both attorneys’ examinations. This would be redundant work and it could also imply that one attorney’s work was unproductive.

Clients also need to be wary of time entries that are excessive in relation to the amount of time it should take an attorney to perform a task. Reviewing a docket sheet for an hour, or even a half hour, to determine a motion’s status is clearly an unnecessary amount of time to be spending on that task. The law firm should have known better than to bill for that full amount of time, even if it did allow its employee to spend their time this way. Billing judgment would dictate that any excessive amount of time spent by attorneys or paralegals attempting to perform a task should be excluded from the legal fees charged to the client.

* Illinois Central Railroad Co. v. Harried, 2011 WL 283925 (S.D. Miss. 2011). Full copies of court decisions may be available through counsel or through various Internet links or paid services.

By Michael Maher

In re Calpine

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(Volume 1, Issue 8 )

In December 2008, Bally Total Fitness filed for bankruptcy in the Southern District of New York. The law firm of Curtis, Mallet-Prevost, Colt and Mosle, LLP (“Curtis”), served as Conflicts Counsel for the debtors in the case. In total, Curtis submitted two fee applications amounting to $1,332,178.40. After reviewing Curtis’ first fee application, which totals $726,695.43, Sterling Analytics, a legal cost consulting firm, discovered that 58.07% of the billings were objectionable. Although the majority of the billings were arguably in violation of ethical standards, the bankruptcy court awarded all fees and costs requested by Curtis.

Block Billing: The largest percentage of objectionable charges fell into the category of block-billing. Nearly 17% ($122,095.00) of the billings submitted by Curtis represented block-billed time entries. Block-billing can be defined as time entries that lump several distinct tasks together without itemizing the time spent on each separate task. In re Mesa Air Group, Inc., 449 B.R. 441 (S.D.N.Y. 2011). By engaging in the practice of block-billing, the timekeeper makes it difficult, if not impossible, for a reviewer to determine the amount of time spent on each task and whether the time spent was reasonable. In re Green, 422 B.R. 469, 477 (S.D.N.Y. 2010); In re Hirsch, 2008 WL 5234057 at *5 (Dec. 11, 2008 E.D.N.Y.). As a result, the use of this practice typically justifies a reduction in an attorney’s request for legal fees. See In re Kohl, 421 B.R. 115, 128-29 (S.D.N.Y. 2009); In re Browntree, LLC, 2009 WL 2843278 (Aug. 28, 2009 E.D.N.Y.) (reducing block-billed time entries by fifty percent). Individually billed tasks are preferred and generally required in order to discourage counsel from “inflat[ing] the actual time spent and group[ing] multiple tasks together hoping to camouflage the true length of an individual task.” In re Hirsch, 2008 WL 5234057 at *6 (Dec. 11, 2008 E.D.N.Y.). 

Multiple Attorneys at Meetings: More than 15% ($122,568.00) of the billings contained multiple attorneys attending the same hearing, outside conference or intra-office conference. Generally, the attendance of more than one attorney at a court conference, deposition, or outside conference results in an excessive fee. Grievson v. Rochester Psychiatric Center, 2010 WL 3894983 at *11 (Sept. 30, 2010 W.D.N.Y.) (finding that the attendance of three attorneys at a court hearing is excessive); Marisol A. v. Giuliani, 111 F. Supp. 2d. 381, 395 (S.D.N.Y. 2000) (“Having seven attorneys present at one court conference and billing time for each of those present is unreasonable.”). This is because this type of work can typically be performed by one attorney. Curtis’ billing records contain numerous instances where more than one attorney attended, and billed for participating in, the same court conference. For example, two attorneys billed for preparing for and attending a first day hearing in the case. One of the attorneys, who bills at an hourly rate of $785, spent 3.8 hours preparing for and attending the hearing. The other, who bills at an hourly rate of $675, billed 2.8 hours preparing for and attending the first day hearing. Therefore, the client was charged more than $4,800 for a court conference that presumably took less than three hours. 

Additionally, intra-office conferences should generally be billed by only one of the participants. Where each attorney bills for his or her time in an office conference, the fees quickly escalate. For example, instead of being charged for the time of one attorney at a one hour office meeting, the client is being charged for the time of three attorneys at that meeting. This is generally an unreasonable practice and the courts have agreed. See, e.g., Grievson v. Rochester Psychiatric Center, 746 F.Supp.2d 454, 468 (Sept. 30, 2010 W.D.N.Y.) Generally, where more than one attorney bills for his or her time spent in the same meeting, the time must be justified by providing the client with an adequate explanation of each attorney’s role in the meeting. In re Bennett Funding Group, Inc., 213 B.R. 234, 245 (N.D.N.Y. 1997).

False Billing: Alarmingly, nearly $100,000 of the objectionable charges represented “false” billing practices. The “false” billing objections mainly resulted from two attorneys billing for attending the same meeting, each recording inconsistent times spent in the meeting. Although many of the discrepancies were between 6 and 12 minutes, some time entries were actually doubled. For example, one attorney billed 18 minutes for attending an office meeting while the other billed 36 minutes for the same meeting. This practice is highly unethical. See Model Rules of Professional Conduct 1.5. It is possible that the inconsistencies were recorded without intending to be deceitful or dishonest. However, where an attorney cannot recall how long a particular meeting took, he or she should communicate with the other participating attorney to determine the most accurate time.

Overhead Charges: Curtis charged more than $41,000 in costs that are typically considered overhead. Overhead is defined as the costs and expenses typically associated with maintaining and operating a law firm. Overhead costs are not reimbursable by the law firm at the client’s expense. Law firms are compensated for such expenses through the hourly rates charged by the attorneys and paralegals. The following are just a few examples of objectionable charges that were found while conducting a review of the records:  approximately $500 in meal charges (Tatum v. City of New York, 2010 WL 334975 at *13 (Jan. 28, 2010 S.D.N.Y.) (“[M]eals that are not required by out-of-town travel are not compensable.”)); approximately $5,800 in word processing charges; and more than $31,000 in computerized research charges (S.E.C. v. Goren, 272 F.Supp.2d 202, 214 (E.D.N.Y. 2003) (refusing to award $18,000 for Lexis and Westlaw charges)).   

Overqualified for Task: Nearly $30,000 of the objectionable charges resulted from professionals performing tasks which they were overqualified to perform. Typically, professionals who perform clerical tasks should not charge their clients for that time or, at the very least, bill their clients at a reduced hourly rate. Tatum v. City of New York, 2010 WL 334975 at *9 (Jan. 28, 2010 S.D.N.Y.) Curtis billed $323 for organizing a file. Courts have frequently held that organizing is a clerical task that is included in the firm’s overhead and, therefore, is not compensable. In re Hudson, 364 B.R. 875, 881 (N.D.N.Y. 2007) (“The court considers administrative activities, photocopying, organizing documents, etc. clerical tasks included in a firm’s overhead rather than services of a legal nature.”). Moreover, countless hours were spent “compiling” and “assembling” documents. Such time should have never been billed to the client. Id. at 881 (“Assembling and photocopying exhibits is something the court considers clerical in nature.”). 

In addition to clerical tasks, some of the entries were objected to because the billing attorney charged his or her full hourly rate for time spent traveling. Courts will typically allow attorneys to be compensated for travel time, but at half of the attorney’s normal hourly rate. Gonzalez v. Bratton, 147 F.Supp.2d 180, 213 (S.D.N.Y. 2001) (reducing travel time by 50%); But See Tatum v. City of New York, 2010 WL 334975 at *8 (Jan. 28, 2010 S.D.N.Y.) (declining to award fees associated with travel time, finding that clients generally resist paying for such time). Moreover, it is important to note that where the billing attorney is performing legal services during travel, courts will allow such time to be billed at the full rate. 

* In Bally Total Fitness of Greater New York, Inc., et al.

By Laura R. Bugdin

Ringcentral v. Quimby

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(Volume 1, Issue 21)

In 2010, a United States District Court Judge denied certain costs related to a claim brought under the Lanham Act. The prevailing party sought compensation for $1,619.26 in incurred costs.  After finding that many of these items should have been absorbed into the firm’s overhead, the court denied $827.47 worth of charges. 

The prevailing party in a Lanham Act claim is entitled to compensation for costs.  In this case, the plaintiff was successful on its claim and submitted costs related to service of process, research fees and various invoices for additional expenses like postage, travel and long distance telephone charges.  The court considered each of the costs presented and found approximately half to be improper and non-compensable.  The plaintiff requested $675.70 for Westlaw legal research charges which the court considered to be overhead and “not properly considered costs that may be awarded.”  The $81.83 in long distance telephone charges were similarly denied as a cost that should actually be considered overhead and absorbed by the firm.  Finally, the court rejected the plaintiff’s request for travel expenses and stated that the cost of travel is “generally not a recoverable cost.”  As a result of these improperly submitted expenditures, the attorney’s incurred costs were denied by more than half.  The remaining costs were awarded to the plaintiff’s attorney “to the extent reasonably required and actually incurred.”  Filing fees and fees for service of process are required costs associated with the case and are therefore proper costs, worthy of compensation. 

Implications for Legal Billing: Attorneys’ fees for handling a legal matter generally encompass more than just hours spent reading, writing and analyzing the law.  There are also miscellaneous costs incurred, some of which are compensable and some of which are considered overhead costs that should be absorbed by the law firm. In order to avoid paying for costs incurred by a retained firm that are considered overhead costs, a client should implement specific guidelines that itemize those costs that are properly reimbursable and those that are considered overhead and non-compensable.  As stated by the court in the above case, legal research charges, long distance telephone calls and travel expenses are examples of overhead charges that should not be passed on to a client.  The court also highlights those expenses that are properly included as reimbursable costs, such as filing fees, delivery of documents to the court and service of process fees.  Since these items are necessary to the underlying case, their cost can be ethically passed along to a client.  Guidelines that enumerate compensable costs and non-compensable overhead items will help determine the costs for which a client is ultimately responsible.

* Ringcentral Inc. v. Quimby, 711 F. Supp.2d (N.D. Cal. 2010). Full copies of court decisions may be available through counsel or through various Internet links or paid services.

By Maria Miglino

Orme v. Burlington Coat Factory

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(Volume 1, Issue 20)

Recently, a District Court in Oregon reduced a plaintiff’s fee request by over $48,000.  Part of this reduction was based on the attorney’s billing of clerical and administrative tasks.  Specifically, the court deducted 79.7 hours representing purely clerical tasks from the fees requested.

In this case, the plaintiff submitted a fee application seeking over $160,000 in legal fees.  In objecting to this application, the defendants identified 169 billing entries that were clerical in nature.  In response, the plaintiff argued that tasks for secretarial time should be considered in determining an award for attorneys’ fees.  The court rejected this argument. Typically, costs associated with clerical or administrative tasks are “considered overhead expenses reflected in an attorney’s hourly billing rate, and are not properly reimbursable.”  However, when it can be demonstrated that overhead expenses are distinct from the hourly rate, courts will compute overhead costs into the fee award.  The court noted that the plaintiff’s attorney made “no argument . . . that his billing practices remove such overhead costs from his own hourly rate in order to capture them separately.”  Furthermore, “[t]he standard presumption . . . strongly suggests that overhead costs are already captured in the reasonable hourly rate.”  In other words, unless the evidence proves otherwise, courts will find that costs and fees for clerical tasks are included in an attorney’s hourly rate and are not separately recoverable.

Implications for Legal Billing It is well established that time expended for clerical tasks should not be charged to the client.  This is true even where an attorney or a paralegal is performing the task.  Moreover, in most cases, it is not permissible to bill clients for clerical tasks at a lower hourly rate.  Simply, these types of tasks are recognized as overhead and should not be billed for at all.

It should be noted that there may be special circumstances where time for clerical or administrative tasks can be billed to a client.  For instance, in some law firms, especially smaller ones, it may be customary for an attorney or paralegal to serve legal documents or file legal papers with court clerks.  Billing a client for this time will most likely be permitted even though some larger firms would have secretarial staff handle tasks of this nature.  However, there are a number of tasks which are universally held to be purely clerical and under no circumstances should the time spent performing these tasks be billed to the client.  These types of tasks include, among other things, time for photocopying, scanning, mailing, and office filing.  Time spent for these tasks should be contemplated by an attorney when determining his or her hourly rate.

* Orme v. Burlington Coat Factory, 2010 WL 1838740 (D. Or. 2010). Full copies of court decisions may be available through counsel or through various Internet links or paid services.

By Laura R. Bugdin

In re Calpine

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(Volume 1, Issue 7)

In December of 2005, Fortune 500 power company, Calpine Corporation, filed for chapter 11 bankruptcy.  After a little over two years Calpine emerged from the restructuring in January 2008. During the bankruptcy, the law firm for the creditor committee requested over $20 million in legal fees and expenses. Of this total, Sterling Analytics, a legal cost consulting firm, reviewed $2.35 million in charges for compliance with legal precedent and ethical standards. Upon completion of this legal audit it was determined that $894,000, or 38%, of the charges were objectionable.  The most significant objections related to false billing, multiple attorneys at meetings, block billing, billing for long days, billing at a high rate for attorneys overqualified for task and vague billing entries.

False Billing: In the reviewed bills there were a total of $379,541 of objectionable “false” billing charges. These potentially “false” entries were evidenced by two attorneys billing for the same line item but recording different time. For example, one attorney would bill a conference at 2.5 hours and another would bill the same conference at 1.0 hour. This happened numerous times throughout the bankruptcy bills. “False” billing is a clearly impermissible billing practice because it violates ethical rules. See Model Rules of Professional Conduct 1.5.

Multiple Attorneys at Meetings: Our review of the legal bills also found $185,412 in objectionable charges related to multiple attorneys at depositions, intraoffice conferences and hearings. This billing practice is generally unfair to the client because it results in charging multiple times for work that could be performed by one attorney. Bankruptcy courts have held that one only attorney should be used in these situations. See In re Dimas, LLC, 357 B.R. 563, 579 (Bankr. N.D. Cal. 2006) (“Normally, it is appropriate for only one attorney from a firm to attend a meeting, conference, or hearing.”).

Block Billing: $106,577 of the reviewed charges represented “impermissible” block billing.  Block billing is the practice of lumping charges together rather than separately charging for each task. Block billing prevents that client from understanding how much time was dedicated to each individual task and whether each task reflected compensable work.  Bankruptcy courts often reduce attorneys’ fee requests due to block billing. See In re Baker, 374 B.R. 489 (E.D.N.Y. 2007) (reducing entire bill by 20% due to improper block billing); In re New Towne Development Group, LLC, 2010 WL 1451480, at *5 (Bankr. M.D. La. 2010) (reducing fees by one-half for all lumped billing entries).

Billing for Long Days: Billing for double digit hours in one day is questionable and usually excessive. In the reviewed bills, $92,286 represented charges exceeding 10 hours a day. These included charges of up to 12.4 hours in one day and 56.9 hours over the course of 5 days. Bankruptcy courts have reduced attorney fee requests due to billing for long days. See In re New Boston Coke Corp., 299 B.R. 432, 448 (Bankr. E.D. Mich. 2003) (“Except in unusual circumstances it is not realistic for an attorney to bill in excess of six to seven hours per day . . . . While it is certainly possible that an attorney could bill ten-, nineteen- or twenty-hour days, it is unlikely that all of that billed time is compensable.”)

Billing for Attorneys Overqualified for Task:  Hourly rates should be appropriate to the task being performed, not who is performing the task. Therefore if an attorney is overqualified for the task being billed, the task should only be compensated at the hourly rate appropriate for that task and not at the attorney’s full hourly rate. Courts have held that is unethical for attorneys to bill at their full rate for non-legal services. See In re Towns, 75 A.D.3d 93 (App. Div. 3rd Dep’t 2010). Of the reviewed bills it was determined that $65,964 in charges were billed at an “improper” rate for the task. A particularly egregious example was a partner billing at a $725 hourly rate for “review and organize project summaries”.

Vague Billing Entries: Vague entries are arguably impermissible because they prevent the client from adequately understanding what work was performed. $65,964 of the reviewed charges were “overly vague.” Examples of such “vague” entries in the Calpine bankruptcy bills include “research”, “emails” and “respond to inquiries”.  Billings containing vague entries are “routinely disallowed” by bankruptcy courts. In re Hirsch, 2008 WL 5234057, at *7 (Bankr. E.D.N.Y. 2008).

* In re Calpine Corporation, et al.

By Nicholas Paslow