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Weekly Wrap Up 12/16/2011

A collection of legal fee news from the past week…

Alternative Fees Being Considered by Washington Governor (The News Tribune) – Washington Governor Chris Gergoire’s administration is looking to cut costs, and legal bills racked up by sex offenders on McNeil Island have moved onto his radar. On average, the state government has been paying $39,000 a year in legal fees for the inmates. Even worse, the state does not even know how much each individual inmate’s legal costs were because attorneys were not required to itemize their bills until this year. Attorneys are currently being compensated at $85 / hr for their time with these cases. State officials are considering switching to flat contracted rates or hiring public defenders to ease the budgetary concerns.

Lawyer Sues Firm Claiming it Encouraged Billing Fraud (ABA Journal) – Former Associate Richard Unitan has filed an employment discrimination suit against his old firm of Adelson, Testan, Brundo & Jumunez in Van Nuys, California. Unitan is claiming that he was fired because he refused to engage in the practice of billing fraud. His suit alleges that the firms 3,000 hours/yr billing requirement forces associates to lie about their billing practices. He further alleges that the he was compelled to engage in unethical practices, such as charging two separate .1 increments of billing for receiving and sending short emails. Most firms limit their billing requirements to 2,100 billable hours. ( For consideration, a 3,000 hour requirement would mean billing slightly more than 8.2 hours 365 days a year).

Over 63% of Dodgers’ Bankruptcy Billing Sample Found to be Objectionable (Sterling Analytics) – On June 27, 2011, the Los Angeles Dodgers (“Dodgers”) filed for chapter 11 bankruptcy. In March 2011, Forbes magazine ranked the Dodgers as the world’s thirty-eighth most valuable sports team, valued at $800 million. The bankruptcy has generated millions of dollars in legal fees, a large portion of which, arguably, should not be compensable due to “improper” billing practices. Sterling Analytics, a legal cost consulting firm, audited a sample of the attorneys’ fees requested for compliance with precedent and ethical guidelines. $816,771.39 in fees and expenses were reviewed. The audit determined that $515,316.21, or 63.09%, of the charges were “improper.” The most significant objectionable charges related to block billing, multiple attorneys at meetings, false billing, vague billing, and billing at a high rate for attorneys overqualified for the task.

Startups Spending Most of Their Seed Money on Legal Fees – (Venture Beat) – A new study released by some of the top Silicon Valley law firms indicates that new startup businesses are spending approximately $80,000 on initial legal costs. Series A financing, which is the first round of financing undertaken by a new business after seed capital, is often exclusively for legal fees (patents and similar costs). All is not lost, however. Market data also indicates that startups are growing businesses at rates not seen in almost 5 years. Graphics are available at the link.

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