Inflating the fees
BigLaw firm gets caught in mocking a client about the fees the firm is charging, and get sued. DLA Piper, the world’s largest law firm was representing a client, Mr. Victor, in a potential bankruptcy of one of his companies. The fees started and never quit. Victor asked about the size of the bills, and the number of new lawyers working on the case, the lead lawyers working the case started mocking him. “I hear we are 200k over our estimate – that’s Team DLA Piper” and “churn that bill, baby” emails made their way around the office.
Once DLA Piper filed suit for $675,000 in past due fees, Victor counter-sued for the “sweeping practice of overbilling.” He got the emails described in his discovery request, along with 250,000 pages of other stuff created in the case. Victor amended his complaint, added fraud and punitive damages request of $22.5M.
Don’t mock your clients, or overbill. And be careful even joking about billing in an email or other discoverable method.
Losing Half the Billing on a Big Case
The plaintiffs lawyers had a good deal, they thought. 12 law firms came together to file a class action suit against LivingSocial, a daily deal online marketing group. The issue was expired deals, a customer buys a deal, pays for it and the deal expires before it is used. The question is who gets the money?
46 lawyers worked on the case, and the lawyers and their paralegals racked up over 4,000 hours. The fee request was $3M. That is only $750 per hour across the board. LivingSocial did not object, but Federal Judge Ellen Huvelle in DC did the math, asked a bunch of questions and wrote a 39 page opinion that decided that the lawyers should not get that much money, and criticized lots of what they did and did not do.
Judgge Huvelle said they would have to make due with only $1.35M and leave the other $2.65M in the pot for the class members.
How much is a name worth?
For Stan Chesley, he thought his name as a “the godfather of the modern class-action lawsuit” ought to get him something extra. His fee was only $20M on a $200M case. The phen-fen cases in KY are now notorious, and Chesley’s matter is not the worst. He got disbarred in KY (his home is Ohio, and what they do is yet to be determined) for an unreasonable fee in the case.
The Court said “his professed ignorance and lack of responsibility for any aspect of the litigation except showing up…” argued against a large fee. Also, the clients signed up for a 1/3 contingency, but the lawyers had charged 49%. Chesley was to get about $14M if he deserved any fee, but he still charged $20M.
Two lawyers in the case have gone to prison for swindling their clients out of $94M of the settlement funds. Their sentences – 20-25 years.
H/T John Conlon
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