DLA Piper Settles $22.5M Suit Over Accused Overbilling of Legal Bills

Posted on August 20th, 2014 by Legal Fee Advisors

The well renowned law firm DLA Piper has reached a confidential settlement in its highly controversial suit stemming from unpaid legal fees. Adam H. Victor, an energy industry executive, was sued by DLA Piper for not paying a portion of his legal bills in the amount of $675,000, which he claimed were excessive. In response, Victor filed a highly publicized counterclaim for fraud and punitive damages of $22.5 million (1 percent of DLA’s revenue from last year), accusing the firm of a “sweeping practice of overbilling.”[1] The counterclaim emphasized that the firm willfully ran up the legal bills by overstaffing assignments, performing needless tasks, and assigning junior attorneys to do high level work.

The case hinged on lawyers’ e-mails which discussed overbilling the client by using phrases such as “churn that bill, baby!” and “that bill shall know no limits” to describe their work on the matter.[2] “Churning” or “bill padding” refers to the deliberate inflation of legal fees by performing superfluous tasks which is a deceptive and unethical means to increase legal fees. These e-mails proved to serve as the ammunition Victor needed to ultimately succeed in his battle against DLA Piper.

Despite the confidential settlement, DLA Piper released an internal memo to DLA lawyers which stated that “[t]he emails were in fact an offensive and inexcusable effort at humor, but in no way reflect actual excessive billing. Instead, the reality of the matter is that the amount of fees billed by DLA Piper are consistent with the work performed.” The memo also goes on to state that the “bills and billing practices undergo the most sophisticated reviews and audits by clients who employ such techniques as a standard practice in connection with outside counsel billings.” A spokesman for DLA Piper also stated in a separate statement that “[i]t is unfortunate that the unprofessional behavior of these lawyers by writing those e-mails has distracted attention away from the fact that a client refused to pay his bills.”

This case likely reinforces a perception that some law firms may engage in the corrupt practice of inflating legal bills by performing unnecessary tasks. It also highlights the grim reality that overbilling is indeed a major problem which is often times difficult to prove. Furthermore, the lack of adequate oversight certainly seems to be a relevant factor contributing to this ruthless practice. There is a perfectly good solution to prevent overbilling from happening in the first place. In order to avoid becoming a victim of overbilling, those who employ law firms and other billable hour professionals can take affirmative action by engaging a team of highly skilled legal fee auditors to institute clear, concise billing guidelines to promote greater transparency and conduct ongoing monitoring of compliance of legal bills as they are submitted, with those guidelines.

A. Vays

Legal Fee Advisors © 2014

[1] DLA Piper LLP v. Adam Victor, Index No. 650374/2012 (Sup. Ct. N.Y. Co.)

[2]Id.