How much is too much when it comes to Billing for Temporary Lawyers?

Posted on January 15th, 2014 by Legal Fee Advisors

A Law Blog by Jacob Gershman entitled The Am Roundup: Dispute over Cost of Temp-Help Lawyers, discusses the practice of law firms hiking up the billable hour rate of temporary legal help in class action suits.  The blog demonstrates just how easy it is for lawyers to stretch their billable rates when complicated litigations are at stake, such as securities class actions involving big corporations and financial institutions.  The question: Is it fair?

Not all may think so. Attorneys for a group of plaintiffs sued Citigroup involving a class action suit settlement. Plaintiff’s attorneys are seeking nearly 100 million in attorneys’ fees as a part of the proposed settlement between Citigroup and its investors.  That amount represents 16.5% of the 590 million total settlement.  The plaintiffs intend to bill their clients as much as $550 an hour for temp contract lawyers reviewing massive amounts of documents in the case.  The problem is the plaintiffs’ firm paid no more than $60 to $70 an hour for this work which was mostly routine. The profit sought is, arguably, huge.

Law firms frequently hire “contract” lawyers directly or through staffing agencies, commonly paying between $50 and $80 an hour.  Some argue that the firms should be passing on the savings to their clients, instead of taking huge profits.  The blog discusses the reasonableness of this kind of fee billing so long as the work is considered “legal” rather than as an “expense.” While some legal ethics experts have proclaimed that circumstances may justify a markup, the question is just how much.  A partner in the firm Kirby McInerney who billed the fees, argued that fees that are charged in excess of what the firm actually paid for them is to “cover overhead and have a profit built in.”  The plaintiffs’ argued that the work required an understanding of “sophisticated financial structures and concepts.”  In excess of 61,000 hours were billed. Of course, the counter argument is that such work could not be that “sophisticated” if performed by temp attorneys, or was a typical document review requiring no special expertise.  The judge in the matter focused on “what a reasonable client would pay.”

The lesson here seems almost obvious.  Had Citigroup negotiated these lawyer costs in the beginning as non-billable, as many corporations do, such language would have typically appeared in their billing guidelines.  However, the blog does point out that it is a rare occurrence in the case of class actions for such “expenses” to be addressed up front, where billing parameters, typically, are loosely based.  Nevertheless, Citigroup is a sophisticated consumer and could very well have specified that they consider temp or contract attorneys’ billings as overhead and therefore not billable, or, at the very least, chargeable at a reduced rate. It is too late for Monday morning quarterbacking for Citigroup, but others may be able to take a lesson from their example.

R. Rosenberg

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