Timekeepers Beware: Block Billing, Other Errors Costs Firm Over $400k in Legal Fees

Posted on August 14th, 2018 by Legal Fee Advisors

By Zachary Kalmbach.

To account for block billing and several other billing inefficiencies, an SDNY court reduced a million-dollar fee request by over 40%. In a breach-of-contract case between Benihana, Inc. (“BI”) and Benihana of Tokyo, LLC (“BOT”), a panel of arbitrators found that BI’s termination of BOT’s license had not been justified. Ten months later, the Court entered an injunction tracking the terms of the arbitration decision, which obliged BOT to comply with agreement.[1] After 6 months, BI claimed that BOT was violating the injunction, and moved for sanctions. The Court agreed with BI, and further ruled that BOT had to pay legal fees BI had incurred attempting to obtain BOT’s compliance with the injunction. BI requested $1,040,782.49 in fees and $21,468.85 in costs. While the Court granted the costs request in full, it reduced the fees by 41% to exclude time billed prior to the injunction order and to account for a number of billing inefficiencies.

First, the Court excluded all hours billed prior to the injunction order. Although BI’s efforts to enforce the injunction were directed towards the same goal of assuring compliance with the agreement, the Court had explicitly notified the parties that it would consider sanctions only as to conduct post-dating the injunction. This, in the Court’s view, precluded any recovery of fees incurred prior to the order.

As to the reasonableness of the number of hours billed, the Court ruled that block billing warranted an across-the-board reduction. Although the court had “no doubt” that the lawyers worked all the hours reported, they were obligated to “be punctilious in accounting for its time,” and “block-billing deficiencies…require reductions to BI’s compensable hours.” For example, block-billed entries such as “review and revisions of motion for sanctions; editing and organization of exhibits; interoffice conferences, telephone conferences, e-mails regarding status and strategy” warranted a reduction.

The Court found other inefficiencies that merited reductions. For example, there were several occasions where multiple lawyers spent substantial time reviewing letters and attending internal conferences, telephone conferences, and other meetings. While “a second pair of eyes” on letters to an adversary or submissions to a court are sometimes merited, numerous timekeepers billing for review of such communications and for common discussions was unacceptable to the Court. Moreover, a number of internal discussions were not compensable. For example, entries such as “attend litigation strategy meetings to discuss the impact of the opinion and the next steps” warranted reductions.

After excluding hours billed prior to the injunction, the Court determined that block billing and the other inefficiencies detailed above warranted an across-the-board reduction in hours. Accordingly, the Court reduced one partner’s hours by 30% and the rest of the attorneys’ hours by 15%. The Court emphasized that the partner, who was the highest paid of all timekeepers, kept especially vague and block-billed time entries and had been found to have similar problems in prior cases. The reductions led to a revised fee award of $613.211.19.

In sum, the Court reduced the requested award of attorneys’ fees by $427,571.30, or 41%. BI’s requested expenses of $21,468.85 were awarded in full. This case offers useful guiding principles to petitioners and challengers of fee awards. For example, block billing may serve as a basis for a reduction even if a court is confident that every hour billed was actually spent working. Moreover, the case suggests that time spent reviewing the work of other lawyers and attending internal conferences such as strategy meetings is not compensable.

[1] The Court awarded BI $118,860.26 in attorneys’ fees for work leading to the injunction. BI originally requested $175,000 in fees, but the Court reduced the award to account for block billing and duplicative work. For a discussion of the fee dispute, see https://legalfeeadvisors.com/new-york-court-gives-benihanas-fees-chop/.

Benihana, Inc. v. Benihana of Tokyo, LLC, No. 15 CIV. 7428 (PAE), 2017 WL 6551198 (S.D.N.Y. Dec. 22, 2017)

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