The Watcher Cat

The Watcher Cat

Monday, March 25, 2013

"Money Talks,--"

When I was a law student, working in the summer between first and second year at the office of a criminal defense attorney (he had an associate, so technically not a solo), we would get the National Association of Criminal Defense Lawyers' journal, "The Champion." In it, the pseudonymous "Winston Schoonover" (the inimitable Charles Sevilla) published a column titled "Wilkesworld." The columns formed the basis of Wilkes: His Life and Times, an uproarious novel depicting of the life of John Wilkes, a blustery, ruthless, brilliant attorney, who vigorously (sometimes a little too vigorously, as witness his leading a riot in the Tombs, in the very first chapter). Wilkes worked hard, took risks, and charged very, very high, terming a fee discussion a "walletectomy."

I thought of Wilkes in reading about Adam H. Victor's counterclaims in a fee dispute with his former attorneys, DLA Piper:
They were lawyers at the world’s largest law firm, trading casual e-mails about a client’s case. One made a sarcastic joke about how the bill was running way over budget. Another responded by describing a colleague’s approach to the assignment as “churn that bill, baby!”

The e-mails, which emerged in a court filing late last week, provide a window into the thorny issue of law firm billing. The documents are likely to reinforce a perception held by many corporate clients — and the broader public — that law firms inflate bills by performing superfluous tasks and overstaffing assignments.

The internal correspondence of the law firm, DLA Piper, was disclosed in a fee dispute between the law firm and Adam H. Victor, an energy industry entrepreneur. After DLA Piper sued Mr. Victor for $675,000 in unpaid legal bills, Mr. Victor filed a counterclaim, accusing the law firm of a “sweeping practice of overbilling.”

Mr. Victor’s feud with DLA Piper began after he retained the firm in April 2010 to prepare a bankruptcy filing for one of his companies. A month after the filing, a lawyer at the firm warned colleagues that the entrepreneur’s bill was mounting.

“I hear we are already 200k over our estimate — that’s Team DLA Piper!” wrote Erich P. Eisenegger, a partner at the firm.

Another DLA Piper lawyer, Christopher Thomson, replied, noting that a third colleague, Vincent J. Roldan, had been enlisted to work on the matter.

“Now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode,” Mr. Thomson wrote. “That bill shall know no limits.”

A DLA Piper spokesman said the firm did not comment on pending litigation.
The quoted e-mails are quoted from an affidavit from Victor's counsel seeking leave to amend his counterclaim and asserting new causes of action against DLA Piper.

I don't know the rights or wrongs of the matter between DLA Piper and Victor; people often write remarkably stupid things thinking they're being funny, or demonstrating bravado, and it's possible that that is all that happened here. But the fact of the dispute and the insouciant air of the e-mails draws attention to a real problem; as Professor William G. Ross of Cumberland School of Law is quoted "the billable hour creates perverse incentives.”

The e-mails are adduced as evidence of unethical practices known in the trade as "churning" and "featherbedding." The Times cites a survey of 250 lawyers in which "more than half" acknowledged churning, that is, "perform[ing] pointless assignments — like doing excessive legal research and extraneous document review or filing frivolous motions — to increase their billable hours." Professor Ross, who conducted the survey, is quoted as drawing attention as well to the problem of featherbedding, that is, "throwing armies of bodies at every problem." Both are charged in Victor's counterclaims, with e-mails in support.

The billable hour has long been seen as an easily abused metric for payment. (From the perspective of the junior associate lawyer, it's drawbacks also exist, in the form of unending days trying to meet the annual requirement.) A useful account of the problem, and of the difficulties besetting any non-regulatory solution is here. For what it's worth, in view of the fact that my own last billable hour experience was long ago and in an era far away, I distrust it, based on just the perverse incentives cited by Professor Ross.

Wilkes, by the way, charged high fees, but didn't feather bed or churn; he did not bill by the hour. Of course, he had the advantage of being fictional.

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