ABA Journal


Trials & Litigation

Does Legal Fees Motion in $590M Citigroup Case Include $1K Per Hour for Low-Paid Contract Lawyers?

Jan 3, 2013, 08:03 pm CST


Sort of like the wages paid to Chinese sweatshop workers for manufacturers of designer brand sneakers, compared to the retail price of the sneakers.

By AndytheLawyer on 2013 01 03, 8:24 pm CST

Right, right. Because slapping on a "standard mark-up" from $40 or $60 an hour to $250 or $550 an hour is somehow the same as "legal work" (even though it might look like unethical conduct or fraud to the uninitiated). No doubt they are marking up every paper clip and photocopy an equivalent % on the same theory. This is why people everywhere love lawyers so much.

By B. McLeod on 2013 01 03, 11:55 pm CST

To be fair to all parties involved a comprehensive legal audit should be conducted on all fees and documented expenses. This should serve to reduce or eliminate all the negative comments that have been leveled towards what appears on the surface to been very high legal fees. It cannot be determined if all these fees are reasonable without a legal audit been performed by a professional legal auditing company. Remember all expenses associated with this matter should also been a part of this audit because our experience has been that some law firms seem to think they do not have to furnish receipts to their clients. This auditing process needs to be conducted now not later and it is the right thing to do. I know that nobody really likes being audited but since auditing as been around since the Roman Empire it obviously is not ever going away. Every business and governmental entity is subject to financial oversight so why should law firms be exempt. My company founded the legal auditing industry over 28 years ago and most all law firms are keenly aware of the process and if the audit is totally objective then they usually fully cooperate with the auditing company. I do not include this comment to be self serving we do not care what company you choose to retain just pick a legitimate company not a mere slick web site.

By Dr. Harry J. Maue on 2013 01 04, 2:22 pm CST

Another amusing question is how a real estate lawyer got a job on a securities case. I have been trying for months to get in on this document review deal but, despite what is regularly referred to as an "impressive" resume, my applications to "third-party agencies" are overwhelmingly responded to with crickets, except for the occasional canned thank you and spiel about how, if they find a "fit" or "match," they will contact me.

By PhillyGirl on 2013 01 04, 5:02 pm CST

Sure Harry, let's add more cost and expense to this outrageous bill. And who is to pay for it?

By Chester on 2013 01 04, 5:35 pm CST

Really, ABA, how about some context? How about a link to the fee application? The article would leave me to believe the fee request is exorbitant (and it generally is in these cases), but this little blurb gives us nothing to go on. That said, why not require the submitting firm to submit an audited fee request, at their expense? (Ignoring, for the moment, what the auditing firm will charge for their contract attorneys....) Which expense might, of course, be otherwise buried somewhere else in the fee request, but it's a start.

By Arlow on 2013 01 04, 6:31 pm CST

This practice is precluded by ethics rules in some jurisdiction, which provides that lawyers can only charge an amount for contract work paid to the contractor. This covers all fees of a contractor, such as payments to a land surveyor retained by the attorney in a property dispute or an expert.

By Malcolm Pipes on 2013 01 04, 6:32 pm CST

@PhillyGirl: Probably because this was CDO-related litigation and the typical real estate lawyer will know much more about secured debt than most any young litigator. It's all about the right skill set. Document reviewers aren't doing actual litigation, so better to have reviewers well-versed in the underlying subject matter.

By CDO Lawyer on 2013 01 04, 6:38 pm CST

It should be unethical for a firm to pay an attorney less than a third of what such attorney is billed out for. That should level the document review business into proper tiers based on experience and expertise. It would prevent outrageous overbilling for clerical work and provide equitable pay for higher level work.

By Contract Attorney on 2013 01 04, 6:46 pm CST

Wow, there's actually a place in America where I can use my law degree and get paid $40 an hour?!? Heck yes, I'll take it! Much better than 3 years of working odd jobs and getting no experience. I'll take the doc review job for $20 an hour and they can bill me out at whatever they want.

By Jake on 2013 01 04, 6:50 pm CST

A biglaw firm hires someone to do legal work for $40 to $60 per hour and bills that out at $1000 per hour. Is there nothing left about the legal trade that has even the appearance of honest and fair dealing, or is it just with biglaw firms that this happens. I saw an article in today's newspaper about a young woman, mother at 15, difficult childhood, broke away from it and got a college degree. Now she plans on becoming a lawyer so that she will have made it. I have sympathy for her. She has no idea of what she is seeking to become a part.

By the plain truth on 2013 01 04, 7:12 pm CST

$40-60/hour ??? That is not accurate for English reviews. In DC, the rate has been hoovering at $30/hour with a few reviews here and there offering $33-34/ hour since the economy tanked and the market was flooded with newly barred attorneys who haven't been able to find permanent legal jobs. The legal job market nationally is in such dire straits that attorneys from all over the country are actually moving to DC to perform document review, not realizing that performing document review seals one's fate in document review land permanently. The only reviews offering $40/hour in DC are the Spanish language document reviews; contract attorneys speaking rare foreign languages can command much higher rates (ie as high as $80/hour for Japaneese). There have been some agencies really low balling the market with offers of $22/hour and getting around the criticism of paying debt riddled attorneys such a low rate by accepting JD's rather than licensed attorneys on their projects.

By Casey on 2013 01 04, 7:19 pm CST

1 - Overhead
2 - everyone knew what the deal was
3 - who cares...

By hiccamer on 2013 01 04, 7:26 pm CST

JAKE @ 10 --- You have to be where the big firms are to get the doc rev work. you have my sympathy.

By FRANCIS MARTIN on 2013 01 04, 9:25 pm CST

# 2 - B. McLeod - you're dead on, as usual. This criminal level of markup (does the mob even markup this much?) is exactly why the public hates and despises lawyers. The usual markup on outside services in most industries is 10-15%, so a contract attorney being paid $40 an hour should not have been billed for greater than $52 an hour - rounding this to $50 would have been expected. As for supervisory time, adding this to the markup is double-billing.

#3 - Dr. Maue - your company "founded the legal auditing industry 28 years ago"? Really? So you were late to the game, then? Because I was doing legal billing auditing back in the 1970's, for a midtown Manhattan auditing firm, as were the entire "Big 8" accounting firms back then, and every corporate internal audit department. In my corporate days in the late 1970's and early 1980's (translation: over 30 years ago!), any time I wanted to impress my bosses, I grabbed the outside counsel bills and went through them with a fine tooth comb. Invaribly I would turn up a wealth of inaccuracies, double-billing, and gouging, earning a reduction in the bills for the corporation, and a nice big fat bonus for me (and who doesn't love making money off of lawyers?). Sadly, some things haven't changed. If I really want to tick off opposing counsel on a matter these days, all I have to do is tear their bills to shreds - I always find errors, and they lose credibilty. Easy, peasy.

#5 - think of it as paying an agent to collect on a judgment - yes, there's a cost, but the end result is converting a bad debt into net revenue, even if that revenue is only a percentage of the total (e.g. - something is better than nothing). I'd say this exorbinant markup here makes the "cost" completely worth it - no auditor is going to charge even close to the difference!

#13 - everyone should care. Higher legal fees being milked to a financial institution are passed along in higher banking fees and higher credit card charges, etc. to us customers, small business owners, etc., and in cutbacks elsewhere - like layoffs in staff (higher costs in one area have to be offset by lhigher revenues or lower costs in another area since the quarterly profits have to stay on course to make sure the fat cats' stock options maintain their value). You really didn't expect that the Citicorp executives will take this out of their compensation packages, did you? God forbid! :)

By NYS Courts ex-wife on 2013 01 04, 9:43 pm CST

@11 - probably a big law phenomenon. Historically there's been a degree of hinkyness (I don't know if I made that word up, but I'm gonna say I did) to the billing practices of some big law firms for their wealthy corporate clients and I guess the perception is that for a while those clients didn't really care. Sometimes it's nice to by Henry V and have a bishop tell you God wants you to invade France and Big Law has the resources and wherewithal to come up with the legal support for doing so.

Things are a bit tighter and, more importantly, it seems that their catching wise to the fact that they can (substantially in some cases) reduce overhead by scrutinizing those bills more closely. It's not like these ginamrous law firms are going to get huffy about how unfairly they're being treated - not if they want to keep their corporate clients - and it's not like people are going to be sympathetic to a bunch of lawyers, anyhow.

What's more - the whole contracted out attorney thing/billing as a partner thing IS potentially a problem should probably get looked at.

By John E on 2013 01 04, 9:49 pm CST

I too was auditing legal bills in the 70's when I was employed by one of the largest corporations in the world. But it was not until my company set forth a formalized methodology within an actual company with full time experienced lawyers working with full time forensic accountants did an actual industry resulted in 1985. I applaud you for randomly reviewing legal bills but to take this up on a full time basis with full time professsionals I regret to inform you that my company has that distinct honor.

By Dr. Harry J. Maue on 2013 01 04, 9:52 pm CST

This situation exists even in small jurisdictions; less than 100,000 population. What you needed to gain a nice corporate client was three names on the letter head. Then once you got them the big firms billed by the pound. Worthless motions for production of documents that were filed on the 30th day after service, requiring a response of course indicating that they had been mailed the day prior to the opposition's filing. How about 45 page motions for summary judgment on each part of the entire case,3 motions for the three issues that included 40 pages of the same boiler plate ?

The only bright light in the situation was when the " Big Law " firms dared to pursue their claims for legal fees in the courts when the cases were not settled. The Courts routinely CUT the big law fees by 50% or more when they reviewed the fee applications.The tragedy was that the settled cases paid the fees and shut up. The big law clients didn't care because this cost was passed on. It was only in the trial cases when the big law clients started to catch on.

Caveat emptor

By Martial law on 2013 01 04, 11:25 pm CST


hiccamer wrote:
2. "everyone knew what the deal was"
3 - who cares…

As to 2, no, they didn't. Its a fee application asking the other side to pay their attorneys fees.

As to 3, I care, because I own stock in Citigroup, and its done poorly enough as it is.

By DirkJohanson on 2013 01 05, 2:44 am CST

Recently moved to Detroit from CT. While waiting for MI admit, took a doc review job. Was the worst job I have EVER had (including the summer I spent in Rome, GA applying molten tar by hand brush to 40,000 gallon propane tanks). I bailed after 8 days. Three (and only 3) interesting take aways:
1) The mark ups: We accepted the positions. Hire Law paid us. Discover Ready paid them. Skadden Aarps paid them. The client paid them.
2) Scary that many of the my co-workers were fine with it. Beware 13 & 9.
3) Scarier that in 8 hours I made 74% of what I billed for (and generally collected) 1 hour in CT.

Still glad I moved to Detroit. Still awaiting MI admit. Sworn in to E Dist MI this pm.

By Russell on 2013 01 05, 6:21 am CST

Fee protest could use cost of technology-assisted review as a benchmark for what is reasonable, and reference articles by Marua Grossman, Gordan Cormac, Anne Kershaw, Herb Roitblatt, and Patrick Oot for support.

By Joe Howie on 2013 01 05, 5:16 pm CST

Meant to add that fee protestor could also cite cases like Da Silva Moore by Mag. Judge Peck.

By Joe Howie on 2013 01 05, 5:20 pm CST

I'm a commercial real estate advisor (former accountant). Because most attorney's work by the hour they are inclined to be "creative" when it comes to billings. A common example is having a file reviewed by several attorneys to "get up to speed". Another is drafting and reviewing simple letters by multiple attorneys. In both instances this generally amounts to on-the-job training of newly-minted attorney's at the client's expense.

When a billing is questionable I generally bring it to the attention (in writing) of the most senior member of the firm, outlining my objection and reasoning. In 28 years I have never been refused a reduction in disputed billings, which can sometimes be 30+% of the billing.

By Steve Cross on 2013 01 07, 1:34 am CST

I once worked in the same government law office as a lawyer, now a retired judge, who started out with a firm that was a big firm for our area, a third generation firm. When he worked there he was required to have billed out eight hours of work by 9:00 in the morning.

By the plain truth on 2013 01 07, 1:43 am CST

I personally don't believe that the markup is that large, but maybe it is. I don't want to be naive. Also, the going rate for doc review is between $20 and $30, maybe slightly higher in NY and LA but not 40-60. Attorneys take these jobs because it's better than anything else out there and sometimes they are flexible with solo practices and usually offer OT pay,. I definitely believe that billing out for $500 for a doc review attorney is ridiculous, though. Someone said 1/3 and that sounds equitable. The dishonesty in our business is astounding.

By MLS on 2013 01 07, 3:09 am CST

The solution is obvious and in the hands of the legal services consumer.........When you see this sort of nonsense going on, fire the law firm and go elsewhere. If that means declining to retain Biglaw firms, so be it.

By AndytheLawyer on 2013 01 07, 5:56 pm CST

Firing the lawyer is not the solution, Andy, because its a fee application to get the other side to pay the fees

By abs on 2013 01 07, 6:24 pm CST

#27 -- Yes, but most judges deciding such applications have a narrower view of what are "reasonable" fees -- the quantification touchstone -- than do greedy BigLaw firms and their feckless clients.

By AndytheLawyer on 2013 01 07, 8:43 pm CST

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