Law Firms
Chadbourne Accused of Overbilling for Research; Other Claims in Pipeline
Posted May 8, 2009 7:26 AM CST
By Debra Cassens Weiss
An unjust enrichment lawsuit claims Chadbourne & Parke billed a client $20,000 for online legal research that cost the law firm only $5,000.
San Diego lawyer Patricia Meyer, who represents the Texas businessman suing Chadbourne, tells the National Law Journal that at least a dozen other law firms are also overbilling for research, and more lawsuits are in the pipeline.
Meyer alleges that Chadbourne and several other law firms are paying flat fees to legal research companies such as Westlaw and LexisNexis, but billing clients at hourly rates, the story says. Meyer claims it is a violation of California ethics rules to charge the higher amount without disclosing the arrangement to clients.
"This appears to be more widespread than you would think," Meyer told the publication. "Basically what we're finding is that certain law firms are using Westlaw and Lexis as profit centers. … Quite candidly, what we're finding is the clients really have no idea that this is going on.”
The plaintiff in the Chadbourne suit, J. Virgil Waggoner, alleges unfair business practices, unjust enrichment, fraud and deceit.
Chadbourne partner Thomas Hall issued this statement to the NLJ: "We adamantly deny this claim of Mr. Waggoner, with whom we ended our relationship over four years ago. It is telling that Mr. Waggoner—a Texan who had retained our New York, not California, office—filed suit in California only after his New York malpractice lawsuit against Chadbourne was dismissed and only after we sued him in New York for unpaid fees."
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Comments
B. McLeod
May 8, 2009 7:43 AM CST
Both services provide billing summaries that show what the session(s) would have cost but for the flat rate. I believe the practice referred to is widespread, and have heard colleagues advance the “justification” that the “cost savings” achieved by the flat rate arrangement “belong to the firm,” for its savvy negotiation of the “discount.” As we all know, copies don’t really cost 25 cents a page either, and most “surcharges” are not carefully matched to true firm administrative costs of billing items through to clients.
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Katrina Jones
May 8, 2009 9:12 AM CST
ABA Formal Opinion 93-379, page 8, first paragraph, states in part, “...if a lawyer receives a discounted rate from a third-party provider, it would be improper if she did not pass along the benefit of the discount to her client rather than charge the client the full rate and reserve the profit to herself. Clients quite properly could view these practices as an attempt to create additional undisclosed profit centers…” We are not construction contractors who can mark-up our materials.
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B. McLeod
May 8, 2009 10:36 AM CST
If “should” were switched in for “can,” I would agree with #2. However, it happens far and wide (and many firms view ABA Formal Opinions as merely precatory or aspirational pronouncements, not to interfere with real world profits).
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R
May 8, 2009 10:40 AM CST
I guess what I don’t understand is how the client should be billed? Should all the clients pay a percentage of the Westlaw/Lexis monthly subscription regardless of if it is used on their case. If the Fee Agreement is to be billed hourly for the work preformed, do I have to bill less if I am using the book in the library (because that didn’t cost me anything) then for drafting a pleading. I do not see how the billing for my time, which is the standard model, would depend on what resource I am using during that time. If I have to do one hour of research, the client should pay for the hour. The rate should not matter if I am using Casemaker (which I get free through the bar), the Local Law Library, or Westlaw/Lexis. This law suit seem frivolous unless Chadbourne & Parke entered into an agreement to just do legal research and opened the Westlaw/Lexis account just for this Texas Business Man. I would also like to know how a Texas businessman who hires an attorney in New York for a New York matter can sue the firm in California, even if the attorneys are licensed in California.
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