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Judge Questions Dewey Fee Application Seeking About $100K a Day

Posted Dec 17, 2008 8:55 AM CST
By Debra Cassens Weiss

A federal judge is seeking more information on a $2.1 million fee application by Dewey & LeBeouf that breaks down to about $100,000 a day in attorney fees.

U.S. District Judge Denny Chin asked for more information on the application by Dewey partner Timothy Coleman, who is the receiver for WexTrust, according to the Am Law Daily and the Wall Street Journal Law Blog. The law firm was appointed as receiver to safeguard the trust’s assets after the Securities and Exchange Commission sued, claiming the trust was operating as a Ponzi scheme that targeted the Orthodox Jewish community.

Chin questioned billing rates as high as $950 an hour for some partners, $605 an hour for some associates, and $285 an hour for summer associates.

“It is difficult to evaluate the reasonableness of the hourly rates for most of the lawyers listed,” the Manhattan judge wrote. “For example, [five attorneys]—all simply described as “Associate”—have substantial hours billed at hourly rates of, respectively, $605, $605, $550, $605 and $605. Without knowing anything about their backgrounds, it is difficult for the court to determine whether the requested hourly rates are reasonable.”

The Am Law Daily posted the fee application (PDF) and Chin’s order (PDF).

Comments

1.

B. McLeod
Dec 17, 2008 10:59 AM CST

Really?  They’re “associates.”  So, at least the four with the $605 rate are presumably fungible and interchangeable like all good “associates” billing at the lock-step rate for their “class.”  The $550 one is obviously in a more junior class, perhaps representing an effort to “economize,” since the bills might have to be explained to the court.  No doubt the big law firm can explain to the judge how all this rationally translates to a justification for the rates billed, without further information.

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2.

Cheryl Benn
Dec 17, 2008 11:00 AM CST

These billing rates are simply ridiculous. Somebody please tell me what a lawyer does to protect a trust for $950 per hour?!?!

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3.

Old Lawyer
Dec 17, 2008 11:14 AM CST

We can’t let overpaid executives in the business sector get ahead of Wall Street lawyers, now can we?

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4.

george
Dec 17, 2008 11:53 AM CST

What a joke.  We need the government to regulate Big Law. 

Why aren’t the partners and the boards who approved these law firms investigated.  I am sure there is some crooked dealings going on.

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5.

Dewey sucks
Dec 17, 2008 11:55 AM CST

“and $285 an hour for summer associates”

I can give you the names of lots of 30 year partners who only bill $275 an hour at their firms.

What does a 1st or 2nd year law student do that deserves $280 an hour.  Someone should go to jail over this.

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6.

Former BigLaw
Dec 19, 2008 4:47 AM CST

Clearly, the court should disapprove summer associate time.  Lots of clients refuse to pay for summers to bill to their matters.  On the other hand, Dewey’s rates don’t seem to be out of line compared to the market.  If you don’t want to pay big firm rates, hire a smaller firm.  If the court has a problem with costs, it should have appointed a less expensive receiver.

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7.

silencedogood
Dec 19, 2008 7:06 AM CST

As someone who currently works with a former associate who billed at $650 per, I can tell you they are not worth it.  But quality is variable by person.  If stuck with a big ticket firm just pick your team carefully, demand budgets, and manage, manage, manage.

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8.

Jeremy
Dec 19, 2008 7:58 AM CST

$285 for summers!?

Meanwhile, in an a completely unrelated article, many large law firms will collapse in 2009:
http://www.abajournal.com/weekly/law_prof_predicts_more_big_law_firms_will_collapse_in_2009

These stories have absolutely NOTHING to do with one another…don’t be crazy and try to draw a causal connection between billing $285/hr for summers and a fundamentally flawed business model.

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9.

Ron
Dec 19, 2008 8:15 AM CST

In my opinion, what this law firm did borders on criminal conduct. It reminds me of a very prominent bankruptcy lawyer in Detroit back in the 1980’s who was eventually caught for billing 32 hour days (the US Attorney’s office reviewed his fee applications submitted in numerous bankruptcy files to discover the fraud).

I have been practicing law now for almost 30 years. I am a fellow in the American College of Trial Lawyers. I am also a Certified Public Accountant.  My fee is still under $200 per hour.

$500 and $600 per hour for associates, and nearly $1,000 per hour for partners is simply obscene, if you ask me.

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10.

emile bussiere
Dec 19, 2008 8:30 AM CST

My father recently passed and i am tying up some loose ends from the firm.  He practiced for over 50 years and his rate was $275.00 in a selct few cases and $225.00 in most.  Law students have no clue what they are doing and should not be charging client any more than a secratrial fee.  Absolute crooks taking advantage of a situation.

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11.

Phil
Dec 19, 2008 8:51 AM CST

One of our litigation partners joined us at the end of 2007 from one of the Big Law NYC firms – moved because of some issues at the old firm and he wanted a new scene.  We are a small boutique firm in the southeast and bill him out at $500.  He told me yesterday his billing rate if he had continued at NYC firm would probably be $800+.  So did the sun in the South affect his brain so much that he is worth less an hour down here? Or I guess with the length of “a New York Minute” as compared to the “Southern-pace-of-life” they have to bill at a higher rate to even out the money? (No, I know. It’s called overhead.)

Our small boutique firm increased partnership income in 2008, as compared to 2007, and will probably have to hire two and potentially three associates in 2008 – we are marketing with the “we-do-great-work-at-a-better rate” sales pitch and are getting some big clients and cases.

As Jeremy (8) said, compare this article with the cross article stating that many large law firms will collapse in 2009.  Is that a real surprise, given Big Law’s rate structure and business model?

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12.

Joe the lawyer
Dec 19, 2008 8:59 AM CST

I am a graduate of a well-regarded New England college and Northwestern Law.  I was an associate and then partner in a mid-sized New York City firm for 21 years.  I left the firm by choice and now practice, again by choice, as a solo in the New Jersey sauburbs of New York City.  I bill $295 or $325 per hour and am lucky to collect that.  I don’t pad my bills.  I give fair value to my clients.  I don’t advertise and I don’t lie to gain any advantage for my clients.  I sleep well, but I could use a new car to replace my ‘99 model and it’s not going to happen this year.  Still, I’m a lawyer, not someone in the business of law, and I’m proud to be an old-fashioned professional.  In my opinion Judge Chin would himself br violating his own duty to WexTrust by approving the rates mentioned in the above article.

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13.

so what?
Dec 19, 2008 9:38 AM CST

What’s the big deal? Tthose are the standard rates for partners and associates in biglaw in cities like NY, DC, LA, Chicago.  Clients pay more for associates and partners from top law schools who work at top firms because they produce top quality work product and can handle large cases. Small town and solo attorneys or attorneys from no-name law schools charging $300 an hour couldn’t possibly handle billion dollar deals or multi-million page document reviews.  That’s why clients go to biglaw firms and that’s why biglaw rates are what they are.  It’s just nonsense that because some lawyers from crappy law schools charge $300 or less that biglaw lawyers are overpaid. You get what you pay for, and clients are willing to pay more for people who are smarter and went to better schools and have gained experience working on complex litigation and deals.

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14.

Hadley V. Baxendale
Dec 19, 2008 9:48 AM CST

I left PrettyBigLawforAroundHere after 25 years to go solo, dropped my rate and have almost more work from the same clients than I can comfortably handle.  Big matters still go back to the big firm.  One of the best parts is that I am no longer in an adversarial positiion with my clients, havnig to defend the prices we were required to charge by Headquarters.  The worst part was the fees from untrained associates—the gap was relatively small—which resulted in our having to cut out training and supervision to make the numbers work for Headquarters.
This is a high-profile case and Dewey was a collective idiot to milk it like this.  It’s a whole lot of work but if you peek behind the curtain, most of it, I bet, is accountant stuff.

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15.

Charles
Dec 19, 2008 10:01 AM CST

$950 per hour can be justified for some lawyers’ time, where his or her experience and expertise makes it cost effective. There is no justification for $600 per hour for an associate. The client may agree to pay it but should not expect to be able to transfer that decision to the opposing side in fee litigation.

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16.

David
Dec 19, 2008 10:13 AM CST

I agree with #13 So What?  It’s not like clients enter into this service relationship unaware.  You get what you pay for, and most multi-billion dollar companies are willing to pay these rates because they know quality work is the result.  Plus, as “so what?” stated, the firms that have partners asking $300/hr cannot possibly take on these large and complex cases without teaming up with a large firm.

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17.

Disappointing
Dec 19, 2008 10:32 AM CST

It still amazes me.  I went to a top 10 law school, and can honestly say I am convinced that the school you attend has very little to do with your abilities as a lawyer.  I have met many talented lawyers from “crappy” law schools, and many talented lawyers from top tier schools.  Everyone studies the same materials, takes the same bar exam, and operates under the same laws in court.  In fact, in my experience, I have found that many lawyers from “crappy” school are much better prepared for litigation when they graduate than those of us from the Ivory Towers. 

Reading these comments weekly I am often reminded of why so many outside the legal fraternity cannot stand our profession.

And yeah, the fees are way too high.

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18.

Andy the Lawyer
Dec 19, 2008 10:34 AM CST

As an attorney practicing with a small southern California firm, I encourage “So What”‘s delusions.  I’ve tried cases against large firms with overinflated egos and billing rates, and won far more than I’ve lost.  Their lawyers vary all over the map in ability and intelligence—just like lawyers in smaller firms.

What “big firm” lifers tend to forget is that a lot of small firms nationwide are filled with excellent lawyers who chose to opt out of the miserable, soul-crushing environments in which big firm apologists still wallow—and who took their skills with them when they left.

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19.

JME
Dec 19, 2008 10:36 AM CST

I bill $125 an hour.  My goal is to bill about 900 hours per year.  My overhead is about $1200 per month.  People like me.  Life is good.

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20.

HVB
Dec 19, 2008 10:43 AM CST

“So What’s” point is flawed.  There are matters that can only be handled by larger firms at one extreme and there are crappy lawyers from crappy schools doing crappy work at the other. You’re comparing chalk and cheese. The legitimate point is whether the rates Biglaw charges for the same work that can be performed as well by Midlaw are justified.  The answer is No. Stick to the salient facts and not the irrelevant extremes.  It’s easy to say “you get what you pay for” but it is not always true.

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21.

Stan Hecht
Dec 19, 2008 10:46 AM CST

It’s not so much the hourly rates that are stomach turning.  It is the $100K per day, taking more money (the rest of the money?) out of the pockets of the Ponzi victims.  This is almost as bad as big law bankruptcy practice, where you would think lawyers would economize but where in the real world thievery really reigns.

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22.

CAM
Dec 19, 2008 10:51 AM CST

The private sector bargains for what it gets, so be it.  But the firm here appears to have charged these rates in a high profile case and sought to have those absurdly high fees then reviewed and approved by a federal judge.  The question is reasonableness.

If the Summer and the other Associates have specific backgrounds and experience in SEC enforcement for years before going to law school, some semblance of higher fees than “normal” might be justified.  But if the Summer and the others do not possess such specialty experience, then not even a premium rate (however defined) can apply. 

Just because some in the private sector may pay such fees has nothing to do with reasonableness.  A fool and his money…..  But here-Dewey milked, no, I’m sorry, the apparent word might be “bilked” this trust (interesting double meaning here) in a manner that is reprehensible, but not necessarily criminal.  The court ought to reduce and/or eliminate the fees in large part, and if recourse further is warranted, consider a prohibition to ban the firm or the attorneys involved from such work in the future before that bankruptcy court.  THAT would serve justice AND send a message.

The court should also turn the matter over to the Office of the US Attorney for evaluation of any criminal wrongdoing or fraud.  The law firm involved, on the information presented, truly appears to have lived up to the moniker so appropos here:  Dewey Cheatem & Howe.

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23.

B. McLeod
Dec 19, 2008 12:01 PM CST

That is funny.  A few decades ago, when I was in school, a firm called “Dewey, Cheatham & Howe” was often featured in hypotheticals.  In the hypotheticals, that firm did a lot of entertaining things, and I assume it was the same entity to which the prior poster refers.

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24.

LA Lawyer
Dec 19, 2008 1:37 PM CST

Hey JEM (#19) - that is one the BEST posts I’ve read.  If you actually do that, big ups to you for finding balance in this legal rat race.

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25.

HVB
Dec 19, 2008 2:29 PM CST

Dewey Cheatham and Howe was the law firm name used in Three Stooges shorts. Or maybe it was Marx Bros; I wasn’t born yet so forgive me.  Anyway law professors picked them up to add humor to exams, like it was appreciated.
DC&H merged with Ketchum, Fleasum and Releasum.

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26.

Dewey Cheatham and Howe
Dec 20, 2008 9:53 AM CST

Who does their books?  Bernie Madoff?

In the Judge’s Order, he says that D&L is billing for 5,503 hours of work over a period of 20 days.

This comes to about 275 hours per day.

It would take about 17 people, billing 16 hours a day, to get to 275 hours per day.  If they worked 8 hours a day, it would take about 35 people to get to 275 hours a day.

I suppose that 17 to 35 people could have worked full time (plus) on this matter for the 20 days or so, but really.

I hope there’s a full investigation.  If D&L did the work and the fees are objectively reasonable, they should get every penny earned.  If it turns it to be otherwise, all of the appropriate consequences should follow.

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27.

Okie Attorney
Dec 20, 2008 10:09 AM CST

From Judge Chin’s Order: “In fact, for the 20-day period from August 11-31, 2008, D&L seeks compensation for 5,503.15 hours for attorney and paralegal time.”  The billing rate for paralegals was $175/hr. to $275/hr.

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