Former associate must repay law firm for failing to bill promised hours, top state court says
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An associate who signed a contract with an “hours billed discrepancy” clause is obligated to repay his law firm for failing to meet promised billable hours, the North Dakota Supreme Court ruled Thursday.
The state supreme court ruled in favor of Bismarck, North Dakota, firm Larson Latham Huettl, which sued associate Travis D. Iversen for an alleged overpayment of more than $35,000 after he left the firm in July 2021. Larson Latham contended that Iversen did not bill enough hours to justify the amount of compensation that he received, and his failure to repay the firm violated his contract.
The “hours billed discrepancy” clause said if Iversen billed less than the base quota for any three-month period, his salary would be “reduced appropriately at the discretion of LLH in order to make up for any discrepancy.” The discrepancy “will be considered to be a debt owed by associate to LLH at the end of the calendar year or at the termination of employment,” the contract said.
Iversen had maintained that he was told that he could only do the work given to him by the firm. He claimed that the agreement was unconscionable because the firm had sole control over his credited hours and primary control over his work. He also claimed that the contract was impossible to perform because the firm failed to give him a sufficient number of clients.
There was “a sharp decline in the cases I was getting, the phone calls I was getting; the work available to me,” Iversen told Law.com.
And those factors were out of his control, he said.
A state district court disagreed with Iversen’s arguments, holding that the contract wasn’t unconscionable because both parties received benefits and had obligations. The judge also said there was nothing in the contract requiring Larson Latham to provide work or clients to Iversen.
The North Dakota Supreme Court affirmed in its Feb. 16 opinion.
The state supreme court also rejected Iversen’s other arguments that Larson Latham had waived its rights under the agreement because it didn’t seek reimbursement until after Iversen left, that there was no consideration for the contract because the firm raised Iversen’s billing rate without raising his compensation, and that the firm failed to mitigate damages by reducing his salary every three months.
Larson Latham had also sued former associate Thomas Burckhard for reimbursement after he left the firm, according to Law.com. The case settled after the North Dakota Supreme Court ruled against Burckhard in December 2022.
Damian J. Huettl, a founding partner of Larson Latham, told Law.com that its performance-based employment arrangement paid lawyers a fixed draw based on expected billable hours.
“They essentially chose their draw based on the hours that they expected to bill,” Huettl said. “So, as time went on, we paid them a draw, so they’d have a monthly income with which to live, and obviously they had fallen behind.”
“You get into that situation where you don’t really want to fire somebody who’s not performing and give them an opportunity to try and rectify the situation, and they just never did,” he told Law.com.