Caught In A Webb: Ferguson hires high profile lawyer to fight US DOJ reforms

Spider web; J Schmidt (NPS); 1977

Spider web; J Schmidt (NPS); 1977

High hourly rates charged by some lawyers make headlines, like this one from the Chicago TribuneFerguson to pay Chicago lawyer Dan Webb $1,335 an hour to pursue reforms.  The “Ferguson” is the small, economically challenged suburb of St. Louis made infamous by the shooting of Michael Brown by a Ferguson police officer in 2014.

In the aftermath of that shooting, and the riots that followed, it became apparent that Ferguson depended heavily, for example, on income from absurd fines and attendant court cost charges which fell on minority citizens.  Now Ferguson has reached out to a marquee legal name to help repair its image.  Naturally, that sort of quasi-legal engagement will not be cheap, with Webb’s quoted hourly rate over $1,300.  (Often these publicly quoted rates are not the rates that these lawyers actually collect.)

As usual, the fuss over Webb’s high hourly rate obscures the real issue, which is the total fee charged by his firm that will include many munchkins (partners, associates, paralegals, and so on), billing at much lower rates, who will be racking up the hours.  (What will they be doing, you might ask?  Usually in this sort of engagement they are making work for themselves by looking through whatever paper exists and generating their own paper, in the form of legal and other research, memos, and so on.  They may also become involved in defending Ferguson against civil claims, for example.)

Webb’s firm isn’t going to make a significant payday just from his time — he’ll be working on lots of other things besides this — so his hourly rate is a red herring.  Indeed, in this sort of engagement, the usual problem is a bait and switch — the client doesn’t get enough of the famous lawyer’s time once the deal is cut.  If all Ferguson ends up paying for is his actual, personal time, that would be a steal — for a “name” lawyer like Webb, hourly rates for properly billable time cannot begin to provide realistic compensation for his unusual PR value and probably wouldn’t even cover his salary. Continue reading

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Strange Bedfellows: Companies complain about relationships between attorneys general and plaintiff law firms

tassel loafers

Tassel Loafers

Some states, often through their attorneys general, are entering into lucrative contingent fee contracts with plaintiff law firms who make millions of dollars by representing the rights of the state (and taxpayers), at the expense of alleged wrongdoers, but also of taxpayers whose rights the firms are representing, and usually settling for a substantial cut.

Representing the lucrative rights of large batches of taxpayers or a state government is a great opportunity for the law firms.  The value of the case is usually a function of how serious the injuries are, multiplied by the number of victims — getting a package of clients delivered with a bow on them by a government agency is a bonanza.  Other law firms run expensive TV ads to solicit plaintiff-clients, others fight with other firms for control of a class action:  A state attorney general can deliver seven figure fee opportunities with the stroke of a pen, in exchange for some routine schmoozing.

Of course, a large worry with all this money lying about is why certain law firms get this work and not others.  No, these projects aren’t put out for competitive bids.  And, yes, there are trails of contributions and other favors from the firms to the politicians or bureaucrats involved.  But those are questions about how particular outside firms get the work.

A better question is: Why aren’t the states doing these cases themselves?  Even a small state has a large pool of lawyers on salary, probably has more lawyers than the largest law firms (though dedicated to other tasks, too).  There’s little or no magic to these cases:  States already have lots of lawyers on staff, many of whom are at least as qualified as outside lawyers to try cases and represent the state’s interest.  [Part of the issue is that these outside lawyers rarely have the skill or experience they claim, upon closer inspection, and most of their bodies are low-paid, inexperienced temps or contract lawyers.]  For any special expertise, they could easily afford to hire hourly experts or even law firms.

With careful management, the states could make limited use of outside expertise as needed and net far more of the recovery for taxpayers from these cases and circumvent this whole unsavory mess, as reported in stories like this:

Plaintiffs law firm Cohen Milstein Sellers & Troll [apparently a Freudian slip — it used to be “Toll”] has donated more than $70,000 to various state attorney general campaigns in the last five years.Since 2010, Cohen Milstein has donated $71,000 to 16 different campaigns, according to a search of FollowTheMoney.org. Of those candidates, 13 would go on to win their state’s general election.

Some of the firm’s largest donations went to: Missouri Attorney General Chris Koster, $5,000; Oregon Attorney General Ellen Rosenblum, $10,000; Pennsylvania Attorney General Kathleen Kane, $10,000; and New Mexico Attorney General Hector Balderas, $5,000.  [While any contribution might be for a dubious purpose, these amounts strike me as “polite” at best — people who rub elbows with politicians and their henchmen are hit up for contributions all the time and these are not enough to be exceptional.]

Other current attorneys general to receive contributions from the firm in the last five years include: Kentucky Attorney General Jack Conway, Mississippi Attorney General Jim Hood, Illinois Attorney General Lisa Madigan, Vermont Attorney General William Sorrell and New York Attorney General Eric Schneiderman.The firm, known for its class action lawsuits, has been hired by a number of state attorneys general, including some of those to whom it donated. …

According to a copy of the firm’s Bank of America [class action case] contract, posted online by the [Mississippi] Attorney General’s Office [which is refreshingly transparent], it is entitled to compensation that shall not exceed the following amounts:– Twenty-five percent of any recovery of up to $10 million; [This should cover the firm’s actual out of pocket spending for attorney and paralegal time, plus real firm overhead — not the inflated “hourly rates” or markups of temps, but the real money spent]
– Twenty percent of any portion of such recovery between $10 million and $15 million; [If the case goes on for a long time, the firm would begin to burn these amounts, too, but then it’s all profit]
– Fifteen percent of any portion of such recovery between $15 million and $20 million; [More profit, if they do a decent job and get a serious settlement after avoiding death by motion]
– Ten percent of any portion of such recovery between $20 million and $25 million; [All profit if they get to this point, though the firm’s inflated “hourly rates” might claim their investment was worth this much or more] or– Five percent of any portion of such recovery exceeding $25 million.The firm also is entitled to “reasonable and necessary costs of the investigation,” including but not limited to travel, witness fees, consultants, accounting and expert fees and expenses.  …

The [potential nursing faciity defendants in a Pennsylvania deal] also argue that [State Attorney General] Kane’s delegation of authority to the law firm is improper because it gives the firm a financial stake in pursuing litigation against them.“Cohen Milstein seeks to enrich itself through large contingent fees based on litigation claims made against petitioners in the name of OAG,” they wrote. “The investigation by Respondent Kane, OAG and Cohen Milstein was not prompted by any material consumer complaints to OAG for allegedly insufficient care, but rather was initiated by Cohen Milstein to extract legal fee recoveries, as reported in the New York Times and other sources.”…

Note the steps in the sample contingent fee contract — 25% down to 5%.  These percentages are actually quite high for this sort of work, but they are meant to look small in comparison with personal injury contingent fees, which are generally around 33%.  That comparison is misleading.  But, if you’ve got a personal injury or other single party contingent fee, the idea of steps is a good one.

The real issue with the contingent steps isn’t so much the percentage, it’s the width or depth of the step — the dollars subject to each step, especially the first one of 25% up to $10 million.  Cut that in half, to $5 million, and maybe skip down to 15% rather than 20% at that point, and you might have a fairer deal.

The key to a good contingent fee is that it rewards the lawyer handsomely for taking real risk and getting the job done well and fast.  Unfortunately most of these deals end up rewarding the firm for selling the client out for a weak settlement after minimal real outlay by the firm.

Business lobbyists have been trying for decades to avoid the consequences of their mistakes by killing consumer and similar laws and also plaintiff law firms in the name of “tort reform” and other anti-lawyer causes.  But it used to be up to states, and federal agencies like the FTC, to look out for consumers, too.  Starting especially with the Reagan Administration, those agencies, federal, state, and local, were defanged, often by cutting their staff, not just changing the laws.  Hiring plaintiff firms to vindicate these rights is a creative way around this problem, so it’s also natural defendants are challenging this development.  For me, the better course would be to have government-paid lawyers vindicate those rights to avoid wasting money on having private law firms do what the states used to do and should again be doing in their own name.

Online Story: Cohen Milstein law firm strengthening relationships with state AGs, earning millions

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Suspended Disbelief: Bar suspends lawyer who took $450K with OCD excuse

Businessman partyingPeople have gone to jail for decades for stealing a few dollars in cash or merchandise.  So why is the Illinois Bar, after several years, just suspending the law license of a lawyer (who admits he took $69,000, or is it $450K, from his old firm) for only a year?  Apparently the lawyer took or involuntarily-borrowed the money from his old law firm — to pay for fake cab rides.

What makes the story even more problematic — from a client’s perspective — is just how far the lawyer, his firms, and the Bar were apparently willing to let him go with various absurd excuses for what was a much larger problem.  Apparently the $69K was the tip of the iceberg — the actual tab is more like $450,000 — and it involves more than just taking the money.

Yet the Bar claims that none of this was ever passed through to a client, according to the Bar’s “audit.”  That’s hard to believe:  Even for partners with big books of business, firms don’t pay cash for significant expenses without being able to pass them through to clients, right or wrong.  Without a client to charge them to, why would a firm even bother to “reimburse” a lawyer — the lawyer should be paying personal amounts out of his own pocket rather than wasting the firm’s time and money to process personal expenses through the firm’s accounting system.  At most firms, you can’t even make a photocopy without plugging in a valid account code. Continue reading

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Motown Mo-money: Was the Detroit bankruptcy worth it?

U.S. Bankruptcy Judge Steven Rhodes was appointed to oversee Detroit’s largest-ever  bankrupt detroitChapter 9 municipal bankruptcy, pitting the City’s usual financial creditors, employees, taxpayers, and pension funds against one another, for the most part.  In the middle stood a host of law firms and other professionals who made almost two hundred million in fees for less than two years of work — one general suspicion of the general public is that most of this work was just churning of paper to run up hourly bills.

By some measures, the $200 million legal tab was surprisingly high to formulate a rough plan to deal with a swing of roughly $10 billion in city debts and assets and address a not particularly long process that was, in large part, settled through mediation.  There have been higher tabs, but usually associated with larger estates.  There’s a substantial chance, if the plan fails or the Detroit economy doesn’t miraculously reverse itself, that this was just another unsuccessful, expensive delay of the inevitable.

The court retained another law firm to ride herd on the legal fees and expenses, a dubious theory that yielded little or no meaningful fee management.  This is similar to what some other bankruptcy courts have done, presumably to divert public and press attention from high legal fees by claiming they were being examined, even if the examination was cursory or inept. Continue reading

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Divorced From Reality: Divorce lawyer says you should spend more to spend less

burning moneyHere are some warnings from a divorce lawyer who wants to warn you about the surprisingly high cost of divorce.  That really shouldn’t surprise anyone, unless you’ve been in a coma for a few decades or don’t use google.  One problem with this “honesty” approach, however, is that the lawyer suggests you need to spend more than you expect sometimes to avoid spending even more later — how can you possible know when enough is enough?

To me, this looks like a variation on the lawyer’s usual pitch to justify higher than expected fees:  Blame the system, the opponent, the judge, and so on, but do whatever the lawyer says and keep the money coming until you don’t have anything left.  Then the lawyer makes excuses by looking back and blaming others, then telling you it would have cost left if you’d spent more, just at different times.   The same might be said of everything in life, but 99 times out of 100, spending more just costs more. Continue reading

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Exit Stage Right: Immigration lawyer migrates from courthouse when government reneges on deal

The legal system is schizophrenic:  Lawyers are supposed to owe a high professional duty ice-logoto do whatever they can, but within some vague bounds, for their clients.  To be the client’s legal champion, but to dial it back for the sake of the “system.”  Unfortunately, it’s those vague boundaries that can be a problem.  The boundaries are there to “protect the legal system” — which protections come at the expense of the client.

Some lawyers and government officials will tell you those boundaries are obvious and important, but they really aren’t obvious and probably unimportant to protecting the system, maybe even counterproductive.  The people who claim they are crucial are just naive or cynically seeking to handicap their opponents.  These boundaries are vague and often manipulated to suit the needs or interests of the lawyer or client who’s got to make the call, or his or her opponent who wants to make an ad hominem argument rather than an argument on the legal merits of the dispute. Continue reading

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Flat World: Flat fees aren’t a legal billing panacea

flat worldThe legal industry press is forever proclaiming the demise of hourly billing in favor of flat fees.  Despite all the hype, nothing has really changed:  In the part of the legal and business press catering to “biglaw,” hourly fees are still dominant.  Hourly billing created biglaw and is the only legal fee alternative where size matters — hourly fees incentives dictate having lots of bodies.  Yet a system of flat fees already existed and will continue to exist, but flat fee economics dictate a smaller firm (or don’t reward a bigger firm, as well as rewarding creativity and efficiency), with lower overhead, and so on — only hourly fees reward quantity over quality.

From the client’s perspective, any billing option has its good and bad characteristics — there is no magic or perfect billing scheme that solves all problems, whether they are the problems of the lawyer or the client.  The key for the client, and also for the ethical lawyer, is to use a billing system that encourages what the client wants to encourage and discourages what the client doesn’t want or need. Continue reading

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Rating Your Lawyer: Setting hourly rates is an art, like collecting them

beersIn the legal and business press, as well as the general public impression of lawyers, setting hourly rates for lawyers is thought to be a mysterious but quasi-scientific process.  Court cases would encourage you to believe that, too, with their talk about relying on “prevailing market rates” and assumptions about the quality and availability of useful, reliable hourly rate data.  In reality, setting hourly rates is more like the hype around brewing fancy beer, with lots of distinctions without a difference, where the name’s as important as the taste.

Legally, setting rates is supposed to consider the local market (geographic and for each area of practice) of similarly experienced and skilled lawyers, all with perfect knowledge of what they actually collect (not just quote) and what all their competitors charge and collect (without violating Section 1 of the Sherman Antitrust Act). A big problem is that the necessary details are not available.  Another big problem is that the data comes mostly from the firms with an interest in enhancing rates, so often the data is sparse and consists mostly of suggested retail rates, not rates as collected.  (To see how soft quoted rates are, just look at the huge “discounts” most insurance companies claim they get, even as the firms make it up by enhancing the staffing, hours, and tactics to get back to profitable territory.)

In reality, setting hourly rates isn’t scientific, statistical, or even objective.  It’s got all the precision, statistical validity and reproducibility of weather forecasting or tasting testing of beer.  Setting hourly rates is often arbitrary, relying on the sort of loose arithmetic usually espoused by economists and politicians.

Rates are assumed in the cases to be known to everyone and hours and expenses are supposed to be accurate to the tenth of an hour and penny, respectively.  Inflating time or expenses can be an ethical or other legal issue.  Setting the hourly rate is supposed to approach that sort of precision, if you read the case law. Continue reading

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No Way Out: Court blocks lawyer’s attempt to dump non-paying client

wrong-way-do-not-enter-signThere are lots of stories about the games some lawyers play to induce reluctant or poor clients to pay up.  The usual theme is that the lawyer will undermine the client’s position to gain leverage to force the client to pay — or else the lawyer will abandon the client.  In reality, even if the lawyer has a legal right to be paid and the client has no legitimate excuse, the lawyer cannot just drop a client.  Indeed, how the lawyer treats the client and whether the lawyer follows the special rules before exiting can be very important.

Quitting or even scaling back work or threatening to quit can be a big mistake for the lawyer.  Once you sign up to be someone’s lawyer, you’ve entered into a professional relationship and there’s no easy way out, even if the client is stubborn, disagreeable, or too cheap to pay.  Many times the lawyer’s attitude will cost money, or worse — the lawyer can even be compelled to continue representing the client if the matter is in court, for example. Continue reading

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To The Victor: State officials fight over legal spoils cloaked in secrecy

coneofsilence

Get Smart’s “Cone of Silence”

There is an entire sub-industry of private lawyers catering to federal, state, and local governments, paid directly or indirectly out of taxpayer or government money (or some other pile of cash at the disposal of government agencies, like government fees, fines, or the like), plus the lawyers who live off opposing them.  In many locales, this source of business is very political — the spoils go to the lawyers with current connections.  A prominent example recently is the millions spent by New Jersey over “Bridgegate” — the closing of a bridge into Manhattan one day in 2014 as apparent retaliation by Governor Christie against commuters passing through cities the governor doesn’t like.

This doesn’t count, for example, “private attorney general” or other arrangements for paying legal fees and expenses out of recoveries from the pockets of defendants by private lawyers in the name of the public, but not actually out of public pockets.

Part of the problem with this underground quasi-public legal economy is the tendency toward favoritism (and overpayment).  Another problem is that it moves what should be routine, but known, expenditures covered in every government budget into a hidden slush fund.  Except for the smallest government entities — like a village or small town or county — pretty much all governments have lawyers on staff, who are paid much more modestly than private lawyers, usually. Continue reading

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