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<span class="" title="2013-03-25T15:36:34+00:00">March 25, 2013, <span>3:36 pm</span></span>
<h3 class="">Suit Offers a Peek at the Practice of Inflating a Legal Bill</h3>
<address class="">By <a href="http://dealbook.nytimes.com/author/peter-lattman/" class="" title="See all posts by PETER LATTMAN">PETER LATTMAN</a></address>
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<p><strong>8:52 p.m. | Updated </strong></p><p>They were lawyers at the
world’s largest law firm, trading casual e-mails about a client’s case.
One made a sarcastic joke about how the bill was running way over
budget. Another described a colleague’s approach to the assignment as
“churn that bill, baby!”</p><p>The e-mails, which emerged in a court
filing late last week, provide a window into the thorny issue of law
firm billing. The documents are likely to reinforce a perception held by
many corporate clients — and the public — that law firms inflate bills
by performing superfluous tasks and overstaffing assignments.</p><p>The
internal correspondence of the law firm, DLA Piper, was disclosed in a
fee dispute between the law firm and Adam H. Victor, an energy industry
executive. After DLA Piper sued Mr. Victor for $675,000 in unpaid legal
bills, Mr. Victor filed a counterclaim, accusing the law firm of a
“sweeping practice of overbilling.”</p><p>Mr. Victor’s feud with DLA
Piper began after he retained the firm in April 2010 to prepare a
bankruptcy filing for one of his companies. A month after the filing, a
lawyer at the firm warned colleagues that the businessman’s bill was
mounting.</p><p>“I hear we are already 200k over our estimate — that’s Team DLA Piper!” wrote Erich P. Eisenegger, a lawyer at the firm.</p><p>Another
DLA Piper lawyer, Christopher Thomson, replied, noting that a third
colleague, Vincent J. Roldan, had been enlisted to work on the matter.</p><p>“Now
Vince has random people working full time on random research projects
in standard ‘churn that bill, baby!’ mode,” Mr. Thomson wrote. “That
bill shall know no limits.”</p><p>A DLA Piper spokesman said the firm did not comment on pending litigation.</p><p>Legal
ethics scholars said that it was highly unusual to find documentary
evidence of possible churning — the creation of unnecessary work to
drive up a client’s bill.</p><p>Stephen Gillers, who teaches professional responsibility at <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/n/new_york_university/index.html?inline=nyt-org">New York University</a>
Law School, called the e-mails a troubling example of lawyers’ flip
attitudes toward a client’s escalating fees. And he noted that they had
come to light at a time when corporations are increasingly rejecting the
billable hour standard and becoming vigilant about controlling
skyrocketing legal expenses.</p><p>William G. Ross, a law professor at
Samford University’s Cumberland School of Law who specializes in billing
ethics, said that the DLA Piper e-mails appeared to support what
several of his studies had shown: that churning, while not endemic, is
an insidious problem in the legal profession.</p><p>In a survey of about
250 lawyers that Professor Ross conducted in 2007, more than half
acknowledged that the prospect of billing extra time influenced their
decision to perform pointless assignments, such as doing excessive legal
research or extraneous document review. There is also the issue of
“featherbedding,” he said, or throwing armies of bodies at every
problem. </p><p>“Lawyers sometimes conflate their own financial
interests with the interests of the client who pays the bills,”
Professor Ross said. “Of course, most lawyers are ethical, but the
billable hour creates perverse incentives.”</p><p>The three DLA Piper
lawyers who wrote the e-mails have since left the firm. Mr. Eisenegger
and Mr. Roldan, who now work for other law firms, did not respond to
requests for comment. Mr. Thomson, now a government lawyer, declined to
comment. Their departures had nothing to do with the Victor case,
according to people briefed on the matter.</p><p>The fee dispute centers
on DLA Piper’s representation of Mr. Victor in a Chapter 11 filing for
one of his holdings, Project Orange Associates, the operator of a power
plant in Syracuse that provided steam to <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/s/syracuse_university/index.html?inline=nyt-org">Syracuse University</a>.
Mr. Victor, the chief executive of TransGas Development Systems, which
is based in New York, said that his fight over the Project Orange bill
was the culmination of a relationship that had deteriorated over the
last decade as DLA Piper undertook a breathtaking expansion.</p><p>He
said that when he first started working with DLA Piper in the late
1990s, the firm was a modest size and went by the name Piper Rudnick.
Mr. Victor had a point person at the firm, Nicolai J. Sarad, a partner
in the energy industry practice.</p><p>But as DLA Piper grew, Mr. Sarad
began spending less time on his assignments, Mr. Victor said. Mr. Sarad
did not respond to a request for comment.</p><p>Through acquisitions,
joint ventures and the aggressive hiring of partners from other firms,
DLA Piper has grown into a global monolith of 4,200 lawyers in more than
30 countries, making it the world’s largest firm by lawyer count. Last
year, it posted revenue of $2.25 billion, according to The American
Lawyer magazine.</p><p>“As the firm got bigger, there were all of these lawyers who I didn’t know suddenly showing up on my bills,” Mr. Victor said.</p><p>He
said he was particularly irked by the routine practice of DLA Piper
partners farming out assignments to the firm’s junior lawyers. He
complained that this resulted in higher bills and often subpar work.</p><p>Internal
DLA Piper e-mails from the Project Orange bankruptcy appear to
corroborate that criticism. Lawyers on the case openly discussed the
inefficient use of junior lawyers, who are known as associates. Mr.
Thomson, a DLA Piper lawyer, wrote that although the firm had reduced
the amount of a bill for Mr. Victor, he expected his fees to escalate.</p><p>“DLA
seems to love to lowball the bills and with the number of bodies being
thrown at this thing it’s going to stay stupidly high and with the
absurd litigation P.O.A. has been in for years it does have lots of
wrinkles,” Mr. Thomson wrote.</p><p>Later, Mr. Thomson complained that
DLA Piper associates were taking too long to complete assignments. “It
took all of them four days to write those motions while I did cash
collateral and talked to the client and learned the facts,” Mr. Thomson
wrote. “Perhaps if we paid more money we’d have skilled associates.”</p><p>The
e-mails were included in the 250,000 pages of documents that were
turned over to Mr. Victor by DLA Piper as part of pretrial discovery in
the case. Mr. Victor said that the e-mails confirmed his worst
suspicions.</p><p>His lawyer, Larry Hutcher at Davidoff Hutcher &
Citron, amended the countersuit last week to include a fraud claim and a
request for $22.5 million in punitive damages, a number representing 1
percent of DLA Piper’s reported revenue last year.</p><p>“For the past
decade, I have fought with DLA to reduce their legal bills,” Mr. Victor
said. “And now I’m going to keep on fighting.”<br clear="all"></p></div></div></div><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br>
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