ACC Starting Crusade Against Bill Churning?

Article Placeholder Image
By William Peacock, Esq. on April 02, 2013 10:02 AM

Too many lawyers. Not enough gigs. What happens when supply greatly exceeds demand?

Firms charge hundreds of dollars per hour for contract counsel, apparently.

Now, we're all familiar with the job market. Many of us who suffered, or are suffering, long-term post-graduate unemployment are familiar with the effect of that market on contract counsel wages. On the rare occasion that such a position is actually available, it pays far less than $100 per hour - unless the position is extremely specialized (such as Japanese patent law).

Last month, the Association of Corporate Counsel, on behalf of the in-house counsel bar, issued an amicus letter to the court in In re Citigroup Securities Litigation. In the letter, the ACC stops short of making accusations, but states that regardless of whether the bloated bill was caused by markup or by overpaying contract counsel, the firm should not get the hundreds of dollars per hour requested.

The case itself is fairly unremarkable. It's class action litigation about toxic mortgages and angry shareholders. The bill, however, is fascinating. Not only are contract counsel making hundreds of dollars per hour, but much of the work was billed after the case reached a settlement agreement.

Reuters has more on the $100 million bill. The case was filed in 2007 and a settlement agreement was reached in May 2012. Temp attorneys are tabbed at $350 to $550 per hour. Document review alone accounted for at least $17 million. And as much as 30 percent of all of the work billed by attorneys occurred after the settlement date.

The ACC, which has no direct stake in the case, isn't the only party objecting. Ted Frank, who according to Reuters is both a Citigroup shareholder and a well-known class action reform advocate, also filed a brief objecting to the arguably excessive fees.

Common sense, the Second Circuit, the Model Rules of Professional Conduct, and the Supreme Court have all said basically the same thing - market price should dictate the reasonable fee billed.

How can you, as in-house counsel, ensure that you don't get stuck with $500 contract counsel? The ACC points out, in their amicus letter, that many in-house attorneys are hiring their own contract counsel. This avoids markup and allows them to set the rate.

Beyond that, it you're lucky and the bill is big enough, the ACC might also weigh in again. The ACC's chief legal strategist told Reuters that "We've been looking for opportunity in courts to weigh in, so this was a pretty juicy target." In other words, this amicus business isn't a one-and-done affair.

Related Resources: