MANHATTAN — A judge in United States District Court for the Southern District of New York reduced the cost of attorneys' fees in a settlement against Bank of America after a firm used temporary attorneys for document review and billed at normal staff rates.
Judge William Pauley III ruled that $10.3 million would be cut for the fees.
The settlement comes from a mortgage-backed securities case involving Pennsylvania Public School Employees' Retirement System v. Bank of America Corporation et al. The court decided in favor of the plaintiffs on March 11 and adjusted June 13.
Barrack, Rodos & Bacine, the firm that represented the plaintiffs, hired temporary attorneys for discovery but billed their clients at the same rate as full-time employees.
“The judge observed the firm was gearing up for discovery by hiring 16 temporary attorneys at the full-time attorney rate that, according to the ruling were gone within a year,” Doug Austin, vice president of professional services with CloudNine, a company that provides discovery software and services to the legal profession, told the Pennsylvania Record.
Barrack, Rodos & Bacine's temporary attorneys worked between 2013 and 2014, and billed at the rate of $362.50 per hour.
Although the firm billed that much for them, it doesn’t necessarily mean they paid those attorneys that much.
It is common for firms to hire temporary attorneys, which costs the firm less, but Pauley said in the decision that he thought the "practice of 'gear(ing) up’ for discovery by hiring a large group of temporary ‘associates’ and billing them at the firm’s standard rates for what this court must assume was first-cut document review” was "troublesome."
Pauley wrote that hiring these temporary associates and billing more than $350 per hour "seems excessive" for work that is typically the domain of contract attorneys and paralegals.
To adjust for the overbilling, Pauley decided to cut the attorneys' fees in the settlement.
“The simplest resolution is to reduce the lodestar multiplier from 1.5 to 1.2, resulting in attorneys’ fees of $41,340,835.80, or 12 percent of the Fund,” Pauley said in the decision.
Austin said that this decision isn’t the first of its kind.
“I haven’t seen a lot of these cases, but I have seen a few,” he said.
Although this isn’t a precedent setting decision, there are lessons that legal firms can learn from this case.
“I think the takeaway is that judges are paying attention and becoming more knowledgeable about what attorneys do, especially when it comes to document review,” Austin said.
In this case, Pauley was aware that discovery is generally work done by lower paid or temporary attorneys and that more than $350 an hour is a rate paid to full-time associates.
“Courts are paying better attention,” Austin said. “They have a better understanding of what work is being done and what fees are likely appropriate for that work.”