Citigroup, Contract Attorneys, In-House Counsel, Plaintiffs Firms, Practice Pointers

House Rules: The Rates Are Too Damned High! (Part One)

In-house counsel need organizations like the ACC to stand up to firms seeking exorbitant fees.

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It is common knowledge around ATL that I am a huge proponent of the Association of Corporate Counsel (“ACC”). I have served on their boards, presented at their seminars and annual meetings, and generally participated as much as my time allows. Now, truthfully, this amount of participation has gotten me to Orlando, Los Angeles and New Orleans; all absolutely necessary trips, I swear. But there is another side to ACC than just fantastically run and organized events and parties, and that other side is advocacy on the part of business, and specifically in-house business.

Lat sent me a press release this week focused on an amicus letter that ACC sent to the S.D.N.Y. regarding the plaintiffs’ attorney fees request in In re Citigroup Securities Litigation, Case No. 1:07-cv-09901-SHS. After reading the letter and doing some research on my own, I came to the conclusion (yet again) that I have missed the boat by not practicing plaintiff-side law. These folks are asking with straight faces for what seem to be exorbitant and outrageous fees. Specific to this post and the ACC letter, they argue that contract attorney time (such attorneys normally make modest hourly wages) should be calculated at Biglaw associate hourly rates in order for the judge to arrive at a fee award. To put on my elite intellectual vocabulary hat for a moment, this is crazy talk…

I have absolutely nothing against contract lawyers. A job is a job in this economy, and this post is not an advocacy piece for or against contract work. This piece regards the fees that the plaintiffs in the above-titled litigation are seeking on the backs of those hardworking contract lawyers. You and I know that those folks did not receive anywhere near the hundreds of dollars per hour that they are being billed out at. And before anyone comments on the fact that Biglaw associates also don’t collect anywhere near their billing rate, let me say, no kidding. However, associates are also not paid $80 to $100 per hour to perform grunt work. And I am not paying a law firm to hire the cheapest labor available and then turn around and bill me at hundreds of dollars per hour — in some cases, 1000 percent over the rate paid to the associate. So let’s dispense with that nonsense straight away.

I pay firms a premium for premium work. I worked in the firm system, and I am well aware of how it operates. It is generally a pyramid scheme rewarding those at the very top, while utilizing throughput to churn those associates who cannot or will not leave before they become too costly. For a miniscule few, partnership is the carrot that becomes a golden ticket working thousands of hours as a partner to buttress the retired partners’ pensions. What I do not pay firms for is the opportunity to have an important document review run by a junior associate overseeing contract workers who are often giving a percentage of their wages to the temp firm that placed them. And yes, I am aware that this type of thing happens all the time. But I am one person, in one company. It is exceedingly difficult, if not impossible, for my voice to be heard above the din of law firms’ ka-chinging accounts receivable invoices. And that’s why I rely on associations like ACC to step up to the advocacy role to ensure that the mode of business mentioned above does not become de rigeur. In fact, it ought to stop, and right away.

The plaintiffs’ firms in the Citibank litigation are salivating over the fees to be awarded. And that’s okay. I get excited when bonus time rolls around, or when I can sell some stock at a profit. But these firms need to be aware that their clients are watching this case with interest (amicus letters don’t appear in district court very often). If firms are viewing this as an opportunity for bigger margins over time, they are missing the long view. Companies don’t like to be taken to the cleaners over legal bills. Especially when companies are clients and not adversaries.

More on this issue to come next week.

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After two federal clerkships and several years as a litigator in law firms, David Mowry is happily ensconced as an in-house lawyer at a major technology company. He specializes in commercial leasing transactions, only sometimes misses litigation, and never regrets leaving firm life. You can reach him by email at dmowry00@gmail.com.

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