Billable Hours, Email Scandals, Ho-Love, Hogan & Hartson, Lateral Moves, Legal Ethics, Money, Partner Issues

Overbilling Gone Wild: Paying the (DLA) Piper

Opening a legal bill from DLA Piper?

Here at Above the Law, we ❤ DLA Piper. The firm makes for great copy; there’s always something funny, ridiculous, or salacious going down over there.

In fairness to DLA Piper, the craziness might not be that high on a per capita basis. DLA Piper is one of the largest law firms in the world. In the most recent Global 100 rankings, DLA took second place in both total revenue and attorney headcount.

Many of the DLA Piper stories are on the lighter side. But this latest one — involving serious allegations of overbilling, apparently supported by internal DLA emails saying things like “churn that bill, baby!” — is no laughing matter….

Here’s a report from Peter Lattman of the New York Times (via Morning Docket; emphasis added):

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!”

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.

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.”

This illustrates the danger of suing a client for unpaid bills. We’ve talked about this before. If the client has any dirty laundry about you, expect it to be thoroughly aired.

And it seems that Adam Victor has some of DLA’s dirty cloth diapers (again, emphasis added):

“I hear we are already 200k over our estimate — that’s Team DLA Piper!” wrote Erich P. Eisenegger, a lawyer at the firm.

Another DLA Piper lawyer, Christopher Thomson, replied, noting that a third colleague, Vincent J. Roldan, had been enlisted to work on the matter.

“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.”

A DLA Piper spokesman said the firm did not comment on pending litigation.

Actually, DLA Piper’s Venusian substation commented to Above the Law: “This is just a misunderstanding. We quote all of our prices in Wampum, not dollars. It’s much easier to barter across our global offices.”

Overbilling happens at many other major law firms. But query whether other firms talk as openly about it as the DLA attorneys reportedly did:

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.

“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. [one of Adam Victor’s companies] has been in for years it does have lots of wrinkles,” Mr. Thomson wrote.

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.”

Ouch. DLA is not exactly known as a market leader in associate pay. During the depths of the Great Recession, the firm froze and then cut associate salaries (before eventually returning to market rates).

On the other hand, one might argue that even if DLA pays the same as Cravath, it won’t get Cravath-caliber associates. Recruits will use prestige as a tiebreaker and go to Cravath anyway — unless, for personal reasons, they need to work in the country continent of Africa. Kigali to 190?

How are these emails being used in Adam Victor’s litigation against DLA Piper? Victor, represented by Larry Hutcher of Davidoff Hutcher & Citron, cites them in support of a request to amend his countersuit against DLA. Victor wants to add a fraud claim and a request for $22.5 million in punitive damages — 1 percent of DLA’s revenue from last year.

As for the individual lawyers who sent or received the smoking-gun emails, they’re no longer at DLA (for reasons unrelated to the litigation with Adam Victor, according to the Times). Here’s information on their whereabouts from Am Law Daily:

[Christopher] Thomson, who no longer works at DLA Piper, could not be reached for comment.

[Vincent] Roldan was a senior associate at DLA Piper who now practices at Vandenberg & Feliu, according to the firm’s website. He did not return a call for comment.

[Erich] Eisenegger, [Jeremy] Johnson and [Timothy] Walsh are now all partners at McDermott Will & Emery. They did not return calls for comment. McDermott spokesman Christopher Rieck declined to comment.

Lee Smolen

So the revolving door continues to spin at DLA Piper. And it goes in both directions, bringing lawyers in as well as sending them out.

Remember Lee Smolen, the prominent real estate lawyer who left Sidley Austin for unknown reasons? He has landed at DLA Piper.

But others have left — including some partners who joined DLA not that long ago. In January 2012, we wrote about a high-powered group of energy lawyers that left Hogan Lovells for DLA Piper. Now, a little more than a year later, most of that group is returning to their former home. As one source told us:

You reported on the Kevin Lipson energy group leaving Hogan Lovells last year for DLA Piper. Members of the group, consisting of Kevin Lipson, Stefan Krantz, Chris Schindler, and John Lilyestrom, [are] returning to Hogan! Big news, after only one year at DLA, this significant energy practice is returning to its home firm.

There’s additional coverage over at Am Law Daily and The BLT (which notes that one member of the group, Lee Alexander, will remain at DLA Piper). An update to the Am Law story notes that two other energy partners, Jeremy Kennedy and Carlos Sole, have left DLA’s Houston office for Baker Botts. One has to wonder: What’s going on with DLA’s energy practice?

A tip for DLA’s remaining energy lawyers: tell clients who complain about their bills that you read the meter wrong. It works every time.

UPDATE (3/27/2013, 10:15 a.m.): DLA Piper has broken its silence and responded to the claims of overbilling. It characterizes the emails as “an offensive and inexcusable effort at humor” but denies that any actual overbilling occurred. Read the full message, an internal memo to DLA lawyers, on the next page.

UPDATE (4/17/2013): The parties in the case have reached a confidential settlement.

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