Attorney Misconduct, Biglaw, Billable Hours, Litigators, Malpractice, Partner Issues, Susman Godfrey, Trials

Ex-Client Sues Debevoise & Plimpton for $55 Million

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Is suing a former client for unpaid bills a wise idea? Maybe not. As John Marquess, president of Legal Cost Control, told the New York Law Journal, “If I were advising any law firm, I would tell them suing a client over fees is a no-win situation. It’s going to get you adverse publicity you may or may not recover from. And if it went before a jury, juries hate lawyers.”

And what if your ex-client is, say, a green company devoted to the cause of sustainable forestry? Going after that client seems like an even worse idea from a PR perspective. Al Gore would not approve.

But Debevoise & Plimpton decided to move forward anyway with its $6 million lawsuit for unpaid fees (see last item). Now the firm is on the receiving end of some unpleasant counterclaims….

From Am Law Litigation Daily:

On Wednesday morning, Debevoise’s erstwhile client, Candlewood Timber Group, filed an answer and counterclaims against Debevoise, seeking damages of $55 million. And some of Candlewood’s allegations about its former law firm aren’t very flattering….

Candlewood now asserts that Debevoise made critical errors, missed major points, and billed excessively for the work of inexperienced lawyers. The firm’s deficiencies, according to Candlewood, forced the company to accept less in a settlement than it should have. The company’s counterclaim contrasts Debevoise with Candlewood’s Delaware counsel–Bouchard, Margules & Friedlander—which successfully represented the company for two-and-half years at a total cost of $450,000. “Over a 10-month pretrial and trial period–during which time D&P had the assistance of BM&F and later Susman–D&P managed to bill for more than 15,000 hours, the equivalent of 10 lawyers working full-time for the ten-month period,” Candlewood’s counterclaim alleges.

Fifteen thousand hours? Not bad. It may not be a Siemens, but this is still the kind of matter that should throw off millions in fees (too bad for Debevoise that they weren’t paid, at least not in full).

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Here’s more about the case’s background, from Am Law:

First, some background. The dispute between Debevoise and Candlewood arose from a 2003 breach-of-contract case Candlewood filed in Delaware Superior Court against Pan American Energy. Candlewood retained Debevoise & Plimpton after it brought the case. But about eight months later, with trial only two months away, Candlewood became unhappy with Debevoise’s work and brought in Susman Godfrey to try the case, with Debevoise staying on in a secondary role.

The father-and-son duo of Stephen Susman and Harry Susman tried the case to verdict in 2006…. Before the verdict became public, Candlewood and Pan American reached a confidential settlement.

(Candlewood was quite happy with Susman Godfrey’s work — just like Ellen Barkin, who was represented by partners Stephen Susman and Jacob Buchdahl in her successful effort to squeeze out another $3.4 million from her billionaire ex-husband, Ron Perelman.)

Robert Chan of Ferber Chan — who doesn’t look like most Chans we know, but hey, this is America in the twenty-first century — furnished Above the Law with this statement about the case:

Candlewood is a green company pioneering the field of sustainable forestry. Debevoise’s retainer agreement promised it would seek to provide “legal services of the highest quality on the most cost-effective basis possible.” Instead it assembled a team of between 87 and 119 time-billers (the bills are so obfuscatory that even the number of people who billed time cannot be determined with accuracy) and missed crucial aspects of the case.

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That’s a lot of timekeepers — and D&P talent doesn’t come cheap. Check out the retainer letter, attached as an exhibit to the answer and counterclaims (PDF):

Our current hourly rates for this matter range from $340 per hour for our first year associates to $775 per hour for our most experienced partners. Rates for legal clerks, project assistants, legal assistants and other support personnel are lower. [Partner Daniel Abuhoff’s] hourly rate is $775, and the hourly rate for [partner] Donald Donovan is $775.

And remember, this was back in July 2005. We suspect that today, some four and a half years later, the rates are even higher. (Perhaps clients now have a greater ability to win discounts off the rate card, thanks to the Great Recession, but we suspect that Debevoise’s official rates for 2010 are higher than they were in 2005.)

Paragraph 75 of the complaint goes on at length about what Candlewood views as excessive staffing and insufficiently detailed bills. It’s a fun and snarky read (although, based on our knowledge and experience of Biglaw, we don’t know that D&P did anything all that unusual here):

But it wasn’t all about the billable hour. Interestingly enough, even back in summer 2005, Debevoise was already experimenting with alternatives:

For its part, Debevoise maintains that the counterclaims are meritless:

In a statement provided to [the American Lawyer] by Debevoise’s lawyer, solo practitioner Roger Bernstein, the firm said that the settlement Candlewood received in the Delaware case was “far in excess of the value of the asset in dispute” and that Candlewood could have done even better had it allowed the jury verdict to be entered.

“We took over a challenging case and provided legal services of the highest quality, contributing to a successful outcome and a substantial recovery for Candlewood,” said Debevoise presiding partner Martin Frederic Evans in the statement. “We’ve tried negotiation, mediation, and compromise to resolve this dispute. It is disappointing to be faced with a party, to whom we provided superior service with a successful outcome, who has chosen to raise baseless objections and now, belatedly, specious counterclaims in an effort to avoid its obligations.”

Candlewood responds by claiming that it has been the party trying to keep things civil and stay out of court. From Robert Chan’s statement to ATL:

Although suffering $55 million in damages at Debevoise’s hands, Candlewood has tried negotiation, mediation, and compromise to resolve this dispute. Debevoise, however, refused to discuss Candlewood’s counterclaims, making it appear that Debevoise has no viable defense. Apparently unaware of the proverb “Pride goeth before destruction, and an haughty spirit before a fall,” Debevoise continued to demand payment of even more than the amount of its bloated time charges.

Candlewood would love to be able to devote its time and energy to its green forestry mission and the last thing it wants is the diversion and unpleasantness of a lawsuit, but Debevoise’s blunders and highhandedness leave Candlewood with no choice but to pursue justice.

It sounds like this will be an interesting ride. We will keep you posted on future developments.

UPDATE: An internal email went around at Debevoise about the Candlewood matter. It included the following statement:

Candlewood yesterday filed its answer and counterclaims, asserting that the firm’s work was inefficient and negligent. Those assertions inevitably will get some press coverage, even though they are and should be seen as baseless, belated arguments raised simply in an effort to avoid paying the fees that Candlewood owes.

You can read the complete answer and counterclaims by clicking here.

UPDATE (7/8/2013): More than three years later, the litigation between Debevoise and Candlewood continues to drag on.

Debevoise & Plimpton v. Candlewood Timber Development, LLC: Amended Verified Answer and Counterclaims [PDF]
Ex-Debevoise Client Raises Nasty Counterclaims in Unpaid Bills Case [Am Law Litigation Daily]

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