N.Y. Court Restricts Award of Attorneys’ Fees of Inexperienced Associate

by Mike Mintz on March 1, 2012 · 1 comment

in Law Firms,Practice Management,Small law firm/solo practice issues

In a recent New York case involving an award of attorneys’ fees, the court called into question the hours worked by an inexperienced associate and the rate charged for those hours. The court subsequently severely reduced the firm’s request for attorneys’ fees.

Facts

The case, Francis v. Atlantic Infiniti, Index No. 19953/06 (N.Y. Sup. Ct., Queens Co. 2/7/12), arose out of the sale of a used automobile which turned out to be a lemon. Plaintiff-purchaser brought an action against the car dealer pursuant to New York’s “Lemon Law”, General Business Law § 198-b.

After summary judgment was granted, the plaintiff sought $99,505 in attorneys’ fees and $3,055.60 in costs for a total of $102,560.60. Defendant did not dispute plaintiff’s request for attorneys’ fees but did dispute the amount, claiming that it was exorbitant.

Plaintiff’s law firm, Sadis & Goldberg, LLP, which specializes in litigating Lemon Law cases, assigned an inexperienced associate to the case. He began practicing law in 2003 and first joined plaintiff’s firm in 2006. He billed 94% or 204.60 hours of the total 227 hours of attorney time on the case at $410.00 per hour. The associate was supervised by an attorney who graduated from law school just a year before he started practicing law. The attorney-supervisor billed 19.2 hours at $330.00 for a total of $6,336.00. (Inexplicably, the billable rate of the supervising attorney was significantly less than that of the inexperienced associate he was overseeing.)  Two additional, more senior attorneys also billed at a rate of $410. Two paralegals billed out at $130.00 per hour.

A paralegal drafted the complaint, and the firm used boilerplate pretrial discovery demands for documents. (The firm does not employ secretaries.) There were no depositions, and plaintiff did not retain experts. The firm billed $2,510.00 for an unfiled motion to compel, and it billed an additional $12,309.00 for a motion for summary judgment. The inexperienced associate billed over half of the $12,309. He conceded that in drafting the motion he relied on motions and briefs that the firm had prepared in prior cases. After the summary judgment motion, plaintiff’s firm had billed more than triple what defendant’s counsel billed.

On the appeal, Sadis billed $60,864.00, of which $51,906.00 was again billed by the inexperienced associate. Defendant’s legal fee for the appeal, on the other hand, was approximately one-fifth that amount. This was the inexperienced associate’s first appeal. Furthermore, some of the documents prepared for the appeal were substantially the same as those drafted in the motion for summary judgment. The associate also used documents that had been prepared for a previous Lemon Law case.

Basis for Awarding Reasonable Attorneys’ Fees

Courts are allowed to award reasonable attorneys’ fees in Lemon Law cases pursuant to General Business Law § 198-b (f)(5), including fees incurred in litigating an appeal.  Factors used to determine reasonableness include time and labor expended as well as the skill required, the complexity of the matter, the attorney’s experience, his ability and reputation, the client’s benefit from the services and the fee usually charged by other attorneys for similar services.

One of the most important pieces of evidence the court relies on to determine the nature and extent of legal services supplied is a contemporaneous time sheet.  The time sheet must provide the number of hours worked, a description of the services provided, the date the services were provided and the specific claim to which the hours pertain.

Hours are disallowed if they are not properly documented or if there are duplicative hours or “padding”. Also, only legal work is supposed to be billed at an attorney’s rate, not clerical or secretarial work and not any other work that can be done by non-lawyers.  Hours reasonably spent by counsel in preparing the fee application and in litigating a fee award are also compensable. However, if the fee claims are exorbitant or the time devoted to presenting the fee application is unnecessarily high, the application can be denied outright or greatly reduced.

Defendant claimed that plaintiff’s counsel improperly billed for non-legal clerical work and that the legal work that was performed was excessive, duplicative, unnecessary, unproductive and inefficient.

Disallowance of Attorneys’ and Paralegal Hours

Not surprisingly, the court disallowed many of the hours that the law firm claimed it spent litigating the action.  For example, the court disallowed the bill for the unfiled motion to compel, reasoning that since it would not be proper for plaintiff’s counsel to bill its client for work on an unfiled motion, the hours could not be charged to the adversary either.

As for the supervising attorney, he never appeared in court, he did not draft any legal papers, and he had only limited contact with defendant’s counsel. A significant amount of his billed time was devoted to supervising the work of the inexperienced associate. The court concluded that this time was duplicative of the work performed by the inexperienced associate and, therefore, reduced the supervisor’s billed time significantly.

As for the paralegals, they billed for work which was partly secretarial in nature. The time spent on clerical functions should not have been billed at a paralegal’s rate, and the court consequently disallowed half their hours.

Reasonableness of Hourly Rates

Sadis claimed that its hourly rates were reasonable, relying on the Laffey Matrix for support. The Matrix provides a listing of hourly rates for the Civil Division of the United States Attorney’s Office for the District of Columbia (not Queens, New York). It is based on the number of years an attorney has been practicing law. Hence, with respect to the attorneys and paralegals who worked on this matter, plaintiff claimed a rate of $410.00 per hour for the inexperienced senior associate; $330.00 per hour for the supervising attorney; $410.00 per hour for the other two senior attorneys; and $130.00 per hour for the paralegals.

Not surprisingly, defendant asserted that plaintiff’s hourly rates were excessive and unreasonable.

As a general rule, the reasonable hourly rate is based on the customary fee charged for similar services by lawyers in the community with like experience and of comparable reputation. The applicant bears the burden of establishing the prevailing hourly rate for the work performed. The Second Circuit has also weighed in on this subject, noting that a reasonable, paying client would only want to spend the minimum amount necessary to litigate the case effectively.

The court concluded that Sadis failed to satisfy its burden of establishing the prevailing hourly rate for legal work performed in Queens County, noting that its reliance on the Laffey Matrix was misplaced. The Matrix provides reasonable hourly rates for civil actions commenced in Federal Court in Washington, D.C.– not a state court in Queens County.

Instead, the court used other means to determine reasonable hourly rates in Queens County.

Specifically, the court looked to other cases, including local federal case law, involving the issue of reasonable attorneys’ fees under other fee shifting statutes. The court concluded that the hourly rate of $300.00 per hour was reasonable for Queens County for an experienced attorney of ten to fifteen years; $250.00 per hour for five to ten years’ experience; $225.00 per hour for five years’ experience or less and $85.00 per hour for a paralegal.

COMPUTATION OF LODESTAR FEE

The next step in calculating an award of attorneys’ fees is multiplying the number of hours reasonably spent on the litigation by the reasonable hourly rate. The basic fee generated by this computation is known as the lodestar fee.

To compute the lodestar fee in this case, the court disallowed some of the inexperienced associate’s hours and reduced his hourly rate to $225, instead of the claimed $410 rate. The supervising attorney’s hours were also cut down. The court disallowed the time he spent supervising the inexperienced attorney, and his hourly rate was reduced to $250.00. The other senior attorneys’ hours were greatly reduced, and their rates were reduced to $300.00. The paralegals were allowed half their hours at a rate of $85.00.

ADJUSTMENTS TO LODESTAR FEE

Once the court calculates the lodestar fee, the court is free to increase or lower the final amount by taking into account the following subjective factors: (1) the novelty and difficulty of the questions presented; (2) the skill needed to perform the legal services properly; (3) the preclusion of other employment by the attorney due to acceptance of the case; (4) whether the fee is fixed or contingent; (5) time limitations imposed by the client or the circumstances; (6) the nature and length of the professional relationship with the client; (7) the amount involved and the results obtained; (8) the undesirability of the case; and (9) awards in similar cases.

The court found no basis for increasing Sadis’s legal fees based on these factors.  On the other hand, the court did find a basis for reducing its fees. Sadis possesses significant experience with Lemon Law litigation and it was thus able to use, and in fact did use, writings and memoranda from prior litigation in similar cases to prosecute this case and litigate the appeal.  The firm did not make allowances for this when it submitted its time records to the court.

Furthermore, other courts have awarded the same firm substantially lower attorney’s fees than the amounts they typically demanded to be awarded.

The court also pointed out that plaintiff’s counsel obtained a full refund of the car’s purchase price, i.e. $20,949.00, yet the firm was seeking $102,560.60 in fees-approximately five times more than the recovered amount. No client in their right mind would pay this amount of legal fees for such a relatively paltry recovery.

Courts can also consider an attorney’s experience or skill in awarding reasonable attorney’s fees. For instance, an experienced or skillful attorney would probably do the work in a shorter period of time than an inexperienced or lesser skilled attorney. In this case, the inexperienced attorney, who expended 94% of the attorney time on the case, had limited expertise. He had practiced law for only three years and had no experience in Lemon Law litigation. Also, he was a novice on the appeal. He did not establish that he needed to spend the claimed 204.60 hours on the case. The action did not involve extensive discovery, depositions, expert witnesses or motion practice other than plaintiff’s motion for summary judgment. There was also no trial. Moreover, neither the case nor the appeal raised any novel or complex issues or even ones that required expert proof.

The associate spent an inordinate amount of time performing legal tasks on a simple, routine, and uncomplicated case—all due to his inexperience. The court reasoned that the work could have been performed in less time and more efficiently by a more experienced, skilled, and knowledgeable attorney. The court thus further reduced plaintiff’s fee request by an additional 45% (on top of the disallowance of hours and the reduction of the attorneys’ and paralegals’ hourly rates) to compensate for excessiveness, padding, and inefficiency in its bill.

 THE TAKE AWAY

The most important lesson firms should bring away from this case is to assign lead attorneys with the requisite skills and experience necessary to handle matters efficiently. Firms should also be vigilant in reviewing timesheets so as to refrain from billing for duplicative, clerical or unnecessary services.

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