Independent Legal Fee Examination
Special Masters, Fee Examiners, Court-Appointed Experts
For Bankruptcies, Class Actions, and Substantial Fee Petitions
A special case for our legal bill review services is the provision of legal fee examinations as part of certain types of proceedings where John Toothman is selected to serve in a neutral or independent capacity, either by agreement of the parties or appointment by a court. This works quite well when the examination process is established early on, rather than waiting until all the work has been done and the formerly avoidable consequences of billing issues become unavoidable, and huge. Three advantages of independent examinations should be obvious: (1) the court's resources are conserved, (2) the parties share the cost, and (3) issues can be addressed earlier, when they are small and easier to fix.
Two important, but underutilized examples, are the fee examiner in a bankruptcy proceeding and the use of masters for class actions. The fact that these options are so rarely used and, even if used, frequently short-circuited or counter-productive, shows that the problems are well-known, but are still being ignored or not addressed effectively. We can provide an independent and effective, including cost-effective, solution to this problem.
Parallel tools might also include mediation and arbitration of fee issues -- we're affiliated with Legal Fee Arbitration, LLC: http://www.legalfeearbitration.us/. We have also served, for example, as pro bono arbitrators for bar-sponsored fee dispute arbitration systems. (For various reasons detailed elsewhere, we do not make a blanket recommendation of fee arbitration by most bar organizations nor by most commercial arbitration services, because of certain inherent conflicts and biases they exhibit.)
Fee Examination Authority
Generally speaking, most courts have the authority to appoint private parties to assist the court, such as Federal Rule of Evidence 706 for court-appointed experts and Federal Rule of Civil Procedure 53 and 54(d)(2) for masters. There are special provisions for fee examiners in bankruptcy (Fed. R. Bnkr. P. 706) and class actions subject to Rule 23(h)(4), Fed. R. Civ. P., see also, the Class Action Fairness Act of 2005. (Mr. Toothman has also served as court-appointed counsel to receivers in state and federal court.)
These tools could be used in any situation where fee-shifting between parties is a possibility or where fees are in dispute, e.g., in a lawyer versus client dispute. In most of those situations, we're hired by one party or the other -- whether it's to support or challenge a fee. We always look for the reasonable fee, regardless of who hires us.
Unfortunately these tools are rarely used properly, or early enough to reduce the stakes. We find, for example, many instances where inexperienced, ill-equipped, and even blatantly biased "fee examiners" with no actual qualifications are appointed to bless the bills. This is often done to deflect press, public, and political embarrassment that high legal fees can cause, whether they are really unreasonable or not.
Fee Examination Hurdles
With class actions, some of the special problems blocking serious review are that, by the time the case is almost universally settled, (1) the defendant(s) have agreed not to object to the plaintiffs' fees (the "clear sailing" provision), and (2) the plaintiffs' nominal lawyers have a serious conflict of interest when it comes to obtaining their fees out of the common fund belonging to the class members. Currently, the judge is left to "represent" the absent class members, few or none of whom have the resources or financial stake to hire someone like us to give the fee claim a serious review. The excesses of class action legal fees are well known, already supposedly addressed by legislation, CAFA, but CAFA neglected to appreciate that it takes more than a new rule to manage fees, it takes a working enforcement mechanism, one that recognizes that the judge doesn't have the resources to review the bills alone, nor is that the proper role for a judge in the adversarial system.
With bankruptcies, the problem is generally that, apart from the interests of their client creditors and debtors, the lawyers who represent them do not wish to rock the boat on one another's fees. (We've had lawyers who hire us ask that we go easy on some billing practices in our reports on other firms because the firm that hired us does the same thing.) Even if the other lawyers are from out of town, they all have an interest in making only cosmetic challenges to legal fees -- just enough to show the client or the press that the adversarial process is supposedly at work, when it isn't. Drawing a fee examiner from the local pool, which is the same pool from which bankruptcy judges (with limited terms) are also drawn, doesn't provide oversight so much as camouflage.
Even the US Trustees Office, which is supposed to have legal fee expertise, is way behind and ill-equipped. Their 2013 Guidelines for Reviewing Applications for Compensation (Fee Guidelines) attempt to make a few practical advances, but they are way behind the technology or state of the bill review art, plus some of their shortcuts (evidently designed to facilitate manual review of bills) will actually be exploited by firms attempting to evade meaningful review.
Honest, Experienced Fee Examination
All too often, even if a bill review is commissioned, it's either a sham -- to divert publicity and angry parties -- or it's performed by unqualified amateurs without the experience or tools to perform a real review. We've reviewed the work of many nominal legal bill examiners and most of them never even read the whole bill, let alone examine it thoroughly, with the skill it takes to find common problems. Serious bill review work requires knowledge, skill, experience, and the right tools. It can't be done with computer software alone, nor can you hire a pack of temps to look the bills over manually -- highlighters and calculators aren't the state of the art.
Part of the value we provide is that we've done this work for years, published nearly all the reliable information and standards for the business, and made the process transparent so it can be a true standard. We don't rely on "because we said so" logic and our work and methods can be verified. We apply the recognized legal standards. And we've tracked the evolution in billing practices and standards, as well as the games some lawyers play to avoid accountability.
Accountants, for example, make particularly useless legal fee examiners. They can check the arithmetic, but they cannot review the entries, hourly rates, work product, resumes, or the like. (We've served in joint ventures with major accounting firms for precisely this reason -- they don't do legal fees.) If you see an accounting firm "reviewing" a legal bill, you're not seeing a legal bill review.
We do not perform "nickel & dime" audits or reviews just to pressure firms to lower bills on technicalities. Indeed, we often support claims for fees -- we always support the reasonable fee. We do not, however, rubberstamp legal fee claims: Although the bill review process is flexible depending on the information available, for example, we use the same approach and applicable standards to review all bills. We do not work on a contingent fee basis -- so we have no financial incentive to arbitrarily knock off fees.
We review legal bills to determine whether the time billed is necessary and reasonable, applying whatever standard the relevant law would (or should) apply. (We also review alternative legal fee arrangements and use an "hourly" review to demonstrate cost-effectiveness of alternatives.) To conduct the review most cost-effectively and quickly, we generally need electronic data versions of the bills, and any supporting documentation from the law firm (whatever the firm will provide). Task-based bills, with relevant details, and organized by actual projects or tasks (not broad, vague categories like "review" or "drafting") are easily provided by firms and yield more meaningful analysis. Firms submitting image files, such as acrobat "pdf" files, are undermining serious review -- and fee examiners or masters who accept bills in this form (let alone those claiming to perform a real review using images or paper bills) are incompetent and inefficient.
Our own fees for reviewing a bill can be billed by the hour or as a flat or percentage fee -- our billing policy contains details of these alternatives. Remember that, although we can analyze even the stalest bill, our philosophy is that it should be more cost-effective to monitor fees, as well as staffing, strategy, and tactics, from the very beginning. The best fee management system is one in which the unreasonable fees never get billed in the first place.
Contact us for expert, exceptional, and cost-effective legal bill review services, including independent, neutral services as fee examiner or special master addressing legal fees in class actions, as well as other situations. These services are provided through TLF Consulting.
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Visit Devil's Advocate for legal fee management and litigation consulting, including legal bill reviews, expert testimony, legal malpractice, and lawyer ethics issues
eywords: The Devil's Advocate, John Toothman (founder), legal fee management, litigation consulting, trial lawyers, legal fee analysis, controlling legal costs, legal cost control, lawyer cost management, legal expense management, alternative legal fees, trial practice, civil litigation, discovery, American Rule, client, lawyer, legal fees, attorney fees, hiring lawyers, attorneys, expert witness, expert testimony, lawyer bill, legal fee invoices, litigation management, fee petitions, bankruptcy, legal bill audit, legal bill review, fee shifting, prevailing party, legal expenses, second opinions, monitoring counsel, legal fee budgets, legal fee estimates, legal malpractice, audit legal bills, general counsel, independent counsel, hourly rates, hourly fees.
Publications include: To Get Paid, Get Reasonable, Trial Practice Checklists (West Group); Legal Fees: Law and Management (Carolina Academic Press), CGL, Civilian's Guide to Lawyers, Client Bill of Rights, Client-friendly billing agreement, hourly fees.
Headquarters in Great Falls, Northern Virginia, USA, in the Metropolitan Washington DC (District of Columbia) area.