It's exciting to see something on my fees wishlist become a reality.

I've written about developing behavioral prompts to encourage lawyers to bill timely and accurately, and LinkedIn just pointed me to an article (here) discussing software that helps lawyers do that. 

Our amicus brief in ASARCO was filed yesterday.

And it's here (and here). 

A short interview about bankruptcy fees on Morning Marketplace.

Here.  Thanks, Ann Heppermann!

Best Practices for Working with Fee Examiners

Lois Lupica and I just published an article in the ABI Journal on how best to work with fee examiners in chapter 11 cases (here).  Given the recent publication of the new USTP fee guidelines in larger cases, we think that our article is particularly timely.  We hope that you do, too.

It's official--the new bankruptcy fee guidelines are rolling out on July 1.

Today's Wall Street Journal has a big article about the U.S. Trustee Program's new fee guidelines for lawyers in larger bankruptcy cases (here).  The rollout of the guidelines isn't a surprise.  The USTP published the proposed guidelines, received comments, revised the guidelines, received more comments, and then promulgated the final version (see here).  As the Wall Street Journal article points out, the next stage of promulgation will address the fees of the non-attorney professionals in the larger cases.

Lois Lupica and I, as part of our follow-up as Reporters for the ABI's National Ethics Task Force Final Report, will be publishing our Best Practices for Working With Fee Examiners in the next issue of the ABI Journal.  (Special thanks go to three people who gave us very helpful comments in our development of our "best practices":  Andy Vara, Robert Keach, and Brady Williamson.)  We think that our suggestions will be useful as people see an increased use of fee review committees and fee examiners.  

A wonderful essay on why loving what you do makes work so easy.

It's by James B. Stewart, and it's in today's special Dealbook section in the New York Times (here).  Although I'm not a fan of eschewing one's hobbies (as my friends can attest), here's the passage that hit home:

. . . The one thing nearly all the partners had in common was they loved their work.

This came as a profound revelation. Of course they worked long hours, because it didn’t feel like work to them. They took great satisfaction in the services they rendered their clients.

That's the kind of job you want to have--one in which you look forward to walking in the door and getting down to business.  (By the way, that's the kind of job I have--and have had, ever since I became a law professor.)

UPDATE, thanks to a good point by one of my fave buddies:  for the first few years of work, you won't know if you love what you do, because you're still learning the ins and outs of your job.  Give it time.

FURTHER UPDATE:  as to that UPDATE point, see here.  My own philosophy, which may have no grounding in reality whatsoever, is that your choices, over time, reflect your psyche's understanding of what it is that you love.

When funny videos on the billable hour pop up, the death of the billable hour approacheth.

See here.  Hat tip to The Legal Whiteboard blog.

The death of the billable hour may be far away, and--for some types of work--may never happen, but for a lot of legal work, I think that the death of the billable hour is approaching, slowly but steadily.

Missing the point about out-of-control fees and expenses.

See this story about a court disallowing some over-the-top expenses (here), especially the last three paragraphs.  Hat tip to Prof. Jessica Gabel for sending me the link to that article.

My take:  orders to show cause can be embarrassing.  Being the focus of a story about one's out-of-control expenses is always embarrassing.

Maybe the speed of law practice is such that it makes it difficult for those lawyers submitting fee apps to a court from reading the line-by-line detail of each bill, but scrimping on time reading attachments that get filed with a court is probably not the best place to save that precious time.  I would hope that the same billing judgment that should operate when sending bills to a client would also apply when submitting fees and expenses to a court.

I wrote a couple of articles about fees and expenses:  see here and here. The latter piece includes a long discussion about the book Professional Fees in Corporate Bankruptcies, by Professors Lynn LoPucki & Joseph Doherty.  I agreed with a significant portion of what LoPucki & Doherty said in the book.  (I disagreed with some other parts, but then, no book's perfect.)  The book is a good read:  useful and clear, with some striking discussions about their data.

Bottom line about this news story that started my post:  not everything is billable.  Not by a long shot.  And until lawyers return to the days where they understand that concept, there will be more stories like the one in law.com.

The transcript from the USTP Fee Guidelines meeting is up:

See here.

Thanks, Legal Ethics Forum!

Sure did appreciate this post. 

Dear Dad: OK, maybe now.

Got to say that today's NYT letter to the editor by Donald Bernstein made my day (here).

It's actually not that much fun saying, "we told you so."

In 2009, Eric Van Horn and I suggested (here) that bankruptcy lawyers might want to pay some attention to the public perception that their fees might be unreasonable.  (I admit that I'm a little fee-obsessed these days:  see here,* here, here, here, and here.)

This morning, the New York Times weighed in on the issue of bankruptcy lawyers' fees (here).  The go-to quote?

By opposing these guidelines, the lawyers handling big bankruptcy cases show they are out of touch with economic realities. Worse, in resisting improvements in accountability, they undermine public confidence in the integrity of the bankruptcy process. 

Yep.  The right approach--demonstrated with particular skill by Cravath's Rich Levin and the National Bankruptcy Conference--is to work with the Office of the U.S. Trustee to reach a workable compromise.  Ultimately, it's the job of the bankruptcy court to determine whether an estate-paid professional's fees and expenses are reasonable.  The Office of the U.S. Trustee is trying to help bankruptcy courts do their job by giving estate-paid professionals a heads-up as to what the U.S. Trustee Program will consider presumptively unreasonable.  Those professionals who are willing to meet the government halfway by saying, "we are very uncomfortable giving you this information, and we don't think the information will help you, but we are comfortable giving you this other information instead, which will help you" are handling this issue the right way.


*  The way that this first link is set up will count this very post as the first in the list.  You'll want to skip that one, unless your brain likes infinite loops, to move to the others in the list.

Some thoughts on reasonable attorney fees.

The juxtaposition of two articles this morning caught my eye.  This morning's Wall Street Journal's article, The Law Firm Business Model Is Dying, reminded me of Big But Brittle, the must-read article by Bernie Burk & Dave McGowan.  (Bernie & Dave's article is much better at discussing the nuances of the changes affecting BigLaw; the WSJ piece is just about lawyer deregulation.)  The other is a New York Times Dealbook piece by Andrew Ross Sorkin:  Madoff Case Is Paying Off for Trustee ($850 an Hour).  Here's the quote in that article that caught my eye:

In a particularly caustic exchange in court last year, Judge Rakoff, upon seeing a group of lawyers enter the courtroom on behalf of the trustee, said: “Can I ask a question, which is, since the trustee’s fees come out of the funds that otherwise would be available for other purposes, why are there four attorneys from the trustee here in court today?”

When the lead lawyer responded that he might need to consult with his colleagues during his argument, Judge Rakoff shot back sarcastically: “If it turns out you give your argument without needing to consult with them, of course, you and your firm won’t charge for their appearance today.”

The lawyer replied: “I, your Honor, am not going to make any promises.”

The fact that these two pieces came out today is just a coincidence, but the backstory on both is that lawyers who assume that their way of doing business will continue indefinitely are in for a shock.

In terms of the Madoff case, I'm a firm believer that Irving Pickard is doing a good job and is worth his hourly rate.  Not every legal theory will work when applied to a particular set of facts, but he's doing his best to get some significant recovery for Madoff's victims. 

But Judge Rakoff is right, too:  just because a law firm can bring several people to a hearing doesn't mean that it should.  The problem of "staffing balance" is the tension between representing a fiduciary (and the concomitant desire to leave no stone unturned, in order to fulfill the fiduciary's duties) and the question of who ends up paying the bills for that representation.  The more diffuse the responsibility is for paying those bills, the less opportunity there is for the client to say, "let's do this but no more than this."

The problem is particularly acute in large chapter 11 bankruptcies, but that's not the only situation in which the problem occurs.  (See here and here for some of my thoughts on staffing balance.)

We train lawyers to be risk-averse.  Risk-averse people are prone to making sure that all of their bases are covered.  That means that lawyers will want to bring everyone to a hearing who might possibly have something to contribute, "just in case."  But with new technologies around to let lawyers call in to hearings, or to be on cell-phone standby, there are ways to trim those bills.  If the lawyers would be willing to move to those technologies but for court rules that interfere (such as prohibiting cell phones in courtrooms), then courts need to rethink their rules.  And if the lawyers are behaving responsibly about who they bring to hearings, then I can see giving them the benefit of the doubt in close cases.

But the most important thing is for the lawyers to communicate their reasons for their staffing choices to the court.  Waiting until a court starts making comments in public about the staffing choices creates the risk that a court will find those staffing choices unreasonable per se. 

There are a couple of ways to communicate staffing choices to the court.  One is explicit:  "Your Honor, with me today is Attorney X (who will cover [single issue]), Attorney Y (who will cover [different issue]), and Attorney Z (who is responsible for helping me with today's overall hearing because [reason])."  Another is by setting benchmarks in advance, with rebuttable presumptions about how many attorneys should be billing for a given task.

Communication is key.  Without such communication, lawyers will be judged in hindsight about the reasonableness of their actions. Whether the client is paying close attention to the bills or is merely an amalgam of interests that--by definition--will not pay close attention to the bills, there are too many pressures on the practice of law to let law firms bill without explaining their staffing choices to someone (the client or the court).

A professor to watch.

I really like Michelle Harner's work (for an example, see here--the Legal Ethics Forum just highlighted it).  Her combination of experience as a former law partner and her work analyzing the behavior of various players in chapter 11 makes her one of my "must reads."

A reminder about the requirement that fees must be reasonable before a bankruptcy court will authorize their payment.

Blaire Cahn has done a lovely write-up at Weil's Bankruptcy Blog (here) of the Ninth Circuit's recent opinion in Montana Department of Revenue  v. Duncan, No. 09-36062, 2010 WL 4903952 (9th Cir. Dec. 2, 2010).

Having done my fair share of fee reviews--and I enjoy fee examining work!--I think that the main issue for attorneys seeking payment from estate funds is a question of judgment.  It's hard, when someone is in the middle of a case, to take the time to ask, "Should I be doing this work?," especially when clients want 100% top-notch work at all times.  But that judgment--at the time someone has to make the go/no-go decision on billing for something--is crucial.

I think that the most rewarding part of fee examining work is having the luxury to call up a professional, if I have a question about the bill, and talk through whether the work (or the expense) was reasonable.  Sometimes, the professional explains why some hinky looking number was actually reasonable, and then I don't have a problem with it and can forward it on, quite happily, to the court for a final decision.  Sometimes, though, the work or expense really can't be considered reasonable.  (My favorite example:  billing the cost of a man's shirt to the estate, on the theory that there was an unexpected overnight visit.)  The job of a fee examiner is to help the court determine reasonableness, because the court makes that ultimate call.

The tough part about reasonableness is the danger of hindsight bias.  I look for "reasonable at the time that the decision to bill/expense something is made"--not for "unreasonable several months later, in retrospect." Hindsight bias really shouldn't complicate the review.

In the end, it's all about using judgment (and then hoping that the court agrees with you).  For more of my take on fees, see here.

Billing judgment matters.

As I was reading this morning's Above the Law post about a federal court cutting legal fees because the law firm requesting fees failed to use good "billing judgment" (see here), I felt particularly vindicated by the Court's discussion of reasonableness.  I've been focusing on issues about legal fees lately (see here), and I think that it's much easier to rack up high fees and expenses when you're assuming that someone other than your client will be footing the bill.

Check out this language from the Court's opinion, which you can download here, thanks (again) to Above the Law:

The Court recognizes that the work performed on researching, drafting, and arguing the preliminary injunction motion provided important roadmap for Plaintiff with respect to its strategy in pursuing this litigation. However, spending almost 420 hours, which equates to almost 53 full work days7, on drafting and defending a preliminary injunction motion is unreasonable in light of Plaintiff’s counsel’s familiarity with the disputed issues. For the same reasons, spending approximately 50 hours on drafting and revising 11-page supplemental declarations and expending significant number of hours on post-Complaint research and preparation appear unreasonable to the Court.

(Opinion at 16.)  The opinion continues with a reduction, not just of fees, but of expenses as well:

Having considered the invoices submitted by Plaintiff and objections raised by Defendant, the Court finds that some of the expenses incurred by these Signature personnel were unnecessary and unreasonable. For example, it is difficult for the Court to believe, and Plaintiff does not explain how, that the faxing or internet charges incurred at the Westin, frequent “entertainment” charges in addition to meals, numerous first class plane tickets, limousine rides or pick-up service to and from the airport, and approximately $400 nightly stays at Hyatt were necessary and reasonable costs related to this litigation when cheaper more reasonable options were at the witnesses’ disposal. 

(Opinion at 36.)

When a lawyer speaks directly with a client about a high bill, there's that moment when the client is likely to ask about the reasons behind some of the charges.  When a lawyer doesn't have to look the client in the eye, so to speak, it's easier to lose track of what a "reasonable" fee or expense should be.

A few updates about bankruptcy fees.

In yesterday's New York Times, Nelson Schwartz and Julie Creswell wrote a fascinating article about the magnitude of bankruptcy fees, especially in the Lehman case (see here). 

Look:  I know how hard lawyers work, and I also know how non-lawyers perceive many of us.  (As does Eric Van Horn--see a piece we wrote for the ABI Journal here or here about handling the misperceptions of bankruptcy lawyers in the media.)

In a world of still-rampant unemployment, we need to remember that we don't have a lot of friends on the "outside" (the world outside bankruptcy law).  If we're not careful, we'll lose the friends we have on the "inside," too.

Here's a plug for an article I'm publishing with the University of Maryland's Journal of Business and Technology Law, an up-and-coming journal with author-friendly editors and a great work ethic.  My new article's called Rethinking Professional Fees in Chapter 11 Cases, and it explores why there are so many problems with the moving parts that make up fee requests.