Remember how, in the film adaptation of John Grisham’s “The Firm,” the young lawyer Mitch McDeere (Tom Cruise)who is trapped in a mob-owned law firm wiggles out of his dilemma in part by proving that the firm’s lawyers were routinely over-billing clients?
Well, the Boston-based Thornton Law Firm and the Labaton Sucharow law firm in New York were caught inflating their billings on a similar scale.
Judge Mark L. Wolf concluded that the two firms double-billed for their attorneys’ work on a class-action lawsuit involving State Street Bank, and even billed for the work of other attorneys not employed at either firm. Thornton’s managing partner, Garrett Bradley, listed his brother as an attorney on the case and charged $200,000 for his time even though Michael Bradley was barely involved. Uncovering this scandal was another triumph of the Boston Globe Spotlight Team, the investigative reporting division that uncovered Boston’s predator priest cover-up in 2002.
The Globe investigation discovered that the firms claimed exorbitant fees for scores of lower paid lawyers who worked on the case. Michael Bradley, for example, was listed as charging $500 an hour when his usual fee was $53 an hour as a court-appointed attorney in Quincy, Mass., and he had no expertise in international currency trades, the subject matter of the litigation. The work of other lawyers was double-counted, because both firms submitted bills for the same lawyers, often with different hourly rates.
The firms claimed that their double-billing of more than 9,300 hours was an inadvertent mistake. In all, the over-billing came to around 15 million dollars.
“The United States has a proud history of honorable, trustworthy lawyers,” wrote the judge in a 159-page ruling. “However, this case demonstrates that not all lawyers can be trusted when they are seeking millions of dollars in attorneys’ fees.” The firms will have to pay back the entire amount, and more fines are likely.
The judge’s comments notwithstanding, over-billing by large law firms, especially when corporate clients and class actions are involved, is not as rare as he suggested. A study by CEB Inc. and Wolters Kluwer NV’s ELM Solutions, companies that work with corporate legal departments to manage their budgets, examined legal invoices from about 100 companies, and found that 21% of lawyers “upbilled” for their time in 2015. Upbilling means rounding up legal hours worked to the next hour or half hour. Spread over all the clients and all the lawyers charging by the hour, the 21% figure translated into millions of dollars taken in by law firms by fraudulent billing every year, and maybe billions.
The judge said lawyers at both Thornton Law Firm and Labaton violated federal and state rules of conduct for lawyers. That’s a no-brainer! Every lawyer is governed by some version of ABA rule 1.5, which prohibits charging unreasonable fees, and Rule 8.4, which makes violating the law an ethics violation as well.
In “The Firm,” Mitch says that every instance of over-billing is federal mail fraud, a crime punishable by a maximum penalty of up to 20 years in state or federal prison and fines of up to $250,000 for individuals. None of the reports I’ve read indicate that a mail fraud prosecution is likely for any of the lawyers involved in this instance, which is too bad. As long as the only penalty for over-billing is to have to pay back the money, some lawyers will be willing to take the chance.