ACC Ups Its Involvement in Outside Counsel Fee Fights

Note: The next-to-last paragraph of this story has been updated to clarify ACC’s position.

Usually fights over attorney fees remain between the company and its outside counsel, or the in-house and outside bars. But some parties are increasingly moving the fight into the courtroom, and the Association of Corporate Counsel wants to fuel that trend.

“You’re starting to see more discussion of these issues in judicial space,” Amar Sarwal, ACC chief legal strategist, told CorpCounsel.com Wednesday. “It’s an interesting moment in terms of court involvement in the legal services industry.”

Sarwal said ACC “is strongly considering going to the Judicial Conference and talking about creating a more systemic rule. Rather than going case by case on overstaffing, churning, and markups, let’s create a rule that makes sense in the new normal world.” The Judicial Conference of the United States develops policy guidelines for the administration of courts.

Sarwal cited several examples of recent fee clashes, including the highly publicized fight between DLA Piper and one of its clients over alleged overbilling and churning of fees, the February filing of New York Attorney General A. G. Schneiderman opposing class counsels’ fees [PDF] related to the Bernie Madoff Ponzi scheme case, and a federal judge’s decision this week to slash a fee request in half in a suit against daily deal company LivingSocial, citing inefficient staffing and high hourly rates.

ACC has already spearheaded an initiative called Value Challenge, a program that seeks to relate the value to the cost of legal services.

Now the in-house group has also become actively involved in the court. It has filed its own “amicus letter” [PDF] in a securities litigation case against Citigroup Inc., objecting to fees for plaintiffs’ attorneys that include a large mark-up of costs for the use of contract lawyers.

This week the plaintiff’s law firm in the case, Kirby McInerney, filed its response [PDF], calling the ACC letter “procedurally improper [and it] should be rejected out of hand.” The firm went on to attack the ACC stance and to defend its seeking a 16.5 percent fee on a $590 million class settlement.

Sarwal said the firm’s response “looks like 2007, but it’s a different legal market today. In-house counsel today scrutinize bills much more closely. And the kind of mark-ups in plaintiffs’ submission don’t pass muster in the new normal.”

He said ACC became involved in the Citigroup case “not because we are against the plaintiffs bar, and not because of the larger class action issues. But we are interested in ensuring that incentives of lawyers and clients are aligned, and we’re not sure it happened in this case.”

The involvement of the courts in fee fights is also part of the “new normal,” he said. “Seeing the courts take a closer look at this is gratifying to ACC. They can be an important partner in bringing business sense back into the legal market.”