Posted on Wednesday, November 17, 2010
Answer: An Insatiable Appetite for Fees.
We comment regularly about the misdeeds of plaintiff's class action lawyers and the dysfunctional class action system in which they operate. But we want to make it clear that by no means do we whitewash the misdeeds of corporate America. Indeed, could anything be worse than the recent Wells Fargo litigation which demonstrated that the bank processed their customers' checks from the largest amount first to the smallest amount last, instead of in the order in which the checks were written? Wells' method depleted their customers' accounts faster, thereby boosting the number of overdraft penalties and filling the bank's coffers at a rate of $35 per transaction. In a scathing ruling, U.S. District Judge William Alsup ordered Wells Fargo to pay $203 million for this blatant manipulation.
But I ask you, how much different are the bank's actions from the activities of the plaintiff's class action bar with regard to the fees and costs they take from class action settlements? Wells Fargo is not the only business that engages in scams to increase their bottom line. Class action lawyers regularly engage in similar schemes to take advantage of their clients in order to boost law firm profits. You be the judge:
• Class action plaintiffs' law firms get away with charging $300 an hour for work actually done by "contract attorneys" paid $50 an hour -- an enormous per hour mark-up;
• Class action plaintiffs' law firms get away with billing clients in 15 minute intervals (known in the trade as a "minimum billing increment"). This system allows them, for example, to bill more than 24 hours in a single day (e.g. a lawyer makes a phone call that takes 5 minutes and charges the client the minimum increment of 15 minutes, thus a lawyer could work for only 20 minutes and charge the client a whole hour, or a lawyer could work 8 hours and charge clients for 24 hours);
• Class action plaintiffs' law firms get away with charging for work performed by partners at $700 an hour that should have been performed by associates at $400 an hour, or charge clients for work performed by associates at $400 an hour that should have been performed by paralegals at $150 an hour;
• Class action plaintiffs' law firms get away with presenting their time records to the court on a daily basis rather than on a task basis, so that it is burdensome for anyone reviewing the records to determine how much time a lawyer has spent on a particular task. For example, a lawyer prepares his oral argument and records x number of hours on several different days, but there is nothing indicating how much total time he spent on this task;
• Class action plaintiffs' law firms get away with obfuscating the expense charges of the case by aggregating costs rather than breaking them out, e.g. "Copying" cost $20,000 (instead of a cost per page), or "Travel" cost $100,000 (instead of itemizing flights, meals, and hotel bills);
• Law firms generally get away with charging for online legal research services on an hourly basis, even though the firms pay a flat monthly fee for the service. They then pass their hidden profit off as a "cost" to the client class; and
• Law firms generally get away with reusing legal research and charging clients the cost of creating the original work (e.g. Lawyer spends five hours drafting a memo for case A and bills the client for it. Lawyer then reuses the same basic memo for case B but bills that client for five hours as well).
And we haven't even talked about bill padding! (The lawyer who spends four hours writing a brief but bills the class for eight hours.)
A straight-talking judge spelled out the reprehensible conduct of one the nation's largest banks. But when is the judiciary going to examine the schemes of class action lawyers with the same zeal with which it scrutinizes the business practices of American corporations - that is, those not involved in the business of class action litigation?
Lawrence W. Schonbrun Huffington Post