Arbitration award calls policies into question

Boston Globe Article
By Casey Ross – original article

$540,000 overcharge sheds light on law firm bills

An arbitrator has found the law firm Goodwin Procter overcharged a real estate client by more than $540,000 in a rare showdown over the billing procedures used by many of Boston’s largest and most prominent legal practices.

The arbitrator, Jeffrey Martin, ruled Goodwin submitted “vague’’ invoices to Northland Investment Corp., failed to provide a promised discount, and used too many of its attorneys to bill for the same legal tasks.

As a result, Martin ordered Goodwin to cut its $1.1 million invoice by 55 percent.
The case is unusual both for the amount of money involved and because it is playing out in public, with the parties disputing financial matters and other issues that law firms typically handle in private.

Although the matter is still being contested — Northland has asked a court to reduce its bill still further, to zero — the arbitrator’s finding calls into question the business model Goodwin and many other large law firms have relied on for decades: Deploying huge legal teams to pursue clients’ cases, often assigning more than a dozen lawyers to compile research, conduct depositions, and draft motions.

The promise of such treatment is part of what attracts clients to large firms, but it can also leave them shocked when they get bills for work by a multitude of lawyers, each costing upward of $250 an hour, and some much more.

“Firms simply throw bodies at cases, and that allows them to bill and bill and bill,’’ said Alan Fanger, a Newton lawyer who specializes in fee disputes with law firms and legal malpractice cases.

“Until fairly recently,’’ he said, “most corporate clients just paid the bill and didn’t ask any questions.’’

But the economic downturn has caused many corporate clients to more closely scrutinize their legal bills and challenge fees they deem unreasonable. Moreover, increased competition between law firms is prompting some to consider alternative billing arrangements, such as flat fees instead of hourly billing.

Fee disputes between law firms and their clients are not unusual, with more than 130 cases a year in the state coming before an arbitration board run by the Massachusetts Bar Association. But legal analysts said disputes typically involve less than $10,000, many resolved before the arbitrator even rules.

Despite the size of the overbilling found by the arbitrator, Goodwin said, the firm does not see Martin’s decision as a repudiation of its practices.

If anything, the firm said in a statement, Martin’s decision affirms its position that Northland still owes it money — now around $560,000 plus other disbursements — rather than backing the client’s assertion it doesn’t owe Goodwin anything.

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