Defunct School Operator Sues Two Big Firms Over Big Legal Bills

Defunct School Operator Sues Two Big Firms Over Big Legal Bills

The trustee of a company that ran for-profit schools and filed for bankruptcy in 2014 has sued Williams & Connolly, alleging that the firm’s billing practices “exceeded the bounds of unreasonableness.”

Duane Morris was also named as a defendant in the suit filed Wednesday in civil district court in Dallas County by ATI Enterprises Inc. The nine-page complaint alleges that the legal services provided to the company by Duane Morris were “duplicative and unreasonable.”

ATI filed for Chapter 7 protection in Delaware two years ago this month, leaving lenders to the privately held operator of vocational training schools holding the bag on millions in debt. The debtor ran a group of for-profit schools in Florida, New Mexico, Oklahoma and Texas that were sued and accused of using fraudulent enrollment practices.

The federal government intervened, claiming that the schools misrepresented their job placement statistics and fraudulently recruited students, allowing them to qualify for federal student aid money while the students accrued debt. In August 2013, the U.S. Department of Justice announced a $3.7 million settlement with the company.

Some of those who sued ATI were a group of former students in Dallas. Williams & Connolly was hired to represent ATI in a subset of the students’ claims that were submitted to arbitration, the company said in its complaint.

“On a regular basis, three or four partners, six to eight associates, seven or more special project attorneys, a few agency attorneys, a system consultant and five-plus paralegals logged substantial hours on the case,” wrote lawyers for ATI in the company’s complaint. Much of this work was billed in 2011.

In total, Williams & Connolly allegedly billed and collected more than $13 million in attorney fees and expenses. The complaint alleges that the expenses included “nearly $47,000 in first class airfare, over $60,000 in hotel reimbursement for staying at the Ritz-Carlton and $31,000 in copying charges—in a single month.”

In a statement, a representative from Williams & Connolly said ATI’s complaint does not fairly capture the size and intensity of the litigation in question and that the firm is confident that its work met professional standards.

“There were more than 650 individual claimants,” said Williams & Connolly in the statement. “The litigation lasted for more than two years, including more than 90 depositions. The trial of 12 bellwether claimants involved 50 live witnesses and 30 witnesses by deposition, and it consumed a month.”

Duane Morris was also hired to work on the arbitration, according to ATI’s complaint, which claims that the firm’s work was “duplicative and unreasonable, especially in light of the excessive work allegedly performed by [Williams & Connolly].”

Duane Morris declined to comment on ATI’s suit against the firm, which was filed by Dallas firms Coffin & Bailey and Cunningham Swaim, the latter of which was formed a year ago this month. ATI’s suit states that the arbitration proceeding did not end well for the company, as it had to pay $1.7 million in awards.

Williams & Connolly did not disclose the claimants’ original demands but said in its statement that the trial result referenced in ATI’s complaint was “a tiny fraction of those demands.”

In bankruptcy court filings, ATI listed assets of less than $50,000 in early 2014 against liabilities to creditors of $383 million. ATI paid a $120,000 retainer to Chipman Brown Cicero & Cole for the Delaware firm to advise it in Chapter 7 proceedings, in which partner Jeoffrey Burtch of Delaware’s Cooch and Taylor has been appointed trustee.

Burtch is listed as a plaintiff on the Dallas suit filed on behalf of ATI’s bankrupt estate and its related companies against Duane Morris and Williams & Connolly.

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