SACRAMENTO — A lawsuit filed last week in San Francisco Superior Court is shining light on a topic that most law firms would like to keep under wraps: fee disputes with clients.
Concord-based Discovery Sales Inc. says Quinn Emanuel Urquhart & Sullivan overcharged the real estate company by at least $745,000 for its work defending former Discovery president Ayman Shahid on federal bank fraud and conspiracy charges. Specifically, the complaint filed on Feb. 19 accuses Quinn Emanuel of violating the terms of a fee agreement by overbilling for partners’ hours, reproduction costs, certain travel expenses and other services between August 2014 and October 2015.
Discovery Sales’ attorneys at Miller Starr Regalia in Walnut Creek are seeking damages of at least $100,000, fees, costs and a court finding that the reasonable value of Quinn Emanuel’s legal services for Shahid is no more than $751,439.
Although bickering over fees isn’t rare, such lawsuits are “not that common,” said law firm consultant Peter Zeughauser. “Usually law firms settle. Law firms don’t want a malpractice claim.” And most clients, he added, wouldn’t be willing to fight a big firm over the disputed difference in billing—in this case about $745,000.
“You’re probably going to spend more on legal fees than that,” Zeughauser said.
Why Discovery Sales and Quinn Emanuel couldn’t work out this dispute behind the scenes isn’t clear. Representatives of both law firms did not return phone messages and emails left Tuesday. The complaint says the plaintiffs and defendants held a teleconference on April 15, 2015, to try to resolve billing and fee issues but “that call and subsequent conversations failed to resolve the dispute.”
The litigants in December 2015 attended a nonbinding arbitration, in which Quinn Emanuel reduced the amount it said it was owed from $1.56 million to $1.49 million, according to the complaint. The Bar Association of San Francisco notified the participants of the findings in late January, but the plaintiffs’ filings don’t say what those findings were.
Exhibits attached to the lawsuit include a 10-page engagement letter signed by Discovery Sales corporate counsel John Willsie and Quinn Emanuel partner Steven Madison. Under terms of the agreement, Discovery Sales was to pay a $50,000 retainer. The two partners expected to work on Shahid’s case would charge a “fixed” rate of $895 an hour. Associates would bill at a rate of $490 an hour to $735 an hour “and we have agreed for this matter to apply a 10 percent discount to those rates,” the letter reads.
A subsequent letter signed again by Willsie and Madison adds additional conditions sought by Discovery Sales, including a prohibition against billing for interoffice conferences and for bringing new attorneys in the case “up-to-speed on our matter.”
In the lawsuit, Discovery Sales alleges that Quinn Emanuel billed $1,175 per hour for partner John Potter’s time on the case, while another attorney’s rate jumped from $490 an hour to $661.50.
“Numerous entries show attorneys billing for conferences with other attorneys in the firm,” the complaint says.
In August 2015, Shahid pleaded guilty to conspiring to cause bank underwriters to approve mortgages for underqualified home buyers. He is scheduled to be sentenced on June 9 by U.S. District Judge Yvonne Gonzalez Rogers of the Northern District of California. The case docket for USA v. Shahid still lists attorneys from Quinn Emanuel as defense counsel.
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