A former DLA Piper client who is challenging the firm over fees has filed with the court what he claims are internal emails by DLA attorneys who discuss deliberate overbilling, with one attorney allegedly writing about another’s "churn that bill, baby!" approach.
Attorneys for the former client, energy executive Adam Victor, say in court papers that the emails "shock the conscience."
"As described herein, the written admissions by DLA Piper attorneys concerning churning perhaps reflect the most egregious conduct by a law firm in any fee matter. These admissions provide a window into a culture of avarice and ruthlessness that casts a pall not only on DLA Piper, but on the entire legal profession.
"Until now, there probably has never been a written admission where members of a law firm have flatly acknowledged they have engaged in such reprehensible and damning conduct," Larry Hutcher and Josh Krakowsky write in DLA Piper v. Victor, 650374/2012, in Manhattan Supreme Court.
DLA Piper spokesman Josh Epstein said the firm doesn’t comment on pending litigation.
The new allegations arise from a lawsuit brought against Victor in February 2012 for $678,763 in past due legal bills. DLA was hired in April 2010 by Project Orange Associates, which is owned by Victor, to handle its bankruptcy before being disqualified due to a conflict.
In earlier court papers, Victor claimed the firm acted as his company’s "ghost counsel" after being ordered to withdraw and continued to bill him (NYLJ, Aug. 10 2012). He alleged a "sweeping practice of over-billing." In the most recent papers, Victor and his attorneys argued that they now have proof of that allegation.
Victor said DLA Piper has produced more than 245,000 pages of documents, including internal emails among DLA Piper partners.
"Based on the recently discovered evidence, Victor can now show conclusively that DLA Piper had knowledge of intentional fraudulent overbilling," his attorneys say in court papers.
Victor’s attorneys have filed as court exhibits what they allege are emails by DLA Piper attorneys working on Victor’s case.
In one exhibit from an email dated May 20, 2010, then-DLA attorney Erich Eisenegger writes to attorneys Christopher Thomson and Jeremy Johnson, "I hear we are already 200K over our estimate—that’s Team DLA Piper!"
According to court papers, Thomson replied to Eisenegger and Johnson: "What was our estimate? But Tim [Walsh] brought Vince [Roldan] [two other DLA Piper attorneys working on POA] in to work on the objection for whatever reason, and now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode. That bill shall know no limits."
Thomson, who no longer works at DLA Piper, could not be reached for comment.
Roldan was a senior associate at DLA Piper who now practices at Vandenberg & Feliu, according to the firm’s website. He did not return a call for comment.
Eisenegger, Johnson and Walsh are now all partners at McDermott Will & Emery. They did not return calls for comment. McDermott spokesman Christopher Rieck declined to comment.
Victor claims in his papers that Eisenegger, Thomson and Johnson continue the email thread, "with each joking about how many attorneys were over-staffed on the POA file and how little work those attorneys actually accomplished."
According to the attached exhibits, Thomson writes to Eisenegger and Johnson, "DLA seems to love to low ball the bills and with the number of bodies being thrown at this thing, it’s going to stay stupidly high and with the absurd litigation POA has been in for years, it does have lots of wrinkles."
Johnson allegedly replied: "Didn’t you use 3 associates to prepare for a first day hearing where you filed 3 documents?"
Thomson allegedly responded to Johnson and Eisenegger, "And it took all of them 4 days to write those motions while I did cash collateral and talked to the client and learned the facts. Perhaps if we paid more money we’d have more skilled associates."
According to the court exhibits, Johnson also allegedly said, "It’s a Thomson project, he goes full time on whatever debtor case he has running. Full time, 2 days a week."
Victor’s attorneys filed the exhibits to support his motion for leave to amend his counterclaims against DLA, seeking to include claims for fraud, among others, as well as a punitive damages claim.
Victor is requesting punitive damages of $22.47 million, which he says is 1 percent of DLA’s reported revenue for 2012.
"It is hard to imagine that sophisticated lawyers associated with a reputable firm would use the cynical and unethical phrase ‘Churn that bill, baby!’ as a rallying cry, but this is the exact mantra that the lawyers at plaintiff DLA Piper…adopted when it came to performing services for defendant Adam Victor" and Project Orange, Victor’s attorneys write. "DLA Piper’s conduct knows no shame or boundaries."
Victor’s attorneys said that while the public has long suspected that attorneys generally "churn time, inflate bills" and create unnecessary work, "that claim has always been difficult, if not impossible to prove. That is no longer the case!"
Victor’s Project Orange Associates and Gas Alternative Systems operated a plant in Syracuse that supplied steam to Syracuse University. In 2008, Project Orange was forced to shut down as a result of deregulation and restructuring of the electric utility industry, Victor claims in court papers.
DLA was hired by Project Orange to handle its bankruptcy in April 2010. But that June, Southern District Bankruptcy Judge Martin Glenn (See Profile) found that DLA’s representation of General Electric, one of Project Orange’s creditors, created a conflict of interest and denied the firm’s application to represent Project Orange.
After the firm was dismissed as counsel, Project Orange retained Klestadt & Winters. However, Victor has said in court papers, DLA continued to "work behind the scenes" for the company.
In DLA’s present suit against Victor for past due legal bills, it says after it withdrew as Project Orange’s counsel in bankruptcy court, Victor told the firm he wanted it to represent him "in his individual capacity."
The firm agreed to do so, DLA claims, and Victor made some payments to the firm from his personal accounts.
Victor earlier in the case unsuccessfully moved to dismiss the suit, arguing he never agreed to retain DLA Piper to represent him personally. Now Victor contends that other emails support that DLA Piper coerced him to permit the firm to "continue churning and billing for outrageous amounts of work on the POA bankruptcy," despite the bankruptcy court’s disqualification of the firm.
Hutcher, of Davidoff Hutcher & Citron, said in an interview that "while my client always believed he was overbilled and overcharged, we’re delighted to see we now have documentary proof to support his allegations."
He added that he and his clients were "disheartened to see" that a law firm "would engage in such wrongful and unethical practices."
Charles Wolfram, an emeritus professor of legal ethics at Cornell Law School, said he has observed cases where there is proof of overbilling, and he suspects the number of firms padding their bills is more than a trivial percentage.
"The extent of it is probably much greater than what we see in reported decisions [and public court papers] because there are so many opportunities and it’s kind of the perfect crime," he said. "Even today when corporations demand details, the details can be manufactured."
Wolfram is not involved in this case. DLA Piper has not yet responded to the new court filings, and there’s been no ruling on them.
The bulk of 4,000-lawyer DLA Piper was formed in 2005 through the combination of British firm DLA and U.S. firm Piper Rudnick. Since then, the firm, which operates under a Swiss verein structure, has grown through a series of other unions and additions. Last year, gross revenue increased 8.6 percent to $2.44 billion, while profits per partner increased 6.9 percent to $1.310 million, according to reports from The American Lawyer, a Law Journal affiliate.
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