Legal News

Judge: Client Can Expect to Pay $300/Night for Attorney?s Food, Lodging

By Dan Slater

We’ve addressed the question of whether it’s prudent for a lawyer to charge a full hourly rate when traveling but not working. Now, a recent fee decision from a judge in the Coke “channel-stuffing” class action provides some guidance on how much it’s appropriate to spend on those business trips.

First, background: The Coke “channel-stuffing” case has been a long road to hoe for plaintiffs firm Coughlin Stoia. The securities class action against Coke, filed in 2000, alleged that the company artificially inflated its revenues through “channel-stuffing” — or persuading distributors to buy more product than they need in order to make business look brisker than it is. Back in February, we noted that a special master in the case recommended that Coughlin Stoia, which has worked on the case for seven years, be barred from serving as class counsel because it allegedly purchased “stolen” Coke documents from a disgruntled former Coke exec. (The firm and the executives argued that neither thought they were taking Coke docs without authority because one of the executives had been ordered, when terminated, to “clean out his office.”) In July, the case finally settled for $137.5 million.

Two weeks ago, U.S. District Court Judge Willis B. Hunt awarded more than $31.5 million to the law firms that worked on the case. (Here’s the story from the Fulton County Daily Report.) Class counsel Coughlin Stoia will share a percentage of the fees with co-counsel from Atlanta class action boutique Chitwood Harley Harnes. Two other plaintiffs firms also will share in the fees — Birmingham, Ala.-based Whatley Drake & Kallas and California firm Gergosian & Gralewski.

Class counsel, according to the Fulton County Daily Report, sought fees valued at 26.04 percent of the settlement — about $35,805,000 — as well as more than $7 million in expenses and interest. But Judge Hunt reduced the percentage from 26.04 percent to 21 percent. He also trimmed more than $4 million from the lawyers’ submitted expenses.

Here are some of the more interesting observations Hunt made along the way:

• The judge wrote, “It further appears that a substantial majority of the work in this matter was performed by attorneys that tended to bill at higher rates while very little of the work was performed by associates with lower rates.” As an example, the judge noted that of 24,914.15 hours billed by Coughlin lawyers, only 1,411.74 were billed by the 11 associates assigned to the case whose hourly rates were $350 or less. “This Court would find it surprising if only six percent of the work performed in this matter was of the type that could be performed by lower-level associates and that assumes that a $350.00 rate could be considered a lower-level rate,” he wrote.
• In disallowing more than $4 million in expenses, Hunt disallowed $93,960.67 for LexisNexis, Westlaw and Online Library Research. He wrote: “This Court is of the opinion that charging separately for use of a research sevice is akin to charging for the use of a case law reporter. That is, the research service is a tool, much like a computer or a pen, and this Court considers the use of such a service part of a firm’s overhead. . . . . Moreover, this Court is aware that many firms pay a flat rate to Lexis and Westlaw regardless of their usage, and class counsel cannot claim such flat rate payments as an out-of-pocket expense.”
• Hunt also reduced Coughlin’s travel expense claims for 122 trips, 14 of them abroad. According to the judge’s own calculations, if Coughlin spent an estimated $6,000 each for overseas travel, it would also have spent an average of nearly $3,000 for each of its 108 domestic trips, including an estimated $1,365.95 per person per night. “This Court is not troubled by the apparent fact that Coughlin attorneys seek high comfort on their journeys,” Hunt wrote, “but neither should the class finance such a lifestyle. This Court finds that a client could reasonably expect to pay $300 per night for his attorney’s food and lodging on domestic trips, and that is the level at which this Court will reimburse Coughlin for its travel.”

The Fulton County Daily Report couldn’t reach attorney Martin D. Chitwood at Chitwood Harley nor Daniel S. Drosman at Couglin Stoia for comment.

Full post as published by Law Blog - WSJ.com on November 21, 2008 (boomark / email).