Forbe reports on Ted Frank's objection to the platiffs' lawyers' fee requests in the Citigroup class action case because it is clear that they marked up the actual costs.
Attorney Ted Frank with the Center for Class Action Fairness has protested the fee request in the Citi case, saying the lead attorneys in the case, Kirby McInerney, are trying to charge shareholders an enormous markup for the work of outside contractors who even in the New York area typically earn $45-$50 an hour. Sophisticated corporate clients have long since banned the practice of charging high rates for inexperienced associates to perform routine document review and scan bills carefully for evidence of such “upcharging.”
Frank also cites an American Bar Association ethics ruling suggesting law firms should only bill clients their actual cost plus a reasonable allocation of overhead, including the cost of outsourced legal work. In theory, the outsourcing firms like Hudson Legal include overhead in what they charge plaintiff firms for their lawyers, meaning they should just pass through those charges to their shareholder clients, instead of marking them up. Plaintiff law firms in class actions take advantage of a seeming loophole that allows them to mark up the fees of licensed attorneys as if they were associates at their own firm, when they couldn’t do the same for, say, an outsourced paralegal.
Read the full article at Forbes.