Quite a Legal Brawl Emerges Over Cosmetics Pricing

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The New York Sun

SAN FRANCISCO – A bitter legal brawl over attorneys’ fees has erupted in a national cosmetics pricing class action lawsuit, with feuding camps of plaintiffs’ lawyers slinging allegations of flagrant billing abuses and extortion.


Among the alleged abuses were bills of $195 an hour for work by paralegals who were paid just $30, claims that attorneys and paralegals worked 24-hour or even 72-hour days, and charges of $90 an hour or more for cleaning desks and filing.


“It’s unfortunate it has gotten kind of nasty,” one of the lawyers in the fray, Michael Caddell of Houston, said in an interview yesterday.


The conflict stems from a settlement an Oakland, Calif.-based federal judge approved last year to end long running litigation over claims that department stores and cosmetics manufacturers conspired to prevent discounting of lipstick, blush, and other beauty counter products.


Under the deal, consumers would benefit from a nationwide giveaway of free cosmetics with a retail value of $175 million and lawyers for the class would receive $24 million from the defendant companies to cover the costs of pursuing the litigation.


The new round of legal infighting was sparked when attorneys who challenged aspects of the settlement asked to be awarded $3 million of the $24 million set aside for plaintiffs’ lawyers in the case. The lawyers who negotiated the settlement strongly opposed awarding fees to the objecting attorneys.


In March, a special master appointed by Judge Saundra Armstrong, Charles Renfrew, said the 21 objecting law firms did nothing of substance to improve the settlement. Mr. Renfrew recommended that the objectors be awarded no fees whatsoever, but said that if the judge thought some fee was appropriate, a total award of about $368,000 to the objectors would suffice.


Mr. Renfrew’s recommendation incensed the objectors, led by two Texas attorneys, Mr. Caddell and Mitchell Toups. In court papers, the pair argued that if their fee request was to be given close scrutiny, the $24 million request from the 19 firms that pursued the case should also be scrutinized. The objectors said records from the settling law firms disclosed “repeated abuses of the billing process.”


According to records filed with the federal court, individuals at one legal group representing the class, the Law Offices of John Burris in Oakland, billed as much as 72 hours in a single day for document review and, in dozens of instances, billed for 24-hour days.


One of the lead attorneys on the case, Francis Scarpulla of San Francisco, requested fees of $195 an hour for a contract paralegal who was actually paid $30 an hour, the objecting lawyers asserted. The paralegal’s actual rate was redacted from most invoices turned over in the case, but was included, perhaps inadvertently, in a couple of spots.


Clerks and paralegals at another plaintiffs’ firm involved in the litigation, Lieff, Cabraser, Heimann, and Bernstein, of San Francisco, billed between $90 and $195 an hour for services described as “cleaned up desk,” “cleaned up office,” and “filing.”


In court filings, Messrs. Caddell and Toups called for an audit of “unreasonable and excessive” fees sought by class counsel. The objectors argued that the fee award to class counsel should be reduced, with the remainder being given to charity.


A professor of legal ethics at New York University, Stephen Gillers, said the difficulties with billing 48 or 72 hours of work in a single day are self-evident. “That’s just not possible,” he observed.


Mr. Gillers said lawyers and their aides can bill for regular work hours lost in connection with travel for a client, but that billing for 24 hours in a day is highly unusual. “I’ve never seen 24,” he said. “No one to my knowledge bills for time you’re sleeping in the hotel. That’s just not done. That would not be billable time in any event.”


Mr. Gillers said it is ethical to mark up the cost of contract workers, within reason. “That’s allowed because you’re accepting responsibility for the quality of their work, but the increment has to be reasonable,” he said. “To charge $195 an hour for a paralegal who’s getting paid $30 seems to be pushing the envelope beyond its breaking point.”


The lawyers accused of overstating their hours and expenses responded by strenuously objecting to Judge Armstrong about the public disclosure of their billing records, which the attorneys said were confidential. Last month, the judge ruled that the records should have been filed under seal and she ordered them stricken from the court’s files. However, for reasons that are unclear, the disputed documents remain accessible on the court’s Web site.


In a brief interview yesterday, Mr. Scarpulla defended the marked-up charges for paralegal work as “common practice” and said all law firms make similar adjustments. “Otherwise, law firms would go broke,” he said. The lawyer said the claims for 72-hour days stemmed from typographical errors. “It was 7.2 hours and the person typing it moved the decimal point,” he said.


In a declaration filed with the court, Mr. Scarpulla accused the objectors of “extortion” aimed at persuading him to drop his objection to their fee request.


Mr. Caddell dismissed the extortion allegation. “That’s slanderous, really,” he said. He acknowledged seeking an agreement with class counsel about fees, but said no negotiations ever took place because of disagreements among the class lawyers.


“They can’t even get along with each other,” he said. “For some reason, we’re the bad guys for saying you should look at a $24 million fee carefully. If I asked for a $24 million fee, I expect that to be looked at with a magnifying glass.”


A partner at Lieff Cabraser, William Bernstein, called the allegations against his firm “off the mark.” He said he supervised a paralegal who worked fulltime on the cosmetics project and maintained a depository of millions of pages of documents from the cosmetics and retail industries.


“Given the thousands of hours of time put into these cases, someone can always, I’m sure, find some reason to second-guess the billing practices,” Mr. Bernstein said. “That’s why we think the percentage of recovery method is a better way to pay lawyers.”


In a curious development, some of the lawyers trying to keep a detailed accounting of the hours and expenses in the case from public view are themselves public officials. A group of state attorneys general who sought changes to the settlement has resisted efforts to force a public accounting of the work it did on the case.


In a recent court filing, a lawyer for the Pennsylvania attorney general’s office, Jennifer Kirk, said the states reached a “private agreement” with attorneys for the class under which the states would be reimbursed for costs of their involvement in the litigation. She indicated class counsel agreed to pay the states about $125,000 in fees and costs.


However, she argued that the states should not be forced to divulge precisely how much time they spent on the case or how the reimbursement was calculated. Ms. Kirk did not respond to a request for comment.


The New York Sun

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