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January 09, 2007

Solos In Charge of What They Charge

Connecticut Law Tribune - December 18, 2006

Others blogs have discussed these cases.  However, my perspective is a little different.

Recently, there were two very interesting court cases involving solos and the fees they both charged and received.

One took place in New York. In McDonald v Pension Plan, 450 F. 3d (2nd Circuit, 2006), solo Edgar Pauk represented James McDonald in a suit against the longshoreman’s union pension plan for improperly calculating the number of years in which he accrued benefits. Pauk prevailed and valued his work at $425 per hour. But the presiding judges (each presiding over different segments of the case) reduced Pauk’s hourly rate to $325 and $390 respectively. The court applied a “blended hourly rate” which considers a law firm model of different level attorneys working on the case at different hourly rates.

Applying such a model to a solo was a first. Even though Pauk performed all the work, the District Court “analogized Pauk’s situation to that of a large law firm” and “created the hypothetical ‘Pauk and Associates’—comprised of one experienced ERISA litigation attorney ($500 per hour) and a hypothetical group of inexperienced associates (less than $300 per hour)—and decided on [his] own which tasks should have been done by respective members of the hypothetical firm.”

This fiction was vacated by the 2nd Circuit for an incorrect application of a blended rate. In an unsigned opinion, the federal appeals court said, “there is simply no support for the proposition that a district court can decide what legal tasks could have been done by a hypothetical associate attorney working for or with Pauk in order to calculate a blended hourly rate of $390.”

The panel, however, still approved the fee award with the hourly rate reduction, based on the trial judge’s finding that Pauk was inefficient and “occasionally vexatious,” and his performance, “though effective, was less than stellar.”

Most interesting, though, was the 2nd Circuit noting that the lower court felt it was “of great significance” that Pauk was a solo practitioner, the implication being that he had much lower overhead. Even though the panel did not reject the trial judge’s finding, it did state in a footnote “that district courts should not treat an attorney’s status as a solo practitioner as grounds for an automatic reduction in the reasonable hourly rate.”

“Indeed, it may be that in certain niche practice areas, attorneys of the highest ‘skill, expertise and reputation’ have decided to maintain a solo practice instead of affiliating themselves with a firm. The reasons for doing so may be numerous, including the inherent problems of high overhead, fee-sharing and imputed conflicts of interest,” that footnote stated.

Which leads me to the next case, that of Curtis Kennedy, a solo in Denver, Colo. Kennedy, who has been practicing out of his modest home for 16 years, takes on the giants and has won scores of huge, sometimes multi-million-dollar, settlements on behalf of those who have been discriminated against in the workplace.

In the underlying case, Kennedy challenged one of the country’s largest class action law firms, California-based Lerach Coughlin, and won. He successfully got Lerach’s fees in a $400 million shareholder securities fraud case against Qwest Communications reduced from $96 million to $60 million. It would have been more than fair for Kennedy to take a reasonable percentage of the $36 million savings. No one would have batted an eyelash, whether he was a solo or not. However, he chose to take just $40,000 in fees and $23,000 for his expert witness.

It is not for anyone, including the judiciary, to say Pauk isn’t entitled to his fees simply because he is a solo. The court applying a blended rate to Pauk’s work by creating a fictional law firm and distributing tasks to hypothetical associates is inappropriate. Nor is it for anyone to say Kennedy is foolish for not taking more. No one is telling solos not to charge prevailing rates or to give their services away. But by not having the overhead, the choice remains theirs to make.

The moral of this column is: freedom from crushing overhead gives the lawyer the flexibility to do what he or she wants.

Susan Cartier-Liebel is solo practitioner, adjunct professor at Quinnipiac University School of Law and a business consultant for solo and small firms. She can be reached at SCartier_Liebel@comcast.net. Copyright © Susan Cartier-Liebel (2006) All Rights Reserved. No portion of this material may be copied, transmitted, posted, duplicated or otherwise used without the express written approval of Susan Cartier-Liebel.

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Comments

Peter Mullison

As a solo, this story is indeed disheartening. The lower court's "effective but less than stellar" proclamation seems ripe for an abuse of discretion claim.

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