When the Court Sets Your Rate — Solos Beware

I read an interesting article recently in the June 16, 2006 issue of ABA Journal E-Report about the experience of New York City solo attorney Edgar Pauk in trying to obtain approval for his fees from the court.

The ERISA case involved a challenge by the estate of James McDonald over calculations that reduced the former longshoreman’s pension because of a break in service. Before Pauk sent his proposed billing rate to U.S. District Judge Naomi Buchwald, he conducted a survey of what attorneys at large law firms working similar ERISA cases bill for their time. He subsequently proposed a rate of $425 an hour based on six affidavits supporting that figure.

Buchwald reduced Pauk’s claimed hours by 35 percent, taking out for, among other things, record-keeping that did not adequately indicate what work was legal and what work was administrative. In addition she set the billing rate at $325 an hour, saying it was of “great significance” that Pauk was a solo practitioner with low overhead costs.

The pension fund appealed Buchwald’s decision to the 2nd Circuit, which affirmed her ruling for Pauk’s client, but took a more imaginative approach to setting his fee. U.S. District Court Judge Kevin Castel created a blended rate by imagining a hypothetical “Pauk & Associates,” and estimating how this larger, imaginary firm might bill for different tasks if the tasks were performed by attorneys of different levels of experience. As a result, he increased Pauk’s rate to $390.

The pension fund appealed once again. A three-judge panel again affirmed the basic rulings but vacated the award of attorney fees that used a blended rate. The court ruled that instead of using a blended rate, which combines different billing rates, courts should evaluate the different litigation tasks actually performed by an attorney. McDonald ex rel. Prendergast v. the Pension Plan of the NYSA-ILA Pension Trust Fund, No. 05-1435-c (June 6).

The ruling also made the argument that courts cannot lower lawyers’ rates just because they are solo practitioners and are assumed to have lower overhead costs than a large law firm. The article surmises that the ruling may make determining a lawyer’s fees more complicated, forcing judges to take a more detailed look at the tasks each lawyer performed, and local rates in effect.

This much is clear for solos and small firm attorneys facing court approval for fees in the wake of this case:

1- make sure your timekeeping records are particularly clear so there is no question that the work you are doing is legal and not administrative in nature; and

2- do your homework to determine what rates are in effect in your region for similar work, regardless of the size of the firm doing the work.

There is some comfort in knowing this case will help support you in arguing that automatic rate reductions cannot be made just because you’re from a solo or small firm.

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