Should Biglaw Be Representing Small Clients?
For the second time in just over a month comes news of another large firm overcharging a small client. Back at the end of October, I posted about former New York Police Commissioner Bernard Kerik's dispute with Fulbright & Jaworski over a $200,000 bill that Kerik claims was unexpected. Now, Reed Smith faces a lawsuit by a non-profit client arguing that it was excessively charged for legal representation (Law.com, 12/4/07) to the tune of $1 million.
According to the article, the Bair Foundation a Christian charitable foundation sued Reed Smith for breach of contract, breach of fiduciary duty, legal negligence and unjust enrichment. The Foundation alleges that Reed Smith estimated the cost of the suit at around $50,000 but that the total tab for the litigation (which the Foundation lost) came to $960,409. The Foundation also asserts that Reed Smith's time records are vague and that it did not properly document its fees. In some ways, then, the Foundation's claims resemble those of Kerik, a standard "bait and switch," wherein clients were told that the case would cost one thing and later charged much more than they'd expected.
But there's an added dimension to the Foundation's case. The Foundation has also argued that Reed Smith's fealty global clients and PPP (profits per partner) lead the firm to charge more than what is appropriate for a smaller client which lacks financial resources. To me, these claims invoke Reed Smith's fiduciary duty to its clients and a duty to the Foundation to explain its fee structure and why that structure was not suitable for a smaller client.
I'm not sure why Reed Smith is fighting this one. Refunding several hundred thousand dollars may be a costly way to make this case go away, but it seems that cost of litigating it (and divulging its billing records) are even higher.
Posted by Carolyn Elefant on December 4, 2007
Rodrigo González Fernández
DIPLOMADO EN RSE DE LA ONU
Renato Sánchez 3586