State Courts Have Wide Discretion, While Federal Courts Usually Reduce By a Trial Court-Assigned Percentage.
Block billing is the practice of assigning a one-time charge to multiple tasks. An example looks like this: “June 10, 2008: Telephone conferences with client, retained expert, and opposing counsel; legal research; meeting with expert and associate—4.00 hours.” As we show below, respected commentators, ethics experts, and JAMS panelists uniformly condemn the practice. Just as important, courts retain extreme discretion to disregard the block entries altogether or reduce the entries by reasonable percentages. Some sample state court (and, as an added bonus, some federal court) decisions are surveyed in this post.
In an article written by M. Leigh, M. Schroeder, and D. Wolf in the November 1997 issue of “U.S. Business Litigation,” the authors opined that block billing is “almost universally disapproved.” Gerald F. Phillips, a Los Angeles-based mediator, arbitrator, and billing expert (also, one of the speakers at the June 19 NALFA seminar summarized in our June 20, 2008 post), explains that the practice “is disapproved because it allows a lawyer to conceal the time spent on each task and prevents the determination of whether individual tasks were performed within a reasonable time.” (See Phillips, “Reviewing A Law Firm’s Billing Practices,” The Professional Lawyer, Fall 2001, p. 11-12.) Mr. Phillips is not alone in his sentiments. Alexander S. Polsky, a neutral at JAMS (based out of the Orange, CA office), has echoed Mr. Phillips’s concerns as well as opined it violates statutory billing mandates to be obeyed by lawyers: “This type of activity clearly violates [Business and Professions] Code section 6148’s requirement that all bills rendered to a client shall clearly state the basis thereof. The principal is unable to review the method of determination of attorney’s fees and costs as required by the code.” (Polsky, Internet article entitled “The Rules Governing Fee Agreements, Statements and Disputes.”)
This brings us to how California state courts deal with block billing. The basic rule is that courts have wide discretion to assign a reasonable percentage to the block billed entries, disregard them altogether, or determine that other evidence is sufficient to substantiate the hours aside from the block billing entries.
· Bell v. Vista Unified School Dist., 82 Cal.App.4th 672, 689 (2001), the seminal case on the block billing subject, supports the proposition “the trial court should exercise its discretion in assigning a reasonable percentage to the entries, or simply cast them aside” if counsel “cannot further define his billing entries ….”
· The Fourth District, Division One (the same court deciding Bell) ruled in the unpublished decision of AntiCancer, Inc. v. Novartis Corp., 2006 WL 147530 at *5-6 (4th Dist., Div. 1 Jan. 20, 2006) (unpublished) that, in the context of awarding fees to a successful SLAPP defendant, “[w]e decline to categorically condemn the use of block billing.” However, the appellate court did give stern warning to practitioners adopting this billing practice that they may be unhappy with a resultant fee award: if block billing entries are used, counsel “places itself at risk of receiving a substantially reduced recovery or no recovery at all based on an unjustified or unsupported request.” (Id. at *5.) The AntiCancer court did quote Bell, sustaining a trial court’s 37% reduction due to block billing and apportionment issues (with the trial court indicating it gave the claimant the benefit of the doubt on most block billing entries, but still made some appropriate reductions).
· Godinez v. Schwarzenegger, Case No. B161508 (2d Dist., Div. 3 Aug. 25, 2005) (partially certified for publication; unpublished on block billing issue) rejected a block billing challenge because the reviewing court determined that the testimony of the attorney about the number of hours worked, even without detailed records, can be accepted as adequate substantiation.
The state courts, if they want, can also borrow the federal approach, which seems to boil down to permitting the district court to reduce the block billed by a reasonable specified percentage amount. Three quick examples illustrate this approach, plus we review a Ninth Circuit decision reversing a percentage reduction as too excessive.
In In re Samuel R. Pierce, Jr., 190 F.3d 586, 593-594 (D.C.Cir. 1999), the D.C. Circuit confirmed that its general practice was to reduce vaguely entered hours of plaintiffs’ attorneys by 10%. Similarly, the Eighth Circuit in H.J. Inc. v. Flygt Corp,, 925 F.2d 257, 260 (8th Cir. 1991) upheld a district court’s reduction of hours billed by the prevailing plaintiff’s attorney by 20% for vague billing entries. Finally, in Gratz v. Bollinger, 353 F.Supp.2d 929, 939 (E.D. Mich. 2005), District Judge Duggan reduced requested fees 10% due to block billing and vague entries.
A contrasting situation, although consistent from a methodology standpoint, was presented in Welch v. Metropolitan Life Ins. Co., 480 F.3d 942 (9th Cir. 2007). There, the firm of Kantor & Kantor (Mike Hensley worked with Lisa Kantor when she was an associate at Kadison Pfaelzer in Los Angeles) prevailed in a federal ERISA fee-shifting context for plaintiffs and sought $39,112 in fees. The district judge awarded only $10,762, reducing the lodestar hourly rate and applying a 20% across-the-board reduction on all entries for block billing. On appeal, the Ninth Circuit reversed. In so doing, the Ninth Circuit found that the 20% reduction was too excessive because only about 50% of the time entries were block billed—resulting in an effective 40% reduction by applying the 20% across-the-board reduction to all billed hours. The Court of Appeals remanded for a recalculation, as well as reversed the hourly rate reduction. (There also is an excellent discussion of the types of proof that will suffice to bolster the lodestar hourly rate being claimed.)
It seems prudent to say that block billing should be avoided. Courts can disregard block entries altogether or apply reductions that the winning plaintiff’s attorney will not like and cannot predict. Aside from that, block billing may well violate attorney statutory billing requirements and ethical prohibitions against billing “unconscionable fees.” The small amount of time necessary to bill each task separately is a small sacrifice to be made in order to avoid the “block billing vortex.”