The New York Law Journal reports a Pryor Cashman legal malpractice and billing case today.  It’s a very big fee, and Judge Schweitzer decides for the law firm today in Pryor Cashman LLP v. U.S. Coal Corporation, Supreme Court, New York County, Index No. 651908/2011.

"Plaintiff Pryor Cashman LLP moves, pursuant to CPLR 32 12, for summary judgment against defendant U.S. Coal Corporation in the principal amount of$2.455.478.86, with interest, dismissing the counterclaims and affirmative defenses, and awarding it costs and expenses incurred in this action.

US Coal cross-moves for summary judgment on its counterclaims for breach of fiduciary duty; ordering Pryor Cashman to forfeit any fees that US Coal would otherwise owe, and for restitution and disgorgement of all amounts paid for any work done during the relevant time period ; dismissing Pryor Cashman’s claims in their entirety; and awarding US Coal the expenses incurred in defending this action, and in prosecuting its counterclaims, including pre- and post-judgment interest, costs, and attorneys’ fees.
 

Pryor Cashman argues that there are no issues of fact relating to its account stated cause of action in that it is has demonstrated that it sent 117 invoices to US Coal using regular mailing procedures, none of which were ever returned. US Coal never objected to any of the invoices,
and even made partial payment. As for the breach of contract cause of action, it asserts that US
Coal cannot dispute the existence of the contract, and that both parties performed under the terms
of the contract. It also contends that the investments obtained were inconsequential in terms of
the amount of equity of the company that was outstanding. Moreover, the shares given to the law
firm were given in appreciation of its agreement to defer payment of the attorney’s fees owed.

US Coal argues that there are substantial issues of fact concerning the reasonableness and accuracy of the invoices, that the claimed bills do not match US Coal’s records, that the mere retention of invoices from a lawyer is not sufficient to prevail on a claim of account stated, and
that Pryor Cashman’s violation of applicable ethical standards provides a complete defense. It
disputes that it ever entered into a contract with Pryor Cashman, and argues that New York
regulations require a signed contract or a final written retainer letter. Moreover, it contends that,
even if there were a contract, there are issues of fact and credibility regarding the law firm’s
performance of its professional obligations.

For the reasons discussed below, the motion is granted as to both causes of action, and the
counterclaims and affirmative defenses are dismissed. Pryor Cashman establish shed a prima facie entitlement to judgment as a matter of law on the cause of action for an account stated, by demonstrating that it sent detailed invoices to US Coal on a regular basis in the course of its business (Geron v DeSantis, 89 AD3d 603, 604 [1st Dept 2011]), and documentary evidence shows that US Coal received and retained the invoices without objection (Miller v Nadler, 60 AD3d 499 [I Dept 2009]). As set forth in his affidavit, Hellige provided an engagement letter, dated July 17,2006, to Karl Douglas, the then managing director of US Coal. Although US Coal states that it has not found a formal retainer letter executed by Pryor Cashman or by US Coal, it concedes that it has a copy of the engagement letter. The engagement letter set forth the terms of the legal work that Pryor Cashman was to perform for US Coal, including: ( I) the general scope of services (corporate and securities.  For the reasons discussed below, the motion is granted as to both causes of action, and the counterclaims and affirmative defenses are dismissed.

Pryor Cashman established a prima facie entitlement to judgment as a matter of law on
the cause of action for an account stated, by demonstrating that it sent detailed invoices to
US Coal on a regular basis in the course of its business (Geron v DeSantis, 89 AD3d 603, 604
[1st Dept 2011]), and documentary evidence shows that US Coal received and retained the
invoices without objection (Miller v Nadler, 60 AD3d 499 [I Dept 2009]).

As set forth in his affidavit, Hellige provided an engagement letter, dated July 17,2006,
to Karl Douglas, the then managing director of US Coal. Although US Coal states that it has not
found a formal retainer letter executed by Pryor Cashman or by US Coal, it concedes that it has a
copy of the engagement letter. The engagement letter set forth the terms of the legal work that Pryor Cashman was to perform for US Coal, including: ( I) the general scope of services (corporate and securities matters); (2) an explanation of the basis of fees to be charged, and a range of billing rates for the attorneys, law clerks, and paralegals; (3) an explanation of the type of expenses likely to be incurred, and which a~e to be reimbursed by US Coal; (4) an explanation of billing practices,
including its practice of sending a monthly invoice setting forth the fees and expenses incurred
during the previous month, and Pryor Cashman’s right to impose interest on balances outstanding
for more than 30 days; (5) an explanation that US Coal is free to terminate the attorney-client
relationship at any time, and that Pryor Cashman will withdraw in a manner that complies with
applicable law; and (6) a discussion about arbitration as the means to resolve disputes regarding
fees charged and services performed.

In challenging the substance of the invoices, US Coal submitted an affidavit it of Michael Brychel, a senior legal auditor in the firm of Stuart, Maue, Mitchell & James, Ltd., sworn to July 9, 20 12. He states that US Coal retained him to review the unpaid legal bills .that are the subject of this action. He concludes that the bills "fall below the prevailing standards of the industry, are consistent with likelihood that Pryor Cashman has overbilled US Coal, and demonstrate that there are substantial issues of fact as to whether those bills are reasonable on their face" (Brychel Affidavit, 20).

The total dollar value of the bills that Brychel reviewed was $4,670,345.23, including
$4,551,826.32 attributed to fees, and $136,547.13, to expenses, with $ 18,028.22 as write-offs
against fees or expenses. In reviewing Pryor Cashman’s bills, he noted that it appeared to charge
US Coal in quarter-hour increments, which does not represent the industry standard (tenths of an
hour) that existed during the time covered by the bill s. He opines that large numbers of instances
of 14-hour-plus days represent questionable billing practices, and in the invoices, he noted
$92,970.00 billed in such a manner which constitute "a significant amount."
According to Brychel, another typical hallmark of questionable billing practices is the
presence of large numbers of entries that repeat virtually word for word over multiple days. In
his review, he identified an attorney who regularly committed such billing entries, and
$64,840.67 of the time billed for this attorney appeared to be only partial entries that were too
vague to enable one to accurately discern the task performed. Another $146,466.21 was
attributed to conferences in which no other party is noted, and $380,190.86 where no subject
matter is stated. Brychel noted that $85,437.83 of expenses were "unusually vague," and
$11 ,92 1.96 of those expenses appear to be billing for overhead, not for actual expenses allocatable to specific amounts expended for the client.
 

Regardless of the merits of these objections, US Coal has not met its burden of showing
that they objected to the invoices within a reasonable time