Overbilling Leads to Disbarment

An attorney’s inability to explain his large bills, coupled with prior discipline for overbilling and his lack of remorse, was enough to warrant disbarment. The state supreme court ruling serves as a stark warning to attorneys to substantiate their bills. ABA Section of Litigation leaders say this is a reminder to be proficient and prudent when informing clients of anticipated costs of litigation, and to execute only those services necessary and required to reach the client’s objective.

A Cautionary Tale in Overbilling

In The Matter of Richard Ledingham, the Supreme Court of the State of New Jersey affirmed an order of the court’s disciplinary review board that disbarred the trust-and-estates attorney Richard Ledingham. Dr. Robert Binder retained Ledingham to draft a second codicil to a “Last Will and Testament and First Codicil.” A different lawyer had drafted that document.

After Dr. Binder died, his 88-year-old widow retained Ledingham to represent her as executrix of the estate. The retainer agreement provided for a rate of $175 per hour. Over the period of a year, Ledingham billed 674 hours, for a total of approximately $120,000. After paying $88,199 in fees, his client began to refute the charges. The lawyer attempted to settle the issue and to reduce his fees. Ultimately, he forgave the remaining fees.

The client retained a new attorney, who began the estate work anew, and he charged a total of $9,412.50. A Vermont attorney was hired to handle ancillary issues, and that attorney charged a total of $3,500.

A district ethics committee filed a complaint against Ledingham, charging him with violating New Jersey Rule of Professional Conduct 1.(5) for charging an unreasonable fee and New Jersey Rule of Professional Conduct 8.4(c) for dishonest conduct. At the disciplinary hearing, the committee’s fee expert, based on 47 years of experience as an estate attorney, opined that Ledingham should not have exceeded 30 billable hours and that the client should not have spent more than $12,000 in fees.

Ledingham offered no rebuttal expert and did not explain why the number of hours he charged was reasonable. He argued that his services were necessary to eliminate $23,243 in New Jersey estate taxes but, as the disciplinary review board observed, he billed the estate six times that.

The board criticized Ledingham for billing 86 hours to review two codicils 15 times over 15 days. The committee’s expert opined that it should have taken him no more than two hours to review those documents. The board also criticized Ledingham for billing the estate 131 hours to review Vermont ancillary probate procedures rather than hiring a Vermont attorney.

Reasonableness Factors for Attorney Fees

New Jersey’s Rule of Professional Conduct 1.5(a) governs unreasonable fees and provides that the reasonableness of a fee can be examined through eight factors, including the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.

In reaching its decision, the court focused on one main issue: the amount that a lawyer of Ledingham’s experience reasonably would have charged for the work he had performed. The court’s tipping point for affirming disbarment, rather than suspension, rested on Ledingham’s lack of remorse and disregard for previous discipline. Ledingham had been previously suspended for overcharging a client and threatening criminal prosecution upon nonpayment. He engaged in a similar practice fewer than five years later. Ultimately, the board held that this time was his third strike.

Section of Litigation leaders agree with the court’s final message: it matters not the technical precision of the work performed, but rather whether the time expended for the work was reasonably necessary. “From both a practical and risk management perspective, it is important to not just look at the accuracy of time entries,” explains Karen L. Hart, Dallas, TX, cochair of the Section’s Real Estate, Condemnation, & Trust Litigation Committee, “but also to evaluate if what has been billed is reasonable and appropriate on that given matter.”

Best Practices to Avoid Fee Issues

“Attorneys should always consider engaging knowledgeable local counsel when needed, and should consider consulting attorneys who have expertise in certain areas that may arise in cases when the primary attorney does not have that expertise,” recommends Emily J. Kirk, Ontario, CA, cochair of the Section’s Solo & Small Firm Committee.

Kirk advises that attorneys should engage in preventative billing practices, including requiring authorization and consent for large projects, educating themselves on out-of-state procedures, and clearly defining each task performed for clients on their monthly invoices. “It is always a good practice to ensure tasks are completed by attorneys with the appropriate level of experience for the task to ensure appropriate billing, and to divide tasks between attorneys so multiple attorney billers are not duplicating work,” Kirk adds.

Hart suggests that attorneys provide their clients with early and recurring budgets, particularly if a matter proves to be more complex than originally anticipated at its outset. “It is part of our duty to our clients to keep our clients informed,” she notes. “As novel issues come up, we need to do our best to explain what is happening and why.”