How many hours does it take a team of lawyers to file 27 documents?
It sounds like the start of a joke, but a judge wasn't laughing after Morgan Stanley billed an adviser nearly $50,000 in legal fees for 220 hours work.
That's how long Morgan Stanley says it took a 5-member legal team to defeat adviser Alan Mann's attempt to overturn an arbitration award that the firm had won against him. The case required the firm's attorneys to file 27 documents; no oral arguments were heard as a judge dismissed Mann's case.
Morgan's victory was short-lived however, as a U.S. District judge rebuked the firm for attempting to bill Mann $49,490 for legal fees that the wirehouse says it incurred during the civil case.
Peggy Leen, a U.S. magistrate judge for the district of Nevada, reduced the fees to about $14,000 and said that number of hours billed "is excessive on its face."
"All but one of these filings are very short, ministerial documents requiring little or no legal judgment or analysis. Counsel did not appear personally before the Court on any matter and Mr. Mann's petition was decided without oral argument," the judge wrote in her decision.
IN THE BREACH
David Liebrader, Mann's lawyer, says the size of Morgan's legal bill was "very surprising."
A spokeswoman for Morgan Stanley says, "We are pleased that the arbitration award was upheld in its entirety, including an award of attorneys' fees to offset the cost of recovering the unpaid note."
The dispute began when Mann left the firm for Merrill Lynch in 2012. He had been with Morgan since starting his career in 1988, according to FINRA BrokerCheck records.
Morgan took Mann to arbitration, demanding that he repay the balance remaining in a promissory note that he had signed.
Liebrader says his client didn't pay the note because the firm allegedly besmirched his reputation to clients after he left. "They had kind of implied that he wasn't in the business anymore and kind of implied something bad had happened," says the Las Vegas-based attorney of 23 years.
In 2014, an arbitration panel ruled in Morgan's favor, ordering Mann to pay about $179,000 for the note and an additional $30,000 in attorney's fees. The arbitration process included 10 hearings.
Since January 1, 2015, firms won attorney’s fees in 59% of arbitration cases, according to Securities Arbitration Commentator, a New Jersey-based research service that tracks data from arbitration awards. In total, arbitrators granted $5.5 million in attorney’s fees.
After losing in his arbitration case, Mann tried to vacate the award in U.S. district court on the grounds that one of the arbitrators was unfairly biased against him.
"He had been involved in a breach of contract dispute at the time. We felt that should have been disclosed and if it had been disclosed, then we would have struck that arbitrator and got a replacement. Unfortunately, the court did not agree," Liebrader says.
80 HOURS TO EDIT ONE DOCUMENT
Morgan — which hired New York law firm Beugelmans to represent it — filed for attorney's fees after defeating Mann's effort to vacate the award earlier this year.
Judge Leen affirmed that Morgan had the right to be reimbursed for attorney's fees, per the terms of the promissory notes that Mann had signed. The judge also found that the fees per hour were in line with what other attorneys charged.
However, the judge took issue with the "unreasonable" number of hours billed, noting that Morgan's attorneys only had to file little more than two dozen documents with the court.
At 220 hours, Morgan's attorneys logged about five-and-a-half weeks of work.
Morgan's attorneys provided a block billing format, and did not itemize their work, which "made it very difficult to analyze the number of hours expended," the judge said.
For example, the judge notes that Daren Luma, a partner at the law firm, billed 6.6 hours at $260 per hour in order to finalize an amended petition and having a phone conference with Morgan Stanley about it.
"The Court has no way of knowing whether the client phone conference lasted 10 minutes or several hours and is forced to estimate the number of hours to apportion to each task," Leen said.
The judge added that it appears that Morgan's attorneys spent 40 hours drafting seven ministerial filings and about 80 hours editing the firm's opposition brief – a 22-page document, excluding attorney signatures and a certificate of service.
The judge also noted the many years of experience that the attorneys on the case had, saying that they must surely have materials and case briefs to draw upon rather than start from scratch with each new lawsuit.
And to drive the point home, the judge said that issues at stake in this case "were not complex or novel."
Liebrader says his client has paid the reduced fees. Reflecting on the hours Morgan's attorney's bill, Liebrader says that it doesn't match his own work experience.
"When you are working on multiple cases, you might spent 30 minutes here and 30 minutes there. But to spend multiple 8-hour days?"