Wachtell's $10 Million Fee "For Services Rendered" Questioned
Yawn. Yet another fee dispute, this one involving venerable Wachtell, Lipton, Rosen & Katz. And at $10 million, the disputed amount pales by comparison to the recent $42 million contingency fee controversy between Alice Lawrence and the lawyers who represented her in litigation over her late husband's estate, which didn't generate much commentary despite a bang up post by David Giacalone.
There's not yet much detail available about the Wachtell fee controversy. According to this WSJ blurb, Wachtell's fees arise out of its role in advising the Bancroft family in connection with deliberations regarding the sale of publisher Dow Jones to News Corp. From the article:
News Corp. gave the family $30 million to cover its fees. The remaining tally -- estimated at as much as $3 million above the News Corp. contribution -- is causing family members to ask advisers questions about the nature of the charges. One item is a $10 million bill from Wachtell, Lipton, Rosen & Katz and its namesake attorney, Martin Lipton. Unlike most law firms, which bill by the hour, Wachtell simply submits an invoice for "services rendered." Some family members argue Wachtell doesn't deserve the $10 million. As they see it, Mr. Lipton and his firm acted as little more than emissaries between the family and News Corp. They zero in on the fact that News Corp.'s unsolicited $60-a-share offer, submitted in April, didn't improve by the time the deal was sealed Aug. 1. Family members note that Wachtell didn't have a formal engagement letter with them.
Though the Lawrence and Wachtell fee dispute involved different subject matter (an estate and corporate transaction, respectively), at the same time, both cases have several common features. In both cases, the clients complained that their lawyers didn't provide adequate value for the amount paid. Lawrence argued that the extra $42 million awarded to her lawyers didn't provide her with any value, since she wound up with the same $60 million that she'd have obtained even without the lawyers' extra five months of work. And the family in the Wachtell case contends that the firm doesn't deserve $10 million since the firm didn't improve on the deal already offered. In addition, neither case involves the much maligned billable hour, which critics blame for most of the evils in the profession, including out-of -control rates and lack of value to clients.
I'm no fan of the billable hour and endorse new approaches to maximize value to clients. But as the Lawrence and Wachtell cases show, even cases involving alternative billing can raise questions about whether the client received value at the end of the day.
Do you think that use of the billable hour would have averted the disputes in these cases? Or were these cases ripe for controversy under any system because of a mismatch between the law firms' understanding of their role and the client's expectations? And why are lawyers so interested in concepts like value billing (a topic which always attracts plenty of discussion) but at the same time, so blasé in commenting about the increasing cost of legal representation? Is it because expensive legal fees are simply a fact of practicing law in today -- or do lawyers avoid criticizing high fee awards out of self-interest?
Posted by Carolyn Elefant on December 18, 2007 at 04:30 PM | Permalink
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