Overbilling and Supervision

By Keith R. Fisher

A recent disciplinary complaint filed by the Illinois Attorney Registration and Disciplinary Commission alleges significant overbilling in violation of the Illinois versions of Model Rules 1.5(a) (charging and collecting an unreasonable fee) and 8.4(c) (conduct involving dishonesty, fraud, deceit, or misrepresentation). 

This routine matter is noteworthy because the firm involved, Reed Smith, itself detected the overbilling and promptly offered the client a refund or a credit for fee payments for work that had not actually been performed.  Only the associate involved, and no one else in the firm, is the subject of the disciplinary action.     

The disciplinary complaint alleges that, on two separate projects, the associate overstated billings by over 90 hours.  At her hourly billing rate of $435, that would represent overbilling by more than $39,000.   

The law firm’s handling of this incident provides a good example of sound managerial policies and procedures that firms can implement for supervision of the work of their lawyers, as contemplated by Model Rule 5.1(a).

Common Interest Agreements and Waiver of Attorney-Client Privilege

By Keith R. Fisher

A recent ruling in a patent infringement suit explores the relationship between non-disclosure agreements (NDAs) and common interest agreements (CIAs) in M&A transactions and assertions of attorney-client privilege in subsequent litigation.  A paradigmatic scenario — one that will be of interest to lawyers negotiating M&A deals — is where an acquiring entity (“Acquiror”), as part of its due diligence, obtains from a target company (“Target”) documents prepared by Target’s attorneys regarding such things as (i) enforceability of Target’s intellectual property or (ii) assessments of claims pending or threatened that Target has infringed the intellectual property of another.  Acquiror and Target will typically enter into an NDA and a CIA to protect this information.  The question is whether those agreements are adequate to prevent a finding that Target has waived attorney-client privilege with respect to those issues. 

In Finjan, LLC v. ESET, LLC, a U.S. Magistrate Judge in the Southern District of California ruled that common interest protection is not a separate privilege; rather, it constitutes an exception to the rule that disclosure of an attorney-client communication to a third party destroys the confidentiality and thereby waives the privilege.  The common interest exception applies where (1) the communication is made by separate parties in the course of a matter of common interest; (2) the communication is designed to further that effort; and (3) the privilege has not otherwise been waived.   A CIA need not necessarily be written, the court said, but the asserting party must produce adequate proof of its existence and demonstrate why the privilege is applicable. 

The court deferred reaching any definitive conclusion on whether the common interest protection exception applied based on the NDA and CIA in that case, because elsewhere in its opinion it was narrowing the permissible scope of document production requests.  The court preferred to await submission of documents responsive to the narrowed request for in camera review before making any determinations on privilege assertions and waivers. 



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