Writing in Forbes, Cardozo lawprof (and friend of this site) Lester Brickman finds it ethically problematic that plaintiff's lawyers in securities class actions routinely farm out discovery review and other high-intensity work to contract lawyers, then mark up the relatively low rates paid to a much higher per-hour figure when presenting the bill for representing the class:
Defendants' law firms used to add a substantial profit margin to these expenses but clients and competition drove out much of that profit. Instead, though there are many variations, when defendants' law firms now submit their bills and expenses to their corporate clients, typically the outside vendors' bills for objectively coding documents are considered an expense and reimbursed at cost.
Not so on the plaintiffs' side, where there is no actual client footing the bill. Here, the law firms collapse the separate processes of objective and subjective coding so that it is all done "by hand" using contract lawyers. Though contract lawyers are paid about $35 to $40 an hour, plaintiffs' firms "bill" this time to the class at $300 an hour or more, sometimes without disclosing that work was not done by the firm's lawyers.
That's before the application of "multipliers" for purportedly outstanding results and other bonanza logic.
Recently, Brickman says, contract lawyers have come forward as whistleblowers to allege not only that the number of hours they worked had been padded in later fee submissions, but that the labor itself had been make-work intended to lay the basis for fee requests rather than to pursue necessary legal objectives. Brickman promises a fuller account in his book in progress on contingency fee law.