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Still more Citigroup Securities coverage

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The Wall Street Journal ($) runs an extensive story on the Citigroup Securities litigation fee request and its $465/hour average charges for contract attorneys (multiplied to $900+/hour cost to shareholders). (One can avoid the paywall with a google search.) One highlight is this Perry-Mason-moment exchange in the fairness hearing where the district court asked Citigroup's attorneys what they charged for contract attorneys:

"I believe the cost was $25 to $35 an hour," Mr. Karp told Judge Stein at the hearing. "But Citigroup is a large vendor and has enormous market power."

Of course, class counsel in a securities litigation of this size also has enormous market power when it offer to buy over 61,000 hours of contract-attorney time—or even over 45,000 hours of contract-attorney time if one excludes the 16,000+ hours billed to contract attorneys after the case settled, a second example of bill inflation that proves the bad faith of the first example.

Professor Stephen Gillers makes the best case for any markup of contract attorneys: "A law firm might charge a client more because the firm is professionally liable for the contract lawyer's work, or because it provided the temps with office space or computers, said Stephen Gillers, a law professor and legal-ethics expert at New York University School of Law. 'All of that justifies a markup,' he said. 'The question is how much.'"

Except in this case, the Second Circuit forbids class members from suing class counsel for malpractice in a settlement eventually adjudicated fair and reasonable, so class counsel faces no real risk of malpractice; and the office space and computers were provided by the third-party vendor. In such a case, the ABA ethics opinion requires the expense to billed out without a markup.

More: Reuters; Law360 ($).

More Point of Law coverage.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.