Uh oh … Will Supreme Court Rule 213 Become Old Rule 220?

April 8, 2011

 

Illinois Supreme Court Rule 220 no longer exists. It was eliminated because it became watered down and unworkable. Rule 220 was intended to provide a responsible framework for the disclosure of expert witness opinions. Over time, the reviewing courts in Illinois created exception after exception to the rule. Eventually, everyone agreed the rule had become ineffectual.

Thus sprang forth Illinois Supreme Court Rule 213, implemented to replace Rule 220. With some adjustments here and there, Rule 213 has been reasonably effective in setting out a clear, understandable and workable outline for expert discovery. A key to its potency has been its mechanism to bar experts whose opinions had not been properly disclosed.

Under Rule 213(f)(1), a party’s disclosure of non-experts “must identify the subjects on which the witness will testify.” Under 213(f)(2) and (3), a party’s disclosure of experts (either retained or independent experts) “must identify the subjects on which the witness will testify and the opinions the party expects to elicit” from the witness. [Note: This is the language applicable to independent experts; the language applicable to retained experts is similar but even more specific and also requires the bases for the opinions be disclosed.]

Rule 213 appears to be very clear that a party must be specific in identifying expert opinions. Of course, case law has also established that an expert “may elaborate on a disclosed opinion as long as the testimony states logical corollaries to the opinion, rather than new reasons for it.” Barton v. Chicago & North Western Transportation Co., 325 Ill. App. 3d 1005, 757 N.E.2d 533 (2001). Nevertheless, the opinion must be disclosed (along with the bases for the opinion).

Recently, in Timothy Whelan Law Associates, Ltd. v. Kruppe, ___ Ill. App. 3d ___ (2d Dist. No. 2_09_1234 March 31, 2011), the Second District Appellate Court issued a decision which opens a hole in Rule 213’s requirement that an expert’s opinions must be fully disclosed in advance of a trial. This was a lawsuit seeking collection of a lawyer’s unpaid fees. The plaintiff, an attorney, was identified in his Rule 213(f) disclosures as a witness who would testify

“regarding the existence of a contract between plaintiff and defendant, the nature of the services provided, and the damages it incurred as a result.”

At trial, the plaintiff/attorney was permitted to testify that the fees he charged to his client, the defendant, were reasonable. Clearly, the Rule 213(f) disclosure did not explicitly state he would so testify. The defendant objected to this trial testimony as not having been disclosed under Rule 213. The trial court overruled the objection, however, indicating the opinion was encompassed within the Rule 213 disclosure.

The appellate court sustained the trial court, finding that because the plaintiff had disclosed he would testify “regarding” his damages, that would reasonably include giving an opinion that his fees were reasonable.

I dissent.

There should be little doubt that the plaintiff’s Rule 213 disclosure was not sufficient to allow the opinion testimony permitted by the trial court. In fact, the plaintiff’s Rule 213 disclosure could only meet the requirement of Rule 213(f)(1), applicable to non-expert witnesses, that only the “subjects on which the witness will testify” be provided. Merely disclosing an expert will testify “regarding” an element of the cause of action does not indicate what that testimony will be or if it will be an expert opinion. If the disclosure made by plaintiff in the Whelan case had been for a non-expert witness, it would have been sufficient. The fact it was being offered as a disclosure of an expert witness opinion, however, requires more specificity and detail.

The modest disclosure that the plaintiff would testify “regarding” damages not only fails to identify the opinion regarding damages which was intended to be offered at trial, but it also fails to identify the bases for any such opinion (as required by Rule 213(f)(3)).

“The Rule 213 disclosure requirements are mandatory and subject to strict compliance by the parties.” Sullivan v. Edward Hospital, 209 Ill. 2d 100, 109, 806 N.E.2d 645 (2004). Rule 213 requires full disclosure of experts’ opinions and the bases for those opinions, and any deviation from the rule should not be allowed, even if proffered “in the interests of justice.” Dept. of Transp. v. Crull, 294 Ill. App. 3d 531, 690 N.E.2d 143 (1998).

Illinois appellate courts have previously dealt situations similar to the Whelan case and found very general, non-specific disclosures to not comply with Rule 213. In Kim v. Mercedes_Benz, 353 Ill.App.3d 444, 818 N.E.2d 713 (2004), the court held a plaintiff’s general disclosure that he would testify at trial “about the matters alleged in plaintiff’s complaint” is insufficient and does not give adequate notice to the defendant of the plaintiff’s intention to offer opinions regarding his damages. Additionally, in Lisowski v. MacNeal Memorial Hospital Assn., 381 Ill.App.3d 275, 885 N.E.2d 1120 (2008), the court ruled where the plaintiff’s Rule 213 disclosures only indicated the expert would testify to “all of the other problems” of the plaintiff, but the topics “depression” and “suicide” were never mentioned in the disclosures, the catchall phase “all of the other problems” was found to not be specific enough to meet the strict requirements of Rule 213, so the expert was properly barred from testifying that plaintiff became suicidal and depressed.

The Second District’s decision in Whelan backs off of Rule 213’s strict requirements of full and complete disclosure of expert opinions. Let’s hope the decision becomes an isolated, unaccepted part of Rule 213’s background. Otherwise, we should already start thinking about which rule is going to replace Rule 213 — just as Rule 213 replaced old Rule 220.

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Are Alternative Fee Arrangements (AFAs) a Flash in the Pan?

March 11, 2010

 

It is de rigeur to assert that AFAs are creating a revolution in the legal services profession, but is it actually a case of the grass being greener on the other side of the fence?

I have participated in AFAs and will no doubt do so in the future, but I have argued that the billable hour will never be replaced as the primary method of lawyer payment. If corporate counsel are merely willing to put into hourly billing matters the same degree of active involvement as is necessary to implement proper AFAs, the billable hour will almost always come out on top because the client retains control.

Interesting bits of information on the AFA vs. Billable Hour debate now come out on an almost daily basis. The following seemed worthwhile of mention in this respect. A recent article (“Survey: In-house counsel cutting legal spending” by Allison Petty in the Chicago Daily Law Bulletin, March 10, 2010, Vol.156, Issue 47) reviewed the results of this month’s Association of Corporate Counsel’s Chief Legal Officer survey. She noted the following about the survey responses:

“Additionally, a large disconnect seems to remain between how much corporate attorneys want to use alternative-billing practices and how much they are actually using them.

Asked, “Would you like to increase the percentage of work handled by outside counsel on alternative-fee arrangements?” 79 percent said yes.

But only 4 percent said they used alternative fees for more than half of their work with outside counsel. The bulk of respondents — 68 percent — said they use alternative fees for 10 percent of work or less.

Still, alternative-fee use has increased from 2008 survey results, when 78 percent of respondents said 10 percent or less of their outside counsel spending was structured around alternative-billing arrangements.”

Ms. Petty then quoted two corporate legal officers regarding their experiences with AFAs, as follows:

“Ronald E. Potempa, associate general counsel at Infor Global Solutions (Michigan), Inc., said his company had tried blended rates and found that they sometimes did not work out well because outside counsel spend less time on the matter.

‘Quite frankly, at the end of the day, we were just glad to get back to normal billing,’ Potempa said.

Alternative billing rarely works for PepsiAmericas Inc., said the company’s senior vice president of legal and government affairs, W. Scott Nehs.

Because the company operates across state and country lines, alternative billing can make matters too complicated, Nehs said. In other words, he said, ‘the juice isn’t worth the squeeze.’”

I really like the way Mr. Nehs put it: “The juice isn’t worth the squeeze.”

I’m sure we will see more AFAs, but hourly billing is here to stay.


Hourly Billing vs AFAs — Redux

March 3, 2010

An extraordinary piece is in the current month’s issue of Corporate Counsel magazine. It is an interview with Richard Baer, the General Counsel of Qwest Communications. Qwest was on the leading edge of companies looking at the possibility of implementing alternative fee arrangements with its lawyers but Mr. Baer has concluded that billable hours are generally better for Qwest than AFAs.

Mr. Baer notes that AFA attorneys have greater incentives to act in ways which are in the law firms best interests but not necessarily those of Qwest, by the manner in which its cases are staffed, the amount of time put into cases and the decisions on when to settle. In his words, “fixed fees just create a different misalignment.”

Although he acknowledges there is still a place for AFAs on certain kinds of matters, he prefers hourly billing because he rejects to old notion that hourly billing attorneys will just churn files for as many hours as is possible. He acknowledges that any lawyer who wants continued business will not act in such a way.

I agree completely with Mr. Baer’s thoughtful analysis, as I’ve previously stated here and elsewhere. His reference to creating a “different misalignment” is critical. Proponents of AFAs tout them as making sure that the client and lawyer’s interests are aligned. However, under the hourly billing model, the client’s interests must always predominate; not so with AFAs. In an AFA, the lawyer and client may be in direct conflict of interests on certain issues in a case, such as how aggressively to act in litigation or other transactions. A lawyer in an AFA might well choose to act to reduce conflict and time spent on a matter. Although that might be consistent with the client’s interests, there are a significant number of situations in which a client wants to push aggressively. For example, many product liability clients assert they do not have the luxury of settling every claim which comes through the door or they risk many, many more such claims in the future.

I continue to believe that if a client is merely willing to work closely with its lawyers, the results will be very good and cost-effective. Mr. Baer notes that by continuing with the hourly billing model, he was able to reduce his legal department’s costs by 10%.

The Q and A at the end of the article says it all:

Q. So, what’s the future of the billable hour?

A. I think it’s going to be around a heck of a lot longer than people think.


Follow-up to AFAs versus Hourly Billing: Kraft Foods

February 17, 2010

Today, AmLaw (affiliated with Corporate Counsel) posted an item which is significant for supporting my point in the last post: “Value” can be achieved by clients in both AFA and hourly billing models, but both models require the client to work for it.

The AmLaw posting (http://preview.tinyurl.com/yl4xsc3) reported on how Kraft Foods, Inc. publicly recognized one of its hourly billing law firms for working closely with Kraft to reduce legal costs. Just as “value” is achieved by a corporate client who puts in the effort to develop AFAs, smart corporate clients like Kraft recognize that the same can be done with hourly billing law firms.

The key in all of this is communication between client and lawyer about their expectations to ensure that the law firm is willing to work for the client’s best interests in all respects, not just for the particular matter for which the law firm was retained.

Congratulations to Kraft Foods’ Legal Department.


Hourly Billing vs. Alternative Fee Arrangements

February 15, 2010

Pat Lamb at the Valorem Law Group is a huge proponent of alternative fee arrangements and has made that fee structure a core part of the firm’s marketing effort. On his blog, Pat recently posted on the subject again proclaiming the virtues of AFAs. I was a little cautious about posting a comment because I had done so once previously but for some reason a decision was made to not post my comment. Nevertheless, I decided to try again and I replied to his most recent post. My comment and Pat’s response to the comment can be found here: http://tinyurl.com/y8cnegr

I didn’t want to have an endless reply/response game on Pat’s blog, so I thought I’d post my thoughts on the matter here.
 
Pat is a good litigation lawyer, and litigation lawyers often spend a great deal of time rewriting the opponent’s arguments and shooting down these “strawman” arguments. It’s good litigation strategy but it does not serve the pursuit of truth. I know that AFAs are all the rage now, but we should at least have a genuine discussion about them.
Pat starts out his reply by saying:

“Let’s begin with a fundamental truth: in any fee structure, a client gets what it pays for. If you buy hours, you will get hours. If you buy efficiency, that is what you will get.”
 
Of course, that is not at all the issue to be dealt with and although it is glib, the statement is hogwash. One can just as easily say “If you buy good, high quality, valuable work to be done by your attorney but only that work, then you’ll get exactly that. If you want to buy an attorney who will decide what to do, when to do and how much to do on your files, then that is what you will get.”
The very end of Pat’s reply is the real key to understanding his enthusiastic marketing of AFAs. He says this:
“While there are, as I have said many times, examples of firms who bill by the hour who are not caught up in maximizing hours, there are too many stories and too much data to dispute the conclusion that a shift from hourly billing to well-thought out AFAs produces materially greater value in the eyes of the client.”
 
I’ve highlighted the significant language: “well-thought out AFAs” because proponents of AFAs usually attempt to make an extremely poor comparison between AFAs and hourly billing. The contrast is usually set out as:
(1) unethical law firms who abuse hourly billing with clients by overbilling for activities which do not advance the client’s interests and in matters in which the clients do not supervise the lawyers,

               versus

(2) “well-thought out” AFAs in which the client and law firm go into great detail about the work to be done, the work which should not be done, the expected outcome of the matter, and the costs to be accrued.

The problem with this type of biased comparison is it assumes the worst possible scenario with hourly billing and the best possible scenario with AFAs. Shouldn’t the proper comparison be between the more likely instances of the two billing systems, and assuming the same degree of client involvement in the matter management and billing process? Of course, that was the point I made in initially posting a comment on Pat’s blog: If clients would put the same interest and work into matters handled under the hourly billing system as they would under an AFA, there is absolutely no reason why the results for the client under an hourly billing structure cannot be far better than the AFA system.

Most client disputes with law firms regarding billing relate to misunderstandings between the two regarding expectations; very few relate to malicious, intentional churning of files. Of course, Pat feeds into the worst case scenario by stating the following:

“That they spend their time avoiding being taken advantage of by their own counsel, however, is something I see as an indictment of the hourly billing model. Protecting your client from being ripped off by your outside lawyer is a waste of resources, certainly not the highest and best use of the inside lawyer’s time and talent. This “policing” approach also assumes that in-house counsel has the time needed to carefully review and monitor all bills.”

Using terms such as “being taken advantage of” and “being ripped off” by outside counsel improperly attempts to lump all hourly billing attorneys into a coven of horrible, unethical ambulance chasers while at the same time elevating all AFA lawyers as cherubic, beneficent halo-wearing professionals who don’t concern themselves with pedantic interests such as money.

The reality is that any corporate client which decides to pursue AFAs has a great deal of work ahead of it, not the least of which is continuing to monitor matters handled by outside AFA counsel to ensure that the proper work is being done. On this point, Pat acknowledges the argument that AFA counsel might put in less needed work in order to enhance the firm’s bottom line, but he again glibly dismisses it by suggesting anything could happen and that “I know of no examples where a firm devoted inadequate resources in the presence of a success incentive.”

Respectfully to Pat, the hourly billing model has existed since lawyers began doing work (including the many years he practiced under such a system and under which he managed to practice ethically and have clients value his assistance). AFAs, for the large part, are a relatively recent creation. To properly address it, we at least have to consider the possibility something will occur. Further, although Pat wants to dismiss it, I guarantee that clients in AFAs are thinking about it, as they should.

Pat and I agree that clients want value, which does not mean the lowest possible cost; it means a mixture of things, including costs, results, expectations, and everything else which clients care about.

To be clear, I have absolutely nothing against AFAs and would happily work with my clients to find mutually beneficial arrangements; I’ve done them in the past. Pat and I disagree, however, on whether a client can obtain “value” in an hourly billing model.

I suspect it is because Pat’s law firm has gone full bore with AFAs as a marketing method, rejecting hourly billing systems. Unfortunately, he absolutely refuses to acknowledge that hourly billing lawyers can provide value. I have a very long list of clients who would disagree with him as they are people and companies with whom I have been deeply involved and who know and trust I will ethically carry out their wishes for their benefit. Certainly there have been disagreements between some lawyers and their clients over billing (although I have not had any), but I pointed out in my comment to Pat the recent lawsuits between AFA lawyers and their clients, so AFAs should not be expected to eliminate controversies.

Client direction, understanding and supervision are critical to ANY successful relationship with lawyers, whether it is in a traditional hourly billing model or a new AFA model.

I believe that the recent surge toward “value” is actually a movement of clients saying they want to work with their lawyers and be certain lawyers and clients are on the same page for the best interests of the client. For that, I say “great!”

As for AFAs versus hourly billing, I say: “Can’t we all just get along?”


What is a “reasonable” fee for a doctor’s deposition?

December 23, 2009

 

How much can a treating physician or other witness with expertise be paid for his/her deposition testimony?

Illinois Supreme Court Rule 204(c) provides as follows:

“The discovery depositions of nonparty physicians being deposed in their professional capacity may be taken only with the agreement of the parties and the subsequent consent of the deponent or under a subpoena issued upon order of court. A party shall pay a reasonable fee to a physician for the time he or she will spend testifying at any such deposition. Unless the physician was retained by a party for the purpose of rendering an opinion at trial, or unless otherwise ordered by the court, the fee shall be paid by the party at whose instance the deposition is taken.”

The Committee Comments to Supreme Court Rule 204(c) state as follows:

“A party may agree to pay a reasonable professional fee to a physician or surgeon for the time he or she will spend testifying at any deposition. The fee should be paid only after the doctor has testified, and it should not exceed an amount which reasonably reimburses the doctor for the time he or she actually spent testifying at deposition.”

Rule 3.4(b) of the new Illinois Rules of Professional Conduct (effective January 1, 2010) indicates that a lawyer shall not “falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law.”

Comment 3 to these Rules states

“With regard to paragraph (b), it is not improper for a lawyer to pay a witness or prospective witness the reasonable expenses incurred in providing evidence or to compensate an expert witness on terms permitted by law. Expenses paid to a witness or prospective witness may include reimbursement for reasonable charges for travel to the place of a deposition or hearing or to the place of consultation with the lawyer and for reasonable related out-of-pocket costs, such as for hotel, meals, or child care, as well as compensation for the reasonable value of time spent attending a deposition or hearing or in consulting with the lawyer. An offer or payment of expenses may not be contingent on the content of the testimony or the outcome of the litigation, or otherwise prohibited by law.

Accordingly, the linchpin of all this is whether the fee paid to a doctor is “reasonable.” So, how should attorneys handle demands by treating physicians and others for very high deposition fees or other conditions imposed on the taking of their depositions?

The greatest concern of an attorney is that he/she will refuse to pay these unreasonable fees and the doctor will then retaliate by giving deposition testimony which is highly unfavorable to that lawyer’s client. On the other hand, it appears that going along with the doctor’s deposition demands might be a violation of the lawyer’s ethical mandates.

So, what is “unreasonable”? About 20 years ago, I filed a petition to find a neurosurgeon’s deposition demand of $750 per hour to be unreasonable. The Court granted my motion because at that point, $750 per hour was unthinkable. Now, $750 per hour is almost commonplace.

I am presently trying to figure out what I should do with the following demands by a neurosurgeon:

• $1,250 per hour (one hour paid in advance);

• the lawyer must pay the remainder due at the end of the deposition (i.e., bringing a blank check);

• $250 to schedule the deposition (not credited against the hourly rate); and

• forfeiture of all deposition amounts if the deposition is cancelled less than 48 hours prior to the deposition.

It is clear that the doctors who attempt to impose these types of deposition fee demands are doing so with the intent of discouraging lawyers from taking their depositions, or at least to minimize the length of time such depositions take. It is manifestly untrue that these doctors are just trying to seek “compensation” for the time they could have spent seeing patients because virtually all such doctor depositions are taken during non-business hours.

Also, the doctors are never willing to make their demands be mutually imposed such that a lawyer’s hourly rate will be paid by the doctor if the physician cancels a deposition or is late, which are all too common occurrences. I wish we as lawyers could get something like combat pay for the need to take a deposition at 6:30 a.m. or staying late into the night to finish the testimony, but those types of concessions by attorneys are taken for granted by the doctors.

So, again, how much is too much? Unfortunately, I don’t know the answer, but I know the standard deposition rates continue to rise and I’m not sure what to do about it. Doctors complain loudly about the costs of litigation driving up the costs of medicine, but in my view, the doctors share a part of the blame because of the fees they charge to give testimony. Every once in a while, lawyers talk about having legislation passed which would impose a cap of the fees doctors could charge to give deposition testimony. The fear is that once the dollar amount cap is enacted, the “cap” would become the minimum charge. Years ago, a very large physician malpractice insurance carrier made it know it would pay $250 per hour to a physician for his/her deposition time without having to obtain higher level authorization. Soon afterward, virtually all physicians began charging $250 per hour.

Maybe we need a more active judiciary stepping in to put a stop to these very high doctor deposition fees, but we probably also need a more active trial bar and those who pay the bills of the doctors giving depositions.


$1,200 per hour billing???

December 16, 2009

Headline: “Some Top Lawyers Bill More than $1,000 an Hour for Bankruptcy Work”  http://is.gd/5qgxr

OK, I know we’re in a capitalist society and that people can charge whatever the market bears, but a lawyer making $1,200 for an hour in a bankruptcy (or any other type matter) seems absurd. That’s about $10,000 for a day’s worth of work! So, at a time when people are complaining about the unforgivably high salaries and bonuses of bankers, financiers, and others, should the legal profession be jumping on board to get the most it can, or should it be demonstrating restraint and reasonableness?

At what point does a lawyer’s billing violate the proscription in the Rules of Professional Conduct against unreasonable fees? Rule 1.5(a) states as follows:

Rule 1.5(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent.

I’m not saying $1,200 per hour is per se unreasonable, and frankly those clients who would pay it are sophisticated and wealthy corporations capable of deciding how much they should pay, but at what point do extremely high fees of the legal profession hurt the image of lawyers. Many attorneys representing plaintiffs in personal injury matters have gotten blackened eyes because of their high contingency fees. Nevertheless, it seems unlikely that an ethics complaint will be pursued against a lawyer who merely makes a lot of money off of a client. The question is, however, do these types of fees tarnish the images of lawyers as a whole?