legal research class action

I do not think these firms should be able to mark up legal research costs without disclosing that to the clients. They should be billed at cost.

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The class action was filed earlier this month in California Superior Court, lead plaintiff being J. Virgil Waggoner, against international law firm Chadbourne & Parke LLP. The charge is that the firm overbilled for legal research. According to the complaint, Waggoner was billed about $20,191.64 for online legal research, but that the firm’s billing practices for computerized legal research were “deceptive” because Chadbourne did not reveal that it billed out more for research expenses than it spent. According to one interview with Waggoner’s lawyer, Patricia Meyer, the actual amount should have been closer to $5,000.

This was not the first time Waggoner had a legal run-in with Chadbourne. In 2007, he sued Caruso, Bracewell & Giuliani — the law firm that employs former New York City mayor and presidential candidate Rudy Giuliani — as well as two former law firm employers of partner Kenneth Caruso, one of which was Chadbourne, for having allegedly “schemed and conspired to steal $10 million”.

Included in the current complain is a letter purportedly from Chadbourne, partner Kenneth Carouso, who wrote that the legal work in question would be on retainer, and that Waggoner would “pay our expenses monthly.” In that letter is no mention that the firm would mark up any of the research costs, which would apparently be the argument that the suit makes. According to the interview with Meyer, a good dozen other law firms also overbill for research, and there are other law suits in the works, which is why this one is positioned as a class action.

At the center of the dispute is how much law firms are allowed to charge for expenses. I emailed Roy Simon, the Howard Lichtenstein Distinguished Professor of Legal Ethics at Hofstra University School of Law, who replied as follows:

Bottom line: Lawyers can mark up expenses beyond cost plus overhead if the client agrees after full disclosure. A client might agree if the product (Lexis, or a court reporter) is one that the client really isn’t in a position to buy directly.