Acceleration

The Goodwin Procter Billing Model; Double the Fees and then Some. Unprecedented Greed.

An arbitrator has found the law firm Goodwin Procter overcharged a real estate client by more than $540,000, e.g. 55% overbill. Unprecedented Goodwin Greed.

$540,000 overcharge sheds light on Goodwin Law firm bills

Arbitration award calls policies into question

December 10, 2010 | Republished; June 14, 2020

An arbitrator has found the law firm Goodwin Procter overcharged a real estate client by more than $540,000 in a rare showdown over the billing procedures used by many of Boston’s largest and most prominent legal practices.

The arbitrator, Jeffrey Martin, ruled Goodwin submitted “vague’’ invoices to Northland Investment Corp., failed to provide a promised discount, and used too many of its attorneys to bill for the same legal tasks.

As a result, Martin ordered Goodwin to cut its $1.1 million invoice by 55 percent.

The case is unusual both for the amount of money involved and because it is playing out in public, with the parties disputing financial matters and other issues that law firms typically handle in private.

Although the matter is still being contested — Northland has asked a court to reduce its bill still further, to zero — the arbitrator’s finding calls into question the business model Goodwin and many other large law firms have relied on for decades: Deploying huge legal teams to pursue clients’ cases, often assigning more than a dozen lawyers to compile research, conduct depositions, and draft motions.

The promise of such treatment is part of what attracts clients to large firms, but it can also leave them shocked when they get bills for work by a multitude of lawyers, each costing upward of $250 an hour, and some much more.

“Firms simply throw bodies at cases, and that allows them to bill and bill and bill,’’

said Alan Fanger, a Newton lawyer who specializes in fee disputes with law firms and legal malpractice cases.

“Until fairly recently,’’ he said, “most corporate clients just paid the bill and didn’t ask any questions.’’

But the economic downturn has caused many corporate clients to more closely scrutinize their legal bills and challenge fees they deem unreasonable. Moreover, increased competition between law firms is prompting some to consider alternative billing arrangements, such as flat fees instead of hourly billing.

Fee disputes between law firms and their clients are not unusual, with more than 130 cases a year in the state coming before an arbitration board run by the Massachusetts Bar Association. But legal analysts said disputes typically involve less than $10,000, many resolved before the arbitrator even rules.

Despite the size of the overbilling found by the arbitrator, Goodwin said, the firm does not see Martin’s decision as a repudiation of its practices.

If anything, the firm said in a statement, Martin’s decision affirms its position that Northland still owes it money — now around $560,000 plus other disbursements — rather than backing the client’s assertion it doesn’t owe Goodwin anything.

Northland, meanwhile, said the decision supports its contention Goodwin dramatically overcharged it and then was unable to justify many of the charges.

The company is now seeking to have even its reduced bill thrown out by a Middlesex Superior Court on the grounds of misconduct by a lead Goodwin lawyer, Gilbert Menna, whom Northland accuses of violating his attorney-client obligations by disclosing confidential financial information about the company and bad-mouthing its chief executive.

The two companies once had a much more amicable relationship.

Northland had hired Goodwin to represent the developer in several legal matters between 2006 and 2009, paying about $3 million for the firm’s work.

The company, which builds large residential and commercial complexes across the country, then received a $1.1 million bill for Goodwin’s representation in an unsuccessful battle with another company that briefly had formed a business partnership with Northland.

The bill for that losing effort led to a heated dispute between Goodwin and Northland, with the law firm bringing the case to an arbitrator to seek payment.

Northland said the fight got personal, and accused Menna of going on a tirade and referring to Northland’s chief executive, Steven Rosenthal, as “cheap’’ and “a lunatic’’ (as well as a more derogatory name) in front of one of Northland’s top investors.

Northland also said Menna told the investor, Michael D’Amelio, that the company was “financially unsound,’’ prompting D’Amelio to spend months reviewing Northland’s books before making additional investments.

In his Oct. 19 ruling, Martin did not consider the allegation against Menna but found that Goodwin failed to make a case for several of the charges on its invoices. The questionable charges included: 206.8 hours of work by six employees to prepare a complaint and injunction papers; 102.9 hours for seven employees to draft another document; and 64.8 hours for five employees to prepare for a motion hearing.

Martin does not disclose the dollar value of the individual charges in his ruling, but lawyers at prominent downtown law firms typically charge from $250 an hour for low-level associates to $750 for top partners, lawyers say.

Another important claim under dispute: whether Goodwin had promised Northland a substantial discount on its final bill. Martin ruled the firm did, and on that matter alone, he shaved 30 percent from the sum.

A spokesman for Northland said it will continue to pursue the allegations of misconduct against Menna. “The company wants to be heard on this issue,’’ the spokesman, Doug Bailey, said. “They feel this escalated once the breach of duty occurred.’’

Goodwin has not filed a response to Northland’s motion. But in a statement, the firm said the allegations against Menna, who recently won a lifetime achievement award from a national real estate association, are a sideshow meant to distract from Northland’s responsibility to pay the firm.

“The arbitrator properly viewed these allegations as irrelevant,’’ the firm’s statement said. “It is unfortunate that Northland now seeks to avoid its own legal obligations by engaging in an unfounded attempt to smear Goodwin Procter and its lawyers.’’

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When there’s an arbitration clause and the arbitrator has already ruled, the following judgment is expected.

Northland Inv. Corp. v. Goodwin Procter Llp.

No. 11–P–1555.

2012-07-25

NORTHLAND INVESTMENT CORPORATION v. GOODWIN PROCTER LLP.

Theodore J. Folkman, Boston, for the plaintiff. Robert L. Ullmann (Benjamin L. Mack with him), Boston, for the defendant.


RUBIN

Theodore J. Folkman, Boston, for the plaintiff. Robert L. Ullmann (Benjamin L. Mack with him), Boston, for the defendant.

Present: RAPOZA, C.J., RUBIN, & FECTEAU, JJ.

RUBIN, J.

Northland Investment Corporation (Northland) appeals from a judgment confirming an arbitration award that resolved a fee dispute between Northland and its law firm Goodwin Procter LLP (Goodwin).

The arbitration hearing between Northland and Goodwin began on July 26, 2010, and lasted three days. Both sides presented testimony, cross-examined witnesses, and submitted exhibits in evidence. Goodwin moved to exclude evidence that Northland sought to introduce to show that one of Goodwin’s senior partners had disclosed confidential information about Northland to an investor, in violation of the law firm’s duty of loyalty and in breach of its obligation of confidentiality. The arbitrator requested that the parties provide him with relevant case law and heard oral argument on Goodwin’s motion to exclude. Northland does not dispute Goodwin’s assertion that it was allowed to make a full offer of proof. After reviewing the case law and considering the arguments made by the parties, the arbitrator determined that the evidence was immaterial and should be excluded. On October 19, 2010, the arbitrator issued a decision, awarding Goodwin approximately forty-five percent of the legal fees it was seeking from Northland.

Northland filed an application to vacate or modify the award with the Superior Court, which was denied. Final judgment entered on July 1, 2011, confirming the arbitrator’s award. Northland filed a notice of appeal with this court on July 21, 2011. Northland argues that the arbitration award should have been vacated rather than confirmed because the arbitrator “refused to hear evidence material to the controversy,” which is one of the bases for vacatur enumerated in G.L. c. 251, § 12( a )(4), inserted by St.1960, c. 374, § 1.

To begin with, we disagree with Northland’s contention that this court is empowered to engage in more searching inquiry in its review of an arbitration award simply because what has been arbitrated is an attorney’s fee dispute. We read Marino v. Tagaris, 395 Mass. 397480 N.E.2d 286 (1985), as an exercise of the Supreme Judicial Court’s supervisory power—a power committed by statute only to that court, see G.L. c. 211, § 3—rather than as calling for more searching inquiry in the ordinary course of arbitration awards in attorney’s fee disputes.

In any event, even if more searching inquiry were called for, Northland has failed to demonstrate that the arbitrator “refused to hear evidence material to the controversy.” G.L. c. 251, § 12( a )(4). The arbitrator’s decision not to admit the evidence was made after a full offer of proof and oral argument. Even if the evidence were material, the arbitrator’s decision does not amount to a “refus[al]” to hear it. Contrast Hague v. Piva, 61 Mass.App.Ct. 223, 225–227808 N.E.2d 843 (2004). The statute speaks of “refus [ing] to hear evidence material to the controversy,” not of erroneous determinations not to admit material evidence or “failures” to hear material evidence. We therefore do not read the statute to create a special rule by which, contrary to the ordinary principles of review of arbitration awards, we may vacate an arbitrator’s award simply because we decide that evidence we determine to be “material” was erroneously excluded from the arbitration.

For aught that appears in the record, the arbitrator in this case may simply have concluded that the alleged breach of fiduciary duty, which caused no injury to Northland, provided no defense to Goodwin’s fee claim, and that the proffered evidence, which the arbitrator evaluated, was therefore not material to the issue before him. Even if the decision by the arbitrator to exclude the evidence were based upon an error of law, a point on which we express no opinion, an error of law does not provide a basis for a court to vacate an arbitration award. See Lynn v. Thompson, 435 Mass. 54, 61754 N.E.2d 54 (2001), cert. denied, 534 U.S. 1131122 S.Ct. 1071151 L.Ed.2d 973 (2002).

Goodwin has sought appellate attorney’s fees in this case, arguing that they are covered by the language in the arbitration agreement. We express no opinion whether the agreement provides for such fees. If the parties have a dispute about the meaning of the attorney’s-fee provision in their agreement, this court is not the forum in which to resolve that dispute in the first instance.

Amended final judgment affirmed.

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