271 - Thomas Counteraffidavit Rebutting Doc 267-2 - Example Legal Fees Audit by Stuart, Maue, Mitchell & James Legal Fees Auditing Firm

Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 1 of 52
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION HARRIS METHODIST FORT WORTH, Plaintiff, v. SALES SUPPORT SERVICES, INC. EMPLOYEE HEALTH CARE PLAN and SALES SUPPORT SERVICES, INC. Defendants and Third-Party Plaintiffs v. TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY, STANDARD SECURITY LIFE INSURANCE COMPANY OF NEW YORK and BERKLEY RISK MANAGERS, Third-Party Defendants. FILED ELECTRONICALLY on February 18, 2008
CIVIL ACTION NO. 4:01-CV-0567-Y
Counteraffidavit of Michael S. Thomas, CPA, ABV Regarding Declaration of Michael J. Brychel [DN 267-2] Lisa A. Manziel Manziel Law Offices SBN: 12957595 E-Mail: lisa@manziel.com 8330 Meadow Road, Suite 100 Dallas, TX 75231 Telephone: 214-369-5500 Facsimile: 214-369-5553 ATTORNEY FOR PLAINTIFF HARRIS METHODIST FORT WORTH
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 2 of 52
CERTIFICATE OF SERVICE I hereby certify that this document is being filed electronically pursuant to the Court's Order Assigning Case to Electronic Case Filing, Docket Number 173, and Northern District Miscellaneous Order 61, Rule 3, Fed.R.Civ.P. Rules 5(b)(2)(D) and 6 (a) and (e) and that Mr. Richard E. Aubin, Mr. Robert M. Candee and Mr. Andrew C. Whitaker will be notified through the Court's CM/ECF system of the filing of this document on the date of filing, Monday, February 18, 2008. s/ Lisa A. Manziel Lisa A. Manziel
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 3 of 52
COUNTERAFFIDAVIT OF MICHAEL S. THOMAS, CPA, ABV On this day came before me Michael S. Thomas who stated the following on his oath: My name is Michael S. Thomas. 1. Qualifications of Counteraffiant I was awarded a Bachelor of Science in Accounting from Louisiana State University degree in 1989 and I have been licensed as a Certified Public Accountant in Texas since 1991. I have ten years auditing experience and nine years forensic accounting experience including litigation-related audits. I hold an Accredited in Business Valuation (ABV) certification from the American Institute of Certified Public Accountants, which is similar to board certification in a legal specialization in the legal profession and requires proficiency in business valuation demonstrated through experience and a written exam. I have served as an expert witness regarding Litigation Support in state and federal courts in the northeast Texas area since 1999 and I am currently involved in that capacity in five cases pending in courts in northeast Texas. I am familiar with common litigation activities and documents such as pleadings, motions, briefs, discovery, and depositions. 2. Reference format herein In this Counteraffidavit, unless otherwise noted all references in the formats "p. 1, 2" or "Brychel p. 1, 2" refer to DN 267-2 and paragraph references marked "" use only the lowest level subsection designator appearing on the page, i.e., "p. 3, c)", not "p. 3, f) 1) c)" For Adobe PDF pages in landscape format (11 x 8.5 inches), the ECF system sometimes does not add page numbers at the top. This occurred with Exhibit A of Manziel's
Counteraffidavit regarding Declaration of Michael J. Brychel - Page 1
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 4 of 52
affidavit, DN 256. In those instances, I refer to "Exhibit A, exhibit page 3", which is in bold type in the lower left corner of the page. 3. Brychel's report would be given no weight by a trained auditor. Because of obvious lack of appropriate education and training, obvious severe bias, fundamental and substantial methodological errors and substantial omissions discussed below, Brychel's report and supporting "analysis" would not be accepted as a valid audit by someone experienced and properly trained in accounting and auditing and the "audit" would be given no weight. In this regard I would caution the trier of fact on attorney fee issues that although the numerous exhibits could possibly appear impressive to someone with no particular background in accounting, from an auditing perspective in general those provide information that is either useless, irrelevant, or can definitely be misleading. Regarding a tendency to mislead, indeed, the "independent" (and therefore one would tend to assume, unbiased) "audit" mischaracterizes time summaries submitted by Plaintiff's counsel as time records and the audit suffers from numerous methodological errors and appears liberally laced with phrases intended to convey the idea that the summaries are a baseless fabrication. On the contrary however, to me as an experienced accountant/auditor, DN 256 Exhibit A, Manziel's time listing, obviously constitutes a distillation and summaries of information in a format such as would commonly be presented to senior managers interested in "the big picture" rather than voluminous documentation of minutia, i.e., "how many total billable hours were spent researching and preparing the motion and brief", as opposed to "how many six-minute increments did the attorney work on the brief on March 14 and how many on the motion?" Counteraffidavit regarding Declaration of Michael J. Brychel - Page 2
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 5 of 52
One area where I do agree somewhat with Brychel's conclusions is total hours spent on large sub-projects such as briefs. However, I reached a conclusion directly opposite from the impression his report gives: rather than overbilling, it is quite obvious that a number of the briefs and/or motions could not possibly have been completed in the small amounts of time Manziel indicated. For the instant audit, no competent auditor would fail to make an easy preliminary "preparation minutes per page" rough calculation on a few of the high-hours sub-projects as part of designing an audit.1 Brychel's failure to even mention that on major sub-projects the hours Manziel claims are substantially below a realistic "preparation minutes per page" rate shows either gross incompetence, extreme bias, deliberate intent to mislead, or some combination thereof and establishes that his report is not reliable; for this reason alone it would not be considered reliable or credible or be given weight by anyone familiar with accounting and auditing principles. (I note, conversely, that because attorneys often mark down clock hours to a lower number of "billable hours", a trained accountant/auditor would not consider billing less than actual time to be false or misleading except possibly on a pilot project, which is not the situation here.)
For instance, DN 256 page 56 of Exhibit A lists 22.00 attorney hours and 5.25 assistant hours for "6/12/2007 through 1/11/2008 - Preparation of Motion and Brief for Attorney Fees and Affidavit and Exhibit in support thereof". It is outright impossible that anyone could (i) prepare a 12-page Affidavit, (ii) input, review and format a 58-page subdivided spreadsheet Exhibit A, (iii) download, review and pull excerpts from a 40-page SEC corporate filing (DN 256, Exhibit B), (iv) research and draft a 5-page motion, and (vi) research and draft a 19-page briefi.e., research, draft, format, print and proofread almost a hundred pages of custom complex informationin less than 28 hours. That comes out to less than 17 minutes per page to perform all related research, data conversion, drafting and finalization. I assume the 28 hours additionally includes the David Holliday affidavit I did not examine, and that would further reduce the "preparation minutes per page" time.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 6 of 52
4. Nature of an audit. An "audit" is not a sheet of paper with numbers or a report stating conclusions. An "audit" is a process. The first step is to examine the activity that will be audited and the work product of that activity. The next step is to determine the type of analysis needed. Then the auditor must determine the type of data that will be needed to conduct the analysis. Then that data must be gathered and preliminarily reviewed. At that point the auditor designs an appropriate audit process that can draw useful and reliable conclusions from the accumulated data. A "one size fits all" audit process cannot be used, even if it is "our standard method". Then the auditor must run the process on a subset of the data large enough to be representative of the whole. Statistical sampling, regression analysis and related analytical techniques are used to determine the necessary minimum size of the sample and comparison reference data. Formal training is absolutely essentialone cannot reliably "pick up complex statistical analytical techniques and methodology on the job". Once the auditor has determined that the designed audit process can produce reliable and meaningful conclusions, the process is then applied to the full corpus of the data being audited. If the data corpus is extremely large, e.g., hundreds of thousands or even millions of individual time entries, then the final analysis is done not on the entire corpus but on one or more representative subsets and it is assumed that the conclusions will apply to the entire corpus. Here too, determining which data items to include in these subsets is done using mathematical statistical modeling techniques. 5. Recognized auditing standards Auditing practices are governed by recognized standards; persons who purport to conduct audits are not free to use arbitrarily selected techniques and methodology, perhaps Counteraffidavit regarding Declaration of Michael J. Brychel - Page 4
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 7 of 52
even "home grown" methodology.2 Like "common law", there is a set of Generally Accepted Accounting Principles ("GAAP") and Generally Accepted Auditing Standards ("GAAS"). I note with some concern that although Brychel talks about "standard" methodology and "auditing", not once does he mention accounting standards either in a general way, e.g., "standard accounting methodology" or by mentioning the specific recognized standards GAAP and GAAS, e.g., Brychel p.3, 7: "This methodology is based on generally accepted principles regarding " As an accountant, I would have severe reservations about the reliability of any purported "audit" from someone who doesn't want to mention the existence of industry-promulgated standards that apparently were not followed. 6. Common audit errors A number of methodological errors commonly appear in audits, some of which I find in Brychel's report. One must first examine and consider the overall analytical approach that was used. Analysis of any type of data basically proceeds from one of two viewpoints, "data-driven thinking" or "theory-driven thinking". The data-driven approach is, "Let's look at the data and see where it leads us." It is my understanding that this is the approach courts normally use. Theory-driven thinking is the exact opposite: "I know what is the correct answer, now let's find data to support it." Theory-driven thinking typically accepts uncritically any information tending to support the examiner's a priori conclusions and harshly criticizes even the most immaterial information that might cast doubt on those conclusions. If data strongly
"I employed - to the extent possible considering the nature of the fee data - the standard legal fee auditing methodology developed and utilized by Stuart Maue in reviewing and auditing billing for legal fees." Brychel p. 3, 7
2
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 8 of 52
contradicts the examiner's a priori conclusions, the examiner either declares the data "obviously in error" without providing specifics and then ignores it, mischaracterizes the data, misrepresents the significance of the data, or simply fails to mention the data, hoping the absence will go unnoticed. "Straw-man" arguments are particularly common when the theory-driven approach is used. Errors introduced by a theory-driven approach can be particularly problematic as the data corpus and the report increase in size and complexity, as it is easier to get "lost in a crowd". Audits can suffer from other methodological errors such as voluminous exhibits that repeatedly present the same data with slightly different "analyses", which is the case with the Brychel exhibits. Seeing a single "problem" item in five different "analyses" can leave the subconscious impression five unrelated problem items exist. Particularly with modern computer-generated data tables, a plethora of neatly-formatted numbers can convey the false impression that a detailed analysis was conducted. Other methodological errors are that audits can mischaracterize or fail to disclose: (1) the specific nature and/or sources of the sample data; (2) the specific nature and sources of reference data; (3) the size of the sample and reference populations; (4) the "product mix" of the sample and reference populations; (e.g., what percentage of each were pleadings, briefs, letters); (5) how the reference data was compiled and its reliability determined; (6) whether and how statistically-aberrant items in the reference data were identified and handled;3 (7) data sampling error rates; (8) the geographical regions from which reference
For example, the average net worth of Bill Gates and any three random individuals exceeds one billion dollars per person.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 9 of 52
data was compiled and whether there are statistically-significant variations by region; (9) the age of reference data and the older/more recent "age mix"; (10) which independent organization(s) examined and confirmed reliability of the examiner's comparison reference data, calculations and methodology in general (the Enron/Arthur Anderson "Who is auditing the auditors?" issue); and (11) whether definitions and concepts used by the auditor for a particular audit are appropriate and consistent with the sample and reference data and the situation (e.g., Brychel's undefined "sophisticated" consumer of legal services p. 3, 7). Another common indicator of the theory-driven approach mentioned above is these types of failures to provide specifics. Instead, the examiner makes only broad unsubstantiated conclusory statements and the end user is provided no way to determine whether they are correct. 7. Preparation for this review To prepare this review I examined the Plaintiff's attorney fees motion DN 254, brief DN 255 and affidavit DN 256, Brychel's report DN 267-2, Plaintiff's summary judgment motions and briefs (first motion DN 83 and brief DN 84, second motion DN 178, brief DN 179 and appendix DN 198), Plaintiff's brief requesting reconsideration DN 228, and Defendants' second motion for summary judgment DN 186. I did not review those documents to analyze the legal issues in detail but rather to obtain an understanding of the depth of the material contained in briefs and similar documents in this case, the amount of supporting references, etc. I also spoke with Lisa Manziel and Joseph Reinckens about how various documents were prepared and I reviewed certain parts of the Stuart Maue website, pages from which are attached hereto as Exhibit A, incorporated herein.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 10 of 52
8. Brychel's lack of accounting qualifications Brychel states that he is an attorney but he states no information as to his qualifications as an auditor. It is well-known that auditing and law are distinct fields and that qualifications in one field simply do not equate to qualifications in the other. Auditing is an accounting activity. Brychel's law degree does not qualify him to perform accounting activities or to render an accounting opinion any more than it would qualify him to perform surgery, render a medical opinion, a psychiatric opinion, or an engineering failure analysis opinioneven if he worked for several years as an attorney for a hospital, a mental health facility, or an engineering firm. Some things simply can't be learned through "on-the-job training". That is why people spend tens of thousands of dollars going to school to earn a degree in accounting, so they will be qualified to perform accounting activities and render accounting and auditing opinions.4 Certainly, over time an intelligent, well-educated person who regularly interacts with accountants can pick up enough terminology and accountants' mannerisms that persons not trained in accounting can get the impression he is appropriately trained and qualified. But if having a law degree and learning some accounting jargon qualified a person to be an accountant, attorneys would routinely handle their own operating and trust accounts rather than hire bookkeepers. One of the things the Stuart Maue webpages show is that Stuart Maue does not require any accounting background at all for attorneys that it hires as auditors, as can be seen at Exhibit A, pp. 8-9. In evaluating the credibility of Brychel's report, one must consider that
Lest the Court misunderstand, although one may not practice law, medicine, etc., without an appropriate license, that is not the case with accounting, even auditing. A CPA license is only required to provide an opinion on certain types of financial audits. But the fact that no license is required still does not automatically endow an opinion with credibility and weight.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 11 of 52
Brychel offers the accounting opinion of a person with no training in accounting on the grounds that an employer gave him a job title indicating that he is an auditor when in fact, he is not qualified to perform auditing tasks or to render an accounting/auditing opinion. I found nothing in Brychel's report indicating he has any accounting training. 9. Brychel's lack of understanding about auditing Brychel's report appears to be self-contradictory and shows a lack of fundamental understanding of the duties of an auditor. He says for example, at Brychel p. 2, 4, "... I have worked with law firms to refine their billing practices; ... I have been consulted by corporations, insurance companies, governmental bodies and other sophisticated consumers of legal services regarding legal fee analysis and legal billing practices." Yet he then says, "My primary duty as a legal fee auditor is the identification and quantification of fees for legal services which are unsupported or appear unreasonable." No, any auditor's primary duty is to determine whether the records accurately reflect the situation as they state it to be. 10. In charge - Brychel p. 3, 6 Brychel p. 3, 6 states, "I was in charge of the review of the Manziel Affidavit and the attached time records." However, it appears he never states that he himself performed any part of the purported audit, in which case the entire report may be made not on personal knowledge. As noted, the time summaries are not "time records". Perhaps the reason
Brychel didn't mention that is because he didn't know ithe simply signed off on something actually prepared by someone else. 11. Who actually prepared the "audit"? Of course, this raises the question of who actually prepared the "audit". One of the things that I found particularly disturbing about the Stuart Maue website is that no one at all Counteraffidavit regarding Declaration of Michael J. Brychel - Page 9
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 12 of 52
is identified. Although the site contains lots of advertising self-hype, it is impossible to tell the actual qualifications of anyone performing the "audits" or even simply their names, job titles and specific dutiesone is left completely in the dark. Are they degreed accountants? "Accounting technicians" who, like Brychel, have no accounting training? Are they even Stuart Maue employees, or is the work outsourced to whichever independent contractors happen to be available? And even if they do have accounting training, how would accounting training qualify them to understand what was involved in the preparation of legal documents in this case? I could find nothing in Brychel's report that answered any of these questions. If indeed there was a "team", there is no indication of their qualifications other than that the person in charge is not an accountant. The report may in fact be simply a lay opinion on accounting issues. For this reason, a trained accountant or auditor would not consider it reliable. 12. Methodological problems with the audit Brychel's report evidences a number of methodological problems that make the overall report unreliable. It appears he employed the theory-driven approach; it is obvious that Brychel did not approach the audit from an unbiased perspective, which itself is a significant methodological error, and in fact he started with a substantial negative bias. Many of Brychel's conclusions are based on unsupported speculation. Much of that speculation obviously assumes incompetence or improper motives by Manziel's firm with no accounting basis for such assumptions. Brychel p. 2, 4 states that his, "primary duty as a legal fee auditor is the identification and quantification of fees for legal services which are unsupported or appear unreasonable." Throughout, Brychel points out alleged problems in the form of a purported "audit" and yet repeatedly fails to point out any serious specifics. Counteraffidavit regarding Declaration of Michael J. Brychel - Page 10
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 13 of 52
As pointed out elsewhere herein, it is obvious from some of Brychel's statements and conclusions that for the most part he did not review major documents. Yet at Brychel p. 3 7 he states that he employed "the standard legal fee auditing methodology developed and utilized by Stuart Maue ." Failure to review readily available major documents is a fundamental methodological error that makes the entire "audit" inherently unreliable. It demonstrates that either the auditor does not know how to design and conduct a proper audit using industry-accepted auditing criteria or he intentionally disregarded accepted methods or he approached the audit process with severe bias that essentially guaranteed unreliable results. Many "objections" of Brychel 10 through 12, are either nitpicking or state the obvious., e.g., any large volume of data entries will contain scrivener's errors. Brychel p. 4, a). One recognized auditing rule is that section labels, titles, and wording in reports should not be misleading.5 Another is that an auditor should not assume improper motives or activity without a reasonable basis.6 A third is that the auditor should not make or imply accusations without reasonable basis. 7 A fourth is that accusatory statements need specific
Brychel p. 6, c) "Impossible Long Billing Days" and "Other Extraordinarily Long Days", regarding Brychel Exhibits B and C of the same names. Brychel p. 9, "Manziel charges extraordinarily small tasks separately - and each at the unnecessarily large increment of 0.25 hours - thereby artificially inflating the actual time recorded." Brychel p. 9, "on April 21, 2005, Manziel sent a brief email to Andrew Whitaker regarding changes to a motion. For this she charged fifteen minutes Manziel copied Richard Aubin on this email. For that "cc" Manziel charged another fifteen minutes." (italics by Brychel) However, Brychel's Exhibit F, DN 267-2, p. 59, shows Manziel charged, "LAM email to Whitaker re: Joint Motion to Waive Oral Argument; requesting Whitaker to advise ASAP" but the next entry is "LAM email to Aubin re: Joint Motion to Waive Oral Argument; Change to be made" (cont'd )
7 6
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 14 of 52
evidence, not vague generalities.8
While it is true that an auditor should approach the
subject with "professional skepticism", this does not mean a strongly negative bias is appropriate or acceptablethis is not a fraud audit. In-house collaboration does not automatically raise suspicion of duplication of effort, particularly in fields such as law where collaboration is the norm. Yet Brychel laces his audit with express unsubstantiated accusations, e.g., Brychel p. 5, b) "duplication is already strongly suggested"; Brychel p. 12, a) "Numerous identical tasks are attributed to both an attorney and an assistant." (italics by Brychel); Brychel p. 14, c) "Manziel explicitly charged for two attorneys to perform the same task." 13. No explanation of methodology - Brychel p. 3, 7 Brychel p. 3, 7 states that he employed, "the standard legal and auditing methodology developed and utilized by Stuart Maue in reviewing and auditing billing for legal fees. This methodology is based on generally accepted principles regarding attorneys fee billing as reflected in case authorities, ethical rules and opinions, scholarly articles, and billing guidelines propagated by sophisticated consumers of legal services." However, he wholly fails to describe such methodology. He does not identify any particular "generally accepted principles", any purportedly authoritative cases, ethical rules or opinions, any articles, or even generally describe the "billing guidelines propagated by sophisticated consumers of legal services". He does not provide any facts or information from which I could determine what he considers to be a "sophisticated consumer" of legal services or what
(cont'd) (original all uppercase, italics added) Based on the distinct descriptions there appears to be no valid reason to assume this was the cc: to Aubin instead of a different email. Brychel p. 5 b) "Such duplication is already strongly suggested by the information in the petition " (italics added)
8
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 15 of 52
other types of legal services consumers he believes exist. I found nothing indicating how his purported "sophisticated consumers" relate to this case, although he certainly seems to intimate that these straw-man "sophisticated consumers" would agree with him. 14. Limits of Brychel's opinion - Brychel p. 4, 9 At Brychel p. 4, 9, Brychel himself states, "I do not opine upon the ultimate reasonableness of the fee sought." In essence, he merely acts as a surrogate for Defendants' attorney Aubin, pointing in all directions with mainly "smoke and mirrors" types of general "suspicions". 15. Records not contemporaneous - Brychel p. 4, a) Brychel p. 4, a) objects, "the time records appear to have been compiled in hindsight using a docket or calendar as a guide." What Brychel mischaracterizes as "time records" is indeed a task-based summary compiled and prepared to track fairly closely the docket sheet, for the Court's convenience. If Manziel had used Brychel's suggested approach, the Court would have to sift through weeks of individual entries of an hour here and an hour there, fifteen minutes on another day, etc., just to figure out how much time was spent on one particular motion or brief. Furthermore, as noted above, it is a lot easier for irregularities to get "lost in the crowd" if voluminous detail is provided and Plaintiff's listing constitutes a distillation and summaries of information in a format such as would commonly be presented to senior managers interested in "the big picture". 16. Timekeeper not identified - Brychel p. 5, b) Brychel p. 5, b) complains, "time records do not identify the timekeeper." Brychel himself then identifies the primary timekeeperseither Manziel, Reinckens, or one legal assistant. He then complains about potential duplication of effort and even says, "Such Counteraffidavit regarding Declaration of Michael J. Brychel - Page 13
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 16 of 52
duplication is already strongly suggested by the information in the petition ." (italics added) Yet he does not point to any information at all, much less "strongly suggestive" information. He is again wasting everyone's time with unwarranted totally speculative assumptions that do not in any way assist the trier of fact. 17. Dates not stated - Brychel p. 5, c) Brychel p. 5, c) complains about, "Impossible Long Billing Days" and "Other Extraordinarily Long Days". Brychel points out, "86.00 hours recorded for September 13, 2004, for attorney time for "Research and preparation of filed Harris' appellate brief" or the 202.15 hours recorded on February 21, 2006 for multiple tasks . . .", and indicates it, "is not clear from the petition" whether all the work was performed on one day or over a period. Even with just a cursory examination it is patently obvious some of the documents could not have been prepared in a single day, e.g., Harris' second summary judgment motion DN 178 has 77 footnotes in 19 pages and Harris' second summary judgment brief DN 179 has 55 footnotes in 27 pages, both with dozens of references to specific pages in various documents. Any accountant or auditor would realize that and understand that the hours shown are not for a single day's work but for a task's work. Understanding this, anyone with even rudimentary training and competence in designing audits would not waste time compiling and would not present the grossly misleading Brychel Exhibit B and Brychel Exhibit C or use the misleading titles, "Impossible Long Billing Days" and "Other Extraordinarily Long Days", which give the false impression of substantial unreliability where in fact, none exists.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 17 of 52
18. Descriptions not sufficiently specific - Brychel p. 6, d) I do not claim to be an expert on "lodestar analysis". It is my understanding that for a lodestar analysis the court first multiplies reasonable hours expended/claimed by an hourly rate to arrive at the base "lodestar amount". In a second step, the court then may adjust the dollar amount up or down depending on a number of factors described in the Johnson case discussed in the attorney fee brief. However, it seems Brychel is yet again portraying his personal biases as industry standards and trying to give the impression of problems when none exist. Brychel p. 6, d) states "In a lodestar analysis, specific task descriptions are critical [emphasis added] to provide the fee paying party or finder of fact with information that allows the determination that different timekeepers performed work related to the case, unique from the work of other timekeepers, and in a reasonable amount of time. ... Tasks should be specific enough to allow a reviewer to determine: ... that timekeepers did not duplicate each other's efforts." (p.7) The level of timekeeping detail Brychel describes as "critical" simply isn't done in the legal profession. Contrary to his assertions, typical time entries would read "Worked on petition", or "research and draft petition", they would not identify particular paragraphs or issues addressed. Furthermore, in this case it is completely irrelevant which attorney timekeeper performed attorney services or which legal assistant timekeeper performed assistant services because Plaintiff and Defendants have stipulated to a single hourly rate of $250 for attorney time and a single hourly rate of $75 for legal assistant time [DN 253] and Manziel listed attorney hours and assistant hours separately.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 18 of 52
Brychel keeps talking about "unique" work but never defines that and never shows an example of timekeepers "duplicating each other's efforts". This is not about painting the same chair twice or two people each noticing the same deposition. Collaboration is the norm in legal work. Brychel complains because he cannot tell whether "Manziel timekeepers performed tasks in even a minimally efficient manner." As discussed above, total times Manziel claims for various sub-projects are unrealistically low based on "preparation minutes per page" rough estimates.9 19. Verb lacking - Brychel p. 7 10 d) final paragraph Brychel p. 7, 10 d) final paragraph states, "many entries do not include a verb and as such the actual activity performed cannot be determined." I discussed this with Manziel. The entries basically involve various documents in the third-party action. Manziel indicated that with the types of "no verb" documents involved in general, the only possible actions could be "review", "draft", "prepare" or "answer/respond to" and that the amount of time would clearly indicate whether the activity was "review" or "draft/prepare/answer". Anything from another party to another party would be "review" and would have a relatively low time amount, generally less than two hours. Anything between Plaintiff and Defendant with a low amount would be "review" and anything with a higher amount would be "draft/prepare/answer".
9
See page 3. Additional examples:
1) first summary judgment motion DN 83, 82.50 attorney hours +25.50 assistant hours = 108 hours, divided by 20 pages = 5.4 hours per page. There are 33 Appendix cites just on pages 5-6. See Exhibit C. 2) first summary judgment brief and Appendix 79.50 attorney hours + 25.50 assistant hours = 105 hours divided by 42 pages in the brief = 2.5 hours per brief page and zero hours to prepare the entire Appendix.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 19 of 52
Although it would be better to include a verb, this is the kind of material auditors deal with every day and a properly designed audit could easily make this distinction through analysis and procedures designed in the audit. 20. Quarter hours rather than tenths - Brychel p. 7, a) Brychel p. 7, a) talks about the fact that Manziel billed many tasks in quarter-hour increments instead of tenth-hour (six-minute) increments. Judging from information on the Stuart Maue website, it appears that Stuart Maue primarily deals with extremely large legal bills in extremely high-dollar litigation. This is the only information available to me for evaluation, since Brychel did not identify any client or any case or any court in his report, he just gave general descriptions. The Stuart Maue website indicates that Stuart Maue routinely audits legal bills in the $10 million, $50+ million, and even higher range, for multi-national mega-corporations. Details and billing methods that might be perfectly appropriate in such extremely high dollar situations are not realistic in cases involving much lower amounts. Although Brychel may feel more comfortable with tenth-hour increments because it is more convenient for him, it is unreasonable to demand that at the end of long litigation a law firm must totally retroactively revamp its billing practices to suit the personal tastes of a third-party auditing firm and unreasonable to imply that a law firm's failure to do so is somehow improper and its client should be penalized. Furthermore, judging from the overall tenor of Brychel's report, if Manziel did redo her billing in tenth-hour increments, Brychel would then claim that the recordsto use his words (Brychel p. 4, 10)"lack common and minimal indicia of reliability and accuracy" because the tenth-hours were not contemporaneously recorded in such units. Counteraffidavit regarding Declaration of Michael J. Brychel - Page 17
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 20 of 52
21. Emails entries - Brychel p. 8-10 Brychel p. 8-10 is a diatribe full of distortional phrases that significantly exaggerate the situation merely because Brychel prefers a different unit of measurement: "extremely brief", "For these fifteen words", "a pattern of charges", "extraordinarily small tasks", "unnecessarily large increment", "artificially inflating", "exaggeration of time", "tiny tasks", "inflated time increment", "no more than a few seconds", "time between [Manziel's] email and [Aubin's] response", "scenario repeats", "entirely inappropriate", "extraordinarily brief tasks". All that in less than three double-spaced pages! Regarding specific complaints, emails are not telegrams, charged by the word or by reading time. A charge for email, and a lot of other quarter-hour activities, includes: (i) retrieving the file, (ii) reviewing file notes, (iii) checking recent emails, and for new emails, (iv) determining what needs to be done, (v) deciding how to proceed at the moment, e.g., send an email, make one or more phone calls, instruct a legal assistant or secretary to perform some activity and/or other activities, (vi) drafting or reading the email/letter, etc., (vii) sending the email/letter, (viii) printing out a file copy, (ix) updating file notes, (x) perhaps forwarding a copy to a legal assistant or staff attorney, and (xi) putting the file back. All of those are legitimate activities involved with "sent (or read) email" or "sent letter", and the cluster of activities cannot be performed in six minutes, regardless of how few words the email may contain. Brychel p. 9, final paragraph, points out that the total time between when Manziel sent an email and received a reply was supposedly 15 minutes. This is yet again grasping at straws trying to portray nothing as a significant problem. First, the amount of time between transmission and reply has no bearing on how long it took to prepare for and draft an email. Counteraffidavit regarding Declaration of Michael J. Brychel - Page 18
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 21 of 52
Second, even if a reply was sent 15 minutes later that does not mean it was received and read immediately. Brychel p. 8, first paragraph, mentions "Sample emails provided to me." He doesn't even claim he has seen all the emails Aubin has. He has no way to know whether the few samples actually represent a true picture of email transactions in this case. Once again, this is a major failure in the design of the audit. Without the full population of emails Aubin has it would be very difficult for an auditor to draw reliable conclusions about the emails. Brychel p. 8-9, EXHIBIT E says, "it is generally encouraged that several brief telephone conferences and/or email exchange be combined in a single entry where they cumulatively total 0.10 hours." Does Brychel truly comprehend that "0.10 hours" is six minutes? Several telephone conferences? Within one six minute period? And "it is generally encouraged" by whom? Audits and such are supposed to assist the trier of fact, not simply make vague general statements. Brychel has not shown that billing in different increments would substantially reduce the overall average time on emails, etc. It might actually increase billed time, e.g., instead of rounding 18 minutes of work down to 0.25 hours it might have result in a charge of 0.30 hours. Regarding Exhibit E, "All 362 Email Tasks" and Exhibit P also discussed below, I note two things particularly worth mentioning, particularly considering Brychel's objections to quarter-hour billing. First, quite a few emails are billed at 0.25 hours total but are between Manziel and Reinckens. They commonly are described as "LAM Rev. Email from Reinckens [details omitted]". There is no corresponding "Reinckens email to LAM" time entry. Thus, the single entry represents both one attorney's time to prepare the entry and the other's to read itjust over 0.10 hours each. Counteraffidavit regarding Declaration of Michael J. Brychel - Page 19
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 22 of 52
Second, I note that only nine of the 362 email entries exceed 0.50 hours and the maximum time for any email is one hour.10 Judging from the descriptions it appears some of those emails involved multi-lawyer negotiation of wording on reports, etc., and other delicate and typically time-consuming activities. Although Brychel rails against the "evils" of quarter-hour increments, he provides no information regarding how common quarter-hour billing is in various areas of the legal industry compared to tenth-hour, especially in plaintiffs' firms or firms that normally work on a contingent-fee basis. In fact, Brychel doesn't even say whether Stuart Maue bills in sixminute increments. Brychel p. 3, 5 says "Stuart Maue is compensated for its time on an hourly rate ." Does that mean he himself bills in one-hour increments? 22. Truncated entries - Brychel p. 11, b) Brychel p. 11, b) objects, "Entries are truncated. Numerous entries are simply incomplete." Harris submitted task-based time summaries such as senior managers would expect, printed from a database. Databases normally limit the length of individual fields. A qualified auditor does not need the full title of each document to determine its basic nature, i.e., plaintiff's pleading, third-party defendant's interrogatory answers, etc. Also, copies of all pleadings, discovery, etc., were provided to all parties, so if Brychel could not determine the nature and content of a document, he could have simply asked Aubin, the attorney who requisitioned the audit. In fact, most of the truncated entries still contain far more detail than is common in attorney billing descriptions, which tend to be along the lines "Letter to defense counsel re Herman deposition". Again, a independent auditor attempting to assist the trier
Brychel p. 8 says one email was charged at 2.50 hours. However, at his Exhibit E DN 267-2 p. 38, next to last entry, the description reads "LAM email to and conference with client re: curriculum vitae; synopsis of case" (Exhibit all uppercase, italics added)
10
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 23 of 52
of fact would try to determine if the missing information is pertinent and if so, find out what the truncated information added to the entry. It appears that once Brychel finds something to question, he stops his audit procedures and immediately concludes, without substantiation, that the time entry represents a questionable fee. 23. Assistant tasks at attorney rates - Brychel p. 11, c) Brychel p. 11, c) objects to two legal assistant activities being charged at attorney rates, the first on May 2, 2003. Presumably this refers to the entry on Manziel Exhibit A at the top of exhibit page number 30, which shows "0.25 Atty Hrs" and reads, "LA email to LAM re: s/w Aubin re: Motion for Summary Judgment; Aubin requesting settlement". I disagree that this is mischarged. There is no corresponding entry "Review of email from LA". In the format used, it appears Manziel has charged 0.25 attorney hours to review the email and did not charge the time it took the legal assistant to prepare and send the email. On the other hand, I agree with Brychel that the February 16, 2006 entry is incorrect. The entry, on Exhibit A exhibit page number 45, reads, "LA email to LAM re: Crosson response to Sales 2nd Motion for Summary Judgment". Unlike the May 2, 2003 entry, this entry is followed by, "LAM rev. email from LA re: Crosson response to Sales 2nd Motion for Summary Judgment." I have discussed this with Manziel, who agrees the time entry was put in the wrong column. That would reduce the total by $43.75, from $523,837.50 to $523,793.75. 24. Same task by attorney and assistant - Brychel p. 12, a) Brychel p. 12, a) complains, "Numerous identical tasks (italics by Brychel) are attributed to both an attorney and an assistant. There is nothing in the fee petition to suggest that the attorney and assistant provided unique contributions. This format suggests Counteraffidavit regarding Declaration of Michael J. Brychel - Page 21
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 24 of 52
likely duplication." (italics added) The format does not suggest "likely" duplication. That is another unwarranted theorydriven biased assumption and again indicates Brychel's "audit" is unreliable. There is nothing to suggest that the attorney and assistant did not provide unique contributions. Collaboration is routine in these situations. 25. Failure to remove redundant, unnecessary or excessive charges - Brychel p.12, b) Brychel p.12, b) again tries to mischaracterize routine billing practices as either grossly incompetent or fraudulent massive overbilling, repeatedly misrepresenting facts or presenting information out of context. Brychel claims to be presenting an audit. He should not be advocating a position, especially one based exclusively on speculation, personal preferences, bias, and conclusions based on insufficient examination or flawed methodology. 26. Intrafirm communication - Brychel p. 12, 1) Brychel p. 12, 1) complains about "routine intrafirm communication, thereby inherently doubling the cost of the communication." This is a ridiculous objection. If a company holds a "routine" training session for 30 people, of course all 30 people get paid, not just one. It is routine for attorneys and assistants to communicate regarding the case. In fact, it is vital that all those working on any particular case understand the ins and outs of the case and the work that the other parties are doing, to avoid duplication of work product. 27. Intrafirm emails - Brychel p. 13, EXHIBIT P In the same vein, Brychel p. 13, EXHIBIT P complains of, "numerous other instances (75) where Manziel charges to review email from attorney Reinckens." Two attorneys are each spending time working on the client's case. They must communicate with each other regarding what is going on, even if the communication is by email. There is Counteraffidavit regarding Declaration of Michael J. Brychel - Page 22
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 25 of 52
certainly nothing unusual about that. If an attorney retains me to perform accounting work for his client and part of that work involves discussions with the attorney, the attorney bills the client for his time and I bill the client for my time. As discussed in the previous paragraph, communication is vital to prosecuting a case and it is appropriate to charge your time for those communications. 28. Add hours due to multiple parties - Brychel p. 13, 2) Brychel p. 13, 2) continues Brychel's unsupported speculation: "Manziel may use the fact that "; "Manziel may be doubling " (italics added). Brychel's "example, on August 18, 2002" is no example at all. Not only does he not attach the email to Whitaker, he doesn't even attach the email to Aubinthe attorney who requested the audit. Brychel simply assumes from two general task descriptions that a 19-year member in good standing of the Texas Bar is trying to cheat his client out of $62.50
11
by double-billing on an
emailthe same Bar member who in the fee application to the Court listed for a number of major "sub-projects" times that are unrealistically low based on "preparation minutes per page" calculations as shown by the examples discussed at page 3 and footnote 9 on page 16. Brychel again offers the Court nothing but speculation and a recommendation that the Court waste its time to conduct "an examination of the emails".
29. "Routine administrative tasks" - Brychel p. 14 3) Brychel p. 14 3) objects "Manziel's affidavit explicitly seeks compensation for the clerical and administrative tasks of "opening a file"."
11
0.25 hours times the $250 hourly rate stipulated in DN 253
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 26 of 52
The first billed item on Manziel Affidavit [DN 256] Exhibit A, Exhibit page 1 is:
Date Doc # Atty Hrs Asst Hrs Description of Legal Services 06/29/01 001 14.00 5.50 Research and preparation of Harris' Original Complaint
This shows again Brychel's "rush to judgment" theory-driven approach of assuming impropriety and then simply assuming data exists to support the conclusion. It also shows his failure to follow basic auditing procedures such as "look at the data". 30. Formatting - Brychel p. 14 3) Brychel p. 14 3) complains about "internal discussions regarding '"formatting" pleadings". This is discussed below at p. 17, 6) regarding "recycling". Manziel and Reinckens have told me the extensive formatting changes were an advocacy decision, not a discussion about margins, etc. 31. Clear Duplication of Effort - Brychel p. 14, c) What Brychel p. 14, c) calls "two attorneys [performing] the same task" is simple collaborationa common practice in the legal profession; two people painting different rooms in the same house is not "duplication of effort". 32. Charges Unrelated - Brychel p. 14, d) Brychel p. 14, d) again makes unwarranted and erroneous assumptions because of his biased theory-driven approach. Manziel submitted a sworn affidavit stating under penalty of perjury that the time entries related to the case. Just because the individual entries do not expressly include the name of the case is no reason to, in essence, accuse Manziel of billing fraud and perjury. Adding the word "necessarily" does not change the accusations: "These tasks do not appear necessarily related to the current civil action." (italics added) These types of baseless assumptions and accusations again show why an experienced Counteraffidavit regarding Declaration of Michael J. Brychel - Page 24
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 27 of 52
accountant/auditor would consider Brychel's audit inherently unreliable. 33. Professional Training - Brychel p. 14 e) Brychel p. 14 e) does raise what could appear to be a legitimate objectionwhy reviewing an order would take four hours, and "Manziel appears to doubt her own timekeeping", including the comment "*** FOUR hours ??? ***". Reinckens informed me that while preparing the time summary sheets he added the notation as a "note to self" that he inadvertently forgot to remove. After adding the note he examined order DN 173, the Electronic Case Filing order. The order required each attorney to complete a multi-part tutorial and for attorneys of record to file a certification. The total process takes about two hours per personhence four attorney and two legal assistant hours. Brychel describes this as "Professional training and research that allows an attorney to maintain basic competence . . .". (italics added) Manziel informs me that this is the only case she has ever had that requires electronic filing, that electronic filing is still not common in Texas and that the vast majority of Texas attorneys (she estimates over 95 percent) have never had any need to learn or use the Northern District's or any other Electronic Case Filing system. Accordingly, as an accountant and auditor I would consider time spent for a single case to be properly billable to the client rather than "to maintain basic competence". This is another example of Brychel applying criteria not appropriate to the circumstances due to inadequate audit design. It also demonstrates his severe bias and eagerness to "rush to judgment". Instead of determining what complying with the order actually required, he again simply estimated reading time.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 28 of 52
34."Form" pleadings - Brychel p. 15, 1) Brychel p. 15, 1) objects about "extraordinary amounts of time" for "form pleadings". I discussed this with Manziel who indicated that the time was not simply to type up and mail the 1-2 page notice but also the scheduling and other logistics. 35. Herman Deposition - Brychel p. 16, 2) Brychel p. 16, 2) objects that 'Manziel records time of 13.50 hours for "Deposition of Karen Herman"' at DN 256 Manziel Exhibit A, exhibit page 23. Exhibit "B" hereto is the cover page of Ms. Herman's deposition, which indicates that the deposition concluded at 9:38 p.m. With travel time and other typical pre- and post-deposition activities, 13.50 hours is not unreasonable. Again, Brychel could have simply asked Aubin how long the deposition took, instead of making assumptions not supported by the documents. 36. Letter to Aubin - Brychel p. 16, 3) In connection with Brychel p. 15, f), Brychel p. 16, 3) complains, "a legal assist charged 30 minutes and Manziel charged three hours and 30 minutes for "LAM Letter to Aubin requesting deposition dates; topics of deposition." Again, with the task time summary approach Manziel employed, time spent reviewing the file, determining topics, checking personal availability, drafting the letter, etc., is all lumped together, in which case the total time is probably not unreasonable. 37. Mediator Fax - Brychel p. 16, 4) Brychel p. 16, 4) complains, "On one instance a Manziel legal assistant charged 2.50 hours for what is described as a fax to the mediator. It is not entirely clear whether it is the mere act of faxing or whether preparation of the document was also included." (italics added) Counteraffidavit regarding Declaration of Michael J. Brychel - Page 26
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 29 of 52
Simply looking at surrounding entries shows no separate entry for preparation. Brychel is again trying to justify a theory-driven a priori conclusion instead of investigating the full facts. 38. Other Parties' work - Brychel p. 17, 5) Brychel p. 17, 5) complains, "Manziel appears to charge frequently and in large time amounts to review the work product of other parties that may not relate to representation of her client. While a limited review of third-party pleadings may have been warranted " (italics added). Brychel again talks only in vague general terms; not once does he identify any particular amount as excessive; not once does he say what he believes would be a reasonable amount. I note that most of the entries have quite low time amounts (0.25-1 hr) except for reviewing briefs and discovery responses. Regarding briefs, Manziel informs me that a number of activities were occurring simultaneously or in rapid succession, such as crossmotions for summary judgment with responsive and reply briefs due shortly thereafter, so she spent more time reviewing the third-parties' arguments, etc., hoping to find information useful for responses or replies, and that in some cases she did find and use information. 39. Recycling same work product - Brychel p. 17, 6) Brychel p. 17, 6) complains about "recycling the same work" and notations that 'the 2006 motions required "no changes"', stating, "A comparison of the actual work product should resolve whether and to what extent Manziel attempts to charge multiple times ." I was able to perform such a comparison in under ten minutes. The first summary judgment motion DN 83 has 15 footnotes, but the 2006 update DN 178 has 77 footnotes. Counteraffidavit regarding Declaration of Michael J. Brychel - Page 27
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 30 of 52
The first brief DN 84 has 5 footnotes in 36 pages; DN 179 has 55 footnotes over 27 pages. There are extensive "formatting" differences. In the first motion/brief all the references are in-line; in the second, references and large blocks of explanatory side comments were moved to footnotes, making the narrative substantially easier to follow. Manziel confirmed to me that the changes were done for improved advocacy. Also, all cites to the Appendix in the first motion/brief, more than 200, had to be converted to DN references and re-checked in the second set. Before, in essence, accusing Manziel of substantial double billing, Brychel should have done what any competent auditor would do before making serious accusationsspend a few minutes examining the documents, as he himself suggests. 40. MSJ Appendix - Brychel p. 18, 7) Brychel p. 18, 7) complains, "The appendix [Harris second summary judgment DN 198] consists of a three page affidavit and photocopies of four documents. On its face, 37.00 hours for the compilation and organization of these documents appears unreasonable." (italics added) Despite the entry's phrasing "compile and organize", when one examines the Appendix it is obvious Manziel did not simply "compile and organize" Broadhurst's affidavit, but researched and prepared the affidavit and its exhibits after extensive one-on-one discussions with Broadhurstthe manager of a major state agency according to the affidavit. The Appendix is titled Appendix in Support of Plaintiff Harris Methodist Ft. Worth's Response to Sales Support's (Second) Motion for Summary Judgment as to Harris. Sales Support's Motion [DN 186] was filed January 31, 2006. Broadhurst's affidavit was signed February 17, 2006, establishing that it was something newly prepared. The affidavit includes substantial fact detail, corrects prior statements of Medicaid personnel, and states official Counteraffidavit regarding Declaration of Michael J. Brychel - Page 28
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 31 of 52
positions of a state agency rather than just recounting events. Reinckens has indicated to me that he originally tried to update Vasquez' second affidavit but Medicaid management refused to let Vasquez sign it because they felt the manager should sign affidavits. Reinckens had to conduct a number of detailed telephone discussions with Broadhurst and had to negotiate what wording Broadhurst would agree to sign in his official capacity. Also, because
Broadhurst is not an attorney, Broadhurst ran each draft through Medicaid's legal counsel, which added to the time required. The affidavit indicates that the relevant Medicaid regulations have changed several times and Reinckens indicated to me that it took extensive tracing by him through several versions in the Texas Register to finally identify and obtain the applicable version for Broadhurst. Taking into account that "compiling" included legal research plus negotiating and drafting the Broadhurst affidavit, I would not consider 37 hours unreasonable. 41. Summary #1 - Brychel p. 18, 13 The basic premise of this paragraph is that Manziel submitted clock-hour records, which is clearly not the case, as indicated by the task-based format; because the basic premise is erroneous, conclusions based on it are unreliable. 42. Summary #2 - Brychel p. 19, 14 Brychel concludes at Brychel p. 20, "In sum, it is my opinion that the Affidavit, standing alone, fails to establish that the fee sought is reasonable in any respect or even to permit a reviewer to determine what a reasonable fee would be." (italics added) However, I note that Plaintiff's Brief states at DN 255 p. 7: "Evidence offered in support of Plaintiff's motion includes all pleadings, motions, responses and briefs previously filed in the case, including those portions of the appeal before the Fifth Circuit that are on file with the Court, Counteraffidavit regarding Declaration of Michael J. Brychel - Page 29
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 32 of 52
all appendixes and other evidence previously filed by any party, and the affidavits and other evidence filed in support of or in opposition to the instant Motion and responses and replies." As the Court is not being asked to decide solely on the basis of "the Affidavit, standing alone", Brychel's conclusion appears hypothetical and inapposite. 43. Incorporated Exhibits - Brychel p. 19, 15 Regarding the incorporated exhibits, I would caution the Court in general that presentation of data in this manner can cause certain erroneous subconscious impressions: Because the same item is being presented repeatedly in different charts, seeing a single questionable item on five different charts can leave the subconscious impression of five separate questionable items. Plaintiff and Defendant stipulated regarding hourly rates. However, displaying hours as dollar amounts triggers a subconscious valuation that will almost always be negative at the hourly rates professionals charge today, i.e., "$125 to review a two-page document???" Although displaying hours as dollars is not technically a misrepresentation, it does tend to trigger subconscious responses that are unfair under the circumstances. This is particularly true regarding time spent on routine "review email", "review order" and similar tasks. A plethora of neatly-formatted numbers can convey the false impression that a detailed analysis was conducted. Table-type charts with lots of detail tend to give the subconscious impression that the data as presented and the conclusions are valid, important, relevant and useful, whether true or not.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 33 of 52
Comments on Individual Brychel Exhibits A-V Exhibit A - "Entries with Date Ranges/Multiple Dates": (3 pp.) This is pointless, as Harris submitted task-based billable-time summaries, not voluminous clock-hour records. Exhibit B - "Impossible Long Billing Days": (7 pp.) This is an outright misrepresentation, as Harris submitted task-based billable-time summaries, not clock-hour records. Exhibit C - "Other Extraordinarily Long Days": (3 pp.) This is an outright
misrepresentation, as Harris submitted task-based billable-time summaries, not clock-hour records. Exhibit D - "Email of April 30, 2007": (1 pp.) Brychel states that he was only provided "samples" Brychel p. 8. It is reasonable to assume that as an admitted advocate Aubin, who requested the report, did not provide randomly selected samples and as someone who lacks training in accounting or auditing he did not have the knowledge necessary to properly select a sample representative of the entire population of the emails available to him. If an auditor is working with non-representative data, the audit results cannot be reliable and trustworthy. Exhibit E - "All 362 Email Tasks": (23 pp.) Most emails have relatively low times, and considering the full range of activities typically involved when an attorney or legal assistant prepares and sends or reads an email, the times do not appear unreasonable. For intrafirm emails, a single time entry generally covers both the sender's and receiver's activities, largely negating Brychel's objection to billing in quarter-hour increments. The Court should note that listing Entry Hours and Combined Hours in parallel columns ("INFORMATIONAL") can give the subconscious impression that all time amounts are double, particularly when Manziel's listing shows Atty Hrs and Asst Hrs in similar parallel columns. Counteraffidavit regarding Declaration of Michael J. Brychel - Page 31
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 34 of 52
Exhibit F - "Tasks for April 21, 2005 Emails": (3 pp.) Exhibit G - "Emails of April 21, 2005": (2 pp.) Exhibit H - "Tasks for October 26, 2006 Emails": (3 pp.) Exhibit I - "Emails of October 26, 2006": (2 pp.) Exhibit J - "Tasks for October 27, 2006 Emails": (3 pp.) Exhibit K - "Emails of October 27, 2006": (2 pp.) In Exhibit pairs F/G, H/I and J/K Brychel picks one set of emails from the sample he was provided and provides no indication regarding what related activities occurred before sending or after receiving the emails, nor any indication the emails are representative of the entire corpus of emails. Exhibit L - "Review of Orders - Unit Billing 0.15": (5 pp.) This Exhibit is another example of generating charts with marginally useful information primarily to convey the impression that the conclusions in the report are well-researched, valid, important, relevant and useful. Exhibit M - "Truncated Entries": (7 pp.) As noted, Harris submitted task-based time summaries such as senior managers would expect, printed from a database, databases normally limit the length of individual fields, Aubin had copies of all the documents and most of the truncated entries still contain far more detail than is common in attorney billing descriptions. According to Reinckens the "description" field is limited to 130 characters and there are 914 records; Exhibit M shows 63 records (6.9 percent) as truncated. Exhibit N - "Attorney & Assistant Both Bill": (18 pp.) This is pointless, as Harris submitted task-based billable-time summaries. Per Reinckens, of the 914 records, 896 include attorney time, 154 include assistant time, 760 are attorney time only and 18 are assistant time only. Listing attorney and assistant time as separate entries would simply have Counteraffidavit regarding Declaration of Michael J. Brychel - Page 32
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 35 of 52
added 136 entries with no additional information over the combined format that was used. Exhibit O - "Back and Forth Communication - Duplication": (3 pp.) This is an excellent example of Brychel's nitpicking and over-use of "computerized analysis"fourteen entries totaling 3.5 hours over three years. The "analysis" says nothing about what activities were conducted by the sender or receiver related to the emails. This is the type of "an examination of the emails" Brychel urges the Court to conduct at Brychel p. 13 (top) and p. 13, 2). Exhibit P - "Attorney Review of Other Attorney Tasks": (7 pp.) This is actually a rehash of Brychel's complaints about emails, "dressed up in a new coat of paint"every entry involves review of an email. As noted above, presenting the same data from different "perspectives" can give the false impression that there are major problems. Exhibit Q - "Two Attorneys Bill for the Same Task": (3 pp.) This again involves two attorneys collaborating; the activities involved negotiating proposed wording in joint status reports, proposed orders, etc. As the Attorney in Charge, Manziel had to read the emails and approve changes and as a person drafting or modifying wording, Reinckens had to read the emails. Exhibit R - "DN 173 Order Assigning Case to Electronic Case Filing": (4 pp.) Brychel only considered time to read the order, not the time necessary to comply with it. Exhibit S - "Excessive Time for Notices": (3 pp.) The chart title is misleading, as times billed are not merely to prepare a basic 1-2 page Notice of Deposition, but also to do all the preliminary work such as reviewing the pleadings, discovery responses, etc., to determine what items to list in the duces tecum.
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 36 of 52
Exhibit T - "Pleadings and Discovery Appear to Relate to 3rd Party Claims": (12 pp.) Many of the entries indicate a minimum billing time. Those that are longer generally involve reviewing discovery responses, pleadings or briefs. Manziel has indicated to me she was looking for arguments, evidence and background information such as people "behind the scenes" who might know how the Twins' claims were handled and that she did find and use some of those in prosecuting Harris' claims. Exhibit U - "Tasks for 37 Hours to Compile & Organize Appendix for MSJ
Response": (3 pp.) Broadhurst's affidavit required substantial research, drafting and negotiation, not just "compiling". Exhibit V - "DN 198 Appendix in Support of Harris' Second MSJ": (16 pp.) Discussed above. Conclusion As discussed throughout this report, my review of Brychels report identified many auditing deficiencies. First, his audit is designed with the assumption that time charges were unreliable and inaccurate. An auditor should be independent and not have any preconceived ideas about what the facts will support. Just because Brychel states he is independent does not make him so. The AICPAs ethical standards require that an auditor not only be independent in fact, but also in appearance. The fact that Brychel and his firms primary source of work is "legal cost management" shows that he has a bias toward reducing legal fees and he is not independent in fact or appearance. Second, many of Brychels conclusions are based on the assumption that the task-based time summaries supplied by Harris were in fact Manziels time records. Since this assumption is incorrect, all of Brychels conclusions based on this assumption should be Counteraffidavit regarding Declaration of Michael J. Brychel - Page 34
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 37 of 52
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 38 of 52
PAGES FROM STUART MAUE WEBSITE www.smmj.com Pages accessed February 2, 2008 at 10:30 p.m.
Thomas Affidavit Exhibit A - Page 1 of 11
SERVICES
ABOUT US
CASE STUDIES
LEGAL AUDIT FAQS
NEWS & ARTICLES
HISTORY
Established in 1985, Stuart Maue began providing legal auditing and litigation consulting services to its client base. Stuart Maues reputation for offering its clients exceptional legal fee auditing services coupled with cutting edge technologies earned Stuart Maue the accreditation by The Wall Street Journal as the oldest legal auditing firm in the United States. Over the years, recognizing the inherent fit between Stuart Maues legal auditing services and other types of cost consulting services, Stuart Maue has expanded to offer a full range of Cost Management Consulting Services to its clients.
Site Map
Privacy Policy
Security
Terms & Conditions
2007 Stuart Maue. All rights reserved.
SERVICES
ABOUT US
CASE STUDIES
LEGAL AUDIT FAQS
NEWS & ARTICLES
INTERNAL LAW DEPARTMENT AUDITS

Stuart Maue offers a comprehensive review of a clients internal processes governing outside counsel. Stuart Maue evaluates several aspects of the internal process. In particular, the methods used to select, manage, evaluate, and compensate outside counsel.
The Stuart Maue approach to an internal law department audit consists of three main components: examining the structure of a clients internal law department, the departments management of outside law firms, and the accuracy in which the internal law department is reviewing their firms bills. At the conclusion of the
review, Stuart Maue will provide a written report to the client detailing each of these areas. Examination of the structure of a clients internal law department: The purpose of this type of review is to assist the client in identifying inefficiencies and possible cost-saving opportunities both internally and with outside firms. division of responsibilities among the various attorneys. Internal law departments management of outside law firms: Stuart Maue will review a corporations expenditures on outside firms paying close attention to the number of firms being used, the selection process for these firms, procedures governing fee agreements, and what function each outside firm performs for the corporation. Internal law departments review of law firm bills: Stuart Maue will review how effectively a clients internal law department has managed compliance with corporate billing guidelines. For the outside firms working on hourly fee arrangements, standard legal auditing principles will be applied. If the client has a fixed fee arrangement with outside counsel, Stuart Maue will Stuart Maue will review both the personnel and the
review the process of how the fixed fee was determined and how modifications of such agreements are handled. Click Here to Receive More Information
Site Map
Privacy Policy
Security
Terms & Conditions
SERVICES
ABOUT US
CASE STUDIES
LEGAL AUDIT FAQS
NEWS & ARTICLES
COMPREHENSIVE BILLING REVIEW

At the foundation of Stuart Maues legal cost management program is a comprehensive bill review service. Before beginning the invoice review program, Stuart Maue will work with the client to develop or enhance their billing guidelines. Once the client billing guidelines are in place, the outside firms are instructed to submit their monthly invoices via Stuart Maues proprietary on-line billing interface, LIBRA-Connex. This simple to use application will
provide immediate feedback to the firms regarding format or computational errors. Stuart Maues legal auditors will review and evaluate each fee and expense entry for compliance with the clients billing guidelines. The auditors review and evaluate each task description for compliance with the
applicable billing guidelines adopted by the client, using the LIBRA-Connex application. Once their analysis is completed, a report is developed that contains detailed exhibits of any noncompliant fee and expense entries for each monthly invoice submitted. When approved by the client, Stuart Maue will transmit a copy of the final report to the client and firms. The client can use this report to generate payment of undisputed amounts
to the firms. If the clients billing guidelines allow the firms a specified period of time for review and comment of the findings, the firm may provide additional details to appeal the findings. Where adequate justification for an adjustment is made, Stuart Maue will adjust its database and appeal report and the client will generate payment for any additional undisputed amounts. At the request of the client, Stuart Maue has the ability to establish an electronic payment process through an Automated Clearing House program set up through a national banking facility. Once Stuart Maue has been given the approval to pay the firms, they will send a report to the banking facility detailing the amount to be paid to each firm. The funds would then be electronically transferred to each firm.
Stuart Maue designs its service offerings with the client in mind. On occasion, the client prefers to manage outside counsel and monitor compliance with billing guidelines in-house. In these instances, Stuart Maues e-billing application, LIBRA-Connex is the ideal solution for clients. Built on the Stuart Maue legal bill review methodology, LIBRA-Connex is a robust software application designed to automate the legal bill review function. It provides an automated review of billing submissions for compliance with the clients billing
guidelines and clearly identifies any items needing further review or clarification. Additionally, clients can monitor law firm performance against established budgets in order to ensure improved efficiency and better control costs. Stuart Maue is also available to train the client and the clients employees on the use of the LIBRA- Connex application or assist the client with any further bill review. Click Here to Receive More Information
Site Map
Privacy Policy
Security
Terms & Conditions
SERVICES
ABOUT US
CASE STUDIES
LEGAL AUDIT FAQS
NEWS & ARTICLES
LEGAL FEE AUDITING OVERVIEW

Legal fee auditing is the review and analysis of the professional billing of legal fees and expenses. It generally involves a complete review and analysis of all billings to an individual matter or group of files. The legal fee audit can be performed on either an ongoing or completed matter, depending on the circumstances. Through this process, a company can benefit financially by identifying legal billing problems and inconsistencies that can threaten the bottom line. The objective of a retrospective legal fee audit is to review such items as: The mathematical accuracy of fees and expense portions of the firms prior billing statements Identify and quantify the billing entries, activities, and fees that appear excessive, duplicative, inadequately documented or otherwise questioned Identify expense items billed by the law firm that are generally considered law firm overhead or do not appear to directly relate to the matter
Click Here to Receive More Information
Site Map
Privacy Policy
Security
Terms & Conditions
SERVICES
ABOUT US
CASE STUDIES
LEGAL AUDIT FAQS
NEWS & ARTICLES
CAREERS
Stuart Maue is interested in receiving resumes from experienced accountants and licensed attorneys for legal fee auditor positions. Please feel free to submit your resume below. Resumes of qualified applicants will be kept on file for future positions.
Attorney / Auditor
Qualifications: Member in good standing of at least one state bar Five or more years experience working as an attorney Litigation and/or bankruptcy experience preferred
Responsibilities: Review and analyze legal bills and associated expense documentation Identify instances of noncompliance with generally accepted billing standards and/or client guidelines Prepare written reports delineating identified instances of noncompliance
Requirements: Analytical orientation with ability to focus on detail Ability to communicate clearly, orally, and in writing Active team participant in multidisciplined groups
Diverse computer skills, especially with Microsoft programs We offer a competitive salary, excellent benefits, and a stimulating environment! Equal Opportunity Employer Contact: Director of Human Resources Previous Page
Site Map
Privacy Policy
Security
Terms & Conditions
SERVICES
ABOUT US
CASE STUDIES
LEGAL AUDIT FAQS
NEWS & ARTICLES
CAREERS
Stuart Maue is interested in receiving resumes from experienced accountants and licensed attorneys for legal fee auditor positions. Please feel free to submit your resume below. Resumes of qualified applicants will be kept on file for future positions.
Accountants / Auditors
Qualifications: Graduation from college or university with major or emphasis in accounting Graduate school degree, C.F.E., C.M.A., C.P.A., or similar designation a plus Experience working as an accountant in business, industry, or government
Responsibilities: Review and analyze legal bills and associated expense documentation Identify instances of noncompliance with generally accepted billing standards and/or client guidelines Prepare written reports delineating identified instances of noncompliance
Requirements: Analytical orientation with ability to focus on detail Ability to communicate clearly, orally, and in writing Active team participant in multidisciplined groups
Diverse computer skills, especially with Microsoft programs We offer a competitive salary, excellent benefits, and a stimulating environment! Equal Opportunity Employer Contact: Director of Human Resources Previous Page
Site Map
Privacy Policy
Security
Terms & Conditions
Case 4:01-cv-00567
Document 271
Filed 02/18/2008
Page 50 of 52
U N I T E D S T A T E S D I S T R I C T COURT NORTHERN D I S T R I C T O F T E X A S F O R T WORTH D I V I S I O N HARRIS METHODIST FT. P l a i n t i f f

VS.
WORTH
Exhibit "B"
C I V I L ACTION NO. 4:Ol-CV-0567-Y
SALES SUPPORT SERVICES, I N C . ) E M P L O Y E E H E A L T H CARE P L A N ) and S A L E S SUPPORT S E R V I C E S , ) INC, ) Defendant and Third-Party P l a i t i f f s )
vs.
TRANSAMERICA L I F E INSURANCE) . A N D A N N U I T Y COMPANY, 1 STANDARD S E C U R I T Y L I F E I N S U R A N C E COMPANY O F ) NEW YORK a n d B E R K L E Y R I S K MANAGERS, ) Third-Party Defendants)
OF
ORAL D E P O S I T I O N KAREN. A . HERMAN
O R A L D E P O S I T I O N O F KAREN A . HERMAN, p r o d u c e d a s a w i t n e s s a t t h e i n s t a n c e of t h e P l a i n t i f f a n d d u l y ~ O L I L w a s t a k a ~n t h e a b o v e s t y l e d a n d n u m b e y e d , c a u s e o n D e c e m b e r 3 0 , 2 0 0 2 , f r o m 1 0 : 5 1 a.m. t o 9 : 3 8 before G a y l o r d S t u r g e s s , C e r t i f i e d S h o r t h a n d p.m., R e p o r t e r No. 7 4 4 i n a n d f o r t h e S t a t e of T e x a s , r e p o r t e d b y S t e n o g r a p h i c m e t h o d a t t h e O f f i c e s of T h e U n i t e d S t a t e s C o u r t h o u s e , F t . W o r t h , R o o m 505, F i f t h F l o o r , F o r t W o r t h , T e x a s , and Merit C o u r t R e p o r t e r s , 600 O i l & G a s B u i l d i n g , 3 0 9 W. 7 t h S t r e e t , F o r t Worth, Texas, p u r s u a n t t o t h e T e x a s R u l e s of C i v i l P r o c e d u r e , N o t i c e (and t h e p r o v i s i o n s stated o n t h e record).
Job N o .
02123OGAS
(GS-2326-mk)
CERTIFIED COPY
Case 4:01-cv-00567 Document 271 Case 4:01-cv-00567 Document 83
Filed 02/18/2008 Filed 03/06/2003
Page 51 21 Page 5 ofof 52
17 CITES ON PAGE
6 cites
5 cites 3 cites
3 cites
1 cite
Thomas Affidavit Exhibit C - Page 1 of 2
Case 4:01-cv-00567 Document 271 Case 4:01-cv-00567 Document 83

16 CITES ON PAGE
Filed 02/18/2008 Filed 03/06/2003
Page 52 21 Page 6 ofof 52
5 cites
4 cites
1 cite
1 cite
1 cite
2 cites
2 cites
Thomas Affidavit Exhibit C - Page 2 of 2

271 - Thomas Counteraffidavit Rebutting Doc 267-2 - Example Legal Fees Audit by Stuart, Maue, Mitchell & James Legal Fees Auditing Firm

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

271 - Thomas Counteraffidavit Rebutting Doc 267-2 - Example Legal Fees Audit by Stuart, Maue, Mitchell & James Legal Fees Auditing Firm

Uploaded by

Copyright:

Available Formats

Case 4:01-cv-00567

CIVIL ACTION NO. 4:01-CV-0567-Y

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 1

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 3

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 5

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 6

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 7

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 8

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 11

evidence, not vague generalities.8

While it is true that an auditor should approach the

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 12

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 14

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 15

See page 3. Additional examples:

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 16

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 20

0.25 hours times the $250 hourly rate stipulated in DN 253

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 23

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 25

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 30

Counteraffidavit regarding Declaration of Michael J. Brychel - Page 33

Thomas Affidavit Exhibit A - Page 1 of 11

LEGAL AUDIT FAQS

NEWS & ARTICLES

Terms & Conditions

2007 Stuart Maue. All rights reserved.

Thomas Affidavit Exhibit A - Page 2 of 11

LEGAL AUDIT FAQS

NEWS & ARTICLES

INTERNAL LAW DEPARTMENT AUDITS

Thomas Affidavit Exhibit A - Page 3 of 11

Terms & Conditions

2007 Stuart Maue. All rights reserved.

Thomas Affidavit Exhibit A - Page 4 of 11

LEGAL AUDIT FAQS

NEWS & ARTICLES

COMPREHENSIVE BILLING REVIEW

Thomas Affidavit Exhibit A - Page 5 of 11

Terms & Conditions

2007 Stuart Maue. All rights reserved.

Thomas Affidavit Exhibit A - Page 6 of 11

LEGAL AUDIT FAQS

NEWS & ARTICLES

LEGAL FEE AUDITING OVERVIEW

Click Here to Receive More Information

Terms & Conditions

2007 Stuart Maue. All rights reserved.

Thomas Affidavit Exhibit A - Page 7 of 11

LEGAL AUDIT FAQS

NEWS & ARTICLES

Thomas Affidavit Exhibit A - Page 8 of 11

Terms & Conditions

2007 Stuart Maue. All rights reserved.

Thomas Affidavit Exhibit A - Page 9 of 11

LEGAL AUDIT FAQS

NEWS & ARTICLES

Thomas Affidavit Exhibit A - Page 10 of 11

Terms & Conditions

2007 Stuart Maue. All rights reserved.

Thomas Affidavit Exhibit A - Page 11 of 11

U N I T E D S T A T E S D I S T R I C T COURT NORTHERN D I S T R I C T O F T E X A S F O R T WORTH D I V I S I O N HARRIS METHODIST FT. P l a i n t i f f

ORAL D E P O S I T I O N KAREN. A . HERMAN