The In-house Bar Challenges Excessive Fees For Contract Lawyers in Citigroup Securities Litigation

Thursday, April 18, 2013 - 15:16


The advocate and voice of the in-house bar, the Association of Corporate Counsel (ACC), filed an amicus letter with the United States District Court for the Southern District of New York to offer the in-house counsel perspective in Citigroup Securities Litigation. ACC, a global bar association of more than 30,000 members who are in-house lawyers employed by over 10,000 organizations, asked the court to recalculate inflated fees that the plaintiffs submitted for contract (“temp”) lawyers.

The letter noted that over the past several years, the market for legal services has softened significantly. As a result, negotiating power has shifted from law firms to clients. It also noted that today’s market does not permit law firms to charge such high mark-ups for temp or contract lawyers. It continues that in-house counsel have worked to secure more value for every dollar spent on legal work, without paying significantly marked-up fees for contract lawyers. According to ACC’s 2011survey with The Wall Street Journal, 65.1 percent hired the contract lawyers themselves and only 12.3 percent used contract lawyers hired by law firms.

“In requesting fees for themselves, class action lawyers must live with the same market forces as everybody else and are not permitted to distort them for their own gain,” said Amar Sarwal, vice president and chief legal strategist for the Association of Corporate Counsel. “And, since clients across the country no longer accept huge markups on contract or temp lawyers, courts shouldn't grant such markups to class action lawyers either,” Mr. Sarwal added.

Through ACC's Value Challenge, in-house counsel, have worked with law firms to adopt practical business principles that address changes in the legal market, such as value-based fee arrangements or project management. 

ACC requested that the court recalculate fees submitted by the plaintiffs’ lawyers to better reflect the reality of today’s market, as legal precedent requires. As stated in ACC's letter, “the plaintiffs’ fee request ignores these marketplace realities. Maybe the plaintiffs’ attorneys paid their contract lawyers far more than the market demanded. Or maybe they padded the actual rates with the sort of unjustifiable profit margins that paying clients would refuse. Either way, there is no basis in the law or in the market to justify the fee request for contract lawyers.”

“The plaintiffs’ fee petition reads like it was written during the boom times, when clients didn't always pay attention to how out of whack legal fees had become. Unfortunately, for them, clients are far more cost conscious and value-driven today,” Mr. Sarwal added.

For developments on legal fees in Citigroup Securities Litigation, or for information about ACC’s Value Challenge and advocacy efforts, visit