David and Goliath

By | 2nd February 2010

A recent US case of a law firm suing a client contains a salutary lesson. 

Debevoise & Plimpton had sued former client Candlewood for $6million in unpaid legal fees and found itself facing “an answer and counterclaim” seeking damages of $55million! [Ex-Debevoise Client Raises Nasty Counterclaims in Unpaid Bills Case, The American Lawyer, 14 January, 2010]

Apparently, some of Candlewood’s allegations against their former advisers were not too flattering which only goes to show that the publicity generated by this type of dispute is often publicity the law firm could well do without.

According to Candlewood’s counterclaim, D&P managed to bill for more than 15,000 hours or the equivalent of 10 lawyers working full time for the 10 month period in question, whereas Candlewood’s Delaware based lawyers successfully represented the company for two and a half years at a total cost of $450,000.

Could this happen in England?

It is possible but it would be as well to remember an interesting part of the judgement of His Honour Judge Simon Brown QC in Earles v Barclays Bank PLC . The case is often cited as an example of justified criticism by the judge of lawyers who fail to abide by the CPR, something he described as “gross incompetence.”

But it also shows that judges in this country are now very much aware of the need to manage costs and in that case, Judge Brown made a distinction between the costs charged in the City of London and the costs charged and recoverable in Birmingham.

If Earles is followed, it looks as if clients will only be faced with “Delaware” costs for “Delaware” type cases.

David took on Goliath in Earles! As the judge said at paragraph 80 of his judgment: “Here we have an impecunious bank customer facing the might of one of the country’s largest banks and a blue chip legal team to match when he has struggled to afford to have a highly competent but small firm from Stratford upon Avon to represent him just for trial”.

The judge allowed Birmingham rates and disallowed City of London rates.

If David did not actually slay Goliath, he gave him a very bloody nose!