The career of Matthew Farmer, a junior partner in the Chicago law offices of Holland & Knight LLP, was on the upswing in December 2004. He had just won a monthlong trial for Pinnacle Corp., a Midwestern home builder accused of copyright infringement, and gotten kudos from many of his partners.
But weeks later, after reviewing billing records in the Pinnacle matter, he decided to leave the 1,200-lawyer firm. Mr. Farmer, 42 years old, believed his own hours on the case had been inflated by the partner in charge of billing, 62-year-old Edward Ryan. Fearing he would violate state ethics rules if he kept quiet, Mr. Farmer blew the whistle to Holland & Knight lawyers.
The firm, which has 24 offices in the U.S. and abroad, took no action and denies Mr. Ryan or the firm did anything wrong. “The amount billed by Holland & Knight in the litigation was reasonable and appropriate,” says L. Kinder Cannon III, the firm’s general counsel. Mr. Ryan declines to comment.
Last October, Mr. Farmer took a 7 percent pay cut to join Cohn Baughman & Martin, a 12-lawyer firm. He says he moved of his own accord because he was upset that Holland & Knight wasn’t acting against Mr. Ryan.
While the facts of the case are still in dispute, Mr. Farmer’s billing allegations offer a rare window into the tricky and emotional issue of inflated billing by law firms. It’s difficult to know how widespread billing fraud is, but Stephen Gillers, an ethics professor at New York University School of Law, says “there is a general consensus that billing fraud has increased” as law firms seek to increase profits and attract top lawyers.
“Bill-padding is the perfect crime,” adds William Ross, a professor at Samford University’s Cumberland School of Law in Birmingham, Ala. It is seldom detected because it is almost impossible for clients to know whether “an attorney really spent three hours doing research instead of five hours,” he says. He says that in a billing survey he conducted in 1996, two-thirds of the attorneys (and three-fourths of the clients) reported knowledge of bill padding. Earlier this year, a partner at Willkie Farr & Gallagher LLP left the firm and was suspended from practicing law due to bill fraud.
Meanwhile, Mr. Farmer is still pressing his claims against Holland & Knight. In February, he sent a letter detailing his charges to a Minnesota state court judge, Janet Poston, accompanied by internal Holland & Knight billing records. Mr. Farmer’s letter led Pinnacle’s insurer, Connecticut Specialty Insurance Co., to file claims against Holland in May, stating that “Ryan and Holland & Knight inflated and falsified legal bills.” Last month, the insurer reached a confidential settlement with Holland & Knight, withdrawing the fraud claims. But Connecticut Specialty’s outside counsel, Robert Haugen, believes the original motion was credible. “I have a standard to live up to in (Minnesota) when I file pleadings,” he says.
Mr. Farmer, who joined Holland & Knight in 2000, became involved in the Pinnacle case in the summer of 2002. A competitor had filed suit in Minneapolis federal court, claiming Pinnacle built homes that infringed on copyrighted designs and seeking more than $30 million in damages. (The jury’s finding in favor of the defendant was later reversed due to an evidentiary ruling at trial; the case may be retried in the future by someone other than Mr. Farmer.)