Yesterday, in In re Babcock & Wilcox Co., the Fifth Circuit held that firms cannot bill full hourly rates for travel time when the time is not spent working. The suit arose after the New York law firm of Caplin & Drysdale sought over $5.6 million in attorney’s fees and $745,000 in expenses following the firm’s role as appointed counsel in a Chapter 11 bankruptcy. The bankruptcy court denied 50% of the full hourly rate for travel time not spent working. This amounted to a reduction of over $135,000. The amounts included travel expenses billed at the full hourly rate, which Elihu Inselbuch, a partner at Caplin & Drysdale, testified was standard practice among New York law firms. The district court affirmed the bankruptcy court’s decision to limit the billable rate for the non-working travel time.
On appeal, the Fifth Circuit evaluated the reasonableness of the compensation, considering the time spent on the case, the rate charged for the services, whether the time was beneficial or beneficial, the complexity and nature of the issue, and how the rate charged compared to the rates of other comparably skilled practitioners.
In its opinion, the three judge panel pointed out that despite Caplin & Drysdale’s claim that billing full hourly rates for travel time was standard practice, “the other law firms involved in this bankruptcy were not objecting to the award of 50% of their hourly rate for non-working travel time.” The Fifth Circuit found that Caplin & Drysdale “did not make a sufficient showing with respect to how other comparable firms billed non-working hours.” In fact, the district court had found the firm did not even identify any other comparable firms.
The Fifth Circuit’s decision addressed the narrow issue before it: whether the time spent traveling but not working could be billed at the regular rate. While upholding the reduction of such fees by 50%, the court emphasized the decision was only to be applied to time spent traveling but not working noting that under a similar rule followed by the Northern District of Texas, the fee guidelines “provide[d] that travel time is compensable at one-half rates, but work actually done during travel is fully compensable.”
Held: The bankruptcy court’s limitation on the rate for travel time not spent working was upheld.
Opinion: Per Curiam: Higginbotham, Benavides, Dennis
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Excellent Blog. I’ve been reading along and just wanted to say hi. I will be reading more of your posts in the future.
- Jason.