Expert Witnesses: Fee Collection Woes

Getting paid can be as challenging for an expert witness as the forensic work, as two recent cases, one civil and one criminal, exemplify all too well. The best written retainer agreements only go so far. Collection efforts — document preparation, hiring an attorney, court appearances, etc. — can be costly in time and expenses.

Some experts try to avoid collection issues by requiring that their retainer (aka, engagement agreement) be with the attorney rather than the client, but attorneys are often opposed, and it is no guarantee of getting paid in a timely manner.

In the case of USA v. Mohammad Alkaramla, No. 16-2191 (7th Cir. 2017), questioned documents expert witness Erich Speckin was hired by an attorney in 2010 to analyze evidence of a defendant mailing a letter threatening to plant a bomb at a school. He waited over six months before suing the attorney for non-payment. Speckin has been waiting more than seven years as the case has wound its way through the courts.

In Laleh v. Johnson, 2017 CO 93, forensic accounting expert witness Gary C. Johnson was appointed by the trial court with the agreement of both parties, two brothers in a fee dispute. Johnson began work in September 2013 and his initial invoices were paid without protest, but after the brothers made an out-of-court settlement in 2014, they refused to pay Johnson's $74000 in outstanding fees. Johnson notified the court, and the court ruled in favor of Johnson. The brothers appealed to the Colorado Court of Appeals and then to the Colorado Supreme Court. Johnson has been waiting over three years.

The causes for the delays in payment are unique to each case.

Speckin

Speckin was retained by Illinois attorney Philip L. Bernstein to assist in the criminal trial of Mohammad Alkaramla who was accused (and later convicted) of mailing a letter to the Ida Crown Jewish Academy, threatening to plant a bomb there if Israel didn't withdraw troops from the Gaza Strip within two weeks.

As Alkaramla was an indigent defendant under the Criminal Justice Act (CJA), federal district court Justice Rebecca R. Pallmeyer appointed Bernstein under the CJA as Alkaramla's defense attorney. At a pretrial status hearing, Bernstein told the court he might need an expert analysis of the evidence, and Justice Pallmeyer instructed him to submit a CJA petition.

Bernstein, however, hired Speckin without submitting the petition. Speckin completed the engagement with no complaints noted, although Alkaramla was convicted. Speckin billed Bernstein $15,142.90.

Six months after Alkaramla was sentenced, Bernstein submitted a reimbursement voucher for Speckin's bill to the court.

Justice Pallmeyer wasn‘t pleased. She informed Bernstein she would not approve the voucher for that amount six months after sentencing. CJA rules require the district court's preapproval of experts unless the “timely procurement of necessary services could not await prior authorization” (CJA §3006A(e)(2)(B)). As well, at the time of the case, the CJA capped expert fees at $2,400 (in 2016 it rose to $2,500), although the CJA does provide for waivers of statutory compensation maximums. Without prior authorization, the maximum compensation was capped at $500 (now $800)1.

Speckin, still unpaid, sued Bernstein in Michigan state court and won. However, Bernstein returned to the federal district court and asked Justice Pallmeyer to vacate the state-court judgment, order Speckin to release all claims against him, and compensate Speckin from CJA funds. Justice Pallmeyer denied Bernstein's motion.

Bernstein appealed, arguing that the CJA provided jurisdictional basis for his motion, that the All Writs Act allows federal courts to “issue all writs necessary … to the usages and principles of law."

The Seventh Circuit Court of Appeals rejected both Bernstein‘s arguments and the district court's decision. As Bernstein “hired Speckin outside the bounds of the CJA, their dispute was one of private contract and governed by state law.” The appellate court found that the All Writs Act only applied where the federal court has jurisdiction, which was not the case here as the contract was not under the CJA. As well, the appellate court found that two statutes, 28 U.S.C. § 1257 and the Anti-Injunction Act, prohibit the district court from acting on Bernstein‘s motion. Lastly, the district court's jurisdiction over payments had “long passed” as it had been nearly seven years since judgment was entered in the case.

The appellate court rejected Justice Pallmeyer‘s order denying Bernstein's motion, remanding the motion with instructions to dismiss for lack of subject-matter jurisdiction.

Johnson

In Khalil Laleh v. Ali Laleh, et al, Co. Dist. Ct., 2012CV2477, the trial court appointed Gary Johnson, from a list of experts agreed to by both parties, as a CRE 706 accounting expert “to untangle the parties' finances.” By the time Johnson was appointed and retained under an engagement agree by the brothers Laleh, the case had expanded to involve at least thirteen claims, nine parties, and six attorneys, with most of the claims involving the brothers' commingled funds. As the case became even more unwieldly, Johnson was appointed as a special master, without objection from the brothers. Johnson encountered so much resistance from the brothers and others in the case that he retained his own counsel, informing the brothers that he had done so.

Johnson's engagement agreement with the Laleh brothers provided that he would continue working until he completed his services or was instructed by the brothers to discontinue the work, and that the brothers were “jointly and severally responsible for the timely and complete payment of all fees and expenses of [Johnson]” and for “reasonable out-of-pocket expenses.” As well, the agreement contain a Governing Law and Jurisdiction provision providing that “[t]he prevailing party in any dispute is entitled to an award of reasonable attorney fees, costs and expenses.”

After Johnson notified the trial court that the Laleh brothers refused to pay his $74,000 in outstanding fees, the court issued an order for the brothers to show cause. They responded that they found Johnson's fees and itemized expenses unreasonable.

The brothers objected to paying fees incurred after they had reached a settlement, and objected to paying Johnson‘s legal fees. They argued that Johnson's “appointment as a special master changed his contractual relationship with them.”

The trial court rejected the Laleh brothers‘ argument, finding Johnson's post-settlement fees to be the costs of collecting his past-due fees and preparing for the evidentiary hearing. The court reasoned that those fees were encompassed in the “all fees and expenses” language in the engagement agreement. The court also rejected the contention that Johnson's appointment as a special master changed his contractual relationship with them.

The trial court noted the more than 12,000 pages of material Johson had reviewed and his 120-page report, and found that the resolution of the brothers‘ claims “was attributable to the work of Mr. Johnson.” The court included Johnson's final bill, including all his legal fees, when it entered judgment in favor of Johnson for $114,000.

The Laleh brothers appealed.

The appellate court unanimously rejected the brothers‘ argument against Johnson's pre-settlement attorney fees, concluding that they did not challenge Johnson‘s hiring of a lawyer in a timely manner and paid at lease some invoices that included Johnson's attorney fees.

The majority of the appellate court disagreed with the trial court that the “all fees and expenses” language in the Fees provision of the agreement “applied to costs that Johnson incurred post-settlement in attempting to collect his past-due fees.” The majority found that the agreement was silent with respect to collection costs, but concluded that the trial court acted within its “inherent authority.”

The Laleh brothers then petitioned the Colorado Supreme Court for review.

The state supreme court held that the court of appeals erred in reaching the inherent authority doctrine “because it was not necessary to do so.” The “Governing Law” provision of the agreement authorized the trial court to order the brothers to pay the post-settlement collection costs. The supreme court remarked that “Neither the parties nor the courts below noted this provision.”

The state supreme court affirmed the court of appeals judgment, albeit on different grounds, and remanded the case to the appellate court.

Reality Check

In hindsight, perhaps both experts could have made different decisions to avoid the delays they have experienced in getting paid, perhaps they could have been more attentive to potential issues, perhaps …, perhaps. The fact is, just like attorneys, any client an expert witness accepts may be a collection nightmare. It's part of the risk of being an expert witness.