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Jul 23 2015

Big Blow to Big Law: “Doc Review” Is Not “Practice of Law” Making Overtime Rules Applicable

One of the dark secrets of Big Law (firms with more than 1,000 lawyers) is that they have a whole contingent of lawyers all across the country who are not part of the firm per se and do lots of the grungiest of the grunge work of the legal world: Document Review. The glut of law students and lawyers has allowed these firms to park hundreds of lawyers in Oklahoma, South Dakota, the Carolinas,etc. whose sole task is to pore through thousands and thousands of pages of emails, medical records, correspondence and other written material that is part of litigation. While first-year hires from top law schools get about $160,000 per year these lawyers are lucky to get $25 per hour. But hey – its a start and at least they are practicing law right? Not so fast.

FLSAThe Second Circuit – the federal appeals court that covers New York – has ruled yesterday that pure document review is not “the practice of law” since it does not require the exercise of legal judgment. The decision could have large ramifications for Big Law, their clients and the lawyers who work for them or the companies that they outsource this work to. The case, Lola v. Skadden, Arps, Meagher &Flom pitted David Lola, a young lawyer admitted to practice in California but who was assigned to work in North Carolina, against Skadden Arps, one of the largest law firms in the world where senior partners bill their Fortune 500 clients over $1,000 per hour. Lola was assigned to work on a case that arose out of the federal court in Ohio. The case was brought in New York where Skadden is headquartered. Lola was paid $25 per hour for fifteen months during which he worked about 55 hours per week. NY law requires that employers pay overtime at a rate of one and a half times the regular rate for any hours over 40 per week. So David sued this legal Goliath for his overtime and for overtime for all others similarly situated.

Skadden’s response was that the Fair Labor Standards Act exempts from overtime employees who are “engaged in the practice of law.” Professionals such as lawyers don’t get overtime – excessive hours is just part of the gig. The lower court agreed and dismissed the case. But the Second Circuit reversed and held that what Lola did was not “the practice of law” as that is defined in North Carolina (that’s where he was working so that’s the definition that applied). North Carolina defines the practice of law as:

“performing any legal service for any other person, firm or corporation, with or without compensation, specifically including . . . the preparation and filing of petitions for use in any court, including administrative tribunals and other judicial or quasi‐judicial bodies, or assisting by advice, counsel, or otherwise in any legal work; and to advise or give opinion upon the legal rights of any person, firm or
corporation.”

The court also noted that North Carolina courts have interpreted the phrase “practice of law” (in cases revolving around the unlicensed practice of law) as requiring “the exercise of some legal judgment.” Lola said he did nothing of the kind.Lola alleges that his work was closely supervised by Skadden and his “entire responsibility . . . consisted of (a) looking at documents to see what search terms, if any, appeared in the documents, (b) marking those documents into the categories predetermined by Defendant, and (c) at times drawing black boxes to redact portions of certain documents based on specific protocols the Defendants provided. The court summarized it this way:

A fair reading of the complaint in the light most favorable to Lola is that he provided services that a machine could have provided.

Finding that these mundane tasks did not amount to “the practice of law” in North Carolina. the Second Circuit reversed the lower court and reinstated Lola’s complaint. The plaintiff was represented by a small, six-lawyer NY firm, Joseph & Kirschenbaum, who specialize in taking on big-name restaurants for wage and hour violations of their servers, dishwashers and busboys. The decision is likely to bring an onslaught of litigation against many Big Law firms which engage in the same practice. We know that these big firms would not entrust the exercise of legal judgment to lawyers earning $25 per hour, so very have to pay them overtime from here on out.

But for me the case also raises several other questions: (1) How much was Skadden billing its clients for Lola’ services? All law firms have very different rates for paralegal work and for legal services. (2)Will their clients be allowed to sue Skadden for back bills in which they were charged for “legal services rendered” now that a very influential court has ruled it was not legal services being performed? (3) How were they allowed to bill it as legal services or even claim it as legal services when Lola was not admitted to practice law in either North Carolina (where he worked) or Ohio (where the case was pending). Seems to me had he lost Lola could have been brought before the North Carolina Bar for the unlicensed practice of law ad Skadden for permitting the unlicensed practice of law. (4) In describing his experience in resumes, interviews and job applications would Lola be lying if he stated that he had been practicing law in North Carolina for the fifteen months involved?

The case will now proceed through discovery and onto trial where perhaps some of the questions may be answered.

The decision can be found HERE

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