Court Handling a Microsoft Case Discusses Sullivan & Cromwell’s Way of Billing its Clients

August 6, 2003

Courts disagree about whether a litigant seeking reimbursement of attorney’s fees (through a statutory or contractual provision) impliedly waives the attorney-client privilege and work product protection covering its lawyer’s work. Even those courts finding no broad implied waiver must assure that a party asked to pay its adversary’s legal bills be provided sufficient information to assess those bills.

In Microsoft Corp. v. Federal Insurance Co., No. M8-85 (HB), 2003 U.S. Dist. LEXIS 2683 (S.D.N.Y. Feb. 24, 2003), Microsoft sued Federal Insurance for refusing to pay its legal fees incurred in several other lawsuits. Although the court rejected Federal Insurance’s argument that Microsoft’s lawsuit impliedly waived all of the protections covering work by Microsoft’s law firm (Sullivan & Cromwell), it held that Sullivan & Cromwell would have to produce some documents. The court explained that “Sullivan & Cromwell does not bill its clients on an hourly rate basis but rather on the ‘value of the services rendered to the client.'” Id. at *7-8 (citation omitted). The court surmised that the law firm “surely must keep track of the ‘amount of work ultimately required,'” and ordered Sullivan & Cromwell to produce such documents as “time sheets, time records, work-in-progress, summaries … [and the] policies, procedures or other documents related to the manner in which the fees charged to Microsoft” were calculated. Id. at *9 (citation omitted).

Law firms whose clients might ultimately seek reimbursement for their fees should bear in mind that they probably will have to produce either billing records or some alternative documents in the later fee dispute.