Donn Rappaport, owner of the ALC data brokering company, is accusing the prestigious corporate law firm of Lowenstein Sandler LLP of over-billing and mismanaging a case he hired them to work on.
In a lawsuit filed in November 2013, Rappaport says Lowenstein racked up $400,000 in legal bills without accomplishing anything noteworthy while pursuing a lawsuit that only had about $750,000 at stake to begin with. Rappaport’s case was cited by the legal blog “The Last Honest Lawyer” as an example of “churning,” one of the perils of law firms charging clients based on billable hours. The law firm did not respond to requests for comment.
In 2010, Rappaport was chairman of the company he founded, ALC, originally known as American List Counsel. Based on College Road West, ALC was one of largest data brokers in the country. He had also been hired as interim CEO of Zumbox, an tech company based in Los Angeles that allows clients to receive paper mail in digital form. For example, the client can have their power bill scanned and delivered by e-mail, and stop the paper version altogether. However, the relationship between Rappaport and Zumbox broke down, and the company fired him. Rappaport sued Zumbox for breach of contract, and at the same time tried to collect some money that Zumbox owed ALC. He wanted $150,000 of severance pay, $55,000 for other expenses, and $495,000 for ALC’s services.
For legal help, he turned to Lowenstein Sandler, the Roseland-based corporate law firm. Rappaport says he had been a client of Lowenstein Sandler for 15 years, and trusted they would handle the matter efficiently. He had a good relationship with Sharon Levine and Peter Ehrenberg, the principals of the firm and would go to Knicks basketball games with them on occasion. “I was very happy with their corporate work,” Rappaport says. “But this was the first litigation that we were involved with. They had performed well for me over the years as corporate attorneys. I was sort of naive about how litigation works, and in hindsight, I don’t think they provided me the direction and counsel I needed or wanted.”
According to the complaint filed by Rappaport against Lowenstein, the law firm put Levine, who was not an expert in litigation, in charge of the case, and assigned six attorneys to engage in what the blog called “a billing frenzy.” Rappaport says that in the first January of the case, the firm billed $51,000 for working on what Rappaport says was a straightforward breach-of-contract dispute. Rappaport says all the attorneys overlooked the fact that the contract had an “arbitration clause” that meant the case could be settled cheaply out of court.
Rappaport says that at about the $150,000 mark, the firm had negotiated a settlement with Zumbox, where they would pay $550,000. But Rappaport says he would not accept the agreement because Lowenstein didn’t get Zumbox to agree to a fairly standard “stipulation” which would guarantee payment.
The case dragged on, and Lowenstein billed another $200,000, much of it in “discovery,” which involved obtaining and reviewing E-mails related to the case. The E-mails ultimately turned up nothing of legal value. After a total of two years had passed and about $400,000 had been billed, Rappaport demanded the firm come up with a budget for the case.
Rappaport accuses the firm of estimating an unrealistically high amount for the budget in an effort to get him to walk away from the boondoggle of a lawsuit. Instead, he demanded reimbursement for their past work. In the end, it was Lowenstein that decided to drop Rappaport as a client.
Rappaport hired Taylor Colicchio, a Canal Pointe Boulevard-based law firm, to represent him. The new firm secured a $550,000 stipulated settlement from Zumbox within two months, Rappaport says. However, he says that in the meantime, Zumbox had essentially run out of money to pay the settlement.
Rappaport says Lowenstein “really dropped the ball on this litigation and they didn’t perform in a professional way,” he says. “It was very disappointing.”
He filed the lawsuit in the Superior Court of New Jersey last year, and the case is currently in the pre-trial discovery phase. Rappaport says dealing with the legal issues has been a distraction from his main pursuit, which is running ALC. “I have spent a tremendous amount of money on what was essentially a fairly cut-and-dried wrongful termination and collection matter,” he says.