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(CN) — It started with an audit.
After Ford discovered it had paid out millions of dollars in fraudulent legal bills for impossible and redundant work, the car manufacturer sued three California law firms in federal court on Wednesday, seeking to pump the brakes on the decadelong scheme.
“The scheme was carried out through a sophisticated criminal enterprise of attorneys and law firms that ingeniously spread their fraudulent billings across thousands of cases against many auto manufacturers so that their fraudulent scheme would go undetected,” Ford wrote in the 27-page lawsuit filed in the Central District of California.
Pinning Steve Mikhov of Knight Law in Los Angeles as the ringleader of the accused racketeering scheme, Ford also named Altman Law Group, Wirtz Law and several other attorneys as defendants.
Under California’s “lemon law,” formally known as the Song-Beverly Consumer Warranty Act, attorneys are entitled to recover fees from car manufacturers for “actual time expended” in bringing a case.
After undergoing an internal audit, Ford says the company discovered these law firms had been billing for impossible work. On one occasion, an attorney claimed to have worked “an ostensibly heroic but physically impossible 57.5-hour workday in November 2016.”
In all, Ford says the audit uncovered 34 days where a lawyer claimed to put in more than 24 hours of work, and 66 entries for hours exceeding 20 daily hours. Other times, attorneys made multiple claims on a single day for full-day depositions in different places.
In addition to impossible and improbable hours, Ford says the lawyers submitted redundant invoices for identical tasks and used vague qualifiers like “legal research” to skew the time actually spent on specific items.
According to Ford, Mikhov also collected fees for 1,200 hours of work that were undated, adding up to $625,000 over the time period.
“These unconscionable and improper practices produced a highly lucrative but fraudulent criminal enterprise built on deceiving and abusing the judicial system, duping unsuspecting clients, and stealing many millions of dollars from auto manufacturers,” Ford says in the lawsuit.
The auto manufacturer says it isn’t the only company to be duped by the scheme, which was spread out across numerous lawsuits and courtrooms, as the attorneys filed more than 5,000 vehicle warranty cases dating back to 2015.
Ford is also not the first to claim the law firms inflated attorneys fees in court. In 2019, the Law Office of Michael Rosenstein sued Knight Law, claiming inflated attorneys fees, as did Hackler Daghighian in 2020. Both cases settled in 2022.
In 2020, a federal judge found the lawyers had “likely overstaffed the case,” and ordered Knight Law and Altman Group’s attorneys’ fees be reduced by 50% to 90% across various categories.
Over the last decade, Ford estimates it paid out $100 million in attorneys fees to the law firms, of which it estimates only half was for legitimate work.
In addition to state RICO violations, Ford claimed the lawyers were abusing interstate wires and the U.S. mail system in submitting and receiving inflated fee applications. Ford asked the court to award the company with trebled damages and attorneys fees.
Over email, Ford’s attorney Doug Lampe credited “a comprehensive investigation” with uncovering the ruse.
“This was a highly lucrative and fraudulent and unlawful enterprise built on deceiving and abusing the judicial system, tricking unsuspecting clients and effectively defrauding automakers out of many tens of millions of dollars,” Lampe wrote.
A spokesperson for Knight Law Group called the lawsuit ridiculous and said Ford was just trying to silence consumer advocates.
“For over 20 years, Knight Law and its attorneys have been California’s leading Lemon Law consumer rights advocates, winning numerous jury verdicts awarding millions of dollars in punitive damages on account of Ford’s documented fraudulent misconduct against consumers, and forcing Ford to settle hundreds of other cases to protect California consumers,” the spokesperson said in a statement. “This lawsuit — which makes no claim that Knight Law’s clients were harmed in any way — mischaracterizes the facts.”
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