Monday, February 4, 2013

Parallel Networks Seeks to Vacate Arbitrator's $3 Million Award to Former Contingency Fee Law Firm Jenner & Block

Joff Wild of IAM has a story (see link below) about a law firm's fee dispute with a non-practicing entity. It might illustrate many things, but to me it indicates a contingency fee arrangement with a hourly fee fall back provision may misalign the lawyers and patent owners interests.

Parallel Network's appeal papers to the district court give a compelling story of what happened. Parallel Networks engaged the Jenner & Block law firm to represent it in a patent enforcement and licensing program. As part of the program, Parallel Networks sued Oracle. After losing a summary judgment motion filed by Oracle for non-infringement, Jenner & Block decided to terminate the atttorney-client relationship. Parallel Networks used Jenner & Block's emails to show how it weighed the economics in handling the appeal on contingency or quitting and seeking payment on an hourly basis. It seems the "contingency" fee arrangement gave no incentive to stay in the case if it got difficult.

Even though some Jenner & Block attorneys felt the basis for appeal was good because of three reversals of this judge in the past and possible error in this case, Jenner & Block decided it was time to quit. Initially, Jenner & Block did not seek the legal fees for the work performed. But after Parallel Networks reached a $20 million settlement two years later with another firm, Jenner & Block demanded $10 million in fees on an hourly basis.

When Parallel Network refused to pay, Jenner & Block sued to have the unpaid fee arbitrated. After arbitrator awarded Jenner & Block $3 million, Parallel Networks filed a motion and petition to vacate the arbitration award of $3 million, arguing the hourly basis provision was unenforceable in Texas.

Even if the provision is held unenforceable, it appears Jenner & Block should be paid something for its services as the record below was likely the foundation required to win the appeal. At the same time, Jenner & Block decision to quit seems influenced by the contingency fee arrangement with the hourly fall back provision. If it goes to trial, I will be interested to see if such a provision is enforceable in Texas.

See Mr. Wild's article: NPE, a law firm and a claim for $10 million in unpaid fees

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