Anti-virus software maker McAfee Inc. has set its sights on a new kind of bug: alleged overbilling.
The Santa Clara, Calif., company is embroiled with Wilmer, Cutler, Pickering, Hale and Dorr over $12 million in legal fees incurred in the trial of former McAfee Chief Financial Officer Prabhat Goyal. The company is accusing WilmerHale of fraud, theft, negligence and breach of fiduciary duty.
"[WilmerHale] intentionally overworked and churned the representation of Goyal; shamelessly employing over 100 WilmerHale timekeepers in the feeding frenzy," McAfee alleged in a complaint filed in the Eastern District of Texas earlier this year. "Defendant's bills reflect at least 16 partners, 34 associate attorneys, 10 legal assistants and 49 staff personnel -- how else could they amass this enormous trove of cash?" the complaint read.
WilmerHale wants the complaint dismissed, explaining in a statement issued Monday that the lawsuit is "no more than a pretext to avoid its advancement duties to Mr. Goyal."
In 2002, the Department of Justice began what would become a three-year investigation into McAfee's accounting practices, according to WilmerHale's motion to dismiss the lawsuit. Goyal was charged with accounting fraud and convicted by a San Francisco jury in May 2007. In its latest motion to dismiss, filed Thursday, WilmerHale noted that the case required the production and review of 1.2 million documents.
Martin Rose, the Dallas lawyer representing McAfee in the fee dispute, alleges in his latest complaint that WilmerHale, which brought in East Coast lawyers to represent Goyal in a San Francisco trial, charged almost $200,000 in expenses for luxury hotel rooms, limousines and charges for room service and bar tabs. The software company described WilmerHale as "unrepentant in its greed."
Paul Yetter, the Houston lawyer representing WilmerHale in the fee dispute, said by e-mail Monday that "over 80 percent of the defense work was done by two lead WilmerHale partners and a handful of associates. The bulk of other timekeepers were needed for review of 1.2 million documents in the case."
He stated that the fees were in line with similar cases, including the backdating trial of Brocade Communications CEO Gregory Reyes.
Yetter, of Yetter, Warden & Coleman, also provided a statement from WilmerHale that said its fees "reflect legal services that were necessary and reasonable in a lengthy and complex matter encompassing five separate cases, particularly one in which Mr. Goyal's very liberty is at stake. Indeed, the California judge commended the firm's efforts as 'extremely well-tried.'"
McAfee says the case may have been too "well tried." Its complaint says that an independent audit in December 2007 showed that WilmerHale had engaged in "a billing scheme which resulted in ... overcharging" since February 2003. McAfee is seeking damages, attorney fees and up to $12 million in legal fees.
WilmerHale argues that the suit was brought both at the wrong time and venue. The firm quoted McAfee as having said in a Delaware court that if Goyal's conviction is upheld on appeal, "he has to pay all those fees back, and it doesn't matter if they are reasonable or unreasonable." As a result, WilmerHale argues, the determination should be made at that point.
Rose disagreed. "So, I catch a guy who's been coming to my jewelry store every day and takes a gold watch every night. I gotta wait until he cleans the store out before I sue him?"
WilmerHale's motion also repeatedly cites a 1996 indemnity agreement between McAfee and Goyal. The agreement, WilmerHale argues, shows that McAfee knew litigation could be costly. In it, McAfee acknowledged that "costs of litigation may be so enormous ... that the defense ... of such litigation is often beyond the personal resources of ... officers."
WilmerHale says the dispute belongs in Delaware, pointing to a forum selection clause in the indemnity agreement mandating that venue "for all purposes in connection with any action or proceeding which arises out of or relates to this agreement."
Rose countered that the indemnity agreement applies to disputes between McAfee and Goyal, not the law firm brought in to represent him. "This lawsuit has nothing to do with the Delaware action or the indemnity agreement," he said.
On Thursday, the day WilmerHale submitted a corrected motion to dismiss the lawsuit, the judge in the case ordered McAfee to file a response no later than 5 p.m. today.
"We'll be responding," Rose said.