A judge said he will dismiss McAfee Inc.'s lawsuit against Wilmer, Cutler, Pickering, Hale and Dorr over alleged overbilling, but the anti-virus software maker's fee fights are far from finished.
McAfee had filed suit claiming that WilmerHale had overbilled in its $12 million criminal defense tab for representing former Chief Financial Officer Prabhat Goyal. Judge Michael Schneider of the Eastern District of Texas announced at the end of a 90-minute hearing on Thursday afternoon that he would dismiss the suit, filed on April 8, though an order had not been posted by Friday evening. The decision, which sided with WilmerHale's four arguments to dismiss the case, came during what was supposed to be a scheduling conference.
"Nothing in yesterday's decision affects in any way our resolve to pursue this, and we in fact are even considering an appeal of yesterday's ruling," McAfee spokesman Michael Busselen said.
While the Texas fee fight has been temporarily put to rest, McAfee is still battling suits filed in Delaware by Goyal and another former executive investigated by the government for securities fraud. Goyal alleges that the Santa Clara company stopped paying fees in his appeal of a May 2007 conviction for securities fraud. Former general counsel Kent Roberts, whose criminal trial begins in September, also says the company is not meeting its contractual indemnity obligations to pay the Cooley Godward Kronish lawyers mounting his defense.
Goyal's May 2 complaint alleged that, among other things, McAfee hadn't paid WilmerHale for his defense since September. After the filing, the company paid the firm and filed a motion to dismiss that suit. Goyal's lawyers at Delaware firm Abrams & Laster have filed a response contending that there was more to the suit than unpaid bills.
The attorney for WilmerHale in Texas, Paul Yetter of Houston's Yetter, Warden & Coleman, said Thursday's dismissal of McAfee's lawsuit is important for Goyal's appeal of his conviction.
"The most important point is that the court's ruling allows Mr. Goyal's defense in California to proceed without the huge risk to him of disruption from the Texas case," he said.
In Roberts' June 11 complaint, he alleges McAfee stopped paying his legal fees in October. It says that on Jan. 4, McAfee partially paid several months' worth of past-due invoices, including half of Roberts' fees in a criminal case and 90 percent of his fees in a civil case. After that, the complaint alleges, no more payments were made, and McAfee owed more than $3 million in attorney fees. Calls to Roberts' attorneys at Cooley were not returned on Friday.
Delaware attorney Kenneth Nachbar, who is representing McAfee in both suits, would not comment on the Goyal case, but seemed optimistic on reaching an agreement in the Roberts case. "We always try to resolve things if we can, and my client is reasonable and, if the other side's reasonable, then a settlement can happen," he said.
Bryan Daly, a white-collar criminal defense lawyer with Mayer Brown in Los Angeles who is not involved in any of the McAfee litigation, said that if Roberts and McAfee had entered an indemnity agreement, which the complaint says they had, the company's failure to pay Roberts' legal fees would be "just a straight breach of agreement."
"We understand we have an obligation to advance reasonable fees," McAfee spokesman Busselen said. "Our argument is we believe we have a legitimate dispute about what is reasonable."
The issue of reasonableness is relevant to each of the suits, Busselen said. Though he wasn't able to address why the company sued WilmerHale and not Cooley, he did say several factors were likely at play.
"Our choice of legal tactics is based on a combination of the degree of unreasonableness of situations as well as the openness of the parties to discuss a fair and reasonable settlement," he said.
The fee fights all began after Roberts was replaced by Mark Cochran as McAfee's general counsel last September, a point made in Goyal's complaint. Prior to joining McAfee, Cochran had been the general counsel of Santa Clara's Hyperion Solutions Corp. and had lost against WilmerHale attorneys representing OutlookSoft Corp. in a 2006 patent fight in the Eastern District of Texas.
Cochran was on vacation and unavailable for comment, according to a McAfee receptionist. Goyal will still be represented by WilmerHale, according to the firm's Texas attorney, and calls to the Cooley lawyers representing Roberts and the attorney representing McAfee in the Texas case were not returned in time for publication.