Two plaintiffs firms are getting a big payday for dropping their backdating lawsuits against Brocade and going to work for the company's special litigation committee.
San Diego's Johnson Bottini and Robbins Umeda & Fink will be paid $8 million guaranteed, plus a piece of anything that's recovered from the 10 former Brocade execs who have been sued by their former company.
The engagement letter (.pdf) was filed by the lawyers from the special litigation committee, Dewey & LeBeouf, after Northern District of California Judge Charles Breyer made it clear at a Thursday hearing that he wanted the agreement between Dewey and the plaintiffs lawyers out in the open.
Breyer's urging came two weeks after Dewey and the plaintiffs lawyers said in a state court hearing that they'd agreed to work together on the special litigation committee's lawsuit against 10 former execs and board members to recover money lost because of the backdating scandal at Brocade. The committee filed the suit for Brocade on Aug. 1 and sought to dismiss the pending state and federal derivative suits filed by Johnson Bottini and Robbins Umeda.
The deal had been kept under wraps, but Breyer told the lawyers on Thursday that the Brocade case has broad implications and should be conducted in the public view.
Neither Marc Umeda or Frank Bottini returned calls seeking comment, and Dewey & LeBeouf's Ralph Ferrara could not be reached for comment.
Umeda and Bottini have been working on the Brocade cases for the past few years. Now they'll get paid $4 million within a month of the deal's approval by the court and another $4 million after the case is done. The two firms will also share in any recovery. The deal lays out a formula for 25 percent of the first $250 million, and smaller percentages if the take goes above that. But the engagement letter caps the company's total obligation to Johnson Bottini and Robbins Umeda at $25 million, though it allows it to choose to pay them more.
Backdating derivative cases have yielded mixed results for plaintiffs lawyers. Most settlements have yielded around $1 million in fees. Marvell Technology said it would pay plaintiffs lawyers $16 million to settle derivative litigation over backdating, although final details have not been released.
The Brocade case is more unusual, because the special litigation committee actually hired the plaintifs lawyers instead of settling with them. Securities litigators said that, given how much it's paying its lawyers up front, Brocade must expect to end up with a huge recovery.
Brocade's complaint says it lost hundreds of millions of dollars in legal fees and settlements because of backdating at the company, and it wants to make convicted former CEO Gregory Reyes and nine others pay.
Brocade's longtime outside counsel, Wilson Sonsini Goodrich & Rosati, already paid $9.5 million for a release of claims for itself and firm Chairman Larry Sonsini. The engagement letter specifically states that the money paid by Wilson will not be counted as part of the total recovery.