David Snow, ALM's editorial director for technology.
Photo: Jason Doiy
"How many vendors have you ever heard of suing lawyers and winning?" That's the question Tom O'Connor brought up when asked about the significance of the Sept. 19 decision in Cataphora Inc. v. Jerrold Seth Parker, in which the defendants were ordered to pay $317,113, according to court documents. That's not a great deal of money. The case was essentially a contract dispute, not a fight over the use of technology. And yet the litigation could be a sign of the times in the changing backdrop of legal technology.
"Mostly the dirty linen in this stuff never goes public," said O'Connor, who is director of the Gulf Coast Legal Technology Center and a member of LTN's Editorial Advisory Board. As a technology consultant, he watched the case with interest. "In the old days, they'd settle the case. From the firm point of view, nobody wanted their business practices aired. The gloves are coming off."
In the case, which the Above the Law blog describes in detail, Cataphora sued a group of big-time plaintiffs attorneys involved in the Chinese drywall multidistrict litigation for breach-of-contract. Cataphora would have been involved in pre-trial document review, but it never did the work. The drywall attorneys canceled the contract upon receipt of an invoice for an up-front fee. According to Roger Chadderdon, technology counsel at Cataphora, who represented the company in court, the attorneys' response to Cataphora at the time was, "Sue us if you dare."
Well, Cataphora dared, and the result so far is positive for the company. The jury in Northern District of California Magistrate Judge Bernard Zimmerman's courtroom believed that the contract was enforceable.
In court, the defense claimed the contract was never valid, and that it included an illegal “success fee” added late in the process. "Terms were slipped in at the last minute," defense counsel Frank Pitre, of Cotchett, Pitre & McCarthy, told LTN. “On the final [emailed] versions, nobody on Cataphora’s side notified [the attorneys] that they had materially changed the terms." And that’s not all. “There were pretrial rulings that skewed the presentation of the case and biased the defense presentation of what happened,” Pitre said. “There will be post-trial motions that I hope will rectify the miscarriage of justice that was done. There's a strong chance this is going to be cured on appeal."
The other side tends to see the result more in David vs. Goliath terms.
"It took them 2 years to come up with some type of defense, but in the end, the jury didn’t buy it," Chadderdon said in an e-mail. "The bottom line of this suit was the principle of the matter. It was wrong and we felt someone had to stand up to the bullies. We are very pleased the jury agreed with that position."
Cataphora handled the case as a legacy issue, Chadderdon added; its legal division was sold to Ernst & Young in May, 2011.
"We're seeing much more of a trend here of lawyers and vendors suing each other," O'Connor said, pointing to the e-discovery malpractice suit a client filed against McDermott Will & Emery in June. Regarding the Cataphora case, "That's not the sort of lawsuit that ever would've been filed 5 years ago. I don't know if that's an indication that things are getting testy in the legal technology world. Everybody's fighting for the work, and things are just getting nastier than the old days. We can't afford to let work go out the door anymore, $300k, $500k."
What do you think? Are the gloves coming off in disputes between law firms and vendors? Comment.
David Snow is ALM's editorial director for technology. Send e-mail.
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Paul Wright
I have some knowledge of the matter. Vendors should adopt a standard business protocol when dealing with lawyers. Lawyers do not begin a case without a signed retainer agreement or a contractual agreement, so vendors should operate in the same manner. Too many times lawyers think they can beat up the vendors using trained negotiation tactics (especially when they lose the case) and in most cases they always win. Due to the fact there are so many vendors in the eDiscovery space most vendors end reducing their rates after doing the actual work, especially when they want to get paid. This case signifies that as a vendor you must protect yourself at all times when dealing with lawyers in a contractual engagement. Most vendors do not file suit against a client under these circumstances as they want to protect their reputations and especially when no work was performed, but they are all revenue hungry in this economy so not as big a surprise. In this particular case no actual work was performed by the vendor, but the vendor was able to provide proof of the profit they would have made if they had been engaged and paid upfront per the contractual obligations.
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