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It’s getting ugly in the litigation trenches. Companies are more willing to fight over the fine print in contracts to squeeze more money out of the people they do business with. And that’s great news for litigators like Geoffrey Howard. “There is an increase in litigation related to the dot-bomb fallout — desperate times beget desperate measures,” the San Francisco-based McCutchen, Doyle, Brown & Enersen partner said. But good times for litigators may turn out to be bad news for some of the lawyers who drew up contracts at the height of the dot-com boom. They could face malpractice claims for putting together contracts that weren’t up to legal snuff. “I’ve been very busy with calls [from companies and litigators] ever since January when the economy took a dive,” said Carol Langford, a Walnut Creek, Calif.-based solo malpractice lawyer. “A lot of the claims are serious; they aren’t just people looking for someone to blame.” Whether the cause is sloppy lawyering or tech executives looking for cash, litigators in the San Francisco Bay Area are seeing a dramatic increase in the number of contract disputes they are handling. Howard said contract disputes take up about 30 percent of his time. “I couldn’t classify any of my work in 1999 as falling into this category,” Howard said. The trend began within months of the stock market’s decline in April 2000, Howard said, and has only increased. He says he has signed on a dozen new contract dispute clients in the past year. Howard has seen loosely written documents drafted by inexperienced in-house lawyers and other contracts that read like corporate lawyers drafted them in a hurry. “There is a lot of fallout from the bad deals that were done,” he said. “A lot of these contracts weren’t even negotiated by lawyers.” One cash-starved startup sued one of Howard’s clients twice, basing both suits on a contract that Howard proved was superseded by later documents. “The language they relied on had been expressly deleted from the operative contract,” Howard said. The opposing counsel pulled out of the case and the company ultimately went under. Not everyone is willing to blame poor lawyering for the problems. David Steuer, a Palo Alto, Calif.-based Wilson Sonsini Goodrich & Rosati partner, said tech companies are simply hard-pressed to meet the obligations they signed on to in better times. “Clients got into big contracts when business was booming,” Steuer said. “They went into some big, forward-looking contracts for parts or services and no longer have the business.” But Steuer said the increase in contract disputes in his practice stems more from Internet-boom bravado than shoddy documents. Many of the disagreements Steuer has looked into involve large manufacturing companies that have a huge overhead to support. Now, neither the parts makers nor their customers can live with the terms of existing contracts, Steuer said. And there’s a lot at stake when it comes to these contracts. Steuer said the client inquiries he’s fielding involve anywhere from $20 million to $75 million. Robert Schaberg, a San Francisco-based Shartsis, Friese & Ginsburg litigation partner, says technology is definitely taking up more of his time: “Two years ago, you saw more run-of-the-mill disputes like securities, some antitrust, normal commercial squabbles. “We’re definitely into that zone right now, where people have decided that they’re going to sue one another instead of going on to the next deal,” Schaberg said. The influx of struggling technology companies has forced Schaberg to shift the way he pursues their claims. Instead of engaging in the “traditional type of scorched earth litigation,” as one litigator put it, lawyers try to work something out between parties. That doesn’t always mean a cash settlement. “You can’t get blood from a stone,” Schaberg said. “There are situations where they don’t have the money.” More disputes are ushered toward mediation, for example, and lawyers like Schaberg try to limit their discovery. Or they negotiate an exchange of something else, like intellectual property rights in lieu of money. McCutchen’s Howard negotiated such a settlement on behalf of a client, winning some licenses and some other IP, which ultimately kept the other company out of bankruptcy. “You need to be creative and think about what your client is going to end up with at the end of the day,” Howard said. On a more ominous note, Howard said he is sending more and more companies to malpractice specialists. “There are certainly ethical issues associated with them — if not outright malpractice,” Howard said. Langford, the malpractice lawyer, has had a busy year fielding queries from companies and from other litigators. A third of those inquiries have merit when it comes to the lawyer’s breach of duty, Langford said, but so far, the damages haven’t warranted a lawsuit. It’s only a matter of time, she said, before the right case comes along. “When deals start going south,” Langford said, “people start wondering if the lawyers acted competently when they put the deal together.”

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