A Texas patent litigant is seeking to overturn a recent arbitration decision that awarded $3 million to Jenner & Block in a dispute over attorney fees, after the Chicago-based firm allegedly withdrew from representing the client on a contingency fee contract.
Susan Levy, managing partner of Jenner & Block, writes in a statement that the allegations in the petition seeking to overturn the arbitration award are "meritless."
The background to Parallel Networks v. Jenner & Block, which was filed on Jan. 29 in Dallas’ 101st District Court, is as follows, according to the petition.
In 2007, Dallas-based Parallel Networks hired Jenner & Block (Jenner) to represent it as a plaintiff in a patent infringement action filed in a Delaware U.S. District Court. Under the contingency fee agreement (CFA), "Parallel Networks was not obligated to pay hourly fees, but instead Jenner’s fee was contingent from any Enforcement Activities concluded by Jenner," the petition states.
A provision in the CFA stated that, if Parallel Networks terminated the CFA, it would compensate Jenner "at the regularly hourly billing rates." That provision also stated that if Jenner "determined at any time that it was not in its economic interest to continue the representation" it could terminate the agreement upon 30 days’ written notice.
In 2008, the Delaware federal court granted a summary judgment of non-infringement adverse to Parallel Networks. "Within three hours of receiving the adverse summary judgment ruling, Jenner attorneys internally discussed how much longer Jenner wanted to continue the representation of Parallel Networks and how best to recoup Jenner’s investment in the case," the petition states. "Jenner believed that it could ‘terminate the engagement for any reason’ and ‘[Jenner] would remain entitled to be compensated at a minimum for [its] fees incurred, based upon regular hourly basis.’ "
In 2009, Jenner terminated the representation, according to the petition. Parallel Networks later retained Houston-based Baker Botts to represent it in the patent infringement case. In 2010, the U.S. Court of Appeals for the Federal Circuit vacated the adverse summary judgment and remanded Parallel Networks’ infringement case to the trial court. In 2011, three days before trial, Parallel Networks settled the case with the defendant, according to the petition.
After the settlement, Jenner allegedly sent Parallel Networks a demand letter for $10.2 million in hourly fees. The breach of contract dispute was later submitted to arbitration in Dallas. On Jan 18, an arbitrator awarded Jenner $3 million based on the firm’s breach of contract and quantum meriut claims, according to the petition.
The fundamental question presented in petition is "whether a termination provision in a contingent fee agreement that allowed Jenner to terminate and seek hourly fees instead of a contingency fee [is] enforceable."
Jamil Alibhai, a partner in Dallas’ Munck Wilson Mandala who represents Parallel Networks, alleges that the arbitration ruling disregards more than 150 years of Texas law governing attorney-client fee agreements, as well as Texas public policy.
"When a Texas lawyer withdraws from a contingency fee case, he usually forfeits the fee," Alibhai says. "No one wants to litigate for years and then have a demand made for work on a case they weren’t willing to see through."
"They [Jenner] tried to enforce an unenforceable contract. . . . they first sought an hourly fee, which doesn’t comport with Texas law or how Texas contingency fees work," Alibhai adds.
In a prepared statement, Levy, Jenner’s managing partner, writes: "We believe the petition, which seeks to vacate a fifty-page arbitration award in the firm’s favor, including an award of attorneys’ fees, is entirely meritless. The petition repeats arguments that were extensively briefed by the parties and that the Arbitrator correctly rejected, and ignores much of the evidence presented at the two-week arbitration hearing. The petition does not come close to meeting the very high threshold the United States Supreme Court and other courts have set for vacating arbitration awards."