This is a decision affirming an arbitrator’s award of legal fees to Jenner & Block. The case is a typical attorney-client fee dispute, but here the Court enforced the parties’ arbitration clause.
The fee dispute arose out of patent litigation handled by Jenner & Block for Parallel Networks. Jenner & Block ultimately withdrew from the litigation after locating successor counsel for Parallel Networks. Jenner & Block cited the client’s failure to pay invoices on a timely basis and its lack of economic resources to continue the litigation.
Parallel Networks claimed that Jenner & Block forfeited all rights to compensation because it withdrew from the litigation. The arbitrator ruled against Parallel Networks.
Jenner & Block sought an award of $10 million in legal fees. The arbitrator awarded $3 million and awarded a percentage of any future proceeds received by Parallel Networks for one of the patent infringement cases.
Two provision of the fee agreement are worth quoting. First, the termination provision is well-drafted and was enforced by the court:
a. Termination by [Parallel]. This Agreement may be terminated by [Parallel] at any time by providing 30 days prior written notice to Jenner & Block. If [Parallel] elects to terminate this Agreement, [Parallel] shall: (i) compensate Jenner & Block for all time expended by Jenner & Block on any Enforcement Activity undertaken on behalf of [Parallel] at the regular hourly billing rates charged by Jenner & Block for its attorneys and legal assistants (in lieu of the Contingent Fee Award applicable to such Enforcement Activity); provided, however, that [Parallel] has not terminated this Agreement as a result of a material breach of this Agreement by Jenner & Block (and such breach was not cured within thirty (30) days of the receipt by Jenner & Block of written notice from [Parallel] of such material breach); (ii) reimburse Jenner & Block for all previously unreimbursed Enforcement Expenses incurred by Jenner & Block under this Agreement; and (iii) at the conclusion of any Enforcement Activity, pay Jenner & Block an appropriate and fair portion of the Contingent Fee Award based upon Jenner & Block [sic] contribution to the result achieved as of the time of termination of this Agreement (to the extent that Jenner& Block has not already been compensated under Section 9.a.(i) hereunder).
b. Termination by Jenner & Block. If Jenner & Block determines at any time that it is not in its economic interest to continue the representation of [Parallel] pursuant to this Agreement, Jenner & Block may terminate this Agreement by providing 30 days prior written notice to [Parallel] provided that the timing of such a termination shall be in full accord with any applicable ethical or legal responsibilities (e.g. those promulgated by the American Bar Association (ABA) or those outlined by the Illinois Disciplinary Rules of Professional Conduct), which bind or otherwise control the behavior or actions of Jenner & Block. Subsequent to the termination, Jenner & Block shall use best efforts to secure substitute counsel for [Parallel]. If Jenner & Block terminates this Agreement, it shall continue to be entitled to receive compensation from [Parallel] pursuant to (i), (ii) and (iii) in the preceding paragraph up to the date of such termination LESS the reasonable costs incurred by [Parallel] to transition any pending or on-going Enforcement Activities that had been commenced with Jenner & Block to successor legal counsel.
The arbitrator found that Jenner & Block met its professional obligations to Parallel Networks and properly terminated the representation.
The arbitration clause is also significant:
8. Arbitration of Disputes
(a) Generally: The parties acknowledge that situations may arise which are not specifically addressed or contemplated in this Agreement. In that event, the Parties shall make a good faith effort to resolve any dispute relating in any manner to the Agreement or to any services provided pursuant to this Agreement in accordance with the general spirit of this Agreement. If the Parties cannot reach a satisfactory resolution, the Parties (or their authorized successors or assigns) agree that such dispute shall be finally adjudicated by arbitration conducted in Dallas, Texas under the auspices of JAMS®. The details concerning such arbitration, will be agreed upon by the Parties prior to the commencement of arbitration or, failing such agreement, by JAMS®. The arbitrator shall be selected by the mutual agreement of the Parties or, failing such agreement, from a panel of three arbitrators nominated by JAMS®, with each Party having the right to strike one of the arbitrators nominated by the other Party.
Because the arbitration award was reviewed under the Federal Arbitration Act, 9 U.S.C. §§ 9-11, the court could only reverse the award in very limited circumstances.
This case is important because it another step in the trend towards using arbitration to resolve legal fee disputes.
Edward X. Clinton, Jr.