Another outside counsel fee fight made the news (no we are not talking about Watchell).
This story begins in 2015, when Philidor RX Services was investigated by the SEC, Congress, and the DOJ for its relationship with Valeant Pharmaceuticals International, Inc. Polsinelli and WilmerHale were both retained to jointly defend the companies. While WilmerHale was billing by the hour, the companies agreed to pay Polsinelli a flat fee of $12 million to “provide legal counsel and assistance in accordance with [the Contract] . . .[,] and another $2 million in the event they needed to hire additional counsel. This is a very, very important fact.
So what happened?
What could be better than not one, but two law firms fighting tooth-and-nail in your defense? Well, turns out two is not for the price of one here. Polsinelli apparently pushed a bulk of the WilmerHale. From Polsinelli’s point of view, the more work WilmerHale took on, the less time and money Polsinelli had to invest in Davenport and Tanner’s defense.”
As you would expect, WilmerHale filed most of the “pretrial motions, responses to the governments motions, jury instructions,” etc. At trial, WilmerHale supplied at least four lawyers to each day, while Polsinelli only two lawyers on deck. After losing their case, the clients sued Polsinelli, alleging breach of contract, unjust enrichment, and mismanagement of litigation.
The gist of the allegations was that Polsinelli negligently performed its contractual obligations by only sending two lawyers to trial, failing to draft and file an appropriate number of court filings, and otherwise not providing enough legal representation to mount a proper defense. Effectively breaching their duty of care by causing their clients to “pa[y] twice for one defense because Polsinelli did not provide enough legal representation.”
Well, the District Court disagreed. Same with the appellate court. The 3rd Circuit rationed that Polsinelli did not violate the obligations outlined in their agreement and that the applicable bar rules regarding charging illegal or excessive fees could make the [engagement letter agreement] unenforceable” was unsupported.
What a payday.