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Cannabis Company Doubles Down on Attorney Fee Clawback

February 22, 2022 | Posted in : Attorney-Client Relationship, Expenses / Costs, Fee Clawback, Fee Dispute, Fee Entitlement / Recoverability, Fees & Corp. Bylaws, Trial / Jury / Verdict

A recent Law 360 story by Sarah Javis, “MedMen Doubles Down on Clawback on Bid for Ex-CFO’s Fees” reports that Cannabis company MedMen has doubled down on its efforts to claw back $612,000 in legal fees it was ordered to pay its former chief financial officer in his unsuccessful suit against the company, accusing the former executive of trying to "slant the record and rewrite the jury's verdict."  MedMen argued in a filing in a California state court that it is entitled to recoup the legal fees it paid to former CFO James Parker because a jury found he "breached his May 2018 employment agreement, stole MME USA's highly valuable trade secrets, and violated his duty of loyalty to the company."

Parker had argued in a Feb. 10 opposition filing that the company can't recoup his legal fees because, among other things, a provision of his employment agreement indicates the company will pay up to $500,000 of his legal fees per year "regardless of the outcome of the dispute."  But that argument is irrelevant, the company argued, because Parker's breaches excused MedMen from its duty to pay his legal fees.  "Parker naturally would like to fixate myopically on that phrasing, but those words have no legal effect given his preceding material breaches of the agreement containing that provision," MedMen argued.

Parker sued MedMen in 2019, alleging breach of contract, promissory fraud, retaliation and wrongful discharge in violation of public policy, and a claim for promissory fraud against the company's founders, Adam Bierman and Andrew Modlin. MedMen, in turn, filed counterclaims against Parker for breach of contract, breach of fiduciary duty, breach of duty of loyalty, misappropriation of trade secrets and conversion.  A California state jury in Santa Monica found in November that MedMen did not constructively discharge or breach Parker's contract, awarding no money to him after he sought a payout of more than $24 million.

MedMen previously raised its arguments about Parker's legal fees in a January motion, in which it argued the court's previous order for it to pay the fees "expressly recognized that, if successful, [MedMen's] counterclaims and affirmative defenses might 'eventually unravel the advancement provision' in [Parker's] May 2018 employment agreement, but deemed that 'an issue for another day.'  That day has finally arrived."

The company has filed a memorandum of costs totaling more than $1 million, including the $612,000 in legal fees, as well as just over $143,000 in deposition costs, most of which Parker also contested.  Parker argued among other things last month that MedMen could not ask for costs incurred defending against his unsuccessful claim that he was fired in retaliation, because California state law requires such an award only if the claim was frivolous.