A recent Law 360 story by Rose Krebs, “X Corp. Accused of ‘Shirking’ Its Obligations in Legal Fee Row”, reports that three former top Twitter executives continue to urge the Delaware Chancery Court to order the Elon Musk-owned social media giant, now called X Corp., to reimburse them for at least $1.1 million in legal costs, accusing the company of "perpetually making excuses" for not meeting its obligations.  In a brief, former Twitter CEO Parag Agrawal, former Chief Legal Officer Vijaya Gadde and former Chief Financial Officer Ned Segal told the court that the company is "gaining a well-earned reputation for shirking its commitments."

They took aim at a cross-motion for summary judgment and accompanying brief X Corp. filed last month, after Agrawal, Gadde and Segal had already sought to have Chancellor Kathaleen St. J. McCormick summarily order the company to pay legal fees they have incurred in connection with Twitter-focused lawsuits and regulatory inquiries.

The three assert that, in their summary judgment bid, they established "beyond any doubt that Twitter has breached its advancement obligations."  "From the beginning of this dispute, plaintiffs have operated by the book — making timely demands for advancement, providing undertakings, and submitting good faith certifications from counsel attesting to the reasonableness of plaintiffs' attorneys' fees," their brief said.  "Plaintiffs have done everything prescribed by Delaware law to obtain advancement from Twitter."

They accuse the company of causing months of delays and "perpetually making excuses for its failure to meet its advancement obligations."  "Although Twitter would like to pretend it is a party that dutifully pays its contractual obligations as they come due, it is in fact perpetually delinquent and is gaining a well-earned reputation for shirking its commitments," they contend.

In a filing last month, they said the social media giant had advanced them roughly $575,000 for their legal costs, but is still "wrongfully" withholding about $1.1 million owed, along with roughly $270,000 in interest and "fees-on-fees" for having to litigate the Chancery suit.  The three sued the social media giant in Chancery Court in April, saying they incurred significant expenses after becoming involved in several legal proceedings because of their former roles as Twitter executives.

They contend that per company bylaws and indemnification agreements, X Corp., as Twitter's successor, is obligated to advance their legal expenses.  Musk fired the three when he took ownership and control of the business in October 2022.  Indemnification agreements covering them, however, remain in effect for proceedings related to their former position as officers, the complaint said.  In a filing last month, the three argued: "Put simply, the world's richest person does not pay his bills."

But, its own filing, X Corp. has called into question the reasonableness of fees related to Gadde's appearance before the House Committee on Oversight and Reform during the committee's investigation into the influence of social media on U.S. elections.  In its own summary judgment filing last month, X Corp. called Gadde's request for fees excessive.

"Unlike many advancement actions, here, X Corp. does not challenge Gadde's entitlement to advancement of reasonable expenses — the company does not dispute that her testimony was required by reason of Gadde's role as former CLO of Twitter," the filing said. "Rather, the company here is challenging only the reasonableness of the fees for which Gadde seeks advancement with respect to the Congressional Inquiry."

X Corp. said Gadde is asking the company to advance "over $1.1 million" for fees incurred by her counsel, Sidley Austin LLP, "in connection with testifying for a single day."  That amount is "nearly 1,100%" what was incurred by two other former Twitter executives who also testified at the same hearing and were "similarly situated witnesses," X Corp. contended.

"The extreme delta between Gadde's legal fees and those of not one, but two separately represented, similarly situated, former Twitter executives who engaged similarly reputable law firms, is on its own sufficiently shocking to require that the reasonableness of Gadde's fees be thoroughly addressed now," the company argues.

X Corp. asked the court to "reduce any advancement award related to Gadde's representation in the congressional inquiry from $1,153,540.81 to $106,203.28 because Gadde failed to prove that all the fees and expenses were reasonably incurred."

But, ina filing, Gadde, Agrawal and Segal fired back.  "Twitter's challenge to these fees is particularly troubling given that Twitter's owner, Elon Musk, contributed to the exposure and complexity of the oversight inquiry when he publicly and repeatedly focused on Gadde and personally toured Capitol Hill to incite Republican lawmakers leading the oversight inquiry," their filing said.  They argued that "the record demonstrates that Gadde's fees incurred in the oversight inquiry are reasonable."

The three criticized the company for venting "invective at Gadde's counsel," including asserting that it engaged in "over-lawyering" and "extensive duplication of effort."  Gadde’s attorneys spent many hours prepping her for the committee’s questions, using five partners with hourly rates from $1,300 to $1,825, two associates charging more than $1,200 an hour and non-lawyer “policy adviser” Tracey LaTurner, who billed at $665 an hour.

"Aside from its invective, the only basis for Twitter's cross-motion is a false comparison between Gadde's attorneys' fees and the attorneys' fees of two other witnesses who testified in the same oversight inquiry," they said.

A recent Law 360 story by Vince Sullivan, “Pillsbury’s Fee Bid Slashed For ’Over-Lawyering’”, reports that a Delaware bankruptcy judge reduced the fees payable to Pillsbury Winthrop Shaw Pittman LLP for its work on the Chapter 11 case of the owner of a California hotel by $946,654, saying the firm overstaffed the case with senior attorneys in what he described as "over-lawyering."   In an opinion from U.S. Bankruptcy Judge John T. Dorsey, the court cited a report from a fee examiner appointed in the case of SC SJ Holdings LLC when it directed the reduction of the firm's fee application, cutting the payable amount from the $6,288,809 requested by Pillsbury down to $5,342,155.

Judge Dorsey said the firm assigned partners and other senior lawyers to tasks below their level of experience, calling the staffing decisions "troubling" in light of Pillsbury twice before having its billings reduced by bankruptcy courts because of similar issues.  "Pillsbury's senior attorneys routinely performed tasks far below their paygrade, including hours of legal research, and they failed to utilize associates for even the most straightforward of tasks such as document review or preparation of privilege logs," Judge Dorsey said.  "This cavalier approach to billing would be unreasonable in any case, but considering this is a firm that has at least twice had its fees reduced for similar staffing concerns, it is troubling."

The firm reduced its rates by 15% before submitting its fee request, and Judge Dorsey directed a further reduction of 10% after other reductions had been made, amounting to a cut of $593,572.  The court also ordered reductions for vague time entries submitted by Pillsbury that don't provide sufficient information about what tasks were being performed and for what reason.

"It is not the Court's job to piece together entries and try to make sense of them. Each entry must be capable of evaluation on its own," the opinion said. "Many of Pillsbury's entries are not."  The reduction in fees on account of vague entries amounts to $67,706.  A further reduction of $284,315 was also ordered by the court because of lumped entries that aggregated billings for multiple activities.

A recent Law.com story by Dan Roe, “Twitter Fee Lawsuit Brings Wachtell’s Billing Practices to Light”, reports that, in addition to charging hourly fees on par with top Wall Street law firms, Wachtell, Lipton, Rosen & Katz routinely charges success fees that rival the fees of investment banks in merger and acquisition transactions, according to an email Wachtell partner William Savitt sent to Twitter’s in-house counsel on the eve of Elon Musk’s takeover of the company.

The firm also adds success fees between two and two-and-a-half times the firm’s hourly fees in “premium billing matters that involve substantial litigation,” according to the email.  Wachtell’s billing structure diverges from Big Law’s traditional hourly structure by billing clients in the manner of investment banks, negotiating success fees by a percentage of deal value or bankers’ fees.

Last week, Musk sued Wachtell in California Superior Court on counts of unjust enrichment and breach of fiduciary duty, alleging Wachtell took advantage of Twitter’s “lame duck” in-house counsel ahead of the company’s sale to Musk and pushed through a success fee that represented the bulk of Wachtell’s $90 million fee for four months of work.

The lawsuit, filed by Reid Collins & Tsai, referenced Twitter’s master retention agreement, signed by Savitt, which made no mention of a contingent or success fee. (The document also states the retention agreement supplements any fee arrangement entered into between Twitter and outside counsel.  No such documents appeared in the complaint.)

In an emailed statement, Wachtell said the firm was “extremely proud” of its work representing Twitter, which “generated billions of dollars in shareholder value by compelling Elon Musk to abide by his contractual obligation to buy Twitter for $54.20 per share,” the firm said.  “The fee for our work was entirely appropriate and expressly approved by Twitter’s board of directors, which was independently advised.  The suit against us is meritless, and we will respond to it in due course.”  Simpson Thacher & Bartlett advised Twitter’s board in the deal.

Last October, when Twitter’s in-house counsel asked Savitt to justify the $90 million fee—which included $26 million in work billed hourly—by outlining comparable arrangements, such that Twitter’s board could approve the fee before the sale, Savitt outlined two methods.

In the first, “Engagement fees as a percentage of banker fees,” Wachtell stated it was frequently paid 60% to 80% of the fees paid to investment advisers.  In seven examples, the firm described instances of being paid between 67% and “over 100%” of the fees charged by investment banks.

The second billing method referenced litigation-intensive engagements, citing examples of the firm charging up to three times its “run-rate” (its hourly rate plus costs and other disbursements) and stating it frequently invoices two to two and a half times its hourly rate.

Wachtell has guarded its billing arrangements and declined to comment for previous American Lawyer articles discussing them.  Yet, in 2015, The American Lawyer obtained a standard fee arrangement Wachtell sent to client CVR Energy in January 2012.  In it, Wachtell stated its “extraordinary expertise and sophistication” didn’t lend itself to hourly fees, with the firm preferring to “base our fees not on time but on the intensity of the firm’s efforts, the responsibility assumed, the complexity of the matter and the result achieved.”

In the CVR Energy engagement letter, the firm said it typically charged 1% or more of the total value of M&A and takeover deals worth less than $250 million and charged 0.1% of matters worth more than $25 billion.  Compared with billing based on total deal value, Wachtell’s apparent preference toward billing a portion of banker fees in deals or multiplying hourly fees in litigation-heavy matters appears more lucrative.

Had Wachtell billed 0.1% of the $44 billion Twitter sale, it would have made $44 million.  Instead, the firm offered Twitter the opportunity to base its fees on those charged by the investment banks on the deal.  Three weeks before partner Benjamin Roth pitched Wachtell’s services to Twitter’s in-house counsel, news outlets reported Goldman Sachs and JPMorgan Chase & Co. were poised to earn a combined $133 million in fees if the deal went through.

Alternatively, a litigation multiplier of 2.5 would place Wachtell’s success fee near $90 million if the addition of the firm’s October hourly fees, which weren’t discussed in the lawsuit, brought the total hourly bill to $36 million.  Twitter also waived its standard 15% discount for outside counsel, according to the complaint. Additionally, Musk took issue with several Wachtell partners leaving time entry descriptions blank.  Wachtell’s highest-billing partners, according to billing records surfaced in the complaint, include Savitt at $1,850 an hour and Leo Strine, of counsel and the former chief justice of the Delaware Supreme Court, at $2,000.

Strine was central to Roth’s email pitch to Twitter Chief Legal Officer Vijaya Gadde, general counsel Sean Edgett and Chief Financial Officer Ned Segal in early June 2022.  “I’ve been following with interest the news about your pending transaction with Elon Musk,” Roth wrote, saying later in the same email, “Leo Strine is now with our firm and sits about 25 feet down the hall from me.”

Roth also emphasized litigation co-chair Savitt’s experience litigating in Delaware and Savitt’s representation of Roth and the firm in a malpractice lawsuit filed by Carl Icahn over the CVR deal.  In 2013, Icahn sued Wachtell for not disclosing to CVR executives that the company’s investment banks would earn more money if the company accepted an existing bid (rather than the banks being incentivized to drive bids up).  The lawsuit also said Wachtell broke from its own engagement letter and billed based on the success fees of the banks instead of using total deal value, with CVR’s counsel stating, “Wachtell is perversely incentivized to negotiate engagement letters that benefit the investment bankers, not the client.”

A recent Reuters story by Andrew Goudsward, “Lawyers Win Big in $787.5 Million Fox Defamation Case,” reports that the $787.5 million settlement that ended Dominion Voting Systems' defamation lawsuit against Fox Corp also marks the end of a lucrative, two-year legal battle for the sprawling teams of highly-paid lawyers on both sides.  At least 31 lawyers from nine different law firms worked on the case, court filings show.

Dominion said Fox News broadcast false claims that the company’s voting machines were involved in a conspiracy to rig the 2020 U.S. presidential election, and won one of the biggest settlements paid in a defamation lawsuit.  Delaware Superior Court Judge Eric Davis complimented the legal teams in court after the settlement, saying he had not seen "as good of lawyering" in 13 years on the bench.

Law firm Susman Godfrey, one of two firms that represented Dominion in the case, was hired on a contingency, or success-fee, basis, according to a source familiar with the fee arrangement.  The firm gave Dominion a "substantial discount" because it viewed the case as pursuing accountability for election falsehoods, the source said.  It was not immediately clear how large a share of the settlement the firm would receive in legal fees.  A spokesperson for Dominion declined to comment.

Dominion accumulated about $12.2 million in out-of-pocket legal costs just from November 2020 through October 2022, according to court filings, which listed law firms and legal consulting companies retained by Dominion.  The filings do not include recent costs associated with preparing for trial or the success fees lawyers could earn from the settlement.

Lucrative Success Fees

Susman Godfrey helped pioneer the use of contingency fees in business litigation, a model more common for plaintiffs in personal-injury lawsuits.  Such arrangements, advertised on Susman's website, have included fees as high as one-third of a settlement in prior cases.  Partners at large corporate law firms like those representing Fox, meanwhile, sometimes bill more than $2,000 per hour, filings in other cases have shown.

Winston & Strawn and DLA Piper, which represented Fox News and parent company Fox Corp, respectively, each fielded teams led by two partners and multiple associates, court filings show.  The Winston & Strawn team was headed by Dan Webb, a top trial lawyer who represented Beef Products Inc in a closely watched defamation case against ABC News that settled in 2017 for at least $177 million.  Fox News also hired Paul Clement and Erin Murphy, top appeals court lawyers who have advocated for conservative causes at the U.S. Supreme Court.

Dominion's lead lawyers at Houston-founded Susman Godfrey included partners Justin Nelson, Stephen Shackelford and Davida Brook.  The company also hired Clare Locke, a firm specializing in defamation cases that represented former Alaska Gov. Sarah Palin in a libel lawsuit against The New York Times.

"We recognized right away just how momentous an issue this was, not only for Dominion, but for the entire country and the integrity of elections," Clare Locke partner Tom Clare told Reuters.  Clare would not discuss legal fees, but said his firm's small size allows it to be "flexible" in structuring agreements with clients.

Past examples of contingency fee arrangements show how lucrative they can be if a case is successful.  Susman Godfrey and another plaintiffs' firm earned about $106 million in 2018 under a contingency fee arrangement in a class action that secured $590 million in combined settlements with major banks accused of manipulating the Libor benchmark interest rate, according to court documents.

Last year, the firm took in one-third of the cash component of a $92.5 million class action settlement to resolve allegations that Voya Retirement Insurance and Annuity Company breached its contract with tens of thousands of life insurance policyholders, court records show.

A recent Law 360 story by Max Jaeger, “Sanctioned NFL Player Must Cover Atty Fees in Poaching Suit” reports that New York Giants wide receiver Kenny Golladay must cover more than $15,000 in attorney fees for his former agency after flouting a subpoena in litigation over whether he was poached by a rival, a Michigan judge said.  In an order, U.S. Magistrate Judge Anthony P. Patti overruled Golladay and approved $14,929 in attorney fees to cover Honigman LLP's representation of the wideout's former agents at Clarity Sports International LLC.  The judge refused to award fees for work by Dowd Bennett LLP, finding them "excessive and redundant" of work by Honigman's lawyers.

Clarity said it cost them a little over $20,000 to get Golladay to comply with a third-party subpoena for his deposition and document production.  The agency says in a separate suit that sports memorabilia sellers helped non-party Creative Arts Agency steal Golladay from them.  The wide receiver is not a party to that suit, but he ignored a 2020 subpoena, so Clarity sued to compel.  The court hit him with sanctions for his "cavalier and reckless attitude" and ordered him to pay Clarity's legal bills for giving them the "run-around."

Golladay opposed most of the Honigman fees, arguing that partner Jeff Lamb's four hours at $580 per hour merely duplicated 19.75 hours of work that partner Andrew Clark did at $455 per hour.  But the court disagreed.  "Although much of attorney Lamb's relevant work appears to have involved review and conference with other attorneys, the court considers such collaboration between partners and associates typical and substantive, as opposed to duplicative and redundant," Judge Patti wrote.

That was "especially true" given Clark was out on leave for two months, the judge said.  He also approved 11 hours that associate Nicholas Burandt contributed at $350 an hour.  Some work was duplicative, however, and the judge denied $5,400 to Dowd Bennett for the roughly 7.5 hours each contributed by Dowd Bennett partner John D. Comerford and associate James B. Martin, who charged $420 an hour and $300 an hour respectively.

Golladay argued he shouldn't have to pay their fees because Clarity retained them on a contingency basis in the underlying tortious interference case against CAA that's separately playing out in Pennsylvania federal court.  Because it is ongoing, Clarity had not "incurred" any fees yet, he argued.  "The court, however, struggles to find the logic in this latter argument, as it would imply that parties (or non-parties) would be shielded from sanctions for poor behavior whenever the opposing side has a contingency-fee relationship," Judge Patti said in his order.

Instead, the judge said Dowd Bennett LLP's contribution amounted to sending emails to Honigman counsel and editing filings, and awarding fees would be excessive.  "Although Respondent's behavior throughout this matter has undoubtedly been unacceptable and necessitated additional work by Petitioners, that work was frustrating more so than complicated," Judge Patti said.

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