A recent Law 360 story, “Ex-Jenner & Block Client Looks to Undo $4.4M Atty Fee Award,” reports that a former Jenner & Block patent litigation client asked a Texas appeals court to vacate an arbitrator’s $4.4 million fee award to the firm, saying it violates public policy to enforce an unconscionable attorneys’ fee agreement.  Parallel Networks LLC retained Jenner & Block under a contingency agreement to pursue patent infringement claims against QuinStreet Inc. and Oracle Corp., but after the company accrued about $500,000 in unpaid legal expenses, the firm withdrew.

Then, after Parallel settled the case through different counsel, Jenner & Block sought to exercise a clause in the fee agreement that allowed it to recover hourly fees for its work on the case or a fair and reasonable fee for its time, and an arbitrator awarded more than $4.4 million -- $3 million as a percentage of the settlement plus about $1.4 million in interest and 16 percent of net proceeds from future settlements related to the patent.

Parallel sued to vacate the fee award, saying the underlying fee agreement is unconscionable and can’t be enforced, arguing courts have the power to review the arbitration decision because it violates public policy.  The company contents the fee award upends 150 years of precedent and says a Dallas trial judge improperly affirmed it in April 2013.

Parallel’s attorney Ron Chapman of Ogletree Deakins Nash Smoak & Stewart argued the contingency fee agreement structure relies on a delicate balance that exposes lawyers to risk, and said the Jenner & Block fee award unethically upsets that balance.  “The lawyer cannot game the system by having his cake and eating it too.” Chapman said.  He argued if Jenner & Block wins, the ruling will give other lawyers a roadmap for how to circumvent ethical standards and pursue fees even after quitting a case, in violation of public policy.

Justice David Bridges was skeptical of the argument the court needed to protect Parallel, saying the contingency contract was negotiated by sophisticated parties who were well represented by counsel in a case involving huge amounts of money.

Arguing for the firm, Paul Koning of Koning Rubarts LLP said a 2008 U.S. Supreme Court case, Hall Associates v. Mattel, prohibits the use of public policy as an entry point for the court to reconsider an arbitrator’s award.  Jenner & Block says the arbitrator already considered, and rejected, the argument that the fee agreement was unconscionable and that his determination on that point can’t be reviewed on appeal.

Koning said Parallel has no statutory grounds to challenge the award, which followed a lengthy arbitration hearing and was rendered in a 51-page decision, and said there’s no basis for the court to revisit the factual findings the arbitrator made.  The firm says Parallel can’t turn to the courts to challenge the arbitrator’s finding it had just cause to withdraw from representing the company after the legal expenses dispute, nor the determination its attorneys were entitled under the contingency contract to recover a fair amount of compensation for their work.  “Otherwise, you’re taking away the benefits of an arbitration decision – speed, economy and finality,” Koning said.