California litigation powerhouse Quinn Emanuel is in another fee dispute, according to The New York Lawyer.
This time, a former client is suing over a $48 million settlement, claiming the firm “fail[ed] to advise him of ‘the meaning and ramifications of all terms of the settlement agreement.’” The original dispute was between client Todd Kurtin and his former partner in SunCal Cos., a real-estate development company. Quinn Emanuel lawyers negotiated the $48 million settlement, which was to be paid in four installments. After the first two, no further payments were made – leaving Kurtin out approximately $23 million plus interest. Not surprisingly, the California real-estate company is having cash-flow problems.
Based on the contingency structure, Quinn Emanuel has pocketed $12 million of the $25 paid so far. Kurtin is somehow blaming the firm for the counterparty’s nonpayment, though.
More about the profitability of these arrangements and the firm’s recent, higher-profile fee dispute, after the jump.
The Recorder quotes John Quinn as saying “[Firm margins] always have been very good, and since we get a fair amount of contingency fee income, the amount that we generate per hour tends be a lot better than hourly cases.” The firm was #5 on the American Lawyer’s Global 100, with 2007 profits-per-partner of $3,010,000 on revenues of $384 million.
So there’s that in favor of doing contingency work. But something about this case tickled a memory.
Quinn Emanuel was also in the middle of the Facebook ownership dispute and settlement. The firm repped Mark Zuckerberg’s Harvard roommates, who founded now-defunct competitor ConnectU. That settlement turned out to be a complete mess. After working out a deal and getting paid in Facebook common stock, the plaintiffs (Quinn Emanuel’s clients), realized that their stock had been issued at a far lower valuation than the valuation at which Microsoft’s investment had been made.
When they realized their stock was worth only a fraction of what they thought they were getting, the founders dumped the firm, which turned around and filed a lien against the company for any settlement proceeds. ConnectU hired Boies, Schiller & Flexner (which recently announced fat bonuses) to try to unwind the settlement by claiming Facebook had defrauded it as to the value of the stock. Facebook, which was advised by Orrick, complained bitterly about being dragged into what it said was really a client/fee dispute. The judge agreed and dismissed all the cases, finding that ConnectU had been represented by legal and financial counsel who could have done an independent valuation at any time but failed to do so.
We expect to hear more on the ConnectU suits against Quinn Emanuel. But what do you think, do the numbers lie? Are contingency arrangements worthwhile for BigLaw?
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