Conflicted

From time to time, we have reported on cases of clients suing their attorneys, to the point that such cases have become commonplace. Occasionally, however, a case still manages to attract our attention.

One such case is noteworthy not so much because of the legal issues presented, but because of the amount in demand, “general damages … in a sum exceeding one hundred million dollars ($100,000,000),” plus special damages, punitive damages and costs in an unspecified amount. Yup, a HUNDRED MILLION BUCKS. That certainly is an attention-getter. (Existence Genetics LLC v. Wilson Sonsini Goodrich & Rosati, P.C.)

Existence Genetics, a personal genomics startup company, met with Wilson Sonsini seeking (according to the Complaint in this lawsuit) “representation for its intellectual property protection initiatives, including patent writing and prosecution.” Again, according to the Complaint, a Wilson Sonsini partner advised that “the patent application process would cost around $20,000; Existence Genetics “would receive 10% off all rates” on work done by the law firm; and that Existence Genetics, which was searching for venture capital, should avoid one specific venture capital firm, which was “too rough to deal with.”

The Wilson Sonsini partner later reported that he had completed a conflict of interest check and that there were no conflicts, whereupon Existence Genetics retained the firm. Unbelievably, but according to the Complaint, Existence Genetics then executed Wilson Sonsini’s standard engagement agreement, which set forth the firm’s customary hourly billing rates “relying on [the partner’s] ORAL agreement to cut 10% off of all rates.” (emphasis added)

A year later, a junior associate at the firm “let slip” that the firm also represented TWO direct competitors of Existence Genetics and had filed patent applications on their behalf. Although they had been duly published, Wilson Sonsini had never reported the existence of these applications to Existence Genetics despite Wilson Sonsini’s – again ORAL - agreement to “conduct a thorough scan of all competitors’ patent applications that are released and send [Existence Genetics] updates every two weeks,” a service for which Wilson Sonsini charged Existence Genetics.

At this point – more than a year into the representation – Existence Genetics decided that Wilson Sonsini had been billing “exorbitant” amounts. Existence Genetics also maintained that it had discovered that the venture capital firm, which it was advised to avoid, is the largest investor in one of the very competitor firms which is being represented by Wilson Sonsini. So, in the grand tradition of dissatisfied clients everywhere, Existence Genetics sued Wilson Sonsini for fraud, negligence and breach of contract.

Existence Genetics claims that Wilson Sonsini inflated its billing by “recommending patents be split into multiple components upon submission to the [Patent Office] when it was not necessary or advisable to do so;” introduced “virtually all information provided to it by [Existence Genetics] in the patent applications … resulting in an unnecessarily exceptionally (sic) large application with over 1,000 pages; and generally provided “substandard legal advice.” As noted above, Existence Genetics now demands damages in excess of a hundred million dollars.

No Answer has yet been filed by Wilson Sonsini and, having seen only one side of the story, we are loathe to comment on the merits of the case. Nevertheless, we would note that this is the second attorney malpractice suit, filed in the last few weeks, wherein there is an allegation of an oral agreement between attorneys and their clients. We thought, clearly erroneously, that no one could be that foolish.

THE LESSON TO BE LEARNED: Conflicts checks are important; sometimes you simply can’t undertake representation of a proposed new client.