In Re Akin Gump Strauss Hauer & Feld, LLP

252 S.W.3d 480, 2008 WL 483452
Court of Appeals of Texas·Decided May 15, 2008·No. 14-07-00402-CV·Published·Cited by 17 cases

Opinion

OPINION

KEM THOMPSON FROST, Justice.

This original proceeding arises out of a long-running fee dispute between a biotechnology company and the lawyers who represented the company in intellectual-property litigation. The trial court below confirmed an arbitration award in favor of the lawyers and rendered a final judgment thereon. More than seven years later, the lawyers asked the trial court for a remand to the original arbitration panel to resolve disputes regarding the meaning of the panel’s arbitration award. The trial court denied the motion and also denied a motion to reconsider and to compel arbitration of these disputes before the original panel. Presuming, without deciding, that such disputes can ever be remanded to the original arbitration panel after a trial court has confirmed the award and rendered final judgment thereon, we conclude that the trial court did not clearly abuse its discretion by denying the lawyers’ motions. Accordingly, we deny the lawyers’ petition for a writ of mandamus.

I. FACTUAL AND PROCEDURAL BACKGROUND

Beginning in 1994, relators Akin Gump Strauss Hauer & Feld LLP, The Robinson Law Firm, Williams Birnberg & Andersen, L.L.P., Michael Madigan, Michael J. Mueller, Kenneth M. Robinson, and Gerald M. Birnberg (collectively hereinafter the “Lawyers”) represented real party in interest Tanox Biosystems, Inc. as plaintiff in certain litigation based on Tanox’s claims against Genentech, Inc. and other companies based on Genentech, Inc.’s alleged violation of a confidentiality agreement and misappropriation of Tanox’s trade secrets (hereinafter, “Trade Secret Claims”). 1 The Lawyers and Tanox executed a contingency fee agreement (the “Fee Agreement”) under which the Lawyers would be compensated only out of any recovery Tanox obtained as a result of the litigation. 2 Tanox agreed to pay the Lawyers a contingent fee calculated on a sliding scale: 25% of the first $32 million recovered on behalf of Tanox, 33 1/3% of the recovery from $32 million to $60 million, 40% of the recovery from $60 million to $200 million, and 25% of the recovery over $200 million. Tanox agreed that, in *483 the event the ease was settled (whether before, during, or after trial), the first $8 million of recovery would be paid to the Lawyers, “regardless of whether the total recovery amounts to or is less than $82 million.”

Under the Fee Agreement, the amount recovered on behalf of Tanox that was subject to the above percentages, included, but was not limited to the following:

(i) all cash, monies, or substantial equivalent recovered by Tanox as a result of the litigation, plus (ii) the economic value to Tanox of all tangible property (real, personal, or mixed) obtained for Tanox as a result of the litigation ... plus (iii) all future payments (such as, by way of example, licensing fees, royalties, and similar future payments) Tanox becomes entitled to receive as a result of the litigation; provided, however, that with respect to royalties or similar future payments received from defendants, Tanox will pay the [Lawyers] 10% of any such amounts, to be paid ... until such time as the “contingent fee” has been paid in full or the “limitations on contingent fee” [no more “contingent fee” as to royalties after aggregate “contingent fee” for all categories reaches $800 million and total contingent fee cannot exceed $500 million in the aggregate] have been reached.

The Fee Agreement also reflected the parties’ recognition that the Trade Secret Claims might be resolved by a “new business arrangement” between Tanox and one or more of the companies against which Tanox had asserted the Trade Secret Claims. Tanox agreed that, in the event of settlement in the form of a new business arrangement, the Lawyers also would receive the percentage contingent fees based on “[a]ny cash, money, or substantial equivalent, any tangible property, and any future payments (such as licensing fees, royalties, income from third parties with respect to defendants’ intellectual property, and similar future payments) received by Tanox as a result of the litigation, on account of such new business arrangement. ...”

In 1996, Tanox and Genentech, Inc. (hereinafter “Genentech”) agreed to settle the litigation. Terms of the settlement included a $16 million cash payment from Genentech to Tanox and a new business arrangement between Tanox, Genentech, and Ciba-Geigy, Ltd. for development of the allergy drug. The parties outlined the new business arrangement in a document entitled “Outline of Terms for Settlement of the Litigations among Genentech, Inc., Genentech International Limited, Tanox Biosystems, Inc. and Ciba-Geigy, Limited, relating to Anti-IgE Inhibiting Monoclonal Antibodies” (hereinafter the “Outline of Terms”). The parties listed in the title of this document signed the document and attached it as an exhibit to the Settlement and Cross-Licensing Agreement. Under the settlement, Genentech and Ciba-Geigy agreed to pay to Tanox royalties and certain payments tied to the achievement of milestones in the forecasted development of the product.

Although the parties provided in the Fee Agreement that Tanox would not “receive any funds relating to this matter without first consulting with and making full disclosure to [the Lawyers],” Tanox did not inform the Lawyers of the $16 million payment from Genentech. The Lawyers learned of the settlement and the payment only after the fact, and immediately made demand on Tanox for $8 million according to the terms of the Fee Agreement. After first hesitating to verify that it had received $16 million from Genentech, Tanox then contested the Lawyers’ right to either the $8 million payment or any fees from the new business arrangement.

*484 Ultimately, as called for by the Fee Agreement, Tanox and the Lawyers submitted their fee dispute to arbitration. Tanox claimed that the Fee Agreement was unconscionable and/or unenforceable based on the Lawyers’ alleged breach of fiduciary duty, legal malpractice, fraudulent inducement, negligence, and the Lawyers’ unjust enrichment, among other theories. The Lawyers claimed that Tanox committed both a breach and an anticipatory breach of the Fee Agreement, by fading to pay the Lawyers the first $8 million received as a result of the litigation and by repudiating Tanox’s obligation to pay a percentage contingent fee on the benefits it is receiving from the new business arrangement. In arbitration, the Lawyers sought damages, including the amounts of the percentage fee interests specified in the Fee Agreement on the royalties, milestone payments, licensing fees, and fees on end-user product sales provided for in the settlement between Tanox, Genentech, and Ciba-Geigy. In their five pleading in the arbitration, the Lawyers also requested a declaratory judgment that the Lawyers have a contingent fee interest, as specified in the Fee Agreement, in “all consideration of every kind and description which Tanox has received or will receive pursuant to the settlement agreement (including, without limitation, the $16 million up front cash payment, all milestone payments, and all royalties) including, without limitation, all such consideration that has been paid or will be paid to Tanox under ...

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In Re Akin Gump Strauss Hauer & Feld, LLP, 252 S.W.3d 480, 2008 WL 483452 (Tex. Ct. App. 2008).

252 S.W.3d 480 (In Re Akin Gump Strauss Hauer & Feld, LLP) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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