The conventional wisdom, according to many risk managers and lawyers, is that suing a client for unpaid fees is almost always a bad idea, usually because the client will respond with a legal malpractice claim, as reflected in this September 30 article by Debra Cassens Weiss from the ABA Journal.
But what if the client almost asks its lawyers to sue for unpaid fees? That’s the situation that Washington D.C. powerhouse Williams & Connolly LLP faced when its former client, IDT Corporation, refused to pay $2 million for work performed in a patent case.
According to this post by Jordan Weissmann in The BLT: The Blog of Legal Times, IDT originally owed $3 million in legal fees. But after W&C agreed to a payment plan where IDT would pay $1 million every September 8 for three years starting in 2008, IDT made only the 2008 payment.
After IDT didn’t make its payment in September 2009, Shmuel Jonas, son of IDT’s founder, Howard Jonas, informed W&C that IDT was pleased with its work, but did not intend to pay the $2 million balance. Jonas acknowledged that W&C would win if it sued IDT, but that after a couple of years of litigation, IDT could settle with W&C for a reduced amount.
Here’s W&C’s complaint for breach of contract, which was filed on October 16 in United States District Court for the District of Columbia. Williams & Connolly, LLP v. IDT Corporation, Civil Action No. 1:09-CV-01958.
But there’s been a development since Weissmann wrote about the case a couple of weeks ago. On October 30, W&C filed a voluntary dismissal of its complaint against IDT. The firm doesn’t give any reason for its dismissal — which is not required by Federal Rule 41(a)(1(A)(i) — but I’ve emailed Beth Stewart, the W&C lawyer who filed the complaint and voluntary dismissal, and asked about the basis for the dismissal. I’ll update this post if I hear back from her.
If the suit was dismissed because IDT came to its senses and decided to pay its bill, end of story. But if, for whatever reason, W&C refiles its suit, I expect the conventional wisdom to prevail, and for IDT to assert a malpractice claim against W&C, notwithstanding its CEO’s praise for the quality of W&C’s work.
These facts are unique, if only because of IDT’s brazenness. But the reality is that a law firm likely faces a malpractice claim if it sues to recover fees, which — usually — makes the firm unwilling to proceed. And clients like IDT will take advantage of that unwillingness.