by Dennis Crouch
Prof Hricik and I both wrote about the Jenner & Block v. Parallel Networks fee arbitration back in 2013. Hricik also testified in the arbitration. [Crouch][Hricik]. Jenner represented Parallel on contingency fee in a patent case against Oracle and at least one other company. Parallel lost on summary judgment and at that point Jenner dropped Parallel as a client. After hiring new counsel and successfully appealing, Parallel eventually was able to eventually settle with Oracle for close to $20 million. At that point, Jenner asked for its fees (requesting > $10 million) and Parallel refused to pay.
Arbitration Award Against Public Policy: The representation agreement included an agreement to arbitrate any dispute over fees. And, in the subsequent arbitration, Jenner was awarded $4 million in fees. According to Parallel Networks, the problem with the fee award is that it is contravened by Texas Public Policy that prevents a contingent fee attorney who drops its client for pure economic reasons to then expect to receive any further compensation.
Of course, one benefit of arbitration is that those judgments are usually final and non-appealable. The Federal Arbitration Act (FAA) generally forces binding arbitration and prevents substantive appeals. Rather, the only role of a court following arbitration is ordinarily to confirm the judgment.
Despite the FAA, Parallel Networks has asked the Texas Supreme Court (SCOTEX) to set aside the arbitration award as a violation of Texas public policy. “An arbitrator’s say-so is not a magic wand that transforms Texas courts into unthinking tools for implementing public policy violations.” And, the question presented asks whether “public policy challenges reviewable by Texas courts [a] basis to vacate arbitration awards made under the FAA?”
Arbitrator as Arbitrary: Non-reviewable decisions (whether by the USPTO or by an arbitrator) are generally troubling because they create the potential for arbitrary awards that depart from both the law and facts.
The case was originally denied hearing by the Texas Supreme Court. On rehearing request, the Court has showed some interest by requesting further briefing from Jenner & Block and two amicus filings have supported the petition. Because it is a Federal Law (the FAA) that has prevented judicial review thus far, the case will be appealable directly to the U.S. Supreme Court once Texas gives its final word.
Briefs are available from the SCOTEX.