O’Melveny is under fire from creditors for not disclosing a waiver in a settlement between SonicBlue creditor VIA and Intel. The creditors committee alleges O’Melveny’s omissions amount to misconduct and want O’Melveny’s final fee request for $1.2 million rejected.
In a brief (.pdf) filed late Friday, O’Melveny lays out a defense that essentially says it wasn’t part of its job to investigate that part of the settlement. It touts its success at reducing VIA’s original $100 million claim down to $12.5 million, which involved extensive negotiations with Intel over patent licensing agreements.
"Guilt by frequency of association" and more, after the jump ...
O’Melveny accuses creditors of substituting a theory of “guilt by frequency of association” for evidence that it did anything wrong. The creditors have touted email and phone conversations between O’Melveny’s Suzzanne Uhland and Bruce Bennett, who represented a set of creditors that benefited from the settlement.
The case has not been kind to many lawfirms that worked for SonicBlue: Pillsbury was kicked off the case and had to pay $10 million earlier this year for not disclosing conflicts of interest.
Judge Marilyn Morgan for U.S. Bankcruptcy Court for the Northern District of California in San Jose back in May questioned whether there was negligence or misconduct on O’Melveny’s part in the settlement, and the omission of the waiver.
It’s worth pointing out the one leading the charge against O’Melveny is William McGrane at McGrane Greenfield. This is the same firm that suffered an embarrassing defeat in June when a slam dunk trade secrets case against Marvell was dismissed over lack of standing. McGrane, who has a habit of buying creditors claims in bankruptcies, had his eye on the VIA claim from the outset, because, without the settlement, VIA would have had senior status over other creditors and received 100 percent of its claim. That factoid comes from creditors committee brief, filed by Ron Oliner at Duane Morris. (.pdf)
It seems that lawyers for SonicBlue have always thought the waiver was simply no big deal, and its effects on other creditors marginal, while some creditors have always been up in arms about it. As if this wasn’t enough reading material, we leave you with a 2007 hearing transcript in the case that explains more on the waiver and its effects on creditors (.pdf).
— Amanda Royal
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