Proview Counsel Apparently Forgot the First Rule of Lawyering

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The First Rule of Lawyering, of course, is to make sure you get paid. Criminal defense lawyers know this. You may be familiar with the old line from Primal Fear, where attorney Martin Vail tells his client, who is up on 1st degree murder charges:

First thing that I ask a new client is ‘Have you been saving up for a rainy day? Guess what? It’s raining.’

Litigators in civil cases don’t have that kind of leverage over their clients, but that kind of attitude is often quite useful. Consider our old friends from the iPad trademark dispute:

Proview Technology, which just ended its dispute with Apple over the iPad trademark last month, found itself in another row on July 23 – this time with the law office that helped it win $60 million from the US tech giant.

The Grandall Law Firm has sued Proview for defaulting on attorney fees of its case with Apple, which it claimed to be 15 million yuan ($2.5 million), said Xie Xianghui, a partner at the firm, according to a report by portal website ifeng.com.

Proview Technology, a debt-ridden Shenzhen-based maker of computer screens and LED lights, defended itself and said the money is still at the court’s disposal and will be used to pay debt back to its creditors.

The law firm should apply with the court for its fees instead of asking the company for the payment directly, said Yang Rongcan, chairman of the Shenzhen Proview.

I can’t say I know all the details here, but this doesn’t look so good. Proview’s financial position was common knowledge, so Grandall knew that these guys were functionally (if not legally) bankrupt. Ordinarily for a client like that, you’d expect a decent upfront retainer payment. I assume Grandall got something at the outset, but maybe not nearly enough.

So the court brokered a settlement, and Apple paid the $60 million. The money is apparently sitting there waiting to be parceled out, but Proview owes anywhere from 220 to 400+ million U.S. dollars. That means a “fight” between the creditors, and between those that have some sort of secured interest (i.e. the banks) and Grandall, which just has a service contract, the lawyers may be shit out of luck.

Now it’s possible that Grandall knew this was going to happen all along, got just enough upfront, and figured that with the publicity and all, the risk was ultimately worth it. Let’s hope they didn’t seriously believe that Proview might actually get enough to pay off its debts from this dispute — that was never really a possibility, even with a favorable court judgment.

I don’t recall ever having worked for an insolvent client who wasn’t already in bankruptcy proceedings (attorney fees are paid off the top when that happens), and I’m not a litigator, so I can’t say what the best method is of avoiding this sort of trouble. That being said, this seems like a crappy result.

A friend told me (I can’t confirm this) that the same partner/team is now defending Qiaodan in the Michael Jordan trademark squatting case. Knowing what we do about that company’s prospects post-judgment, let’s hope these guys got a lot up front this time.

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