Hi there,
Wachtell’s alleged bad behaviour that is the subject of the Twitter v. Wachtell saga seems (on the face of the complaint) shocking.
But if it’s all true, can we really blame them?
ICYMI, Twitter CEO Elon Musk recently lodged a complaint against Wachtell to claw back $90M in fees paid by Twitter for the firm’s representation of the company in its contentious acquisition by Musk.
According to the complaint, those fees included a last-minute success fee of $60M+ over and above "time on the clock" that was approved by Twitter’s outgoing board in the final minutes of their (alleged) lame-duck tenure.
Last week, I wrote about how I believe the case against Wachtell might resolve and what it means for the legal industry. (You can read it here.)
And now I ask you this.
Can we really blame Wachtell for their (alleged) bad behaviour?
After all, they’re far from the first or last law firm to (allegedly) take advantage of their position on the eve of close to extract an exorbitant “success fee.”
Like these real anecdotal situations recently brought to my attention by a colleague and former (law firm) partner of mine.
This sort of thing has happened twice in the last 3 years on deals I or close colleagues have been working on.
As he further detailed, one particular firm lobbed an extra $1-2M on a fixed price fee arrangement with no prior discussion.
And another waited until they knew the deal was at a point where their client — a peripheral party to the main deal — needed to sign off on the deal to then extract demands for their client that were arguably uncommercial, unreasonable, and unethical.
Not exactly the same and smaller numbers [than Wachtell] obviously, but I have been extremely surprised about the ethics of decisions made by top firms…waiting until the day a deal is to be done.
How do egregious pricing arrangements continue to escape more scrutiny?
For an industry obsessed with regulating “ethics” and “professionalism,” why aren’t partners getting hauled over burning coal by their clients?
And why do clients keep hiring them?
Perhaps not the same ones who’ve absorbed their exorbitant fee exploitations in the past, but someone is still giving them their business.
Law firms — or to be more precise, certain partners in law firms — behave badly because we’ve let them. Heck, we’ve encouraged it.
Corporate legal departments continue to pay thinly documented and highly questionable fees without query.
Organizations shrug their shoulders and hide behind their ignorance of how legal really works.
Industry rankings tout profit per equity partner as the measure of good firm standing.
And of course, what I call the "IBM cop-out" effect...
"You can’t blame me. I engaged [insert top 5 law firm name] and we spent [insert exorbitant fee]."
Every article I have read on Twitter v. Wachtell is pro-Wachtell.
Funny that.
I think it goes beyond everyone jumping on the anti-Musk bandwagon.
Much of the legal industry, including its commentators, wants the status quo to remain.
Ever-increasing law firm profits; it suits law firms (which dwarf in-house teams in number).
Also makes for much better click-bait for legal journalists.
While I predicted a fast resolution in the case (with Wachtell paying back a substantial portion of their fee), I can’t help but hope that my prediction turns out to be wrong.
I would much prefer a public airing of what "value" in legal really means. And a re-set for the industry.
Not to mention how juicy a full airing of Wachtell’s fee arrangements would be!
What will it take to change the broken system?
That’s easy to answer.
Clients. They have the power. No one else does.
I’d love to hear your thoughts on the matter.
Or your own examples of questionable “success fees” in action.
Cheers,
