In The News

New York Law Journal

By Anthony Lin
Published on January 25, 2007

Morgan, Lewis & Bockius' attempt to ride the dot-com boom one more time has landed the firm in court seeking almost $800,000 in allegedly unpaid legal fees.

In late 2004, the law firm began representing IBuyDigital.com, Inc., a Brooklyn-based Internet retailer that hoped to have an initial public offering the following year. The IPO never happened and Philadelphia-based Morgan Lewis sued IBuyDigital.com in Manhattan Supreme Court in December 2005, seeking $788,697 in fees.

In a decision dated Jan. 11, Manhattan Supreme Court Justice Rosalyn Richter (See Profile) permitted the case to proceed, denying both Morgan Lewis' summary judgment motion and IBuyDigital.com's motion to dismiss. She threw out several counterclaims by which IBuyDigital blamed Morgan Lewis for the failure of the IPO, but permitted the company to proceed with a breach-of-contract claim over whether then-Morgan Lewis partner David J. Sorin "personally" led the IPO representation.

The dispute in Morgan Lewis v. IBuyDigital.com, 604442/05, centers on an engagement letter Mr. Sorin sent to Elliot Antebi, chief executive officer of IBuyDigital.com, in October 2004. According to the letter, Morgan Lewis agreed to cap its fees for the IPO at $425,000 and submit monthly bills that would not be due "until the consummation of the transaction."

The decision will be published Tuesday.

If the IPO were not completed, the agreement called for the parties to work out a plan by which IBuyDigital.com would pay its legal bills over several months.

The firm is arguing that, though the agreement specified a cap, it also provided that the bills could increase "if conditions change." IBuyDigital.com was informed in invoices of billing increases, the firm argues, and did not object at the time. Morgan Lewis also claims a part of its bills were for services not related to the proposed IPO.

But Justice Richter said Morgan Lewis had failed to adequately demonstrate that the bills had even been sent to IBuyDigital.com, beyond submitting a "conclusory" affidavit in which Mr. Sorin said invoices were mailed.

"There is no evidence submitted, however, of the basis for Sorin's knowledge that the bills were in fact mailed, or any proof that they were mailed on a particular date," Justice Richter wrote. She said the fact that IBuyDigital.com claimed to have received no invoices at all raised a triable fact.

IBuyDigital.com's surviving counterclaim is based on Mr. Sorin's pledge in the engagement letter to "personally lead" the IPO representation. The company, which had previously only used less expensive small firms and solo practitioners, claims it hired Morgan Lewis based largely on Mr. Sorin's reputation, that it was harmed when he delegated most of the work to associates and that he was absent at critical moments.

In his affidavit, Mr. Sorin states that he personally devoted 294.5 hours to IBuyDigital.com's IPO and 131.1 hours to other work for the company.

Internet IPOs were ubiquitous in the late 1990s, when they provided a major source of revenue for law firms, which were generally paid out of the proceeds of such transactions. But interest in such IPOs, with notable exceptions like Google, has dampened over the past several years as market conditions have changed and Sarbanes-Oxley has imposed higher costs on companies seeking to go public.

Mr. Sorin worked out of Morgan Lewis' Princeton, N.J., office. He had previously been head of the office there for WilmerHale and was one of New Jersey's most prominent technology lawyers. He has since left the practice of law.

Morgan Lewis is represented by John Siffert of Lankler Siffert & Wohl. IBuyDigital.com is represented by Terrence A. Oved of Oved & Oved.

 

 

 

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