By Edward McIntyre
Macbeth turned to Sara and Duncan “Pete Moore, a friend, and my go-to AI guru, asked if we could meet. Said it was urgent. I told him to come right over. Are you both free for a few minutes?”
In chorus: “Of course.”
“Great. I’ve told our receptionist to show him in.”
Introductions done and with everyone seated at the conference table, Macbeth started: “Pete, what’s on your mind?”
“It’s a bit of a long story, but —”
“We’ve got time. Press on.”
“Three years ago, I agreed to help a struggling AI company with some intricate software issues. Short story. My approach succeeded. Overwhelmingly. The owners sold the company for megabucks. But — they stiffed me on our agreement. Palmed off my work as their own.”
“Nasty people.”
“So, I sued. Lawyers took it on a contingent fee. The jury returned a verdict of 8-mil.”
“Congratulations!”
“Yeah. But there’s more.”
“Always is. What happened?”
“The verdict was 3 mil, compensatory. 5 mil, punitive. Based on a finding of actual fraud.
Duncan, Sara, and Macbeth all nodded.
Macbeth: “Ratio seems reasonable.”
“My lawyers thought so. We celebrated handsomely.”
“But then?”
“Yeah. But then. The judge entered something called a JNOV. Left the fraud finding stand. But cut my damages to $150,000 compensatory. $200,000 punitive.
“Ouch.”
“Ouch is right. My lawyers appealed. Tell me the JNOV is a mess. No basis for it. Certain to be overturned on appeal. Extremely confident about our chances. I’ve talked to another lawyer. A friend. She agrees.”
“But?”
“But I suddenly learned about something called a 998. That’s why I’m here.”
“Tell us.”
“Apparently a year ago or so, the defendants did a 998. I didn’t even remember it until this happened. My lawyers tell me it was for $850,000. They say they dismissed it as a non-starter. Rejected it out of hand. Now I just learned that I could be on the hook for the other side’s costs. Including expert fees. Never dreamed I had that kind of risk. I may not have gone to trial if I had.”
Sara and Duncan exchanged wide-eyed glances.
Macbeth spoke. “And you now have a judgment for $350,000, well below the 998.”
“You nailed it. The big problem for me is the other side’s experts. They ran up fees topping $750,000.”
“That’s a lot of experting.”
“Yeah. My lawyers tell me no court will allow it. Outrageous waste. But the judge in our case just reduced my damage award. I can’t count on her cutting the expert fees. Not sure I can count on anything.”
“What can we do for you?”
“Two things. First, how is it that I’m only learning about the risks of a 998 now?
Next, need your recommendation for a smart IP lawyer. I’ll pay out of pocket. Someone who can guide me through this?” Someone who’s only on my side.”
“Any reason to think your current lawyers aren’t?”
“No. They did a great job at the trial. I like them. But they have a contingent fee. Understandably, they want to go for a big award. Get the 8-mil reinstated. I may want to settle. I think the defendant would love to get rid of the fraud finding. I see a possible conflict.”
“We understand. On that front, we can give you recommendations. Good IP lawyers who specialize in AI. You’ll get sound advice from any of them.”
“Thanks. What about the 998 issue?
“What do your lawyers say?”
“They say they assumed I knew what it meant. Admit we never really discussed it. The offer was so low, they thought immediate rejection would send a message.”
“Let’s talk about professional responsibility. Sara —”
“First and foremost, your lawyers had a duty to communicate to you any significant development in your case.”
Duncan chuckled. “A 998 fits that bill.”
Sara nodded. “More importantly, they had the duty to explain it to you to the extent necessary to allow you to make an informed decision about your case.”
Pete: “Now I learn the cold reality.”
Duncan added: “They also had the duty to consult with you about the means to accomplish your objectives. Whether to accept a settlement offer certainly fits within — air quotes — ‘the means to accomplish’ your goals.”
“So my lawyers messed up.”
Macbeth picked up the conversation. “They had ethical obligations to communicate critical information to you, Pete. From what you tell us, it appears they didn’t.”
“But I don’t want a fight with them. Not with the appeal pending.”
“We understand. And with the representation continuing, you don’t have to cross that bridge yet. Besides, if they’re correct, and the JNOV’s overturned, you may want to do nothing.”
“But this news tells me one thing. I need names for a recommendation.”
“That we can do.”
“Thanks, guys. At least I feel I have some options.”
Editor’s Note: Rules of Professional Conduct, rules 1.4(a)(2), 1.4(a)(3), and rule 1.4(b) mandate the communication obligations that Macbeth and his team discussed.