Broadcom’s Lawyers Bolt From Brobeck; Will Chipmaker Too?
By ANDREW SIMONS
There’s a new twist in a pair of lawsuits pitting Irvine-based Broadcom Corp. against Orange County arts patrons and the Minnesota State Board of Investment and its chairman, Gov. Jesse Ventura.
Three of the four attorneys at San Francisco-based Brobeck, Phleger & Harrison LLP representing Broadcom in the federal suits are moving to London-based Clifford Chance LLC, which recently hired 16 Brobeck partners in a bid to build its practice on the West Coast.
Among the defectors: Tower Snow, Brobeck’s former chairman and architect of the firm’s aggressive push during technology’s heyday. Snow left the firm in May after a clash with partners about the firm’s continued focus on tech.
Brobeck partners Michael Orpey and Daniel Tyukody, who are listed on the Broadcom suits, also left to join Clifford Chance. Howard Privette, the fourth partner listed on the Broadcom suit, isn’t going to Clifford Chance.
The departures come as part of a mass exodus in Brobeck’s securities litigation practice led by Snow. Brobeck’s policy committee expelled Snow for his talks with Clifford Chance about setting up the firm’s West Coast practice. Snow landed the Broadcom case for Brobeck.
The split begs the question of which firm,Brobeck or Clifford Chance,will handle the Broadcom suits. A hearing in one of the cases is set for July 22. The chipmaker declined to comment on the issue last week.
“It’s such a big case, I’m sure Brobeck would want it,” said Don Hamman, head of the litigation department for Newport Beach law firm Stradling, Yocca, Carlson & Rauth LLC.
Typically, attorneys leaving a firm send letters to clients advising them of their move. Once the new firm employs an attorney, they then can solicit business,including from their former clients.
There’s a loyalty factor for Broadcom. Brobeck took the chipmaker public in a bang-up 1998 offering that made founders Henry Nicholas and Henry Samueli billionaires.
But in high-profile cases such as the two against Broadcom, it might not make sense to switch attorneys halfway into the game.
“Technically the case still belongs to Brobeck,” said Rick Weiner, a partner at Irvine-based law firm The Busch Firm LLC. “But it doesn’t serve the client well to switch attorneys when they’ve been the ones working on the case.”
The two shareholder suits charge Broadcom with boosting sales and profits by improperly accounting for revenue. The move allowed Nicholas and Samueli and financial chief William Reuhle to cash in on an artificially inflated stock price, the suits charge.
The cases center on how Broadcom accounted for warrants issued to customers of companies it bought in return for their business. Broadcom chalked up the warrants as goodwill, a special charge, rather than as discounts or rebates against sales.
The first suit was filed as a federal class action led by Minnesota’s investment board, a Broadcom investor. That suit was dismissed in March and then re-filed in April.
In an earlier interview, Broadcom lawyer Daniel Tyukody said the company is seeking to have the new version dismissed too,without the option of re-filing,at a July 22 hearing.
The other suit brought by directors of the Orange County Performing Arts Center originally was filed in Orange County Superior Court. But Broadcom attorneys,the ones who recently left Brobeck,successfully argued to have the suit shifted from state to federal court.
The move was seen as a setback for the plaintiffs, who had bet on better odds in state court. Recent changes to federal law restrict “discovery”,the ability of plaintiffs to subpoena documents and interview company officials under oath in preparing for trial.
The OC suit sparked uproar among philanthropists and prompted Samueli and Nicholas to quit the board of the Performing Arts Center, where Samueli has given $10 million of the $96 million raised so far for a new concert hall.
Tom Tierney, one of those suing Broadcom, was set to become the arts center’s chairman in July. But he withdrew from consideration two months ago amid the turmoil spawned by the suit. Paul Folino, chief executive of Costa Mesa-based Emulex Corp., now is the board’s chairman designate.
The OC suit could face an uphill battle in federal court. In March, U.S. District Court Judge Gary Taylor initially dismissed the Minnesota case saying he saw no evidence Broadcom conspired to defraud investors.
Some observers had predicted both cases would be settled because shareholder suits require too much money and time to fight. Some 90% of all such cases are settled, according to attorneys.
But OC lawyers and businesspeople say the moves reflect Broadcom’s combative style, whether in business or in the courtroom.
Observers also point to Broadcom’s decision to fight a patent suit by Intel Corp. Some legal and industry sources call it a “bet the company” move, though Broadcom officials may not have had much of a choice. Settling would mean hefty royalty payments to Intel.
The Intel case, which was broken into two phases to make it easier on jury members, charged Broadcom with infringing on five patents covering the majority of Broadcom’s products and a big part of its annual sales.
In December, Broadcom prevailed in the first part of the case over networking chips and a video decompression chip. A jury found Broadcom hadn’t violated one of the patents and declared the other invalid.
