Response Reply

Cal. Super. - 6th Dist.March 30, 2021

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21CV381517 Santa Clara - Civil Allison Lane (SBN 1523 84) Justin J. Fields (SBN 259491) DUANE MORRIS LLP Spear Tower One Market Plaza, Suite 2200 San Francisco, CA 94105-1 127 Telephone: +1 415 957 3000 Fax: +1 415 957 3001 E-mail: alane@duanemorris.com jfields@duanemorris.com Attorneys for Defendant WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION Electronically Filed by Superior Court of CA, County of Santa Clara, on 8/10/2021 1:33 PM Reviewed By: S. Vera Case #21 CV381 51 7 Envelope: 7031892 SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA Phunware, Inc., Plaintiff, V. Wilson Sonsini Goodrich & Rosati, Professional Corporation, DOES 1-25, Defendants. Case N0. 21CV381517 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION Date: August 17, 2021 Time: 9:00 am. Dept: 2 Judge: Hon. Drew Takaichi Complaint Filed: March 30, 2021 . Vera REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION In an attempt to overcome the clear language of its 2009 Engagement Agreement With WSGR agreeing t0 arbitrate disputes, Phunware offers four arguments that strain credulity. The first three arguments are essentially the same. Phunware contends that the Engagement Agreement only applies t0 transactional work, and not litigation. But the Engagement Agreement cannot be read so narrowly under any reasonable interpretation. The very first paragraph unmistakably provides that “[i]f in the future you request us t0 perform additional legal services 0n matters other than the Legal Services described above, then, unless a separate engagement has been entered into With respect t0 such additional legal services, it is understood that those future legal services or matters will be provided by us under the same terms and conditions described herein. . . .” (Liddiard Decl., EX. A.) This broad language applies to any “future legal services” Which necessarily includes litigation. Phunware also claims that as 0f a “SPAC” transaction in 2018, it is not the same “Phunware” that entered into the Engagement Agreement in 2009. This argument does not make sense on its face; Phunware, Inc. is still Phunware, Inc. With the same CEO and Co-Founder, and the same business. More troubling, the allegations of Phunware’s recent July 30, 2021 Complaint against WSGR directly contradict its argument that the Phunware in 2009 is different from the Phunware as of 2018.1 (See concurrently filed Request for Judicial Notice, EX. A, the July 3O Complaint.) That is because in the July 30 Complaint, the “current” Phunware asserts malpractice claims arising from pre-SPAC legal advice from WSGR; such allegations would not be possible if the “current” Phunware was a different entity than the pre-SPAC Phunware. After brushing away Phunware’s cherry-picked phrases in the Engagement Agreement and implausible theories about being a “different” Phunware, it has n0 credible argument to avoid its agreement t0 arbitrate all disputes With WSGR. WSGR requests that the Court grant this Motion. /// 1 WSGR filed its Motion t0 Compel Arbitration in this action on May 18, 2021. Phunware’s July 30, 2021 Complaint was filed thereafter, and thus it was not discussed in WSGR’S moving papers. 2 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 II. NONE OF THE FOUR REASONS PHUNWARE ASSERTS TO AVOID ITS CONTRACTUAL OBLIGATION TO ARBITRATE HAS MERIT As the scope of the Engagement Agreement and arbitration clause are at the heart of Phunware’s Opposition, we quote them again for reference. The full context of these provisions is important, and undermines the cherry-picked phrases that Phunware misconstrues. As pertinent here, the Engagement Agreement contemplates that WSGR would provide all manner of legal services t0 Phunware, and that the Engagement Agreement would apply: We are pleased to have been retained to advise Phunware, Inc. (the “Company”) with respect t0 legal representation (“Legal Services”). This letter describes the basis on Which [WSGR] Will provide Legal Services t0 the Company and bill for those Legal Services . . . If in the future vou request us t0 perform additional legal services 0n matters other than the Legal Services described above, then, unless a separate engagement has been entered into With respect to such additional services, it is understood that those future legal services or matters will be provided bV us under the same terms and conditions described herein at the billing rates and policies in effect at the time such services are performed. (Liddiard Decl., EX. A, p. 1; emphasis added.) The Engagement Agreement contains a binding arbitration provision: We do not anticipate having any disagreements with the Company about the quality, cost 0r appropriateness 0f our services, but if any concerns about these matters arise, please notify us immediately. We would endeavor t0 resolve any disagreements in a fair and amicable manner. If for some reason we were not able t0 resolve anV dispute ourselves, then WSGR and the Company agree that all disputes or claims between us as of any nature whatsoever shall be resolved by binding arbitration before the American Arbitration Association 0r JAMS in the county 0f Santa Clara, whichever the Company prefers. This agreement includes but is not limited to disputes over the quality 0r appropriateness 0f our services, the fees and costs 0f our services and the Company’s obligations to timely Dav for our services. (Liddiard Decl., EX. A at pp. 3-4; emphasis added.) A. The Engagement Agreement Unequivocallv Covers Anv Tvpe Of Future Legal Services, Which Includes Litigation. Phunware claims that the 2009 Engagement Agreement “was only t0 provide transactional advice.” (Opp., at 7:8-9.) But the document does not say that. The Engagement Agreement states that it Will apply to “additional legal services on matters other than the Legal Services described above,” which is objectively broad enough to include litigation. (Liddiard Decl., EX. A.) 3 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Phunware also asserts that the phrase “all disputes” in the 2009 Engagement Agreement should be read narrowly. (Opp., at 7:22-27.) Once again, Phunware cherry-picks phrases t0 avoid the conclusion compelled by a full and fair reading of the document. In context, the phrase “all disputes” emphasizes the broad scope 0f the arbitration provision for all legal services that WSGR may provide to Phunware. (Liddiard Decl., EX. A [“If for some reason we were not able t0 resolve any dispute ourselves, then WSGR and the Company agree that all disputes or claims between us as O_f any nature whatsoever shall be resolved by binding arbitration. . ..” Emphasis supplied].) B. The Uber Representation Is An “Additional Legal Service” Under The Engagement Agreement. Phunware cites cases that do not support its reading 0f the 2009 Engagement agreement. Principally, Phunware’s reliance 0n Lawrence v. Walzer & Gabrielson (1989) 207 Cal.App.3d 1501, is misplaced because the language in the arbitration clause there is materially different. There, the law firm argued that the phrase “any other aspect 0f our attomey-client relationship” in the arbitration clause compelled arbitration of any dispute arising out of the attorney-client relationship, including malpractice. (Id. at 1505-1506.) However, as the Court of Appeal noted, that quoted language was taken out of context by the law firm: The issue before us, however, is not Whether the phrase ‘any other aspect of our attorney-client relationship,’ standing alone, would encompass an action for attorney malpractice, because in the retainer agreement at issue, these words do not stand alone. Instead, the phrase is one provision in an agreement devoted almost exclusively to financial matters and appears in a sentence which reads: ‘In the event of a dispute between us regarding fees, costs, 0r any other aspect 0f our attorney- client relationship, the dispute shall be resolved by binding arbitration.’ In context, the arbitration clause appears t0 be limited t0 disputes concerning financial matters such as fees and costs. . .. (Id. at 1506.) Unlike the arbitration clause in Lawrence, the WSGR-Phunware arbitration clause read in context shows that it broadly covers all fixture legal services provided by WSGR unless a separate engagement exists. Like the law firm in Lawrence, Phunware cherry-picks phrases from the Engagement Agreement rather than reading the relevant language in context. When read in context, /// 4 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the first paragraph indisputably indicates that the Engagement Agreement applies t0 fixture legal services including litigation. Phunware also suggests that the Court should find ambiguities in the Engagement Agreement and then construe it against WSGR as a “contract of adhesion.” (Opp., at 923-10: 15.) Phunware’s argument is wrong as a matter of law. Attorney engagement agreements are unlike, for example, hospital admissions forms that constitute adhesion contracts. (Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102, 1110.) Attorney engagement agreements are not made 0n a take it 0r leave it basis, but are more typically negotiated agreements tailored for a particular client. (Id. [“The Powers [malpractice plaintiffs] possessed the freedom t0 employ the attorney 0f their choice and bargain for the terms of their choice.”].) Here, by affixing the signature of its@ Alan Knitowski to the Engagement Agreement, Phunware “affirms that it understands that it is free t0 consult with other counsel before signing this letter about agreeing to the terms 0f the letter, including the provision for binding arbitration.” (Liddiard Decl., EX. A at p. 4.) Put simply, there is no adhesion contract here that would trigger Phunware’s proposed analysis. Phunware also cites WSGR’S 2011 representation in a dispute against Calloway Golf Interactive, Inc., Which had a separate engagement agreement. (Opp., at 10:15-26.) But the 2009 Engagement Agreement expressly contemplates that a separate agreement may be prepared for other representations. The key point - again reading the 2009 Engagement Agreement in its full context - is that its terms and conditions apply t0 any fixture legal services unless such a separate agreement exists. Very simply, since no separate agreement existed as to the Uber litigation, the 2009 Engagement Agreement - by its express terms - covered the engagement. Moreover, if Phunware is suggesting that the Calloway Engagement Agreement actually governs here because it is later in time and involved litigation, WSGR notes that it also contains an arbitration provision and the same broad language as the 2009 Engagement Agreement for future legal services. C. Phunware’s “Conspicuous, Plain and Clear” Test Is Inapposite Next, Phunware takes out 0f context a citation to a footnote in a 1989 State Bar Ethics Opinion obliquely referenced in a Rutter Guide treatise. (Opp, 11:1-7.) Phunware engages in these /// 5 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 mental gymnastics t0 create a non-existent legal proposition: that WSGR had to provide a “conspicuous, plain, and clear arbitration clause With regard t0 the Uber suit.” (Id.) First, Ethics Opinion No. 1989-1 16 presented this issue: “May an attorney-client retainer agreement include a provision for mandatory binding arbitration of potential malpractice claims against the attorney?” Of course, 3O years later, the answer t0 that question is well-settled: yes. At the time, the Ethics Committee offered guidance to lawyers t0 ensure arbitration clauses would be enforceable. That is What footnote 5 addresses: it recommends in a somewhat dated fashion that lawyers are “well advised to ensure that the arbitration clause is conspicuous, plain, and clear.” Footnote 5 then recommends steps like ensuring the arbitration clause is in at least 10-point font. In context, the phrase “conspicuous, plain, and clear” refers to the clarity and format of the arbitration clause. The Rutter Guide, in tum, states: “An arbitration clause that covers malpractice claims should be conspicuous, plain, and clear[,]” citing footnote 5. In context, the Rutter Guide is discussing the various forms an arbitration clause can take. Phunware offers n0 criticism 0f the format ofWSGR’S arbitration clause, nor could it. Moreover, the phrase “conspicuous, plain and clear” more typically arises in analyzing Whether to enforce provisions in adhesion contracts Where such contracts limit the duties 0r liability of the “stronger” party. (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 710.) More recent case law confirms that the phrase has n0 application here t0 an attorney fee agreement, as noted above. (Powers, 54 Cal.App.4th at 1110 [citing Madden; rejecting the “conspicuous, plain, and clear” analysis for adhesion contracts When considering an attorney fee agreement].) Here, the scope of the 2009 Engagement Agreement is unmistakable. It is not “ambiguous” about applying to “fixture legal services” as Phunware untenably claims. (Opp., at 11:18-26.) The 2009 Engagement Agreement meticulously explains that future legal services Will fall into two categories: (1) they will be governed by the Engagement Agreement; or (2) otherwise a separate agreement, if entered into, would govern. D. Phunware’s “Re-constituted” Companv Theorv T0 Avoid Arbitration Fails Perhaps more troubling than Phunware’s specious interpretation of the 2009 Engagement Agreement is its “re-constituted” company theory. Phunware, Inc. asks the Court t0 conclude that 6 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff Phunware, Inc. is not the same Phunware, Inc. that entered into the 2009 Engagement Agreement. (Opp., at 1221-12.) First, WSGR apprises the Court of another complaint by Phunware against WSGR filed in Santa Clara Superior Court 0n July 30, 2021, Case No. T21-1701, and requests judicial notice 0f that filing. (See concurrently filed Request for Judicial Notice (“RJN”), EX. A.) WSGR filed this Motion to Compel Arbitration on May 18, 2021, and thus could not have raised Phunware’s July 30, 2021 Complaint at that time. The July 30 Complaint Will also be the subject of a motion t0 compel arbitration. Importantly here, the allegations in the July 30 Complaint contradict Phunware’s current contention that it is a different company now than it was in 2009. In this most recent Complaint, Phunware alleges that “Mince 2009, at various times, Phunware retained WSGR t0 provide legal advice and t0 represent it in disputes.” (RJN, EX. A, Par. 7.) That allegation does not state or suggest that the Phunware in 2009 is different than the Phunware today; it implies just the opposite. Phunware criticizes WSGR’S “advice and counsel in connection with a ‘SPAC transaction,’ through Which Phunware allegedly became a publicly-listed company.” (Par. 8.) Again, the diction confirms that Phunware does not consider itself a “different” entity in 2009 versus the present. Damning to its present theory, Phunware then alleges that WSGR committed malpractice by harming Phunware before the 201 8 SPAC transaction. (Pars. 11-14.) If Phunware were truly a different company today as compared to before the SPAC transaction, it could not fairly make such allegations about pre-SPAC advice because a different company would have no malpractice claim. Second, Phunware’s theory is inconsistent with how the law treats attorney engagement agreements where a company undergoes the type of change Phunware claims happened here. Under Corporations Code section 1591 1.09, a converted entity is normally deemed t0 be the same entity that existed before the conversion. (Corp. Code §1591 1.09, subd. (a).) Accordingly, a converted entity is vested With the same property and rights - and contractual obligations - as the pre- conversion entity. (Corp. Code § 1591 1.09, subd. (b).) This is also consistent With case law: a corporation may be bound by an attorney-services contract entered into prior to its incorporation, Where it impliedly adopted the agreement “by knowledge and acquiescence” after it was 7 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 incorporated. (Abbott v. Limited Mutual Compensation Ins. C0. (193 8) 30 Ca1.App.2d 157, 162-163; cf David v. Southern Import Wine C0. (1936) 171 So. 180, 182 [pre-incorporation agreement for attorney t0 incorporate the company ratified by subsequent receipt of benefits, specifically, “the actual creation 0f the corporation itself”].) Moreover, the “current” Phunware, Inc.’s CEO and Co-Founder, Alan Knitkowiski, is the same CEO of Phunware that signed the 2009 Engagement Agreement for Phunware. (Liddiard Decl., EX. A, p. 1.) They conduct the same general business as before. In fact, Phunware’s Form S-l Registration Statement submitted to the SEC confirms that the SPAC transaction was not an asset acquisition but was rather amg, with Phunware remaining in existence. (RJN, EX. B.) III. CONCLUSION Phunware contractually agreed to arbitrate all disputes “of any nature whatever” With WSGR. It cannot avoid the broad and clear scope of that agreement by misreading the Engagement Agreement or claiming to be a “different” Phunware. WSGR requests an order compelling Phunware to arbitrate this dispute. Dated: August 10, 2021 DUANE MORRIS LLP By: /s/ Allison Lane Allison Lane Justin J. Fields Attorneys for Defendant WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION 8 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE Phunware, Inc. v. Wilson Sonsini Goodrich & Rosati, Professional Corporation, et al. Santa Clara County Superior Court No. 2 1CV38 1 5 1 7 I am a resident 0f the state 0f California, I am over the age 0f 18 years, and I am not a party t0 this lawsuit. I am an employee of Duane Morris LLP and my business address is Spear Tower, One Market Plaza, Suite 2200, San Francisco, California 94105. I am readily familiar with this firm’s practices for collecting and processing correspondence for mailing With the United States Postal Service and for transmitting documents by FedEx, fax, email, messenger and other modes. On the date stated below, I served the following documents: REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION X BY ELECTRONIC SERVICE: Based 0n a court order 0r an agreement of the parties t0 accept service by e-mail 01' electronic transmission, I caused the documents t0 be sent t0 the person(s) at the e-mail addresses listed below. I did not receive, within a reasonable time after the transmission, any electronic message 0r other indication that the transmission was unsuccessful. James McManis Attorneys for Plaintiff Tyler Atkinson PHUNWARE, INC. Andrew Parkhurst McMANIS FAULKNER a Professional Corporation 50 West San Fernando Street, 10th Floor San Jose, California 951 13 Telephone: ( 408) 279-8700 Facsimile: (408) 279-3244 Email: tatkinson@mcmanislaw.com I declare under penalty 0f perjury under the laws 0f the State of California that the foregoing is true and correct. Dated: August 10,2021 fl“) l % Trina C. Morgan ' ’ DM1\12302051.2 9 REPLY IN SUPPORT OF DEFENDANT WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION’S MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION: CASE NO. 21CV3815 17