The Manatt, Phelps & Phillips, LLC law firm has been sued in the United States District Court for the Southern District of New York for allegedly breaching its engagement letter by failing to file suit against Under Armour. The complaint, which was filed on June 3 and includes a count for fraud in the inducement, was filed by Multiple Energy Technologies, LLC, which claims that it retained Manatt for the specific purpose of pursuing a false advertising claim against Under Armour.
Multiple Energy Technologies says that Manatt understood and represented that it would serve as legal counsel for the company in disputes against Under Armour and Hologenix, LLC, but that it only focused on the latter entity, failing to initiate any action against Under Armour during the four months that the representation arrangement was in place. The complaint does not attach the engagement letter, but quotes a portion of it that purportedly states that Manatt would “represent and advise [MET] in connection with a false advertising claim against Hologenix LLC, Hologenix, Inc., and Under Armour (the ‘False Advertising Claim’).”
A lawsuit was filed against Hologenix on February 28, 2019, with Manatt noticing its appearance on behalf of Multiple Energy Technologies. Multiple Energy Technologies says that it continuously asked Manatt strategy questions concerning Under Armour and that Manatt ultimately answered that Under Armour was not covered by its engagement, demanding additional monies from Multiple Energy Technologies if it wanted to pursue separate legal action against Under Armour.
Manatt eventually withdrew from representing Multiple Energy Technologies in the litigation that was initiated against Hologenix; Multiple Energy Technologies claims that the withdrawal came after Manatt attempted to impose new terms of engagement on it and after Multiple Energy Technologies made many inquiries as to why no action was being taken against Under Armour.
A lawsuit was later initiated by Multiple Energy Technologies against Under Armour, which remains pending in the United States District Court for the Western District of Pennsylvania and seeks injunctive relief as well as damages for Under Armour’s alleged breaches of duties owed to Multiple Energy Technologies as well as misappropriation of Multiple Energy Technologies’ trade secrets and proprietary information. Multiple Energy Technologies is represented by White and Williams LLP in that action.
Multiple Energy Technologies’ lawsuit against Manatt includes four causes of action. The breach of contract claim asserts that Manatt breached the engagement agreement when it unilaterally decided that Under Armour was not included in the scope of work and that the cap on fees, included in the engagement agreement, did not apply to taking action against Under Armour. An unjust enrichment claim says that Manatt should be required to return any monies it is holding onto that Multiple Energy Technologies provided as a retainer and that were not used prior to Manatt’s withdrawal from the Hologenix litigation. A declaratory judgment cause of action asks the court to rule that Multiple Energy Technologies owes no further fees to Manatt. Lastly, a fraud in the inducement cause of action claims that Manatt, through its partners (including Barry Lee), affirmatively stated that it received firm-management approval to enter into a capped-fee arrangement that included litigation against Under Armour. Multiple Energy Technologies relied on the representations and was thus injured by the reliance on such misrepresentation. Multiple Energy Technologies is seeking punitive damages based on the alleged fraud in the inducement.
I have reached out to Manatt for comment on the pending litigation and, if received, will update this story.
Darren Heitner is the founder of Heitner Legal. He is the author of How to Play the Game: What Every Sports Attorney Needs to Know, published by the American Bar Association, and is an adjunct professor at the University of Florida Levin College of Law. You can reach him by email at heitner@gmail.com and follow him on Twitter at @DarrenHeitner.