New Derivative Case Against Brocade Directors Accuses Wilson Sonsini of Malpractice, Zusha Elinson, The Recorder, 05-02-2008

If your clients are going to jail over the legal advice you provided, are they going to keep coming back for more? Why is it that Brocade only fired Wilson Sonsini on advice from the judge?

Wilson Sonsini is at the heart (at least in the press) of the stock-option backdating scandals of 2006-current. According to the above article, the firm itself has now been sued over stock option backdating.

Few plaintiffs have gone after companies’ outside lawyers in backdating lawsuits. But a new derivative case against directors and officers at Brocade Communications Systems Inc. also targets the company’s law firm, Wilson Sonsini Goodrich & Rosati. Filed April 18 in Northern District federal court by a small San Diego firm, Johnson Bottini, the suit accuses Wilson Sonsini of legal malpractice for allegedly blessing backdating at Brocade, a company that saw two of its former executives convicted of criminal charges.

While their numbers still look good, with this kind of press, how do you sustain current client relationships, or build new ones? How do you sell the firm to your board when facing a “bet the farm” case? How do you answer my favorite RFP questions: Has the firm ever been sued for malpractice? “Um, yeah, but the client only went to jail on the lesser charges, and paid a $15 million fine.” Not a ringing endorcement for the “trust” column.

And, I haven’t even mentioned the whole Ann Baskin, GC for HP, scandal.

Has Wilson Sonsini entered a Brobeckesque death spiral? Is it time to start a ghoul-pool? If not, how do they repair the damage?