## Facts

- Telex Corporation, a sophisticated corporate litigant, pursued Supreme Court review after a major appellate reversal in its antitrust litigation against IBM, which left Telex exposed to an affirmed $18.5 million judgment on IBM’s counterclaim.
- Telex retained the San Francisco law firm Brobeck, Phleger & Harrison, through partner Moses Lasky, under a written contingency-fee agreement focused on preparing and filing a petition for certiorari.
- Telex insisted on a fixed, advance fee arrangement rather than an after-the-fact fee determination.
- The agreement provided a minimum fee of $1,000,000 if Brobeck (1) prepared and filed the certiorari petition and (2) Telex obtained a “recovery” in the IBM litigation, with additional provisions tied to different potential outcomes.
- Brobeck prepared and filed the certiorari petition.
- Before the Supreme Court acted, Telex and IBM entered a “wash settlement” releasing all claims and ending the litigation, eliminating Telex’s exposure on IBM’s $18.5 million judgment.
- Brobeck billed Telex $1,000,000 under the agreement; Telex refused to pay, arguing there was no contractual “recovery” and that the fee was excessive and unconscionable under California law.
- In diversity litigation in the Northern District of California, the district court granted summary judgment to Brobeck for $1,000,000 plus interest; Telex appealed.

## Issues

1. Whether the “wash settlement” constituted a “recovery” under the parties’ written fee agreement, triggering the $1,000,000 minimum fee once the petition for certiorari was filed.
2. Whether the $1,000,000 fee was unconscionable or otherwise unenforceable as an excessive attorney fee under California law.
3. Whether summary judgment was proper given the contract language and the record on unconscionability.

## Decision

- The Ninth Circuit affirmed summary judgment for Brobeck and the award of $1,000,000 plus interest.
- The court held the fee agreement was unambiguous and that the settlement’s elimination of Telex’s $18.5 million liability constituted a “recovery” within the meaning of the contract.
- The court rejected Telex’s unconscionability defense, emphasizing Telex’s sophistication, the negotiated nature of the agreement, the contingent risk assumed by counsel, and the substantial value of the result to Telex.
- The court concluded there were no genuine disputes of material fact requiring trial on contract meaning or enforceability.

## Legal Principles

- Unambiguous attorney-client fee contracts are enforced according to their terms; a settlement that confers a substantial economic benefit (including relief from a large liability) may qualify as a contractual “recovery,” depending on the agreement’s language.
- In assessing whether an attorney fee is unconscionable or excessive under California law, courts examine the circumstances case-by-case, including bargaining context, client sophistication, risk allocation, and the value of the result, not solely time expended.
- A high contingent fee negotiated at arm’s length with a sophisticated, well-represented corporate client is unlikely to be invalidated absent evidence of oppression, deception, or a fee so extreme as to be legally intolerable.
- Summary judgment is appropriate when contract interpretation presents a question of law due to unambiguous language and the record does not support a triable issue on unconscionability.

## Conclusion

The Ninth Circuit enforced a negotiated contingent-fee agreement requiring payment of a $1,000,000 minimum fee after counsel filed a certiorari petition and the client obtained substantial economic benefit through a wash settlement eliminating an $18.5 million exposure; the fee was not unconscionable on the undisputed record.


Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866 (9th Cir. 1979)