Wilson Sonsini Goodrich & Rosati has paid $9.5 million to Brocade Communications Systems to release itself — as well its chairman and former Brocade board member, Larry Sonsini — from civil claims stemming from the backdating disaster at the firm’s longtime client.
News of Wilson’s payment was tucked into a footnote in court filings Friday connected to the effort by Brocade’s special litigation committee to recover some of the approximately $830 million it alleges the scandal has cost the company in settlements, legal fees and a missed merger opportunity with Cisco Systems Inc.
The special litigation committee, represented by Dewey & LeBeouf’s Ralph Ferrara, filed suit against 10 former executives and board members late Friday, accusing them of racketeering, securities violations and breach of fiduciary duties. Criminally convicted CEO Gregory Reyes and HR chief Stephanie Jensen are named along with other defendants in the 282-page complaint. The new lawsuit will take the place of pending derivative suits if Brocade wins motions to dismiss them.
Wilson Sonsini was Brocade’s outside counsel and Larry Sonsini sat on the company’s board when Brocade backdated stock options. Both were named in a federal derivative suit filed by San Diego plaintiffs firm Johnson Bottini in April.
In moving to dismiss that derivative suit, the committee detailed its reasons for letting Sonsini and his firm off the hook. The committee wrote that it weighed the opinion of a legal ethics expert as well as testimony and documents related to Sonsini and the firm’s roles at Brocade. It also listened to Sonsini and his firm’s “contentions that Brocade employees misled WSGR about stock-option grants” and that the firm had negotiated a good settlement with the SEC and helped avoid DOJ action against Brocade. The committee also considered the firm’s longstanding relationship with Brocade and the firm’s “willingness” to help the company resolve any “outstanding questions” about the backdating.
Wilson’s money was a factor, too: “WSGR’s commitment to pay (and its subsequent payment of) a one-time contribution in the amount of $9.5 million in recognition of and in order to defray some of the significant costs Brocade has incurred over the past four years in connection with the various investigations and lawsuits relating to the Company’s historical stock option practices.”