MEMORANDUM To: Officers and Directors From: Chris Imlay, W3KD Re: BPL Appeal (Confidential, Attorney-Client Privileged Communication) Date: September 10, 2007 It is necessary to inform you of the financial circumstances involving the BPL appeal and the Wilmer, Cutler, Pickering, Hale & Dorr law firm. As is normal in court appeal proceedings where an organization retains outside counsel, we interviewed several law firms before deciding on WilmerHale. As I informed the Executive Committee last March, if ARRL is dissatisfied with WilmerHale, the responsibility stops essentially with me, since I recommended them to Dave and Joel in the first place. I am sold on this Firm, due not only to my past experience with them in a Supreme Court appeal, but also with their interest and ability to conceptualize what is really a very complicated, technical agency appeal in this case. However, they are not inexpensive, and we knew that going in. As the Board has previously been informed, we asked them early on what they anticipated it would cost to handle this appeal. This was long before the Petition for Reconsideration had been adjudicated, but after the initial Report and Order was released and our Petition for Reconsideration filed. They told me they thought it would cost $600,000. I politely told them thanks, but no thanks; that was far outside our means. Later, they sent us a comprehensive memo on the Section 301 argument (free, prepared by a summer associate of theirs who was a ham), and said that they would like to talk with us about the appeal, and they thought they could work with us on the fee issue. Long story made short, we asked them for a good faith estimate of the cost of handling this appeal, and they came up with an estimate of $200,000. They asked that the number not be considered a cap, but rather a good faith estimate of the total cost of the appeal. This was acceptable to us, and we proceeded with WilmerHale on that basis. The next firm down our list of outside counsel was Wiley, Rein & Fielding, which had estimated the cost of the appeal at $250,000, again, not a cap, but an estimate. We rejected WRF for other reasons. The mechanics of WilmerHale billing have been that monthly, or bimonthly bills have been sent to me, and I have reviewed them and then forwarded them to Barry Shelley for payment. I reviewed the time expended by each of the “team” at WilmerHale. The bills, and the time expended are fairly typical of large law firms (of which I am not a fan). I have, perhaps foolishly, not kept a running tally of the payments made or the billed amounts, but Barry Shelley did. What triggers this memo now is a very, very large bill, just received, for work done primarily on the reply brief during the month of July. The reply brief in this case is most important because it rebuts the briefs of the FCC and of the intervenors in favor of FCC. While none of us was overly impressed with the FCC’s brief (and from what FCC said to the WilmerHale lawyers, neither was the FCC General Counsel’s office), the Intervenors for FCC prepared a fairly strong brief, very fact-oriented. It required some skill to rebut, and I think WilmerHale did a good job of that. But here are the numbers of what they have billed us so far: Aggregate payments made to WilmerHale during 2006: $ 43,240.47 Payments made to WilmerHale to date in 2007: $ 192,594.79 Total Payments to WilmerHale to date, EXCLUDING current bill: $ 235,835.26 Amount of Current Bill, not yet paid: $ 83,105.79 Total Payments to WilmerHale to date, INCLUDING current bill: $ 318, 941.05 As you can see, the amounts billed to date exceed the good faith estimate by more than 50%. We had earlier, several months ago, before the initial brief was filed, cautioned WilmerHale that their billing was getting out of hand, and that they were approaching the total of the good faith estimate even before the main brief was filed. They responded at that time that they would caution the “team” to work more efficiently. This latest bill, larger by more than twice any prior bill, included a hand-written note to me from Jon Frankel, the lead lawyer at WilmerHale on this case. It said essentially that he had written off a large part of the time spent that would otherwise have appeared on the bill, not due to inefficiency or wasted effort on their part, but because the billing was “so far above the initial discussions’ figures.” He said he realized that this was an expensive set of briefs, and we still have the oral argument to get through, but it is a “hard and important case” and he hoped the end product shows the results of the efforts. After discussing this with Barry, Dave and Joel, I called Frankel and sent an e-mail to him. Briefly summarized, I told him that the most recent bill created a dilemma for us. They had exceeded the good faith estimate by more than 50%; the case does not have unlimited value for ARRL; and we were not aware of what work was done in August, or what would be required to get through the oral argument. However, it is easy to estimate that at this rate, the cost of the appeal would be frighteningly close to $400,000, and had that been the estimate at the time we commenced the project, we would not have gone forward. Because we based the decisions (1) to go forward with the appeal, and (2) to retain WilmerHale, based on their $200,000 estimate, and having received a bill which will make the total paid to date almost $319,000, it was necessary to ask them now to cap their fees at what has been billed so far. I told him that I was obligated to refer the matter to our Board of Directors for evaluation, and that I did not know whether our Board would allow the case to proceed further under the current arrangements. I noted that our Board has to answer to constituencies, and that for a non-profit, these fees are not sustainable. I reiterated that the case does not have limitless value for us. I received a response from Frankel late that same evening, saying that they were going to their finance committee and asking for approval to cap their fees at the amount already billed to us. He anticipated that it would be approved. I anticipate that it will as well. If not, I will inform you what alternative proposal they have. While I told them that we are entirely pleased with their work-product, we are not at all pleased with the billing situation. Dave was worried that taking such a line with them might cause them to deemphasize the work on the oral argument, which is an important component of the case. While that is a very reasonable concern, I believe it is not likely. Firms in WilmerHale’s category have important reputations to maintain in order to capture other business, and they have to perform well (and they play to win at all costs). I believe that forcing them to cap their fees at this point will not have any effect on their performance whatsoever. Your views are welcome. Again, while the extent that the billing exceeded the good faith estimate was not entirely foreseeable (since the main part of the overrun is due to this current bill, which is larger by a great deal than expected and larger than prior experience would have led us to expect), any failure to monitor or control the legal costs is my own failure. Any dissatisfaction you have with WilmerHale is the result of my strong recommendation of that Firm to Dave and Joel, and to the Executive Committee, and therefore rests with me. I continute to suggest, however, that this Firm has done very good work for us, and has put us in a position where we might win, and establish some very valuable precedent in dealing with Part 15 issues in the future, not just BPL. 73, Chris Imlay W3KD ________________________________________________________________________ Email and AIM finally together. You've gotta check out free AOL Mail! - http://mail.aol.com