The $44 mln Accenture judgment riddle: When is it time to pay up?

February 7, 2014

You might have thought that after nearly 225 years of American jurisprudence, the law was clear on whether a defendant can avoid surrendering a final award while it seeks review from the U.S. Supreme Court. But based on a $44 million fight between the consulting company Accenture and a would-be oil and gas services software company called Wellogix, it isn’t at all.

Wellogix’s business plan was to sell oil and gas companies proprietary software to streamline their planning and procurement processes. It made the apparent mistake, however, of partnering with other companies that supplied core accounting software. In 2005, Wellogix and SAP made a joint bid to provide global software for complex services to BP. Unbeknownst to Wellogix, however, SAP was also working directly with BP’s consultant, Accenture, on a software system. Wellogix came to believe that SAP and Accenture had hijacked pieces of its design and, in so doing, had destroyed the company. In 2008, Wellogix sued SAP, Accenture and BP, accusing them of stealing and misappropriating its trade secrets. U.S. District Judge Keith Ellison of Houston dismissed SAP for lack of jurisdiction. BP and Wellogix agreed to arbitration. Accenture went to trial.

A Houston federal jury returned a verdict against Accenture in May 2011, awarding Wellogix $26.2 million in compensatory damages and $68.2 million in punitive damages. Judge Ellison reduced the punitive damages to $18.2 million but otherwise denied Accenture’s post-trial motions for judgment as a matter of law or for a new trial. Accenture posted a $49 million bond to cover the judgment and interest, and took its case to the 5th Circuit Court of Appeals. Ellison stayed enforcement of the judgment “pending final disposition of Accenture’s appeal.”

In a highly fact-specific opinion last May, the 5th Circuit panel of Judges Leslie Southwick and Stephen Higginson and Senior Judge Harold DeMoss upheld the jury verdict and damages award against Accenture. The appellate opinion, written by Higginson, said that the judges might have found differently had they been in the jury box, but that “there was sufficient evidence to support the jury’s verdict and the resulting damages awards.” Accenture’s lawyers at Baker Botts and Sidley Austin moved for reconsideration and en banc review. Last month the 5th Circuit denied the motions. On Jan. 24, the 5th Circuit issued its mandate affirming the judgment against Accenture.

Wellogix’s counsel at Laminack, Pirtle & Martines immediately sent a letter to Baker Botts, demanding that Accenture pay up. Accenture refused. It asked Judge Ellison to stay enforcement of the judgment until it filed a petition for certiorari and the Supreme Court decided whether to take the case.

Here’s where things get interesting. Wellogix’s appellate lawyers at Wright & Close filed a brief on Feb. 5, asserting that Ellison’s 2011 order staying judgment was superseded by the 5th Circuit’s mandate. The trial judge’s jurisdiction ended once the appellate court resolved the case with finality, Wellogix argued, and under the Federal Rules of Civil Procedure, only the 5th Circuit and the Supreme Court can stay enforcement of a judgment mandated by the circuit court. “This is not a close question,” Wellogix said in its brief. “Because the 5th Circuit issued its mandate, with no attempt by Accenture to delay that action, that court would have to recall its mandate in order for it to have jurisdiction to grant a stay. The chances of that happening are slim…. The circuit justice of the Supreme Court, Hon. Antonin Scalia, could also grant a stay under Supreme Court Rule 23. The chances of that happening are even slimmer.”

Accenture filed a brief in opposition on Thursday. It argued that it wasn’t asking Ellison to stay the mandate of a higher court, as Wellogix framed the issue, but to grant Accenture temporary relief from the trial court’s own judgment. “Contrary to Wellogix’s assertion,” Accenture said, “numerous cases recognize that district courts have this authority, even after the court of appeals has ruled.”

The trouble is that both Accenture and Wellogix (in a Feb. 7 reply to Accenture) do a great job of undermining the worth of each other’s cited precedent. They’re both more effective in ripping the other side’s arguments than in finding case law to support their own positions. It seems as though there’s hardly a district judge in the nation who has faced exactly the scenario here, hard as that is to believe.

Accenture says it’s planning to file a cert petition any day now, so Wellogix won’t have to wait long to find out if the court will take the case. (I give the petition vanishingly low odds, given that Accenture’s 5th Circuit appeals raised mostly fact issues.) Wellogix, meanwhile, has virtually no value aside from its judgment against Accenture; according to Accenture, the company’s lawyer told Ellison that Wellogix and its attorneys “are in hock at high interest rates.” (Accenture actually turned Wellogix’s financial straits against it, arguing that Accenture won’t be able to recover its money from Wellogix if the Supreme Court ends up overturning the judgment.)

Wellogix counsel Thomas Wright told me the company believes the law is clear that it can collect the money it’s due, but declined additional comment. Accenture counsel Maria Boyce of Baker Botts didn’t return my phone call.

(Reporting by Alison Frankel)

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