(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Jenna Greene

April 15 (Reuters) - Defamation cases can come in

unexpected guises - including soft-serve vanilla ice cream.

The McDonald's ice cream machines that churn out such treats

including McFlurries, shakes and soft-serve cones are notorious

for frequent breakdowns. So a start-up company called Kytch

introduced a computer device in 2019 intended to improve the

machines' reliability.

The ensuing litigation has been anything but sweet.

Originally represented by defamation specialty firm Clare

Locke, Kytch sued McDonald's and other defendants for $900

million, alleging the fast food giant falsely told franchisees

its device was unsafe.

According to court papers, that case is on the verge of

settling. But a brawl over $7 million or more in legal fees and

costs is just beginning.

A recent The New York Times profile of the 14-lawyer firm,

which served as co-counsel to Dominion Voting Systems in helping

secure a $787.5 million settlement last year in a lawsuit

against Fox Corp, detailed friction among its lawyers,

culminating in the departure of four non-equity partners in

August.

The quartet launched their own plaintiffs-side defamation

shop, Meier Watkins Phillips Pusch, and took Kytch's business

with them.

Kytch did not respond to requests for comment.

As the litigation nears settlement -- and with it, the

prospect of a contingency fee payout for Kytch's counsel -- the

question now becomes how to divide the spoils.

Legal fee expert John O'Connor of O'Connor and Associates

told me that the key issue for a judge or arbitrator is likely

not whether Clare Locke gets paid at all for its three years of

work on the case, but rather how much. Will the firm get an

hourly rate -- or an hourly rate plus a multiplier, in

recognition of its original risk in taking the matter on

contingency and its contributions in achieving the outcome?

"There's no set way of figuring it out," he said. "It's

very, very ad-hoc."

The battle lines are already being drawn.

Clare Locke, which in court papers said it had devoted more

than 10,000 hours to the case before it was terminated as

counsel, said that the firm had "looked forward to securing a

large verdict for Kytch and a contingency fee for itself."

To Clare Locke co-founder Libby Locke, the "true motivation"

of the ex-partners in decamping to launch their own firm was to

take the multi-million-dollar fee for themselves, she told me.

Former Clare Locke partner Daniel Watkins scoffed at the

notion. "Outright denial" was his response when I asked him

about Locke's contention.

Watkins, who joined Clare Locke as a lateral associate in

2016 and made non-equity partner in 2021, said the decision to

split off was completely unrelated to the Kytch litigation. He

declined to elaborate on any specific incidents that may have

prompted the move.

As for Kytch following them to their new firm, Watkins said

clients "have wide latitude in their choice of counsel," and

that he'd been playing a lead role in the representation since

the company hired Clare Locke in November 2020.

In its complaint against McDonald's pending in San Francisco

federal court, Kytch said it had developed a low-cost way to

troubleshoot problems with the fast food giant's soft-serve

machines.

(The machines are reported to break so often that a website,

McBroken.com, tracks the outages nationwide. Even McDonald's

social media has made fun of the chronic breakdowns, tweeting in

2020, "We have a joke about our soft serve machine, but we're

worried it won't work.")

Rather than welcome the fix, Kytch alleges that McDonald's

destroyed its nascent business by falsely telling franchisees

that its device could cause serious human injury by potentially

starting up the ice cream machines during cleaning.

McDonald's did not respond to requests for comment, but in

court papers, its lawyers from Orrick, Herrington & Sutcliffe

denied Kytch's allegations, calling them "a work of fiction."

The defendants say Kytch never tried to meet McDonald's

testing requirements and that the company made a good faith

effort to warn franchisees of a potential risk.

We onlookers aren't likely to learn who had the better

argument. In a March 15 court filing, the parties said they had

tentatively reached a settlement agreement.

The notice caught the attention of Clare Locke, which in

court papers said it fears its ex-client will settle the

litigation and disperse the proceeds without paying the firm for

its work.

Clare Locke says the fee dispute, per the terms of three

engagement letters with Kytch, is subject to arbitration and

persuaded an arbitrator in early April to issue an order

temporarily freezing any settlement funds. It also sued Kytch in

federal court in Virginia to confirm the order.

Covering all bases, the firm also asked U.S. Magistrate

Judge Thomas Hixson in San Francisco not to dismiss Kytch's suit

against McDonald's or approve any settlement-related requests

until after Clare Locke's attorneys' liens have been resolved.

Watkins on behalf of Kytch responded in a court filing on

Thursday that Clare Locke, no longer party to the McDonald's

litigation, didn't ask to intervene and lacks standing to weigh

in.

Moreover, Watkins wrote that Kytch has agreed not to

distribute any settlement proceeds for 45 days, while Clare

Locke's "potential entitlement" to fees or expenses is sorted

out.

Besides, Watkins noted, the McDonald's case isn't even over.

Clare Locke is trying to "enforce a lien against a settlement

that doesn't yet exist."