Eastern District of Texas
This is the first Legal Pulse commentary of WLF’s new General Counsel, Mark Chenoweth, who assumed that post on July 15, 2013.
Kudos to U.S. District Magistrate Judge Roy Payne (E.D. Tex.), who disqualified Los Angeles-based law firm Russ, August & Kabat (RAK) and partner Marc Fenster from serving as lead counsel to plaintiff TQP Development, LLC (a patent assertion entity, cf. here) in a lawsuit against Adobe Systems, Inc. on July 13. After representing Adobe from 2006 through February 2012 in an ongoing series of opinion letters about whether Adobe products infringed particular patents, RAK and Fenster turned around and filed suit against their longtime client in two other patent cases.
Judge Payne would have none of it. Noting that “Adobe had a reasonable expectation that RAK would continue to act as its lawyer” and that “RAK failed to give Adobe reasonable notice to the contrary before undertaking the adverse representation,” he held that RAK violated Model Rule of Professional Conduct 1.7(a), which prohibits lawyers from representing clients with concurrent conflicts of interest and Texas Rule of Professional Conduct 1.15 regarding the provision of reasonable notice to a client upon termination of representation.
Adobe only found out about RAK’s adverse representation in the Texas case (filed on August 31, 2012) when RAK filed a motion (on August 13, 2012) to appear pro hac vice as counsel in a separate lawsuit against Adobe it had filed in Delaware on July 12, 2012. RAK estimated at the disqualification hearing that it began pre-suit investigation no earlier than August 1 in the Texas case. Judge Payne commented, “It is surprising and disheartening that RAK appeared at the hearing without having reviewed its own records to determine when it began its representation … in this case, which is at the heart of this issue. The Court can only assume that the estimate of August 1 is at least as favorable to RAK as the actual date.”
So, had RAK and Fenster followed the rules and given Adobe reasonable notice of their termination of representation, would they have been able to represent the Texas plaintiff? Because Judge Payne found that Adobe was still a RAK client when the adverse representation began, he did not have to reach the question whether the two matters were “substantially related” (governed by MRPC 1.9 and TRPC 1.09). However, he warned that “counsel should always interpret this term broadly in considering their duty to a former client, and the Court considers it to be a very close call in this case.” In other words, Judge Payne takes seriously the expectation that lawyers appearing in his courtroom will exhibit integrity.
Regrettably, this offense was neither RAK’s nor Fenster’s first. U.S. District Judge Richard Andrews likewise disqualified the firm and partner as lead counsel in the aforementioned Delaware case (in a March 4, 2013 order) where they had tried to represent Parallel Iron, LLC, another patent assertion entity, in a patent infringement action against Adobe.
In the absence of an express retainer agreement, Judge Andrews looked at the contacts between the lawyer and client to assess the reasonableness of Adobe’s belief that RAK and Fenster were still serving as its counsel. Judge Andrews had no problem determining that “RAK never actually notified Adobe that it would be unavailable to provide further opinion letter work” and that “[i]t was fair for Adobe to believe that its opinion counsel would not transform into adverse counsel without warning.” Although cognizant of the opinion counsel’s limited role, Judge Andrews stated that “opinion counsel is still counsel, complete with fiduciary duties to clients and professional obligations under the Model Rules.” Because Rule 1.7 protects a client’s interest in the loyalty of its attorneys, Judge Andrews applied a per se rule of disqualification to remedy the violation.
When it comes to professional conduct, apparently some lawyers just never learn their lesson. Now that federal judges hearing both cases involving Adobe have granted motions to disqualify, here’s hoping there won’t be a strike three.