Boston Scientific Corporation v. Johnson & Johnson, Inc., D.Del., Nos. 07-333; 07-348; 07-409-SLR (Aug. 25, 2009), read opinion here.
This is a memorandum opinion of the U.S. District Court for the District of Delaware, following an evidentiary hearing, in which the Court denies a Motion to Disqualify the law firm of Howrey LLP from representing plaintiffs Boston Scientific Corporation and Boston Scientific Scimed, Inc. in these referenced cases.
Wyeth is a global pharmaceutical company with multiple divisions and subsidiaries. It sought the disqualification of the Howrey firm, which represents plaintiff Boston Scientific against Wyeth in the instant Delaware federal patent litigation, even though a European office of the Howrey firm represents Wyeth in a separate and unrelated patent matter in Europe. The Court discussed several different subsidiaries in the U.S. and in Europe that use very similar variations on the name Wyeth Pharmaceutical, such as Wyeth Pharmaceuticals, Inc. and Wyeth Pharmaceuticals Limited. There was no question that Howrey has handled several matters for what the Court referred to as the “Wyeth family of companies” between 2003 and 2009. However, the Court observed that there was some confusion about exactly which Wyeth entity or division Howrey had been representing, and the Court found that Wyeth contributed to that confusion because for example, in-house attorneys would supervise the work of attorneys in various subsidiaries. Howrey contributed to the confusion by failing to distribute client representation memoranda in each matter it handled for Wyeth. Importantly, however, the Howrey attorneys in the U.S., none of whom worked on the adverse matter in Europe, maintained an ethical wall and the instant case compared to the matter in Europe were completely unrelated.
The Court summarized the arguments on which the instant Motion to Disqualify Howrey was based, as follows: (i) Attorney conduct before the Court is governed by the Court’s local rules; (ii) The Court’s local rules provide that attorneys must adhere to the American Bar Association’s Model Rules of Professional Conduct; (iii) The Model Rules provide that an attorney shall not, without consent, represent a client if doing so places the attorney in a position directly adverse to another client; (iv) Howrey’s representation of plaintiffs in the instant cases violates the Model Rules because it places Howrey, without the consent of Wyeth, in a position directly adverse to Wyeth, which is a client of Howrey in another matter; and (v) The appropriate remedy in these circumstances is disqualification. The Court agrees with Wyeth’s arguments only with respect to (i) through (iv), but not with the last argument regarding the need for disqualification.
Review of Applicable Law
The Court referred to Local Rule 83.6(d) of the United States District Court for the District of Delaware as the starting point in its analysis for the application of the ABA’s Model Rules as the governing standards for attorneys admitted to practice before the Court. The Court recognized its power to disqualify attorneys for violation of the Model Rules, but nevertheless observed that such motions to disqualify are generally disfavored. See U.S. v. Miller, 624 F.2d 1198, 1201 (3d Cir. 1980); Integrated Health Services of Cliff Manor, Inc. v. THCI, Co. LLC, 327 B.R. 200, 204 (D.Del. 2005). Moreover, the Court emphasized that disqualification was never automatic (citing Elonex I.P. Holdings, Ltd. v. Apple Computer, Inc., 142 F.Supp. 2d 579, 583 (D.Del. 2001)) (See here for a short article I wrote some time ago about another case that discussed the issues addressed in the Elonex case and cited to the decision).
Violation of Model Rule 1.7
In sum, the Court found that Howrey did violate Model Rule 1.7, but that violation did not warrant disqualification in this case.
The Court summarized the requirements of the relevant parts of Model Rule 1.7 as follows: Rule 1.7(b) provides that a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. Rule 1.7(a) provides that a “concurrent conflict of interest” occurs where the representation of one client will be directly adverse to the other client. There was no dispute in this case that the representation by Howrey of the plaintiffs in this case places it in a position directly adverse to Wyeth. The Court also found that through one of Howrey’s European offices, Wyeth was a client of Howrey.
The U.S. District Court for the District of Delaware in this decision relied on Delaware Chancery Court cases for the Delaware law which recognizes that in the absence of an express contract or a formal retainer agreement evidencing an attorney-client relationship, courts “look at the contacts between the potential client and its potential lawyers to determine whether it would have been reasonable for the ‘client’ to believe that the attorney was acting on its behalf as counsel.” See, e.g., PharmAthen, Inc. v. SIGA Technologies, Inc., 2009 WL 2031793, * 1 (Del. Ch. July 10, 2009) (See summary of that decision on this blog here).
Whether Disqualification Is Appropriate In This Case
Despite the Court’s finding that Model Rule 1.7 was violated by Howrey, the Court nonetheless concluded that disqualification was not an appropriate remedy under the circumstances. The Court reasoned, based on Elonex, supra, that despite the concurrent representations by Howrey in unrelated matters, they were “being done out of different offices and different cities” and were being done with an ethical wall in place between the two matters. See 142 F.Supp. 2d at 583-84.
Importantly, the Court added that the failure of Howrey to comply with Model Rule 1.7 was “to a significant degree, due to Wyeth’s conduct. Among other things, Wyeth’s naming conventions, its use of the same in-house attorneys on matters involving different subsidiaries without consistently identifying to Howrey which entity those in-house attorneys were representing, and the willingness of it and its subsidiaries to receive billing invoices for matters on which they were not directly engaged with Howrey, together created significant confusion for Howrey as to which entity or entities it was representing, confusion which is evident from Howrey’s timesheets, its mailing of billing invoices, and the averments of its attorneys in Europe. Wyeth should not now benefit from such obfuscatory conduct.” In closing, the Court noted that it was aware of case law in other jurisdictions suggesting that a violation of Model Rule 1.7 should result in disqualification, but the Court did not find those decisions persuasive.