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A law firm representing a company suing Apple Inc. for patent infringement may stay in the case despite the firm's contacts with a lawyer whose firm represents Apple in other intellectual property matters and who gave his wife--a principal of the plaintiff in this case--some help in pursuing her company's claim, the U.S. District Court for the Northern District of California decided Aug. 7 (FlatWorld Interactives LLC v. Apple Inc., N.D. Cal., No. 12-cv-01956-WHO, 8/7/13).
Judge William H. Orrick found that the lawyer breached his duty to Apple by assisting his wife and her company in plotting a suit against it, but that the firm the plaintiff ultimately retained to handle the case was not tainted by its minimal contacts with the lawyer. He had a conflict of interest only by being a partner in a firm that represents Apple in other matters and did not actually have any confidential information about this case, Orrick reasoned.
Jennifer McAleese is a co-founder and director of FlatWorld Interactives LLC and is married to lawyer John McAleese, who until recently was a partner in the Philadelphia office of Morgan Lewis Bockius. Morgan Lewis has represented Apple since 2003 on various matters, including patent prosecutions related to the touch-based user interface of Apple devices.
FlatWorld contends that Apple products infringe its patent for certain user interface technology. John McAleese and his wife discussed the possibility of FlatWorld's suing Apple or finding a purchaser for the patent who could use it to sue Apple. Eventually McAleese helped his wife and FlatWorld arrange to retain Hagens Berman Sobol Shapiro LLP on a contingent fee basis to press the company's infringement claims against Apple.
After suit was filed, an Apple director noticed John McAleese's name on FlatWorld's privilege log, and he e-mailed a Morgan Lewis partner expressing concern and questioning the privilege for documents logged under McAleese's name. That lawyer forwarded the e-mail to McAleese, who told his wife about Apple's concerns and called Hagens Berman to discuss the matter.
This contact was allegedly the first time any lawyer at Hagens Berman knew that Morgan Lewis worked for Apple. After back-and-forth over the privilege claims and McAleese's contact with Hagens Berman, Apple moved to disqualify Hagens Berman from representing FlatWorld in the patent litigation.
The court denied disqualification, although not without some disapproving words about McAleese's conduct.
The court concluded that “John McAleese acted as an attorney for FlatWorld contrary to his legal and professional duty” when he acted contrary to Apple's interests by helping his wife and FlatWorld, over nearly six years, in trying to find a purchaser that would buy the patent to sue Apple and in locating and hiring a law firm that would sue Apple.
The court found it irrelevant that McAleese acted informally in these efforts without charging any fee. He took part in numerous communications adverse to Apple as an attorney both before and after the litigation was filed, Orrick said.
Although McAleese did not personally work on Apple's matters at Morgan Lewis, he was obligated to act loyally toward his firm's client even for actions that were not technically legal services, the court added.
The court also concluded, however, that Hagens Berman was not tainted by McAleese's conflict because there was no evidence that McAleese ever received material confidential evidence about Apple during his time at Morgan Lewis--let alone passed it on to Hagens Berman--except for the e-mail in which a Morgan Lewis attorney conveyed Apple's concerns about privilege claims for communications involving McAleese.
Regarding Hagens Berman's handling of that e-mail, the court distinguished Rico v. Mitsubishi Motors Corp., 68 Cal. Rptr.3d 758, 23 Law. Man. Prof. Conduct 632 (Cal. 2007), which disqualified lawyers who secretly made use of an opponent's work product that came into their hands rather than notifying opposing counsel about their possession of it.
Hagens Berman's conduct was far different, and it gained no advantage by learning of the potential conflict from McAleese's disclosure of the disputed e-mail rather than from Morgan Lewis or Apple's counsel, the court said.
The court explained that to succeed on its disqualification motion, Apple had to make a threshold showing that McAleese had confidential information about Apple. That showing was not made, Orrick found.
The court emphasized that McAleese's conflict was imputed only because of his association with Morgan Lewis, not because he knew anything confidential about Apple. He never worked on any Apple matters during his years at the firm; rather, he focused primarily on environmental matters in a location separate from where Apple's patent matters were handled. An extensive forensic investigation of Morgan Lewis's computer system indicated that McAleese never accessed or received any confidential information about Apple, Orrick pointed out.
Apple invoked Pound v. Cameron, 36 Cal. Rptr.3d 922, 22 Law. Man. Prof. Conduct 5 (Cal. Ct. App. 2005), which disqualified a lawyer whose co-counsel had previously received confidential information from the adverse party even though the co-counsel never shared the information with the lawyer.
But it does not follow from Pound, Orrick said, that disqualification is required where, as here, a firm associates with a conflicted attorney who had no confidential information from the adverse party. In several other cases, courts have declined to disqualify counsel even when the conflicted co-counsel did in fact have confidential information but never shared it with the attorney whose involvement is being challenged, Orrick said.
The court cited McAleese's minimal involvement in the case against Apple as a further reason not to disqualify Hagens Berman. McAleese did not play any substantive role in the case, Orrick found. He and Hagens Berman merely discussed the terms of the firm's retainer agreement with FlatWorld, engaged in small talk at a social lunch about a deposition and discussed the privilege log concerns that Apple had raised, the court said.
Disqualifying Hagens Berman would prejudice FlatWorld and impose a significant hardship on it due to the difficulty of finding a capable and willing replacement, the need to replicate the firm's efforts and the delay that would result, Orrick added.
FlatWorld's lead counsel were Jeff D. Friedman of Hagens Berman, Berkeley, Calif., and Mark S. Carlson and Steve W. Berman of the firm's Seattle office. Kenneth H. Bridges and Michael T. Pieja of Bridges & Mavrakakis LLP, Palo Alto, Calif., were lead counsel for Apple.
Copyright 2013, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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