Firm Can Stay Despite Concurrent Representation

By Samson Habte

A national law firm that claims it was baited into taking a minor role in a California case as part of a ruse to engineer its disqualification from a bigger case in Florida won’t be booted from the latter action, a federal magistrate judge in Florida held Dec. 16 ( Lanard Toys Ltd. v. Dolgencorp LLC , 2016 BL 419166, M.D. Fla., No. 3:15-cv-849-J-34PDB, 12/16/16 ).

The decision was a victory for Gordon & Rees Scully Mansukhani LLP, which can keep representing a small toy manufacturer that filed a patent infringement and unfair competition lawsuit in Florida federal court against retail giants Toys “R” Us Inc. and Dollar General Corp.

The disqualification fight was picked by Toys “R” Us, which argued that lawyers working out of a Gordon & Rees office in Florida couldn’t represent Lanard Toy Ltd. in the federal case because other lawyers at one of the firm’s California offices were defending Toys “R” Us in a state lawsuit there.

Magistrate Judge Patricia D. Barksdale said Gordon & Rees “plainly violated” ethics rules that govern conflicts of interest by “undertaking representation of TRU in the California case while undertaking representation against TRU in this case.”

But Barksdale nevertheless refused to disqualify Gordon & Rees. In a 13-page opinion, she said the fact that the firm’s violation was caused by “an inadvertent input error” during conflict-checking procedures, and “not a deliberate disregard of the duty of loyalty,” militated against disqualification.

"[B]alancing the interests and mindful that Lanard is presumptively entitled to counsel of its choosing and [that] disqualification is a harsh sanction to be resorted to sparingly, disqualification is unwarranted,” Barksdale wrote for the U.S. District Court for the Middle District of Florida.

Client Setting Conflict Trap?

Lanard accused Toys “R” Us and its outside counsel, Lewis Anten of Lewis Anten P.C. in Los Angeles, of engineering the conflict that gave rise to this disqualification dispute.

Lanard said lawyers at Lewis Anten manufactured the conflict by asking Gordon & Rees to act as local counsel for Toys “R” Us in a California case several months after the firm began representing Lanard in the Florida case.

Lanard’s lead counsel, Gordon & Rees partner Richard P. Sybert, said in a declaration that Anten knew that Sybert had represented Lanard for more than 30 years, “and that is his motivation for bringing this motion, not any concern for conflicts or prejudice.”

In a response to the motion to dismiss, Lanard said Anten “has been sanctioned by a court for improperly using a motion to disqualify as a tactical device,” and that he was doing the same thing here.

At oral argument, Sybert said his firm’s decision to act as local counsel for Toys “R” Us in the California case didn’t create a conflict because “the only thing” the firm did in that California matter was to “act as a mail drop for an answer that was drafted by lead counsel.”

No Harm, No Foul

Barksdale said Gordon & Rees “plainly violated” Florida Rule of Professional Conduct 4-1.7 when lawyers at the firm began defending Toys “R” Us in the California case while others were representing Lanard in this case.

Barksdale also chastised Gordon & Rees for its “unapologetic” response to the conflict, which made “an otherwise easy decision on the disqualification motion harder.”

But disqualification “is not mandatory, even when a court finds a lawyer is violating a conflict-of-interest rule,” Barksdale said. “Instead, a ‘court should be conscious of its responsibility to preserve a reasonable balance between the need to ensure ethical conduct on the part of lawyers appearing before it and other social interests, which include the litigant’s right to freely chosen counsel,’” Barskdale wrote, citing case law.

Factors relevant to that determination include “the nature of the ethical violation, the age of the case, the prejudice to the parties, the effectiveness of counsel in light of the violation, the public’s perception of the profession, whether the attempt to disqualify is a tactical device or a means of harassment, and whether any screening measures have been implemented,” Barksdale said.

Applying that test here, the court said “the factors favoring Lanard’s position are strong enough, particularly Lanard’s lack of culpability and its right to be represented by counsel of its choice.”

Holland & Knight LLP and Lewis Anten P.C. represented Toys “R” Us Inc. Gordon & Rees Scully Mansukhani LLP represented Lanard.

To contact the reporter on this story: Samson Habte in Washington, D.C. at shabte@bna.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bna.com

Copyright © 2016 American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.