Implied Attorney-Client Relationship Stemming from a Joint Defense Agreement Leads to the Disqualification of a Law Firm
A New Jersey U.S. District Court recently, here,
disqualified the Kaye Scholer law firm from a multidistrict patent infringement litigation (commonly referred to as the "Gabapentin action") stemming from the side-switching activities of two current Kaye Scholer lawyers. In reaching its decision, the court first held that the personal disqualification of the two lawyers who recently joined the Kaye Scholer firm could be imputed to the entire firm and second, that the parties to a Joint Defense Agreement had the right to assert a disqualifying conflict of interest based on an implied-attorney client relationship against Kaye Scholer.
In 1991, the Judicial Panel on Multidistrict Litigation consolidated several patent infringement cases against different defendants (referred to by the court as the "First-Wave Defendants"). Shortly after the consolidation, the First-Wave Defendants entered into a Joint Defense and Confidentiality Agreement which recognized, among other things, the sharing of confidential information, including attorney work-product among defendants and defense counsel in order to help in the defense of the litigation. Four years after the consolidation the plaintiff, Pfizer, sought a substitution of attorneys. Pfizer wanted to replace it's old counsel with Kaye Scholer. A few months prior to this, two attorneys joined Kaye Scholer who were, at their prior firm, the senior counsel representing Ivax, one of the First-Wave Defendants in the Gabapentin action. While they were counsel for Ivax, the two lawyers were privy to confidential attorney work product and privileged information relating to not only Ivax, but to all the First-Wave Defendants and they helped establish and execute the defense strategy. When the two attorneys were brought into the Kaye Scholer firm, Ivax was consulted and a conflict waiver was executed. Additionally, Kaye Scholer established an ethical screen within the firm to protect against the sharing of any confidential information.
During the disqualification motion, Kaye Scholer argued that the firm soley owed ethical obligations to Ivax because only Ivax was the former client of its two attorneys, and that the waiver between Ivax and Kaye Scholer and the ethical screen were sufficient safeguards to protect the other First-Wave Defendants confidences.
In its decision disqualifying Kaye Scholer, the court found that the Joint Defense Agreement created a fiduciary relationship or implied attorney-client relationship among all the First-Wave Defendants because the agreement revealed a clear intent that any voluntarily-shared information would remain confidential and be protected by the attorney-client privilege. The court went on to find that while there was no reason to doubt the efficacy of Kaye Scholer's ethical screen or the integrity of the two lawyers who had previously represented Ivax, that under the Rule 1.10(c) of the New Jersey Rules of Professional Conduct the fiduciary relationship of the two lawyers to all the First-Wave Defendants had to be imputed to Kaye Scholer as well. The only way Kaye Scholer could have avoided disqualification is if the firm would have sought a conflict waiver from all the other First-Wave defendants, pursuant to RPC 1.10(d).