A Client Is Penalized When a Merged Chicago Law Firm Violates Conflict of Interest Rules
A recent Northern District of Illinois decision exemplifies what can happen when two firms merge and fail to perform a thorough conflicts check. In Andrew Corp. v. Beverly Manufacturing Co., 2006 WL 408113 (N.D.Ill., February 16, 2006), Andrew sued Beverly for infringing on three of Andrew's patents. In the complaint, Andrew alleges that Beverly willfully infringed on two patents after Beverly received written notice from Andrew of the alleged infringement. Beverly wished to use three opinion letters written by its counsel from the law firm of Barnes & Thornburg in the company's defense to the willful infringement allegations. Andrews filed a motion seeking to prevent Beverly from presenting evidence regarding the three opinion letters and bar Barnes & Thornburg attorneys from testifying or otherwise participating in the case. While Barnes & Thornburg have not filed an appearance on behalf of either client in this particular case, both Andrew and Beverly are current clients of the firm on other matters.
Before the instant lawsuit was filed, but while Barnes & Thornburg represented both Andrews and Beverly, the firm issued three opinion letters to Beverly which stated positions that were adverse to Andrew. These three opinion letters were clear evidence that Beverly did not willfully infringe against Andrew's patents. Beverly had previously been represented by two partners at Barnes & Thornburg when the attorneys were members of the law firm Lee Mann, Smith, McWilliams, Sweeney & Ohlson. Back in 2000, these attorneys represented Beverly in a dispute the company had with Andrew that ended in a settlement. Two years later, while still at the Lee Mann firm the same two attorneys began working for Beverly on their opinions with regard to Andrew's patents at issue in this case and opened two legal files in the Lee Mann firm filing system regarding that work - however, in these files Andrew was not listed as the adverse party. At the beginning of 2003, the Lee Mann firm merged into Barnes & Thornburg and the two attorneys who had represented Beverly at Lee Mann now became partners at the new merged Barnes & Thornburg firm. At the time of the merger, Andrew was a client of Barnes & Thornburg.
During the merger, Barnes & Thornburg failed to recognize the conflict between Andrew and Beverly despite the fact that the work the two Lee Mann attorneys performed for Beverly analyzed Andrew's patents adversely to Andrew and the firm approved Beverly as one of its new clients. Because the conflict was not identified, Barnes & Thornburg failed to inform Andrew or Beverly of any conflict and failed to request a consent from either client. Then later in 2003, Barnes & Thornburg provided Beverly with the three opinion letters that were adverse to Andrew and the center of the current controversy. In 2004, both Andrew and Beverly contacted the firm seeking representation in the present patent dispute and Barnes & Thornburg finally recognized the conflict and declined both companies request for representation against the other. Interestingly, despite the firm's 2004 recognition of the conflict, and the firm's 2003 opinion letters that are adverse to a client, lawyers at Barnes & Thornburg still represent both Andrew and Beverly in other matters.
In the motion, Andrew argued that Barnes & Thornburg breached its fiduciary duties to Andrew by taking positions adverse to the company in the opinion letters provided to Beverly - therefore, the company contended the firm should be disqualified from any participation in the case, that the three opinion letters must be withdrawn, and that Beverly must be barred from using the opinions or presenting any testimony regarding those opinion letters in the case. Beverly countered by arguing that it is blameless in this situation and that it should not be punished for the mistakes made by Barnes & Thornburg.
In granting Andrews motion, the court held while Beverly may not have known of the conflict, a "[l]awyers' errors in civil proceedings are imputed to their clients." The decision goes on to explain that the court's obligation includes "the duty to safeguard the sacrosanct privacy of the attorney-client privilege" and "[p]rohibiting lawyers who violate ethical requirements from further participating in the legal proceedings to which the violation pertains is one way to renew the public's faith in the integrity of the legal profession and in the fairness of the judicial proceedings." The court did, however, point out that at a later date Beverly may seek recourse from Barnes & Thornburg in a separate legal malpractice lawsuit if it so desires.