Perimeter Internetworking Incorporated v. Jacobson

Filing 14

ORDER denying plaintiff's 5 Motion to Compel. Signed by Judge Frederick J Martone on 12/22/11.(ESL)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 Perimeter Internetworking, Inc., 9 Plaintiff, 10 vs. 11 Jay Jacobson, 12 Defendant. 13 ) ) ) ) ) ) ) ) ) ) No. MC 11-00095-PHX-FJM ORDER 14 We have before us plaintiff's motion to compel compliance with subpoena to Osborn 15 Maledon, P.A. ("Osborn") (doc. 5), Osborn's response (doc. 8), and plaintiff's reply (doc. 13). 16 Plaintiff Perimeter Internetworking, Inc. ("Perimeter") acquired Edgeos, Inc. ("Edgeos") 17 through an asset purchase agreement ("APA") executed by Perimeter, Edgeos, and the two 18 shareholders of Edgeos, Erik Stephens and Jay Jacobson. Osborn represented Edgeos in this 19 transaction and was paid by Perimeter. Edgeos, Stephens, and Jacobson signed the retainer 20 agreement. Edgeos later merged into Perimeter. 21 Jacobson served as an employee pursuant to contract until he was terminated by 22 Perimeter for cause. Perimeter sued Jacobson, who asserted counterclaims relating to the 23 APA. Perimeter requested all documents pertaining to Osborn's representation of Edgeos, 24 including all documents provided to it by Jacobson. Osborn refused to comply. Jacobson 25 was notified of the subpoena but did not object to it or consent to disclosure. 26 Osborn asserts that it may not reveal confidential information of its former client, 27 Jacobson, without his consent. Perimeter asserts that it is a client of Osborn since it acquired 28 Edgeos, and joint representation does not take away its right to its own client file pursuant 1 to Arizona Rule of Professional Conduct ER 1.16(d). 2 No rule directly addresses the identity of the client after a merger. And while ER 3 1.9(a) and (b) allow a lawyer to represent a client adverse to his former client if the former 4 client gives consent, there is no such waiver provision for revealing information relating to 5 the representation of a former client. See ER 1.9(c)(2). 6 The parties have not eased our task. Neither party cites a case or opinion from the 7 Committee on the Rules of Professional Conduct. Perhaps no relevant authority exists. Our 8 search does not uncover any cases or opinions on point. Nevertheless, a full development 9 of the facts and legal arguments would still have been possible, but this too was lacking on 10 both sides. Many irregularities appear in the short recitation of the underlying facts. For 11 instance, we are left to wonder why Jacobson failed to object to the subpoena although he 12 is presumably represented by counsel, why Perimeter paid Osborn's legal fees related to the 13 APA, why it did not receive a copy of the client file from Osborn or Edgeos after the merger, 14 and more. 15 A lawyer may represent an organization and any of its directors or shareholders. ER 16 1.13(g). Such dual representation, while beneficial in certain circumstances, can easily lead 17 to conflicts like the one at hand. As section 1 of the comment to ER 1.13 recognizes, "[a]n 18 organizational client is a legal entity, but it cannot act except through its officers, directors, 19 employees, shareholders and other constituents." Edgeos was a legal entity, yet it would be 20 unrealistic to say that it was entirely separate from its only two shareholders. It could not act 21 except through Jacobson and Stephens. Edgeos as it was then constituted, with two 22 shareholders, was Osborn's client during the merger. As a result, we understand Osborn's 23 hesitation to relinquish its file to a party who is now adverse to one of these shareholders. 24 IT IS HEREBY ORDERED DENYING plaintiff's motion to compel (doc. 5). 25 DATED this 22nd day of December, 2011. 26 27 28 -2-

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