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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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Perimeter Internetworking, Inc.,
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Plaintiff,
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vs.
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Jay Jacobson,
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Defendant.
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No. MC 11-00095-PHX-FJM
ORDER

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We have before us plaintiff's motion to compel compliance with subpoena to Osborn

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Maledon, P.A. ("Osborn") (doc. 5), Osborn's response (doc. 8), and plaintiff's reply (doc. 13).

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Plaintiff Perimeter Internetworking, Inc. ("Perimeter") acquired Edgeos, Inc. ("Edgeos")

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through an asset purchase agreement ("APA") executed by Perimeter, Edgeos, and the two

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shareholders of Edgeos, Erik Stephens and Jay Jacobson. Osborn represented Edgeos in this

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transaction and was paid by Perimeter. Edgeos, Stephens, and Jacobson signed the retainer

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agreement. Edgeos later merged into Perimeter.

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Jacobson served as an employee pursuant to contract until he was terminated by

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Perimeter for cause. Perimeter sued Jacobson, who asserted counterclaims relating to the

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APA. Perimeter requested all documents pertaining to Osborn's representation of Edgeos,

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including all documents provided to it by Jacobson. Osborn refused to comply. Jacobson

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was notified of the subpoena but did not object to it or consent to disclosure.

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Osborn asserts that it may not reveal confidential information of its former client,

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Jacobson, without his consent. Perimeter asserts that it is a client of Osborn since it acquired

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Edgeos, and joint representation does not take away its right to its own client file pursuant

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to Arizona Rule of Professional Conduct ER 1.16(d).

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No rule directly addresses the identity of the client after a merger. And while ER

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1.9(a) and (b) allow a lawyer to represent a client adverse to his former client if the former

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client gives consent, there is no such waiver provision for revealing information relating to

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the representation of a former client. See ER 1.9(c)(2).

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The parties have not eased our task. Neither party cites a case or opinion from the

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Committee on the Rules of Professional Conduct. Perhaps no relevant authority exists. Our

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search does not uncover any cases or opinions on point. Nevertheless, a full development

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of the facts and legal arguments would still have been possible, but this too was lacking on

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both sides. Many irregularities appear in the short recitation of the underlying facts. For

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instance, we are left to wonder why Jacobson failed to object to the subpoena although he

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is presumably represented by counsel, why Perimeter paid Osborn's legal fees related to the

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APA, why it did not receive a copy of the client file from Osborn or Edgeos after the merger,

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and more.

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A lawyer may represent an organization and any of its directors or shareholders. ER

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1.13(g). Such dual representation, while beneficial in certain circumstances, can easily lead

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to conflicts like the one at hand. As section 1 of the comment to ER 1.13 recognizes, "[a]n

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organizational client is a legal entity, but it cannot act except through its officers, directors,

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employees, shareholders and other constituents." Edgeos was a legal entity, yet it would be

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unrealistic to say that it was entirely separate from its only two shareholders. It could not act

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except through Jacobson and Stephens. Edgeos as it was then constituted, with two

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shareholders, was Osborn's client during the merger. As a result, we understand Osborn's

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hesitation to relinquish its file to a party who is now adverse to one of these shareholders.

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IT IS HEREBY ORDERED DENYING plaintiff's motion to compel (doc. 5).

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DATED this 22nd day of December, 2011.

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