TransPerfect Global, Inc. et al v. MotionPoint Corporation

Filing 217


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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 5 6 TRANSPERFECT GLOBAL, INC.; TRANSPERFECT TRANSLATIONS INTERNATIONAL, INC.; AND TRANSLATIONS.COM, INC., 9 United States District Court For the Northern District of California 10 11 ORDER DENYING MOTION FOR RELIEF FROM JUNE 20, 2012 ORDER GRANTING MOTION FOR DISQUALIFICATION OF COUNSEL Plaintiff/Counterclaim Defendant, 7 8 No. C 10-2590 CW v. MOTIONPOINT CORPORATION, Defendant/Counterclaim Plaintiff. ________________________________/ 12 13 On May 30, 2012, in this patent infringement case, Plaintiffs 14 and Counterclaim Defendants TransPerfect Global, Inc., 15 TransPerfect Translations, International, Inc., and 16, Inc., collectively referred to as TransPerfect, 17 moved to disqualify Defendant and Counterclaim Plaintiff 18 MotionPoint Corporation’s counsel McDermott Will & Emery, LLP. 19 The motion was referred to Magistrate Judge Spero, who held a 20 hearing on June 20, 2012, and granted the motion. 21 Subsequently, McDermott and MotionPoint moved for relief from 22 the non-dispositive disqualification order. 23 the parties to file supplemental briefing on the limited issue of 24 whether a later-acquired client may obtain disqualification of 25 counsel for an earlier-acquired client. 26 the parties’ submissions, the Court DENIES MotionPoint's motion 27 for relief from the Magistrate Judge's June 20, 2012 order. 28 The Court permitted Having considered all of 1 2 BACKGROUND TransPerfect commenced this action in June 2010. Phil Shawe 3 and Elizabeth Elting are the co-Chief Executive Officers and co- 4 owners of TransPerfect. 5 percent of the company, respectively, and it is undisputed that 6 they are significantly involved in management. 7 2011, Carlyn S. McCaffrey was a partner at Weil, Gotshal & Manges 8 LLP, and represented Shawe and Elting, providing estate planning 9 services. Shawe and Elting own forty-nine and fifty Prior to April In April 2011, McCaffery left Weil to join McDermott, United States District Court For the Northern District of California 10 but continued to represent Shawe and Elting at McDermott, even 11 though McDermott was representing MotionPoint in this action. 12 LEGAL STANDARD 13 A magistrate judge's order on a non-dispositive pre-trial 14 matter shall be modified or set aside only if the reviewing 15 district court finds that the order is clearly erroneous or 16 contrary to law. 17 erroneous when, “although there is evidence to support it, the 18 reviewing court on the entire evidence is left with the definite 19 and firm conviction that a mistake has been committed.” 20 States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948). 21 Fed. R. Civ. P. 72(a). An order is clearly United DISCUSSION 22 MotionPoint objects to the following portions of the 23 Magistrate Judge's June 20, 2012 order: (1) that TransPerfect’s 24 delay in bringing the motion for disqualification of counsel did 25 not warrant denying this motion and (2) that McDermott’s 26 representation of Shawe and Elting in unrelated estate planning 27 matters creates a conflict of interest within the meaning of 28 2 1 California Rule of Professional Conduct 3-310(C)(3). 2 Relief at 2. 3 Mot. for MotionPoint fails to demonstrate that the June 20, 2012 order disqualifying counsel is clearly erroneous or contrary to law. 5 With respect to the delay and other equities presented on the 6 motion for disqualification, the June 20, 2012 order discussed the 7 equities and policy concerns at length and found that MotionPoint 8 cited no California authority denying a disqualification motion 9 based on concurrent representation, rather than successive 10 United States District Court For the Northern District of California 4 representation, upon only a finding of delay and prejudice. 11 20, 2012 Order at 17. 12 June With respect to MotionPoint’s second objection on the ground 13 that McDermott did not breach its duty of loyalty to Shawe and 14 Elting within the meaning of Rule 3-310(C)(3), the holding of the 15 June 20, 2012 order that McDermott's representation of MotionPoint 16 is directly adverse to Shawe and Elting, who together own 99% of 17 TransPerfect, is not clearly erroneous or contrary to law. 18 respect to the particular issue briefed by the parties on the 19 instant motion, whether a later-acquired client may obtain 20 disqualification of counsel for an earlier-acquired client, 21 MotionPoint has not demonstrated that the June 20, 2012 order 22 should be set aside. 23 24 25 26 27 28 With Rule 3-310(C) of the California Rules of Professional Conduct provides, A member shall not, without the informed written consent of each client: (1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or 3 1 2 (2) Accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict; or 3 4 5 (3) Represent a client in a matter and at the same time in a separate matter accept as a client a person or entity whose interest in the first matter is adverse to the client in the first matter. 6 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rule 3-310(C)(3) “represents a ‘per se rule of disqualification which generally prevents an attorney from undertaking a representation which is adverse to a current client.’” Pour Le Bebe, Inc. v. Guess? Inc., 112 Cal. App. 4th 810, 822 (2003). See Flatt v. Superior Court, 9 Cal. 4th 275, 284 (1994)(“Indeed, in all but a few instances, the rule of disqualification in simultaneous representation cases is a per se or ‘automatic’ one.”). “Subparagraph (C)(3) is intended to apply to representations of clients in both litigation and transactional matters.” Cal. Rules of Prof. Conduct 3-310 Discussion. In Truck Insurance Exchange v. Fireman’s Fund Insurance Company, 6 Cal. App. 4th 1050, 1057 (1992), the defendant Fireman’s Fund Insurance Company (FFIC), which was the firm’s first-acquired client, successfully moved to disqualify the firm from representing the plaintiff Truck, which was the lateracquired client. The firm was asked to represent Truck in litigation against the FFIC and others. It discovered that it had been defending an entity related to the FFIC in two wrongful termination suits. representation. The firm informed FFIC of Truck’s request for FFIC objected to the concurrent representation and did not provide written consent. proceeded to represent Truck. The firm, nevertheless, The court of appeal affirmed the 4 1 trial court’s order granting FFIC’s motion to disqualify the firm 2 because the firm knowingly created the conflict and could not 3 avoid the automatic disqualification rule applicable to concurrent 4 representation by withdrawing from representation of the less 5 favored client. 6 from its representation of its FFIC, its first client, did not 7 cure the conflict caused by concurrent representation. 6 Cal. App. 4th at 1057. That the firm withdrew 8 Truck does not address the question presented here, whether a 9 later-acquired client may obtain disqualification of counsel for a United States District Court For the Northern District of California 10 pre-existing client. 11 implicitly held that the duty of loyalty runs to the first- 12 acquired client because the firm was prohibited from withdrawing 13 its representation of the pre-existing client so as to continue to 14 represent the later acquired client. 15 Truck, 6 Cal. App. 4th at 1055-56 (the firm, “knowing that it was 16 representing FFIC in the wrongful termination cases, nevertheless 17 agreed to begin representing Truck against FFIC in the insurance 18 coverage case.”)) (emphasis added in Reply Brief). 19 recognizing the distinction between former representation and 20 concurrent representation, the court of appeal emphasized the 21 concern for the duty of loyalty owed to each client and did not 22 differentiate between an earlier- and later-acquired client in the 23 case of concurrent representation: 24 25 26 27 28 MotionPoint argues that the court in Truck Def.’s Reply at 3-4 (citing However, in In cases involving the representation of a client against a former client, “the initial question is ‘whether the former representation is “substantially related” to the current representation.’ (See Trone v. Smith (9th Cir. 1980) 621 F.2d 994, 998, and authorities cited therein.)” (Global Van Lines v. Superior Court, [144 Cal. App. 3d 483, 488 (1983)], fn. omitted.) “Substantiality is present if the factual contexts 5 1 2 3 4 5 6 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 of the two representations are similar or related.” (Trone v. Smith (9th Cir. 1980) 621 F.2d 994, 998.) If a substantial relationship exists, courts will presume that confidences were disclosed during the former representation which may have value in the current relationship. Thus, actual possession of confidential information need not be proven when seeking an order of disqualification. (Civil Service Com. v. Superior Court (1984) 163 Cal.App.3d 70, 7980.) In contrast, in the concurrent representation context “[t]he principle precluding representing an interest adverse to those of a current client is based not on any concern with the confidential relationship between attorney and client but rather on the need to assure the attorney's undivided loyalty and commitment to the client. [Citations.]” (Civil Service Com. v. Superior Court, supra, 163 Cal.App.3d at p. 78, fn. 1.) This distinction between former representation and concurrent representation, and the distinct concerns at issue, are well recognized: “In contrast to representation undertaken adverse to a former client, representation adverse to a present client must be measured not so much against the similarities in litigation, as against the duty of undivided loyalty which an attorney owes to each of his clients.” (Unified Sewerage Agency, etc. v. Jelco Inc. (9th Cir. 1981) 646 F.2d 1339, 1345, italics in original; see also Cinema 5, Ltd. v. Cinerama, Inc. (2d Cir. 1976) 528 F.2d 1384, 1386.) If this duty of undivided loyalty is violated, “public confidence in the legal profession and the judicial process” is undermined. (See In re Yarn Processing Patent Validity Litigation (5th Cir. 1976) 530 F.2d 83, 89.) Truck, 6 Cal. App. 4th at 1056-57. 20 In support of their argument that counsel’s duty of loyalty 21 runs to its first client, such that counsel may not be 22 disqualified from representing an existing client on a motion by a 23 later-acquired client, MotionPoint and McDermott cite Friskit v. 24 RealNetworks, Inc., 2007 WL 1994204 (N.D. Cal.). There, the Chief 25 Executive Officer and chairman of the defendant company moved to 26 disqualify a firm representing the plaintiff because, after the 27 firm had begun representing the plaintiff, the CEO retained the 28 6 1 firm in an unrelated matter. 2 disqualification and stated that it is “clear that the duty of 3 loyalty runs to the first client and precludes disqualification at 4 the instance of the later-acquired client.” 5 1994204 at *1. 6 The court denied a motion for Friskit, 2007 WL The Magistrate Judge expressly rejected MotionPoint’s 7 reliance on Friskit in favor of the reasoning set forth in Fujitsu 8 Limited v. Belken International, et al., 2010 WL 5387920 (N.D. 9 Cal.). June 20, 2012 Order at 15-16. In Fujitsu, the defendant United States District Court For the Northern District of California 10 Netgear moved to disqualify the law firm of Baker Botts, which 11 concurrently represented the plaintiff Fujitsu. 12 Bott’s first-acquired client, while Netgear was the firm’s later- 13 acquired client. 14 concurrent representation, Fujitsu and Netgear were adverse to 15 each other and it had simply “overlooked the adversity between 16 Fujitsu and Netgear” at the time that Netgear engaged the firm to 17 represent it. 18 cured the defect by withdrawing from its representation of 19 Netgear, the second client. 20 that California law prohibited counsel from withdrawing its 21 representation of a pre-existing client in favor of a new client, 22 but allowed counsel to withdraw from representing the later- 23 acquired client. 24 rejected that view. 25 did not distinguish between pre-existing and later-acquired 26 clients and cited subsequent state appellate court authority 27 holding that “‘a lawyer may not avoid the automatic 28 disqualification rule inapplicable to concurrent representation of Fujitsu was Baker Baker Botts conceded that, during the period of 2010 WL 5387920 at *3. Baker Botts argued that it Citing Truck, Baker Botts contended 2010 WL 5387920 at *6. The court, however, In Fujitsu, the court determined that Truck 7 1 conflicting interests by unilaterally converting a present client 2 into a former client.’” 3 Bebe, Inc. v. Guess? Inc., 112 Cal. App. 4th 810, 822 (2003)). 4 2010 WL 5387920 at *7 (quoting Pour Le In granting the motion for disqualification, the Magistrate 5 Judge agreed with the analysis of California law set forth in 6 Fujitsu and held that the per se rule of disqualification applies 7 to McDermott’s concurrent representation conflict. 8 considered the relevant authority, the Court determines that the 9 June 20, 2012 order was not clearly erroneous or contrary to law. United States District Court For the Northern District of California 10 11 Having CONCLUSION For the reasons set forth above, MotionPoint’s motion for 12 relief from the Magistrate Judge’s June 20, 2012 order is denied. 13 Docket No. 204. 14 IT IS SO ORDERED. 15 16 17 Dated: 9/11/2012 CLAUDIA WILKEN United States District Judge 18 19 20 21 22 23 24 25 26 27 28 8

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