TransPerfect Global, Inc. et al v. MotionPoint Corporation
Filing
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ORDER by Judge Claudia Wilken 204 DENYING MOTION FOR RELIEF FROM JUNE 20, 2012 ORDER GRANTING MOTION FOR DISQUALIFICATION OF COUNSEL. (ndr, COURT STAFF) (Filed on 9/11/2012)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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TRANSPERFECT GLOBAL, INC.;
TRANSPERFECT TRANSLATIONS
INTERNATIONAL, INC.; AND
TRANSLATIONS.COM, INC.,
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United States District Court
For the Northern District of California
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ORDER DENYING
MOTION FOR RELIEF
FROM JUNE 20, 2012
ORDER GRANTING
MOTION FOR
DISQUALIFICATION
OF COUNSEL
Plaintiff/Counterclaim
Defendant,
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No. C 10-2590 CW
v.
MOTIONPOINT CORPORATION,
Defendant/Counterclaim
Plaintiff.
________________________________/
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On May 30, 2012, in this patent infringement case, Plaintiffs
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and Counterclaim Defendants TransPerfect Global, Inc.,
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TransPerfect Translations, International, Inc., and
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Translations.com, Inc., collectively referred to as TransPerfect,
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moved to disqualify Defendant and Counterclaim Plaintiff
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MotionPoint Corporation’s counsel McDermott Will & Emery, LLP.
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The motion was referred to Magistrate Judge Spero, who held a
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hearing on June 20, 2012, and granted the motion.
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Subsequently, McDermott and MotionPoint moved for relief from
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the non-dispositive disqualification order.
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the parties to file supplemental briefing on the limited issue of
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whether a later-acquired client may obtain disqualification of
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counsel for an earlier-acquired client.
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the parties’ submissions, the Court DENIES MotionPoint's motion
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for relief from the Magistrate Judge's June 20, 2012 order.
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The Court permitted
Having considered all of
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BACKGROUND
TransPerfect commenced this action in June 2010.
Phil Shawe
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and Elizabeth Elting are the co-Chief Executive Officers and co-
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owners of TransPerfect.
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percent of the company, respectively, and it is undisputed that
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they are significantly involved in management.
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2011, Carlyn S. McCaffrey was a partner at Weil, Gotshal & Manges
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LLP, and represented Shawe and Elting, providing estate planning
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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
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but continued to represent Shawe and Elting at McDermott, even
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though McDermott was representing MotionPoint in this action.
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LEGAL STANDARD
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A magistrate judge's order on a non-dispositive pre-trial
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matter shall be modified or set aside only if the reviewing
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district court finds that the order is clearly erroneous or
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contrary to law.
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erroneous when, “although there is evidence to support it, the
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reviewing court on the entire evidence is left with the definite
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and firm conviction that a mistake has been committed.”
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States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).
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Fed. R. Civ. P. 72(a).
An order is clearly
United
DISCUSSION
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MotionPoint objects to the following portions of the
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Magistrate Judge's June 20, 2012 order: (1) that TransPerfect’s
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delay in bringing the motion for disqualification of counsel did
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not warrant denying this motion and (2) that McDermott’s
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representation of Shawe and Elting in unrelated estate planning
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matters creates a conflict of interest within the meaning of
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California Rule of Professional Conduct 3-310(C)(3).
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Relief at 2.
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Mot. for
MotionPoint fails to demonstrate that the June 20, 2012 order
disqualifying counsel is clearly erroneous or contrary to law.
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With respect to the delay and other equities presented on the
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motion for disqualification, the June 20, 2012 order discussed the
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equities and policy concerns at length and found that MotionPoint
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cited no California authority denying a disqualification motion
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based on concurrent representation, rather than successive
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United States District Court
For the Northern District of California
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representation, upon only a finding of delay and prejudice.
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20, 2012 Order at 17.
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June
With respect to MotionPoint’s second objection on the ground
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that McDermott did not breach its duty of loyalty to Shawe and
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Elting within the meaning of Rule 3-310(C)(3), the holding of the
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June 20, 2012 order that McDermott's representation of MotionPoint
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is directly adverse to Shawe and Elting, who together own 99% of
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TransPerfect, is not clearly erroneous or contrary to law.
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respect to the particular issue briefed by the parties on the
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instant motion, whether a later-acquired client may obtain
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disqualification of counsel for an earlier-acquired client,
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MotionPoint has not demonstrated that the June 20, 2012 order
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should be set aside.
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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
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(2) Accept or continue representation of more than one
client in a matter in which the interests of the
clients actually conflict; or
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(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.
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United States District Court
For the Northern District of California
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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
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trial court’s order granting FFIC’s motion to disqualify the firm
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because the firm knowingly created the conflict and could not
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avoid the automatic disqualification rule applicable to concurrent
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representation by withdrawing from representation of the less
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favored client.
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from its representation of its FFIC, its first client, did not
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cure the conflict caused by concurrent representation.
6 Cal. App. 4th at 1057.
That the firm withdrew
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Truck does not address the question presented here, whether a
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later-acquired client may obtain disqualification of counsel for a
United States District Court
For the Northern District of California
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pre-existing client.
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implicitly held that the duty of loyalty runs to the first-
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acquired client because the firm was prohibited from withdrawing
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its representation of the pre-existing client so as to continue to
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represent the later acquired client.
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Truck, 6 Cal. App. 4th at 1055-56 (the firm, “knowing that it was
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representing FFIC in the wrongful termination cases, nevertheless
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agreed to begin representing Truck against FFIC in the insurance
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coverage case.”)) (emphasis added in Reply Brief).
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recognizing the distinction between former representation and
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concurrent representation, the court of appeal emphasized the
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concern for the duty of loyalty owed to each client and did not
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differentiate between an earlier- and later-acquired client in the
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case of concurrent representation:
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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
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United States District Court
For the Northern District of California
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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.
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In support of their argument that counsel’s duty of loyalty
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runs to its first client, such that counsel may not be
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disqualified from representing an existing client on a motion by a
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later-acquired client, MotionPoint and McDermott cite Friskit v.
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RealNetworks, Inc., 2007 WL 1994204 (N.D. Cal.).
There, the Chief
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Executive Officer and chairman of the defendant company moved to
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disqualify a firm representing the plaintiff because, after the
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firm had begun representing the plaintiff, the CEO retained the
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firm in an unrelated matter.
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disqualification and stated that it is “clear that the duty of
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loyalty runs to the first client and precludes disqualification at
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the instance of the later-acquired client.”
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1994204 at *1.
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The court denied a motion for
Friskit, 2007 WL
The Magistrate Judge expressly rejected MotionPoint’s
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reliance on Friskit in favor of the reasoning set forth in Fujitsu
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Limited v. Belken International, et al., 2010 WL 5387920 (N.D.
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Cal.).
June 20, 2012 Order at 15-16.
In Fujitsu, the defendant
United States District Court
For the Northern District of California
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Netgear moved to disqualify the law firm of Baker Botts, which
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concurrently represented the plaintiff Fujitsu.
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Bott’s first-acquired client, while Netgear was the firm’s later-
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acquired client.
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concurrent representation, Fujitsu and Netgear were adverse to
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each other and it had simply “overlooked the adversity between
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Fujitsu and Netgear” at the time that Netgear engaged the firm to
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represent it.
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cured the defect by withdrawing from its representation of
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Netgear, the second client.
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that California law prohibited counsel from withdrawing its
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representation of a pre-existing client in favor of a new client,
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but allowed counsel to withdraw from representing the later-
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acquired client.
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rejected that view.
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did not distinguish between pre-existing and later-acquired
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clients and cited subsequent state appellate court authority
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holding that “‘a lawyer may not avoid the automatic
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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
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conflicting interests by unilaterally converting a present client
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into a former client.’”
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Bebe, Inc. v. Guess? Inc., 112 Cal. App. 4th 810, 822 (2003)).
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2010 WL 5387920 at *7 (quoting Pour Le
In granting the motion for disqualification, the Magistrate
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Judge agreed with the analysis of California law set forth in
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Fujitsu and held that the per se rule of disqualification applies
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to McDermott’s concurrent representation conflict.
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considered the relevant authority, the Court determines that the
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June 20, 2012 order was not clearly erroneous or contrary to law.
United States District Court
For the Northern District of California
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Having
CONCLUSION
For the reasons set forth above, MotionPoint’s motion for
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relief from the Magistrate Judge’s June 20, 2012 order is denied.
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Docket No. 204.
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IT IS SO ORDERED.
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Dated: 9/11/2012
CLAUDIA WILKEN
United States District Judge
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