Amazon.com, Inc. et al v. Personal Web Technologies, LLC et al

Filing 312

ORDER CONDITIONALLY GRANTING 283 STUBBS ALDERTON & MARKILES, LLP'S MOTION TO WITHDRAW AS COUNSEL FOR PERSONALWEB TECHNOLOGIES, LLC. Signed by Judge Beth Labson Freeman on 6/24/2022. (blflc4, COURT STAFF) (Filed on 6/24/2022)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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IN
RE
PERSONAL
WEB
TECHNOLOGIES, LLC ET AL., PATENT
LITIGATION

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AMAZON.COM, INC. and AMAZON WEB
SERVICES, INC.,

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Plaintiffs

United States District Court
Northern District of California

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v.

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PERSONALWEB TECHNOLOGIES, LLC
and LEVEL 3 COMMUNICATIONS, LLC,

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Case No. 18-md-02834-BLF
ORDER CONDITIONALLY
GRANTING STUBBS ALDERTON &
MARKILES, LLP’S MOTION TO
WITHDRAW AS COUNSEL FOR
PERSONALWEB TECHNOLOGIES,
LLC

Case No.: 5:18-cv-00767-BLF

Defendants.

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PERSONALWEB TECHNOLOGIES, LLC
and LEVEL 3 COMMUNICATIONS, LLC,

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Case No.: 5:18-cv-05619-BLF

Plaintiffs

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v.
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TWITCH INTERACTIVE, INC.,

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Defendant.

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Before the Court is Stubbs Alderton & Markiles, LLP’s (“SAM”) second motion to withdraw
as counsel for PersonalWeb Technologies, LLC (“PersonalWeb”) as to the post-judgment collection
proceedings regarding PersonalWeb’s patent infringement claims against Amazon.com, Inc.;
Amazon Web Services, Inc.; and Twitch Interactive, Inc. (collectively, “Amazon”). See Motion,
ECF No. 728.1 In compliance with this Court’s Order, ECF No. 752, Michael Weiss, as President

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All ECF numbers in this order pertain to In re: PersonalWeb Techs., LLC, No.
18–md–02834–BLF.

United States District Court
Northern District of California

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and Manager of PersonalWeb, appeared as a representative of PersonalWeb along with specially

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appearing counsel Robert M. Charles, Jr. at the June 23, 2022 hearing on PersonalWeb’s motion.

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SAM previously filed a motion to withdraw, which the Court conditionally granted on June 25,

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2021, holding that SAM could withdraw only if replacement counsel for PersonalWeb filed a notice

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of appearance. See Order on First Motion to Withdraw, ECF No. 694. Since that order, no notice

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of appearance for PersonalWeb’s replacement counsel has been filed, so SAM remains as

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PersonalWeb’s counsel in this case.

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developments in the case since the Court’s order on SAM’s first motion to withdraw have put SAM

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in danger of committing California ethical violations.

In its second motion to withdraw, SAM argues that

See Motion, ECF No. 728; Reply,

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ECF No. 748. Specifically, SAM points out that PersonalWeb has failed to comply with the Court’s

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discovery orders, creating potential conflict and competent representation issues on SAM’s part.

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See ECF Nos. 664, 704. Additionally, SAM points out that a Los Angeles County Superior Court

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has issued a preliminary injunction in a PersonalWeb receivership action appointing a receiver (the

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“Receiver”) and enjoining PersonalWeb from interfering with the Receiver’s duties. See Kehr

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Decl., ECF No. 728-1, Ex. E. SAM argues that it would breach the preliminary injunction if it

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continued to represent PersonalWeb in this case. Amazon opposes SAM’s motion and makes

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several requests for affirmative relief against SAM. See Opposition, ECF No. 742.

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Based on the below reasoning, the Court CONDITIONALLY GRANTS SAM’s second

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motion to withdraw. As with the Court’s order conditionally granting SAM’s first motion to

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withdraw, SAM may withdraw (1) once PersonalWeb has filed a notice of appearance for

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replacement counsel or (2) upon satisfactory explanation of the Receiver’s refusal to authorize

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substitute counsel and submission of effective contact information for the Receiver and

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PersonalWeb. Additionally, as outlined at the June 23, 2022 hearing on SAM’s motion to withdraw,

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the Court DIRECTS SAM to make several requests of the Receiver, as outlined below. Also, the

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Court STRIKES Amazon’s requests for affirmative relief against SAM and STAYS further motion

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practice before the Magistrate Judge handling post-judgment discovery.

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I.

BACKGROUND
On July 27, 2021, the Court issued an Amended Judgment in favor of Amazon for
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$5.4 million in attorneys’ fees, costs, and post-judgment interest.

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ECF No. 708. The Court’s judgment followed a finding on summary judgment that Amazon did

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not infringe PersonalWeb’s asserted patents. See Summary Judgment Order, ECF No. 578.

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On May 25, 2021, SAM moved to withdraw as counsel for PersonalWeb, arguing that

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withdrawal was appropriate because PersonalWeb had discharged SAM as its counsel and retained

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replacement counsel to represent it in the post-judgment collection proceedings. See ECF No. 688.

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On June 25, 2021, the Court conditionally granted SAM’s motion to withdraw, allowing SAM to

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withdraw only upon notice of appearance by replacement counsel. See Order, ECF No. 694 at 4.

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The Court found that unless replacement counsel filed a notice of appearance, SAM’s withdrawal

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United States District Court
Northern District of California

See Amended Judgment,

would unduly prejudice Amazon by thwarting Amazon’s efforts to collect its judgment. See id.

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In the year since the Court’s June 25, 2021 Order, no notice of appearance for PersonalWeb’s

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replacement counsel has been filed in this case. SAM now moves to withdraw as counsel for

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PersonalWeb for a second time. See Motion, ECF No. 728. SAM argues that based on factual

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developments since the Court’s order conditionally granting SAM’s first motion to withdraw, the

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prejudice to SAM if it is not allowed to withdraw outweighs any prejudice to Amazon from SAM’s

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withdrawal. See Motion, ECF No. 728. Specifically, SAM argues that if it is not allowed to

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withdraw, then it risks violating provisions of the California Business & Professions Code and the

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California Rules of Professional Conduct. See id. Amazon opposes, arguing that SAM has not

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identified grounds warranting reconsideration of the Court’s denial of SAM’s previous withdrawal

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motion. See Opposition, ECF No. 742.

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SAM points to two main developments since the Court’s order conditionally granting SAM’s

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first motion to withdraw.

First, SAM points to a state court receivership action involving

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PersonalWeb. On April 27, 2021, creditors filed a receivership action in Los Angeles County

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Superior Court against PersonalWeb (“Receivership Action”). The Los Angeles County Superior

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Court issued a preliminary injunction appointing Robb Evans & Associates LLC (the “Receiver”)

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as receiver on June 1, 2021. See Kehr Decl., ECF No. 728-1, Ex. E. The stipulation enjoined

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PersonalWeb and its representatives, inter alia, from “[d]oing any act or thing whatsoever to

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interfere with the Receiver taking control or possession of, or managing the property subject to this
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United States District Court
Northern District of California

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receivership; or in any way to interfere with the Receiver; or to harass or interfere with the duties of

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the Receiver; or to interfere in any manner with the exclusive jurisdiction of this Court over the

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property and assets of Defendant PersonalWeb, or its subsidiaries or affiliates.” See id. at 5. Further,

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the stipulation enjoined PersonalWeb and its representatives from “[c]ommencing, prosecuting,

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continuing, or entering into any suit or proceeding in the name or on behalf of Defendant

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PersonalWeb, or any of their subsidiaries or affiliates, except for any pending enforcement actions

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by Defendant PersonalWeb concerning it [sic] intellectual property claims[.]” See id. at 4.

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Second, SAM points to PersonalWeb’s failure to comply with the Court’s April 27 and

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July 20, 2021 discovery orders. See ECF Nos. 664, 704. SAM also points to Amazon’s threats of

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sanctions and contempt motions against SAM and PersonalWeb if PersonalWeb continues to fail to

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comply with the Court’s discovery orders. See Motion, ECF No. 728 at 7–8 (citing Gersh Decl.,

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ECF No. 728-6 ¶ 6, Ex. J; Parker Decl., ECF No. 728-2 ¶¶ 3–4; Sherman Decl., ECF No. 728-3

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¶ 6).

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II.

LEGAL STANDARD

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Under Civil Local Rule 11-5, counsel may not withdraw from an action until relieved by

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order of the Court after written notice has been provided, reasonably in advance, to the client and to

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all other parties who have appeared in the case. Civ. L.R. 11-5(a). A corporation, unincorporated

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association, partnership or other such entity may appear only through a member of the bar of this

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Court. See Civ. L.R. 3-9(b); see also United States v. High Country Broad Co., Inc., 3 F.3d 1244,

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1245 (9th Cir. 1993).

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“In this district, the conduct of counsel, including withdrawal of counsel, is governed by the

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standards of professional conduct required of members of the State Bar of California.” Optrics Inc.

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v. Barracuda Networks Inc., No. 17–cv–04977–RS, 2020 WL 1815690, at *2 (N.D. Cal. Feb. 28,

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2020) (citation omitted). Before withdrawing for any reason, however, an attorney must take

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“reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client, including

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giving due notice to the client, allowing time for employment of other counsel, complying with

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rule 3-700(D), and complying with applicable laws and rules.” Cal. R. Prof. Conduct 3-700(A)(2).

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The decision to permit counsel to withdraw is within the sound discretion of the trial court.
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United States District Court
Northern District of California

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United States v. Carter, 560 F.3d 1107, 1113 (9th Cir. 2009). Courts consider several factors when

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deciding a motion for withdrawal, including: “(1) the reasons counsel seeks to withdraw; (2) the

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possible prejudice that withdrawal might cause to other litigants; (3) the harm that withdrawal might

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cause to the administration of justice; and (4) the extent to which withdrawal will delay resolution

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of the case.” Deal v. Countrywide Home Loans, No. 09-CV-01643-SBA, 2010 WL 3702459, at *2

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(N.D. Cal. Sept. 15, 2010) (citations omitted).

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III.

DISCUSSION
SAM’s Motion to Withdraw

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A.

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SAM argues that withdrawal is warranted because if SAM continues to represent

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PersonalWeb in this action, SAM will violate the California Business & Professions Code and the

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California Rules of Professional Conduct. See Motion, ECF No. 728. First, SAM argues that

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California Business & Professions Code § 6103 precludes SAM from continuing to represent

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PersonalWeb because doing so would constitute “willful disobedience or violation” of the

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preliminary injunction in the Receivership Action. See Motion, ECF No. 728 at 5–6 (citing Kehr

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Decl., ECF No. 728-1, Ex. E).

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Conduct 1.1 precludes SAM from representing PersonalWeb, because SAM cannot do so “with

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competence” because of PersonalWeb’s lack of communication regarding the Court’s outstanding

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discovery orders. See id. at 6 (citing ECF Nos. 664, 704). Third, SAM argues that it cannot continue

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to represent PersonalWeb under California Rule of Professional Conduct 1.7(b), because Amazon

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may file a contempt motion or motion for sanctions related to PersonalWeb’s discovery obligations

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that could create a conflict between SAM and the uncooperative PersonalWeb. See id. at 7–8.

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Accordingly, SAM asserts that any prejudice to Amazon from SAM’s withdrawal is outweighed by

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the prejudice to SAM in remaining as PersonalWeb’s counsel. See id. at 8–9. SAM argues that

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courts have granted motions to withdraw even where they leave corporate parties unrepresented,

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leaving the party unrepresented and putting “extreme pressure” on it to find new counsel. See Reply,

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ECF No. 748 at 3–4 (citing Thomas G. Ferruzzo, Inc. v. Sup. Ct., 104 Cal.App.3d 501, 504 (1980);

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Gamet v. Blanchard, 91 Cal.App.4th 1276, 1284 (2001)). In response, Amazon argues that SAM

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has not identified a material change to warrant reconsideration; any ethical violations result from

Second, SAM argues that California Rule of Professional

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United States District Court
Northern District of California

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SAM improperly taking direction from PersonalWeb, rather than the Receiver; and allowing SAM

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to withdraw would prejudice Amazon, just as the Court previously held.

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ECF No. 742 at 6–9.

See Opposition,

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The Court finds that SAM has failed to show that circumstances have changed sufficiently

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to warrant modifying the Court’s prior order conditionally granting SAM’s motion to withdraw.

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See Order on First Motion to Withdraw, ECF No. 694. In that order, the Court found that “SAM’s

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withdrawal presents undue prejudice to [Amazon],” because “newly retained counsel has refused to

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appear” and “[i]t appears that PersonalWeb is manipulating the situation by claiming that SAM is

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not authorized to represent it in post-judgment proceedings while stalling on having its new attorney

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file an appearance.” See id. at 3. Accordingly, the Court granted SAM’s motion to withdraw on the

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condition that PersonalWeb filed a notice of appearance for replacement counsel. See id. at 4. A

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year has passed, and PersonalWeb has still failed to file a notice of appearance for replacement

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counsel.

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SAM’s arguments are insufficient to make the Court reconsider its prior order without

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obtaining certain information from the Receiver. As to SAM’s arguments related to the California

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Rules of Professional Conduct and PersonalWeb’s discovery obligations, if counsel could move to

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withdraw every time its client failed to meet its discovery obligations, the flood of unrepresented

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parties would inundate the courts. To minimize any prejudice to SAM while the Court works out

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the issue of PersonalWeb’s representation in this case, the Court hereby STAYS further motion

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practice before the Magistrate Judge handling post-judgment discovery.

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As to SAM’s argument regarding the California Business & Professions Code § 6103 and

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the preliminary injunction in the Receiver Action, the Court notes that the preliminary injunction in

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the Receivership Action explicitly carves out PersonalWeb’s intellectual property litigation. See

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Kehr Decl., ECF No. 728-1, Ex. E at 4. However, the reach of that provision is unclear as is the

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division of authority vested in the Receiver versus the authority retained by PersonalWeb to fulfill

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its obligations in these post-judgment proceedings under the jurisdiction of the federal court.

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It is not this Court’s intention to force SAM to violate the state court preliminary injunction

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or its ethical obligations. But the Court has serious concerns that PersonalWeb is making a mockery
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of these judicial proceedings. After all, it was PersonalWeb that invoked the jurisdiction of this

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Court by filing over 60 patent infringement cases against various Amazon customers. PersonalWeb

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lost all of those cases and is now left with a judgment against it for over $5 million. Performing a

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possum act by playing dead before this Court is not acceptable conduct. Thus, before SAM may

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withdraw from the case, the Court must receive communication from the Receiver on certain issues

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that will advise the Court on the necessity of allowing PersonalWeb to proceed as an unrepresented

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party or to order appearance of substitute counsel before SAM may withdraw.
To this end, the Court orders PersonalWeb to request that the Receiver provide written

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United States District Court
Northern District of California

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responses to the three questions set forth below to be transmitted by PersonalWeb to this Court.
Amazon’s Requests

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B.

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In its Opposition, Amazon makes several requests. See Opposition, ECF No. 742 at 9–10.

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First, Amazon requests that the Court direct SAM to comply with certain post-judgment discovery

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orders. See id. Second, Amazon requests that the Court order the Receiver to appear and show

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cause why he has failed to cause PersonalWeb to comply with the Court’s orders and why he has

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not retained substitute counsel in this action. See id. at 10. Third, Amazon requests that the Court

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retain jurisdiction over SAM regarding potential sanctions. See id.

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The Court STRIKES Amazon’s requests as improper attempts to seek affirmative relief in

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its Opposition. See Finjan, Inc. v. Blue Coat Sys., Inc., No. 13–cv–03999–BLF, 2015 WL 3630000,

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at *13 n.8 (N.D. Cal. June 2, 2015). Moreover, this Court will not interfere with the judicial acts of

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the Magistrate Judge handling these issues.

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IV.

ORDER
For the foregoing reasons, IT IS HEREBY ORDERED that:

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SAM’s second motion to withdraw is CONDITIONALLY GRANTED. SAM may

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withdraw (1) upon notice of appearance by replacement counsel for PersonalWeb;
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or (2) upon receipt of the Receiver’s responses to the inquiries listed in No. 2 and

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submission of effective contact information for PersonalWeb and its assurance that
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it will be responsive to these judicial proceedings. Satisfaction of No. 2 is not self7
executing and will require express approval of the Court;
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within seven days of this Order, PersonalWeb SHALL do the following:

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a. PersonalWeb SHALL provide a copy of this Order to the Receiver;
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b. PersonalWeb SHALL request in writing that the Receiver answer the following
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United States District Court
Northern District of California

questions in writing within 30 days and submit those answers to this Court
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immediately upon receipt:
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i. Based on the ongoing proceedings before the Northern District of
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California in In re PersonalWeb Technologies, LLC Patent Litigation,
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No. 18–md–02834–BLF, will the Receiver retain counsel to appear in this
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federal court case?
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ii. If the Receiver is not willing to retain counsel for the Receiver, will the
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Receiver authorize PersonalWeb to do so and to reasonably compensate
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that attorney?
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iii. If the Receiver is not willing to retain counsel, or authorize PersonalWeb
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to do so, will the Receiver confirm that there are no restrictions under the
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receivership proceedings barring PersonalWeb from complying with
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orders issued by the federal court, appearing before the Court, and making
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statements binding on PersonalWeb?
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c. PersonalWeb SHALL transmit to the Receiver a copy of this Order within seven
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days and submit a cover letter requesting a written response within 30 days
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thereafter;
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within 30 days of this Order, PersonalWeb SHALL file a status update with the Court

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indicating whether it has received a written response from the Receiver regarding the

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requests listed above;

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Court will communicate with the Los Angeles County Superior Court directly;

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5.

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Amazon’s requests for affirmative relief in its Opposition (ECF No. 742 at 9–10) are
STRICKEN; and

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if the Receiver chooses not to respond to PersonalWeb’s requests listed above, the

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Further motion practice before the Magistrate Judge handling post-judgment
discovery is stayed for 45 days.

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United States District Court
Northern District of California

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Dated: June 24, 2022
______________________________________
BETH LABSON FREEMAN
United States District Judge

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