Sonos Inc. v. D&M Holdings Inc. et al
Filing
70
MEMORANDUM OPINION regarding MOTION to Disqualify Counsel (D.I. 19 ). Signed by Judge Richard G. Andrews on 9/9/2015. (nms)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
SONOS, INC.,
Plaintiff;
v.
D&M HOLDINGS INC. d/b/a THE D+M
GROUP" D&M HOLDINGS U.S. INC., and
DEN ON ELECTRONICS (USA), LLC,
Civil Action No. 14-1330-RGA
Defendants.
MEMORANDUM OPINION
Philip A. Rovner, Esq. (argued), Jonathan A. Choa, Esq., POTTER ANDERSON & CORROON
LLP, Wilmington, DE; George I. Lee, Esq., Sean M. Sullivan, Esq., Rory P. Shea, Esq., J. Dan
Smith, Esq., LEE SULLIVAN SHEA & SMITH LLP, Chicago, IL.
Attorneys for Plaintiff.
Jack B. Blumenfeld, Esq., Michael J. Flynn, Esq., MORRIS, NICHOLS, ARSHT &TUNNELL
LLP, Wilmington, DE; John M. Jackson, Esq., Nathaniel (Nate) St. Clair II, Esq., Kurt A.
Schwarz, Esq. (argued), Matthew C. Acosta, Esq., JACKSON WALKER L.L.P, Dallas, TX;
David Folsom, Esq., JACKSON WALKER L.L.P., Texarkana, TX.
Attorneys for Defendants.
September
1-,
2015
!d!:lis~
STRICTJUD.-4--
Before the Court is Defendants' motion to disqualify the law firm of Lee, Sullivan, Shea
& Smith ("Lee Sullivari"). (D.I. 19). The matter has been fullybriefed.
(D.I. 20, 28, 45).
The Court held oral argument on June 19, 2015. (D.I. 50). For the reasons set forth below,
Defendants' motion is denied.
I.
BACKGROUND
Plaintiff filed the present action forpatent infringement against Defendants on October
-21, 2014, alleging infringement of multiple patents relating to wireless audio technology. (D.I.
1). Plaintiff accuses Defendants' home entertainment operating system (REOS) of
infringement. (Id.). At the time of the complaint, Plaintiff was represented by the law firm
McDonnell, Boehnen, Hulbert & Berghoff LLP ("McDonnell Boehnen"). McDonnell Boehnen
has since withdrawn as Plaintiffs counsel. (D.I. 5). Plaintiff is now represented by Lee
Sullivan. (D.1. 15).
McDonnell Boehnen began representing Defendants in patent related matters in 2002.
(D.I. 33 if 6). Mr. George Lee began working on patent litigation matters for Defendants in
2002 but stopped in March 2009. (Jd:if 8). Mr. Sean Sullivan worked on patent matters for
Defendants between 2003 and mid-2007. (D.I. 36'if 8). Mr. Rory Shea only worked on two
assignments for Defendants, one as a summer associate in 2005 and another as an associate in
September 2006. (D.I. 34·if 8). Mr. Dan Smith never performed any work for Defendants.
(D.I. 35 if 8).
In early 2012, Mr. Lee began representing Plaintiff while he was still working at
McDonnell Boehnen. (D.I. 33 ·if 20). Defendants acquired the technology behind the accused
REOS product in the latter part of2012 . .(D.I. 38-1 at 16 [Exh. CJ). In June2014, Defendants
1
launched the accused product. (D.I. 21if11). Defendants issued a press release to this effect
on June 2,2014. (D.I. 38-1 at 2 [Exh. A]). On June 5, 2014, McDonnell Boehnen ended its
attorney-client relationship with Defendants. (D.I. 23 ·ir 4; D.I. 33 if 25). There is no allegation
that any of the Lee Sullivan lawyers learned anything about HEOS from Defendants while at
McDonnell Boehnen. (See generally D.I. 21).
. Plaintiff asked McDonnell Boehnen to analyze Defendants' HEOS products for possible
infringement in September 2014. (D.I. 33 ·ir 29). McDonnell Boehnen filed the complaint in
the present case on behalf of Plaintiff in October 2014 (with Mr. Sullivan and Mr. Shea on the
complaint (D.I. 1 at 20)). McDonnell Boehnen withdrew as Plaintiff's counsel on November
19, 2014. (D.I. 5).
In December 2014, Mr. Lee, Mr. Sullivan, Mr. Shea, and Mr. Smith left
McDonnell Boehnen. (D.I. 33, 34, 35 & 36). They formed Lee Sullivan on January 1, 2015.
(D .I. 33 'if 4). Lee Sullivan entered an .appearance in the present case on behalf of Plaintiff on
January 26, 2015. (D.I. 15).
II.
LEGAL STANDARD
This Court has summarized the relevant legal principles for determining a motion to
disqualify:
The Court has the inherent authority to supervise the
professional conduct of attorneys appearing before it, including the
power to disqualify an attorney from a representation. See United
States v. Miller, 624 F.2d 1198, 1201 (3d Cir. 1980). Motions to
disqualify are "generally disfavored" and, therefore, require the
moving party to show clearly that "continued representation would
be impermissible." Talecris Biotherapeutics, Inc. v. Baxter Int'!
Inc., 491 F. Supp. 2d 510, 513 (D. Del. 2007) (internal quotation
marks and citations omitted); see also Conley v. Chaffinch, 431 F.
Supp. 2d 494, 496 (D. Del. 2006) (same). Because "[t]he
maintenance of public confidence in the propriety of the conduct of
those associated with the administration of justice is so important,"
however, a court may disqualify an attorney "for failing to avoid
2
even the appearance ofimpropriety." KabiPharmaciaAB v. Alcon
Surgical, Inc., 803 F. Supp. 957, 960 (D. Del. 1992).
Attorney conduct is governed by the ethical standards of the
See In re Corn
court before which the attorney appears.
Derivatives Antitrust Litig., 748 F.2d 157, 160 (3d Cir. 1984). The
District of Delaware has adopted the Model Rules of Professional
Conduct ("M.R.P.C."). See D. Del. LR 83.6(d)(2). M.R.P.C.
Rule 1.9(a) provides:
A lawyer who has formerly represented a client in a
matter shall not thereafter represent another person
in the same or a substantially related matter in which
that person's interests are materially adverse to the
interests of the former client unless the former client
gives informed consent, confirmed in writing.
To establish that a representation violates· Rule 1.9, four
elements must be shown: "(1) the lawyer must have had an attorneyclient relationship with the former client; (2) the present client's
matter must either be the same as the matter the lawyer worked on
for the first client, or a 'substantially related' matter; (3) the interests
of the second client must be materially adverse to the interests of the
former client; and (4) the former client must not have consented to
the representation after consultation." Apeldyn Corp. v. Samsung
Elecs. Co., Ltd., 660 F. Supp. 2d 557, 561 (D. Del. 2009).
To determine whether a current matter is "substantially
related" to a matter involved in a former representation, and, thus,
whether disqualification under Rule 1.9 is appropriate, the Court
must answer the following three questions: "(1) What is the nature
and scope of the prior representation at issue? (2) What is the nature
of the present lawsuit against the former client? (3) fu the course of
the prior representation, might the client have disclosed to his
attorney confidences which could be relevant to the present action?
fu particular, could any such confidences be detrimental to the
former client in the current litigation?" Satellite Fin. Planning
Corp. v. First Nat'l Bank of Wilmington, 652 F. Supp. 1281, 1283
(D. Del. 1987) (internal quotation marks and citations omitted); see
also Talecris, 491 F. Supp. 2d at 514.
As the Third Circuit has explained, M.R.P .C. 1.9 exists for
the purpose of preventing "even the potential that a former client's
confidences and secrets may be used against him," to maintain
"public confidence in the integrity of the bar," and to fulfill a client's
rightful expectation of "the loyalty of his attorney in the matter for
which he is retained." Corn Derivatives, 748 F.2d at 162.
Therefore, in attempting to determine whether a "substantial
3
relationship" exists, "disqualification is proper when the similarity
in the two representations is enough to raise a common-sense
inference that what the lawyer learned from his former client will
prove useful in his representation of another client whose interests
are adverse to those of the former client." Cardona v. General
Motors Corp., 942 F. Supp. 968, 973 (D.N.J. 1996) (internal
quotation marks and citations omitted). While the party seeking
disqualification bears the burden of establishing the existence of a
substantial relationship, any doubts about whether disqualification
is appropriate should be resolved in favor of the moving party, in
order to ensure protection of client confidences.
See INA
Underwriters v. Nalibotsky, 594 F. Supp. 1199, 1207 (E.D. Pa.
1984); see also Buschmeierv. G & G Invs., Inc., 2007 WL4150408,
at *7 (E.D. Pa. Nov. 19, 2007).
To the extent that a motion to disqualify involves imputing
an individual lawyer's representation to an entire firm, M.R.P.C.
1.lO(a) is also relevant. Rule 1.lO(a)(l) provides:
·While lawyers are associated in a firm, none of them
shall knowingly represent a client when any one of
them practicing alone would be prohibited from
doing so by Rules 1.7 or 1.9, unless the prohibition
is based on a personal interest of the prohibited
lawyer and does not present a significant risk of
materially limiting the representation of the clientby
the remaining lawyers in the firm.
Rule 1.10(a)(2) applies in circumstances in which a firm is
conflicted due to a prior representation undertaken by an attorney
while the attorney was at a different law firm. Rule 1.10 "imputes
one attorney's conflicts to all other attorneys in his firm." United
States v. McDade, 404 Fed. App'x 681, 683 (3d Cir. Dec. 22, 2010);
see also Exterior Sys. v. Noble Composites, Inc., 210 F. Supp. 2d
1062, 1068 (N.D. Ind. 2002) ("Rule 1.10 addresses situations where
a conflict of interest may be imputed to other lawyers associated in
the same firm with the tainted lawyer.").
Resolving the question of whether to disqualify counsel
requires the Court to "carefully sift allthe facts and circumstances."
Nemours Found. v. Gilbane, Aetna, Fed. Ins. Co., 632 F. Supp. 418,
428 (D. Del. 1986) (internal citations and quotation marks omitted).
Indeed, "whether disqualification is appropriate depends on the facts
of the case and is never automatic." Boston Scientific Corp. v.
Johnson & Johnson, Inc., 647 F. Supp. 2d 369, 374 n.7 (D. Del.
2009). The required inquiry necessarily involves "a painstaking
analysis of the facts." Satellite Fin. Planning, 652 F. Supp. at 1283
4
(internal quotation marks omitted); see also Carlyle Towers Condo.
Ass'n v. Crossland Sav., FSB, 944 F. Supp. 341, 345 (D.N.J. 1996)
("Disqualification. questions are intensely fact-specific, and it is
essential to approach such problems with a keen sense of practicality
as well as a precise picture of the underlying facts."). Furthermore,
the Court approaches motions to disqualify counsel with "cautious
scrutiny," mindful of a litigant's right to the counsel of its choice.
Laker Airways, Ltd. v. Pan American World Airways, 103 F.R.D.
22, 27-28 (D.D.C. 1984).
Intellectual Ventures I LLC v. Checkpoint Software Techs. Ltd, 2011 WL 2692968,
*~
(D. Del.
June22, 2011).
III.
DISCUSSION
Defendants argue that Lee Sullivan should be disqualified under Rule 1. 7, which pertains
to concurrent conflicts of interest. (D.I. 20 at 12). Rule 1.7 states:
(a) Except as provided in paragraph (b), a lawyer shall not represent
.a client if the representation involves a concurrent conflict of
interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse
to another client; or
(2) there is a significant risk that the representation of one or
more clients will be materially limited by the lawyer's
responsibilities to .another client, a former client or a third person or
by a personal interest of the lawyer.
None of the Lee Sullivan lawyers has had an actual concurrent conflict of interest iri the present
case. Mr. Lee, who was the last of the Lee Sullivan lawyers to do any work for Defendants,
stopped working on matters for Defendants in March 2009 and began representing Plaintiff in
early 2012. (D.I. 33). Defendants, however, were still clients of McDonnell Boehnen in 2012.
I declined to take any ex parte submissions from Defendants (see D.I. 50 at 53), and thus it is
possible that some of the patent applications that McDonnell Boehnen lawyers were pursuing on
behalf of Plaintiff were "directly adverse" to the Defendants' interests. There is no evidence,
however, that any of the Lee Sullivan lawyers, as prohibited by Rule 1.IO(a)(l), "knowingly''
5
represented Plaintiff at a time when they had any reason to believe (let alone knowledge) that
there was a conflict with another client's interests. Plaintiff operates in the field of wireless
audio technology, and Defendants did not publicly enter this field until they released their REOS
product in June 2014. Thus, when Mr. Lee began representing Plaintiff in litigation in 2012, he
had no concurrent conflict, and during the entire time McDonnell Boehnen represented
Defendants in 2012 to 2014, he had no actual concurrent conflict and did not violate any
disciplinary rules. Therefore, Rule 1. 7 does not apply .1
Since I have not reviewed the proffered ex parte materials, I will assume without
deciding that Rule 1.7(a) applied to the Lee Sullivan lawyers while at McDonnell Boehnen as
imputed grounds for disqualification. See Rule 1. lO(a)(l ). I do not think this matters. When
the Lee Sullivan lawyers left McDonnell Boehnen, they left any imputed disqualifications behind
them. The rule of imputed disqualification applies "[w]hile lawyers are associated in a firm."
Id. When lawyers are no longer associated in a firm, they are not subject to the imputed
disqualifications they had while in the firm. Plaintiff raised this argument in its brief, citing
multiple cases. (D.I. 32, pp. 13-17). Defendants did not respond to it in their reply brief. (D.I.
45). Plaintiff raised this argument again at oral argument. (D.I. 50 at 30-35). Defendants
responded, but without disagreeing with Plaintiff that imputed disqualification would not follow
the Lee Sullivan lawyers to their new firm. Rather, Defendants' position was that the Lee
Sullivan lawyers had an actual conflict because two of them had signed the complaint in this
1 Defendants also rely on the so-called "hot potato" doctrine for their Rule 1. 7 argument. The Third Circuit,
however, has not had occasion to adopt the hot potato doctrine. The evidence in the record is the decision to
terminate the attorney-client relationship with Defendants was not made by any of the Lee Sullivan lawyers.
Therefore, assuming the existence of the "hot potato" doctrine, I do not fmd that it applies here to the Lee Sullivan
lawyers.
6
case. (D.I. 50 at 48). Thus, Defendants do not contest Plaintiffs argument that imputed
disqualification does not follow them to their new firm.
As for Defendants' position at oral argument, I disagree. When the two Lee Sullivan
lawyers signed the complaint, Defendants had not been McDonnell Boehnen' s client for about
4Yz months. An imputed conflict does not become an actual conflict just because it is not
noticed.
Defendants also argue that Lee Sullivan should be disqualified under Rule 1.9, which
pertains to conflicts of interest arising out of an attorney-client relationship with a former client.
(D.I. 20 at 15). It is undisputed that Defendants are former clients of the Lee Sullivan attorneys
and that Plaintiffs and Defendants' interests are materially adverse in the present case. The
only issue is whether Lee Sullivan's current representation of Plaintiff is the "same" or
"substantially related" to its attorneys' prior representation of Defendants while at McDonnell
Boehnen. I find it is not.
Although the Lee Sullivan attorneys' prior representation of Defendants involved matters
relating to patent litigation, it involved different patents and different products. Defendants
were not operating in the field of wireless audio technology until Defendants launched their
HEOS product in June 2014. At the time this occurred, McDonnell Boehnen ended its attorneyclient relationship with Defendants. Thus, anything the Lee Sullivan attorneys worked on for
Defendants prior to March 2009 (as they did no work for Defendants after then) is not
substantially related to their representation of Plaintiff. The present litigation is solely related to
the asserted patents and the accused HEOS technology. Any confidences that Defendants
disclosed to the Lee Sullivan attorneys during their prior representation occurred before March
2009 and involved unrelated patents and technology. Thus, no confidential information
7
disclosed in prior cases would be relevant to the patents or technology in suit. At most,
Defendants disclosed their general strategy for handling patent litigation, which is not enough to
warrant disqualification. Thus, I do not believe there is any evidence that the Lee Sullivan
attorneys' representation of Plaintiff in this case is substantially related to any of the work
previously performed for Defendants. Therefore, the Lee Sullivan attorneys have no actual or
imputed conflicts of interest, and I will not disqualify them.
IV.
CONCLUSION
For the reasons set forth herein, Defendants' motion is denied. A separate order will be
entered.
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?