NASDAQ, INC. et al v. MIAMI INTERNATIONAL HOLDINGS, INC. et al

Filing 127

OPINION filed. Signed by Judge Brian R. Martinotti on 11/26/2018. (mmh)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________________
:
NASDAQ, INC, et al.,
:
:
Civil Action No. 17-6664-BRM-DEA
Plaintiffs,
:
:
v.
:
:
OPINION
MIAMI INTERNATIONAL HOLDINGS, :
INC., et al.,
:
Defendants.
:
____________________________________:
MARTINOTTI, DISTRICT JUDGE
Before this Court is an appeal by Fish & Richardson, PC (“Fish”) (ECF No. 107) of
Magistrate Judge Douglas E. Arpert’s September 6, 2018 Memorandum and Order (ECF No. 105)
granting Nasdaq, Inc. (“Nasdaq”), Nasdaq ISE, LLC (“ISE”), and Ften, Inc.’s (“FTEN”)
(collectively, “Plaintiffs”) Motion to Disqualify Fish as Miami International Holdings, Inc, Miami
International Securities Exchange, LLC, MIAX Peral, LLC, and Miami International
Technologies, LLC’s (collectively, “MIAX”) counsel. (ECF No. 54.) Plaintiffs opposed the
appeal. (ECF No. 109.) Having reviewed the parties’ submissions filed in connection with the
appeal and having declined to hold oral argument pursuant to Federal Rule of Civil Procedure
78(b), for the reasons set forth below and for good cause having been shown, Fish’s Appeal (ECF
No. 107) is DENIED and Judge Arpert’s September 6, 2018 Memorandum and Order (ECF No.
105) is AFFIRMED.

I.

BACKGROUND
Fish does not dispute Judge Arpert’s recitation of facts to Nasdaq’s Motion to Disqualify.

See (ECF No. 107-1 at 9 (“[T]he core facts on Plaintiff’s Motion to Disqualify Fish were not in
dispute. Rather, the dispute was the legal conclusions to be drawn based on those facts, i.e.,
whether disqualification under RPCs 1.9 and 1.10 was appropriate.”).) Indeed, Judge Arpert noted
“[t]he relevant facts [were] generally not contested.” (ECF No. 105 at 6.) As such, the Court
incorporates Judge Arpert’s comprehensive recitation of the background, in relevant part:
Plaintiffs [Nasdaq], [ISE] and [FTEN] bring this action
alleging patent infringement and misappropriation of trade secrets
against four entities collectively referred to by the parties as MIAX.
The Complaint contains ten counts. Counts I and II of the Complaint
allege that MIAX has infringed two separate patents owned by ISE.
Counts III, IV, V and VI allege that MIAX has infringed four
separate patents owned by Nasdaq. Count VII alleges that MIAX
infringed a patent owned by FTEN. The final three counts, Counts
VIII through X, allege that MIAX misappropriated certain of
Nasdaq’s trade secrets.
The seven patents-in-suit relate generally to electronic
trading technology. More specifically, ISE’s patents are directed to
how an automated exchange allocates trades between traders.
FTEN’s patent relates to automatically cancelling orders by
monitoring market data from a plurality of exchanges. Nasdaq’s
patents are directed to displaying quotes in a particular way,
monitoring whether a trader’s trading terminal is online, and
assigning orders to designated securities processors. ECF No. 69-6
at ¶ 22. All of the patents-in-suit are alleged to be infringed by the
same accused products and services relating to electronic trading
platforms.
MIAX is represented in this action by [Fish] and Reed Smith
LLP (“Reed Smith”). Plaintiff Nasdaq is a former client of Fish.
Fish represented Nasdaq with respect to intellectual property matters
from 1998 until 2011, during which time Fish prosecuted many
patents on behalf of Nasdaq, including the four patents that Nasdaq
is asserting in the present case (the “Nasdaq Patents”). The Nasdaq
Patents were filed between 1998 and 2002, and the patents issued
between 2009 and 2011. ECF No. 54-1 at 3.
In 2011, Fish’s representation of Nasdaq was terminated.
ECF No. 69-1 at ¶ 6. Fish transferred Nasdaq’s patent portfolio to
another law firm, Nixon & Vanderhye, P.C. Id. Fish did not retain

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any copies of the physical files from Nasdaq after the representation
was terminated. Id. at ¶ 8. Most of the Fish attorneys that worked
on prosecuting the Nasdaq Patents still practice with Fish today, and
all reside in the firm’s Boston office. Id. ¶ 5.
When approached about representing MIAX in the instant
case, Fish apparently recognized that there was a conflict -- it could
not be adverse to its former client, Nasdaq, in any matter
substantially related to Fish’s prior representation. As such, Fish and
MIAX entered into a “limited-scope engagement agreement” with
respect to the present action. Id. ¶ 9. Under this agreement, MIAX
would be required to retain an additional law firm as “conflicts
counsel” to handle all matters where Fish would have a conflict with
Nasdaq. Id. MIAX retained Reed Smith as conflicts counsel.
Consequently, according to Fish, Fish is lead counsel for aspects of
the case pertaining to ISE, FTEN and the trade secret claims, but
Fish will have no input into the defense of the four Nasdaq Patents.
ECF No. 69 at 7. Reed Smith, on the other hand, is lead counsel for
issues relating to the Nasdaq Patents. Id.
When challenged by Nasdaq regarding its appearance in this
matter, Fish asserted that its appearance on behalf of MIAX presents
no conflict because its representation excludes the Counts in the
Complaint involving the Nasdaq Patents. ECF No. 54-1 at 4. Fish
advised Plaintiffs that in order to meet its ethical obligations to
Nasdaq, Fish screened every lawyer who previously represented
Nasdaq and has “walled off” its entire Boston office from
participation in this case (the Fish attorneys working on this case are
located in the firm’s New York, Texas, California and Washington
D.C. offices). Id.
(ECF No. 105 at 1-3.)
Nevertheless, on March 2, 2018, Plaintiffs moved to disqualify Fish, arguing Fish’s efforts
to avoid a conflict were “woefully deficient.” (ECF No. 54 at 4.) In their Motion to Disqualify,
they argued Fish’s participation in this matter will prejudice Nasdaq because “(1) Fish prosecuted
four of the seven patents that are asserted of this action; (2) the remaining three patents involve
the same field of technology for which Fish provided IP counseling to and prosecuted patents for
Nasdaq; and (3) the trade secret claims similarly involve the same technological field and may
implicate confidential information that Nasdaq provided to Fish during its previous relationship.”
(ECF No. 105 at 3.) On September 6, 2018, Judge Arpert granted Plaintiffs’ Motion to Disqualify

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Fish, finding in part, “[a]s opposing parties, and given the fact that the other Plaintiffs, IFE and
FTEn, are wholly-owned subsidiaries of Nasdaq, there can be no dispute that Nasdaq and MIAX
have adverse interest with respect to this litigation.” (ECF No. 105 at 7.) Now, Fish appeals Judge
Arpert’s decision. (ECF No. 107.)
II.

LEGAL STANDARD
With respect to a district judge’s review of a magistrate judge’s decision, Federal Rule of

Civil Procedure 72(a) states: “The district judge . . . must consider timely objections and modify
or set aside any part of the order that is clearly erroneous or is contrary to law.” Id. Similarly, this
Court’s Local Rules provide that “[a]ny party may appeal from a Magistrate Judge’s determination
of a non-dispositive matter within 14 days” and the District Court “shall consider the appeal and/or
cross-appeal and set aside any portion of the Magistrate Judge’s order found to be clearly erroneous
or contrary to law.” L.Civ.R. 72.1(c)(1)(A).
A district judge may reverse a magistrate judge’s order if the order is shown to be “clearly
erroneous or contrary to law” on the record before the magistrate judge. 28 U.S.C. 636(b)(1)(A)
(“A judge of the court may reconsider any pretrial matter [properly referred to the magistrate
judge] where it has been shown that the magistrate judge’s order is clearly erroneous or contrary
to law.”); Fed. R. Civ. P. 72(a); L.Civ.R. 72.1(c)(1)(A); Haines v. Liggett Grp., Inc., 975 F.2d 81,
93 (3d Cir. 1992) (describing the district court as having a “clearly erroneous review function,”
permitted only to review the record that was before the magistrate judge). The burden of showing
that a ruling is “clearly erroneous or contrary to law rests with the party filing the appeal.” Marks
v. Struble, 347 F. Supp. 2d 136, 149 (D.N.J. 2004). A district judge may find a magistrate judge’s
decision “clearly erroneous” when it is “left with the definite and firm conviction that a mistake
has been committed.” Dome Petroleum Ltd. v. Employers Mut. Liab. Ins. Co., 131 F.R.D. 63, 65

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(D.N.J. 1990) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)); accord
Kounelis v. Sherrer, 529 F. Supp. 2d 503, 518 (D.N.J. 2008). However, “[w]here there are two
permissible views of the evidence, the factfinder’s choice between them cannot be clearly
erroneous.” United States v. Waterman, 755 F.3d 171, 174 (3d Cir. 2014) (quoting Anderson v.
Bessemer City, 470 U.S. 564, 574 (1985)). The magistrate judge’s ruling is “contrary to law” if it
misinterpreted or misapplied applicable law. Kounelis, 529 F. Supp. 2d at 518; Gunter, 32 F. Supp.
2d at 164.
III.

DECISION
A. Limiting the Scope of Representation
Fish argues the threshold legal issue to be determined prior to deciding whether Fish is

averse to a “former client” in a “substantially related” matter under RPC 1.9(a) is whether Fish
was permitted to limit the scope of its representation of IMAX. (ECF No. 107-1 at 9-10.) Plaintiffs
argue Fish’s limited scope representation does not work to immunize the conflict of interest at
hand. (ECF No. 109 at 7-8.)
Rule of Professional Conduct 1.2(c) states, “A lawyer may limit the scope of the
representation if the limitation is reasonable under the circumstances and the client gives informed
consent.” The Restatement (Third) of the Law of Lawyering, Section 121, comment c(iii), notes
“[s]ome conflicts can be eliminated by an agreement limiting the scope of the lawyer’s
representation if the limitation can be given effect without rendering the remaining representations
objectively inadequate.” Illustration 4 of the Restatement is instructive:
Lawyer has been retained by Client to represent Client in general
business matters. Client has a distribution contract with
Manufacturer, and there is a chance that disputes could arise under
the contract. Lawyer represents Manufacturer in local real estate
matters completely unrelated to Client’s business. An agreement
between Lawyer and Client that the scope of Lawyer’s

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representation of Client will not extend to dealing with disputes with
Manufacturer would eliminate the conflict posed by the chance
otherwise of representing Client in matters adverse to Manufacturer
(see § 128). Such an agreement would not require the consent of
Manufacturer.
Id. § 121 ill. 4. To eliminate the conflict, the Lawyer was required to craft a representation
agreement that avoided all disputes involving the Client and Manufacturer to avoid the chance of
the Lawyer having to represent the Client in matters adverse to the Manufacturer. Id.
Although a lawyer may limit the scope of its representation, Judge Arpert was correct in
finding that the limitation here was unreasonable under the circumstances of this matter. (ECF No.
105 at 7.) It is undisputed that Fish is representing MIAX in this case and that Nasdaq is an
opposing party to the matter. An attorney-client relationship existed between Fish and Nasdaq for
over a decade, which means Fish has familiarity with Nasdaq’s strategic approaches to managing
its technology and inventions. In fact, Fish prosecuted Nasdaq Patents asserted in this case, and,
as such, there is no doubt that during the course of that relationship Fish obtained confidential
information that is likely to bear upon the current dispute between Nasdaq and MIAX whether as
to the patents or misappropriate on trade secrets claims. See Essex Chem. Corp. v. Hartford Acc.
& Indem. Co., 993 F. Supp. 241, 246 (D.N.J. 1998) (finding that, where the matters are
substantially related, “the court will presume that the attorney has acquired confidential
information from the former client”); see also Audio MPEG, Inc. v. Dell, Inc., 219 F. Supp. 3d
563, 569 (E.D. Va. 2016) (“It is well settled that once an attorney-client relationship has been
established, an irrebuttable presumption arises that confidential information was conveyed to the
attorney in the prior matter.”).
As opposing parties and given that IFE and FTEN are wholly-owned subsidiaries of
Nasdaq, Nasdaq and MIAX clearly have adverse interests in this litigation. Despite MIAX’s

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attempt to parcel individual claims in this case for conflict purposes, this is one lawsuit, all claims
are contained in a single Complaint, and IMAX elected to file a single motion to dismiss in
response to the Complaint. The single brief on the motion to dismiss filed by Fish and Reed Smith
attacked all the patents in the case on practically identical grounds, including those that Fish had
previously prosecuted and won for Nasdaq. In addition, the brief contained a joint introduction,
fact section, and joint exhibits. This demonstrates a collaborative effort in representing MIAX
against Nasdaq, irrespective of their limited scope representation agreement. As such, Judge
Arpert’s conclusion that Fish and MIAX’s limited-scope agreement was not appropriate under the
circumstances is not “clearly erroneous or contrary to law.” L.Civ.R. 72.1(c)(1)(A). Unlike the
Illustration 4 in the Restatement, Fish is representing IMAX in a matter adverse to Nasdaq and the
limited scope agreement did not avoid all disputes between Nasdaq and IMAX. Accordingly,
Fish’s Appeal is DENIED for this reason alone. Nevertheless, the Court will briefly address Fish’s
RPC 1.9 and 1.10 arguments.
B. RPC 1.9
Fish argues Plaintiffs did not carry their burden to justify disqualification. (ECF No. 1071 at 19.) Plaintiffs argue Judge Arpert correctly disqualified Fish under City of Atl. City v. Trupos,
992 A.2d 762 (N.J. 2010). (ECF No. 109 at 19.)
A motion for disqualification calls for the Court to “balance competing interests, weighing
the need to maintain the highest standards of the profession against a client’s right freely to choose
his counsel.” Dewey v. R.J. Reynolds Tobacco Co., 536 A.2d 243, 251 (N.J. 1988) (citation
omitted). However, “a person’s right to retain counsel of his or her choice is limited in that there
is no right to demand to be represented by an attorney disqualified because of an ethical
requirement.” Id. The burden of production is borne by the party seeking disqualification. Trupos,

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992 A.2d at 771. If the burden is met, the burden shifts to the attorney sought to be disqualified to
demonstrate the matter in which they represented the former client is not the “same or substantially
related” to the matter in which the disqualification motion is brought. Id. Therefore, the burden of
persuasion on all elements under RPC 1.9(a) remains with the moving party, it “bears the burden
of proving that disqualification is justified.” Id. (citation omitted). Lastly, “a determination of
whether counsel should be disqualified is, an issue of law, subject to de novo plenary appellate
review.” Id.
The Rule of Professional Conduct 1.9(a) states, “[a] lawyer who has represented a client in
a matter shall not thereafter represent another client in the same or a substantially related matter in
which that client’s interests are materially adverse to the interests of the former client unless the
former client gives informed consent confirmed in writing.” There are “three necessary predicates
to the application of R.P.C. 1.9(a)’s disqualification bar.” Trupos, 992 A.2d at 772. First, the law
firm must have “formerly represented” the plaintiff asserting disqualification. Id. Second, the
subsequent matter must be “materially adverse” to the interests of the former client. Id. Third, the
two matters must be “the same or substantially related.” Id.
As to the first element, Fish’s argument that this Court should only evaluate whether ISE
and FTEN are former clients of Fish is erroneous. Although neither ISE nor FTEN were ever
clients of Fish, Nasdaq was indisputably a “former client” of Fish and is an adverse party to IMAX
in this action. In fact, Fish is representing IMAX against Nasdaq in Counts VIII through X, alleging
that MIAX misappropriated certain of Nasdaq’s trade secrets. Therefore, the former client element
is met. The fact that neither ISE nor FTEN were ever clients of Fish is not an issue germane to
disqualification.

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As to the second element, Fish does not contest the “materially adverse” finding. It does
not discuss this requirement in its brief. Nevertheless, this matter is clearly “materially adverse”
to the interests of the Nasdaq. Fish prosecuted four of the seven patents that are asserted in this
action, the remaining three patents involve the same field of technology for which Fish allegedly
provided intellectual property counseling to and prosecuted patents for Nasdaq, and the trade secret
claims involve the same technological field and may implicate confidential information that
Nasdaq provided to Fish during its prior relationship. (ECF No. 105 at 3.)
As to the third element, Fish claims the matters are not “substantially related.” Specifically,
it contends that just because it represented Nasdaq years ago and the matters share similar subject
matter, is not enough to call the matters “substantially related.” (ECF No. 107-1 at 26.) Pursuant
to RPC 1.9,
matters are deemed to be “substantially related” if (1) the lawyer for
whom disqualification is sought received confidential information
from the former client that can be used against that client in the
subsequent representation of parties adverse to the former client, or
(2) facts relevant to the prior representation are both relevant and
material to the subsequent representation.
Trupos, 992 A.2d at 764. The Court finds Fish received confidential information from Nasdaq that
can be used against Nasdaq in this matter and facts relevant to Fish’s representation of Nasdaq are
relevant and material to this matter.
Through a decade long relationship with Nasdaq, Fish possessed information relating
generally to Nasdaq’s patent prosecution strategy and approach to defending the validity of its
patents, and knowledge of what Nasdaq protected as trade secrets apart from its patented
inventions in the electronic trading technology field. (ECF No. 109 at 23.) Fish’s prior intellectual
property counseling and prosecution work for Nasdaq unquestionably allowed Fish to gain access
to confidential information that can be used to Nasdaq’s detriment in this case. In fact, “[t]he seven

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asserted patents and the alleged trade secrets involve the same general field of technology, and the
accused instrumentalities are the same for all the patent infringement claims.” (ECF No. 105 at 7.)
Moreover, Fish unquestionably possesses direct knowledge of four of the seven patents in this
matter and has chosen to jointly participate in this matter with Reed Smith by filing a single motion
to dismiss. Kaselaan & D’Angelo Associates, Inc. v. D’Angelo, 144 F.R.D. 235, 239 (D.N.J. 1992)
(“Recognizing that plaintiff’s attorney’s longstanding relationship with Commercial Union would
necessarily have mad him privy to confidential and proprietary information of Commercial Union,
including its claims and litigation philosophy, its methods and procedures for defending claims
and litigation, and its information regarding the administration of various business operations, the
court held that plaintiff’s attorney could use such information to the substantial disadvantage of
his former client Commercial Union.”); Essex Chem. Corp.. Co., 993 F. Supp. at 246 (finding that,
where the matters are substantially related, “the court will presume that the attorney has acquired
confidential information from the former client”). Furthermore, the Fish attorneys involved in
Nasdaq’s past representation are still members of Fish in the Boston office.
Although approximately seven years have passed since Fish’s representation of Nasdaq,
the passage of time does not dilute the significance of the confidences provided and the
overwhelming substantial relationship between the issues here and the past relationship.
Accordingly, the matters are substantially related, and Fish’s Appeal is DENIED.
C. RPC 1.10
Fish argues in the alternative that even if there was a conflict, disqualification is
inappropriate. (ECF No. 107-1 at 31.) Plaintiffs argues disqualification was appropriate because
“whatever alleged prejudice that befalls MIAX is mitigated by the fact that ‘MIAX has been

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represented by two sets of attorneys form the outset of this litigation,’ and ‘Reed Smith’s
representation of MIAX can continue uninterrupted.” (ECF No. 109 at 32.)
While disqualification typically is the “result of finding that a disciplinary rule prohibits an
attorney’s appearance in a case, disqualification never is automatic.” United States v. Miller, 624
F.2d 1198, 1201 (3d Cir. 1980). In fact, “[m]otions to disqualify are viewed with ‘disfavor’ and
disqualification is considered a drastic measure which courts should hesitate to impose except
when absolutely necessary.” Alexander v. Primerica Holdings, Inc., 822 F. Supp. 1099, 1114
(D.N.J. 1993) (citation omitted). A court “should disqualify an attorney only when it determines,
on the facts of the particular case, that disqualification is an appropriate means of enforcing the
applicable disciplinary rule.” Id. In doing so, “[i]t should consider the ends that the disciplinary
rule is designed to serve and any countervailing policies, such as permitting a litigant to retain the
counsel of his choice and enabling attorneys to practice without excessive restrictions.” Id. The
question of whether disqualification is appropriate is essentially a balancing test, with the “client’s
right to freely choose his counsel” on one side of the scale, and “the need to maintain the highest
standards of the legal profession” on the other. Strategic Envtl. Partners, LLC v. Bucco, No. 135032 CCC, 2014 WL 6065816, at *2 (D.N.J. Nov. 12, 2014).
In Wyeth v. Abbott Labs., 692 F. Supp. 2d 453, 459 (D.N.J. 2010), the court provided
several factors this Court should consider in determining whether disqualification is warranted: (1)
prejudice to the former client; (2) prejudice to the new client; (3) whether the law firms
representation of the former client in the former matter has allowed the new client to gain access
to any confidential information relevant to this case; (4) “the cost—in terms of both time and
money—“for the new client to retain new counsel; (5) “the complexity of the issues in the case

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and the time it would take new counsel to acquaint themselves with the facts and issues”; (6)
“which party, if either, was responsible for creating the conflict.”
Weighing these factors, the Court finds disqualification was appropriate. “Indeed, finding
otherwise would allow the same law firm that argued for the patentability of Nasdaq’s inventions
to represent parties adverse to Nasdaq in this suit who are arguing those very same patens are
invalid.” (ECF No. 105 at 9.) On balance, Nasdaq would suffer more prejudice and hardship if
Fish’s representation of MIAX was allowed, being that Fish has access to confidential information
and is familiar with Nasdaq’s strategic approaches to managing its technology and inventions. By
contrast, prejudice to MIAX would be minimal because: (1) this case is still at the pleading stage,
(2) MIAX has also voluntarily hired Reed Smith to represent it in this matter on several issue and
Reed Smith is already familiar with this case; and (3) Fish is responsible for creating its own
conflict in this case by choosing to represent MIAX in a litigation where it previously prosecuted
the same patents for Nasdaq. Accordingly, disqualification was proper.
IV.

CONCLUSION
For the reasons set forth above, Fish’s Appeal (ECF No. 107) is DENIED and Judge

Arpert’s September 6, 2018 Memorandum and Order (ECF No. 105) is AFFIRMED.

Date: November 26, 2018

/s/ Brian R. Martinotti
HON. BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE

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