The Big Idea Company v. The Parent Care Resource, LLC et al
Filing
15
OPINION AND ORDER granting motion to disqualify counsel. Signed by Magistrate Judge Norah McCann King on 9/14/12. (rew)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
THE BIG IDEA COMPANY,
Plaintiff,
vs.
Civil Action 2:11-cv-1148
Magistrate Judge King
THE PARENT CARE RESOURCE, LLC,
et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court with consent of the parties, 28
U.S.C. § 636(c), for consideration of defendants’ Motion to Disqualify
Counsel (“Defendants’ Motion”), Doc. No. 6, plaintiff’s Memorandum in
Opposition (“Plaintiff’s Response”), Doc. No. 7, and defendants’ Reply
to Plaintiff’s Memorandum in Opposition (“Defendants’ Reply”), Doc.
No. 11.
Defendants seek the disqualification of plaintiff’s counsel,
John J. Okuley and the law firm of Okuley Smith, LLC, on the basis of
a conflict of interest existing between John Okuley and defendants P.
Michael Valley, II and Sharon A. Staley.
Defendants’ Motion is GRANTED.
For the reasons that follow,
The Court determines that an
evidentiary hearing is not necessary for the resolution of Defendants’
Motion and denies plaintiff’s request for an evidentiary hearing.
See
Gen. Mill Supply Co. v. SCA Servs., Inc., 697 F.2d 704, 710 (6th Cir.
1
1982); Dayton Bar Ass’n v. Parisi, 131 Ohio St.3d 345, at ¶ 15 (Ohio
2012) (indicating that the Ohio Supreme Court has never required an
evidentiary hearing before ruling on every motion for
disqualification).
I.
BACKGROUND
Plaintiff The Big Idea Company brings this action for trademark
infringement, unfair competition under the Lanham Act, and copyright
infringement, based on, inter alia, defendants’ use of mark “THE
PARENT CARE RESOURCE.”
Complaint, Doc. No. 2, at ¶¶ 23-41.
Plaintiff
is the owner of the “The Parent Care Solution” trademark, and is
represented by John Okuley and the law firm of Okuley Smith, LLC.
at ¶ 24.
Id.
Named as defendants are The Parent Care Resource, LLC, PMV
Management Company, Inc., Eastwind Capital, LLC, P. Michael Valley II,
Insurance Agency, Inc., Sharon A. Staley and P. Michael Valley, II.
Defendants’ Motion seeks the disqualification of plaintiff’s
counsel on the basis of a conflict of interest existing between John
Okuley and defendants Mr. Valley and Ms. Staley.
Defendants allege
that attorney Jerry K. Mueller provided them with legal services in a
matter substantially related to this case while Mr. Mueller was a
named partner with the law firm of Mueller Smith & Okuley, LLC.
Defendants’ Motion, at 2-3.
Plaintiff’s counsel, Okuley Smith, LLC,
is a successor to Mueller Smith & Okuley, LLC, and Mr. Mueller is no
longer associated with either firm.
Affidavit of John Okuley (“Okuley
Affidavit”), attached to Plaintiff’s Response.
While Mr. Mueller was with the firm of Mueller Smith & Okuley, he
performed a trademark search for defendants and gave his opinion via
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email that “[n]one of [the] hits appear to pose an impediment to
federal registration of the mark.”
Defendants’ Motion, Exhibits A, B.
Mr. Valley responded to Mr. Mueller’s email and stated the following:
“Can you go ahead and start the process, if you need a retainer let us
know but we would like to hire you to do this[.]”
Id., Exhibit C.
Mr. Mueller responded on the same day, requesting a $1,000 retainer
and agreeing to “start working on the [trademark] application.”
Exhibits C, D.
Id.,
An invoice sent to defendant Eastwind Capital, another
of the defendants named in this action, shows that the $1,000 retainer
was received by Mueller Smith & Okuley, LLC, and that $201.00 was
charged for an “online trademark registrability search.”
E.
Id., Exhibit
Mr. Mueller also billed Eastwind Capital for one half hour of his
time.
Okuley Affidavit, at ¶ 14.
There is no indication that Mr.
Mueller ever completed or submitted the trademark application.
See
Defendants’ Reply, at 4.
Plaintiff argues that no conflict of interest exists and points
to a lack of information about defendants in Okuley Smith, LLC’s
records.
Specifically, plaintiff asserts that – despite having
policies in place requiring a conflict check and engagement agreement
– Okuley Smith LLC’s records do not show that a conflict check was
performed or that an engagement agreement was ever obtained for any of
the defendants.
Okuley Affidavit, at ¶¶ 8-10.
Also, the firm’s
records allegedly do not indicate that a trademark availability search
was performed for any of the defendants.
Id. at ¶ 15.
Plaintiff also
asserts that Mr. Mueller “had an unauthorized practice of maintaining
certain files on his laptop computer, or not maintaining any
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electronic or paper files.”
II.
Id. at ¶ 19.
STANDARD
The standard for disqualifying an attorney in federal litigation
was summarized by the court in Hamerick v. Union Twp., 81 F. Supp. 2d
876 (S.D. Ohio 2000):
A motion to disqualify is the proper method for a
party-litigant to bring an issue of conflict of interest or
the breach of an ethical duty to the court's attention.
Musicus v. Westinghouse Elec. Corp., 621 F.2d 742, 744 (5th
Cir. 1980). Confronted with such a motion, courts must be
sensitive to the competing public interests of requiring
professional conduct by an attorney and of permitting a party
to retain the counsel of his choice.
Kitchen v. Aristech
Chem., 769 F. Supp. 254, 257 (S.D. Ohio 1991). In order to
resolve these competing interests, the courts must balance the
interests of the public in the proper safeguarding of the
judicial process together with the interests of each party to
the litigation. General Mill Supply Co. v. SCA Servs., Inc.,
697 F.2d 704, 711 (6th Cir. 1982).
The power to disqualify an attorney from a case is “incidental
to all courts, and is necessary for the preservation of
decorum, and for the respectability of the profession.”
Kitchen, 769 F.Supp. at 256 (quoting Ex Parte Burr, 9 Wheat.
529, 22 U.S. 529, 531, 6 L.Ed. 152 (1824)). However, “the
ability to deny one's opponent the services of his chosen
counsel is a potent weapon.” Manning v. Waring, Cox, James,
Sklar & Allen, 849 F.2d 222, 224 (6th Cir. 1988). Motions for
attorney disqualification should be viewed with extreme
caution for they can be misused as techniques of harassment.
Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 722
(7th Cir. 1982).
Hamerick, 81 F. Supp. 2d at 878.
III. DISCUSSION
As a preliminary mater, it is necessary to discuss what rules are
applicable in this case.
Defendants argue that Ohio Rules of
Professional Conduct 1.9 and 1.10 require that John Okuley and Okuley
Smith, LLC, be disqualified as plaintiff’s counsel in this case.
Defendants’ Motion, at 1.
Plaintiff argues that the issue of
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disqualification should be decided under a three-part common law test.
Plaintiff’s Response, at 3-4.
“The primary purpose behind the prohibition . . .
against dual representation of clients with
adverse interests is to ensure that confidences
or secrets of a client imparted to an attorney in
the course of their attorney-client relationship
will not be revealed to an adverse party or used
to the client's disadvantage.”
OneBeacon Am. Ins. Co. v. Safeco Ins. Co., No. C-1-07-358, 2008 WL
4059836, at *2 (S.D. Ohio Aug. 25, 2008) (quoting Sarbey v. Nat’l City
Bank, 66 Ohio App.3d 18, 26 (9th Dist. 1990)).
Despite previous
reliance on the common law, the United States Court of Appeals for the
Sixth Circuit now looks “to the codified Rules of Professional Conduct
for guidance” in determining whether an attorney should be
disqualified from representing a client based on a conflict of
interest.
See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v.
Alticor, Inc., 466 F.3d 456, 457 (6th Cir. 2006), vacated in part on
other grounds, 472 F.3d 436 (6th Cir. 2007).
Accordingly, the Ohio
Rules of Professional Conduct govern in this district.
Perkins v.
Rieser, No. 3:07-cv-325, 2012 WL 1606657, at *1 (S.D. Ohio May 8,
2012); Khan v. Cellco P'ship, No. 1:10-cv-118, 2011 WL 5042071, at *2
(S.D. Ohio Sept. 8, 2011) (citing OneBeacon, 2008 WL 4059836 at *2).
Defendants Mr. Valley and Ms. Staley argue that Mr. Mueller
provided legal services to them in a matter substantially related to
this case while Mr. Mueller was a partner with the law firm of Mueller
Smith & Okuley, LLC.
Defendants’ Motion, at 2-3.
As noted supra,
Okuley Smith, LLC, is a successor to Mueller Smith & Okuley, LLC, and
Mr. Mueller is no longer associated with either firm.
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Okuley
Affidavit, at ¶ 1.
Because Mr. Mueller is no longer associated with
the firm, disqualification of John Okuley and Okuley Smith, LLC, is
mandatory in this case if Mr. Mueller would be disqualified under Rule
1.9(a) from representing plaintiff by virtue of his previous
representation of defendants, and if that disqualification is imputed
to John Okuley and Okuley Smith, LLC, under Rule 1.10(b).
A.
Ohio Rule 1.9(a)
Ohio Rule 1.9(a) provides in pertinent part:
Unless the former client gives informed consent, confirmed in
writing, 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.
Ohio R. Prof. Conduct 1.9(a).
“The use of the term ‘shall’ in Rule
1.9(a) requires mandatory disqualification when those circumstances
defined therein are present.”
R.E. Kramig Co., Inc. v. Resolute
Mgmt., Inc., No. 1:07-cv-658, 2009 WL 1395342, at *4 (S.D. Ohio May
18, 2009) (citing OneBeacon, 2008 WL 4059836 at *2).
The term
“substantially related matter” is defined as “one that involves the
same transaction or legal dispute or one in which there is a
substantial risk that confidential factual information that would
normally have been obtained in the prior representation of a client
would materially advance the position of another client in a
subsequent matter.”
Ohio R. Prof. Conduct 1.0(n).
In the case presently before the Court, there is no question that
defendants Mr. Valley and Ms. Staley are former clients of Mr.
Mueller.
“An attorney-client relationship includes the representation
of a client in court proceedings, advice to a client, and any action
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on a client's behalf that is connected with the law.”
Hamrick, 79 F.
Supp. 2d at 875 (citing Landis v. Hunt, 80 Ohio App.3d 662, 669-70
(10th Dist. 1992)).
The test of whether an attorney-client
relationship was created is “essentially whether the putative client
reasonably believed that the relationship existed and that the
attorney would therefore advance the interests of the putative
client.”
Id. (citing Henry Filters, Inc. v. Peabody Barnes, Inc., 82
Ohio App.3d 255, 261 (6th Dist. 1992)).
Plaintiff does not dispute the fact that Mr. Mueller provided
legal services to defendants.
See Plaintiff’s Response, at 7-8
(indicating that Mr. Mueller provided services to defendants and that
the exhibits submitted with Defendants’ Motion “on their face only
prove that Attorney Mueller, and Attorney Mueller alone, dealt with
the Defendants.”)
Additionally, the exhibits submitted with
Defendants’ Motion establish that an attorney-client relationship
existed.
Mr. Mueller performed a trademark search for defendants and
rendered his professional opinion via email that “[n]one of [the] hits
appear to pose an impediment to federal registration of the mark.”
Defendants’ Motion, Exhibits A, B. In response, Mr. Valley stated that
they “would like to hire” Mr. Mueller; Mr. Mueller requested a $1,000
retainer and agreed to “start working on the application.”
Exhibits C, D.
Id.,
An invoice sent on firm letterhead to defendant
Eastwind Capital shows that the $1,000 retainer had been received by
Mueller Smith & Okuley, LLC, and that $201.00 had been charged for an
“online trademark registrability search.”
Id., Exhibit E.
The firm
records show that Mr. Mueller also billed Eastwind Capital for one
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half hour of his time.
Okuley Affidavit, at ¶ 14.
This Court
concludes that an attorney-client relationship existed between Mr.
Mueller and Mr. Valley and Ms. Staley because Mr. Mueller provided
legal advice to them, agreed to work for them, and charged for his
services.
Plaintiff’s interests in this matter are materially adverse and
substantially related to the matter for which Mr. Valley and Ms.
Staley received legal advice from Mr. Mueller.
Mr. Valley and Ms.
Staley received legal advice from Mr. Mueller regarding the
availability of, applying for, and registering “THE PARENT CARE
RESOURCE” mark.
See Defendants’ Motion, Exhibits A-E.
In this
action, plaintiff asserts claims based on defendants’ use of “THE
PARENT CARE RESOURCE” mark. Complaint, Doc. No. 2, at ¶¶ 23-41.
To
prevail in this case, plaintiff will be required to prove, at a
minimum, that defendants’ use of “THE PARENT CARE RESOURCE” mark “is
likely to cause confusion, or to cause mistake, or to deceive as to
the affiliation, connection, or association of” defendants with
plaintiff, “or as to the origin, sponsorship, or approval of his or
her goods, services, or commercial activities by” plaintiff.
U.S.C. § 1125(a)(1)(A).
See 15
The “registrability” of the “THE PARENT CARE
RESOURCE” mark and the similarities between defendants’ mark and
plaintiff’s mark are directly at issue in this case, and they are
substantially related to the legal services Mr. Mueller provided for
defendants.
Mr. Mueller performed a “registrability search” for the
mark, rendered his legal opinion as to the mark’s availability and
agreed to draft and file an application to register the trademark.
See Defendants’ Motion, Exhibits A-D.
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The direct relationship between
Mr. Mueller’s prior representation of defendants and plaintiff’s
claims in this case creates a substantial risk that confidential
factual information obtained by Mr. Mueller would materially advance
plaintiff’s interests.
If it were Mr. Mueller who represented
plaintiff in this action, he would surely have to argue that his legal
advice to defendants regarding the mark was incorrect and that
defendants’ use of the mark infringed on plaintiff’s rights.
It is
evident, based on the foregoing, that plaintiff’s interests are
adverse to defendants’ interests, and that this action involves a
matter substantially related to the matter in which Mr. Mueller
previously represented defendants.
Finally, Mr. Valley and Ms. Staley have not consented to the
representation of plaintiff by Mr. Mueller, John Okuley, or Okuley
Smith, LLC, in this case.
Accordingly, all the elements requiring
disqualification under Ohio Rule 1.9(a) are present;
Mr. Mueller
would be prohibited from representing plaintiff under the
circumstances presented by this case.
See R.E. Kramig Co., 2009 WL
1395342 at *4 (indicating that disqualification is mandatory when the
terms of Rule 1.9(a) are met).
B.
Ohio Rule 1.10
The imputation of a conflict of interest is governed by Ohio Rule
1.10,1 which provides in pertinent part:
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Plaintiff’s Response ignores the applicability of the Ohio Rules of
Professional Conduct. Instead, as noted supra, plaintiff relies on a threepart common law test and argues that disqualification is not warranted because
there was no attorney client relationship between John Okuley and defendants.
See Plaintiff’s Response, at 7-8. As previously indicated, however, the
United States Court of Appeals for the Sixth Circuit now looks “to the
codified Rules of Professional Conduct for guidance” in determining whether an
attorney should be disqualified from representing a client based on a conflict
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(b) When a lawyer is no longer associated with a firm, no
lawyer in that firm shall thereafter represent a person with
interests materially adverse to those of a client represented
by the formerly associated lawyer and not currently
represented by the firm, if the lawyer knows or reasonably
should know that either of the following applies:
(1) the formerly associated lawyer represented the client in
the same or a substantially related matter;
(2) any lawyer remaining in the firm has information protected
by Rules 1.6 and 1.9(c) that is material to the matter.
Ohio R. Prof. Conduct 1.10(b)(1),(2).
As explained above, Mr. Mueller would be prohibited from
representing plaintiff under Rule 1.9(a) based on his previous
attorney-client relationship with some or all of the defendants.
Mr.
Mueller is also no longer associated with Okuley Smith, LLC or Mueller
Smith & Okuley, LLC.
disputed.
Okuley Affidavit, at ¶ 20.
These issues are not
Instead, plaintiff argues that no conflict of interest
currently exists, that no knowledge was retained by John Okuley or
Okuley Smith, LLC, regarding Mr. Mueller’s prior representation of Mr.
Valley and Ms. Staley, and that the files and billing records of
Okuley Smith, LLC, do not contain any information about the nature of
of interest. See Nat’l Union Fire Ins. Co., 466 F.3d at 457. “In the absence
of any Sixth Circuit authority mandating application of the” three-part common
law test, “the Court is bound to apply the Ohio Rules of Professional
Conduct.” Khan, 2011 WL 5042071 at *5. Ohio Rule 1.9(a) governs conflicts
involving “former clients” and Ohio Rule 1.10 governs the imputation of those
conflicts to a firm. By its terms, Rule 1.10 does not require that an actual
attorney-client relationship have existed between the party seeking
disqualification and the attorney sought to be disqualified. Ohio R. Prof.
Conduct 1.10(b).
Plaintiff also argues that Mr. Mueller’s prior representation of
defendants and all confidential information obtained during that
representation have been effectively screened from other members in the law
firm. Plaintiff’s Response, at 6. Ohio Rules 1.9 and 1.10 do not, however,
provide for a screening exception under the circumstances of this case. See
Ohio R. Prof. Conduct 1.9, 1.10; Khan, 2011 WL 5042071, at *7 (“Once an
attorney is disqualified under Ohio R. Prof. Cond. 1.9, a new attorney in his
firm cannot avoid disqualification by ‘screening’ no matter how diligently.”)
(citations omitted).
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Mr. Mueller’s representation.
Id., at ¶¶ 21-23.
Although plaintiff
does not expressly make the argument, the Court construes Plaintiff’s
Response to argue that disqualification is not necessary because John
Okuley and Okuley Smith, LLC, did not know that Mr. Mueller’s
representation of Mr. Valley, Ms. Staley, or Eastwind Capital
concerned a matter substantially related to this action.
In support of this argument, plaintiff asserts that – despite the
existence of a firm policy requiring a conflict check and an
engagement agreement prior to representing a client – the records of
Okuley Smith, LLC, do not show that a conflict check was performed or
that an engagement agreement was ever obtained for any of the
defendants.
Okuley Affidavit, at ¶¶ 8-10.
Also, the firm’s records
allegedly do not indicate that a trademark availability search was
performed for any of the defendants, and Mr. Mueller allegedly “had an
unauthorized practice of maintaining certain files on his laptop
computer, or not maintaining any electronic or paper files.”
Id. at
¶¶ 15, 19.
Plaintiff’s arguments actually suggest that, had firm policies
been observed, John Okuley and Okuley Smith, LLC, reasonably should
have known that Mr. Mueller’s prior representation of defendants
concerned a matter substantially related to the representation of
plaintiff in this case.
Firm policies requiring a conflict search and
an engagement agreement prior to the representation of a client are
reasonable measures to prevent conflicts of interest.
Had Mr. Mueller
followed firm policies, it is highly likely – given the extent of John
Okuley’s conflict check prior to accepting plaintiff as a client –
that John Okuley and Okuley Smith, LLC, would have known that Mr.
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Mueller’s prior representation of defendants was substantially related
to this action.
Whether or not Mr. Mueller followed firm policy is of no
consequence.
The Rules of Professional Conduct are in place to
protect clients, not attorneys, and an attorney’s failure to maintain
adequate records or to follow firm policy cannot be used as a
justification to avoid disqualification based on a conflict of
interest.
See Ohio R. Prof. Conduct 1.7, Comment 1 (“The principles
of loyalty and independent judgment are fundamental to the
attorney-client relationship and underlie the conflict of interest
provisions of these rules.
Neither the lawyer's personal interest,
the interests of other clients, nor the desires of third persons
should be permitted to dilute the lawyer's loyalty to the client.”);
OneBeacon, 2008 WL 4059836 at *2 (“The primary purpose behind the
prohibition . . . against dual representation of clients with adverse
interests is to ensure that confidences or secrets of a client
imparted to an attorney in the course of their attorney-client
relationship will not be revealed to an adverse party or used to the
client's disadvantage.”) (citations omitted).
Additionally, John
Okuley knew or should have known – prior to the firm’s engagement by
plaintiff – that Mr. Mueller had billed defendant Eastwind Capital for
legal services.
Okuley Affidavit, at ¶¶ 13, 14, 24.
John Okuley also
knew, or reasonably should have known had firm policies been followed,
that Mr. Mueller had performed a “trademark registrability search” for
defendants regarding “THE PARENT CARE RESOURCE” trademark.
See
Defendants’ Motion, Exhibit E (an invoice sent on firm letterhead to
defendant Eastwind Capital detailing the services Mr. Mueller
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provided).
Given that plaintiff’s claims are predicated on
defendants’ alleged use of the “THE PARENT CARE RESOURCE” mark, and
the invoice on firm letterhead sent to defendant Eastwind Capital
indicating that Mueller Smith & Okuley, LLC, had “rendered” services
regarding “‘THE PARENT CARE RESOURCE’ Trademark,” John Okuley and
Okuley Smith, LLC, reasonably should have known that Mr. Mueller had
represented defendants in a matter substantially related to this case.
All of the elements of Rule 1.10(b)(1) have been met.
It follows
that Mr. Mueller’s disqualification must be imputed to John Okuley and
Okuley Smith, LLC, in this case.
Mr. Mueller would be prohibited from
representing plaintiff under Rule 1.9(a), given his previous
professional relationship with Mr. Valley and Ms. Staley.
That
disqualification must be imputed to John Okuley and Okuley Smith, LLC,
because Mr. Muller is no longer associated with firm, the firm’s
representation of plaintiff is materially adverse to defendants, and
John Okuley and the firm reasonably should have known that Mr. Mueller
represented defendants in a matter substantially related to this
action.
Under the circumstances, disqualification is mandatory under
Ohio R. Prof. Conduct 1.10(b)(1).
See OneBeacon, 2008 WL 4059836 at
*2.
Accordingly, defendants’ Motion to Disqualify Counsel, Doc. No.
6, is GRANTED.
September 14, 2012
s/ Norah McCann King
Norah McCann King
United States Magistrate Judge
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