TQP Development, LLC v. Adobe Systems Incorporated

Filing 60

ORDER granting 34 Adobe Systems Incorporated's Motion to Disqualify Plaintiffs Counsel (Russ, August and Kabat). Signed by Magistrate Judge Roy S. Payne on 7/13/2013. (rsp1)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
TQP DEVELOPMENT, LLC
v.
ADOBE SYSTEMS INCORPORATED

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Case No. 2:12-CV-570-JRG-RSP

MEMORANDUM ORDER

Currently before the Court is Adobe Systems Incorporated’s Motion to Disqualify
Plaintiff’s Counsel (Dkt. No. 34), filed on January 16, 2013. The matter came on for hearing on
July 12, 2013. For the reasons assigned in Open Court and summarized herein, the Motion is
GRANTED as to Marc A. Fenster and the Russ August & Kabat law firm (“RAK”), but is
withdrawn as to the Spangler & Fussell law firm, and is declared moot as to the Ni Law Firm due
to its withdrawal from the case.
It is undisputed that RAK, the current lead counsel for TQP, represented Adobe in a
series of matters between 2006 and 2012 involving the issuance of opinion letters concerning
whether Adobe products infringed certain patents.

The last of these engagements, herein

referred to as the “Manufacturers”1 matter, commenced in 2010 with an analysis of certain
patents owned by Manufacturers and whether they were infringed by Adobe products.
According to the Declaration of Nicholas Martini (Dkt. No. 34-4), these opinions were updated
and revised several times through December 2011 (requiring about 112 hours of RAK attorney
time) as additional patents were obtained by Manufacturers and additional information was
1

This fictitious name is drawn from the opinion of Judge Andrews in a Delaware case
granting a nearly identical motion to disqualify RAK from a case against Adobe on behalf of a
different plaintiff, which was filed the month before this case. Parallel Iron, LLC v. Adobe
Systems Incorporated, Civil Action No. 12-874-RGA (D. Del., March 4, 2013).

received by Adobe. The last services by RAK on this matter were provided by Marc Fenster of
RAK during a February 6, 2012 conference call with two of Adobe’s inside counsel and a Senior
Vice President. Mr. Fenster declares that he asked during this call whether Adobe needed any
further work on this matter and he was told they did not. The Adobe declarants do not recall this
exchange. Both sides agree that there were no further communications regarding the matter
before Mr. Fenster and RAK undertook to represent TQP in this matter several months later.
This suit was filed on August 31, 2012, but RAK estimates2 that they undertook the presuit investigation no earlier than August 1, 2012. By that time, the Delaware case had been filed
against Adobe on July 12, 2012, but Adobe did not learn of RAK’s involvement in that case until
RAK filed a motion to appear pro hac vice on August 13, 2012. Thus, Adobe had received no
notice of RAK’s termination of the attorney-client relationship until after RAK had undertaken
the adverse representation of TQP.
The primary basis of the motion is that RAK breached Rule 1.7(a) of the Model Rules of
Professional Conduct of the American Bar Association. As the Fifth Circuit made clear in In re
Dresser Industries, Inc., 972 F.2d 540, 544 (5th Cir. 1992), lawyers practicing in the federal
courts of this Circuit are governed by both the Model Rules and those of the forum state. Rule
1.7(a) provides that “a lawyer shall not represent a client if the representation involves a
concurrent conflict of interest. A concurrent conflict of interest exists if ... the representation of
one client will be directly adverse to another client.”
As

Texas

Rule

of

Professional

Conduct

1.15

(“Declining

or

Terminating

Representation”) states: “Upon termination of representation, a lawyer shall take steps ... such as
2

It is surprising and disheartening that RAK appeared at the hearing without having
reviewed its own records to determine when it began its representation of TQP in this case,
which is at the heart of this issue. The Court can only assume that the estimate of August 1 is at
least as favorable to RAK as the actual date.

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giving reasonable notice to the client ... .”

It is well established that “an attorney-client

relationship may arise by implication if the lawyer knows a person reasonably expects him to
provide legal services but does nothing to correct that misapprehension.” Valls v. Johanson &
Fairless, L.L.P., 314 S.W.3d 624, 634 (Tex.App.–Houston, June 3, 2010). If it can arise in that
fashion, an existing attorney-client relationship can definitely continue by implication. Counsel
for RAK was unable to articulate at the hearing any basis to suggest that Adobe would not have
expected to continue to use RAK’s legal services to evaluate the further developments in the
Manufacturers matter, as those developments are shown in the Martini Declarations to have
played out after the February 2012 telephone conference. The Court finds that Adobe had a
reasonable expectation that RAK would continue to act as its lawyer in the Manufacturers matter
and that RAK failed to give Adobe reasonable notice to the contrary before undertaking the
adverse representation of TQP in this matter.
Having found that Adobe was still a client at the time RAK undertook the adverse
representation, it is not necessary to determine whether the two matters (the Manufacturers
matter and this case) are “substantially related.” That question only presents itself if Adobe is
considered a former client at the time that RAK undertook the TQP representation in this case.
See ABA Model Rule 1.9 and Texas Rule 1.09. Suffice it to say that counsel should always
interpret this term broadly in considering their duty to a former client, and the Court considers it
to be a very close call in this case.
For the foregoing reasons, the Motion for Disqualification is GRANTED and Marc A.
Fenster and the Russ August & Kabat law firm are hereby disqualified from representation of the
Plaintiff in this matter.

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IT IS FURTHER ORDERED that local counsel for Plaintiff meet and confer with
Defendant’s counsel and report to the Court within 30 days on the manner in which the lead
counsel role for Plaintiff will be handled in this case. If no agreement is reached, counsel should
request a Status Conference with the undersigned.
SIGNED this 3rd day of January, 2012.
SIGNED this 13th day of July, 2013.

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ROY S. PAYNE
UNITED STATES MAGISTRATE JUDGE

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