Galderma Laboratories, L.P. et al v. Actavis Mid Atlantic LLC

Filing 60

Memorandum Opinion and Order denying 18 Motion to Disqualify Vinson & Elkins LLP. (Ordered by Judge Ed Kinkeade on 2/21/2013) (axm)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
GALDERMA LABORATORIES,
L.P., GALDERMA S.A., and
GALDERMA RESEARCH &
DEVELOPMENT, S.N.C.,
Plaintiffs,
v.
ACTAVIS MID ATLANTIC LLC,
Defendant.

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No. 3:12-cv-2038-K

MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiffs Galderma Laboratories, L.P., Galderma S.A., and
Galderma Research & Development, S.N.C.’s (collectively “Galderma”) Motion to
Disqualify Vinson & Elkins, LLP (Doc. No. 18). The Court conducted a hearing on
this motion on October 28, 2012. The Court has reviewed the motion, the parties’
briefs, the appendices and supplemental appendices. Additionally, the Court has
reviewed the Executive Summaries filed by each party (Docs. No. 54 & 55), has
considered the parties’ arguments at the hearing on October 28, 2012, and the
applicable law. The Court DENIES Galderma’s Motion (Doc. No. 18) because
Galderma gave informed consent to Vinson & Elkins’s (“V&E”) representation of
clients directly adverse to Galderma in matters that are not substantially related to
V&E’s representation of Galderma.

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I.

Factual Background
Galderma is a worldwide leader in the research, development, and

manufacturing of branded dermatological products. Galderma is headquartered in
Fort Worth where it employs approximately 240 people. Galderma and its affiliates
have operations around the world, employing thousands of people and reporting
worldwide sales of 1.4 billion euros for the year 2011 alone.
As a complex, global company, Galderma routinely encounters legal issues and
the legal system. Galderma has its own legal department to address these issues. The
legal department is headed by its Vice President and General Counsel, Quinton
Cassady. Mr. Cassady is a lawyer who has practiced law for over 20 years and has
been general counsel for Galderma for over 10 of those years. In addition to an inhouse legal department, Galderma, through Mr. Cassady, frequently engages outside
counsel to assist with a wide range of issues. Over the past 10 years, Galderma has
been represented by large law firms including DLA Piper, Paul Hastings, and Vinson
& Elkins, LLP (“V&E”). Galderma also engages smaller law firms as needed.
In 2003, Galderma and V&E began its attorney-client relationship. V&E sent
Galderma an engagement letter. As part of the engagement letter, V&E sought
Galderma’s consent to broadly waive future conflicts of interest, subject to specific
limitations identified in the engagement letter. The waiver contained in the
engagement letter is as follows:
We understand and agree that this is not an exclusive agreement, and
you are free to retain any other counsel of your choosing. We recognize
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that we shall be disqualified from representing any other client with
interest materially and directly adverse to yours (i) in any matter which
is substantially related to our representation of you and (ii) with respect
to any matter where there is a reasonable probability that confidential
information you furnished to us could be used to your disadvantage.
You understand and agree that, with those exceptions, we are free to
represent other clients, including clients whose interests may conflict
with ours in litigation, business transactions, or other legal matters. You
agree that our representing you in this matter will not prevent or
disqualify us from representing clients adverse to you in other matters
and that you consent in advance to our undertaking such adverse
representations.
On behalf of Galderma, Mr. Cassady signed that he understood and, on behalf of
Galderma, agreed to the terms and conditions of engaging V&E, including the waiver
of future conflicts of interest.
Beginning in 2003, Galderma engaged V&E for legal advice relating to
employee benefit plans, Galderma’s 401(k) plan, health care benefit programs,
employment issues, and other issues relating to the administration of such programs.
V&E continued to advise Galderma on employment and benefits issues into July of
2012.
In June 2012, while V&E was advising Galderma on employment issues,
Galderma, represented by DLA Piper and Munck Wilson Mandala, filed this
intellectual property lawsuit against Actavis Mid Atlantic, LLC (“Actavis”). At that
time, V&E had already represented various Actavis entities in intellectual property
matters for six years. Without any additional communication to Galderma, V&E
began working on this matter for Actavis, and in July 2012, V&E filed Actavis’s
answer and counterclaims.
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In July 2012, Galderma received a copy of Actavis’s answer and counterclaims,
and became aware that V&E was representing Actavis. After brief discussions in late
July between Mr. Cassady and V&E, Galderma asked V&E to withdraw from
representing Actavis. On August 6, 2012, V&E chose to terminate its attorney-client
relationship with Galderma rather than Actavis. On that same day, V&E stated that
it would not withdraw from representing Actavis, because Galderma had consented to
V&E representing adverse parties in litigation when it signed the waiver of future
conflicts in the 2003 engagement letter. Galderma then brought this motion to
disqualify.
II.

Galderma’s Motion to Disqualify
Galderma now moves to disqualify V&E from representing Actavis in the

underlying patent litigation. The briefing of the parties has been wide-ranging, but at
oral arguments, counsel acknowledged that the crux of the issue is this: whether or
not Galderama, a sophisticated client, represented by in-house counsel gave informed
consent when it agreed to a general, open-ended waiver of future conflicts of interest
in V&E’s 2003 engagement letter. Galderma argues that its consent was not
“informed consent” when its own, in-house lawyer signed the agreement on its behalf
because V&E did not advise Galderma of any specifics with regards to what future
conflicts Galderma may be waiving. V&E argues that in this case, because Galderma
is a highly sophisticated client who is a regular user of legal services and was
represented by its own counsel, the waiver language is reasonably adequate to advise

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Galderma of the material risks of waiving future conflicts, despite being general and
open-ended.
A.

Legal Framework for Resolving Ethics Questions

Fifth Circuit precedent requires the court to consider several relevant ethical
standards in determining whether there has been an ethical violation.
Disqualification cases are guided by state and national ethical standards adopted by
the Fifth Circuit. In re American Airlines, 972 F.2d 605, 610 (5th Cir. 1992). In the
Fifth Circuit, the source for the standards of the profession has been the canons of
ethics developed by the American Bar Association. In re Dresser, 972 F.2d at 543.
Additionally, consideration of the Texas Disciplinary Rules of Professional Conduct is
also necessary, because they govern attorneys practicing in Texas generally. See FDIC
v. U.S. Fire Ins. Co., 50 F.3d 1304, 1312 (5th Cir. 1995). The Court also considers,
when applicable, local rules promulgated by the local court itself. Id. Because
motions to disqualify are substantive motions, which affect the rights of the parties, a
party cannot be deprived of its right to counsel on the basis of local rules alone. In re
Dresser, 972 F.2d at 543.
The Court must give careful consideration to motions to disqualify because of
the potential for abuse. Disqualification motions may be used as “procedural
weapons” to advance purely tactical purposes. In re American Airlines, Inc., 972 F.2d at
611. A disqualification inquiry, particularly when instigated by an opponent,
presents a palpable risk of unfairly denying a party the counsel of his choosing. U.S.

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Fire Ins. Co., 50 F.3d at 1316. When the Model Rules are invoked as procedural
weapons, the party subverts the purpose of the ethical rules. MODEL RULES OF PROF’L
CONDUCT, Scope, cmt. 20 (2010).
When a client hires multiple firms, that creates inadvertent problems for the
ethical system in at least two ways. One is when the client hires every large and small
firm possible to prevent any local firm from being on the other side. The second
problem happens in cases such as this, where a client hires a firm for work that is
important, but small in size compared to some unrelated large matters. The ABA
recognized this problem may occur:
When corporate clients with multiple operating divisions hire tens if not
hundreds of law firms, the idea that, for example, a corporation in
Miami retaining the Florida office of a national law firm to negotiate a
lease should preclude that firm’s New York office from taking an adverse
position in a totally unrelated commercial dispute against another
division of the same corporation strikes some as placing unreasonable
limitations on the opportunities of both clients and lawyers. ABA
Comm. on Ethics & Prof’l Responsibility, Formal Op. 93-372 (1993)
(withdrawn by ABA Comm. on Ethics & Prof’l Responsibility, Formal
Op. 05-436 (2005)).
Sophisticated clients can retain their adversary’s counsel of choice in unrelated
matters while attempting to invalidate prospective waivers of future conflicts
when that counsel later becomes adverse to them. Large firms would never be
able to take on small, specialized matters for a client unless the firms could
reasonably protect against this potential abuse by preserving their ability to
practice in other areas where the client has chosen to retain different counsel.

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B.

Ethical Standards for Waiver of Future Conflicts

With the ABA canons of ethics as a guide, informed by state and local rules,
the Court considers the ethical standards relevant to this specific case.
As a general rule, a lawyer is not allowed to sue his own client, which he
concurrently represents in other matters. In re Dresser, 972 F.2d at 540. This holding
mirrors the position of the ABA Model Rules of Professional Conduct (“Model
rules”), which provide that, “[e]xcept as provided in paragraph (b) a lawyer shall not
represent a client if the representation involves a concurrent conflict of interest.”
MODEL RULES OF PROF’L CONDUCT R. 1.7 (2010). Rule 1.7(b) creates an exception.
Notwithstanding the existence of a concurrent conflict of interest under
paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one
client against another client represented by the lawyer in the same
litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
Id. R. 1.7(b).
“Informed consent” denotes the agreement by a person to a proposed
course of conduct after the lawyer has communicated adequate information
and explanation about the material risks of and reasonably available
alternatives to the proposed course of conduct. Id. R. 1.0(e).
No Northern District rule speaks directly to the issues raised in this case
– informed consent and unrelated conflicts of interest pertaining to current
clients. Local rules do require that all lawyers who practice before the
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Northern District of Texas follow the Texas Disciplinary Rules of Professional
Conduct. Loc. R. 83.8(e). The Texas rule on conflicts of interest involving
current clients is more lenient than the Model Rules. See Tex. Disciplinary
Rules Prof’l Conduct R. 1.06 reprinted in Tex. Gov’t Code Ann., tit. 2, subtit.
G, app. A (West 2005). That rule permits representing clients against current
clients so long as the two matters are not substantially related or reasonably
appears to be or become adversely limited. Id. Under the Texas rule, there is
no need for informed consent. See id. A lawyer representing an enterprise with
diverse operations may accept employment as an advocate against the
enterprise in a matter unrelated to any matter being handled for the enterprise.
Id., Cmt 11.
In a past case, the Fifth Circuit noted that the dissimilar, arguably
contradictory standards set by the Model Rules and the Texas Rules requires a
court to weigh the relative merits of each of the various competing
disqualification rules as the court proceeds through each step of the analysis.
US Fire Ins. Co., 50 F.3d at 1312. Unlike US Fire Ins. Co., it is undisputed that
there is a conflict of interest. The difference between the Model Rule and the
Texas Rule goes to the central issue in this case, the need for informed consent.
To give weight to the Texas Rule over the Model Rule in this case would vitiate
the cornerstone of the national standard, the requirement of informed consent.
Thus, while the Court has considered the applicable Texas Rules, the Model

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Rules and authority related to them must control in determining Galderma’s
motion to disqualify. See In re Dresser, 972 F.2d at 543–45 (reversing the
district court for applying Texas Disciplinary Rules instead of the more
restrictive national standards).
Under the Model Rules, a client’s waiver of future conflicts is valid when
the client gives informed consent. MODEL RULES OF PROF’L CONDUCT R.
1.7(b) (2010). Clearly, all clients, even the most sophisticated, must give
informed consent. Id. What disclosure from an attorney is reasonably
adequate to allow for informed consent for a particular client is not clear. The
Model Rules, the Comments to the Model Rules, and the Formal Opinions of
the ABA’s Committee on Ethics and Professional Responsibility outline a
number of factors for courts to consider in determining whether a client has
given informed consent to waive future conflicts of interest.
1.

ABA Model Rules and Applicable Comments

One source for determining how to apply the Model Rules is the
comments to the Model Rules. The comments do not add obligations to the
Model Rules but provide guidance for practicing in compliance with the Rules.
Id. Preamble, cmt. 14. The text of each Rule is authoritative, but the
Comments are intended as guides to interpretation. Id. Preamble, cmt. 21.
The Comments to Rule 1.7, governing current client conflicts, recognize
that a lawyer may properly request a client to waive future conflicts, subject to

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the test in Rule 1.7(b). Id. 1.7, cmt. 22. The effectiveness of the waiver is
generally determined by the extent to which the client reasonably understands
the material risk that the waiver entails. Id.
When dealing with a waiver of future conflicts, a specific waiver of a
particular type of conflict has the greatest likelihood of being effective. Id. A
general and open-ended waiver will ordinarily be ineffective, because the client
will likely not have understood the material risks involved. Id. Consent using
a general or open-ended waiver is not per se ineffective, but considering the
entire spectrum of clients, a general and open-ended waiver is likely to be
ineffective because the vast majority of clients are not in a position to
understand the material risks from the open-ended language of the waiver
itself.
The same comment highlights that consent to a general, open-ended
waiver is more likely to be effective when dealing with a narrow set of
circumstances. If the client is an experienced user of the legal services involved
and is reasonably informed regarding the risk that a conflict may arise, that
consent is more likely to be effective. Id. The consent is particularly likely to
be effective when the client is independently represented by other counsel in
giving consent and the consent is limited to future conflicts unrelated to the
subject of the representation. Id.

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The comments to Rule 1.0, which defines “informed consent,” mirror
the comments to Rule 1.7. For consent to be “informed,” the lawyer must take
reasonable steps to ensure that the client or other person possesses information
reasonably adequate to make an informed decision. Id. R. 1.0, cmt. 6.
Ordinarily, this requires communication that includes a disclosure of the facts
and circumstances giving rise to the situation, any explanation reasonably
necessary to inform the client or other person of the material advantages and
disadvantages of the proposed course of conduct and a discussion of the
client’s or other person’s options and alternatives. Id. The more experienced
the client is in legal matters generally and in making decisions of the type
involved, the less information and explanation is needed for a client’s consent
to be informed. Id. When dealing with a client who is independently
represented by other counsel in giving the consent, generally the client should
be assumed to have given informed consent. Id. Just like Rule 1.7, Rule 1.0
shows there is a vast difference in what type of disclosure is necessary to ensure
that a client has reasonably adequate information to make an informed
decision, depending on the sophistication of the client and, importantly,
whether or not the client is represented by an independent lawyer.
2.

ABA Committee on Ethics and Professional
Responsibility Formal Ethics Opinions

The ABA’s Standing Committee on Ethics and Professional
Responsibility has also issued a formal ethics opinion dealing expressly with
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informed consent to future conflicts. ABA Comm. on Ethics & Prof’l
Responsibility, Formal Op. 05-436 (2005) [hereinafter ABA Formal Op. 05436]. As amended in February 2002, Rule 1.7 permits a lawyer to obtain
effective informed consent to a wider range of future conflicts than would have
been possible under the Model Rules prior to their amendment. Id. Prior to
the 2002 Amendment of the Model Rules, informed consent was limited to
circumstances in which the lawyer was able to and did identify the potential
party or class of parties that may be represented in the future matter. Id.; ABA
Comm. on Ethics & Prof’l Responsibility, Formal Op. 93-372 (1993)
(withdrawn) [hereinafter ABA Formal Op. 93-372]. Additionally, informed
consent may have been limited further by the need to identify the nature of
the likely future matter. ABA Formal Op. 05-436; ABA Formal Op. 93-372.
Relying on Comment 22, the Committee opined that, following the
amendment, open-ended, general informed consent was likely to be valid if the
client is an experienced user of legal services. ABA Formal Op. 05-436. The
opinion gave significant weight to the sophistication of the client and its use of
independent counsel, factors which previously had not been relevant to
informed consent. See ABA Formal Op. 05-436 (Opinion 93-372 does not
vary its conclusions as to the likely effectiveness of informed consent to future
conflicts when the client is an experienced user of legal services or has had the
opportunity to be represented by independent counsel in relation to such

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consent). The Committee concluded that because Comment 22 supported the
validity of a general, open-ended waiver in particular circumstances, the limits
on effective consent established in ABA Formal Opinion 93-372 were no
longer consistent with the Model Rules. ABA Formal Op. 05-436.
C.

Burden of Proof

On a motion to disqualify, the movant bears the ultimate burden of
proof. Galderma must establish that there is a conflict of interest under the
applicable ethics standards and if so, that disqualification is the proper remedy.
See Forsyth v. Barr, 19 F.3d 1527, 1546 (placing the burden of establishing a
conflict on the client seeking disqualification). V&E does not dispute the
concurrent representation of Galderma and Actavis establishes a conflict of
interest under the Model Rules. V&E argues that Galderma gave informed
consent for V&E to represent clients adverse to it in litigation, which waives
any right to claim a conflict of interest. Absent informed consent, there is no
question that V&E’s contemporaneous representation of Actavis and Galderma
is a current client conflict on an unrelated matter. See In re Dresser, 972 F.2d at
545; MODEL RULES OF PROF’L CONDUCT R. 1.7 (2010).
With regards to allocating the burden of proof, the issue of “informed
consent” is similar to the issue of exceptional circumstances that the court
addressed in In re Dresser. See In re Dresser, 972 F.2d at 545. On the issue of
exceptional circumstances, the court noted that it would be the attorney’s

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burden to show a reason why the court should allow the otherwise
impermissible dual representation. Id. Other courts considering informed
consent in this context have also concluded that shifting the burden is
appropriate, so that the attorney bears the burden of showing informed
consent. See Celgene Corp. v. KV Pharmaceutical Co., No. 07-4819, 2008 WL
2937415, at *6 (D.N.J. July 29, 2008); El Camino Res., Ltd. V. Huntington Nat’l
Bank, 623 F. Supp. 2d 863, 869 (W.D. Mich. 2007). Because, absent
informed consent, there is no question that V&E’s contemporaneous
representation of Actavis and Galderma is a current client conflict on an
unrelated matter, Galderma need prove nothing more to establish a violation
of Model Rule 1.7. V&E has raised the issue of informed consent in response
to the otherwise established violation. Because V&E has raised the issue in its
defense, the Court concludes that V&E has the burden to show that Galderma
gave informed consent. Because the Court concludes that Galderma gave
informed consent, the Court need not address whether Galderma has proved
that disqualification of V&E is warranted.
D.
Whether or Not Galderma Gave Informed Consent to the Waiver
of Future Conflicts
To meet its burden of showing informed consent, V&E must show that it
provided reasonably adequate information for Galderma to understand the material
risks of waiving future conflicts of interest. MODEL RULES OF PROF’L CONDUCT R.
1.0, cmt. 6 (2010). Two related questions in this test form the analysis. The first
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question is whether the information disclosed is reasonably adequate for a client to
form informed consent. If the waiver does, the second question is, whether or not the
disclosure is reasonably adequate for the particular client involved in this case. The
focus of the first question is on what information is being disclosed, and the focus of
the second question is on circumstances pertaining to the client.
1.

Whether V&E’s Disclosure Is Reasonably Adequate for a
Client to Form Informed Consent

Rule 1.0 provides three basic factors to help determine whether a disclosure is
reasonably adequate to allow for informed consent. See id, 1.0(e). Rule 1.0(e)
identifies that informed consent is characterized by: 1) agreement to a proposed
course of conduct, 2) after the lawyer has communicated adequate information and
explanation about the material risks, and 3) the lawyer has proposed reasonably
available alternatives to the proposed course of conduct. Id. The language of the
agreement is a primary source for determining whether or not a particular client’s
consent is informed. See Celgene Corp., 2008 WL 2937415, at *8 (July 29, 2008
D.N.J.).
The waiver language at issue in this case is found in V&E’s 2003 engagement
letter. First, the 2003 engagement letter identifies a course of conduct with regard to
concurrent conflicts of interest. Second, the engagement letter includes an
explanation of the material risk in waiving future conflicts of interest. Third, the
letter explains an alternative course of conduct for Galderma. All of these favor a
finding that Galderma’s agreement manifested informed consent.
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First, the Court examines the language for whether or not the parties agreed to
a course of conduct with regard to conflicts of interest. The letter, in relevant part,
states:
We recognize that we shall be disqualified from representing any other
client with interests materially and directly adverse to yours (i) in any
matter which is substantially related to our representation of you and
(ii) with respect to any matter where there is a reasonable probability
that confidential information you furnished to us could be used to your
disadvantage. You understand and agree that, with those exceptions, we
are free to represent other clients, including clients whose interests may
conflict with yours in litigation, business transactions, or other legal
matters.
These sentences, the bulk of the waiver language, identify a course of conduct for the
parties. The course of conduct identified is that V&E is given wide ranging freedom
to represent other clients, including those whose interests conflict with Galderma.
The outer boundaries of the parties agreed course of conduct is defined in the
previous sentence. Despite V&E’s freedom to represent other clients with conflicting
interests, V&E would not be able to represent a client in a material and directly
adverse manner where the adverse representation is substantially related to the
representation of Galderma, or there is a reasonable probability that confidential
information Galderma furnished could be used to its disadvantage. The course of
conduct identified in the waiver language provides for broad freedom for V&E to
represent clients with whom it would otherwise have a conflict of interest, limited by
specifically identified situations.

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Galderma argues the waiver is open-ended and vague, which makes it
unenforceable. First, an open-ended waiver is not per se unenforceable. See MODEL
RULES OF PROF’L CONDUCT R. 1.7, cmt. 22 (2010) (allowing for the validity of openended waivers). Second, simply because a waiver is general, does not mean it is
vague. The waiver language in the contract signed by Galderma provides a
framework for determining in the future, when a conflict arises, whether or not V&E
will be disqualified.
Galderma maintains that the provisions of the waiver must be more specific so
that a person who reads the waiver can know whether the parties anticipated a
particular party or a particular type of legal matter. Naming a potential party and the
nature of a future matter were requirements identified by the ABA Committee on
Ethics prior to the 2002 amendments. ABA Formal Ethics Op. 93-372. The
amendments, for the first time specifically included guidance on informed consent to
future conflicts of interest. ABA Formal Ethics Op. 05-436. The 2002 amendments,
which support the validity of general, open-ended waivers, permit informed consent
to a wider range of future conflicts that would have been possible prior to the
amendments. Id. Because the 2002 amendments changed the standard for when a
client’s waiver of future conflicts is effective, and in response to those changes, the
ABA subsequently withdrew Formal Opinion 93-372, a lawyer is no longer required
to meet the limitations established in ABA Formal Ethics Opinion 93-372 to obtain
informed consent from all clients. See ABA Formal Op. 05-436. While specifying a

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particular party or type of legal matter does make it more likely that the waiver will
be effective for a wider range of clients, using a general framework for determining a
course of conduct does not render the waiver unenforceable. The waiver language
supports a finding of informed consent because it provides a course of conduct by
which the parties can manage future conflicts relating to the attorney-client
relationship.
Second, the Court looks to see whether or not the waiver language includes
any explanation of the material risk of waiving future conflicts of interest. Waiver
language that informs the client of the material risk of waiving future conflicts
supports a finding of informed consent. See MODEL RULES OF PROF’L CONDUCT R.
1.0(e) (2010); Celgene, 2008 WL 2937415, at *8. V&E waiver language in this case
informs Galderma that if they agree, Vinson and Elkins representation of Galderma,
“will not prevent or disqualify us from representing clients adverse to you in other
matters.” The previous language explains that V&E is not necessarily disqualified
when representing another client with interests “materially and directly adverse to
[Galderma].” The waiver explains that agreeing to the waiver risks V&E advocating
for another client directly against Galderma. This is exactly the risk of which
Galderma now claims they were not informed. This language explains the material
risk in waiving future conflicts, and so this language also supports a finding of
informed consent.

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Third, the Court looks to see whether the waiver language contains any
explanation of reasonably available alternatives to the proposed course of conduct.
When the waiver language includes explanation of alternatives to the course of
conduct, this also supports a finding that the client gave informed consent. See
MODEL RULES OF PROF’L CONDUCT R. 1.0 (e) (2010); Celgene, 2008 WL 2937415, at
*8. In this case, the alternative course of conduct is for Galderma to hire other
counsel. The waiver language tells Galderma, “You are free to retain any other
counsel of your choosing.” Elsewhere, the engagement letter tells Galderma that
V&E’s representation of Galderma is based on the parties’ mutual consent. The
language in the waiver and the agreement as a whole identifies at least one
alternative; Galderma need not engage V&E on this matter if they do not wish to
consent to the proposed terms and conditions. This language, although the least clear
of the three factors, also supports a finding of informed consent.
Galderma largely relies on the rationale of the Celgene court to argue that the
waiver language in this case is not reasonably adequate for a client to make an
informed decision. The Celgene court considered similar waiver language in that case.
Id. at *2. In holding that the waiver language was not reasonably adequate, the
Celgene court reasoned that the attorneys seeking the waiver of future conflicts needed
to further identify risks to Celgene, such as particularizing generic pharmaceutical
companies as a potentially conflicted client and identifying patent disputes as a
potential matter where the attorneys may represent a client with conflicting interests.

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Id. at *8. The court also reasoned that the attorneys needed to further explain
alternatives such as defining substantially related matters or considering broader
limitations such as refraining from representing all general drug companies. Id.
While such language is even better evidence of a client giving informed
consent, the Court disagrees with the Celgene Court that this type of language is
always necessary to show informed consent. The examples given by the Celgene court
are all examples of ways in which attorneys may identify a particular party, class of
parties, or the nature of the potentially conflicting future matter. This type of
language is not always necessary for a client to give informed consent, given the 2002
amendments to the Model Rules. ABA Formal Op. 05-436. If such language was
always required, general and open-ended consent would never be valid. See id. To
the contrary, the Committee recognized that under particular circumstances, general
and open-ended consent is still likely to be valid. Id.; MODEL RULES OF PROF’L
CONDUCT R. 1.7, cmt. 22 (2010).
The Court concludes that the waiver in the 2003 engagement letter is
reasonably adequate to allow clients in some circumstances to understand the
material risk of waiving future conflicts of interest. The language discloses a course of
conduct for determining when V&E will be disqualified, explains the material risk
that V&E may be directly adverse to the client, and explains an alternative, that the
client need not hire V&E if it does not wish to consent. The Court must next
examine Galderma’s sophistication and whether Galderma was independently

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represented in the waiver to determine whether or not the disclosure provided was
reasonably adequate to allow Galderma to understand the material risks of waiving
future conflicts. Id. R. 1.0, cmt. 6 & R. 1.7, cmt. 22.
2.

Whether V&E’s Disclosure is Reasonably Adequate for
Galderma to Form Informed Consent

For the general, open-ended waiver to be valid in this case, V&E must still
establish that the disclosure was reasonably adequate to allow Galderma to
understand the material risks involved. The communication necessary to obtain
informed consent varies with the situation involved. Id. R. 1.0, cmt. 6. The principal
considerations at this point in the analysis are the sophistication of the parties and
whether the client was represented by counsel independent of the law firm seeking
the waiver. See RESTATEMENT (THIRD) LAW GOVERNING LAWYERS § 122, cmt. c(i)
(2000).
a. The Client’s Sophistication
The parties have disagreed sharply as to whether or not the client’s
sophistication is relevant to resolving this issue. Galderma argues that the
sophistication of the client is not relevant, whereas V&E argues that a client’s
sophistication is a critical factor.
The Comments to the Model Rules and the ABA Committee on Ethics
Opinions state that client sophistication is indeed relevant. A lawyer need not inform
a client of facts or implications already known to the client. MODEL RULES OF PROF’L
CONDUCT R. 1.0, cmt. 6 (2010); RESTATEMENT (THIRD) OF LAW GOVERNING
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LAWYERS § 122, cmt. c(i) (2000). Thus, the client’s existing knowledge affects
whether the disclosure in a case is reasonably adequate. Additionally, a client is also
sophisticated when “the client…is experienced in legal matters generally and in
making decision of the type involved….” MODEL RULES OF PROF’L CONDUCT R. 1.0,
cmt. 6 (2010). Normally, such persons need less information and explanation than
others. Id. The comments to Model Rule 1.7, specifically dealing with conflicts of
interest, also consider the knowledge and experience of the client in determining
whether or not a client’s consent is effective. See MODEL RULES OF PROF’L CONDUCT
R. 1.7, cmt. 22 (2010). Since the addition of these Comments to the Model Rules,
the Committee on Ethics has also changed its position, concluding that the
effectiveness of client consent does vary with the client’s level of sophistication. ABA
Formal Op. 05-436 (withdrawing its prior Formal Op. 93-372 as now inconsistent
with the Model Rules). Under the 2002 changes to the Model Rules, a sophisticated
client need not be provided as much information for the disclosure to be reasonably
adequate for the client to give informed consent.
Galderma is highly sophisticated client. Galderma describes itself as one of the
world’s leading dermatology companies. In 2011, Galderma and its affiliates reported
worldwide sales of 1.4 billion euros, which is approximately 1.87 billion dollars.
Galderma is involved in extensive research as part of its normal operations, having
filed approximately 5,500 patent applications and patents. Galderma operates

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worldwide with either R&D centers or manufacturing centers in France, Sweden,
Canada, Brazil, Japan, and the United States.
Galderma is also sophisticated in its legal experience. Galderma is presently
involved in approximately a dozen different lawsuits, many involving large, complex
patent disputes. Galderma litigates in state and federal courts across the country,
including Texas, New York, Massachusetts, Florida, Georgia, Illinois, Wisconsin, and
Delaware. In doing so, Galderma routinely retains different, large law firms to advise
the corporation on various matters across the country including, DLA Piper, Paul
Hastings, and V&E. Galderma is experienced in retaining large, national law firms
and has signed waivers of future conflicts as part of engaging a national law firm on at
least two other occasions, including as recently as February of 2012. Quinton
Cassady, who signed the 2003 V&E engagement letter, is the same person who
signed engagement letters with DLA Piper which also contained waivers of future
conflicts. In one case, Mr. Cassady even initialed the future conflicts waiver portion
of an engagement letter. The record in this case demonstrates that Galderma is a
client who is highly sophisticated in both legal matters generally and in making
decisions to retain large, national firms. This level of sophistication weighs in favor of
finding informed consent in this case.
Galderma relies on Woolley v. Sweeney to argue that that the Fifth Circuit
requires the same full disclosure from an attorney regarding conflicts without regard
to the client’s sophistication. See No. 3:01-cv-1331, 2003 WL 21488411 (N.D. Tex.

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May 13, 2003, Stickney, J.). Woolley is inapposite, however, as the case dealt with a
conflict known to the attorneys at the time the client retained the attorneys and the
attorneys sought the waiver. See id. at *1. If a conflict of interest is known to an
attorney at the time he seeks a waiver, the attorney is not allowed to hide that
conflict, regardless of whether the client is sophisticated or not. See id. But here, the
attorney is not withholding information regarding a conflict of which the attorney is
already aware.
Even if the holding in Woolley were applicable, the Court would still be
compelled to hold that Galderma’s sophistication and independent representation
were factors in the informed consent decision. The precedent relied on by the court
in Woolley predates the 2002 changes to the Model Rules. See id. at *6, 11 (citing
Horaist v. Doctor’s Hosp. of Opelousas, 255 F.3d 261, 268 (5th Cir. 2001) & E.F. Hutton
& Co., Inc. v. Brown, 305 F. Supp. 371, 398 (S.D. Tex. 1969)). The Fifth Circuit’s
current framework establishes that the national standard guide the court’s analysis,
and that standard is determined by the current ABA Model Rules and related
authority. In re Dresser, 972 F.2d 540, 541 (5th Cir. 1992).
b.

Independent Counsel

Another related, but different factor the Court considers is whether the client
is represented by independent counsel. A client represented by independent counsel
needs less information and explanation than others for its consent to be informed.
MODEL RULES OF PROF’L CONDUCT R. 1.0, cmt. 6 & R. 1.7, cmt. 22 (2010); ABA

24

Formal Op. 05-436. For the purposes of determining informed consent, the effect is
the same whether that independent lawyer is inside the client’s organization or is
other, outside counsel. RESTATEMENT (THIRD) OF LAW GOVERNING LAWYERS, § 122,
cmt. C(i) (2000). The importance of this factor is obvious. The ultimate test for
determining whether a client gave informed consent is whether the disclosure is
reasonably adequate to allow a client to understand the material risks involved.
MODEL RULES OF PROF’L CONDUCT R. 1.0, cmt. 6 & R. 1.7, cmt. 22 (2010). When
the client has the benefit of its own lawyer, who is bound by and familiar with the
same ethical obligations of the lawyers seeking a waiver, less disclosure is needed to
reveal to the independent counsel and its client the consequences of agreeing to the
proposed waiver of future conflicts. Another lawyer, who is familiar with the ethical
requirements of practicing law, is inherently more informed than even the most
sophisticated lay person. The comments to the Model Rules reflect the importance of
this factor, going so far as to say that “generally a client…who is independently
represented by other counsel in giving the consent should be assumed to have given
informed consent.” Id. R. 1.0, cmt. 6 (emphasis added).
Galderma has its own legal department. Galderma has a general counsel with
over 20 years of experience practicing law, who is a member of both the Texas state
bar and the federal bar. Galderma relies on its general counsel, Mr. Cassady, and the
corporate legal department to give competent legal advice pertaining to complex legal
matters. Mr. Cassady, as an inside counsel, is still lawyer independent from V&E,

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advising Galderma on whether or not Galderma should give its consent. See
RESTATEMENT (THIRD) OF LAW GOVERNING LAWYERS, § 122, cmt. C(i) (2000).
Mr. Cassady claims now that he did not intend to consent to V&E
representing a generic drug manufacturer when he signed the 2003 engagement letter.
The language in the Model Rules is clear; informed consent turns on an objective
standard of reasonable disclosure and reasonable understanding. See MODEL RULES
OF PROF’L CONDUCT

R. 1.0 & 1.7 (2010). Mr. Cassady’s current declaration that he

did not actually intend for Galderma to consent does make a general waiver invalid
because when a sophisticated party is represented by independent counsel a general,
open-ended waiver is still likely to be reasonably adequate disclosure.
Galderma argues that existing case law holds that even a sophisticated client,
represented by its own independent counsel cannot give informed consent based on
general, open-ended waiver language. The national standard set by the ABA Model
Rules and the Restatement (Third) of the Law Governing Lawyers do not take such a
position, and the cases cited by Galderma are distinguishable in critical ways.
Galderma argues that the rationale of a pair of cases out of California
persuasively demonstrate why V&E’s waiver language is not sufficient for a client to
form informed consent. See Visa U.S.A., Inc. v. First Data Corp., 241 F. Supp.2d 1100
(N.D. Cal. 2003); Concat, L.P. v. Unilever, P.L.C., 350 F. Supp.2d 769 (N.D. Cal.
2004). Galderma’s reliance is misplaced for several reasons. First, the Concat court
relying on Visa U.S.A., held that to obtain informed consent, the prospective waiver

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must disclose the nature of the subsequent conflict. Concat, L.P., 350 F. Supp.2d at
820. There is no requirement under the current Model Rules that all prospective
waivers must disclose a specific nature of a subsequent conflict to be valid. See
MODEL RULES OF PROF’L CONDUCT R. 1.7 (2010).
Second, the Concat court found that the waiver language was not sufficient to
form informed consent, because it did not name a specific party like the advance
waiver in Visa U.S.A., Inc. See Concat 350 F. Supp.2d at 821. The Visa U.S.A., Inc.
court relied, in part, on Formal Opinion 93-372, which stated that the closer the
lawyer who seeks a prospective waiver can get to circumstances where not only the
actual adverse client but also the actual potential future dispute is identified, the
more likely the prospective waiver is ethically permissible. Visa U.S.A., Inc., 241
F.Supp.2d at 1107. While still true, a disclosure, identifying a particular client no
longer a requirement for every client to form informed consent. See ABA Formal Op.
05-436 (withdrawing and expanding on ABA Formal Op. 93-372). Critically,
nothing in either case suggests the courts examined the national standard for
informed consent in light of the changes to the Model Rules and the new comments,
on which the parties have focused in this case. Because of that court’s reliance on
ABA Formal Opinion 93-372, which the ABA has since withdrawn, and because ABA
Formal Opinion 05-436 expanded the situations for which a waiver provides a basis
for informed consent, the difference between Visa and Concat is no longer persuasive
for whether a particular waiver is insufficient to form the basis of informed consent.

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See ABA Formal Op. 05-436 (stating that Opinion 93-372 concludes informed
consent is limited to circumstances in which the lawyer is able to and does identify
the potential party or class of parties that may be represented in the future matter(s),
and Opinion 93-372 is no longer consistent with the Model Rules).
Galderma also relies heavily on the rationale in Celgene Corp. v. KV
Pharmaceutical Co., where the court concluded that the general open-ended waiver
language was not sufficient to show the lawyers seeking a waiver obtained informed
consent. See 2008 WL 2937415, at *12 (July 29, 2008, D.N.J.). Both the law and
the rationale of the Celgene court are distinguishable.
As to the law, the Celgene court considered itself bound by Third Circuit and
New Jersey Supreme Court precedent which differs from the national standard
because the precedent incorporated New Jersey state rules, which elucidate a
different, more stringent standard. See In re Congoleum Corp. 426 F.3d 675 (3rd Cir.
2005). Under New Jersey rules the test for informed consent is whether the attorney
provided both “full disclosure and consultation.” See id. at *4 (discussing In re
Congoleum Corp., 426 F.3d 675 (3d Cir. 2005)). To meet the “consultation” part of
the test under New Jersey law, the Third Circuit concluded that, an attorney should
have to first indicate in specific detail all of the areas of potential conflict that
foreseeably might arise. In re Congoleum, 426 F.3d at 691. Bound by precedent, the
Celgene court could not find Celgene had given informed consent unless the lawyers
seeking the waiver told Celgene of specific implications and the specific possibility

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that the lawyers might represented a generic pharmaceutical company in future
patent litigation. Celgene, 2008 WL 2937415, at*11.
In the Fifth Circuit, the Model Rules, are the primary source of guidance for
this Court, and the test for informed consent is whether the client understands the
material risks involved in waiving the future conflict. MODEL RULES OF PROF’L
CONDUCT R. 1.0 (e) & 1.7, cmt. 22 (2010). Additional consultation outside of the
waiver is not a requirement to obtain informed consent. A lawyer need not inform
the client through additional consultation of facts or implications already known to
the client. Id. 1.0, cmt. 6; RESTATEMENT (THIRD) LAW GOVERNING LAWYERS § 122,
cmt. c(i)(2000). Accordingly, under the national standard, as opposed to the New
Jersey standard, additional consultation is not required for a client to give informed
consent when, without it, the client is aware of sufficient information reasonably
adequate to make an informed decision. MODEL RULES OF PROF’L CONDUCT R. 1.0,
cmt. 6 (2010); RESTATEMENT (THIRD) LAW GOVERNING LAWYERS § 122, cmt. c(i)
(2000).
The Court also disagrees with The Celgene court’s analysis regarding the role of
independent counsel in determining whether a client gave informed consent. See
Celgene, 2008 WL 2937415, at *9–10. The Celgene court acknowledged Comment 22
to Model Rule 1.7 and ABA Formal Opinion 05-436, but determined that these
authorities merely acknowledged that a consent that is otherwise “informed, but
general is likely to be valid if the client was represented by independent counsel in

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the waiver transaction.” Id. at 10. The court concluded that using independent
counsel was not relevant to whether or not a client’s consent is informed. Id.
Comment 22 to Model Rule 1.7, Comment Six to Model Rule 1.0, ABA
Formal Opinion 05-436, and Section 122 of the Restatement (Third) of Law
Governing Lawyers all incorporate independent counsel as an important factor to
determine whether or not a client gave informed consent. Comment Six explains, in
determining whether the information and explanation provided are reasonably
adequate, relevant factors include whether the client is independently represented by
other counsel in giving the consent. MODEL RULES OF PROF’L CONDUCT R. 1.0, cmt.
6 (2010). When a client has their own lawyer who reviews the waiver, the client does
not need the same type of explanation from the lawyer seeking a waiver because the
client’s own lawyer can review what the language of the waiver plainly says and advise
the client accordingly. The court cannot agree with the Celgene court because to do so
would ignore the knowledge and advantage that clients gain by employing their own
counsel to advise them, and the national ethical standards clearly compel the court to
consider a client’s use of independent counsel.
3.

Whether Galderma Gave Informed Consent to the Waiver of
Future Conflicts of Interest

V&E’s disclosure is general and open-ended. In many cases, and for many
clients, the disclosure in this case would likely not be reasonably adequate to allow a
client to make an informed decision. Even though general, the disclosure language
does lay out a course of action for when V&E would be disqualified for a conflict of
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interest and when not. The disclosure warns in plain language that Galderma’s
consent means V&E may appear directly adverse to Galderma in litigation, the very
risk of which Galderma now claims they were not made aware. Galderma is a
sophisticated client who has experience engaging multiple large law firms and has
twice signed similar waiver provisions with at least one other law firm it has hired.
Finally, having the benefit of its own independent counsel to advise Galderma on
what the language meant, Galderma, through its own counsel, chose to sign the
engagement letter which included the waiver of future conflicts.
Given the 2002 amendment to the Model Rules on informed consent and
waivers of future conflicts, the authority related to those changes, and the evidence in
this case, the Court concludes that Galderma gave informed consent to V&E's
representation of clients directly adverse to Galderma in substantially unrelated
litigation. Because V&E’s representation of Actavis falls within the scope of that
informed consent, V&E is not disqualified from representing Actavis.
III.

Conclusion
Galderma gave informed consent for V&E to represent other clients in

litigation directly adverse to Galderma, subject to the limitations specifically
identified in the waiver language. V&E’s representation of Actavis falls within the
scope of that informed consent. Therefore, V&E’s representation of Actavis is not a

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violation of ethical standards, and disqualification is not warranted.
SO ORDERED.
SIGNED on February 21st, 2013.

ED KINKEADE
UNITED STATES DISTRICT JUDGE

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