March 2 decision from the U.S. District Court for the Eastern District of Texas in Maxell Ltd. v. Apple Inc. involved a motion to disqualify Apple’s counsel due to a conflict triggered by the hiring of a new lateral partner who previously had performed work for Maxell, the opponent in the litigation.

Of particular concern to the court was the application of the American Bar Association‘s Model Rules of Professional Conduct, which allow screening to cure a conflict when a lawyer changes firms, and the actions that were taken once the conflict was discovered to eliminate the opportunity for disclosure of confidential information. Ultimately, the court denied the motion to disqualify, although the lawyer’s new firm failed to comply with all of the provisions of the screening rule.

Facts Giving Rise to the Conflict

The underlying case, now settled, was a patent infringement action, filed on March 15, 2019, relating to smartphone technology. From April 2016 to January 2020, attorney Justin Park worked at Mayer Brown LLP and represented Maxell on matters related to smartphones.

According to Maxell, Park was an integral member of the patent litigation team, with unlimited access to Maxell’s confidential business and technical information related to Apple matters, among others, attending meetings related to the case against Apple, having direct knowledge of Maxell’s litigation strategy, and being privy to materials protected by the attorney-client privilege and work-product doctrine.

Six months after Park moved to DLA Piper, on July 30, 2020, DLA Piper filed documents on behalf of Apple in a related proceeding before the U.S. International Trade Commission. Two days prior to the filing, Park spoke to an attorney working on the DLA Piper team representing Apple and relayed his views about the attorneys at his prior firm working on the Maxell smartphone patent litigation.

The July 30 filing led counsel for Maxell, Jamie Beaber, to call Park. Beaber asked about Park’s disclosure of any confidential Maxell information and whether an ethical screen had been established.

After the call, Park notified the vice chair of his practice group, who then notified a member of the firm’s office of the general counsel. The attorney in the general counsel’s office was previously unaware of Park’s prior work for Maxell and informed Park that he could not disclose any information about Maxell to any DLA Piper attorney representing Apple.

On Aug. 10, 2020, Park responded “informally” to Beaber, during a communication about personal matters, and explained that his firm’s office of the general counsel had been contacted about implementing an ethical screen. DLA Piper said it initiated the screening “immediately,” but it was not until Aug. 18, 2020 — almost three weeks after the July 30 filing — that Park received a “formal ethical screen notification.” The notification mandated, among other things, that Park not communicate with any member of the DLA Piper Apple team on matters related to Maxell, not work on anything related to his previous work for Maxell, not access any case files for any matter involving Apple and Maxell, or receive any information about any matter involving Apple and Maxell.

On Aug. 28, 2020, DLA Piper entered its appearance for Apple in the patent infringement action. On Sept. 11, 2020, counsel for Maxell sent a letter to DLA Piper noting the conflict of interest due to Park’s former work for Maxell and asking for information about the protection of Maxell’s confidential information.

DLA Piper and counsel for Maxell then exchanged a number of communications. Finally, on Sept. 16, 2020, DLA Piper provided Maxell with written notice that it had erected an ethical screen, and on Sept. 28, DLA Piper described the screening procedures it had implemented weeks before.

Additional questions from Maxell led to the discovery by DLA Piper that it received several email threads relating to Maxell in connection with the transfer of files for a different client. The emails contained confidential Maxell case settlement strategies and royalty rates for the Maxell smartphone patent portfolio. DLA Piper quarantined those emails on or about Oct. 14, 2020. That disclosure led to more questions and answers.

Dissatisfied with DLA Piper’s responses to its additional inquires, on Oct. 28, 2020, Maxell filed its motion to disqualify. The trial was scheduled to begin on Dec. 6, 2020.

Applicable Rules of Professional Conduct

The court considered both the model rules and the Texas Disciplinary Rules of Professional Conduct. The result is the same under both sets of rules. This article will address only the model rules.

A former client conflict clearly existed in this case under the Model Rule of Professional Conduct 1.9. Park’s current firm, DLA Piper, was representing Apple in a matter on which Park had worked while at Mayer Brown. Although Park was not working on the Maxell matter, that conflict was imputed to him under Rule 1.10(a).

The screening provisions in Rule 1.10 can cure the conflict that arises out of a disqualified lawyer’s association with a prior firm. But, the provisions are rigorous:

  • The disqualified lawyer is timely screened and is apportioned no part of the fee from the engagement giving rise to the conflict.
  • Written notice is promptly given to the affected former client, which must include: a description of the screening procedures; a statement of the firm’s and the screened lawyer’s compliance with the rules; notice that review may be available before a tribunal; and an offer to respond promptly to any written inquiries or objections.
  • The screened lawyer or a partner of the firm must provide a certification of compliance with the rules at reasonable intervals upon the former client’s written request and upon the termination of the screen procedures.

The undisputed facts established that DLA Piper did not comply with these requirements. The screen was not erected promptly. There was no statement about Park’s sharing in any fee from the Apple engagement. DLA Piper only belatedly provided a somewhat detailed description of the screening procedure and a statement of the firm’s compliance.

It did not offer to — and did not — respond promptly to Maxell’s questions and objections. There was no certification of compliance during the few months the screen was in effect prior to the court decision.

The other provision of concern to the court was the obligation under Rule 1.9(c) to maintain the confidentiality of all information received during the engagement for the former client except as allowed with respect to current clients, and not to use the information to the disadvantage of the former client except as the rules otherwise would permit or when the information has become “publicly available.”

The discovery of the very sensitive emails in the possession of DLA Piper raised significant questions about compliance with Rule 1.9(c).

The Court Denied the Motion to Disqualify

The court carefully evaluated DLA Piper’s conduct in light of the standard for disqualification, which balances the need to ensure ethical conduct by attorneys with other social interests, including a litigant’s right to counsel of its own choice.

With respect to the dissemination of confidential information, the court recognized that where a conflict of interest exists, it is presumed that client confidences were shared but ruled that DLA Piper had rebutted that presumption with the submission of “exhaustive evidence.” With respect to the screen, the court recognized that the screening was flawed but concluded that it was not ineffective.

On July 30, 2020, when DLA Piper learned about the conflict, it initiated screening procedures and instructed Park not to discuss Maxell with anyone representing Apple. By Aug. 18, all of the DLA Piper attorneys working on Apple matters had been instructed not to speak to Park about their work for Apple.

Of critical importance to the court in connection with both of these issues was the submission of affidavits by three dozen attorneys and employees involved in matters for Apple stating that they received no confidential Maxell information.

In addition, DLA Piper presented evidence that no one at the firm had accessed the confidential Maxell emails other than Park, who deleted them, and an attorney from the firm’s office of the general counsel and information technology personnel for purposes of responding to the motion to disqualify.

The court also referred to the physical distance between Park, who worked in Washington, D.C., and the attorneys working on the Apple matter who were located in California and Texas.

Finally, equitable considerations weighed against disqualification. The case was at an advanced stage, only weeks away from trial. DLA Piper billed more than 3,000 hours. A party’s right to counsel of its own choice is critically important, and removing DLA Piper would create a significant hardship for Apple. Inevitably, the trial would be delayed leading to inefficient administration of justice.

The court imposed two conditions upon DLA Piper: (1) that it provides Maxell with written updates regarding DLA Piper’s continued compliance at reasonable intervals, upon Maxell’s request; and (2) that it return or destroy all copies of the confidential Maxell documents in its possession.

Best Practices in Screening

Apart from the specific requirements of the applicable rules, case law contains guidance on determining the effectiveness of screening. Those factors include:

  • The substantiality of the relationship between the attorney and the former client;
  • The time lapse between the matters in dispute;
  • The size of the firm and the number of disqualified attorneys,
  • The nature and extent of the disqualified attorney’s involvement, and
  • The timing of the screen.

Elements of an effective screen include:

  • The prohibition of discussion of sensitive matters;
  • Restricted circulation of sensitive documents;
  • Restricted access to files; and
  • A strong firm policy against breach, including sanctions and physical and/or geographical separation.

Many reported cases have held that an untimely or ineffective screen will not save a firm from disqualification.

What Went Wrong and How to Fix It

DLA Piper could have avoided this situation completely by taking two simple steps.

First, during the period it was considering Park’s candidacy, DLA Piper should have run a thorough conflicts check on the matters Park was handling (or had handled in the past) but was not bringing to the firm.

The Maxell representation would have appeared on the conflicts check for the new Apple engagement, and the conflict would have been identified at that time. Then, Park could have been screened before DLA Piper began the work for Apple adverse to Maxell.

Second, the screen could have complied with the provisions of the applicable screening rule.

If there was a question as to which rule applied, the screening provisions should have been consistent with the most rigorous requirements prohibiting fee apportionment and requiring prompt and detailed notice, as well as certifications of compliance in certain situations.

Robust conflicts checking of lateral attorneys and implementing strong screening protocols can save firms time and expense associated with defending disqualification motions. Even where, as in the case of DLA Piper here, such motions do not succeed, they clearly distract from the substantive representation of the client and can create strains in the attorney-client relationship.

Guard against this happening at your firm. Engage in proactive intake and strong screening to avoid such motions in the future.

Reprinted with permission from the April 2, 2021 issue of Law360. © 2021 LexisNexis. Further duplication without permission is prohibited. All rights reserved.

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