Everyone knows the old adage, “Don’t mix business with pleasure.” But a slightly less well-known counterpart phrase is, “Don’t mix your self-owned business with your law firm.” It can lead to some hairy conflict-of-interest issues, like the ones this writ of mandamus petition to the Federal Circuit raised.
In re Dell, Inc., No. 2012-m129 (Fed. Cir. Oct. 23, 2012) (Judges Bryson, Moore, and O’Malley) (non-precedential order)
In late 2008, an attorney named James Desmarais started a company called Round Rock Research LLC. Desmarais is the former legal counsel for Micron Technology, Inc., and he’s also a partner in the firm Desmarais LLP. Round Rock Research purchased thousands of patents from Micron, including 8 that have been asserted against Dell in two patent infringement suits, one filed in the Eastern District of Texas in June 2011, and one filed in the District of Delaware in October 2012.
Round Rock hired Desmarais LLP, which has 4 other partners and 10 associates, as legal counsel for the patent infringement suit. As is common in patent suits, Dell requested a protective order to limit the individuals who can access its highly confidential technical documents.
Typically, the protective order would allow only outside counsel to see these documents. But here, Desmarais’s firm was representing James Desmarais’s personal legal interests—so who’s outside and whose inside? Since the lines are blurry, Dell wanted to bar Desmarais’s entire firm’s access to its highly confidential technical documents.
Both district courts denied Dell’s request to bar the entire law firm from seeing Dell’s documents and granted the protective order only to Desmarais individually. Dell then petitioned the Federal Circuit requesting that the appellate firm block the rest of Desmarais’s firm’s access.
The Federal Circuit denied the petition. The court recognized that, sometimes, attorneys should not have access to confidential information if they’re involved in “competitive decisionmaking” for a client. One circumstance that may support this limitation arises if an attorney is so connected to the client’s business activities that there’s an unacceptable risk that confidential information might be disclosed despite the protective order’s restrictions.
Here, Round Rock agreed to treat Mr. Desmarais as a competitive decisionmaker and stipulated that he would not represent Round Rock in the litigation. But the Delaware district court found that none of the other attorneys at the firm were competitive decisionmakers worthy of exclusion.
Dell also argued that Desmarais’s role within Round Rock created a concurrent conflict of interest under the ABA’s Model Rules of Professional Conduct, which guide against representing a client when “a personal interest of the lawyer” would limit the lawyer’s responsibilities to another client. Dell argued further that another rule imputes the conflict to all members of the firm because “there is a general presumption of shared confidences among attorneys associated in a firm.”
The Federal Circuit said, though, that these rules weren’t enough to bar an entire law firm from access to discovery materials related to the litigation. The case law dealing with competitive decisionmaking, the court noted, has “rejected denial of access on such general assumptions.” And Dell didn’t cite a single case to support its position that the entire firm should be barred from accessing discovery materials because of its relationship with Desmarais.
As a final point, the Federal Circuit remarked that the trial court is in a better position to decide what role the Model Rules of Professional Conduct should play in a case like this. The trial court judges in both Texas and Delaware concluded that the right of a client to select its counsel outweighed the ethical concerns raised here. The Federal Circuit didn’t see anything in Dell’s petition that justified overturning that conclusion.
Do you agree with the Federal Circuit and the Delaware and Texas courts? Tell us what you think!