320 F. Supp. 3d 314
D.D.C.2018Background
- Altova GmbH (plaintiff) sued competitor Syncro Soft over alleged infringement of U.S. Patent No. 9,501,456, which covers an "automatic fix" feature for XML errors; accused product is Syncro Soft's OXYGEN XML Editor v.19 (Quick Fix).
- Syncro Soft moved to disqualify Altova's counsel, Sunstein Kann Murphy & Timbers LLP (Sunstein), because Sunstein previously represented Syncro Soft for many years in trademark, copyright, and trademark-maintenance matters.
- Sunstein began representing Altova in unrelated trademark matters around 2011 while continuing to represent Syncro Soft; in late June 2017 Sunstein accepted the patent matter for Altova and on July 6, 2017 terminated its Syncro Soft representation without obtaining Syncro Soft's consent to the adverse litigation.
- Sunstein attempted to mitigate by erecting an ethical wall and by withdrawing from Syncro Soft, arguing the conflict was unforeseeable and withdrawal was permissible under Comment 5 to Mass. R. Prof. C. 1.7.
- The court considered whether Rule 1.7 (conflicts among current clients) applied and whether Sunstein breached its duty of undivided loyalty by representing Altova against its then-current client Syncro Soft; the court concluded Rule 1.7 applied and disqualification was appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 1.7 governs the conflict | Sunstein argues Syncro Soft was effectively a former client by the time Altova's matter arose | Syncro Soft says it was a current client when Sunstein accepted Altova's adverse matter | Court: Syncro Soft was a current client; Rule 1.7 applies |
| Whether concurrent conflict existed | Syncro Soft: representation of Altova is directly adverse and creates material limitation on loyalty/confidences | Sunstein: conflict was unforeseeable; it withdrew and blocked access to Syncro files | Court: representation was directly adverse; conflict existed under Rule 1.7 |
| Whether withdrawal without consent was permissible | Syncro Soft: consent required; withdrawal to favor new client is improper | Sunstein: Comment 5 allows withdrawal for unforeseeable conflicts; engagement letter warned of possible termination | Court: conflict was foreseeable (e.g., Altova's patent issued 2016); withdrawal without informed consent was not proper |
| Appropriate remedy | Syncro Soft: disqualification of Sunstein from representing Altova | Sunstein: seek less drastic remedy than disqualification | Court: disqualification is appropriate and granted |
Key Cases Cited
- Markham Concepts, Inc. v. Hasbro, Inc., 196 F. Supp. 3d 345 (D.R.I. 2016) (firm may not evade conflict by quickly terminating existing client to take adverse new matter)
- Picker Int'l, Inc. v. Varian Assocs., Inc., 670 F. Supp. 1363 (N.D. Ohio 1987) ("hot potato" doctrine cautioning against dropping a client to accept a more lucrative adverse representation)
- Bryan Corp. v. Abrano, 52 N.E.3d 95 (Mass. 2016) (duty to anticipate potential conflicts and loyalty to current clients)
- Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 42 N.E.3d 199 (Mass. 2015) (Rule 1.7 protects confidences and safeguards loyalty)
- SWS Fin. Fund A v. Salomon Bros., Inc., 790 F. Supp. 1392 (N.D. Ill. 1992) (discussing prophylactic function of conflict rules)
- Adoption of Erica, 686 N.E.2d 967 (Mass. 1997) (disqualification is a drastic, prophylactic remedy to be used when necessary)
- Freeman v. Chicago Musical Instrument Co., 689 F.2d 715 (7th Cir. 1982) (disqualification serves protective, prophylactic purposes)