916 F.3d 975
Fed. Cir.2019Background
- Katten Muchin Rosenman LLP (Katten) represented Bausch & Lomb in an ongoing trademark matter and signed an engagement letter that referenced Valeant Pharmaceuticals International, Inc. (Valeant-CA) and incorporated Valeant’s Outside Counsel Guidelines (OC Guidelines).
- The OC Guidelines stated they govern Valeant-DE, its subsidiaries and affiliates, required conflict checks before representation, and demanded heightened loyalty from “key firms.”
- Attorneys Deepro Mukerjee and Lance Soderstrom moved from Alston & Bird to Katten on May 3, 2018; they previously represented Mylan in district and PTAB proceedings involving patents owned or licensed to Valeant affiliates (Valeant-CA, Salix, Dr. Falk).
- Valeant-CA and Salix moved to disqualify Katten from representing Mylan in three appeals (Valeant II, Salix II, Dr. Falk II), arguing Katten’s ongoing representation of Bausch & Lomb (a Valeant affiliate) creates a concurrent conflict under Model Rule 1.7.
- The court found the engagement letter and OC Guidelines created an ongoing attorney-client relationship extending to Valeant-CA and its subsidiaries, and independently found the affiliates (Valeant-CA, Salix, Bausch & Lomb) were sufficiently interrelated (shared infrastructure, common in-house legal, financial interdependence) to establish a corporate-affiliate conflict.
- The court concluded Katten violated Rule 1.7 by representing Mylan adverse to Valeant-affiliates without informed, written consent and granted the motions to disqualify.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Katten’s engagement letter/OC Guidelines created an ongoing attorney-client relationship with Valeant-CA and its subsidiaries | Engagement letter + OC Guidelines establish Katten represents Valeant-CA and affiliates, creating a conflict | Engagement letter governs only Bausch & Lomb; OC Guidelines only restrict “key firms,” and Katten is not a key firm | The engagement letter and OC Guidelines created an ongoing relationship with Valeant-CA and subsidiaries; Katten’s representation of Mylan is conflicted |
| Whether affiliates (Valeant-CA, Salix, Bausch & Lomb) are so interrelated that representing one is equivalent to representing all | Affiliates share operations, legal department, employees, and financial ties — creating an affiliate conflict | Representation of Bausch & Lomb does not automatically bind other affiliates absent clear agreement | Affiliates are sufficiently interrelated (operational commonality and financial dependence) to give rise to corporate-affiliate conflict |
| Whether Katten’s post-hire ethical wall cures the conflict or avoids disqualification | Ethical wall and adherence to rules mitigate conflict | Ethical wall insufficient because created after the move, partial in scope, and no prior notice or waiver | Ethical wall inadequate; disqualification warranted despite wall |
| Whether disqualification is required or discretionary given Rule 1.7 violation | Disqualification unnecessary under balancing of circumstances and prejudice | Disqualification appropriate to protect client loyalty and avoid conflict | Court disqualified Katten — even if balancing were required, factors favored disqualification |
Key Cases Cited
- Celgard, LLC v. LG Chem, Ltd., [citation="594 F. App'x 669"] (Fed. Cir.) (apply regional circuit law and look to total context for disqualification analysis)
- Atasi Corp. v. Seagate Tech., 847 F.2d 826 (Fed. Cir.) (regional circuit law governs professional conduct issues on appeal)
- GSI Commerce Sols., Inc. v. BabyCenter, LLC, 618 F.3d 204 (2d Cir.) (factors for when affiliates are so interrelated that representing one implicates loyalty to another)