196 F. Supp. 3d 345
D.R.I.2016Background
- Markham Concepts, Inc. and Lorraine Markham sued Hasbro alleging breach of contract and IP/control issues over The Game of Life; case early in litigation with motions pending and the docket stayed pending this motion.
- Attorneys Louis M. Solomon and Michael S. Lazaroff left Cadwalader in March 2016 to join Greenberg Traurig (GT); they had been Markham’s counsel at Cadwalader on this matter.
- GT had a long-standing relationship with Hasbro since 2008, including patent prosecution work, and had a retainer with a conflicts/waiver clause.
- GT sought Hasbro’s waiver to assume the Markham matter; Hasbro refused and GT then withdrew from Hasbro and hired Solomon and Lazaroff, taking Markham on.
- Hasbro moved to disqualify GT, Solomon, and Lazaroff under the Rhode Island Rules of Professional Conduct (RIRPC), arguing GT improperly dropped a current client to avoid a conflict (the “hot potato” doctrine).
Issues
| Issue | Hasbro (Plaintiff) Argument | GT (Defendant) Argument | Held |
|---|---|---|---|
| Whether Hasbro was a current client when GT accepted Markham | GT was an active client; GT sought to expand work and withdrawal was timed to avoid conflict (hot potato) | GT said it terminated Hasbro before taking Markham, making Hasbro a former client | Hasbro was a current client; court applies hot potato doctrine and treats relationship as ongoing |
| Whether the hot potato doctrine requires per se disqualification | Disqualification appropriate because GT dropped a current client to assume adverse representation | GT argued hot potato does not automatically disqualify and RIRPC violations don’t mandate disqualification; prejudice to Markham weighs against it | Hot potato doctrine applies but disqualification is not automatic; court will examine equities |
| Whether confidential-information risk justifies disqualification here | Not necessary to show transfer of confidences; disloyalty and timing suffice given Rule 1.7 loyalty duties | GT pointed to lack of substantial relation and lack of confidentiality risk; argued representation was sporadic and unrelated | Court found no realistic risk of using confidences was necessary here; loyalty breach alone (intentional drop to assume conflict) supports disqualification |
| Whether prejudice to Markham or other factors defeat disqualification | Hasbro emphasized loyalty and reputational harms outweigh Markham’s inconvenience | GT argued prejudice to Markham (lead counsel removed, disruption) and that Hasbro unreasonably refused waiver | Court concluded Markham’s prejudice was limited (other counsel on record, case at early stage); Hasbro’s refusal was reasonable and does not excuse GT’s breach — disqualification granted |
Key Cases Cited
- W. Sugar Coop. v. Archer-Daniels-Midland Co., 98 F. Supp. 3d 1074 (C.D. Cal. 2015) (discusses and applies the hot potato doctrine barring quick client drop to avoid conflict)
- Merck Eprova AG v. ProThera, Inc., 670 F. Supp. 2d 201 (S.D.N.Y. 2009) (survey of hot potato precedent recognizing doctrine)
- Picker Int’l, Inc. v. Varian Assocs., Inc., 869 F.2d 578 (Fed. Cir. 1989) (addressing loyalty and conflicts when firms attempt to avoid client conflicts)
- Gray v. R.I. Dep’t of Child., Youth & Fam., 937 F. Supp. 153 (D.R.I. 1996) (describing Rule 1.7’s loyalty focus and need for case-specific disqualification analysis)
- Falvey v. A.P.C. Sales Corp., 185 F.R.D. 120 (D.R.I. 1999) (disqualification where risk that prior representation yielded material confidential information)
- Borges v. Our Lady of the Sea Corp., 935 F.2d 436 (1st Cir. 1991) (caution that disqualification decisions depend on case-specific facts and discretion)
- Kevlik v. Goldstein, 724 F.2d 844 (1st Cir. 1984) (articulating the substantial-relationship/confidential-information test for conflicts)