Oxford Systems, Inc. v. CellPro, Inc.
45 F. Supp. 2d 1055, 1999 WL 242523 (1999)
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Rule of Law:
An attorney-client relationship may be found based on the client's reasonable subjective belief, even without a formal retainer agreement, preventing the firm from representing an adverse party. Alternatively, a firm may be disqualified from representing a party whose interests are adverse to a former client in a substantially related matter if the firm cannot rebut the presumption that its remaining attorneys possess the former client's confidences.
Facts:
- For thirteen years, Becton Dickinson (Becton) had a professional relationship with the law firm Perkins Coie, using the firm exclusively for its legal work in Washington State since 1990.
- Perkins Coie served as local counsel for Becton in a patent infringement lawsuit against CellPro.
- CellPro was represented in that patent suit by the law firm Lyon & Lyon.
- A central issue in the patent litigation was the validity of legal opinions Lyon & Lyon had provided to CellPro, which Becton sought to characterize as a sham.
- After the patent litigation was transferred to Delaware, Perkins Coie continued to assist Becton with various aspects of the case, including preparing to depose a partner from Lyon & Lyon.
- Subsequently, a securities fraud class action was filed against CellPro and Lyon & Lyon, alleging that Lyon & Lyon issued false and misleading patent opinions.
- Perkins Coie undertook the representation of Lyon & Lyon in the securities fraud action.
- At the time Perkins Coie began representing Lyon & Lyon, Becton was still actively pursuing a multi-million dollar claim for attorneys' fees against Lyon & Lyon in the Delaware patent case.
Procedural Posture:
- Shareholders filed a securities fraud class action lawsuit against CellPro and Lyon & Lyon in the U.S. District Court for the Western District of Washington.
- The law firm Perkins Coie entered an appearance as counsel for defendant Lyon & Lyon.
- Becton Dickinson, a non-party, filed a motion to intervene in the lawsuit for the sole purpose of seeking to disqualify Perkins Coie.
- The court granted the motion to intervene.
- Becton Dickinson filed a motion to disqualify Perkins Coie from representing Lyon & Lyon in the litigation.
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Issue:
Does a law firm's representation of a new client create an impermissible conflict of interest requiring disqualification when the new client's interests are materially adverse to those of a long-standing client in a substantially related matter, and the long-standing client reasonably believes an attorney-client relationship still exists?
Opinions:
Majority - Zilly, District Judge.
Yes, the representation creates an impermissible conflict of interest requiring disqualification. First, the court determines that Becton was a current client of Perkins Coie at the time the firm undertook representation of Lyon & Lyon. The existence of an attorney-client relationship turns on the client's reasonable subjective belief. Given the 13-year relationship, Becton's exclusive use of Perkins Coie for Washington matters, and the firm's recent work for Becton, it was reasonable for Becton to believe it had an ongoing relationship with the firm. Under RPC 1.7, representing a client with interests directly adverse to a current client is prohibited without written consent, which Becton did not give. Second, even if Becton were considered a former client, disqualification would still be required under RPC 1.9. The court finds it is undisputed that the patent litigation and the current securities fraud case are substantially related matters, as both center on the validity of Lyon & Lyon's patent opinions. Furthermore, the interests of Becton (who is seeking fees from Lyon & Lyon) and Lyon & Lyon (who is defending the validity of its opinions) are materially adverse. Perkins Coie argued that disqualification was not required under the exception in RPC 1.10 because the partner who handled the Becton matter had left the firm. However, the court found the firm failed to rebut the presumption that confidential information was shared among the remaining lawyers. The declarations of two associates were insufficient, as one associate's (Alaniz) involvement was found to be substantial and not merely peripheral, and billing records showed that numerous other unidentified Perkins Coie personnel also worked on the Becton matter. Because the firm could not prove that no remaining lawyer possessed Becton's confidences, disqualification is necessary to protect the client and the integrity of the process.
Analysis:
This decision emphasizes that the determination of a current attorney-client relationship can hinge on a client's reasonable subjective belief, shaped by a long course of dealing, rather than a specific, active engagement. It reinforces the high burden on a law firm seeking to avoid imputed disqualification under RPC 1.10 after a lawyer's departure. The ruling demonstrates that a firm must affirmatively and comprehensively prove that no remaining lawyers possess material confidential information, and self-serving declarations from only a few involved attorneys may be insufficient. This serves as a strong precedent for resolving doubts in favor of disqualification to protect client confidences and loyalty.
