Risk Update

Conflicts and Disqualification News — Decisions of Note & A Lumber IP Suit

Latest of note from Bill Freivogel.

(Chuck Lundberg dropped me a note, noting “Freivogel on Conflicts, the online Bible of conflict of interest, is 20 years old this month.” Congrats, Bill!):

  • Warner v. Google LLC, 2020 BCSC 1108 (CanLII) (S. Ct. B.C. July 29, 2020).The claim is that Google improperly gathered data from certain Canadians using Android phones. As a settlement was being negotiated, before class certification, Plaintiff and his law firm (“Law Firm”) got into a disagreement about where cy-pres funds should be distributed. Plaintiff wanted those funds to go to Free Software Foundation, an American not-for-profit.
    • Other parties wanted the funds to go to Canadian bar-related foundations. In this opinion the court was faced with whether Plaintiff should be replaced, and, if so, whether Law Firm should be replaced.
    • First, the court determined that Plaintiff should go because of Plaintiff’s possibly advantageous relationship with the Free Software Foundation and its leader(s), and Plaintiff’s difficult conduct during the cy-pres dispute. As to Law Firm, the court ruled it could stay.
    • The court noted the “bright line” Canadian conflicts rule might otherwise mean that Law Firm could not continue because of its disagreement with Plaintiff. However, the court looked at prior Canadian decisions suggesting that class actions can be different in this respect. Thus, even though no class has yet been certified, with the only relationship being Law Firm’s representation of Plaintiff, keeping Law Firm in the case would be in the best interests of the future class.
  • In re Vascular Access Centers, L.P., Bankruptcy No. 19-17117-AMC (E.D. Pa. April 6, 2020).Debtor sought to have Law Firm approved as Debtor’s counsel. The U.S. Trustee objected because Law Firm had a conflict under Section 327(a) of the Bankruptcy Act and because Law Firm violated Bankruptcy Rule 2014(a) by failing to disclose all Law Firm’s relationships to Debtor’s principal owner.
    • The court approved the retention, finding that the conflict really existed only three days and was inconsequential. The court was very troubled by the disclosure failure and ruled that Law Firm would receive no compensation for work prior to when Law Firm finally did make the disclosures.

Lumber Exec Wants Rival Firm In IP Suit DQ’d For Estate Work” —

  • “In a motion filed Thursday in Arkansas federal court, FiberPro LLC Founder Joshua Krauss said his legal relationship with Friday Eldredge & Clark LLP has given the firm access to his private information, making it unethical for the firm to represent Timber Automation LLC in its suit alleging Krauss and his associates stole confidential information and used it to start their own rival lumber company.”
  • “To back up the claim he is still a client of the firm, Krauss noted that he has remained in touch with Duke to share updates on the estate through email exchanges in 2017 and 2018. Duke specifically asked to be informed of any changes to the estate so he could keep the couple’s documents up to date in the case of changes to the tax code, according to the brief.”
  • “But even if Friday Eldredge can show he is no longer its client, Krauss said, disqualification is still in order because the parties’ previous relationship has given the firm access to information that would provide Timber Automation with an unfair advantage in litigation.”
  • “Timber Automation originally sued Krauss, FiberPro and two other former employees in Arkansas state court on July 15. Timber Automation alleged that Krauss, a former vice president of sales for one of its subsidiaries, convinced project engineer Jeremy Hutson and designer Henry Meyers to join him in starting a competing business. Before jumping ship, the complaint alleges, the three conspired to download thousands of files from Timber Automation’s servers — including equipment designs, vendor catalogs and proprietary spreadsheets — for use in creating their rival company.”