Risk Update

Disqualification Debates — New York City Bond Battle, Pharma Patent Fight

Posted Dan Bressler

“New York City claims conflict of interest in request to disqualify Sidley Austin” —

  • “Last week’s intervention by the city of New York to disqualify a law firm from a qui tam case involving alleged price fixing of municipal bonds brings conflicts of interest to the forefront of already prolonged and complex litigation.”
  • “In a Nov. 16 filing in New York’s state supreme court, New York City and the New York City Transitional Finance Authority (TFA) requested to disqualify law firm Sidley Austin from representing Morgan Stanley in an ongoing case involving variable rate demand obligations (VRDOs).”
  • “The city’s motion stems from the fact that Sidley Austin and its predecessors, i.e. Sidley Austin Brown & Wood LLP and Brown & Wood LLP, had served as the city’s bond counsel for three decades: 1986 to 2016. The firm also served as counsel for the TFA for almost twenty years, i.e., 1997 to 2016. In that capacity, according to the filing, Sidley Austin ‘was instrumental’ in drafting and negotiating the bond remarketing agreements that are at issue in the current litigation.”
  • “Consequently, the city contends that the firm has an impermissible conflict of interest because the interests of Sidley’s current client, Morgan Stanley, are materially adverse to those of New York City and the TFA.”
  • “The City of New York also believes that allowing Sidley Austin to continue its representation of Morgan Stanley means that the firm would be in a position to ‘use privileged and/or confidential information about the drafting, negotiation, and interpretation” of the agreements at issue.'”
  • “In its filing, the city claims that Sidley Austin did not seek its consent to represent Morgan Stanley. It also contends that Sidley Austin ‘failed to act promptly once the city brought this conflict to their attention.'”
    Said Sidley: “‘Sidley had no role in advising the city regarding the issue raised in the complaint and was not itself involved in any of those activities.’ Sidley Austin further argued in the letter that it has fully met its confidentiality obligations with respect to its representation of the city. The firm also notes that the attorneys who worked on bond matters for the city and for the transit authority are no longer with the firm.”
  • “The city sees the latter argument as insufficient in part because of an ABA rule, which says that a conflict stays with the firm, even if attorneys who worked on the conflicted matter(s) leave the firm.”

“Novartis Wants Atty DQ’d From MS Drug Patent Row In Del.” —

  • “In a brief filed Nov. 22 in support of its disqualification motion, Novartis asserted that the court should bar Chidambaram S. Iyer of Sughrue Mion PLLC from representing plaintiff Shilpa Pharma Inc. because the company has identified him ‘as the only named Shilpa witness to several 2016 discussions with Novartis about licensing the patent’ at issue in the suit.”
  • “‘Mr. Iyer allegedly was the first to tell Novartis about the patent’s existence in a one-on-one discussion in February 2016; he then set up and attended a meeting with unnamed Shilpa representatives and Novartis to discuss a license in March 2016; and he then followed up with one or more one-on-one discussions with Novartis in April 2016,’ the brief said. ‘Ultimately, Novartis declined the license.'”
  • “Those discussions are central to Shilpa’s patent infringement case, with Shilpa relying ‘on the licensing discussions to claim willful and intentional direct and indirect infringement,’ Novartis said.”
  • “Under American Bar Association professional conduct guidelines, ‘[a] lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness;’ thus, Iyer should be disqualified, the company said.”