Risk Update

Freivogel Findings — Derivative Action Dismissal, Patent Infringement Lawyer Ethical Screen, Former Client Fight, and More

Posted Dan Bressler

Bill Freivogel has been quite busy, keeping an eye on all decisions and update conflicts and risk related. With his kind permission, and my continuing thanks for that making some days of this blog thing easy, I’m sharing some of his commentary and detail on his latest spotted stories of note:

Gottlieb v. Beckerle, 2024 WL 678007 (N.J. App. Div. Feb. 20, 2024).

  • Derivative action on behalf of Company.
  • Company’s board hired Lawyer to conduct an investigation on whether the action should continue. Lawyer was of counsel to Law Firm. Lawyer’s principal occupation is law professor. Lawyer submitted a report recommending that the board should seek dismissal of the suit. On Defendants’ motion to dismiss the case, Plaintiff claimed, among other things, that Lawyer’s recommendation should be rejected because Lawyer and Law Firm had conflicts of interest because they had been representing Company “for over thirty years.”
  • The trial court dismissed the case. In this opinion the appellate court affirmed. The court said that, without more, the fact that the law firm doing a derivative action investigation has been representing the company on other matters does not mean the board could not rely upon the investigation.
  • The court also noted that Lawyer’s own work for Company had been minimal, that his investigation in this case was quite thorough, and that Lawyer and Law Firm had no relationships with individual Defendants. Therefore, Company’s board was reasonable in relying upon it.

AGI Suretrack, LLC v. Farmers Edge Inc., 2024 WL 693971 (D. Neb. Feb. 20, 2024).

  • Patent infringement case.
  • Defendant proposes to use lawyer Robert Stoll as an expert witness. Stoll is a partner at Faegre.
  • Faegre is not handling this infringement case. But, Faegre has represented Plaintiff and Plaintiff’s parent company, including an executive termination matter, arguably involving information relevant to this case.
  • Faegre claims it has screened Stoll from any matters related to this case. Nevertheless, the magistrate judge, in this opinion, has granted Plaintiff’s motion to disqualify Stoll as an expert witness.
  • The court distinguished the holding in Commonwealth Ins. Co. v. Stone Container Corp., 178 F. Supp.2d 938 (N.D. Ill. 2001) (also a magistrate judge opinion), which was one of the early cases holding that, for conflicts purposes, a lawyer/expert does not have a client.

Original LULAC Council No. 2 v. Rey Feo Scholarship Foundation, Inc., No. SA-23-CV-1307-XR (W.D. Tex. Feb. 14, 2024).

  • The parties are fighting over who has the rights to certain trademarks. Plaintiff moved to disqualify the defendant’s lawyer (“Lawyer”) on former-client (Rule 1.9) grounds. There were two primary issues: (1) whether Lawyer previously represented Plaintiff, and (2) whether the earlier matter was substantially related to this case.
  • In this opinion the court denied the motion, on both grounds. The analyses were too routine and fact-specific to be of precedential value.
  • The most interesting aspect was that Lawyer had represented a predecessor company to Plaintiff. The court found that the predecessor was too defunct, and predecessor’s relationship to Plaintiff too attenuated, for Plaintiff to claim that Plaintiff had been Lawyer’s client.

Bold, Ltd. v. Rocket Resume, Inc., 2024 WL 589116 (N.D. Cal. Feb. 13, 2024).

  • Copyright infringement case. Bold moved to disqualify Resume’s law firm (“Law Firm”). In this opinion the court granted the motion. Lots of lawyers with various affiliations moving around, some of whom had done work for Bold and were later with Law Firm.
  • The key issue was substantial relationship under Rule 1.9. Routine analysis of questionable precedential value. Very California-centric.

In re The Norwich Roman Catholic Diocesan Corp., 2024 WL 535120 (D. Conn. Bankr. Feb. 9, 2024).

  • The Bankruptcy Court appointed the Unknown Claims Representative (“UCR”) in 2022. This opinion responds to UCR’s application to employ Law Firm as its counsel.
  • The problem is that Law Firm as been serving as Debtors’ counsel in a number of other church sexual abuse cases. In denying the application, the bankruptcy judge said that representing the UCR here seems “at odds” with serving “as parish counsel in several other pending bankruptcies.”
  • The court discussed the application of Section 327 of the Bankruptcy Act and the distinction between “actual conflicts” and “potential conflicts,” but clearing all that away, this application simply did not pass the “straight-face” test (our phrase, not the court’s).