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Audio MPEG, Inc. v. Dell, Inc.

United States District Court, E.D. Virginia, Norfolk Division

October 25, 2016

AUDIO MPEG, INC., ct al., Plaintiffs,
v.
DELL, INC., et al., Defendants.

          OPINION & ORDER

          HENRY COK-E MORGAN, JR. SENIOR UNITED STATES DISTRICT JUDGE

         A hearing on Plaintiffs' Motion to Disqualify Winston & Strawn LLP ("Motion to Disqualify"), Doc. 233, and Plaintiffs and Third Party Defendant's Motion for Protective Order to Adjourn the August 24, 2016 Deposition of Aleks Mehrle ("Motion for Protective Order"), Doc. 223, was conducted on September 7, 2016. At the conclusion of the hearing, the Court GRANTED the Motion to Disqualify, Doc. 233, and ORDERED Winston & Strawn LLP ("W&S") disqualified from representing Defendant Dell ("Dell") effective September 7, 2016. The Court now supplements its ruling with this Opinion and Order and DENIES the Motion for Protective Order, Doc. 223, as MOOT.

         I. PROCEDURAL HISTORY[1]

         This is a patent case involving the alleged infringement of the MPEG Standards, including U.S. Patent Nos. 5, 777, 992; 5, 323, 396; and 5, 539, 829. Compl. ¶¶ 4, 24. The patented technologies facilitate the playing of music and other audio on electronic devices. Id. ¶ 2.

         On August 10, 2016, a Magistrate Judge held a hearing on Dell's Motion to Compel Responses to Interrogatories, Doc. 152, and Dell's Motion to Compel the Deposition of Gerardus Lokhoff, Doc. 199. Doc. 220. The Magistrate Judge GRANTED Dell's Motion to Compel Responses and DENIED Dell's Motion to Compel Lokhoff's deposition. Id. at 2. Prior to the hearing, Plaintiffs brought the "in camera matter" of disqualification to the Court's attention, and the Magistrate Judge ORDERED the Parties "to determine promptly whether they intend to present the matter to the Court." Id. at 3.

         On August 17, 2016, Plaintiffs filed the Motion for Protective Order, Doc. 223, and Andrew Ward's accompanying Declaration in support, Doc. 225. The Motion for Protective Order concerns the deposition of Aleks Mehrle ("Mr. Mehrle") scheduled for August 24, 2016. Doc. 223 at 1. On August 17, 2016, Plaintiffs and Third Party Defendant filed a Motion to Expedite the Consideration of the Motion for Protective Order. Doc. 226. On August 18, 2016, Dell filed an Opposition to Plaintiffs' Motion to Expedite. Doc. 227. On August 18, 2016, a Magistrate Judge GRANTED Plaintiffs' and Third Party Defendant's Motion to Expedite. Doc. 228. The Order (1) required Dell to respond to the Motion for Protective Order by noon on August 22, 2016; (2) required Plaintiffs and Third Party Defendant to file any reply by noon on August 23, 2016; and (3) prohibited Mr. Mehrle's August 24, 2016 deposition from going forward until the Motion for Protective Order was resolved or the deposition could be "taken by counsel not implicated by any potential disqualification issue." Id. at 1. On August 18, 2016, Plaintiffs and Third Party Defendant replied in support of their Motion to Expedite. Doc. 229.

         On August 22, 2016, Dell filed an Opposition to the Motion for Protective Order. Doc. 230. On August 22, 2016, Plaintiffs replied in support of their Motion for Protective Order. Doc. 231. On August 22, 2016, Plaintiffs filed the Motion to Disqualify W&S, Doc. 233, and Garrard R. Beeney's Declaration in support, Doc. 235. On August 22, 2016, Plaintiffs filed a Motion to Stay Discovery Pending the Court's Resolution of Their Motion to Disqualify W&S. Doc. 236. On August 22, 2016, Plaintiffs filed a Motion to Expedite Briefing and Consideration of the Motion to Disqualify, Doc. 233, and a Motion to Stay Discovery, Doc. 236. Doc. 238. On August 23, 2016, Dell filed an Opposition to Plaintiffs' Motion to Expedite. Doc. 239. On August 23, 2016, a Magistrate Judge GRANTED the Motion to Expedite, Doc. 238. Doc. 240. The Order required (1) Dell to respond to the Motion to Disqualify by August 31, 2016; (2) Plaintiffs and Third Party Defendant to reply by September 2, 2016; (3) Dell to respond to the Motion to Stay Discovery by August 25, 2016; and (4) Plaintiffs and Third Party Defendant to file their reply by August 26, 2016. Id. at 1. On August 23, 2016, Plaintiffs replied in support of their Motion to Expedite, Doc. 238. Doc. 241.

         On August 25, 2016, Dell opposed Plaintiffs' Motion to Stay. Doc. 242. On August 26, 2016, Plaintiffs replied in support of their Motion to Stay. Doc. 243. On August 26, 2016, a Magistrate Judge GRANTED Plaintiffs' Motion to Stay "until the resolution of plaintiffs' motion to disqualify Winston & Strawn LLP, or until further order of this Court." Doc. 244 at 1. On August 31, 2016, Dell filed an Opposition to the Motion to Disqualify, Doc. 256, and filed Kathleen B. Barry's Declaration in support, Doc. 261. On September 2, 2016, Plaintiffs replied in support of the Motion to Disqualify, Doc. 263, and filed Garrard Beeney's Declaration in support, Doc. 264. On September 6, 2016, Dell filed a Notice of Supplemental Authority. Doc. 265.

         A Markman hearing was scheduled for November 17, 2016, the final pretrial conference was scheduled for January 5, 2017, and the trial was scheduled for January 17, 2017. See Doc. 88. On September 7, 2016, the Court heard oral argument on the pending Motions and GRANTED the Motion to Disqualify, Doc. 233. Doc. 268.

         II. LEGAL STANDARDS

         A. Virginia Rules of Professional Conduct 1.9 and 1.10

         This Court has adopted the Virginia Rules of Professional Conduct. See Local Civ. R. 83.1(1); Id. app. Fed. R. Disciplinary Enf't R. IV(B); see In re Morrissey, 305 F.3d 211, 224 (4th Cir. 2002). Rule 1.9 states in pertinent part,

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or substantially related matter in which that person's interests are materially adverse to the interests of the former client unless both the present and former client consent after consultation.

Va. R. Prof 1 Conduct 1.9(a).[2] Rule 1.10 governs the actions of a conflicted lawyer's firm:

(a) While lawyers are associated in a firm, none of them shall represent a client when the lawyer knows or reasonably should know that any one of them practicing alone would be prohibited from doing so by Rules 1.6, 1.7, 1.9, or 2.10(e).
(c) A disqualification prescribed by this Rule may be waived by the affected client under the conditions stated in Rule 1.7.

Va. R. Prof 1 Conduct 1.10. These Rules indicate the need for disqualification if

(1) the moving party and opposing counsel had a prior attorney-client relationship, (2) the interests of the opposing counsel's present client are adverse to the movant, (3) the matters involved in the present underlying lawsuit are substantially related to the matters for which the opposing counsel previously represented the moving party, and (4) the moving party does not consent.

Touchcom. Inc. v. Bereskin & Parr. 299 Fed.App'x 953, 954 (Fed. Cir. 2008) (applying Virginia law to a disqualification issue).

         In 1992, the Virginia State Bar's ethical Council considered a case in which a firm representing medical malpractice plaintiffs sought to hire an attorney employed at a firm representing medical malpractice defendants. Va. State Bar Legal Ethics Op. 1428 (Feb. 22, 1992) ("Va. LEO 1428"). The attorney participated in the defense firm's cases against the plaintiffs firm, and the cases continued after the attorney accepted the plaintiffs firm's offer. Id. "[T]he Committee opined that, absent the consent of the attorney's former client (the defendant in the medical malpractice cases) after full disclosure, it would be improper for the attorney to personally represent the plaintiff and similarly improper for his new firm to continue to represent the plaintiff." Id. The impropriety exists if "the plaintiffs firm currently represented the adverse party or was subsequently contacted by the adverse party on a specific matter on which the attorney/new hire had previously worked." Id. Screening the attorney from the litigation at the new firm would not cure the impropriety, but if the attorney "had not worked on the matter while at his former firm and ... did not possess any secrets or confidences of the former client which could be used to the disadvantage of the former client or to the advantage of the new client, " the firm could continue the representation. Id.

         B. The Court's Duty and Discretion

         I. The Court's Duty to Maintain the Integrity of the Bar

         The Fourth Circuit has cautioned against the "mechanical and didactic application" of conflict rules, Aetna Cas. & Sur. Co. v. United States. 570 F.2d 1197, 1202 (4th Cir. 1978) (quoting Int'l Elecs. Corp. v. Flanzer,527 F.2d 1288, 1293 (2d Cir. 1975)), or "weigh[ing] the circumstances with hair-splitting nicety, " United States v. Clarkson. 567 F.2d 270, 273 n.3 (4th Cir. 1977) (internal quotation marks omitted). However, because courts have a "duty to maintain the highest ethical standards of professional conduct to insure and preserve trust in the integrity of the bar, " Sunbeam Prods., Inc. v. Hamilton Beach Brands. Inc.,727 F.Supp.2d 469, 472 (E.D. Va. 2010), the Fourth Circuit has emphasized that ethical rules governing disqualification of counsel are to be applied ...


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