Hot Potato Conflicts

I recently taught about successive conflicts in my ethics class, and there could be no better timing than the Fish & Richardson case to explain the hot potato scenario.  The “hot potato doctrine” means that firms are generally prohibited from dropping smaller clients (like hot potatoes) in order to pick up more lucrative clients.

Apparently, Fish & Richardson represented, until recently, headset maker Aliph in its regulatory work out of Fish’s D.C. office.  Aliph is now suing to have Fish & Richardson disqualified from representing a direct competitor against it in a patent case.  As the Recorder explained:

Aliph Inc. moved to disqualify Fish from representing Bluetooth rival Plantronics in the patent case two weeks ago, arguing that the firm shouldn’t be allowed to sue its own client or get out of the mess by suddenly disowning Aliph at 8:30 p.m. the night before . . . .

Aliph says in court papers that it hired the firm to do FCC regulatory work in May. In December, the company got a call from the relationship partner, Terry Mahn of the firm’s Washington, D.C., office, trying to get Aliph’s consent for Fish to represent an adverse party in litigation. Fish wouldn’t identify the party or the matter, according to Aliph, and the company refused to waive the conflict.

Following further unsuccessful entreaties, Mahn sent an e-mail to Aliph on Jan. 14 saying, “Unfortunately, firm management has now weighed in and has directed me to inform you that we can no longer represent Aliph on regulatory matters without Aliph’s consent to the firm being adverse on IP matters unrelated to our regulatory work, as was explained in our initial engagement letter.” The next day, Fish attorneys from the firm’s Dallas office filed the patent infringement suit for Plantronics against Aliph in the Eastern District of Texas. The suit claims that the earbuds used for Aliph’s Jawbone Bluetooth headsets infringe on a Plantronics patent.

Diane Karpman, an ethics lawyer with Karpman & Associates, said what Fish is accused of doing took a lot of “chutzpah.”

“It’s breathtaking that a firm would disengage at 8:30 and then sue them in the morning,” Karpman said. “It would seem to be a pretty valid argument that they were working on this beforehand.”

There are a number of interesting things about this case.  First, I love how the partner responsible for attempting to get consent to client conflicts is called the “relationship partner.”  Are other partners off the hook for managing relationships now?  Is that just a nicer way than saying conflicts partner or ethics counsel?

Second, it also makes me wonder about what is going on inside the firm.  Did the D.C. partners get a vote on which client to keep?  Is this a sign of the D.C. office versus the Dallas office and showing who has more power?  I am curious to hear what happens to firms after these kinds of conflicts among clients in which one partner clearly exerts power over another to keep and/or acquire clients at the expense of other partners in the same law firm.

Cross posted at Indisputably.

This Post Has 2 Comments

  1. Bruce Boyden

    In terms of which matter would be most lucrative, Aliph’s was a minor regulatory proceeding, so it seems like there wouldn’t be much internal debate over that. So why did it take until 8:30pm the night before to drop Aliph? Without any facts, my uninformed guess would be that the Aliph relationship partner fought a rear-guard action to keep his client, one he eventually lost, but not until it was too late to provide a decent interval.

  2. Ed Caja

    I would think that a threat to drop unless would generate a call to the State Bar.

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