Opinion
Civil No. 04-3419 ADM/RLE.
December 20, 2004
Michael V. Ciresi, Esq., and Annamarie A. Daley, Robins, Kaplan, Miller Ciresi L.L.P., Minneapolis, MN, on behalf of Plaintiff.
Peter M. Lancaster, Esq. and Rachel K. Paulose, Esq., Dorsey Whitney LLP, Minneapolis, MN, on behalf of Defendants.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
This matter is before the undersigned United States District Judge pursuant to Polaris Industries, Inc. and Polaris Sales Inc.'s ["Polaris" or "Defendants"] Appeal [Docket No. 30] from the November 15, 2004 Order of Magistrate Judge Raymond L. Erickson ("Order") [Docket No. 28]. The Order denied Defendants' motion to disqualify Plaintiff's counsel [Docket No. 6]. In its Complaint [Docket No. 1], Arctic Cat, Inc. ("Arctic Cat" or "Plaintiff") accuses Polaris of willfully infringing upon two of Arctic Cat's Patents for storage compartments within the fender of All-Terrain Vehicles ("ATVs"). In their motion to disqualify, Defendants argue Arctic Cat's counsel, Annamarie A. Daley ("Daley") and Robins, Kaplan, Miller Ciresi L.L.P. ("Robins"), should be disqualified from the current matter because of the significant legal advice and litigation work Daley and the Robins firm have previously provided to Polaris. Judge Erickson's Order found disqualification was not necessary because the current litigation was not "substantially related" to the prior representation. The factual and procedural background in this matter is comprehensively set forth in the Order. Since there is no objection to the factual and procedural background, it is incorporated by reference for purposes of the present Appeal. For the reasons set forth below, Defendants' Appeal is denied and the Order is affirmed.
II. DISCUSSION
A. Standard of Review
The standard of review for appeals of a magistrate judge's order on nondispositive pretrial matters is extremely deferential. The district court must affirm an order by a magistrate judge unless it is "clearly erroneous or contrary to law." See D. Minn. LR 72.1(b)(2); see also Banbury v. Omnitrition Int'l Inc., 818 F. Supp. 276, 279 (D. Minn. 1993). "A finding is `clearly erroneous' when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Chakales v. Commissioner of Internal Revenue, 79 F.3d 726, 728 (8th Cir, 1996). Thus, the Court must affirm Judge Erickson's Order unless its findings are clearly erroneous or contrary to law.
B. Standard for Disqualification
Pursuant to D. Minn. R. 83.6(d), the professional conduct of attorneys licensed to practice in the District of Minnesota is governed by the Minnesota Rules of Professional Conduct. In re Potash Antitrust Litigation, 1993 U.S. Dist. LEXIS 19065, at *27 (D. Minn. Dec. 8, 1963). Whether an attorney should be disqualified based upon an alleged conflict of interest is governed by Rule 1.9 of the Minnesota Rules of Professional Conduct. Prod. Credit Ass'n of Mankato v. Buckentin, 410 N.W.2d 820, 823 (Minn. 1987). Rule 1.9 provides:
A lawyer who has formerly represented a client in a matter shall not thereafter:
(a) 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 the former client consents after consultation; or
(b) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit with respect to a client or when the information has become generally known.
Minn. R. Prof. Conduct 1.9.
As Judge Erickson's Order correctly states, the Minnesota Supreme Court has set forth the following three-part test for evaluating lawyer disqualifications:
(a) Considering the facts and the issues involved, is there a substantial, relevant relationship or overlap between the subject matters of the two representations?
(b) If so, then certain presumptions apply: First, it is presumed, irrebuttably, that the attorney received confidences from the former client and he or she will not be heard to claim otherwise. Second, it is also presumed, but subject to rebuttal, that these confidences were conveyed to the attorney's affiliates.
(c) Finally, at this stage, if reached, the court weighs the competing equities.
Order at 7-8. Lennartson v. Anoka-Hennepin Indep. Sch. Dist. No. 11, 662 N.W.2d 125, 129 (Minn. 2003) (quoting Jenson v. Touche Ross Co., 335 N.W.2d 720, 731-32 (Minn. 1983)). The test is now codified in Rule 1.9. See Lennartson, 662 N.W.2d at 132.
The disqualification inquiry centers on the often difficult determination of whether the pending suit is "substantially related" to the prior representation. Buckentin, 410 N.W.2d at 825. To guide this analysis, the Minnesota Supreme Court has adopted the "interpretive guidance furnished in the commentary following Rule 1.9, [Minnesota Rules of Professional Conduct]." Id. at 823-24. The comment first observes, for the purposes of the Rule, the scope of a matter is often dependent on the facts of the particular situation and the degree of the lawyer's involvement. See Minn. R. Prof. Conduct 1.9;Buckentin, 410 N.W.2d at 823. The comment elaborates: "a lawyer who recurrently handled a type of problem for a former client is not precluded from later representing another client in a wholly distinct problem of that type even though the subsequent representation involves a position adverse to the prior client." Minn. R. Prof. Conduct 1.9. Finally, the comment notes: "the fact that a lawyer has once served a client does not preclude the lawyer from using generally known information about the client when later representing another client." Id. Courts interpreting the commentary have concluded: "[t]o satisfy the substantial relationship test, the moving party must establish that the relationship between issues in the prior and present cases is patently clear [and] the issues involved have been essentially the same . . ." Cook v. City of Columbia Heights, 945 F. Supp. 183, 187 (D. Minn. 1996) (quoting Federal Deposit Ins. Corp. v. Amundson, 682 F. Supp. 981, 988 (D. Minn. 1988)).
As Judge Erickson's Order noted, the Amundson court analyzed the standard for attorney disqualification under the antecedent to the Minnesota Rules of Professional Conduct. 682 F. Supp. at 983 n. 2. However, the opinion notes the court would have reached the same conclusion under the superseding rules,id., and other courts in the District of Minnesota have relied on Amundson when evaluating whether attorney disqualification for an alleged conflict of interest is appropriate. See, e.g., Cook v. City of Columbia Heights, 945 F. Supp. at 187; Bieter Co. v. Blomquist, 132 F.R.D. 220, 223 (D. Minn. 1990).
"Ultimately, the party seeking the disqualification of opposing counsel bears the burden of showing disqualification is warranted" and "must satisfy a high standard of proof;" however, "any legitimate doubts which are created by the movant's proffer, must be resolved in favor of disqualification." Olson v. Snap Products, Inc., 183 F.R.D. 539, 542 (D. Minn. 1998) (citations omitted). As Judge Erickson's Order states, due to "the potential for abuse by opposing counsel, disqualification motions should be subject to particularly strict scrutiny." Order at 10 (quotingHarker v. C.I.R., 82 F.3d 806, 808 (8th Cir. 1996)).
C. Legal Analysis
1. Nature and Extent of Prior Representation and the Applicable Standard of Disqualification
As Defendants' first and second objections are closely related, they will be discussed together. Defendants claim the nature and extent of Robins' prior representation of Polaris, coupled with the holding of Buckentin, dictates the firm's disqualification. In support of its Motion, Polaris notes (1) Robins lawyers in general and Daley in particular previously provided legal advice about responding to and designing around patents of their "arch enemy," Arctic Cat; (2) almost 200 Robins lawyers worked on various legal issues for Polaris and collected over $10 million in legal fees from 1996 to 1999; (3) Robins and Daley defended Polaris against patent infringement and trade secret misappropriation claims asserted by Injection Research Specialists ("IRS"); and (4) Daley acted as Polaris' primary outside counsel. As a result of this representation, Polaris avers the Robins firm obtained confidences that could be used against it in the current litigation.
Polaris relies on Buckentin where an attorney who had served as the former general counsel for a Credit Bank was disqualified from litigating on behalf of a borrower against the bank. 410 N.W.2d at 823-25. Although the attorney was not litigating over any loans or on behalf of any borrowers to whom he had previously provided adverse representation, the Minnesota Supreme Court found the matters substantially related because he had overseen loan administration and formulation of interest rates on loans of the same type. Id. at 824-25. In addition, Polaris argues that a matter is substantially related "if a lawyer could have obtained confidential information in the first representation that would have been relevant in the second." Fuente v. Honeggers Co., 1985 WL 801, at *3 (N.D. Ill. Apr. 17, 1985).
The Minnesota Supreme Court found no substantial relationship existed in a second representation in which the attorney sought to represent a borrower against a credit association.
As an initial matter, Fuente does not state the applicable standard for determining whether a matter is substantially related in Minnesota. The Buckentin court requires disqualification only if it is established the prior representation was "so closely related . . . that it is readily apparent that it is substantially and essentially akin to the pending matter." 410 N.W.2d at 824. Likewise, Amundson established a standard requiring the identity of issues in the two matters to be "patently clear" and "essentially the same." 682 F. Supp. at 989. Such a demanding standard matches the test set forth by the comment to Rule 1.9.
Although Robins provided substantial legal services to Polaris, including representation in the areas of intellectual property, patent litigation and counseling, and antitrust counseling, no evidence suggests Robins lawyers "did any work for Polaris relating to the fender-storage technology at issue in the current litigation, or worked on the . . . Accused Products or did any patent work on this technology." Daley Decl. [Docket No. 20] ¶ 3. Robins was not involved in patent prosecution for Polaris. Furthermore, it appears the development of the Accused Products had not progressed beyond the conceptual stage by June of 1999 when Polaris terminated its relationship with Robins. Johnson Decl. [Docket No. 13] ¶¶ 4-5.
Polaris' characterization of Daley as its primary outside counsel during the period in question is an overstatement. Although Robins and Daley provided a wide variety of legal services, Polaris also retained other law firms and lawyers to represent it in patent prosecution, environmental, real estate, trademarks, financing, securities, corporate, employment and collections matters. Daley Decl. ¶ 5. Despite the absence of a formal "in-house counsel" position, Polaris assigned "of Counsel" status to an attorney from Kaplan, Strangis and Kaplan, P.A. who remains on its Board of Directors. Id. ¶¶ 9-10, 13.
After reviewing Polaris' in camera submissions, Judge Erickson determined that no one at Robins accumulated any confidential, proprietary, or trade secret information bearing on the legal and factual issues related to the present litigation. Order at 12. Furthermore, any information Robins did gain concerning Polaris' operations was of the nature which would be "`generally known' after the conduct of routine discovery." Id. at 13.
Polaris has failed to show "the relationship between issues in the prior and present cases is patently clear [and] the issues involved [are] essentially the same . . ." Cook, 945 F. Supp. at 187. The Order's findings are neither clearly erroneous nor contrary to law.
2. Polaris' Burden of Showing Confidences Jeopardized by Robins' Former Representation
Polaris claims the Order relied on a finding that "Polaris has failed to detail any confidence, which it shared with the Robins firm, which is in jeopardy because the firm now represents Arctic Cat." Order at 6. Polaris argues such a finding imposes a burden on it that is contrary to the Eighth Circuit's pronouncement that "[t]he Court will assume that . . . confidences were disclosed to the attorney bearing on the subject matter of the representation. It will not inquire into their nature and extent." Defs.' Obj. to and Appeal from Magistrate Judge's Denial of Mo. to Disqualify Pl.'s Counsel at 6 (quoting State of Arkansas v. Dean Foods Prod. Co., 605 F.2d 380, 383 (8th Cir. 1979)).
Polaris mischaracterizes the Eighth Circuit's statement inDean Foods. The aforementioned pronouncement is part of a larger quotation drawn from T.C. Theatre Corp. v. Warner Bros. Pictures, Inc., 113 F. Supp. 265, 268-69 (S.D.N.Y. 1953). The sentence preceding the aforementioned quotation states: "(T)he former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are substantially related to the matters or cause of action (where) the attorney previously represented him, the former client." Id. (emphasis added). Only after the court finds the matters substantially related will the court assume confidences were disclosed. Id. Such an approach mirrors the three-part test promulgated by the Minnesota Supreme Court in Jenson and Lennartson and is consistent with Judge Erickson's analysis.
Judge Erickson provided Polaris with the additional opportunity of submitting "privileged" documents for in camera review. After reviewing the documents, he "found no showing that anyone at the Robins firm possesses confidential, proprietary or trade secret information which bears upon the legal and factual issues to be litigated in this action." Order at 12.
3. Polaris' Objection to Robins' Representation of Arctic Cat
Finally, Polaris contests language in the Order finding that its objections to Robins' representation of Arctic Cat have been tardily asserted. Order at 14. Polaris argues that it did not waive its right to object to being sued by its former counsel or to Robins' representation of Arctic Cat in matters not adverse to Polaris, much less unduly delay in objecting in the present motion.
As a threshold matter, there is ample evidence to support the Order's finding that Polaris had notice of Robins' representation of Arctic Cat long before the present Motion to Disqualify. See Daley Decl. ¶¶ 16-18. During the summer of 2000, Arctic Cat, Polaris and other snowmobile and ATV manufacturers were sued in two separate lawsuits on antitrust claims. Robins, through Daley, represented Arctic Cat in these suits without objection from Polaris. In December 2000, Daley attended a meeting of the snowmobile manufacturers' association as counsel for Arctic Cat. Although Polaris' Snowmobile Product Manager was also present at the meeting, Polaris did not object to Daley's representation of Arctic Cat. Finally, Daley has represented Arctic Cat in various regulatory matters, including work involving ATVs. Although Polaris is often present for these same matters, it has never raised concerns over Daley's representation of Arctic Cat. As the Order notes, "that absence is oddly inexplicable given Polaris' strongly voiced complaint . . . that the Robins firm, and Daley in particular, held, and continue to hold, Polaris' trade secrets and confidential information, which would be of inestimable value in the hands of an `aggressive competitor' who competes `head-to-head' with Polaris." Order at 15; Malone Decl. [Docket No. 12] ¶ 17.
Ultimately, however, the Order does not rely on the timeliness of Polaris' Objection in denying Defendants' Motion to Disqualify Robins. The Order found that the present litigation was not substantially related to Robins' former representation of Polaris. Furthermore, Rule 1.9(b) states that a lawyer may not use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit or when the information has become generally known. Because Robins possessed only information that was generally known or would be routinely disclosed during discovery, Polaris' consent was found to be unnecessary. As previously discussed, this Court cannot say that either of these findings is clearly erroneous or contrary to law. As a result, the issue of whether Polaris delayed exercising, or waived, its right to object to Robins' representation of Arctic Cat is immaterial.
For the aforementioned reasons, Polaris' appeal is denied and Judge Erickson's Order Denying Defendants' Motion to Disqualify Counsel is affirmed.
III. CONCLUSION
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS HEREBY ORDERED that:
1. Judge Erickson's Order Denying Defendants' Motion to Disqualify Counsel [Docket No. 28] is AFFIRMED;
2. Defendants' Appeal of the Magistrate Judge's Order [Docket No. 30] is DENIED.