Careers

Diversity, Equity & Inclusion

Experience

Innovation

Interactive Maps

Locations

About

Pages

Meet our team of innovators
Ask us how we do it

Professionals

Insights

Services

Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

Home | Thompson Hine LLP

Atlanta

Chicago

Cincinnati

Cleveland

Columbus

Dayton

Los Angeles

Minneapolis

New York

Silicon Valley

Washington, D.C.

<img style="max-width: 100%;height: auto;max-width: 100%;height: auto" loading="lazy" class="alignright size-medium wp-image-1934" src="https://www.thelawforlawyerstoday.com/wp-content/uploads/sites/754/2015/09/Batteries-200x300.jpg" alt="Batteries" width="200" height="300">Celgard, LLC v. LG Chem, Ltd., a disqualification case decided by the Federal Circuit, continues to make waves. &nbsp;Insightful commentary from Ronald Rotunda is <a href="https://verdict.justia.com/2015/07/20/the-celgard-decision-and-lawyer-disqualification">here</a>; he notes that typing the case name into Google yields more than 5,000 hits.
Last December, when the opinion came out, there was concern (see&nbsp;<a href="http://www.legalethicsforum.com/blog/2015/01/economic-harm-as-direct-adversity-under-17a.html">here</a>&nbsp;and <a href="http://patentlyo.com/hricik/2015/01/federal-circuit-disqualify.html">here</a>)&nbsp;that if read broadly, Celgard could signal a dangerous standard under which concurrently representing clients with adverse interests up and down a single supply chain might be sufficient to create a disqualifying conflict of interest.
The ruling should not be read broadly, however &mdash; in its opinion, the court expressly rejects such a reading. &nbsp;But Celgard&nbsp;does yield lessons about possible conflicts in concurrently representing clients who are economic competitors.
Celgard, and LG Chem and Apple, oh my!
The case involves a&nbsp;patent dispute between Celgard and defendant LG Chem, which makes lithium batteries alleged to infringe on Celgard&rsquo;s patent. &nbsp;Jones Day sought an injunction on behalf of Celgard against LG Chem. &nbsp;While not a party to the dispute, Apple uses LG Chem&rsquo;s batteries in its products.
Rule 1.7 of the North Carolina Rules of Professional Conduct on concurrent conflicts of interest, patterned after <a href="http://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_7_conflict_of_interest_current_clients.html">Model Rule 1.7</a>(a)(1), bars representation &ldquo;directly adverse&rdquo; to another client that the lawyer represents in an unrelated matter. &nbsp; Jones Day&rsquo;s representation of Celgard had foreseeable economic consequences for Apple, because Apple&rsquo;s supply of lithium batteries was subject to potential disruption were Jones Day to win an injunction on behalf of Celgard.
The Federal Circuit upheld the district court&rsquo;s determination that Jones Day&rsquo;s representation was &ldquo;directly adverse&rdquo; to Apple, and that Apple had the right to intervene and to disqualify Jones Day.
Injunction used as leverage
The key to the Federal Circuit&rsquo;s disqualification holding was that even before Jones Day became involved as counsel, Celgard had sent Apple a copy of its injunction motion, and &ldquo;requested to work with Apple to find a mutually beneficial business arrangement to resolve the issues around infringement of Celgard&rsquo;s intellectual property,&rdquo; the court said.
Thus, Jones Day&rsquo;s representation was not adverse to Apple merely in an economic sense; rather, said the court, its client, Celgard, additionally targeted Apple &ldquo;in an attempt to use the injunction as leverage in negotiating a business relationship [with Apple].&rdquo; &nbsp;Thus, the court deemed Jones Day&rsquo;s representation of Celgard to be adverse to Apple&rsquo;s interests, including its &ldquo;legal obligations.&rdquo;
The court expressly disclaimed any intent to hold that Rule 1.7 covered conflicting representations &ldquo;merely because the client is up or down the supply chain.&rdquo; &nbsp;Thus, contrary to some early expressions of concern, the case does not upset the usual rule, which, as Rotunda says, is that &ldquo;there is no conflict simply because a law firm represents a client [in a case] and the result in the case would make it more difficult or more expensive for another client [represented by the lawyer in unrelated matters] to purchase a good or service.&rdquo;
The usual rule is enunciated in comment [6] to Rule 1.7: &nbsp;&ldquo;[S]imultaneous representation in unrelated matters of clients whose interests are only economically adverse ... does not ordinarily constitute a [direct adversity] conflict of interest.&rdquo;
No broad reach &mdash; but caution still required
Recognizing that Celgard&rsquo;s&nbsp;holding is a limited one, and that it depended on some unique facts, the ruling is a good opportunity to highlight two additional points about representing clients whose interests are economically adverse to each other:
<ul>
<li>First, while the circumstances might not raise a &ldquo;direct adversity&rdquo; conflict under Rule 1.7(a)(1), you may still have a &ldquo;material limitation&rdquo; conflict under&nbsp;<a href="http://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_7_conflict_of_interest_current_clients.html">Model Rule 1.7(a)(2)</a> &mdash; which arises when &ldquo;there is a significant risk that the representation of one or more clients will be materially limited by the lawyer&rsquo;s responsibilities to another client ...&rdquo; &nbsp;If your ability to consider, recommend or carry out an appropriate course of action for Client A will be materially limited by your loyalty to Client B, as an economic competitor of Client A (or could be perceived to be), then you should consider whether you need consent &mdash; from both clients &mdash; in order to proceed.</li>
<li>Second, check whether you or your firm has agreed to the terms of &ldquo;outside counsel guidelines,&rdquo; which an increasing number of large clients require as a condition of the engagement. &nbsp;Such guidelines may place limits on your ability to take on the representation of economic competitors of those clients. &nbsp;Knowing what those guidelines provide before you accept the representation of another client is clearly the best way to steer clear of conflicts problems.</li>
</ul>

core/freeform

Ethics

Legal Ethics, Professional Responsibility and the Business of Law

Celgard DQ decision– sky is not falling, but representing economic competitors still  merits caution