granted by "knowledgeable and sophisticated parties"); Restatement (Third) of the Law Governing Lawyers § 122 cmt. d (prospective waiver acceptable if "client possesses sophistication in the matter in question and has had the opportunity to receive independent legal advice about the consent"); NYCLA Ethics Op. No. 724 (blanket waiver may be permissible, "depending on the client's sophistication, its familiarity with the law firm's [multidisciplinary] practice, and the reasonable expectations of the parties at the time consent is obtained").
First Data is a Fortune 500 company with over $6 billion in annual revenues. See Schrader Decl. Exh. A. It is a knowledgeable and sophisticated user of legal services. It has a legal department of about fifty attorneys and routinely hires top-tier national law firms such as Bingham McCutchen, Heller, and Sidley Austin to handle its complex corporate transactions and litigation matters. See Schrader Decl. Exhs. B, C. First Data can and should be expected to understand the full extent of what it waived when it signed Heller's explicit waiver letter.
C. Ethical Walls
It is undisputed that Heller immediately put an intra-firm ethical wall in place when Visa sued First Data, which barred contact between the Heller attorneys representing First Data and the Heller attorneys representing Visa. See Epsen Decl. ¶ 4, Exh. A. First Data argues that the institution of an ethical wall is insufficient to repair Heller's breach of its duty of loyalty, and that Heller has breached its duty of confidentiality to First Data by its dual representation of Visa and First Data.
Heller conceded at oral argument that if it had breached its duty of loyalty to First Data through its dual representation of Visa and First Data, an ethical wall would not be sufficient to cure the breach. See William H. Raley Co., Inc. v. Superior Court, 149 Cal.App.3d 1042, 1049, 197 Cal.Rptr. 232 (1983), criticized on diff. grounds by River West, 188 Cal.App. 3d at 1308, 234 Cal.Rptr. 33. But Heller did not breach its duty of loyalty to First Data by agreeing to represent Visa in this matter after receiving a valid prospective conflict waiver from First Data. Heller thus is not claiming that the ethical wall is necessary to protect Heller's duty of loyalty to First Data.
Rather, Heller instituted the ethical wall to protect Heller's duty of confidentiality to its client First Data. First Data states that it has shared information concerning its finances and its general business plan to its patent lawyers, and argues that such information is presumed imputed to all Heller attorneys. See, e.g., Henriksen v. Great American Savings & Loan, 11 Cal.App.4th 109, 114-15, 14 Cal.Rptr.2d 184 (1992). Heller can rebut that presumption by "showing that effective screening procedures were implemented to prevent the passing of information between the tainted lawyer[s] and other members of the firm." Panther v. Park, 101 Cal.App.4th 69, 76, 123 Cal.Rptr.2d 599 (2002). Because First Data makes no showing in its papers beyond the presumption of shared confidentiality in support of its allegations, and because Heller has demonstrated that it immediately put an ethical wall in place as soon as Heller was retained as Visa's counsel in this action, see Epsen Decl. Exh. A, there has been no breach of the duty of confidentiality here.
The motion to disqualify Heller is DENIED. This order fully adjudicates the motions listed at 25 and 41 on the clerk's docket for this case.
IT IS SO ORDERED.
*fn2 Given the nature of the charges raised by First Data against Heller and the existence of an ethical wall between certain attorneys at Heller, Heller hired independent outside counsel to represent its interests in this motion. The court finds good cause to permit Heller to appear through outside counsel on this motion.
*fn3 In light of this motion and the allegations that First Data has raised against it, Heller has offered to withdraw as counsel on the patent litigation matter, but First Data has insisted that Heller stay on. See Epsen Decl. Exhs. E-F.
*fn4 At oral argument, First Data claimed that Cal. Rule of Prof. Cond. §§ 3-310(C)(1) and (2) also applied to Heller's conduct. Sections 3-310(C)(1) and (2), though, apply only to the simultaneous representation of parties in the same action, as First Data itself admits. See Cal Rule of Prof. Conduct 3-310(C) ("a member shall not, without the informed written consent of each client, (1) accept representation of more than one client in a matter in which the interests of the clients potentially conflict, or (2) accept representation of more than one client in a matter in which the interest of the client actually conflict;" emphasis added); see also Zador Corp., N.V. v. Kwan, 31 Cal.App.4th 1285, 1294, 37 Cal.Rptr.2d 754 (1995) (stating that 3-310(C)(1) and (2) apply only to joint representations in the same action); First Data Opening Br. at 10 (same). Those sections thus are not at issue here.
*fn5 Zador involved representation of two clients in the same action under sections (1) and (2) of Cal. Rule of Prof. Conduct 3-310, and not section (3). While a second consent is required in that circumstance, a second consent is not required when the dual representation is of two clients in separate matters. Cal. Rule of Prof. Conduct 3-310 discussion § 7 (requiring reaffirmation of consent only when conflict arises between parties in the same litigation).
*fn6 Visa and Heller argue that the prejudice to Visa caused by the disqualification of its counsel of choice should be taken into account. The court, however, may not balance Visa's interests against First Data's unless there is a showing that First Data unreasonably delayed bringing this motion for tactical reasons. Dept. of Corporations, 20 Cal.4th 1135, 1145 n. 2, 86 Cal.Rptr.2d 816, 980 P.2d 371 (1999); River West, Inc. v. Nickel, 188 Cal.App.3d 1297, 1307-09, 234 Cal.Rptr. 33 (1987). The record does not support such a finding here.
*fn7 The language used by Heller in the First Data letter is in fact more explicit than blanket waivers that have been upheld in similar situations by other courts. See, e.g., Zador, 31 Cal.App. 4th at 1301, 37 Cal.Rptr.2d 754 (a waiver of conflict with named client "notwithstanding any adversity that may develop" sufficient to bar disqualification in subsequent litigation); General Cigar, 144 F. Supp.2d at 1336 (a waiver of conflict with named client "in any matter not substantially related to this representation" sufficient to bar disqualification in subsequent litigation).
*fn8 First Data states that its IP counsel does not regularly communicate with other members of its legal department and therefore Visa and Heller should have informed First Data in 2001 that Visa could potentially sue it over the expansion of its private arrangements. At that point, before this suit had been filed, that information was protected under attorney-client and work-product privileges, and Heller would have been prohibited from disclosing it. The main purpose of the conflict waiver rules is to permit First Data the lawyer of its choice. See, e.g., Flatt, 9 Cal.4th at 285 n. 4, 36 Cal.Rptr.2d 537, 885 P.2d 950; Zador, 31 Cal.App. 4th at 1295, 37 Cal.Rptr.2d 754. It is preferable to require First Data to coordinate communications between attorneys in its 50 person legal department before agreeing to a conflict waiver designed for First Data's benefit rather than force Visa, the senior client, to disclose privileged information or risk losing the lawyers it hired first.