UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
December 22, 2010
BELKIN INTERNATIONAL, INC.; BELKIN, INC.; D-LINK CORPORATION; D-LINK SYSTEMS, INC.;
NETGEAR, INC.; ZYXEL COMMUNICATIONS CORPORATION; AND ZYXEL COMMUNICATIONS, INC.,
The opinion of the court was delivered by: Lucy H. Koh United States District Judge
United States District Court For the Northern District of California
ORDER GRANTING NETGEAR, INC.'S MOTION TO DISQUALIFY BAKER BOTTS AND DENYING NETGEAR, INC.'S MOTION FOR STAY
Defendant Netgear, Inc. moves to disqualify the law firm of Baker Botts and for a stay pending resolution of this motion. Dkt. No. 34 ("Mot."); see also Dkt. No. 60 ("Reply Br.").
Plaintiff Fujitsu Limited opposes the motion. Dkt. No. 55 ("Opp'n"). After considering the parties' 22 submissions and oral arguments, the Court GRANTS Netgear's motion to disqualify Baker Botts 23 and DENIES Netgear's motion for a stay as moot.
Netgear and Fujitsu agree that three separate legal matters, all involving Baker Botts, pertain to Netgear's current motion. These matters include (1) Baker Botts' representation of Fujitsu in its current patent infringement action against Netgear and other defendants; (2) Baker Botts' representation of Netgear and another client in a reexamination proceeding; and (3) Baker Botts' representation of Netgear concerning some of Netgear's indemnity issues with suppliers.
5 infringement of Fujitsu's United States Patent No. Re. 36,769 (the "Ozawa Patent"), a Fujitsu 6 executive first notified Netgear of its infringement claim in a letter dated March 19, 2002. Dkt. No. 38 ("Busse Decl."), at ¶ 19; Dkt. No. 56 ("Showalter Decl."), at ¶ 3. In this letter, Fujitsu 8 offered Netgear a license to the Ozawa Patent. Busse Decl. ¶ 19. Netgear's outside counsel, Jamie 9
A. Fujitsu's Patent Infringement Action against Netgear
Although Fujitsu only recently filed its complaint against Netgear and other defendants for DiBoise and other lawyers at Wilson, Sonsini, Goodrich & Rosati, responded and informed Fujitsu 10 that a license was unnecessary given that the Ozawa Patent claims appeared invalid over the prior art. Id. After receiving this response, Fujitsu asked Barton Showalter of Baker Botts to communicate with Wilson Sonsini regarding Fujitsu's claims against Netgear. Showalter Decl. ¶ 3.
Besides exchanging many letters and e-mails, Showalter and
representatives of Netgear also
met twice in face to face meetings and once through a
videoconference. Id. At the two face to face 15 meetings, held on June
18, 2003 and July 26, 2004, the parties discussed Netgear's contention
that 16 certain prior art, which was not before the examiner who
initially allowed the Ozawa Patent to 17 issue, invalidated the
patent. See Busse Decl. ¶ 20; Showalter Decl. ¶¶ 3-4; Dkt. No. 41
("DiBoise Decl."), at ¶¶ 2-3. After discussions ended without resolving the
matter, Fujitsu decided to petition 19 the United States Patent &
Trademark Office ("PTO") for a reexamination of the Ozawa Patent. 20
Baker Botts began the reexamination proceeding on behalf of Fujitsu on May 18, 2005.
Showalter Decl. ¶ 4. Showalter acted as one of the counsel of record for Fujitsu during the 23 reexamination process. Busse Decl. ¶ 22. By letter dated September 30, 2005, Showalter informed 24
Patent. Showalter Decl. ¶ 6. Netgear did not respond. Id. During 2007 and 2008, Baker Botts and Busse Decl. ¶¶ 35-38. On December 8, 2009, the PTO issued the Ozawa Patent reexamination See Busse Decl.¶ 20; Showalter Decl. ¶ 4.
Wilson Sonsini of the reexamination proceeding and again offered Netgear a license to the Ozawa Showalter continued to represent Fujitsu in the Ozawa Patent reexamination proceeding. See certificate and allowed, over the prior art cited by Netgear and others, forty-five of the original Ozawa Patent claims and forty-one new claims. Showalter Decl. ¶ 4.
Showalter was copied on the letter. Busse Decl. ¶ 17. On September 3, 2010, Fujitsu, still 6 represented by Baker Botts, filed this lawsuit against Netgear and Rayspan for infringement of the Following the issuance of the Ozawa Patent reexamination certificate, on February 1, 2010, Fujitsu's in-house counsel wrote Netgear reasserting Fujitsu's patent infringement claim. Id. ¶ 15.
Ozawa Patent. Id. ¶ 29. Fujitsu alleges that Netgear infringes the Ozawa Patent by selling wireless 8 interface cards and routers. Id. One of the allegedly infringing products is the WPN824, a high-9 speed wireless router that employs multiple antenna configurations to enable faster and more stable 10 connections. Id. ¶¶ 7, 29.
Netgear and Rayspan Corporation, one of Netgear's suppliers of antenna technology. Dkt. No. 36 Wireless Router infringes its U.S. Patent Nos. 7,358,912 and 7,139,562. Busse Decl. 3. Shortly 16 after Ruckus filed its complaint, Netgear and Rayspan agreed to a formal common defense and 17 joint defense arrangement. Id. ¶ 4. Under the arrangement, Netgear and Rayspan maintained joint 18 representation by the same counsel and pursued a common strategy. Id. Brian Busse, Netgear's Director of Intellectual Property, Legal, and Sandra Godsey, Rayspans' Chief IP Counsel, freely 20 shared information and ideas about the Ruckus case throughout the dispute. Id.
B. Ruckus Reexamination Proceeding
On May 5, 2008, Ruckus Wireless, Inc. filed a complaint for patent infringement against ("RJN"), Ex. A ("Ruckus Compl."), at 1. Ruckus alleges that Netgear's WPN824 RangeMax
In September 2008, Netgear and Rayspan hired counsel to represent them in defending the Ruckus lawsuit and in pursuing a reexamination of the Ruckus patents. Id. ¶ 5. The PTO ordered a 23 reexamination of certain claims of the '562 and '912 patents on November 28, 2008 and December 2, 2008, respectively. Id. The court ordered a stay of the patent infringement suit while the 25 reexaminations, which are still pending, proceeded in the PTO. Id. On November 4, 2009, Ruckus 26 filed a second patent infringement lawsuit against Netgear and Rayspan. Id. ¶ 6. The court also 27 ordered the stay of this second lawsuit pending the completion of the '562 patent's reexamination.
2 litigation and reexamination proceeding. In their search for new counsel, they participated in a 3 conference call with Baker Botts on November 17, 2009. Dkt. No. 37 ("Godsey Decl."), at ¶¶ 3-4.
Showalter participated in the call after signing a non-disclosure agreement. Id. ¶ 4. During the 5 call, and afterwards, Godsey provided Baker Botts with information about the lawsuit, Netgear's 6 history with Ruckus, the design of the WPN284, and general litigation and reexamination strategy.
Baker Botts' representation of them in the reexamination proceeding. Showalter Decl. ¶ 9. In 9 response to Rayspan and Netgear's request, Showalter also submitted a budget proposal for the Netgear and Rayspan ultimately decided to retain other counsel, not Baker Botts, to defend them in the Ruckus litigation. They did, however, sign an engagement letter with Baker Botts for 13 the '562 reexamination matter on January 4, 2010. Busse Decl. ¶ 6. For various reasons, 14 11. To help Showalter prepare for a meeting with Godsey and others at Rayspan's facility in San WPN824. Busse Decl. ¶ 18. Showalter never reviewed the information. Showalter Decl. ¶ 16.
20 a representation related to Netgear's indemnification agreements with its chipset suppliers and 21 international manufacturers. Busse Decl. ¶ 13. Netgear communicated with Kurt Pankratz, a 22 partner in Baker Botts' Dallas office concerning the engagement. Id.; Showalter Decl. ¶ 13.
Netgear. Busse Decl. ¶ 15. After Busse discussed the conflict with Pankratz, Netgear agreed to 26 waive the conflict. Id. Netgear also granted Baker Botts a limited advance waiver of certain future 27 conflicts. Id. ¶ 16. This waiver allowed Baker Botts to "represent a party with interests directly
In 2009, Godsey and Busse began discussing replacing their current counsel in the Ruckus Id. ¶¶ 4-5. On November 25, 2009, Showalter submitted a proposal to Rayspan and Netgear for 8
Ruckus litigation on December 2, 2009. Id.
Showalter overlooked the adversity between Fujitsu and Netgear at that time. Showalter Decl. ¶ 15
Diego, Busse, on February 5, 2010, sent Showalter confidential information related to the
C. Netgear Indemnity Matter
On January 11, 2010, Netgear signed an engagement agreement with Baker Botts to handle Before accepting representation of Netgear in the indemnity matters, Baker Botts informed
Netgear that it represented another company, MOSAID, in asserting certain patents adverse to adverse to Netgear's, so long as the adverse representation is not substantially related to the 2 matters" that Baker Botts was handling for Netgear. Id. 3 historical indemnity settlements. Id. ¶ 18. and certain indemnification matters, Showalter and Pankratz recognized the conflict between 8
Fujitsu may bring a patent infringement lawsuit against Netgear in the
future and requested that
rmed Busse that he could not take on a
representation of Netgear without a waiver. Id., Ex. 10. After
Busse discussed the matter with
On February 28, 2010, Busse wrote a letter to Baker Botts detailing their concerns. Id. ¶ 27. Baker Botts did not immediately respond to the letter, but Showalter did withdraw as Netgear's 16 reexamination counsel in March of 2010. Id. ¶¶ 26-27. On September 13, 2010, Baker Botts' Decl., Ex. 2. In its letter, Baker Botts failed to acknowledge the signed engagement letters it had 19 with Netgear and represented that the firm had "decline[d] both Netgear engagements." Id. Baker 20
Botts attorneys recorded a total of sixteen hours to the Ruckus reexamination billing number but 21 never billed Netgear for any of this time. Id. ¶ 18. motion to disqualify Baker Botts as counsel for Fujitsu. Netgear also seeks an order (1) requiring Baker Botts to return all confidential information it obtained from Netgear and Rayspan, (2) 26 requiring Baker Botts to destroy any related work product, and (3) precluding Baker Botts from 27 providing Fujitsu's replacement counsel with any work product that Baker Botts developed about 28 this lawsuit since November 2009. Mot. 22. In its motion, Netgear also moves this Court to stay
On February 8, 2010, Busse sent Pankratz his confidential analyses of indemnity claims and
D. Baker Botts Seeks an Additional Conflict Waiver
In early February, after already engaging Netgear in the Ruckus reexamination proceeding Netgear and Fujitsu. Showalter Decl. ¶ 14. On February 8, 2010, Pankratz informed Busse that Netgear agree to allow Baker Botts to represent Fujitsu in that lawsuit. Busse Decl. ¶ 18. In a 11 phone message on February 22, 2010, Showalter info Netgear's general counsel, Andrew Kim, they decided not to agree to the waiver. Id. ¶ 23. Deputy General Counsel wrote to Busse and addressed Netgear's February 28, 2010 letter. Busse
E. Netgear Moves to Disqualify Baker Botts
Shortly after Fujitsu served Netgear with a formal complaint in this case, Netgear filed this this case pending resolution of its motion to disqualify Baker Botts, Mot. 21-22, and makes a 2 request for judicial of three documents, Dkt. No. 36. powers." Certain Underwriters at Lloyd's London v. Argonaut Ins. Co., 264 F. Supp. 2d 914, 918 (N.D. Cal. 2003). Under Civ. L.R. 11-4(a)(1), all attorneys who practice in this Court must 7 comply with the standards of professional conduct required of members of the State Bar of 8
California. This Court, therefore, applies state law in determining matters of disqualification. In re
II. LEGAL STANDARD
"The right to disqualify counsel is a discretionary exercise of the trial court's inherent County of Los Angeles, 223 F.3d 990, 995 (9th Cir. 2000). "Depending on the circumstances, a 10 disqualification motion may involve such considerations as a client's right to chosen counsel, an attorney's interest in representing a client, the financial burden on a client to replace disqualified counsel, and the possibility that tactical abuse underlies the disqualification motion." People ex 13 rel. Dept. of Corporations v. SpeeDee Oil Change Sys., Inc., 20 Cal. 4th 1135, 1145, 980 P.2d 371, "Motions to disqualify counsel are strongly disfavored." Visa U.S.A., Inc. v. First Data Corp., 241 F. Supp. 2d 1100, 1104 (N.D. Cal. 2003). For one, motions to disqualify involve "a 17 conflict between a client's right to counsel of his choice and the need to maintain ethical standards 18 of professional responsibility." Comden v. Superior Court, 20 Cal. 3d 906, 915, 576 P.2d 971, 975, 145 Cal. Rptr. 9, 13 (1978). Moreover, courts recognize that the ethical rules can be used 20 tactically. See e.g., Optyl Eyewear Fashion Intern. Corp. v. Style Companies, Ltd., 760 F.2d 1045, 1050 (9th Cir. 1985). As a result, "disqualification motions should be subjected to particularly 22 strict judicial scrutiny." Id. (quotation and quotation marks omitted).
Nevertheless, "the paramount concern must be the preservation of
public trust both in the
scrupulous administration of justice and in the integrity of the
bar." State Farm Mut. Auto. Ins. Co.
37, 86 Cal. Rptr. 2d 816, 823 (1999) (citations omitted).
v. Federal Ins. Co., 72 Cal. App. 4th 1422, 1428, 86 Cal. Rptr. 2d 20
(1999). "Consequently, the 26 recognizably important right to choose
one's counsel must yield to the ethical considerations that embody
the moral principles of our judicial process." Id.
The second is the lawyer's duty of confidentiality. Because the Court finds that Baker Botts' breach 5 of the first duty is dispositive, it will not consider the second.
public confidence in the legal profession and the judicial process." SpeeDee Oil, 20 Cal. 4th at 11
Netgear, in essence, argues that Baker Botts' breach of two separate duties should lead this Court to disqualify the firm from representing Fujitsu. The first is the lawyer's duty of loyalty.
The Court will also address Netgear's motion to stay and its request for judicial notice of
A. Duty of Loyalty
"Attorneys have a duty to maintain undivided loyalty to their clients to avoid undermining 1146, 980 P.2d at 379, 86 Cal. Rptr. 2d at 824 (citations omitted). "The effective functioning of 12 the fiduciary relationship between attorney and client depends on the client's trust and confidence 13 in counsel." Id. (citation omitted). "The courts will protect clients' legitimate expectations of 14 loyalty to preserve this essential basis for trust and security in the attorney-client relationship." Id. 15 at 1147 (citation omitted).
As a result of this duty, lawyers in California cannot simultaneously represent two clients that are adverse to each other, even where the adversity arises in two unrelated matters. Flatt v. Superior Court, 9 Cal. 4th 275, 284-86, 885 P.2d 950, 36 Cal. Rptr. 2d 537 (1994). Unless the 19 lawyer fully discloses the conflict and obtains a waiver in writing, the lawyer is prohibited from 20 simultaneous representations. Id. at 286 n.4. This rule is also articulated in the Rules of Professional Conduct of the State Bar of California. Rule 3-310(C)(3) states: "A member shall not, 22 without the informed written consent of each client[, r]epresent a client in a matter and at the same 23 time in a separate matter accept as a client a person or entity whose interest in the first matter is 24 adverse to the client in the first matter." As one court put it, "an attorney (and his or her firm) 25 cannot simultaneously represent a client in one matter while representing another party suing that 26 same client in another matter." Certain Underwriters, 264 F. Supp. 2d at 919.
"[I]n all but a few instances, the rule of disqualification in
cases is a per se or 'automatic' one." Flatt, 9 Cal. 4th at 284;
see also SpeeDee Oil, 20 Cal. 4th at
1147 ("[I]f . . . a law firm[ ]simultaneously represents clients who
have conflicting interests, a  2 stringent per se rule of
disqualification applies. With few exceptions, disqualification
follows 3 automatically, regardless of whether the simultaneous
representations have anything in common or 4 present any risk that
confidences obtained in one matter would be used in the other.")
(citation 5 omitted). 6
At the hearing, Baker Botts made several concessions. First, Baker
Botts conceded that the
bar against concurrent representation of adverse parties results in
per se disqualification. Second,
Finally, Baker Botts also conceded that during that period of
concurrent representation, Fujitsu and
Baker Botts conceded that, at one point, it concurrently represented
both Fujitsu and Netgear.
Netgear were adverse to each other.
What Baker Botts did not concede, however, is that Baker Botts is disqualified here.
Fujitsu argues that Baker Botts properly cured the concurrent representation conflict by 13 discontinuing its representation of Netgear.*fn1 Mot. 11-12. In response, Netgear claims that the law 14 in California prohibits an attorney from curing a concurrent representation conflict by dropping the 15 less favored client once a conflict arises. Id. at 11 (citing Truck Ins. Exch. v. Fireman's Fund Ins.
Co., 6 Cal. App. 4th 1050, 1057 (1992)). In Truck, the court held that "a law firm that knowingly 17 undertakes adverse concurrent representation may not avoid disqualification by withdrawing from 18 the representation of the less favored client." 6 Cal. App. 4th at 1057, 8 Cal. Rptr. 2d 228 (citations 19 omitted). The clear language of the court's holding in Truck favors Netgear's position. 20
Nonetheless, Fujitsu attempts to distinguish the facts at issue in
Truck from the facts of the
case at hand. Opp'n 14-16. Fujitsu argues that Truck involved a law
firm attempting to withdraw from representing a pre-existing client
in order to represent a new, second client. Id. at 14. Fujitsu
claims that, in contrast, Baker Botts is attempting to withdraw from
representing a second client,
Netgear, in favor of its first client, Fujitsu. According to Fujitsu,
California, while prohibiting the 25 former, allows the latter.
fails to persuade this Court that the distinction is significant. Fujitsu cites three cases in support of 3 its position. The first, Sabrix, Inc. v. Carolina Cas. Ins. Co., 2003 WL 23538035 (D. Or. July 23, 2003), is inapposite. The court in Sabrix did not announce the rule proposed by Fujitsu. Rather Sabrix involved an exception to the general rule announced in Truck. That exception allows a 6 lawyer to continue representing a pre-existing client when the conflict created by a second client 7 occurs by "mere happenstance" through no fault of the lawyer. Because that exception does not 8 apply here, this Court will not apply Sabrix to this case.
Even though Fujitsu's factual distinction may be accurate, Fujitsu's cited legal authority Fujitsu also cites a California Court of Appeal decision, Forrest v. Baeza, 58 Cal. App. 4th 65 (1997). The facts and context of that case also make it inapplicable here. In Forrest, the lawyer originally represented both the corporation and the corporation's directors in a derivative suit.
Because the directors were accused of violating their duties to the corporation, the lawyer's 13 representation of both created a conflict. Although the court disqualified the lawyer from 14 continuing to represent the corporation, it allowed the lawyer to continue to represent the directors.
Fujitsu's attempt to glean a more general rule from the court's holding in Forrest, a rule that would extend beyond the derivative suit context, is unpersuasive. As the court in Forrest 17 recognized, the corporation's lawyer "did not unilaterally (or otherwise) decide to drop one client in 18 preference for a more favored one." Id. at 80. A derivative suit, through no fault of the lawyer, 19 creates two clients with adverse interests where previously only one existed. Rather than force all 20 parties to find new counsel, courts have decided, for various policy reasons, to allow the lawyer to 21 continue to represent the directors. See id. at 80-82 (finding that federal authority and legal 22 commentary both support resolving the problem of dual representation in the shareholder 23 derivative suit context by requiring the corporation to find new counsel and allowing the individual 24 defendants to retain the corporate attorney). This decision in the shareholder derivative suit 25 context does not mandate a similar rule where a lawyer willingly takes on two adverse clients. 26
Here, Baker Botts voluntarily agreed to represent both Fujitsu and Netgear. Because the unique 27 circumstances at issue in a shareholder derivative lawsuit are not present, the court's holding in
Forrest does not apply.
The final case that Fujitsu cites, Friskit, Inc. v. RealNetworks, Inc., 2007 WL 1994204 (N.D. Cal. July 5, 2007), is the most on point. In Friskit, Foley & Lardner represented Friskit in a 3 lawsuit against RealNetworks. During the course of that litigation, RealNetworks' CEO, Chairman 4 of the Board, and owner of 32.4% of its common stock employed Foley to represent him in 5 unrelated matters. Subsequently, the CEO moved to disqualify Foley from representing Friskit in 6 its lawsuit against RealNetworks. The court denied his motion. In so holding, the court stated that 7
"the duty of loyalty runs to the existing client, and is not subordinate to any duty owed a later-8 acquired client. . . . To enforce that duty by disqualifying the attorney from representing his 9 existing client would turn the duty of loyalty on its head." 10
Although this case does support Fujitsu's proposed rule, it does not appear to represent the prevailing view in California courts. Not only did the court in Truck not make a distinction between pre-existing and later-acquired clients, but a more recent California Court of Appeal 13 decision also failed to make such a distinction. According to that court, "a lawyer may not avoid 14 the automatic disqualification rule applicable to concurrent representation of conflicting interests 15 by unilaterally converting a present client into a former client." Pour Le Bebe, Inc. v. Guess? Inc., 112 Cal. App. 4th 810, 822, 5 Cal. Rptr. 3d 442, 453 (2003) (quoting American Airlines, Inc. v. (quotation marks and alterations omitted).
Baker Botts' position. In State Farm Mut. Auto. Ins. Co. v. Fed. Ins. Co., 72 Cal. App. 4th 1422, Carruth originally represented State Farm in an insurance dispute. That dispute potentially 24 implicated Federal Insurance Company ("Federal") as an additional insurer with coverage 25 obligations to State Farm's insured. Before State Farm brought any formal lawsuit against Federal, McCormick brought an action against Federal on behalf of State Farm. After Federal's matter 28 involving McCormick settled, Federal moved to disqualify McCormick's representation of State Sheppard, Mullin, Richter & Hampton, 96 Cal. App. 4th 1017, 1037, 117 Cal. Rptr. 2d 685 (2002))
Furthermore, in the case with facts most similar to the case at hand, the California Court of Appeal reversed the trial court and granted the defendant's motion to disqualify the law firm in 1428, 86 Cal. Rptr. 2d 20 (1999), the law firm of McCormick, Barstow, Sheppard, Wayte & Federal engaged McCormick in a separate, unrelated matter. While that matter was ongoing, Farm. In granting the motion to disqualify, the court applied the per se rule of disqualification that 2 applies to concurrent representation. It stated that "so inviolate is the duty of loyalty to an existing 3 client that the attorney cannot evade it by withdrawing from the relationship." Id. at 1431 (citation 4 omitted). 5
The factual similarities between the State Farm case and this case
persuade the Court that
the holding in State Farm should apply. Baker Botts represented
Fujitsu in a dispute with Netgear.
Baker Botts represented Fujitsu, it took on Netgear as a client. Just as the settlement in State Farm 9 did not lead the court to abandon the per se disqualification rule, Baker Botts' withdrawal as 10 counsel for Netgear did not cure its concurrent representation conflict. Therefore, the per se rule of
Like the dispute in State Farm, that dispute eventually ripened into a lawsuit. During the time that disqualification still applies.
The Court, nevertheless, recognizes that "disqualification is a drastic measure," Crenshaw v. MONY Life Ins. Co., 318 F. Supp. 2d 1015, 1020 (S.D. Cal. 2004) (citation omitted), that will 14 impact both Baker Botts and Fujitsu. Baker Botts performed very little work for Netgear, and the 15 firm did not charge Netgear for any legal services. Moreover, Netgear had agreed to waive a direct 16 conflict with MOSAID when it engaged Baker Botts for its indemnity matters. Although Baker 17
Botts made a mistake, it is understandable that Baker Botts would attempt to resolve the problem 18 by withdrawing as Netgear's counsel. If the Court disqualifies Baker Botts, Fujitsu too will be 19 hurt. Showalter has been representing Fujitsu in this matter for nearly a decade. To force Fujitsu 20 to find new counsel would deny Fujitsu of their chosen counsel through no fault of their own and 21 could significantly slow Fujitsu's efforts to litigate this case. 22
In spite of these concerns, the Court grants Netgear's motion. Baker
Botts clearly accepted
two clients whose interests were adverse to each other. This is
especially inexcusable given that
Netgear. During that time he attended at least two face to face
meetings with Netgear 26 representatives where Fujitsu asserted its
infringement claims against Netgear. Furthermore,
Showalter was among the counsel of record in the Ozawa Patent reexamination proceeding. In that Showalter had been representing Fujitsu for nearly eight years when he agreed to represent proceeding, Baker Botts, on behalf of Fujitsu, sought a reexamination certificate validating the Ozawa Patent over the prior art cited by, among others, Netgear. 3
decision, and California state law controls here. Because the facts of State Farm, a California Court of Appeal decision that the court in Friskit did not cite, bear the greatest resemblance to the 6 facts at hand, the court's holding in State Farm should apply.
Although this Court respects the decision of the district court in Friskit, it is an unpublished
The policy reasons supporting the per se disqualification rule also favor disqualification.
As the California Supreme Court has stated, "[a]ttorneys have a duty to maintain undivided loyalty 9 to their clients to avoid undermining public confidence in the legal profession and the judicial 10 process." SpeeDee Oil, 20 Cal. 4th at 1146 (citations omitted). Once Baker Botts accepted Netgear as a client, the firm owed Netgear a duty of loyalty. Baker Botts breached that duty, and the Rules of Professional Responsibility of the State Bar of California, by assisting Fujitsu in 13 advancing patent infringement claims against Netgear. Although the consequence of that breach- 14 per se disqualification-does negatively impact Baker Botts' first client Fujitsu, allowing Baker 15
Botts to avoid that consequence by simply withdrawing as counsel for Netgear, a secondly 16 acquired but nonetheless fully engaged client, is not the best way to restore confidence in the legal 17 profession.
Moreover, courts must protect a client's legitimate expectations of loyalty. See SpeeDee Oil, 20 Cal. 4th at 1147 (citation omitted). Fujitsu's claim to Baker Botts' undivided loyalty 20 certainly lasted longer than Netgear's. That, however, does not alter the fact that Netgear had the 21 same claim to undivided loyalty once Baker Botts accepted Netgear as a client. Unfortunately for Baker Botts, in California, the solution to a direct, concurrent conflict in client loyalties is per se 23 disqualification. Once a client engages a lawyer, that client must be able to expect undivided 24 loyalty. Even though disqualification is a harsh penalty, allowing a law firm to resolve voluntarily 25 created conflicting loyalties by simply dropping the less favored client undermines this 26 expectation.
Fujitsu's supplemental declaration in support of its opposition, filed after the hearing, does not persuade the Court to change its decision. Fujitsu's willingness to drop the WPN824 product from the case if Baker Botts can continue as its counsel, see Dkt. No. 63, does not change the fact 2 that Baker Botts concurrently represented Fujitsu and Netgear.
for a stay. The issuance of this order, therefore, renders the motion to stay moot.
'562 patent, (3) and a copy of the Ozawa Patent. This Court "may take judicial notice of court 10 filings and other matters of public record." Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (citation omitted). Netgear certified to the Court that the copies of the documents that they provided to the Court are true and accurate. Because the fact that these 13 documents are what Netgear represents them to be is not subject to reasonable dispute and is 14 capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably 15 be questioned, the Court hereby grants Netgear's request.
For the foregoing reasons, Netgear's motion to disqualify is GRANTED. Baker Botts is disqualified from representing Fujitsu in this matter. Additionally, this Court ORDERS Baker Botts to return all confidential information it obtained from Netgear and Rayspan and to destroy 20 any work product related to that confidential information. The Court, however, finds Netgear's 21 request that Baker Botts be precluded from providing Fujitsu's replacement counsel with any work 22 product that Baker Botts developed about this lawsuit since November 2009 overly broad. Netgear 23 conceded this at the hearing. Netgear may file an amended, more narrowly tailored request if this 24 order does not resolve Netgear's concerns.
C. Motion to Stay
At the hearing, Netgear agreed that a prompt issuance of the Court's order obviated the need
D. Request for Judicial Notice
Along with its motions, Netgear requests judicial notice pursuant to the Federal Rule of Evidence 201 of: (1) the complaint in the Ruckus Wireless v. Netgear litigation, (2) a copy of the
As stated, Netgear's motion to stay is DENIED as moot, and Netgear's
request for judicial
notice is GRANTED.
IT IS SO ORDERED. 4