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Oracle America, Inc v. Innovative Technology Distributors

July 20, 2011

ORACLE AMERICA, INC.,
PLAINTIFF,
v.
INNOVATIVE TECHNOLOGY DISTRIBUTORS, LLC, DEFENDANT.



The opinion of the court was delivered by: Lucy H. Koh United States District Judge

ORDER DENYING PLAINTIFF'S MOTION TO DISQUALIFY COUNSEL (re: dkt. #38)

This case involves a multi-million dollar contract disputed between Plaintiff Oracle America, Inc. ("Oracle") and Defendant Innovative Technology Distributors, LLC ("ITD").

Presently before the Court is Oracle's motion to disqualify counsel. See Dkt. #38. Pursuant to Civil Local Rule 7-1(b), the Court deems this motion appropriate for resolution without oral 22 argument and vacates the July 21, 2011 motion hearing. The July 21, 2011 case management 23 conference, however, remains as set. For the reasons explained below, Oracle's motion to 24 disqualify counsel is DENIED.

I.Background

A.The Parties

Oracle is a Delaware corporation with its principal place of business in Redwood Shores, California. It is the successor in interest to Sun Microsystems, Inc. ("Sun"). ITD is a New Jersey limited liability company with its principal place of business in Edison, New Jersey. Aside from 2 the contract dispute, Oracle has moved to disqualify certain counsel associated with ITD. Some 3 background on the prior business relationship between the parties is necessary to provide context 4 for the present motion before the Court.

later Oracle. See Decl. of Linda Spinella ¶ 2. The formal legal relationship between the two 7 companies goes back to 2005, when ITD signed a General Terms agreement and supplemental 8 agreements with Sun ("Sun-ITD Agreement"). As a result of the Sun-ITD Agreement, ITD 9 became a distributor of Sun's products to customers in the telecommunications industry. Id. ¶ 9.

Since its inception, ITD has been a reseller of hardware and software products for Sun, and Over the next several years, ITD and Sun modified their rights and responsibilities with several follow-on agreements, including executing "Amendment No. 1" to the Sun-ITD Agreement in September 2009. Id.

ITD continued to act as a reseller of Oracle products when Oracle acquired Sun in January 2010. Oracle Compl. ¶ 10. However, during the second half of 2010 and due to reasons that are a 15 matter of dispute, the parties' relationship soured. On March 1, 2011, the parties' senior executives 16 and legal counsel met in person to try to resolve their differences, id. at ¶ 13, but the meeting was 17 not successful. On March 2, ITD filed a complaint in New Jersey Superior Court ("ITD New Jersey Complaint")-since removed to the Federal District of New Jersey and then transferred to 19 this Court and related to this action. ITD seeks damages against Oracle for breach of contract, 20 violation of the New Jersey Franchise Practices Act, and other claims. According to Oracle's Complaint, the contract dispute arises from ITD's failure to pay for $19 million of product that Oracle supplied to ITD under contract, beginning around July 2010. Oracle Compl. ¶ 1.

B.Motion to Disqualify ITD Counsel

Oracle's motion to disqualify alleges that Vicky Dal Molin, a former in-house lawyer at Sun and then Oracle, should be disqualified for breaching her ethical duties by representing ITD in 26 this litigation. Oracle also alleges that ITD's long-time outside counsel, Lowenstein Sandler, PC 27 ("Lowenstein") should be disqualified because it "partnered" with Dal Molin.

1. Vicky Dal Molin's Employment at Sun

Dal Molin's employment with Sun began in March 2001 in Australia. Decl. of Vicky Dal Molin ¶ 5. In July 2005, Dal Molin moved to New York to become Senior Counsel for Sun's 4 Financial Services Area. Id. at ¶ 6. In April 2006, she became the Assistant General Counsel for 5 Sun's Channels Organization, making her "responsible for a variety of contract and compliance 6 issues" involving "thousands of resellers," including ITD. Id. at ¶ 8. In July 2008, Dal Molin 7 became Assistant General Counsel for Sun's Global Partners and Sales Group. Id. at ¶ 9.

9 she first became involved with a "substantive matter dealing with ITD in or around the Summer of Dal Molin worked on several ITD-related matters on behalf of Sun. Dal Molin recalls that 2009." Id. at ¶ 11. The business executives in the Global Partners and Sales Group wanted to create an addendum to the Sun-ITD Agreement. Id. Dal Molin attended meetings between ITD

and Sun in New York on July 14, 2009 and in Boston in September 2009. In preparation for these 13 meetings, Dal Molin "review[ed] the proposed terms for the contract addendum that the Sun 14 business representatives had put together, and assisted in finalizing those terms and preparing the 15 addendum for execution." Id. The timing of the September 2009 meeting and execution of the 16 "addendum" coincide with the September 2009 execution of Amendment No. 1 to the Sun-ITD 17 agreement.

Dal Molin also recalls working for Sun on a matter that both parties refer to as the Motorola

"last time buy" issue. According to ITD, in 2008, ITD purchased $11.3 million worth of Sun 20 products scheduled to be phased out, based on Sun's forecast that Motorola was planning to buy 21 these products and a promise from Sun to accept the return of the products if Motorola did not 22 follow through. See Friedman Decl. Exh. A ¶¶ 116-120. But, Motorola only purchased about half 23 of these products from ITD, leaving ITD with $6 million worth of inventory it could not sell. Id. at 24 ¶ 121. Dal Molin became involved with this issue in August 2009, when ITD requested that Sun 25 accept the return of the products. Dal Molin Decl. ¶ 12. Specifically, Dal Molin provided 26 comments on a draft e-mail to be sent from Sun to ITD, raising "queries/issues" related to the 27 potential agreement in response to Oracle personnel's request for legal input. 28

Dal Molin continued in her role at Sun until early February 2010-one month after Oracle's

2 acquisition of Sun-when she accepted an offer from Vincent James Spinella of ITD to become 3

ITD's General Counsel. Id. ¶¶ 14-16. Prior to leaving Oracle, Dal Molin completed a form 4

"setting forth the basic terms of Sun's contracts with ITD." Id. at ¶ 13. The document shows that 5

Dal Molin reviewed the Sun-ITD agreement at issue in the underlying contract dispute in this 6 action and "flagged" certain contract terms for review by Oracle.

9 firm has handled "virtually all" of ITD's legal work, "including all of ITD's transactional, 10 intellectual property, and litigation matters," with the sole exception of ITD's local counsel for this lawsuit. Id. at ¶¶ 3-4. In connection with this dispute, Lowenstein has reviewed thousands of pages of documents, held numerous meetings with ITD executives, researched legal issues and 13 prepared ITD's 42-page complaint against Oracle. Id. at ¶ 5. ITD believes it would be "severely 14 prejudiced" if Lowenstein was disqualified from representing ITD in this matter. Id. at ¶ 7.

2. Lowenstein

Lowenstein has been ITD's primary outside counsel since 2005. L. Spinella ...


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