A verein-teresting thought experiment? Part 2

So, if you missed Part 1 you can get up to speed here.  Now I indicated I’d get the underlying documents (plural) this weekend and finish this little thought experiment today, but I don’t actually practice in the International Trade Commission (shocking to hear I bet) so beyond getting to the order of disqualification itself, I’ve had no luck.  But, I’m okay with that, because just being able to read the full ruling itself has given me a better, fuller perspective on this situation.  Which, of course, is the reason you usually ought not write about things based solely on media reports of what a legal decision was all about.

The end result, for me, though is that I still do think it entirely fair, when applying RPC 1.0’s definition of a firm, to hold even the largest of law firms to how they brand and market themselves to the public.  Yet, given what else was going on in this particular decision, I don’t think this moment amounts to the kind of potentially earth-shaking ruling that the media reports focus on as a possibility.  That’s because while the decision about whether Dentons was one firm, or more than one firm (specifically, whether Dentons Canada, LLP and Dentons US, LLP would be treated as two different law firms), was integral to the ultimate decision to disqualify but I don’t happen to think it was the most important factor in the outcome.

First, a quick primer on the underlying factual situation.  Dentons US has been representing the complainants in this ITC investigation against The Gap.  The Gap has a problem with that because for over twenty years Dentons and a predecessor firm, Salans, have represented The Gap in other matters, including a contemporaneous engagement in Canada regarding customs compliance issues.  Dentons says the dual representation is not a problem because Dentons US and Dentons Canada should be treated as separate firms for purposes of conflicts and, even if not, The Gap’s engagement letter with Dentons Canada contains a waiver of potential future conflicts.  (On this point, the court really doesn’t spend any time addressing what the specific language said or why it was not sufficient.  The court appears to claim that Dentons US walked away from that argument in its briefing:  “Indeed, Dentons US asserts that ti does not rely on an advance waiver for establishing that a conflict does not exist.”

Nevertheless, what’s missing from the focus of the media reports is that Dentons had apparently acknowledged in writing to at least one of the clients in the ITC matter, RevoLaze, that it had an “existing conflict” because of Dentons Canada’s representation of The Gap.  This disclosure was made in connection with a funding agreement involving Dentons US, RevoLaze, and a third-party litigation funding company.  It is hard for me to read the opinion without thinking that this fact was the key tipping point for the court.

The rest of the opinion reads very much like the kind of piece in which, after weighing all of the competing factors, the court could have reached a conclusion not to disqualify despite concluding that there was a violation of RPC 1.7 but for the fact — weighed heavily by the court in favor of disqualification — that prior to the issue ever being raised by the court or by the Gap — Dentons had been concerned enough about it to raise it itself with the clients on one side but not the other.

Thus, I do still think that we’re likely headed down a path in which the efforts to find structures that would allow seemingly unlimited growth of the size and scope of modern law firms are going to put real pressure on the way conflicts of interest are regulated.  If the pressure brought to bear by such firms on the existing regulatory structure is not successful in changing the rules of the road, I do ultimately think firms will have to break into smaller pieces.

But I have a harder time seeing the ruling in this case as any sort of watershed moment because had Dentons managed to be 100% consistent in the position it ultimately took about whether there was a conflict or not, then they quite  likely could have avoided disqualification.  And, speaking generally, the ramifications of disqualification from lucrative engagements tend to have more impact on strategic thinking — and willingness to stake out aggressive positions on taking on conflicting engagements — in the large law firm domain then the risk that one or more individual lawyers may be at risk for exposure to disciplinary proceedings involving a conflict of interest matter.