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Dr. Falk Pharma GmbH v. Generico, LLC

Broad Client Definition in Engagement Letter Leads to Disqualification

Dr. Falk Pharma GmbH v. Generico, LLC, __ F.3d __, 2019 WL 692670 (Fed. Cir. Feb. 20, 2019) (Lourie, O’MALLEY, Reyna) (PTAB; N.D. W. Va.: Keeley; D.N.J.: Chesler) (3 of 5 stars)

In related appeals, Fed Cir grants motions to disqualify Katten Muchin Rosenman LLP (“Katten”) as counsel for Mylan, which appeared in these cases as an ANDA applicant, accused infringer, and IPR petitioner. Under regional circuit law (all three circuits at issue apply the Model Rules of Professional Conduct), Katten’s representation of Mylan presented a current conflict of interest under MRPC 1.7. The opinion describes how Katten (to which two of Mylan’s outside attorneys had relocated in mid-2018) had an ongoing attorney-client relationship with Bausch & Lomb (“B&L”) in connection with trademark litigation. Under the express terms of the B&L engagement letter, and the Outside Counsel Guidelines incorporated by reference therein, this created an attorney-client relationship between Katten and B&L’s indirect parent Valeant Pharmaceuticals International, Inc. (“Valeant-CA”), as well as Valeant-CA’s various subsidiaries—i.e., the movants. The opinion rejects Mylan’s various arguments that the attorney-client relationship should not extend beyond Bausch & Lomb, analyzing the terms of the engagement letter and the circumstances of its signing. Because Valeant-CA and its various subsidiaries were clients of Katten, it could not be adverse to them by representing Mylan in the appealed-from cases.

The opinion also analyzes the “corporate interrelatedness” of Valeant-CA, Bausch & Lomb, and the other subsidiaries. Applying 2nd Circuit law (and reasoning that the other regional circuits would apply the same test), the opinion reasons that per GSI Commerce Solutions, 618 F.3d 204 (2nd Cir. 2010), the companies are sufficiently interrelated to give rise to a corporate affiliate conflict.

The opinion declines to determine whether disqualification of Katten for its violation of MRPC 1.7 is mandatory, reasoning that even under a multi-factor or totality of the circumstances test, disqualification is appropriate because Mylan faces neither prejudice nor undue hardship. Movants sought only prospective relief, so no resubmission of briefing is required, and there is sufficient time for Mylan to retain new counsel for further briefing and argument. Katten’s proposal to form an ethical wall around the lawyers who had worked on Bausch & Lomb (or Valeant-CA, or its affiliates) matters is insufficient.

KEYWORDS: ETHICS; PROFESSIONAL CONDUCT; CONFLICT OF INTEREST (YES); DISQUALIFICATION (YES)