Business Court Denies Motion For Disqualification Of Counsel

in an Order yesterday in International Forest Products Corp. v. Jackson Paper Mfg. Co., the Business Court denied a motion to disqualify defense counsel from representing Jackson Paper.  The lawyers who were challenged were from the Atlanta firm of McKenna Long & Aldridge. 

The basis for disqualification was that McKenna had previously represented a Jackson Paper subsidiary, Stonewall, in matters substantially related to the Business Court case and in matters on which the lawyers'  testimony would be required. The Plaintiff  International had acquired the claims it was pursuing against Jackson Paper by assignment from Stonewall in a receivership proceeding.

If it were Stonewall suing Jackson, it seems likely that McKenna Long could not have been jackson's counsel due to McKenna's previous representation of stonewall.  That's because Rule 1.9 of the Revised Rules of Professional Conduct says that

a lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client.

But International Forest didn't acquire the attorney-client relationship between McKenna Long and Stonewall.  It only acquired the claims that Stonewall had against Jackson.  Judge Murphy said that this made all the difference and that the Rule did not apply:

Rule 1.9 and its commentary. . .make clear that a duty of loyalty attaches to a client, and not to a claim or transaction. The lawyer-client relationship is a personal one and cannot be assigned. In the present matter, a lawyer-client relationship existed between McKennaLong and [Stonewall]. Thus, McKenna Long’s duty of loyalty and confidentiality are owed to Stonewall, not to Stonewall’s claims or interests. This personal duty, therefore, did not transfer to Plaintiff International Forest Products Corporation (“International Forest”) when it acquired certain of Stonewall’s claims. As an assignee, International Forest cannot claim protection under the duty of loyalty because it is not a former client of McKenna Long itself. Therefore, Rule[] 1.9 [is] inapplicable.

Another ground for disqualification was International's stated intention to call McKenna Long lawyers (other than Jackson's litigation counsel) as witnesses.  RPC 3.7(a) says that a lawyer cannot be an advocate at a trial in which the lawyer is likely to be a necessary witness.  But RPC 3.7(b) says that other lawyers in a lawyer-witness’s firm may continue to act as advocate unless the lawyer-witness’s testimony would be adverse to the client’s interests.  The Defendants didn't claim that the lawyer testimony would be adverse, so Judge Murphy denied that aspect of the disqualification motion as well.

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