[00:00:01] Speaker 06: The United States Court of Appeals for the Federal Circuit is now open and in session. [00:00:06] Speaker 06: John Saylor of the United States and his honorable court. [00:00:09] Speaker 01: Please be seated, ladies and gentlemen. [00:00:11] Speaker 01: Good morning. [00:00:15] Speaker 01: We have three cases this morning consolidated into one. [00:00:18] Speaker 01: 172312, Dr. Faulk versus Mylan et al. [00:00:26] Speaker 01: 172636, Salix versus Mylan. [00:00:31] Speaker 01: 18 2097 Valiant versus Mylan and we have a motion to intervene and a motion for disqualification. [00:00:46] Speaker 01: We are going to grant the motion to intervene and therefore we needn't hear argument on that topic. [00:00:54] Speaker 01: We understand that [00:00:57] Speaker 01: Ms. [00:00:57] Speaker 01: Bork will take five minutes, three and two, and leave Mr. Lipsy 15 and 10. [00:01:10] Speaker 01: And are you both representing the same client? [00:01:13] Speaker 02: If I may, Your Honor, to some extent, yes. [00:01:19] Speaker 02: I represent Valiant Pharmaceuticals, International Inc., and Salix. [00:01:25] Speaker 02: in what we've been calling the New Jersey action, the 18-20-97 case. [00:01:30] Speaker 02: Ms. [00:01:31] Speaker 02: Burke represents Salix and intervenor VPI in the other two cases. [00:01:40] Speaker 02: And with the court's permission, since we think that our entitlement to relief in all three cases is substantially the same, I was going to endeavor during my argument to explain why we were all entitled to relief. [00:01:54] Speaker 02: And Ms. [00:01:55] Speaker 02: Burke was going to reserve some time to answer questions that were peculiar to her two cases. [00:02:01] Speaker 01: So you're going to speak first? [00:02:03] Speaker 02: With the court's permission. [00:02:04] Speaker 01: That'll be fine. [00:02:05] Speaker 01: And you're going to take a total of 15 minutes? [00:02:12] Speaker 01: Yes, and reserve 10 minutes. [00:02:15] Speaker 01: 25. [00:02:16] Speaker 01: So we'll set this for 25. [00:02:18] Speaker 01: All right. [00:02:20] Speaker 01: Mr. Lipsy, please proceed. [00:02:22] Speaker 02: OK. [00:02:22] Speaker 02: Thank you, Your Honor. [00:02:25] Speaker 02: Our motion for disqualification begins with the fact that Valiant Pharmaceuticals International, Inc. [00:02:35] Speaker 02: and Salix are both current clients of the Catten firm. [00:02:40] Speaker 02: We believe the engagement agreement, which is Exhibit 5 to the Diner Declaration, is dispositive on the point. [00:02:48] Speaker 02: It is an agreement by, between, and executed by Valiant Pharmaceuticals [00:02:53] Speaker 02: International Inc., which is the parent company. [00:02:57] Speaker 02: It incorporates by reference the outside council guidelines that specifically refer to it governing the relationship between VPI and its affiliates and outside council, and it offers a list of affiliates to assist in avoiding conflicts. [00:03:16] Speaker 02: Now, Catten relies on the commentary to Rule 1.7 for [00:03:22] Speaker 02: a proposition which is true in the abstract, that a party representing a sub doesn't necessarily represent the parent. [00:03:31] Speaker 02: But when you look at that commentary, specifically Comment 34, it says, unless there is an understanding that the lawyer will avoid conflict with affiliates. [00:03:41] Speaker 02: And that is exactly what this contract provides. [00:03:46] Speaker 02: And indeed, ABA formal opinion 95-390, which we cited, is explicit on the point. [00:03:52] Speaker 02: Clearly, a corporate affiliate must be treated as a client, whether generally or only for purposes of Rule 1.7, if the lawyer has agreed so to treat it, regardless of whether any actual work has been or is to be performed for the affiliate. [00:04:10] Speaker 01: Now, what- Speaking of has been, if we agree with you, Mr. Lipsy, what will be the consequence, if any, on past decisions? [00:04:21] Speaker 01: the decision from the board and from West Virginia, presumably not from New Jersey, because you won there. [00:04:32] Speaker 01: But how about the decisions from the other two tribunals? [00:04:36] Speaker 02: It seems to me that this problem arose while those cases were in this court. [00:04:50] Speaker 02: in May of 2018. [00:04:52] Speaker 02: And I believe those appeals were docketed in 2017. [00:04:56] Speaker 02: So unless Ms. [00:04:58] Speaker 02: Burke is going to hang me by my thumbs and contradict me, I suspect that there is no impact on those decisions from this motion. [00:05:07] Speaker 02: Those decisions, we think, were wrong for other reasons, which we'll address in the merits. [00:05:12] Speaker 04: And for prejudice purposes, as I understand it, [00:05:17] Speaker 04: disagree with Milan's concern about the need to re-brief and you say that there is no need to re-brief? [00:05:24] Speaker 02: We do not believe there's a need to re-brief. [00:05:26] Speaker 02: I mean there's a certain practicality associated with these things and we are looking for relief going forward. [00:05:39] Speaker 04: Alright, how do you respond to your friend's argument on the other side that says [00:05:44] Speaker 04: because they are not a key firm within the O.C. [00:05:49] Speaker 04: guidelines, that they're not bound by the loyalty provisions. [00:05:55] Speaker 02: We think that's an irrational reading of the agreement for this reason. [00:06:00] Speaker 02: Section 1.2, which deals with conflicts, specific, paragraph 1 specifically requires a conflict check and offers a list of affiliates to help identify a conflict. [00:06:14] Speaker 02: The second paragraph, last sentence, specifically requires all firms must follow the ethics rules. [00:06:21] Speaker 02: Now, that includes Rule 1.7, which requires avoiding concurrent conflicts. [00:06:28] Speaker 02: Now, the Comment 6 of the ABA Comment 6 to Rule 1.7 makes clear that that does not include economic conflicts, so-called business conflicts, which we've all confronted [00:06:42] Speaker 02: law practice where there's no ethical conflict but it's directly adverse to your client's business relationship. [00:06:48] Speaker 02: And so the first two sentences of the second paragraph of section 1.2 deal with that and they require something more. [00:06:57] Speaker 02: Something more than adherence to the ethical structures by so-called key firms that are in the million dollar plus per year category. [00:07:05] Speaker 02: And that requires them to avoid any conflict, whether ethical or economic, with any [00:07:12] Speaker 02: entity or affiliate of the P.I. [00:07:15] Speaker 02: And that's the rational reading of that agreement. [00:07:18] Speaker 04: To read it out... So you're saying rather than limit 1.2 to only key firms, that that second paragraph actually expands the obligations of key firms? [00:07:29] Speaker 02: Of key firms, exactly. [00:07:30] Speaker 02: It imposes on key firms something more than the pure ethical obligation extending into economic conflicts. [00:07:42] Speaker 02: Now, frankly, there's a reason why the engagement agreement includes VPI and all its affiliates, and that's because the evidence before this Court has shown that VPI and its affiliates have operational commonality in terms of sharing many key elements of general and administrative work and support, including computer systems, and most importantly, share a common legal department and also have financial interdependence [00:08:10] Speaker 02: Boush and Loan sales representing 57 percent of Valiant's revenues and Sale Exit sales representing 20 percent. [00:08:17] Speaker 02: And those are circumstances that indicate that these affiliates should be considered a client even absent express agreement as comment 34 to ABA rule 1.7 makes clear and the GSI case that we've cited makes clear. [00:08:33] Speaker 02: That's even in the absence of agreement. [00:08:36] Speaker 06: Let's go back to the [00:08:38] Speaker 06: to the agreement under 1.2 in the engagement guidelines, the third paragraph, it seems to define what a significant degree of royalty is, not necessarily in terms of the money. [00:08:53] Speaker 06: It goes on and says that such firms should not represent any party, and it goes on and says, of any valiant entity. [00:09:00] Speaker 06: And it seems to me that this part right here, any [00:09:05] Speaker 06: Validant entity that the the parties were foreseeing this corporate representation or The different organization organizational forms that can exist and it's limiting the significant loyalty To not just to the one million dollars in building but also with respect to a valid entity which seems to me to say that if you're not a key firm and [00:09:33] Speaker 06: then it's okay to represent affiliates. [00:09:36] Speaker 02: We respect, Your Honor. [00:09:38] Speaker 02: I think you're not focusing on the right any in that sentence. [00:09:41] Speaker 02: The sentence says that they should not represent any party in any matters, any matters, not just ethical conflict matters, where such parties interests conflict with the interests of any valued entity. [00:09:55] Speaker 02: In other words, it's a blunderbuss limitation on taking on work that's conflicting with the ethical or economic interests [00:10:03] Speaker 02: of the Valiant enterprise. [00:10:06] Speaker 06: Well, it's not that big of a scope of a blunderbuss because it's defining key external firms not only by, well, with respect to any Valiant entity, and I am focusing on that, which seems to imply that if you're not a key firm, then the corporate conflict rules don't apply to you, the affiliate rules. [00:10:31] Speaker 02: Well, with respect [00:10:34] Speaker 02: The suggestion that the last sentence, which says all firms have to apply by the ethical guidelines, which prohibit taking on direct adversity to a current client, to suggest that that is somehow narrowed, that bigger firms have more latitude there than smaller firms is not, we think, a rational reading, and I would again reiterate, [00:11:01] Speaker 02: The point here is the higher degree of loyalty that's expected here goes to any conflicts, even conflicts that might not be pure ethical conflicts. [00:11:14] Speaker 02: It only makes sense reading this that the obligations of these key firms be broader than the narrower ones, not narrower. [00:11:28] Speaker 04: One of the Salix motions refers to valiant [00:11:32] Speaker 04: pharmaceuticals, ink, but there is no such entity, is there? [00:11:38] Speaker 02: I believe that there may be such an entity as an intermediate subsidiary, and I vaguely recall there being reference to an entity by that name owning certain trademarks, but it itself is a wholly owned subsidiary of Valiant Pharmaceuticals International, Inc. [00:11:59] Speaker 02: Okay. [00:12:01] Speaker 02: And I'll invite Ms. [00:12:03] Speaker 02: Burke if I have misstated. [00:12:04] Speaker 02: I'm sure she will correct me. [00:12:08] Speaker 02: Now, Rule 1.7 required valiance-informed consent to be waived for the adverse representation. [00:12:18] Speaker 02: ABA formal opinion 96-400 that we've cited makes it clear that even if disqualification is only a risk but not a certainty, the hiring firm's client, that's us, [00:12:30] Speaker 02: is entitled to consultation to obtain informed consent early in the hiring process. [00:12:36] Speaker 02: Now, they claimed, well, we couldn't. [00:12:39] Speaker 02: We couldn't ask for consent. [00:12:42] Speaker 02: And the ABA comment to Rule 1.7 deals with that. [00:12:46] Speaker 02: Comment 19 says, it may be impossible to obtain consent. [00:12:52] Speaker 02: And if that's the case, it says the parties have to be separately represented. [00:12:57] Speaker 02: In other words, the fact that you may not be able to get permission to ask for consent doesn't mean you can go forward. [00:13:03] Speaker 02: It means you have to stop. [00:13:06] Speaker 04: Now... What if you did to have the engagement letter? [00:13:10] Speaker 04: What's your argument for a conflict without the engagement letter? [00:13:16] Speaker 02: As I said, the [00:13:20] Speaker 02: Operational commonality and financial interdependence of the parent with its subs, which had been proven in the Gorman declarations in this case, would, without the agreement, be the circumstances that the rule contemplates as requiring that the affiliate be treated as a client, at least for conflict purposes. [00:13:41] Speaker 04: So are you essentially saying that these valiant entities do not adhere to the separate corporate forms? [00:13:50] Speaker 02: All I am not saying that and I don't believe that this standard is equivalent to a piercing the corporate veil standard. [00:14:01] Speaker 02: I think there is a middle ground here for an interrelationship which for ethical purposes requires that the entities be treated as the same for conflicts purposes when it is apparent for example that they share a common legal department and on day one [00:14:17] Speaker 02: that legal department will have to see the lawyer as giving advice. [00:14:21] Speaker 02: And on day two, we'll have to see that law firm as an adversary pounding their head. [00:14:25] Speaker 02: And that's the sort of thing that those ethical rules are intended to prevent. [00:14:30] Speaker 02: So yes, we believe that we meet the limitations in that GSI case that I cited, regardless of whether we have the agreement or not. [00:14:41] Speaker 02: We think the agreement is absolutely crystal clear. [00:14:44] Speaker 04: Did the GSI case apply [00:14:46] Speaker 04: the law of any of the states that are at issue here? [00:14:49] Speaker 02: It was a Second Circuit case, but we think that the rationale is, and candidly, there aren't that many of these cases really anywhere. [00:15:00] Speaker 02: And the opinions seem to cite, with approval, analyses done in different districts and different circuits that seem to make sense. [00:15:08] Speaker 02: And that one seems particularly to make sense in the fact. [00:15:11] Speaker 04: So was the state from which that case arose a state that adopted the model rules? [00:15:17] Speaker 02: I don't know, I assume so, because I think that they all have in the Second Circuit. [00:15:24] Speaker 02: I think we have an exhibit in our papers that lists those. [00:15:38] Speaker 02: We were entitled to be asked for informed consent. [00:15:40] Speaker 02: We weren't. [00:15:43] Speaker 02: Catten, the lateral attorneys in Milan, all knew of VPI's involvement in these three cases. [00:15:50] Speaker 02: We're named parties in the New Jersey case. [00:15:52] Speaker 02: The certificates of interest in this court identify VPI's interest in those cases. [00:15:59] Speaker 02: The lateral attorneys themselves identified both CLX and VPI as adverse parties when disclosing the Dr. Falk and West Virginia cases to Catten. [00:16:07] Speaker 02: That's in Mr. Verdi's declaration, paragraph 6. [00:16:11] Speaker 02: Mylan was aware of the relationship between Bausch and Loam and VPI. [00:16:16] Speaker 02: They had just finished two extensive litigations on Bausch and Loam technology, where they had been represented by the lateral attorneys. [00:16:27] Speaker 02: One was a Prolenza matter that was settled by agreement. [00:16:31] Speaker 02: That's diner exhibit 25. [00:16:33] Speaker 02: Mylan received a license there from [00:16:36] Speaker 02: Plaintiffs B and L on behalf of themselves and their affiliates. [00:16:40] Speaker 02: That's in paragraph five. [00:16:42] Speaker 02: Notices were to be sent to both B and L and Valiant in that agreement. [00:16:46] Speaker 02: And indeed, notices for Mylan were to be sent to the lateral attorneys. [00:16:51] Speaker 02: And that is an ongoing agreement between Mylan and B and L and Valiant. [00:16:58] Speaker 02: And there is in the record the fact that there were direct communications between Dennis Portland of Valiant [00:17:04] Speaker 02: and Mr. Jenkins of Mylan in connection with that settlement, and that's Diner Exhibit 26. [00:17:10] Speaker 02: The same is true of the be-preved matter. [00:17:12] Speaker 02: There was also a settlement there, Diner Exhibit 30, again with a license, again requiring notice to B&L and Valiant. [00:17:19] Speaker 02: That's on page 25. [00:17:21] Speaker 02: Again, with notice to the Mylan lateral attorneys. [00:17:24] Speaker 02: Again, there was direct communication between Dennis Poland of Valiant and Mr. Jenkins of Mylan. [00:17:30] Speaker 02: That's Diner Exhibit 31. [00:17:32] Speaker 02: which says the settlement agreement has been signed by Valiant. [00:17:35] Speaker 02: I mean, Mylan was well aware of the involvement of Valiant in the intellectual property matters of its subsidiaries. [00:17:46] Speaker 02: We believe that the lateral attorneys had an obligation to inform Mylan of a possible limitation on their ability to continue that representation relating to B&L when they decided to move. [00:17:59] Speaker 02: And we believe that the assumption should be that they did so and that Mylan also was aware of the situation and aware of the possibility of conflict with the involvement of VPI in the IP matters of its subs. [00:18:15] Speaker 02: And we think it asks too much from this Court to ask to assume that Mylan was not so informed, particularly when the Jenkins declaration [00:18:25] Speaker 02: is conspicuously silent about what Mylan knew and when they knew it. [00:18:31] Speaker 02: Now, the balance of interests we talk about, we think VPI is the only innocent party here. [00:18:38] Speaker 02: Everybody else knew of the problem or should have known about the problem and went ahead anyway. [00:18:46] Speaker 02: We know for a fact that Catten calculated the value of the VPI representation. [00:18:52] Speaker 02: We saw that in the Verity Declaration. [00:18:54] Speaker 02: They were never close to $1 million a year. [00:18:57] Speaker 02: We know for a fact they calculated the value of the lateral attorney acquisitions. [00:19:01] Speaker 02: There's a press release, Diner Exhibit 1, expected to generate significant revenue for the firm. [00:19:07] Speaker 02: And we know they read the engagement agreement that explicitly covered VPI and was signed with VPI and have offered what we contend is an irrational interpretation of it in an effort to justify a headlong dash into the arms of a more lucrative client. [00:19:26] Speaker 02: There's little or no prejudice to Mylan in the relief we're requesting. [00:19:30] Speaker 02: Mr. Florence of Parker Poe has indicated he will argue the Dr. Falk IPR. [00:19:37] Speaker 02: Mr. Florence also filed an entry of appearance in the West Virginia appeal, identifying himself as principal counsel on October 13, 2017. [00:19:47] Speaker 02: Indeed, as clear from the Bork declaration, he tried the case below. [00:19:51] Speaker 02: He is perfectly capable of arguing it on appeal without prejudice to Mylan. [00:19:56] Speaker 02: Our New Jersey action is an appeal from a partial summary judgment on the obviousness issue related to a single claim. [00:20:04] Speaker 02: The entire evidentiary record on that motion fits in one banker's box. [00:20:09] Speaker 02: And it's a routine practice in this court. [00:20:11] Speaker 02: That involves a different patent, doesn't it? [00:20:13] Speaker 02: Yes, absolutely. [00:20:15] Speaker 02: And it's a routine practice in this court for clients who have lost below to retain new appellate counsel. [00:20:24] Speaker 02: And Mylan, in the 15 appeals in the last year, only four of those were with a lateral attorney, three of which are the subject of the motion to disqualify here. [00:20:33] Speaker 02: They have a stable, they are a frequent participant in proceedings in this Court. [00:20:38] Speaker 02: They have a stable, able appellate advocates who could easily take on and handle that matter. [00:20:44] Speaker 02: And if there's expense involved, Your Honor, that's between Catten and Mylan. [00:20:48] Speaker 02: That's something Catten should reimburse Mylan for. [00:20:51] Speaker 02: It's not a ground [00:20:52] Speaker 02: for punishing innocent Valiant and requiring them to accept basically second class citizenship with their law firm. [00:21:00] Speaker 04: So what is the harm to Valiant or any of its affiliates? [00:21:03] Speaker 02: The harm here is multifaceted. [00:21:09] Speaker 02: First, there is in fact a risk of confidential information contamination. [00:21:18] Speaker 02: And that comes [00:21:22] Speaker 02: from several things. [00:21:24] Speaker 02: Again, the agreement is enlightening here. [00:21:26] Speaker 02: Section 2.4 says, talks about strategic decisions and litigation. [00:21:31] Speaker 02: It requires consultation with Valiant on strategic decisions, types of pleadings, legal theories, even retention of experts. [00:21:39] Speaker 02: There's a Section 1.6 on litigation settlements that require risk assessment, case evaluation, and client consultation. [00:21:46] Speaker 02: The Lefebvre Declaration, paragraph 6, pointed out the Catten through its long history. [00:21:50] Speaker 02: has been privy to that sort of information, including the claims review process, litigation strategies, and settlement approaches and strategies. [00:21:58] Speaker 02: And these endocases are often mating dances headed for settlement. [00:22:05] Speaker 06: And so... To date, there has been no breach of any type of confidentiality or confidential information. [00:22:11] Speaker 02: We perhaps are paranoid. [00:22:15] Speaker 02: But the fact that an ethical law was proposed [00:22:19] Speaker 02: when an ethical wall doesn't solve a rule 1.7 violation, and was proposed, limited, seemingly irrationally, just to lawyers who had worked for Valiant in the last 18 months, concerned us that damage may already have been done, and that that wall was gerrymandered to allow people to live. [00:22:38] Speaker 06: That's pretty common. [00:22:40] Speaker 06: It's pretty common to set up an ethical wall whenever you think there may be a potential violation, even though [00:22:49] Speaker 06: There is no violation. [00:22:50] Speaker 06: I mean, firms often take the highway and bend on the safe side. [00:22:56] Speaker 02: Well, that would have been true had they set it up when they joined. [00:22:59] Speaker 02: They didn't. [00:22:59] Speaker 02: They set it up the day we asked them to withdraw. [00:23:03] Speaker 02: Mr. Diner spoke to the lateral attorneys on the morning of May 7th, and that is the day the ethical law was installed. [00:23:10] Speaker 02: It was installed late. [00:23:11] Speaker 02: It's only partial, and it is somewhat irrational, and it causes us concern. [00:23:17] Speaker 06: There's about 17 days that elapsed from the time that Mr. Mercantile moved to Catton from the time that they erected the ethical wall. [00:23:27] Speaker 06: So that's about a couple weeks. [00:23:34] Speaker 02: That's true. [00:23:35] Speaker 02: It is late. [00:23:37] Speaker 02: I don't quarrel with the fact that there were 17 days. [00:23:40] Speaker 02: These people had been talking to each other since mid-September of 2017. [00:23:45] Speaker 02: The wall went up. [00:23:47] Speaker 06: What other prejudice, what other harm is there other than the potential for divulgence or disclosure of confidential information? [00:23:59] Speaker 02: There is the fundamental harm to the reason we have the rule in the first place. [00:24:04] Speaker 02: We have these ethical rules to preserve an uncompromising duty of loyalty of lawyers to their clients and the commentary to rule 1.7 makes clear that violation of it causes the [00:24:16] Speaker 02: existing client to feel betrayed. [00:24:18] Speaker 02: It interferes with the quality of the relationship. [00:24:22] Speaker 02: It's sufficiently important that it is an ethical requirement. [00:24:26] Speaker 02: It is important to public trust in the legal profession and to the appropriate presentation of evidence and argument to the courts. [00:24:35] Speaker 02: And it [00:24:38] Speaker 06: The argument they've made, they basically have said- Doesn't rule 1.7 stand in somewhat opposition to what you're saying? [00:24:47] Speaker 06: That a lawyer who represents a corporation or a federal organization does not, by virtue of that representation necessary, represent any constituent or affiliate? [00:24:56] Speaker 06: Seems that the rules, the way they're written, begin with the premise that there is no conflict when you're representing affiliates. [00:25:06] Speaker 02: That comment goes on to say unless there's an understanding to the contrary, and there was a contract here to the contrary, and that ethical opinion that I cited deals explicitly with that. [00:25:18] Speaker 02: They've basically argued, and I see I'm about to eat up the entirety of my rebuttal time. [00:25:23] Speaker 02: They've argued almost as if the Wyeth case in New Jersey rewrote the rule, so that it said, well, you can represent a client [00:25:32] Speaker 02: directly adverse as long as that client can't prove that there's material damage to confidential information. [00:25:38] Speaker 02: That is not what Wyeth did. [00:25:40] Speaker 02: Even Wyeth and the cases following Wyeth recognize a big factor lost in their analysis is the purposes to be served by the rule and the duty of loyalty and the confidence in the legal system. [00:25:53] Speaker 02: It is unseemly what happened here. [00:25:57] Speaker 02: It is easy to avoid. [00:25:59] Speaker 02: There is an easy remedy without much prejudice to my land. [00:26:02] Speaker 02: that vindicates the rule and makes lawyers follow it. [00:26:06] Speaker 02: And the cases that follow Wyeth, like the GE case they rely upon so heavily, all look at the nature of the violation. [00:26:14] Speaker 06: Why haven't you cited to the exceptions under comment 64 to rule 1.7? [00:26:22] Speaker 02: I'm sorry? [00:26:24] Speaker 02: Which exceptions? [00:26:27] Speaker 06: Comment 34. [00:26:32] Speaker 06: What it does, it provides three exceptions to that general rule that I just read to you. [00:26:37] Speaker 06: Yes. [00:26:37] Speaker 06: It says that even though, it says unless one of the three exceptions apply, unless three exceptions were, if any one of those fits, then we're somewhat free to go on and find that representation necessarily represents a conflict of affiliates. [00:27:00] Speaker 02: exceptions, as I read them in Comment 34, are to the ability to represent affiliates, which include the circumstances are such that the affiliate should also be considered a client of the lawyer, which is our argument for operational commonality. [00:27:18] Speaker 02: There is an understanding between the lawyer and the organizational client that the lawyer will avoid representation adverse to the client's affiliates. [00:27:24] Speaker 02: That's our contract. [00:27:26] Speaker 02: And or the lawyer's obligations to either the organizational client or new client are likely to limit materially the lawyer's representation of the other client. [00:27:35] Speaker 02: We don't need to rely on that one. [00:27:37] Speaker 02: We only need one, and we've got to. [00:27:40] Speaker 02: But just to be clear, in Wyeth, the movement was in part responsible for the conflict and had no intention of retaining the law firm. [00:27:54] Speaker 02: We want to retain Catten. [00:27:56] Speaker 02: The only person at Catten that doesn't like us is Mr. Verdi. [00:28:00] Speaker 02: If we had good relations with the people we were working with, we would like to continue them. [00:28:04] Speaker 01: Ms. [00:28:04] Speaker 01: Filipsi, as you noted, your time has expired. [00:28:08] Speaker 01: We'll give you two minutes for a bottle later. [00:28:11] Speaker 01: Ms. [00:28:13] Speaker 01: Bork, you're about to begin your five minutes, and you apparently want to take three and save two. [00:28:24] Speaker 03: Correct, Your Honor. [00:28:25] Speaker 03: I don't want to repeat what Mr. Lipsy did a fine job of articulating, but just a couple of things for the record. [00:28:32] Speaker 03: In addition to Salix and Valiant, I also represent Dr. Falk Farmer. [00:28:37] Speaker 03: That's the patent owner in the IPR appeal. [00:28:40] Speaker 03: In terms of the court's question about the impact on the two appeals, the one from the PTAB and the one from the Northern District of West Virginia, [00:28:52] Speaker 03: The conflict issue arose after the briefs had been fully briefed and we were waiting for oral argument. [00:29:01] Speaker 03: So the issue is unique to simply this appeal. [00:29:06] Speaker 03: I'd like to point out that I think Mr. Lipsy already pointed out there is absolutely no harm to Mylan in this instance because Mylan is represented by another law firm, was throughout the entirety of the IPR proceeding. [00:29:21] Speaker 03: And the other law firm was the lead counsel in the Northern District of West Virginia action, so they have adequate representation. [00:29:29] Speaker 03: In fact, Mr. Florence from the Parker-Poe firm is designated as the attorney to argue the appeal in the IPR, and there's no reason he can't argue the appeal from the Northern District of West Virginia, as he was lead counsel. [00:29:42] Speaker 03: The only other thing that I'd like to add is we cited one case in [00:29:48] Speaker 03: our briefs as to the standard in the Fourth Circuit. [00:29:52] Speaker 03: And it was United States v. Clarkson. [00:29:56] Speaker 03: It was an old case from 1977. [00:29:58] Speaker 03: I would just like for the record to bring to the Court's attention a later case that indicates that that standard is still good law, that the Fourth Circuit applies the test from U.S. [00:30:12] Speaker 03: Clarkson, which is to, in order to prevent the appearance of impropriety [00:30:18] Speaker 03: They resolve all doubts in favor of disqualification. [00:30:23] Speaker 03: And I have a case from the very district judge we were in front of, Judge Keighley, and that is Burgess-Lester v. Ford Motor Company 643, Fed SUP 2nd, 811, and that's from 2008, where she adopted that standard in finding disqualification under the rules of professional conduct in the West Virginia. [00:30:49] Speaker 01: We'll save the remainder of your time. [00:30:52] Speaker 03: Thank you. [00:30:53] Speaker 01: Mr. Verdi. [00:30:56] Speaker 01: First off, are you representing Catten or Miley? [00:31:00] Speaker 01: Miley. [00:31:02] Speaker 05: Miley. [00:31:02] Speaker 05: But I suppose because I have familiarity with the rules of professional conduct, it made sense I do the argument. [00:31:09] Speaker 04: So let's... Let's hope everybody in the firm has familiarity with the rules of professional conduct. [00:31:14] Speaker 05: I hope so. [00:31:16] Speaker 05: Let's start with the letter. [00:31:19] Speaker 05: the engagement letter, which I think the court started with and correctly so. [00:31:24] Speaker 05: The nature of a relationship between a law firm and a client is contractual in nature. [00:31:29] Speaker 05: And engagement letters and outside counsel guidelines can make the conflict restrictions either more or less restrictive on the law firm. [00:31:37] Speaker 05: They can waive conflicts in the future that would otherwise prohibit the law firm, law firm be prohibited from taking. [00:31:44] Speaker 05: But they can expand and say, for example, you may not be adverse to any of our affiliates, even though rule 1.7 might make the law firm able to do so. [00:31:55] Speaker 05: So we have been representing Bausch & Lomb since 2001. [00:31:59] Speaker 05: I mean, the company's been around since 1853. [00:32:02] Speaker 05: And so they've stand-alone company very well recognized. [00:32:04] Speaker 05: The ICS base has only been doing trademark and advertising law work for them. [00:32:10] Speaker 05: They were purchased by Valiant in 2013. [00:32:12] Speaker 05: Is it Valiant? [00:32:13] Speaker 04: Well, it doesn't matter that you're doing one kind of work for one entity and another kind of work for another if, in fact, there is coverage under the letter that says you can't represent affiliates. [00:32:26] Speaker 04: That you could be doing employment law for them, and it would still not matter. [00:32:29] Speaker 05: Absolutely, Your Honor. [00:32:31] Speaker 05: It's a contractual matter. [00:32:32] Speaker 05: And that's why this letter is so centrally important. [00:32:35] Speaker 05: We had continued to do work for Bausch & Lomb after they were purchased by Valiant in 2013, doing the work with them the way we always had. [00:32:44] Speaker 05: It wasn't until October 2016 that we received this letter with the outside council guidelines. [00:32:50] Speaker 05: Now, this is fairly common. [00:32:52] Speaker 05: The bigger companies have more and more recently begun to send out outside council guidelines. [00:32:56] Speaker 05: We get between 100, 150 of these a year. [00:32:59] Speaker 05: And we look at them very carefully. [00:33:01] Speaker 04: Right. [00:33:01] Speaker 04: That doesn't mean you're not governed by them. [00:33:03] Speaker 05: No, absolutely, because we are governed by them, that we're not going to take on a representation that puts restrictions on us that we could not tolerate. [00:33:11] Speaker 05: So for example, we frequently see outside council guidelines that say, you agree as a condition of this representation, that you will not be adverse to any of our affiliates ever, period, full stop. [00:33:23] Speaker 05: And we look at those very carefully, because given the circumstances, we may decide [00:33:27] Speaker 05: That's too heavy a burden for us. [00:33:29] Speaker 05: It would limit us too much. [00:33:31] Speaker 04: But isn't it in the law firm's best interest to where there's any question to get an affirmative letter that says, we are not barred from representing any of your affiliates? [00:33:41] Speaker 05: Well, the Outsight Council guidelines that are at the center of this was Valiant's own language. [00:33:48] Speaker 05: We didn't negotiate it. [00:33:50] Speaker 05: Valiant imposed it upon us. [00:33:51] Speaker 05: So two years after they purchased Bausch and Lomb, [00:33:56] Speaker 05: We got this, and we understood this is not uncommon when you have a large conglomerate, that they're going to sort of standardize how legal work is done. [00:34:04] Speaker 05: And that paragraph that Mr. Lipsy was so dismissive of for us was quite significant. [00:34:10] Speaker 05: It said that if, unless we were what they defined as a key external firm, then we would default to the normal rules of 1.7. [00:34:21] Speaker 04: Did you go to them and say, this is the way we're reading this? [00:34:24] Speaker 04: Do we have any dispute over this? [00:34:27] Speaker 05: No. [00:34:27] Speaker 04: You never sought any kind of waiver of potential conflict. [00:34:32] Speaker 05: No. [00:34:32] Speaker 05: We didn't view this as waiving conflicts. [00:34:35] Speaker 05: In other words, the default standard is 1.7, 34, that in the absence of other circumstances, we may be adverse to affiliates of the court. [00:34:44] Speaker 05: That's the default standard. [00:34:46] Speaker 05: What this does is it creates a higher degree of loyalty by saying, [00:34:50] Speaker 05: you will be barred from representing being adverse to our affiliates. [00:34:55] Speaker 05: Even if rule 1.7 says you can be, you will be barred for it. [00:35:00] Speaker 05: But it was very specific. [00:35:02] Speaker 05: Only if you are a key external firm. [00:35:05] Speaker 05: Basic contract reading says that means if you're not a key external firm, you're not presumptively barred by this letter. [00:35:12] Speaker 05: You're still bound by rule 1.7. [00:35:14] Speaker 05: We acknowledge that. [00:35:16] Speaker 05: But that means you're not presumptively bored. [00:35:18] Speaker 04: So are you saying the first paragraph of 1.2 doesn't apply to all firms? [00:35:23] Speaker 05: It does. [00:35:25] Speaker 05: But in order to determine whether there's a conflict or not, in other words, to the extent that we're representing an affiliate of Valiant and we want to be adverse to another affiliate, if we were a key external firm, we'd be contractually bored from doing so and we wouldn't. [00:35:40] Speaker 05: However, we were never a key external firm, never came close to being a key external firm, and that was an important consideration for us. [00:35:46] Speaker 04: Well, but the first paragraph says, for convenience in identifying potential fund conflicts, a listing of affiliated entities is available upon request. [00:35:54] Speaker 04: And then if you go back up, it says that these guidelines govern the relationship between Valiant BPI, its subsidiaries, and affiliates. [00:36:06] Speaker 04: Right. [00:36:07] Speaker 04: So is it your position that that's [00:36:09] Speaker 04: that there is no reference in this engagement guidelines that indicates that there are restrictions with respect to affiliated entities? [00:36:24] Speaker 05: No, Your Honor. [00:36:25] Speaker 05: I think Mr. Lipsy might have misstated our position. [00:36:27] Speaker 05: Our position is that in the absence of any agreement, the default of 1.7 Comment 34 controls. [00:36:35] Speaker 05: We can be adverse to an affiliate provided there aren't circumstances, one of the three circumstances indicated that we, indicating that they should be treated the same as the, as the existing client and therefore we cannot do it. [00:36:47] Speaker 05: What this letter purports to do though, is to say that if you're one of our key external firms, you don't go by rule 1.7, you will, may not be adverse to any of our affiliates as a condition of you working for us. [00:37:00] Speaker 05: And frankly, we see that in an awful lot of these [00:37:03] Speaker 05: on a lot of these outside council guidelines, a complete just demand. [00:37:09] Speaker 05: If you work for us, you cannot be adverse to our affiliates. [00:37:11] Speaker 04: And we make the decision. [00:37:13] Speaker 04: What's the response to Mr. Lipsy's argument that, in fact, that simply represents a broader obligation? [00:37:18] Speaker 04: So for instance, you couldn't possibly represent a generic even if it wasn't in direct conflict. [00:37:27] Speaker 05: That's not what the language says. [00:37:29] Speaker 05: The language is, the way you explain why this is different is because under rule 1.7, we're presumptively able, absent of special circumstances, to be adverse to an affiliate. [00:37:42] Speaker 05: This language says if you're a key external firm, you cannot be, even if you otherwise couldn't be. [00:37:47] Speaker 04: It says you can't do anything that conflicts with any interest of any affiliate, which would be much broader. [00:37:53] Speaker 05: But the of any affiliate part is critical. [00:37:56] Speaker 05: Because you don't have to be concerned about being adverse and affiliate if you don't trigger one of the other circumstances unless you contractually agreed to do this. [00:38:05] Speaker 05: This language is clear. [00:38:07] Speaker 05: If we were not a key external firm, then we're just bound by the normal restrictions of rule one point set. [00:38:14] Speaker 04: So what's your response to their reliance on GSI? [00:38:20] Speaker 05: GSI is a very different type of case. [00:38:23] Speaker 05: GSI, in that case, it was a company that was basically operated out of the headquarters of the parent company, Johnson & Johnson. [00:38:31] Speaker 05: All they did was service the advertising business. [00:38:34] Speaker 05: It had no stand alone, no stand alone. [00:38:37] Speaker 04: Well, isn't those all the legal entities combined in this case? [00:38:42] Speaker 05: Well, we don't know. [00:38:45] Speaker 05: to be blunt. [00:38:46] Speaker 05: There's 130 sub-series. [00:38:47] Speaker 04: They're not disputing their statement that all of these entities confine their legal representations, which seem to be a critical factor in GSA. [00:38:57] Speaker 05: We don't know how they have said a blanket statement, we've combined our legal departments. [00:39:02] Speaker 05: We do know that the same attorneys that we have been dealing with at Bausch & Lomb since 2001 were the same attorneys we were dealing with after they were purchased. [00:39:11] Speaker 05: We don't have insight into how they structure or what they mean by having a second. [00:39:15] Speaker 04: We didn't seek any discovery on this. [00:39:17] Speaker 05: No. [00:39:18] Speaker 05: No, we didn't. [00:39:19] Speaker 05: But I will tell, I will say this, and this is a critical point. [00:39:23] Speaker 05: Because we get so many outside council guidelines that simply say, you may not be adverse to any of our affiliates. [00:39:29] Speaker 05: And then it's up to us to decide whether that's something we can accept or not. [00:39:34] Speaker 05: When it said it was only for firms that didn't qualify. [00:39:37] Speaker 04: Right, but so even if the letter didn't govern it. [00:39:39] Speaker 04: you still have the problem with the other exceptions because of the way these entities are structured and interrelate. [00:39:46] Speaker 05: Well, these companies, what we do know about Valiant is that they buy existing drug companies. [00:39:54] Speaker 05: For example, Bausch & Lomb had been in operation for 160 years before they were purchased by Valiant. [00:40:00] Speaker 05: Whatever Valiant may decide to do about consolidating backroom operations or services, [00:40:07] Speaker 05: We really don't have any visibility into it. [00:40:09] Speaker 04: But again, you didn't ask for discovery, and you don't have anything to dispute their statements, right? [00:40:15] Speaker 04: They say on its face that there are overlaps in operations and critically overlaps in all the legal operations. [00:40:26] Speaker 04: So that the lawyer doing work for one entity could be the same lawyer doing the work for another entity or working together with those lawyers. [00:40:36] Speaker 04: That is a fact. [00:40:37] Speaker 04: We have to accept that fact because you haven't challenged it. [00:40:40] Speaker 05: Well, we don't have the ability to challenge it because we don't have discovery and emotion like this. [00:40:46] Speaker 05: We are just basing it upon the information that's publicly available. [00:40:50] Speaker 05: But even that question, and assume that you say... Did you ever discern a potential for conflict? [00:40:56] Speaker 05: Of course we did. [00:40:57] Speaker 06: We put this into our conflict system, but... Why didn't you go back to VPI then and seek a waiver? [00:41:03] Speaker 05: We didn't see it as a conflict, so we didn't seek a waiver. [00:41:07] Speaker 05: As a matter of fact, it's a very dangerous thing, practically speaking, if you don't believe there's a conflict, to ask a client for a waiver. [00:41:14] Speaker 05: Because then, the client says no, and you still think there's no conflict, you're basically handcuffed by that. [00:41:21] Speaker 05: Their first argument would be, if there was not a conflict, why did they ask for a waiver? [00:41:24] Speaker 05: We just didn't see this as a conflict. [00:41:27] Speaker 05: We had never represented Valiant Pharmaceuticals International. [00:41:31] Speaker 05: They had never come to us and said, we have a legal problem, we want a consultation. [00:41:35] Speaker 05: Same thing with Sanlix. [00:41:36] Speaker 05: We had never done any type of legal work for those two entities. [00:41:40] Speaker 05: The only work we did was for the same company we'd always been representing, Bausch and Lowe. [00:41:45] Speaker 05: This is really just opportunism. [00:41:47] Speaker 04: Well, that's not the only work you did. [00:41:48] Speaker 04: It's only work that's currently being done. [00:41:50] Speaker 04: But you did a lot of other work for other Valiant entities, right? [00:41:55] Speaker 05: No. [00:41:56] Speaker 05: The only other one we did work for was Valiant Pharmaceuticals North America. [00:42:00] Speaker 05: And that was with regard to the privacy policy on their website. [00:42:05] Speaker 05: And that representation stopped in January 2016. [00:42:08] Speaker 06: So when did you set up the ethical wall? [00:42:13] Speaker 06: It was prior to them receiving the letter from the sailors. [00:42:17] Speaker 05: What happens is because all ethical walls are driven by our computer system, because it's what automatically limits access to documents and information on the system. [00:42:27] Speaker 05: You have to have a client matter number opened [00:42:30] Speaker 05: And so the client, because Mr. Mukherjee came earlier in April, the rest of his team didn't arrive until April 30th. [00:42:37] Speaker 05: The case was not transferred to Katnett until May 1st. [00:42:40] Speaker 05: And so that's when we opened, that's when the client matter was open. [00:42:44] Speaker 05: Usually it takes a day or two. [00:42:45] Speaker 05: There's an intervening weekend in this case, because May 7th is a Monday. [00:42:49] Speaker 05: It usually takes a day or two for the wall to go into effect. [00:42:51] Speaker 06: You don't have an ethical wall in all new matters. [00:42:54] Speaker 05: No. [00:42:55] Speaker 06: Well, we are the ones that you believe there may be a potential for a conflict. [00:43:00] Speaker 05: There was a... Well, we wanted to make sure that... Well, first of all... This is what I was asking you. [00:43:06] Speaker 06: You thought there was a potential for a conflict. [00:43:08] Speaker 06: You said no. [00:43:09] Speaker 06: We didn't think there was a... Well, we understood... You erected the ethical wall prior to receiving notice from Salix that there was a problem. [00:43:17] Speaker 05: Because if there was any chance of confidential information between Bausch and Lomb about Bausch and Lomb being given to the Salix [00:43:27] Speaker 05: We could create a conflict. [00:43:30] Speaker 06: But that is a conflict. [00:43:31] Speaker 06: You possess confidential information of Bausch and Lomb, and now you represent another party and you're concerned that there may be leakage of that confidential information, so you erect the ethical law. [00:43:43] Speaker 05: Well, we erected it as a prophylactic measure because the work that we were doing for Bausch and Lomb was only about eye care products and only about trademark and advertising issues. [00:43:54] Speaker 05: The work for Salix or for Mylan against Salix dealt with patent issues. [00:44:00] Speaker 05: It's a completely different world than trademark. [00:44:03] Speaker 05: I don't need to explain that to the score. [00:44:05] Speaker 05: It's a whole different discipline, different considerations, different specialties. [00:44:10] Speaker 05: And we were dealing with eye care products for Bausch and Lomb. [00:44:13] Speaker 05: This case involves gastrointestinal drugs for a completely different subsidiary. [00:44:19] Speaker 05: We didn't see there was any way we could possibly get information that was useful. [00:44:23] Speaker 05: The only thing that Valiant has pointed to is they claim that we got confidential information about settlement strategies. [00:44:31] Speaker 05: If you look at what's actually in the affidavits they submitted, most of the work that we did for Bausch and Lomb was in context of having the National Advertising Division of the Better Business Bureau has sort of a self-policing function. [00:44:48] Speaker 05: It's not a government entity where they deal with claims of false advertising. [00:44:53] Speaker 05: That's the bulk of the work we did for Barca Loan. [00:44:56] Speaker 05: There's no settlement strategies. [00:44:58] Speaker 04: We're going back to where we were before, where you conceded that if there's concurrent representation, it doesn't matter. [00:45:03] Speaker 04: I mean, you're slicing this really thin. [00:45:06] Speaker 04: You're saying, OK, this was trademark, not patents. [00:45:09] Speaker 04: Or you're saying it was iCare products, not some other product. [00:45:13] Speaker 04: I mean, it's very often true that we see trademark and patent, even copyright, in one case, because they all relate to the same product. [00:45:22] Speaker 04: I don't understand that. [00:45:23] Speaker 04: effort to slice the salami so thick. [00:45:26] Speaker 05: Well, but we put up a wall, and we had informed Mr. Mukherjee not to talk about the case, and he submitted an affidavit in this case, which has not been controversial, and he never did. [00:45:36] Speaker 05: So it was no conversation. [00:45:37] Speaker 05: What I was trying to explain is the reason why the wall appears to have been up late is because we need a client matter number in order to make the wall effective. [00:45:45] Speaker 05: Otherwise, the computers don't know what bodies of material it needs to exclude other attorneys from. [00:45:54] Speaker 04: On the prejudice point, I don't understand how the Parker co-firm who was involved in underlying matters and in matters relating to these same patents is somehow inadequate for purposes of representation. [00:46:11] Speaker 05: Well, two things. [00:46:12] Speaker 05: One is that's only in one of the two cases, the West Virginia case, New Jersey case. [00:46:16] Speaker 05: This same Mr. Mukherjee and his team were handling the matter from point 50. [00:46:21] Speaker 05: That's the same patent. [00:46:23] Speaker 05: It's a different case. [00:46:25] Speaker 00: New Jersey involved a different patent. [00:46:30] Speaker 05: Yes. [00:46:30] Speaker 05: As far as the appeal, Mylan had asked Ms. [00:46:34] Speaker 05: Mukherjee to be involved in the trial and the appeal, shadow counsel over Parker-Paul, and had specifically asked them to handle the appeal. [00:46:43] Speaker 05: So the fact that Mylan is willing to go through this process [00:46:48] Speaker 01: I think itself indicates that they think it's pretty important that Mr. Mogadji... Even if you're dealing with different patents and even different therapy areas, you're dealing with one legal counsel and you get a feel for the company's approach to legal issues. [00:47:09] Speaker 01: Are they inclined to compromise or play hardball? [00:47:13] Speaker 01: So you're dealing with one law, one legal department. [00:47:18] Speaker 05: That's what they say. [00:47:20] Speaker 05: That's not what we experienced. [00:47:22] Speaker 05: We didn't get any particular insight into how they dealt with cases. [00:47:26] Speaker 05: They said most of the work we were doing was in front of the Better Business Bureau. [00:47:30] Speaker 05: And so it also is not really applicable to this case. [00:47:35] Speaker 05: We're talking about arguments on an appeal. [00:47:37] Speaker 05: So the idea of settlement strategies or any kind of extraneous information, this is a close record on appeal. [00:47:45] Speaker 05: It doesn't really provide any advantage. [00:47:48] Speaker 05: to even have some sort of big sense. [00:47:49] Speaker 04: That means that that case is never settled on appeal. [00:47:53] Speaker 05: Well, but he's here to argue the appeal. [00:47:57] Speaker 05: He worked on the appeal. [00:47:58] Speaker 05: He's here to argue the appeal. [00:47:59] Speaker 04: Well, he's here to represent Mylan in connection with all matters at this point related to the appeal, right? [00:48:07] Speaker 04: Yes. [00:48:09] Speaker 04: So you're saying that there would never be settlement discussions during the appellate process? [00:48:14] Speaker 05: But to the extent that someone was even going to raise that argument, that's why we made sure Mr. Mukherjee never talked to the people doing work for Bausch and Lombard. [00:48:22] Speaker 05: A wall was set up. [00:48:23] Speaker 05: Because even though we don't think there's a conflict or there's any useful information, you want to insulate yourself from the accusation that there might have been. [00:48:31] Speaker 05: And that's why the wall went up. [00:48:34] Speaker 05: But all of this goes to the issue of whether [00:48:39] Speaker 05: VPI, Valley Pharmaceuticals and Encyclopedics could be considered our client. [00:48:44] Speaker 05: That's, that's, that's, and we submit, we never passed that acid test of ever having them contact us or doing any legal advice to them or contacting us as their attorney. [00:48:58] Speaker 06: Did they approve your legal bills? [00:49:01] Speaker 05: We assume so. [00:49:01] Speaker 05: We were told where to send the legal bills, but we don't really know what happened to the bills after that. [00:49:07] Speaker 05: But even if Valiant was in charge of reviewing and even paying the legal bills, there's tons of case law, ABA opinions, that the person pays for a legal bill of a different person is not the client. [00:49:21] Speaker 05: As a matter of fact, you have to be careful that you don't end up into a conflict position. [00:49:25] Speaker 06: That would be more key or more important given the fact that Valiant was also the legal department in charge of legal affairs. [00:49:37] Speaker 06: you were handling? [00:49:40] Speaker 05: Well, actually, we'd give them possibly visibility into how our trademark practice worked. [00:49:44] Speaker 05: But it has nothing to do with the new attorneys coming in who were doing patent work. [00:49:49] Speaker 05: So we just don't see how there was any useful information that could have been traded. [00:49:54] Speaker 05: But we did set up a wall just in case someone would make that accusation, as they've done here. [00:49:59] Speaker 05: But all of this goes to the initial threshold question of whether they were our client, whether VPI and Salix were our clients. [00:50:08] Speaker 05: We still maintain that the test of that, you can have an attorney-client relationship without an engagement letter. [00:50:16] Speaker 05: So an engagement letter is not dispositive. [00:50:19] Speaker 05: You cannot be a client and pay for somebody's legal bills, so that's not dispositive. [00:50:22] Speaker 05: The dispositive test is basically the same rule as it is of contract, the meeting of the minds. [00:50:27] Speaker 05: Did they ever approach us? [00:50:29] Speaker 05: Did either of these two entities ever approach us and say, we want to consult with you on a legal matter? [00:50:34] Speaker 05: They didn't. [00:50:35] Speaker 05: They even, even, even Valiant doesn't claim they did. [00:50:39] Speaker 05: So we had no contact with them as, as, as, as their counsel. [00:50:43] Speaker 01: Well, the first, the first sentence of the letter talks about the relationship between your firm, Catten, and Valiant. [00:50:50] Speaker 05: But it doesn't describe any work that we're going to do. [00:50:53] Speaker 05: This is all about how we're going to bill, what restrictions we have on billing, how we're supposed to have cases, what kinds of charges we take. [00:51:00] Speaker 06: But what it does do, it says that this governs the relationship between Valiant and the firm and outside counsel. [00:51:09] Speaker 06: It governs the relationship. [00:51:12] Speaker 05: Well, but that is for purposes of billing. [00:51:16] Speaker 05: That's all it is. [00:51:16] Speaker 05: There's nothing in here that talks about any specific work that we're supposed to be doing. [00:51:20] Speaker 06: Well, then the record indicates your bills were paid by VPI. [00:51:24] Speaker 06: and that BPI's in-house counsel was in charge of legal affairs for all of the affiliates, for the whole organization. [00:51:30] Speaker 05: On the first point, if they were paying the bills, that doesn't make them a client. [00:51:34] Speaker 05: On the second point, if they're legal counsel... Well, but it indicates that. [00:51:38] Speaker 05: I mean, it... Well, there's... Commentary 13 to Rule 1.7 specifically discusses the fact that having someone pay your legal bills doesn't make them the client. [00:51:53] Speaker 04: So, if that's the only factor, I mean, this is a, you have to look at, as the cases do, look at all the factors with respect to how the entities are structured. [00:52:02] Speaker 05: Right. [00:52:04] Speaker 05: But, because I see my time is running out. [00:52:06] Speaker 05: Even if we still maintain that given what this is. [00:52:10] Speaker 01: Your time isn't running out. [00:52:12] Speaker 01: Okay. [00:52:12] Speaker 01: You needn't continue beyond what you have to say, but you have eight and a half minutes. [00:52:17] Speaker ?: Okay. [00:52:17] Speaker 05: What this letter said to us, [00:52:19] Speaker 05: is that we would be under the basic rules of 1.7 in dealing with their affiliates. [00:52:25] Speaker 05: And we did not see, we were not aware of any overlap, any risk of confidential information. [00:52:29] Speaker 04: Why didn't you question and say, why does it talk about a relationship with BPI when we don't have a relationship with BPI? [00:52:38] Speaker 05: Because this was the letter we were given. [00:52:40] Speaker 05: We're not really, these are not negotiable documents. [00:52:44] Speaker 06: Don't you integrate that into your conflict system? [00:52:47] Speaker 06: Seems like they would enter valiant pharmaceuticals? [00:52:53] Speaker 05: What we entered into the system, actually, also we had a specific flag on this case that tied to our billing system so that if our bills ever caught close to a million dollars, we'd flag that we were going to have a completely different set of obligations at that point and would be presumptively not able to be adverse. [00:53:11] Speaker 06: I don't know if you'd have a completely different set of obligations. [00:53:15] Speaker 06: may be arguably a different degree of loyalty, which I'm not sure what that is. [00:53:21] Speaker 06: I'm not sure what a significant degree of loyalty is apart from 1.7. [00:53:25] Speaker 05: Well, the significant degree of loyalty is that we are barred from being adverse to their affiliates, even if 1.7 says we could as a matter of contrast. [00:53:35] Speaker 05: And we do see this a lot. [00:53:37] Speaker 05: And I need to stress how critical it was that they didn't say, as a condition of [00:53:43] Speaker 05: of working for us, that you will not be adverse to any of our affiliates, period, full stop. [00:53:49] Speaker 04: Is it really your position that you never either do or can negotiate an engagement letter with your clients? [00:53:57] Speaker 05: In my experience, given the 100 to 150, we don't get much traction with it. [00:54:06] Speaker 05: If anything, it's small things about how we store information or how we do bills. [00:54:10] Speaker 05: But on that basic issue, [00:54:12] Speaker 05: We see it more and more, especially larger companies. [00:54:16] Speaker 05: They're perfectly capable of saying that. [00:54:18] Speaker 05: And that's really important for us. [00:54:20] Speaker 05: If they had told us that here, that we take the view you cannot be adverse to our affiliates, period, regardless of what rule 1.7 may allow you to do, I'm not so sure we would have continued working for Bausch & Lomb. [00:54:31] Speaker 05: We would then have to basically agree not to be adverse to 130 companies all over the drug market, and a company like Valiant who's continually buying and selling companies. [00:54:44] Speaker 04: But law firms all the time say, we'll represent this affiliate as long as it doesn't apply to any others. [00:54:49] Speaker 04: Are you saying you never do that? [00:54:51] Speaker 05: We do, but not in a circumstance where we've gotten outside counsel guidelines. [00:54:56] Speaker 05: And in this case, [00:55:00] Speaker 05: I think the only actual reading of this is that we're under 1.7. [00:55:04] Speaker 05: The only reason we wouldn't be is if we were a key external firm and had billings much larger than we ever had. [00:55:10] Speaker 05: At that point, it becomes, as a matter of contract, we are not able to be adverse to their affiliates. [00:55:15] Speaker 05: Remember, adverse doesn't just mean suing them. [00:55:19] Speaker 05: It also means being adverse in the transaction. [00:55:21] Speaker 05: And we look at, when we have a client who comes in, [00:55:25] Speaker 05: with an outside council guideline that says you will not be able to serve affiliates. [00:55:29] Speaker 05: We look at that very, very carefully. [00:55:30] Speaker 05: We take it quite seriously. [00:55:32] Speaker 05: That's a big deal for us. [00:55:33] Speaker 05: It may prevent us from operating entirely within certain industries as a result. [00:55:39] Speaker 05: So the fact that they didn't say that was quite significant to us. [00:55:43] Speaker 06: Isn't the key firm provision, it seems to me that it says, well, one way of looking at this is that don't come back to us and ask if you're a key firm. [00:55:54] Speaker 06: They'll come back to us and ask us for a waiver to be adverse to an affiliate. [00:56:01] Speaker 06: But yet under 1.7, if you're a regular 1.7 firm as you argue that you are, then if you're going to represent an affiliate that's adverse, then you should go first and get a waiver. [00:56:14] Speaker 05: Well, no, that's not what 1.7 says. [00:56:17] Speaker 05: It's up to the lawyer to determine whether under the circumstances a conflict was created such that the affiliate and the original client should be treated as one and the same. [00:56:27] Speaker 05: We didn't see anything that indicated we should do that. [00:56:30] Speaker 06: Well, it says there any conflict of interest that is discovered in the check or that develops can only be approved so they can be approved or waived or otherwise cleared by written agreement [00:56:40] Speaker 06: So if you're a 1.7 firm, you don't think you're a key firm. [00:56:45] Speaker 06: You're barred forever. [00:56:46] Speaker 06: In other words, you can't cure if you're a key firm. [00:56:51] Speaker 06: But you can cure this if you're a 1.7 firm. [00:56:54] Speaker 06: But you did not cure it. [00:56:57] Speaker 05: Well, because we didn't view this as a conflict. [00:57:00] Speaker 06: because of the fact that we didn't see any special... That's hard to contemplate, that you don't see a conflict, or even the potential of a conflict here. [00:57:12] Speaker 06: You do it enough to erect the ethical wall, but you sign an agreement with Valiant all over it, you're getting your bills from Valiant, Valiant provides in-house counsel, the in-house counsel relationships that your firm is doing, [00:57:30] Speaker 06: And you don't see a conflict? [00:57:34] Speaker 05: Well, we don't see a conflict because there's nothing in here in which we're actually doing work for Valiant Pharmaceutical International. [00:57:42] Speaker 06: You signed the deal with them. [00:57:44] Speaker 05: We signed the deal with them, but again, because they may be paying the bills or reviewing our bills, that doesn't make them the client. [00:57:50] Speaker 05: They never came to us [00:57:52] Speaker 05: and asked us for legal representation on any matter. [00:57:55] Speaker 05: They never consulted with us on legal representation on any matter. [00:57:58] Speaker 05: There's 130 subsidiaries of Valley Pharmaceutical Inc. [00:58:02] Speaker 05: Valley Pharmaceutical Inc. [00:58:03] Speaker 05: is in the business of buying and selling companies. [00:58:05] Speaker 05: They're up in Laval, Quebec. [00:58:07] Speaker 05: The kind of work that they do has nothing to do with... I understand that. [00:58:11] Speaker 06: And again, but it seems to me that you agree that if you were a key firm, you're barred, there's no cure. [00:58:16] Speaker 06: Yes. [00:58:17] Speaker 06: And you're arguing, I'm a 107 firm, [00:58:21] Speaker 06: The key firm provision doesn't apply. [00:58:24] Speaker 06: But yet, if you are a 1.7, under the terms of the agreement that you signed, you should have gone and sought a conflict. [00:58:30] Speaker 06: But you're saying that we never did see a conflict. [00:58:33] Speaker 06: That's hard to understand. [00:58:36] Speaker 05: OK. [00:58:37] Speaker 05: Well, that was based upon the best information we had. [00:58:41] Speaker 05: We did ask them when they raised this, is there anything else that you want to tell us that would support the finding of BPI being a client? [00:58:50] Speaker 05: They didn't respond. [00:58:51] Speaker 05: They filed the motion. [00:58:52] Speaker 05: Also, the information that they claim shows that they were all together. [00:58:57] Speaker 05: We saw for the first time in the pleading. [00:58:59] Speaker 05: But now I really am almost out of time. [00:59:01] Speaker 05: I just want to move on to the second part of this. [00:59:04] Speaker 05: This is all about whether Valiant is a client or not. [00:59:09] Speaker 05: But under both West Virginia and New Jersey law, even if Valiant is deemed to be a client, [00:59:16] Speaker 05: That's not the end of the issue. [00:59:18] Speaker 05: It doesn't mandate automatic disqualification as a result. [00:59:22] Speaker 05: You have to look at a series of factors. [00:59:25] Speaker 05: As a matter of fact, both New Jersey and West Virginia are very keen about pointing out that these disqualification motions should be looked at with great skepticism. [00:59:34] Speaker 05: And that rather than sort of uphold the integrity of the legal profession, can actually work in the opposite, making it look like opportunism and [00:59:43] Speaker 05: I believe the word from Wyatt that's vexatious tactics should be enough to eliminate a law firm. [00:59:49] Speaker 05: You basically have to find that there is actual some prejudice here to Valiant. [00:59:57] Speaker 05: So had Mr. Mukherjee and his team not ladled into Canton, right now, Valiant would be facing his team. [01:00:09] Speaker 05: Nothing would have changed. [01:00:10] Speaker 05: The fact that he's in a different law firm [01:00:12] Speaker 05: doesn't change the facts at all, only if they could cite actual specific information that he would have obtained that would give him an unfair advantage. [01:00:20] Speaker 05: And there is none. [01:00:21] Speaker 05: They cannot cite anything that would give him an unfair advantage. [01:00:27] Speaker 05: And so in both cases, they say that in the absence of a significant prejudice, the West Virginia case is even a more difficult standard to quote as [01:00:46] Speaker 05: When the conflict is such as clearly to call into question the fair or efficient administration of justice, so you have to actually find something. [01:00:57] Speaker 05: And usually what this boils down to, is there some specific, not generalized theoretic, specific confidential information that could have been or actually was given to counsel that would be of relevance to the new case? [01:01:13] Speaker 05: And they've not cited anything here. [01:01:16] Speaker 05: And we are unaware of any such information. [01:01:19] Speaker 05: So under the, even if you decide that somehow VPI and or Salex were client, that doesn't end the inquiry. [01:01:26] Speaker 05: I think I'm out of time. [01:01:27] Speaker 01: Thank you, Mr. Verger. [01:01:31] Speaker 01: Mr. Lipsy, we're giving you two minutes for a bottle if you need it. [01:01:36] Speaker 02: Thank you, Your Honor. [01:01:36] Speaker 02: I'll try not even to use that. [01:01:40] Speaker 02: Just on the contract, and I hate to be a dead horse, but the one party that clearly is a client is Valiant, because that's the person the contract's with on the very first page, Valiant Pharmaceuticals International, and they're the ones who signed it. [01:01:53] Speaker 02: And moreover, under the provisions, we don't have to have something that says, oh, and you won't be adverse to our affiliates, because under the provisions, the affiliates are the clients also. [01:02:04] Speaker 02: VPI and its affiliates are the clients. [01:02:07] Speaker 02: And as a matter of logic, if a small provider would be free under 1.7 to be adverse to affiliates, there would be no reason to give that relief to a big provider, which is the way they're reading the agreement. [01:02:23] Speaker 02: It's an irrational reading. [01:02:24] Speaker 04: So what do you think the second sentence in the second paragraph of 1.2 means? [01:02:34] Speaker 02: I think it requires [01:02:35] Speaker 02: an additional degree of loyalty beyond that required by the ethical rules addressed in the last sentence that includes not bringing actions that are against the economic interests of Valiant Pharmaceuticals, even if they are not technically ethical conflicts. [01:02:54] Speaker 02: Give me an example. [01:02:56] Speaker 02: An example is where you have two companies both selling [01:03:06] Speaker 02: cholesterol drugs, direct competitors, fiercely competing. [01:03:10] Speaker 02: And you're representing one in a big time case and all of a sudden you decide to take on another to help their direct competitor in a big time case and they come to you and say, what are you doing? [01:03:22] Speaker 02: Don't you realize that those guys are eating our lunch? [01:03:26] Speaker 02: What on earth are you doing? [01:03:27] Speaker 02: That's an economic conflict. [01:03:29] Speaker 02: We worry about those because you can lose the client over those. [01:03:33] Speaker 02: But they're not ethical conflicts and what the [01:03:36] Speaker 02: The only rational reading of this is that the obligations of the big firm are to give us greater loyalty than the rules actually require. [01:03:47] Speaker 02: We don't need them to say, oh, we won't represent affiliates. [01:03:52] Speaker 02: Affiliates are already the client under the terms of the agreement. [01:03:56] Speaker 02: And then on the question of whether they've done anything for valiant, there is an email that Mr. Verdi sent to Mr. Gorman. [01:04:03] Speaker 02: on May 11, 2018, its diner declaration, Exhibit 16, and it specifically says, Catten did handle some small matters for Valiant itself between 2015 and 2017. [01:04:26] Speaker 02: Thank you, Mr. Lipsy. [01:04:29] Speaker 01: We'll hear from Ms. [01:04:31] Speaker 01: Borff if she has anything further to say. [01:04:35] Speaker 03: Yes, the court has some questions for me. [01:04:37] Speaker 03: I don't have anything further to say. [01:04:40] Speaker 01: Thank you. [01:04:40] Speaker 01: Well, we've heard valiant arguments from both sides, and we'll take the motion under revisement. [01:04:46] Speaker 02: Thank you. [01:04:48] Speaker 02: All rise. [01:05:01] Speaker 06: The honourable court is adjourned for the day today. [01:05:05] Speaker 01: Well done, councillor.