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Legal Malpractice Issues

Conflicts of interest: A client is not a needle in a law firm’s haystack, part 2

by | Jul 23, 2022 | Conflict of Interest |

In part 1 of this post, we introduced readers to RevoLaze LLC v. Dentons US LLP, a recent Ohio case in which a jury awarded a client more than $32 million in compensatory damages for losses related to their law firm’s failure to disclose a major conflict of interest. An appeals court affirmed the decision on appeal and the law firm has asked the Ohio Supreme Court to consider the case.

As of this writing on July 22, the Supreme Court’s docket information indicates that the court has not yet decided whether to hear the appeal.

Far-reaching conflicts issues

This case is factually and legally complex, so we take a high-level look. Dentons is a massive international law firm with over 200 branches in more than 80 countries, according to its website. Its business model is the Swiss verein, a type of legal association among entities under Swiss law.

As we explained in part 1, Ohio family business RevoLaze – owner of patents for a groundbreaking laser abrading process to age and fade denim – retained Dentons US to represent it in related patent, import and licensing matters before the International Trade Commission (ITC) as well as in federal court against several allegedly infringing companies.

One of the defendants was The Gap, Inc. (Gap), which requested disqualification of Dentons US in representing RevoLaze against Gap, because Gap was a long-time client of Dentons through various of its verein portals (branches) around the world and recently at Dentons Canada. Gap claimed that Dentons did not reveal the conflict of interest to it nor did Dentons request waiver of the conflicts issue.

In other words, RevoLaze was Dentons US’s client, suing a Dentons Canada client while represented by Dentons US. Dentons claimed its various verein portals were “separate firms” for purposes of conflicts of interest so there was no conflict with Gap as a client of other verein locations.

The trial court, jury and appeals court all disagreed for many reasons, including:

  • The lead Dentons US attorney, Mr. Hogge, told RevoLaze that suing Calvin Klein might bring a motion to disqualify because the company was a former client of Dentons Hong Kong.
  • “[O]verwhelming evidence” showed the Dentons verein “operated as a single firm.”
  • While Dentons stated otherwise, an expert witness concluded that the verein portals had a “common conflict base” and shared confidential client information among them.
  • Disqualification under the circumstances was foreseeable and caused harm to RevoLaze because of having to abandon remedies it sought from the ITC and to negotiate and settle for lower royalties because of perceived chaos from losing their lawyers.

Takeaways

This case raises conflict-of-interest issues that likely will continue to come to light. Namely, what impact will it have on malpractice cases involving other international firms also organized as vereins or as other legal entities formed under the laws of other countries but unfamiliar in the U.S.? Boiled down to the basics, whether a conflict exists at a multi-office firm is not that different than whether one exists between individual lawyers in an office-sharing arrangement. In those cases, judges and juries tend to ask whether the lawyers share staff and if confidential client information is ever shared or compromised – the same issues facing a multi-portal verein on a much bigger scale.