In a June 30 order granting Gap’s motion to disqualify Dentons, Chief Administrative Law Judge Charles Bullock sharply criticized the firm and Dentons patent litigation chair Mark Hogge for taking on RevoLaze LLC and a related entity as clients despite recognizing they had a conflict with Gap.
“Dentons owes Gap a duty of loyalty, yet it stands to benefit both in terms of legal fees and a share in certain proceeds by representing other clients who are seeking to bar Gap’s imports into the U.S.,” the judge wrote.
“Additionally, although Dentons apparently realized that there was a conflict, it did not attempt to obtain Gap’s informed consent. This inaction shows disregard for the rules of professional conduct,” Judge Bullock added.
Lawyers for the complainant, Ohio-based laser inscribing company RevoLaze, argued that Dentons US was legally separate from Dentons Canada and other branches under the verein structure, and that the firm’s work for the company in the ITC matter was tantamount to representation by a separately named law firm from the one working for Gap.
Gap in turn argued that Dentons — which recently became the largest international legal network — “holds itself out to the world as one firm” and breached professional conduct rules by taking on clients adverse to Gap.
The initial ITC complaint filed last August by Dentons partner Mark Hogge for RevoLaze accused Gap, along with Abercrombie & Fitch Co., Eddie Bauer LLC, Levi Strauss & Co. and nine other companies of importing products using patented “laser abraded denim having a worn or patterned appearance.”
Gap has been a client of Dentons and its legacy firms for decades. In its bid to disqualify Dentons, Gap argued that it had more than a dozen open matters in the hands of Dentons lawyers, giving the firm access to confidential company information relevant to the ITC investigation through its verein “portal,” according to the order.
The company further argued that Dentons disclosed to RevoLaze in a litigation funding deal with Longford Capital Fund I LP that it did have a conflict with Gap, along with two other respondents. With Dentons in a partial contingency fee deal with RevoLaze, Gap said Dentons had put itself in line to benefit directly “from its own unethical conduct,” according to the order.
Referring to ABA Model Rule 1.0 and direction about lawyers who “present themselves to the public in a way that suggests that they are a firm,” Judge Bullock determined that Dentons should be treated as a single firm and did breach conflict rules when it took on the case.
Judge Bullock also took issue with Hogge’s argument that Gap’s confidential information had been screened from lawyers working on the ITC matter, and that he’d only intended to identify Gap as a “potential” business conflict.
In fact, the judge said, the firm had specifically identified an existing conflict with Gap in its RevoLaze retainer agreement.
The complainants’ opposition “shows a lack of understanding of the nuances of the ABA Model Rules between current and former clients and when ethical screens may be implemented,” the judge said. “This unfamiliarity with the rules undermines the persuasiveness of Mr. Hogge’s later determination that Dentons US could proceed without conflict.”
In a statement Thursday, Dentons said it was "surprised and troubled" by a disqualification coming several months into the case.
"We respectfully believe the decision applied the wrong standard and instead should have enforced Gap’s clear written agreement with our Canadian colleagues, which directly refutes its disqualification argument," the firm said. "We intend to exhaust all of our avenues of relief in order to correct multiple errors in the decision."
Hogge was also focus of a 2012 malpractice suit against his former firm, Greenberg Traurig LLP. Lock maker Wyers Products had accused him and the firm of failing to properly counsel them on the risks of rejecting a settlement offer in a patent fight.
The firm settled the case a day before a trial was set to begin in March. Hogge did not respond to a request for comment Thursday.
The case is not the first conflict challenge alleging conflicts across branches of a verein, a structure in which the firm maintains a single brand and top-level management, but keep finances and legal work under separate legal entities.
Last year, lawyers representing John Wayne Enterprises launched a disqualification bid against Fulbright & Jaworski in a trademark case over John Wayne-branded whiskey, alleging that conflicts had arisen from the firm's verein merger with Norton Rose.
While a California judge tossed the case on jurisdictional grounds, ethics experts predicted that the growth of verein firms — they include DLA Piper, Baker & McKenzie and Squire Patton Boggs — would trigger more challenges focused on improper sharing of client information and ethical conflicts.
Since the three-way merger of SNR Denton, Fraser Milner Casgrain and Salans in 2013, Dentons has become the world’s largest legal network, with branches in the U.S., Canada and Europe, respectively, and a fourth branch covering the United Kingdom, the Middle East and Africa.
Dentons added yet another verein branch in a merger earlier this year with Dacheng, China’s largest law firm.
The order is dated May 7 and was published June 30. Some of the respondents in the ITC matter settled earlier this year, including Levi Strauss, VF Corp., and Modelos Yasiro, according to RevoLaze.
The complainants are represented by Steven Molo of MoloLamken LLP. Gap is represented by Megan Whyman Olesek of Kenyon & Kenyon LLP.
The case is In the Matter of Certain Abraded Denim Garments, Inv. No 337-TA-930, in the U.S. International Trade Commission.
--Editing by Mark Lebetkin.