Commentary: How We Have Lost Our Way—Galderma v. Actavis

Vol. 22 No. 1

Lawrence J. Fox is a partner of Drinker Biddle & Reath LLP in Philadelphia and a member of the ABA House of Delegates. Mr. Fox is also the Crawford Lecturer at Yale Law School, where he teaches professional responsibility. He is the founder and the supervising lawyer for the Ethics Bureau at Yale.

A professional responsibility triple Lutz! In Galderma Laboratories, L.P. v. Actavis Mid Atlantic LLC, 2013 U.S. District Lexis 24171 (N.D. Texas, Feb. 21, 2013), Vinson & Elkins successfully resisted a motion to disqualify, earning the right to both defend against a claim brought by and bring a counterclaim against its own current client. And it did so by snaring what United States District Court Judge Ed Kinkeade deemed to be informed consent, stripping sophisticated clients of any notion of loyalty so long as the law firm seeking this wonderful business opportunity buries in its standard retainer letter the following warm and fuzzy language:

We understand and agree that this is not an exclusive agreement, and you are free to retain any other counsel of your choosing. We recognize that we shall be disqualified from representing any other client with interest materially and directly adverse to yours (i) in any matter which is substantially related to our representation of you and (ii) with respect to any matter where there is a reasonable probability that confidential information you furnished to us could be used to your disadvantage. You understand and agree that, with those exceptions, we are free to represent other clients, including clients whose interests may conflict with ours in litigation, business transactions, or other legal matters. You agree that our representing you in this matter will not prevent or disqualify us from representing clients adverse to you in other matters and that you consent in advance to our undertaking such adverse representations.

Sadly, the result is not surprising. Once there was a time when two things were true. First, a prospective waiver of a conflict of interest would only be valid if the nature of the future matter and the likely class of adverse parties were sufficiently defined that one could conclude the client was able to give informed consent. Second, the lawyer was required to have a consultation with the client before seeking a waiver of any kind.

The opinion places an exclamation point on changes that were crafted by the ABA Ethics 2000 Commission and adopted by the ABA House of Delegates, over this author’s strenuous objections, adding comment [22] to Rule 1.7. That comment endorsed totally uncabined prospective waivers for sophisticated clients and for the same class of clients who employ in-house counsel, eviscerating any meaning from the simultaneous and ironic change Ethics 2000 wrought, substituting for the requirement of consent consultation the far more client-protective standard of informed consent.

One is left to imagine how this all went down at Vinson & Elkins. Did they break out champagne? The implications, indeed, are quite profound. For, if we allow lawyers to sue their present clients without their clients’ informed consent, have we not lost our birthright as professionals, entitled to special respect as officers of the court because we are not mere actors in an unregulated marketplace, but fiduciaries with all the special responsibilities that word conveys?

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