-FBS Wink, Inc., d/b/a Wink Salon v. Wink Threading Studio, Inc., No. 2:2010cv00450 - Document 72 (E.D. Va. 2011)
Court Description: OPINION and ORDER granting Plaintiff's Motion to Disqualify Counsel for Defendant (ECF No. 60); disqualifying both Joseph R. DelMaster and Jeffrey C. Flax from further representation of the defendant in this matter; denying as moot Motion to Wit hdraw as Counsel (ECF No. 62), filed by DelMaster and Flax; vacating the stay imposed by the Court's Order of 6/28/11 (ECF No. 71); directing defendant to identify and retain substitute counsel promptly; such counsel to enter an appearance in th is case within 21 days of the date of this Order; directing counsel for parties, upon appearance of substitute counsel for defendant, to schedule a settlement conference as outlined; directing counsel to contact courtroom deputy for District Judge Ro bert G. Doumar to schedule final pretrial conference and jury trial; directing Mr. Flax to deliver a copy of this order promptly to defendant; directing Mr. Flax to file a declaration certifying his delivery of Order to defendant as outlined. Signed by Magistrate Judge F. Bradford Stillman and filed on 7/26/11. (mwin, )
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FILED UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA JUL 2 6 2011 Norfolk Division WINK, INC. d/b/a Wink Salon, CLERK, U.S. DISTRICT COURT NORFOLK. VA Plaintiff, v. Case No.: WINK THREADING STUDIO, 2:10cv450 INC., Defendant. OPINION AND ORDER Before Counsel Inc. the for Court Defendant d/b/a Wink Esq., represented DelMaster, defendant of these the Esq., at Inc. issues by 2011, to Disqualify plaintiff 6, 62), filed by counsel for defendant on June plaintiff Jeffrey at C. 28, corporation, was 2011. the Duncan hearing, Flax, Esq., Kaur, also Motion and G. Byers, Joseph represented president in to The Court held a 2 011. the Hamsimran and Wink, and attendance R. the owner at the the key defendant was The official court reporter was Heidi Jeffreys. is a trademark in dispute willful. filed on June 14, I. This 60), Motion June hearing. defendant hearing. the and the on motions Plaintiff's No. (ECF No. Wink Threading Studio, on the (ECF Salon Withdraw as Counsel hearing are is BACKGROUND infringement whether case. infringement by One the of The defendant relies on an "advice of counsel" defense with respect to this issue. On June 6, 2011, the plaintiff moved to disqualify both lead and local counsel for the defendant on the ground that both attorneys are subject to a non-waivable conflict of interest due to concurrent representation of the defendant and Charles Payne, the defendant's former attorney. Payne was engaged by the defendant in 2010 to counsel it on intellectual property matters eyebrow threading Harsimran business.1 and In president Kaur, corporation, and Daniel Singh, consultant for the defendant, On June 23, and potential 2010, April 2010, owner Kaur's franchising of its Payne met the defendant of father and a with business to discuss these areas of concern. Payne submitted an application to the United States Patent and Trademark Office on Kaur's behalf, seeking to trademark the WINK mark. The plaintiff September complaint it stop 9, 2010. and a using thereafter, filed The letter the WINK its complaint defendant on this received from plaintiff's name in counsel September 11, matter notice on of the demanding that 2010. Shortly the defendant ended its relationship with Payne and retained Joseph R. DelMaster to represent it in this litigation. In considering to withdraw, these competing motions to disqualify and the Court relies on the factual representations of counsel for both parties, both at hearing and in their motion papers, and on documents submitted in support of the plaintiff's motion. Although defense counsel do not concede that there is a conflict of interest, the pertinent facts are not in dispute. - 2 - DelMaster, an out-of-state attorney, associated with Jeffrey C. Flax to serve as local counsel. On October 4, Office mark issued sought an by 2010, the United States Office Kaur Action due to refusing likelihood Patent and Trademark to of register the with confusion WINK the plaintiff's previously registered mark, WINK SALON. On October 20, plaintiff's counsel, On October 28, complaint. to the complaint, non-party and by 2010, legal identifying DelMaster trademark advice DelMaster four and response belonging produce produced searches to, entered the as certain to asserting that the rather documents defendant, than their of conducted defendant. the 3 on On defendant's which attorney-client Byers corresponded the subpoena required DelMaster. as Payne's client therefore files privilege determinations necessarily were made by current counsel from as well as a privilege produced and he the Later that same day, documents identified to Flax subpoenaed documents provided documents with DelMaster and Payne, to the the defendant filed its answer the plaintiff privilege was asserted. Payne with regarding this litigation. client files he had received from Payne, log corresponding case. regarding 2011, Byers, which 2011, Payne of, 14, 2, began the defendant waived formal service of On December 23, On March March DelMaster Duncan G. 2010, appearance in this behalf 2010, for the defendant, mail to DelMaster. Byers Later stating: in "Now that Flax and I are acting as Mr. the litigation, please the day, we DelMaster have clarified Payne's counsel note that all sent an that e- Jeff for the purpose of communication with him should proceed through either Jeff or me for the duration of the case." PL's 2011, Payne [DelMaster] Id. Ex. replied said May Supp. to above 18, Ex. the is 2 011, the transcript, Court Mo]n behalf of the DelMaster, attendance. he in 13, e-mail correct ECF No. 61. On March 15, chain, advising that: as as concerned." far I am "What 14. On Byers, Br. was reporter and Payne, actual IcL^ Ex. one 3, else represented 57. or that In the deposition DelMaster at 2. was appeared Other than identified in Payne confirmed at deposition that being at Payne. noted no at 2-3. "currently Id^ deposed Defendant." See id. DelMaster." Byers Payne individually confirmed potential conflict that of he discussed any DelMaster, by Mr. had not interest nor had he signed a written conflict waiver. with id. at 57-58. Substantively, testimony with respect Payne the by Singh to Payne's and their deposition Kaur use testimony regarding and Payne's registration of conflicts advice the to WINK with them mark. testified that he advised Kaur and Singh that their use of WINK mark was "problematic" - 4 due - to the plaintiff's prior registration testified with and that Kaur's use of Payne did trademark May 19, deposition, 2011, Byers conflict several the of Byers them nor deposed Kaur of of any and such Singh problem the plaintiff's Singh. At the end concern that DelMaster's On May conflict prior defendant 20, 2 011, of conference the concurrent implicated a potential Byers interest. calls of had the counsel Some of first of regarding the later involving DelMaster and Flax well. Plaintiff's that, on June counsel 2, 2 011, On June motion to said 2011, disqualify, withdraw as counsel 14, counsel moved motion to has any 1, that defendant taint of a No. in confirmed lieu of a DelMaster the the that he 63. may be defendant. merit." better motion was papers still 5 In response filed this conceding Br. in did a being motion, in any Supp. - Later the way of same to defense concede, that to motion served with new counsel interest. - Flax counsel Defense of substantive and wwithout actual conflict represented and Flax. withdraw Withdraw the ECF to further Payne represented by DelMaster any mark. conversations with state bar conversations were as inform Payne and the telephone SALON the WINK SALON mark. interest. potential not raised his representation of WINK application, registration and use of On the Mot. that to however, without day, the plaintiff filed a response to the motion to withdraw, that it did not oppose the motion to withdraw. When asked relationship DelMaster was to "not of with an Payne, he files and written or could that their terminated, relationship he explained to with Payne further had no relationship tasks was that, in represent to the such that deposition, further obtain and waive attorney-client affirmatively his undertook his defendant. but his 64. "entirely the Payne course for reviewing and producing the attorney's the necessary, that Flax DelMaster consent that DelMaster defending concluded. Payne and and limited purpose of been relationship," in discovery." discovery, whether had obliquely ongoing for hearing Payne responded perform tied up at ECF No. stating confirmed concurrent He claims from would it might not only be willing have been obtained from both client had he had not however, consent defendant any malpractice that which representation suggested, written the tasks the either that he clients go against if further Payne to resolve any conflict. When asked Flax responded the the litigation. discussions the extent that, with plaintiff's as He of local his counsel, acknowledged, Payne motion in role he compel - 6 - the had however, connection with to in the an a representation, limited some earlier production role in substantive hearing of on certain documents from privileged. Payne initially See generally Order of May 9, II. The withheld Court first from 2011, production ECF No. as 49. ANALYSIS considers the guidance of the Fourth Circuit: In determining whether to disqualify counsel for conflict of interest, the trial court is not to weigh the circumstances "with hair-splitting nicety" but, in the proper exercise of its supervising power over the members of the bar and with the view of preventing "the appearance of impropriety, " it is to resolve all doubts in favor of disqualification. United States v. (citations 2d 591, As 602 Clarkson, omitted); (E.D. Va. see 567 F.2d 270, also Sanford v. 273 n.3 (4th Cir. Virginia, 687 F. 2009). this Court has previously observed: It is, justice of course, that the important in our parties be free system of to retain counsel of their choice. "However, this Court has held that the right of one to retain counsel of his choosing is * secondary in importance to the Court's duty to maintain the highest ethical standards of professional conduct to insure and preserve trust in the integrity of the bar."' Accordingly, "[t]here must be a balance between the client's free choice of counsel and the maintenance of the highest ethical and professional standards in the legal community." Moreover, the party a high standard disqualification is are well seeking disqualification of proof warranted. settled. - 7 - has to show that These principles 1977) Supp. Sanford, 687 Tessier v. 729 {E.D. F. Supp. Plastic Va. 2d at 602 {citations Surgery Specialists, 1990) omitted) Inc., 731 F. (quoting Supp. 724, (citations omitted)). While, as the Fourth Circuit explained in Clarkson, the assessment to be made in a disqualification motion cannot be made with "hair-splitting nicety," it is nonetheless true that the asserted conflict must be a real one and not a hypothetical one or a fanciful one. Put another way, disqualification simply cannot be based on mere speculation that tta chain of events whose occurrence theoretically could lead counsel to act fact counter to his occur." The client's interests might in rule requires professional judgment of the lawyer is be affected. Accordingly, some likely to stronger disqualification indicator than applicable when judicial the independent intuition or surmise on the part of opposing counsel is necessary warrant the "drastic step of disqualification to of counsel." id- at Fresh, 602-03 Inc., Aetna Cas. (4th Cir. (citations 966 F.2d & Surety Co. 1978), 690 F.2d 1086, 142, Chauffers, U.S. 558, 488, 492 the (4th United States, Cir. 1089-90 (4th Cir. (1990); see and F.2d 1197, v. v. Farm citing 1200-01 City of Richmond, 1982)). "the lawyer's duty of loyalty long has representation and Shaffer 1992), 570 and Richmond Hilton Assoc. Teamsters 586 (quoting 145-46 v. The Court notes that precluded omitted) of Helpers, also p[U]nder Virginia Local Dyntel law it is his or her client a fiduciary duty."); ft conflicting No. 391 Corp. v. clear that Tessier, interests." v. Terry, Ebnerf a 494 120 F.3d lawyer owes 731 F. Supp. at 733 (recognizing that an attorney has a duty of client). Rule This 1.9 of duty of loyalty is the Virginia Rules of loyalty to his reflected in Rules 1.7 Professional Conduct, and which govern conflicts of interest with respect to current and former clients, respectively. See generally Va. & [1], Va. cants. The [6], principles privilege to of are undertakes Va. R. [8]; R. confidentiality also concerns represent provides 1.7 of the R. Prof 1 Conduct 1.7 Conduct and 1.9 the implicated conflicting Prof'l Conduct 1.6; Va. Rule Prof'l R. & cmt. [3].2 attorney-client when attorney See interests. an generally Prof'l Conduct 1.7 cmt. Rules Virginia [30]. Conduct of Professional that: (a) Except as provided in paragraph (b) , a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. exists if: A concurrent conflict of interest (1) the representation of one client will be directly adverse to another client; or (2) there representation of is significant risk that the one or more clients will be materially limited by the lawyer's responsibilities to another client [or] a former client (b) .... Notwithstanding concurrent conflict (a) , a lawyer may the existence of interest represent a affected client consents after consultation, Pursuant to Local Civil Rule 83.1(1), for the practice of law in civil cases Virginia Rules of Professional Conduct. 83.1(1); see also Sanford, 687 F. - 9 Supp. - of a under paragraph client if each and: the ethical standard in this Court is the See Local Civil Rule 2d at 601. (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) the consent memorialized in writing. Va. R. 596, Prof'l Conduct 1.7; see from also the client Sanford, 687 F. is Supp. 2d at 601. The conflict of Rule 1.7(a)(2).3 interest at issue in this case arises under The concurrent representation of the defendant 3 DelMaster has suggested that Payne is a former client and this conflict of interest is therefore properly governed by Rule 1.9 rather than Rule 1.7. But based on the representations of counsel and the documents submitted in support of the motion to disqualify, it appears that Payne is a current rather than former client mail message, Payne's of DelMaster and Flax. In his March 14, 2011 eDelMaster identified himself and Flax as wMr. counsel for the purpose of the litigation." PL's Br. in Supp. Ex. 13, ECF No. 61. In his March 15, 2011 e-mail message, Payne confirmed that this was his understanding as well. IcL_ Ex. 14. When deposed on May 18, 2011, Payne testified, without qualification, that DelMaster was his attorney, As recent representing as June 2, him individually. 2011, Payne See advised id. Ex. 3, plaintiff's at 57. counsel that he was still being represented by DelMaster and Flax. id. at 6. And at the hearing held on June 28, 2011, DelMaster was unable to clearly state that the attorney-client relationship with Payne had been terminated; DelMaster hedged instead, noting that he had no further tasks to perform for Payne and expressing his subjective impression that theirs was "not an ongoing relationship, " and one which was * entirely tied up in discovery." On the whole, the facts presented to the Court, by proffer and by exhibit, suggest that DelMaster and Flax - 10 - and Payne by DelMaster and Flax clearly poses undertook to represent Payne litigation, which remains ongoing. In any event, even if Payne for the a significant risk duration of is properly considered a this former client, DelMaster and Flax would still owe him a residual duty of loyalty with respect to the subject of their past legal representation, and they would therefore still face a disqualifying conflict of interest. Rule 1.9 provides that w [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 unless both the present and former client consent after consultation." Va. R. Prof'l Conduct 1.9(a) (emphasis added). Under Rule 1.9, absent consent by both the defendant and Payne after consultation, DelMaster and Flax would still be prohibited from representing the defendant in this same matter in which they represented Payne because the conflicting testimony of Singh and Kaur, on the one hand, and Payne, on the other, with respect to the advice he provided regarding the defendant's use and registration of the WINK mark, testimony which strongly suggests the existence of a malpractice claim against Payne. See Touchcom, Inc. v. Bereskin & Parr, 299 Fed. App'x 953 (Fed. Cir. 2008) (applying Virginia law) (disqualifying counsel for malpractice plaintiff who had previously represented malpractice defendants at deposition in underlying patent litigation against the malpractice plaintiff, and noting that Rule 1.9 "was designed not only to protect client confidences, but *to establish broader standards of attorney loyalty.'") (quoting Sharp v. Sharp, Ct. 26, Oct. No. 02-74, 2006 WL 3088067, at *25-*26 (Va. Cir. 2006)). Moreover, even if Rule 1.9 did provide the framework for analyzing whether DelMaster and Flax may have breached their duty of loyalty to Payne as a former client, Rule 1.7 continues to provide the framework for analyzing whether they may have breached their duty of loyalty to the defendant as a current client. See Va. R. Prof'l Conduct 1.7(a)(2) ("A concurrent conflict of interest exists if ... there is significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to ... a former client."). The disqualification of DelMaster and Flax in this case hinges not on whether they have a conflict of interest vis-a-vis a former client, but whether a conflict of interest materially limits their current representation of the defendant in the present litigation. - 11 - that the representation materially limited by of one of counsel's these duty two loyalty of clients to will the be other, particularly in light of the conflicting testimony of Singh and Kaur, on the one hand, and Payne, on the other, with respect to Payne's advice regarding the defendant's use and registration of the WINK mark. (wSimultaneous See Va. R. representation of litigation may conflict ... An Prof'l impermissible conflict discrepancy in the parties' is may Conduct parties 1.7 whose cmt. interests governed by paragraph exist by testimony . reason . . of claim that it his may conflict of client may be willing have against interest. heart of the issue. both the defendant DelMaster or Payne This if .") to waive necessary proposed waiver and to to Payne. advise It the is that defense counsel in defendant's another, this malpractice Moreover, can case, corporate without or in open any malpractice to eliminate goes right the to the permissible for regarding the against Payne, who is it is difficult to conceive of any effectively where present the disadvantaging 12 - advice-of-counsel of directly Payne with action - an testimony representatives disciplinary not defendant assertion or waiver of malpractice claims way (a) (2) . DelMaster and Flax owe a duty of loyalty to Flax also their client. in substantial This is well illustrated by DelMaster's suggestion, court, [23] that Payne and the contradict one respect may to potential result from this litigation, or Conversely, it effectively without is impairing difficult avoid or his professional reputation. to conceive of any way counsel mitigate the potential harm to can Payne without undermining the defendant's advice-of-counsel defense. On this record, such as it is, the Court is satisfied that that the asserted conflict of interest is a real one, not merely hypothetical or fanciful. 03. But pursuant permissible where, to See Sanford, Rule notwithstanding inter alia, consultation, 1.7(b), a "each and . . . 687 F. a the the in Nevertheless, despite ample opportunity to do so, Flax that they have not either the defendant or Payne, R. from of Prof'l may be interest consents memorialized concede Va. conflict client consent writing." 2d at 602- representation concurrent affected Supp. after client Conduct is 1.7(b). DelMaster and obtained written consent from and the little evidence that has been submitted to the Court on this motion suggests that there has been no meaningful consultation between defense counsel and their clients Br. regarding this in Supp. Ex. 2, In the Court's conflict in any event. at 122-23; eyes, id^ Ex. there is 3, See PL's at 57-58. little doubt that DelMaster and Flax are conflicted and that neither the defendant nor Payne has consented in writing after consultation. has instructed disqualification. that all £ee doubts Clarkson, - 13 - be The Fourth Circuit resolved 567 F.2d in at favor 273 of n.3. Accordingly, the Court concludes that DelMaster and Flax must necessarily be disqualified. III. CONCLUSION For the foregoing reasons, the Court FINDS that both Joseph R. DelMaster and Jeffrey C. Flax have a disqualifying conflict of concurrent interest due to their defendant and Charles Payne, representation the defendant's of former attorney. Plaintiff's Motion to Disqualify Counsel for Defendant 60) the (ECF No. is GRANTED and both Joseph R. DelMaster and Jeffrey C. Flax are DISQUALIFIED from further representation of the defendant in this matter. The Motion to Withdraw as Counsel DelMaster and Flax, (ECF No. 62), filed by is DENIED as MOOT. The Court ORDERS that the stay imposed by the Court's Order of June 28, 2011 (ECF No. 71) is hereby VACATED. The Court further ORDERS the defendant to promptly identify and retain substitute counsel, with such counsel to enter his or her appearance in this case within 21 days of the date of this Order.4 Upon the entry of appearance by substitute counsel for the defendant, counsel for both parties are DIRECTED to contact The court notes that the defendant is a corporation, and a corporation is not permitted to appear pro se in federal court Rowland Counci1' ^H^ v, v. 506 U-S. U.S., Cal. 194, 326 Men's 202-03 Fed. Colony, (1993); App'x 14 - II Men's Advisory Honour Technical~Gr^~ 141, ~T42 (unpublished per curiam opinion). - Unit (4th CirT 200?Y the Magistrate Courtroom Deputies at a settlement conference Miller, United counsel for Deputy Lori both this matter Magistrate States in 222-7222 Judge. parties Baxter (757) at are before to schedule Hon. Promptly E. thereafter, DIRECTED to contact 222-7244 (757) Tommy to schedule Courtroom a final pretrial conference and a jury trial in this matter before Hon. Robert G. Doumar, The Court United States District Judge. further ORDERS Mr. Flax to promptly deliver copy of this Order to the defendant upon his receipt of it. Flax is DIRECTED to file a declaration certifying his of this Order to the defendant, IS including the date and method of SO ORDERED UNITED STATES MAGISTRATE JUDGE Norfolk, Virginia July Zb , 2 011 - Mr. delivery delivery. IT a 15 -
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