Clegard LLC v. LG Chem. Ltd., Federal Circuit, 12-10-14
Jones Day represented the plaintiff in a matter where success would be economically harmful to non-client Apple, which was a customer of defendant. Apple was a Jones Day client on unrelated matters. It intervened to disqualify Jones Day on the ground that the representation was directly adverse to Apple because success against defendant would cause Apple to lose defendant as its lithium battery supplier.
The court disqualified. Jones Day argued that it would not be possible for a law firm to anticipate the economic consequences to a non-party client who happened to be in an opponent's supply chain. But the court held that here the retainer agreement with plaintiff expressly said that the firm would not be adverse to Apple, so Jones Day did in fact recognize Apple's interest.
So the firm's effort to carve out adversity to Apple was used as a basis to find a conflict by showing awareness of Apple's adverse interest. But whether there was a conflict or not in the work the Jones Day did agree to do was in fact the question, independent of the carve out. The carve out should not have been used to find a conflict simply because it recognized Apple's interest.
This is a somewhat surprising case. Perhaps it is right on the facts. It is per curiam and non-precedential. However, the implications can be disturbing if read even a bit broadly. Many litigations can have economic consequences for a non-party client, even foreseeable ones and here Apple was a client on unrelated matters. The case holds that as a client even on unrelated matters Apple had a right not to see Jones Day appear for another client in a matter in which Apple was not a party because of foreseeable economic harm to Apple. The court cites its own 2006 precedent which I have not yet read.