Blue Planet Software, Inc. v. Games Intern., LLC

• Decision Date: 25 August 2004
• Docket Number: No. 03 Civ. 8904(SHS).,03 Civ. 8904(SHS).
• Parties: BLUE PLANET SOFTWARE, INC. and Alexey L. Pajitnov, Plaintiffs, v. GAMES INTERNATIONAL, LLC and Elorg Company, LLC Defendants.
• Court: U.S. District Court — Southern District of New York

331 F.Supp.2d 273

BLUE PLANET SOFTWARE, INC. and Alexey L. Pajitnov, Plaintiffs, v. GAMES INTERNATIONAL, LLC and Elorg Company, LLC Defendants.

No. 03 Civ. 8904(SHS).

United States District Court, S.D. New York.

August 25, 2004.

John J. Kirby, Jr., Latham & Watkins, New York City, for Blue Planet Software, Inc. and Alexey L. Pajitnov.

Glenn D. Bellamy, Greenbaum Doll & McDonald PLLC, Cinnaciti, OH, Mark Norman Mutterperl, Fulbright & Jaworski L.L.P., New York City, for Games Intern., L.L.C., ELORG, L.L.C.

OPINION and ORDER

STEIN, District Judge.

I. INTRODUCTION

This action arises out of a dispute over the intellectual property rights to the world-famous video game Tetris. Plaintiffs Blue Planet Software, Inc. and Alexey L. Pajitnov are suing Games International, L.L.C. ("Games") and Elorg Company, LLC ("Elorg USA") claiming that they, not defendants, own those rights. Defendants Games and Elorg now bring this motion to disqualify plaintiffs' counsel John J. Kirby, Jr. and his firm Latham & Watkins LLP from continuing to represent plaintiffs due to an alleged conflict of interest emanating from Kirby's prior representation of Nintendo of America, Inc. in a separate action in 1989-90 while he was associated with another law firm. Because plaintiffs' counsel is in a position to use privileged information concerning his current adversaries due to his prior representations, thus giving his current clients an unfair advantage, defendants' motion is granted.

II. FACTUAL BACKGROUND

This action is the latest battle over the ownership of the rights to Tetris. From 1989 to 1993, plaintiffs' counsel Kirby, along with others at the firm with which he was then associated — Mudge Rose Guthrie Alexander & Ferdon — represented Nintendo in an action brought against it by Tengen, Inc. centered on the property rights to Tetris. Prior to that lawsuit, V/O Electronorgtechnica ("Soviet Elorg"), the alleged predecessor of defendant Elorg USA, licensed its rights for Tetris to Nintendo. In turn, Nintendo required Soviet Elorg to provide it with substantial assistance and access to documents if Nintendo's rights were called into question by a third party. That very contingency occurred when Tengen, Inc. brought suit against Nintendo in 1989 in federal court in the Northern District of California claiming that it had certain rights to Tetris.

Pursuant to its contractual obligations, Soviet Elorg, and its CEO, Nikolai Belikov, provided assistance to Nintendo during that litigation, including granting Kirby and his fellow attorneys what defendants describe as "unfettered access to the confidential internal records" of Soviet Elorg. Nintendo — represented by Kirby — and Soviet Elorg engaged in joint efforts to ensure that Nintendo won the suit brought by Tengen: various letters between the two parties demonstrate their mutual interest in having the court confirm Soviet Elorg's ability to grant Nintendo the rights in question. In fact, one of those communications was marked as an "Attorney/Client Privileged Communication" and instructed that all further communications conform to particular procedures in order to maintain attorney-client confidences. Following several years of litigation, Nintendo was successful in defending its claimed rights in Tetris against Tengen's claims.

At present, Kirby, now a partner at Latham, represents plaintiffs in this separate dispute over the intellectual property rights to Tetris, this time against Soviet Elorg's alleged successor, defendant Elorg USA. Because Kirby had substantial access to Elorg USA's alleged predecessor's confidential documents and discussed confidential information with Soviet Elorg's employees, defendants seek to disqualify Latham, arguing that Kirby, through his representation of Nintendo in the Northern District of California action, had access to confidential information from Elorg USA's predecessor that can be used against Elorg USA in this litigation.

III. DISCUSSION

A. Conflict of Interest — General Principles

When deciding a motion to disqualify an attorney, federal district courts in New York consider various sources of law, including the ABA Model Rules of Professional Conduct, the ABA Model Code of Professional Responsibility, and the New York Code of Professional Responsibility. See Regal Marketing, Inc. v. Sonny & Son Produce Corp., No. 01 Civ.1911, 2002 WL 1788026, at ^*4 (S.D.N.Y. Aug.1, 2002) (quoting Blue Cross and Blue Shield of New Jersey v. Philip Morris, Inc., 53 F.Supp.2d 338, 342 (E.D.N.Y.1999)). Those rules provide valuable guidance, although they are not binding. See Regal, 2002 WL 1788026 at ^*4; Papyrus Tech. Corp. v. New York Stock Exch., Inc., 325 F.Supp.2d 270, 275-76 (S.D.N.Y.2004).

When a party moves for the disqualification of his adversary's attorney, "any doubt is to be resolved in favor of disqualification." See Hull v. Celanese Corp., 513 F.2d 568, 571 (2d Cir.1975); see also Nichols v. Village Voice, 99 Misc.2d 822, 826, 417 N.Y.S.2d 415 (N.Y.1979). In United States v. Oberoi, the U.S. Court of Appeals for the Second Circuit explained this cautious approach:

The dynamics of litigation are far too subtle, the attorney's role in that process is far too critical, and the public's interest in the outcome is far too great to leave room for even the slightest doubt concerning the ethical propriety of a lawyer's representation in a given case. These considerations require application of a strict prophylactic rule to prevent any possibility, however slight, that confidential information acquired from a client during a previous relationship may subsequently be used to the client's disadvantage.

See 331 F.3d 44, 51 (2d Cir.2003) (citing Emle Inds. v. Patentex, Inc. 478 F.2d 562, 571 (2d Cir.1973)).

In Bd. of Educ. of the City of New York v. Nyquist, 590 F.2d 1241, 1246 (2d Cir.1979), the Second Circuit enumerated two types of cases where disqualification is generally appropriate: this action is an example of what the Second Circuit described as the "more common[ ]" of them — "where the attorney is at least potentially in a position to use privileged information concerning the other side through prior representation, ... thus giving his present client an unfair advantage."¹ See also Martens v. Thomann, 273 F.3d 159, 177 n. 11 (2d Cir.2001) (citing Nyquist, 590 F.2d at 1246).

The Second Circuit has established a three part test to govern disqualification as follows:

An attorney may be disqualified from representing a client in a particular case if:

(1) the moving party is a former client of the adverse party's counsel;

(2) there is a substantial relationship between the subject matter of the counsel's prior representation of the moving party and the issues in the present lawsuit; and

(3) the attorney whose disqualification is sought had access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of the client.

See Evans v. Artek, 715 F.2d 788, 791 (2d Cir.1983).

1. Former Client

Though the first step of the Second Circuit's test in Evans may be read to require a formal attorney-client relationship, ample case law makes clear that an attorney nonetheless may be disqualified despite the lack of a formal attorney-client relationship; other factors may mandate denying one party her attorney of choice so as to avoid fundamental unfairness.

Such relief generally should be granted "only when a violation of the Canons of the ABA Code of Professional Responsibility poses a significant risk of trial taint." See Glueck v. Jonathan Logan, 653 F.2d 746, 748 (2d Cir.1981). The Second Circuit in Glueck went on to state that this risk exists "when an attorney ... might benefit a client in a lawsuit by using confidential information about an adverse party obtained through prior representation of that party...." Id.; see also Bulkmatic 2001 WL 504841, at ^*2 ("Such risk can arise ... `where an attorney is at least potentially in a position to use privileged information concerning the other side through prior representation ....'") (quoting Nyguist 590 F.2d at 1246).

In certain circumstances, disqualification may be appropriate when an attorney gains access to the confidences even of someone who is not formally a client. One court explained that an attorney may be disqualified from representing interests adverse to a non-client "where the close and indeed symbiotic relationship between ... [the non-client] and the actual client, quite naturally encouraged confidential discussions with [the attorney] and the exchange of confidential information which the [non-client] would not otherwise have imparted." See Flushing Nat'l Bank v. Municipal Assistance Corp. for the City of New York, 90 Misc.2d 204, 210, 397 N.Y.S.2d 662, 667 (N.Y.1977).

Another court further emphasized that a formal attorney-client relationship may not be required in certain circumstances:

The disqualification of an attorney by reason of conflict of interest will not be denied solely because there is no actual attorney-client relationship between the parties. A "fiduciary obligation or an implied professional relation" may exist in the absence of a formal attorney-client relationship. Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1319. It is clear that where an attorney receives confidential information from a person who, under the circumstances, has a right to believe that the attorney, as an attorney, will respect such confidences, the law will enforce the obligation of confidence irrespective of the absence of a formal attorney client relationship.

Nichols 99 Misc.2d at 824, 417 N.Y.S.2d 415; see also AMBAC Indemnity Corp. v. Bankers Trust Co., 145 Misc.2d 52, 57, 546 N.Y.S.2d, 265, 269 (N.Y.1969) (A party may be "a vicarious or de facto client" despite no formal attorney-client relationship and disqualification may be appropriate in such circumstances.); Papyrus Tech., 325 F.Supp.2d at 276-77 (For...