Conflict Necessitates Withdrawal
The underlying suit in this case involves a patent dispute between BMW and Arigna. See Compl., ECF No.1. In particular, BMW sues Arigna for a declaratory judgment that BMW has not infringed a specific patent owned by Arigna. See id. ¶¶ 40–47. BMW seeks a declaratory judgment of non-infringement because Arigna has sued BMW in other tribunals—including another district court and the United States International Trade Commission (“ITC”)—for patent infringement. See id. ¶¶ 20–39. As relevant here, Susman has represented Arigna in its patent enforcement suits, including at the ITC and in various district courts. See Mot. Withdraw at 3; Mem. Opp’n Mot. Withdraw at 2.
Susman’s motion to withdraw, however, is only tangentially related to the underlying litigation with BMW. Rather, the motion to withdraw is related primarily to a dispute between Susman, Arigna, and Longford Capital Fund III, LP (“LCF”). From what the Court gathers, LCF is a private investment company that invests in commercial legal claims it believes will generate a return on investment through money damages. See Mot. Withdraw at 1. Here, LCF has funded Arigna’s patent-enforcement suits in exchange for a cut of the proceeds of those suits. See id. at 4. At some point, a disagreement arose between Susman, Arigna, and LCF about the amount of money Arigna owed to LCF from Arigna’s suits. After that disagreement, two things occurred: (1) Arigna sued LCF for declaratory judgment, and (2) LCF sent Susman a demand letter based on Arigna’s failure to put certain funds into an escrow account and then initiated arbitration against Susman and Arigna. See id. at 5; see also Mem. Opp’n Mot. Withdraw at 5.
Because of these two actions, Susman believes that it now has a conflict of interest with its client, Arigna. First, Susman contends, it is likely that Susman attorneys will be called as witnesses by one or both parties in Arigna’s lawsuit against LCF and in the arbitration. See Mot. Withdraw at 5. Susman says, therefore, that it may need to offer testimony adverse to Arigna’s interests in one or both proceedings. See id. Second, Susman says that under its representation agreement with Arigna, Arigna is obligated to indemnify it in the arbitration proceeding, but that Arigna has rejected its indemnity obligations. See id at 5-6.
Wirhdrawal will not unduly delay the matter or prejudice the client
the Court concludes that withdrawal is also appropriate given the potential ethical considerations involved in Susman’s continued representation of Arigna. Susman contends that it has a direct conflict of interest with Arigna based on the arbitration proceeding and district court case involving LCF. See Mot. Withdraw at 7–8. Arigna disagrees that there is a conflict of interest that merits withdrawal here. See Mem. Opp’n Mot. Withdraw at 1.
The Court concludes that there is at least a serious risk that Susman’s continued representation of Arigna would result in a conflict of interest. Under the D.C. Rules of Professional Conduct, “a lawyer shall not represent a client with respect to a matter if: . . . [t]he lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by the lawyer’s responsibilities to or interests in . . . the lawyer’s own financial, business, property, or personal interests.” D.C. Rule of Professional Conduct 1.7(b)(4); see also D.C. Rule of Professional Conduct 1.16(a)(1) (requiring that a lawyer withdraw from representation if “[t]he representation will result in violation of the Rules of Professional Conduct”). The Rule’s use of the phrase “may be” suggests that even a reasonable possibility that a lawyer’s professional judgment will be affected is sufficient to create a conflict. D.C. Rule of Professional Conduct 1.7(b)(4); see also May, Black’s Law Dictionary (11th ed. 2019) (defining the word “may” as “[t]o be a possibility,” as in “we may win on appeal.”); c.f. Freeman v. U.S., 971 A.2d 188, 194 (D.C. 2009) (“The danger of an attorney’s conflict of interest is that the ‘attorney may forego efforts he would ordinarily undertake on behalf of one client, in order that the other client may not thereby be harmed.’” (citation omitted)). According to Susman, LCF initiated arbitration proceedings against it on account of actions taken by Arigna. See Mot. Withdraw at 8. Susman further contends that its representation agreement with Arigna requires Arigna to indemnify Susman for the costs of defending itself in the arbitration proceeding. See id.; see also Representation Agreement, Mot. Withdraw, Ex. 1 at 14, ECF No. 25-3 (“You agree to indemnify and hold us harmless for and against any demands or claims asserted by others to any portion of the Claims subject to this Agreement.”). And through the declaration of its general counsel, Susman has represented that it “would be invoking its indemnification right.” See Jonathan J. Ross Decl. ¶ 15, ECF 25-2
The matter is stayed for 90 days so that the client can secure new counsel. (Mike Frisch)