Overview
Baker & McKenzie moved to withdraw from its representation of plaintiff in an unfair competition/misappropriation of trade secrets lawsuit when the defendant was acquired by another of Baker & McKenzie's clients, Altiris, Inc. Altiris refused to waive the conflict of interest and argued that Baker & McKenzie was required to withdraw due to the fact that Baker & McKenzie's work for Altiris was substantially related to the work performed for plaintiff in the lawsuit. The court: (a) examined the matter under the concurrent representation standards of Model Rule 1.7 and the former client conflicts standards of Model Rule 1.9, (b) determined that the work performed for the two clients was not substantially related, (c) found that the impact of a withdrawal upon plaintiff would be substantial, (d) denied Baker & McKenzie's motion to withdraw from its representation of plaintiff and (e) ordered Baker & McKenzie to withdraw from its representation of Altiris if Altiris continued to refuse to waive the conflict.

Complete Summary
Baker & McKenzie began representing plaintiff in 1997 and initiated a lawsuit on plaintiff's behalf against defendant on June 27, 2003, alleging unfair competition, computer fraud, copyright infringement and misappropriation of trade secrets. Baker & McKenzie had represented Altiris for two years, primarily in regards to international corporate and business matters. On Dec. 2, 2003, Altiris acquired defendant as a wholly owned subsidiary and notified Baker & McKenzie of the acquisition. Baker & McKenzie asked both plaintiff and Altiris to waive the concurrent conflict of interest, and plaintiff agreed to do so. Altiris refused and insisted that Baker & McKenzie withdraw from representing plaintiff.

Baker & McKenzie then moved to withdraw, and the court held an evidentiary hearing on the motion. Altiris argued that Baker & McKenzie had performed legal work for Altiris that was substantially related to the work performed for plaintiff in the lawsuit and that, even if Baker & McKenzie withdrew from its representation of Altiris, it could not continue to represent plaintiff under the former client conflict of interest standards. Plaintiff argued that it would be prejudiced by the withdrawal due to the significant time and legal fees already invested in the litigation and the fact that it would have to expend money and time bringing new counsel into the case. Plaintiff also argued that the legal work Baker & McKenzie performed for Altiris was not substantially related to the lawsuit.

The court identified three issues to be addressed in resolving the conflict:

Noting that the conflict arose through the activity of one of the clients and not by any action of Baker & McKenzie, the court analyzed the conflict using the following factors identified in Gould, Inc. v. Mitsui Mining and Smelting Co., 738 F.Supp.1121 (N.D.Ohio 1990):

1. The resulting prejudice to the party moving for disqualification;
2. The costs of disqualification to the non-moving party;
3. The complexity of the case; and
4. The origin of the conflict.

The court found that there was no evidence indicating that Baker & McKenzie had received information related to defendant's litigation strategies or confidential business information because of the work it performed during the acquisition, so Altiris was not prejudiced by the concurrent representation. The court also found that plaintiff had already expended more than $300,000 in the litigation and that obtaining and educating new counsel would be very expensive. Moreover, this expense was an indication of the complexity of the case. Ultimately, again noting that the conflict was initiated by Altiris' acquisition of defendant, the court ruled that Model Rule 1.7 did not disqualify Baker & McKenzie from continuing to represent plaintiff.

The court next observed that, should Baker & McKenzie continue to represent plaintiff without written consent from Altiris, Baker & McKenzie would be forced to withdraw from its representation of Altiris due to the current conflict of interest. At that point, Altiris would become a former client, thereby requiring a conflict analysis under the former client conflict standard identified in Model Rule 1.9 -- specifically, whether the matter is "the same or a substantially related matter."  To do so the Court employed the following three-step test enunciated in Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 255 (7th Cir. 1978): 

1. A factual determination of the scope of the prior representation;
2. A determination whether it was reasonable to infer that confidential information allegedly given would have been given in the matter; and 
3. Whether that information was relevant to the pending litigation.

Again stating that the scope of Baker & McKenzie's representation of Altiris was international corporate work, the court found it reasonable to assume that confidential information had been exchanged. Because the representation of Altiris, however, was not substantially related to the representation of plaintiff, Baker & McKenzie learned no confidential information that would affect the disposition of the lawsuit. Altiris failed to show that Baker & McKenzie's representation of plaintiff was substantially related to its representation of Altiris, so Baker & McKenzie was not required to obtain Altiris' consent to continue representing plaintiff under the former client conflict of interest standards.

Finally, the court used the following guidelines to determine whether to grant Baker & McKenzie's motion to withdraw: 

1. The reasons why withdrawal was sought;
2. The prejudice withdrawal might cause to other litigants;
3. The harm withdrawal might cause to the administration of justice; and
4. The degree to which withdrawal would delay the resolution of the case.

The court found that, although both parties would be prejudiced by the withdrawal, plaintiff would be more prejudiced than Altiris. Further, the fact that plaintiff would have to engage new counsel would unduly delay the case. Balancing all of the factors, the court denied Baker & McKenzie's motion to withdraw and ordered, instead, that Baker & McKenzie withdraw its representation of Altiris should Altiris refuse to consent to the concurrent conflict of interest. 

Significance of the Case
This case presents a cogent and well-articulated approach to conflict of interest problems that result from client acquisitions, as distinct from conflicting representations by a law firm. The holding is also consistent with the view expressed in many recent cases to the effect that courts will view disqualification motions with disfavor because so many of them appear to be brought primarily for tactical reasons.