A February 22, 2018 order in Merial Inc. et al. v. Abic Biological Labs. Ltd (Sup. Ct. N.Y.), here, enjoined King & Spalding from representing Abic Biological Labs (“Abic”) and Phibro Animal Health Corporation (“Phibro”) in an ICC arbitration where Abic and Phibro were adverse to Merial Societe Par Actions Simplifiee (“Merial SAS”), which was a former K&S client.
The evidence appears to have shown that K&S had represented Merial SAS, and related entities, from 1998 to at least 2011 concerning transactions and litigation in the animal health and vaccine space. K&S had also for many years represented Phibro and related entities in the animal health and vaccine space.
Merial SAS was acquired by Boehringer Ingelheim GmBH (“Boehringer”) in 2017, and K&S had represented an affiliate of Boehringer until December 2017. In the summer of 2017, Merial and Boehringer became cross-wise, and until then, none of the Merial parties knew that K&S had been representing Phibro.
In the summer of 2017, K&S wrote a letter to the person that it had often interacted with, the head of prosecution and litigation at Merial SAS (Dr. Jarecki-Black), explaining that K&S was representing Abic and Phibro in a licensing dispute they had with Merial SAS (and other entities). Dr. Jarecki-Black responded by asserting that K&S’ representation presented a conflict of interest and demanding that K&S withdraw. A few weeks later, the firm refused, explaining in a letter that it had represented different corporate entities in the matters Dr. Jarecki-Black pointed to, the matters were in all events unrelated to the ICC licensing dispute, and no K&S lawyer who was working against Merial SAS in the ICC matter had represented it previously. In response, Merial SAS reiterated its positions, and its letter also made a new (and very odd) argument: because the license in dispute included a New York choice of law clause, a California lawyer from K&S who was representing Phibro was engaged in the unauthorized practice of law. In its final letter, K&S reiterated that there was no substantial relationship between its work for and the work against Merial SAS, and made short shrift of the odd argument about the unauthorized practice of law.
It seems the parties could not agree on who was right, and instead Merial SAS filed suit in New York seeking an injunction to prevent K&S from being adverse to it (and Boehringer, and affiliated entities) in the ICC.
The court enjoined K&S. What struck me as quite concerning was that there was no overlap between patents or licenses K&S had worked on for Merial SAS and those in the ICC arbitration. Instead, the court noted that K&S “clearly knows a great deal about how the Merial entities approach issues relating to patents and licenses in the animal health and animal vaccine space.” The trial court emphasized that Merial SAS had relied on “a highly credentialed ethicist, Roy D. Simon” and noted that, although the decision was for the court to make, “King & Spalding offered no expert testimony to rebut Mr. Simon’s expert opinion.” The court then noted that “a reasonable lawyer like Mr. Simon came to the conclusion that King & Spalding’s multiple representations of [Merial SAS entities] on issues meaningful to the limited number of players in teh animal health and animal vaccine space would materially advance Abic and Phibro’s interests vis-a-vis Merial,” particular because Dr. Jarecki-Black “will play an integral role in Merial’s defense” in the arbitration.
There are several things of note. First, it is unusual for actual injunctions to be sought (rather than disqualification), and usually injunctions are litigated quite differently from motions to disqualify, but K&S appeared to litigated this as a basic disqualification motion. Second, from the opinion, at least, the injunction was granted based upon what is called “playbook” information — knowing how a client litigates or otherwise behaves, not actual specific confidential information — which is also atypical in some jurisdictions. Third, and from afar, this was not correctly decided, which underscores the point that whenever a firm is faced with a disqualification motion, it should consider the need for expert testimony (and Professor Simon is a highly credentialed ethicist; I don’t think he knows much about patents or licensing), and the need to show — although it’s the other side’s burden — there is no real risk of misuse of confidential information.