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Shire Laboratories Inc. v. Nostrum Pharmaceuticals

July 25, 2006

SHIRE LABORATORIES INC., PLAINTIFF,
v.
NOSTRUM PHARMACEUTICALS, INC., DEFENDANT



The opinion of the court was delivered by: Hughes, U.S.M.J.

MEMORANDUM OPINION

This matter comes before the Court upon Motion by Plaintiff, Shire Laboratories, Inc. ("Plaintiff"), to Disqualify the law firm of Kenyon & Kenyon LLP ("Kenyon"), counsel for the Defendant in this case. Defendant Nostrum Pharmaceuticals, Inc. ("Defendant") opposes the Motion. The Court reviewed the written submissions of the parties and conducted oral argument on June 20, 2006. For the reasons that follow, Defendant's Motion to Disqualify the law firm of Kenyon & Kenyon is denied.

I. BACKGROUND AND PROCEDURAL HISTORY

Plaintiff is a pharmaceutical company that markets Adderall XR(r) and Carbatrol(r). Adderrall XR(r) is used for the treatment of attention deficit hyperactivity disorder and Carbatrol(r) is used for the treatment of epilepsy and trigeminal neuralgia. Defendant seeks approval to market a generic version of Carbatrol(r). On September 18, 2003, Plaintiff filed a Complaint against Defendant to prevent Defendant from marketing a generic version of Carbatrol(r).

In a prior lawsuit, Plaintiff filed a patent infringement lawsuit in the District of Delaware against Impax Laboratories, Inc. ("Impax") which sought approval to market a generic version of Adderall XR(r). (Huag Decl. at ¶ 2.) Kenyon represented Impax and Frommer Lawrence and Haug, LLP ("FLH") represented Plaintiff in the Delaware litigation. Id. On January 19, 2006, Impax and Plaintiff settled the Delaware litigation and entered into a Promotional Service Agreement ("PSA") through which Impax would allocate funds towards the promotion of Plaintiff's manufactured Carbatrol(r). Id. at ¶ 4. As a result, Plaintiff and Impax have a joint interest in the promotion and sale of Carbatrol(r). At least four Kenyon employees participated in the PSA settlement negotiations, including Philip J. McCabe, Esquire, Meg Snowden, Esquire, Arthur Hoag, Esquire and Edward H. Haug, Esquire. Id.

Kenyon and FLH provided contradictory accounts as to whether confidential information was exchanged during PSA settlement negotiations. Mr. Haug, lead council for Plaintiff in the Delaware litigation, alleged that he discussed the matter before this Court with Mr. McCabe and Ms. Snowden. Id. at ¶ 5. In addition, he alleged that he disclosed confidential information regarding the Carbatrol(r) generic market, including the timing for potential generic entry. Id. at ¶ 7. Mr. McCabe, however, recalled no such discussion. (McCabe Decl. at ¶ 4.) Plaintiff was unaware that Kenyon was considering representing a generic producer of Carbatrol(r) during PSA settlement negotiations. (Huag Decl. at ¶ 9.) Kenyon continues to represent Impax but not in regards to Carbatrol(r). (McCabe Decl. at ¶ 7.)

On May 25, 2006, Defendant filed a Motion for admission pro hac vice for Kenyon attorneys Richard L. DeLucia, Esquire, and Michael P. Hogan, Esquire to appear before this Court in the above captioned case. On June 5, 2006, Plaintiff filed a Cross-Motion to Disqualify Kenyon. Plaintiff alleges that Defendant's launch of a generic version of Carbatrol(r) could injure Plaintiff's and Impax's financial interest in the PSA from the Delaware litigation. In addition, because Kenyon was present at PSA settlement negotiations, Plaintiff alleges that Kenyon will not be able to represent Defendant without relying upon confidential information adverse to Plaintiff from the Delaware litigation.

A. Plaintiff's Motion to Disqualify the Law Firm of Kenyon & Kenyon from Representing Defendant

The Rules of Professional Conduct ("RPC"), as adopted by the New Jersey Supreme Court, govern attorney conduct in this Court. L. Civ. R. 103.1. Plaintiff argues that Kenyon's representation of Defendant is a violation of the RPC 1.7 which states that " . . . a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. . . ." Pl.'s Br. at 4. Plaintiff notes that New Jersey law permits a concurrent conflict of interest if "each affected client gives informed consent, confirmed in writing, after full disclosure," RPC 1.7(b)(1). Id. at 4. Plaintiff reasons that RPC 1.7(b)(1) prohibits Kenyon's representation of Defendant because Impax did not provide informed consent, either verbal or written. Id. at 4.

Plaintiff also notes that RPC 1.7(c) used to prohibit successive representations which created "an appearance of impropriety" as an "ordinary knowledgeable citizen acquainted with the facts would conclude." RPC 1.7 was recently amended and the "appearance of impropriety" language was removed. As a result, Plaintiff argues that although there is little case law on the issues presented in this matter, a plain reading of the revised RPC 1.7 provides support for the argument that Kenyon cannot represent Defendant because of a conflict of interest. Id. at 5.

In addition, Plaintiff argues that Kenyon's representation of Defendant is "materially limited" by Kenyon's prior representation of Impax in the Delaware litigation. Plaintiff's position rests in large part on the assertion that Kenyon cannot represent Defendant without "considering, relying upon, and potentially disclosing" confidential information from the Delaware litigation. They further assert that Kenyon's representation of Defendant could injure Impax's financial interests in the PSA. Id. at 5-6.

Finally, Plaintiff argues that Kenyon should be disqualified, rather than just the individual lawyer associated with the Delaware litigation, because Kenyon is in violation of RPC 1.10(a) which imputes any conflict of interest of the individual lawyer to the entire law firm. Id. at 6.

B. Defendant's Opposition to the Motion

Defendant argues that Plaintiff does not have standing to disqualify Kenyon because Plaintiff is not a current or former client of Kenyon. Def.'s Br. at 3. Defendant further argues that disqualification is a severe measure that should only be used "when absolutely necessary" Id. at 1 (citing Rohm & Haas Co. v. American Cyanamid Co., 187 F.Supp.2d 221, 226(D.N.J. 2001)). Defendant reasons that disqualification is not "absolutely ...


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