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Nasdaq, Inc. v. Miami International Holdings, Inc.

United States District Court, D. New Jersey

September 6, 2018

NASDAQ, INC. et al, Plaintiffs,
v.
MIAMI INTERNATIONAL HOLDINGS, INC., et al., Defendants.

          MEMORANDUM & ORDER

          HON. DOUGLAS E. ARPERT, UNITED STATES MAGISTRATE JUDGE

         This matter comes before the Court on a motion by Plaintiffs for an Order disqualifying Defendants' counsel, Fish & Richardson P.C. The Court decides the matter without oral argument pursuant to Local Civil Rule 78.1. The Court has carefully considered the parties' submissions, and for the reasons below, the motion is granted.

         I. Background

         Plaintiffs Nasdaq, Inc. (“Nasdaq”), Nasdaq ISE, LLC (“ISE”) and FTEN, Inc. (“FTEN”)[1]bring this action alleging patent infringement and misappropriation of trade secrets against four entities collectively referred to by the parties as MIAX.[2] The Complaint contains ten counts. Counts I and II of the Complaint allege that MIAX has infringed two separate patents owned by ISE. Counts III, IV, V and VI allege that MIAX has infringed four separate patents owned by Nasdaq. Count VII alleges that MIAX infringed a patent owned by FTEN. The final three counts, Counts VIII through X, allege that MIAX misappropriated certain of Nasdaq's trade secrets.

         The seven patents-in-suit relate generally to electronic trading technology. More specifically, ISE's patents are directed to how an automated exchange allocates trades between traders. FTEN's patent relates to automatically cancelling orders by monitoring market data from a plurality of exchanges. Nasdaq's patents are directed to displaying quotes in a particular way, monitoring whether a trader's trading terminal is online, and assigning orders to designated securities processors. ECF No. 69-6 at ¶ 22. All of the patents-in-suit are alleged to be infringed by the same accused products and services relating to electronic trading platforms.

         MIAX is represented in this action by Fish & Richardson P.C (“Fish”) and Reed Smith LLP (“Reed Smith”). Plaintiff Nasdaq is a former client of Fish. Fish represented Nasdaq with respect to intellectual property matters from 1998 until 2011, during which time Fish prosecuted many patents on behalf of Nasdaq, including the four patents that Nasdaq is asserting in the present case (the “Nasdaq Patents”). The Nasdaq Patents were filed between 1998 and 2002, and the patents issued between 2009 and 2011. ECF No. 54-1 at 3.

         In 2011, Fish's representation of Nasdaq was terminated. ECF No. 69-1 at ¶ 6. Fish transferred Nasdaq's patent portfolio to another law firm, Nixon & Vanderhye, P.C. Id. Fish did not retain any copies of the physical files from Nasdaq after the representation was terminated. Id. at ¶ 8. Most of the Fish attorneys that worked on prosecuting the Nasdaq Patents still practice with Fish today, and all reside in the firm's Boston office. Id. ¶ 5.

         When approached about representing MIAX in the instant case, Fish apparently recognized that there was a conflict -- it could not be adverse to its former client, Nasdaq, in any matter substantially related to Fish's prior representation. As such, Fish and MIAX entered into a “limited-scope engagement agreement” with respect to the present action. Id. ¶ 9. Under this agreement, MIAX would be required to retain an additional law firm as “conflicts counsel” to handle all matters where Fish would have a conflict with Nasdaq. Id. MIAX retained Reed Smith as conflicts counsel. Consequently, according to Fish, Fish is lead counsel for aspects of the case pertaining to ISE, FTEN and the trade secret claims, but Fish will have no input into the defense of the four Nasdaq Patents. ECF No. 69 at 7. Reed Smith, on the other hand, is lead counsel for issues relating to the Nasdaq Patents. Id.

         When challenged by Nasdaq regarding its appearance in this matter, Fish asserted that its appearance on behalf of MIAX presents no conflict because its representation excludes the Counts in the Complaint involving the Nasdaq Patents. ECF No. 54-1 at 4. Fish advised Plaintiffs that in order to meet its ethical obligations to Nasdaq, Fish screened every lawyer who previously represented Nasdaq and has “walled off” its entire Boston office from participation in this case (the Fish attorneys working on this case are located in the firm's New York, Texas, California and Washington D.C. offices). Id. Plaintiffs, however, have moved to disqualify Fish, arguing that Fish's efforts to avoid a conflict are “woefully deficient.” Id. Plaintiffs argue that Fish's continued participation in this matter will prejudice Nasdaq because (1) Fish prosecuted four of the seven patents that are asserted of this action; (2) the remaining three patents involve the same field of technology for which Fish provided IP counseling to and prosecuted patents for Nasdaq; and (3) the trade secret claims similarly involve the same technological field and may implicate confidential information that Nasdaq provided to Fish during its previous relationship.

         In response, Fish contends there is no conflict that compels its disqualification. Fish argues that it does not represent MIAX with respect to Nasdaq's patent claims in this action and, therefore, no conflict exists as to those claims. Fish further claims that no conflict can exist as to the claims by ISE and FTEN because neither entity was a former client. With respect to the trade secret claims asserted by Nasdaq, Fish alleges that these claims are wholly distinct from the past work Fish did on the Nasdaq Patents, and Plaintiffs have not demonstrated that any of the trade secret information at issue was every imparted to Fish. Finally, Fish contends that even if a conflict was found to exist, a balancing of the relevant factors leads to the conclusion that Fish may represent MIAX here.

         II. Analysis

         A. Legal Standard

         The Court's power to disqualify an attorney derives from its inherent authority to supervise the professional conduct of attorneys appearing before it. United States v. Miller, 624 F.2d 1198, 1201 (3d Cir. 1980). In this District, questions of attorney ethics are governed by Local Civil Rule 103.1(a), which provides that the conduct of attorneys admitted before this Court shall be governed by the Rules of Professional Conduct (“RPCs”) of the American Bar Association as modified by the New Jersey Supreme Court. FMC Corp. v. Guthery, 2009 WL 485280 (D.N.J. February 24, 2009); see also Carlyle Towers Condo. Ass'n v. Crossland Sav., 944 F.Supp. 341, 345 (D.N.J.1996). Typically, when interpreting the Rules of Professional Conduct, our courts “look[ ] to New Jersey's state courts' interpretations of them as primary authority and modifies that interpretation when required or permitted by federal law.” Guthery, 2009 WL 485280 at *3.

         This dispute arises under RPCs 1.10(a) and 1.9(a). Pursuant to RPC 1.10(a), “[w]hen lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by … RPC 1.9.” Under RPC 1.9(a), “[a] lawyer who has represented a client in a matter shall not thereafter represent another client in the same or a substantially related matter in which that client's interests are materially adverse to the interests of the former client unless the former client gives informed consent confirmed in writing.” New Jersey's Supreme Court has noted that the “prohibition [of RPC 1.9(a)] is triggered when two factors coalesce: the matters between the present and former clients must be ‘the same or ... substantially related,' and the interests of the present and former clients must be ‘materially adverse.'” City of Atl. City v. Trupos, 201 N.J. 447, 462 (2010). Matters are “substantially related” if two elements are met: “(1) the lawyer for whom disqualification is sought received confidential information from the former client that can be used against that client in the subsequent representation of parties adverse to the former client, or (2) facts relevant to the prior representation are both relevant and material to the subsequent representation.” Id. at 467. Importantly, the analysis as to whether matters are ...


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