On May 17, 2016, the International Trade Commission (the “Commission”) issued the public version of its opinion (dated May 16, 2016) in Certain Laser Abraded Denim Garments (Inv. No. 337-TA-930).
By way of background, this investigation is based on an August 18, 2014 complaint filed by RevoLaze, LLC and TechnoLines, LLC (collectively, “RevoLaze”) alleging violation of Section 337 in the importation into the U.S. and sale of certain laser abraded denim garments that infringe one or more claims of U.S. Patent Nos. 5,990,444; 6,140,602; 6,252,196; 6,664,505; 6,819,972; and 6,858,815. See our August 19, 2014 and September 19, 2014 posts for more details on the complaint and Notice of Investigation, respectively.
All twenty respondents named in the notice of institution were terminated from the investigation, and the sole remaining issue before the Commission concerned the disqualification of the law firm of Dentons US LLP (“Dentons US”), RevoLaze’s prior counsel in the proceedings before the presiding ALJ. See our August 3, 2015 and August 5, 2015 posts for more details on ALJ Bullock’s order granting Respondent’s Motion to Disqualify Counsel and Complainants’ motion to intervene for the sole purpose of seeking reconsideration and/or Commission review of the order disqualifying counsel.
Respondent The Gap, Inc. (“Gap”) filed a motion seeking to disqualify Dentons US as counsel for RevoLaze because Gap was currently a client of counsel’s attorneys in Canada (“Dentons Canada”); and thus, Denton US’s representation adverse to Gap in the present investigation violated Rule 1.7 of the ABA Model Rules of Professional Conduct (“Model Rule 1.7”). Dentons US argued that although both it and Dentons Canada are members of the Swiss verein Salans FMC SNR Denton Group (“the Dentons Verein”), the two members are separate law firms that do not impute conflicts of interest upon each other. In Order No. 43 (issued on May 7, 2015), the ALJ found that the Dentons Verein was a single law firm for purposes of Model Rule 1.7 and disqualified Dentons US. Complainants then filed a motion for Dentons US to intervene “for the sole purpose of seeking reconsideration and/or Commission review of Order No. 43” which the ALJ granted in Order No. 82. RevoLaze and Dentons US also moved for reconsideration of the ALJ’s Order No. 43, but the ALJ denied this motion in Order No. 83, finding that it was untimely and offered no new arguments. Denton US petitioned the Commission for review of Order Nos. 43 and 83. However, on April 12, 2016, the Commission issued a notice finding the issue moot in view of the termination of the investigation and, as explained below, vacated Order No. 43 and determined not to review Order No. 83.
Whether Swiss Vereins Should Be Treated as a Single Law Firm under the Model Rules
The ALJ had found that Swiss vereins and thus Dentons Verein fell within the scope of the definition of “law firm” in the Model Rules. However, the Commission found the record evidence “cannot support such a broad decision” because it concerned only the structure of Swiss vereins generally rather than Dentons Verein specifically.
Whether Dentons US and Dentons Canada Should Be Treated as a Single Law Firm
To determine whether Dentons US and Dentons Canada should be treated as a single law firm, the Commission turned to Comment 2 of Model Rule 1.0, which contains factors determinative of whether a group of attorneys constitute a law firm. Specifically, the Commission examined: “(1) whether the attorneys present themselves to the public in a way that suggests they are a firm; (2) whether the attorneys conduct themselves as a firm; (3) the terms of the formal agreement between associated attorneys; (4) whether associated attorneys have mutual access to information concerning clients they serve; and (5) in ‘doubtful cases,’ the ‘underlying purpose of the Rule involved,’ here Rule 1.7 (conflicts of interest).”
Finding the evidence to be conflicting as to whether Dentons Verein and its members present themselves to the public as a single firm, the Commission took no position on this first factor. As to the second factor, the tell-tale sign pointed to by Gap was the conflicts check system run by Dentons Verein which had identified Gap as a conflict. In any event, Dentons Verein argued that it does not operate as a law firm because its members do not share profits or confidential information and that Gap was a business, not an ethical, conflict. The Commission withheld judgment and noted the evidentiary shortcomings in the supporting declarations offered by Dentons US. Similarly, the Commission took no position regarding the third (terms of any formal agreement), fourth (mutual access to information concerning clients), and fifth (purpose of the rule) factors because of deficiencies in the record and lack of argument from Gap and OUII in the last factor.
As a result, the Commission concluded that it could not determine whether members of the Dentons Verein could be treated as a single law firm because the evidentiary record of the investigation lacked sufficient information to properly assess the factors of Model Rule 1.0, Comment 2.
Gap and OUII argued that the Commission should decline to review this issue as it had no practical effect since all the respondents had been terminated from the investigation. Dentons US, on the other hand, argued that “an attorney has standing to appeal a reprimand issued as a sanction . . . .” The Commission agreed with Gap and OUII and found the issue of Dentons US’s disqualification to be moot because: (1) “the investigation has been terminated against all respondents by settlement, consent order, or withdrawal of the complaint;” (2) there is nothing the Commission can do to redress any injury to RevoLaze or Dentons US from the disqualification; and (3) “determining whether Dentons US should have been disqualified would appear to have no practical effect on this investigation.”
The Commission also declined to initiate further proceedings to resolve the disqualification issue because of the “added delay, burdens, and expenses that would be incurred by the parties and the Commission.”
Finally, in light of its decision to not reach the disqualification issue, the Commission vacated Order No. 43, explaining that the “‘established practice’ is to vacate the decision below with a direction to dismiss” when a case becomes moot on appeal.