Thursday, August 23, 2012

Covington & Burling sued for allegedly violating the "hot potato doctrine"

A former client of Covington & Burling (3M Corp.) has filed a complaint against the firm arguing that the law firm violated its duties to the client when it allegedly dropped the client in one matter to accept representation of another client (the state of Minnesota) against 3M.  The client is claiming a violation of what is sometimes referred to as the "hot potato doctrine" which considers it a violation of fiduciary duties when a lawyer abandons a client with the express purpose to claim the client is a "former" client which would allow the lawyer to take on a certain representation the lawyer would have been unable to undertake if the client had still been a "current" client.  You can read the complaint here.

Covington has asserted, on the other hand, that it agreed to represent the state of Minnesota in its litigation against 3M after confirming that the firm had no active matters for 3M and that there was no conflict based on any prior representation of 3M.  Covington has also stated that 3M signed a waiver in which it specifically agreed that Covington could sue 3M in the future on unrelated matters.

Evidently, 3M is now saying that Covington was representing 3M in active matters - although unrelated - at the time Covington agreed to represent Minnesota against 3M.  Covington is saying it was not representing 3M at the time.  So this is a matter of fact that will need to be determined.  In other words, the court will have to determine if Covington was in fact representing 3M in any active matters at the time. Also, the court will have to examine the waiver signed by 3M and determine it is is valid and whether it applies to the facts of the case. 

Assuming the waiver is not dispositive, if it is true that the chronology of events was what 3M claims it to be (that the law firm was representing 3M in an active matter, then the state asked the law firm to take on a new case against 3M, then the law firm dropped 3M, then the law firm took on the representation of the state and sued 3M...), I have to say that sounds a lot like a hot potato case to me, but it will depend on the chronology of events.  If, as Covington argues it had completed the representation of 3M long before it agreed to represent the state of Minnesota, there is no basis for 3M's claim.

Another thing that is interesting here is that the hot potato doctrine is usually used in support of a motion to disqualify a firm in an ongoing case.  Here, 3M tried to get Covington disqualified in the case it filed on behalf of the state of Minnesota seventeen months after that case had started.  That long delay in filing the motion is problematic but the motion has not been decided. Obviously, it will be interesting to see what happens with that motion.   (After the motion was argued, 3M filed a motion to recuse the judge and apparently the case is now before a different judge).  But whatever the case may be, the interesting thing I was referring to is that in this instance 3M has filed a claim for damages, asking for compensatory damages and for a refund of fees paid to the firm over a period of years.
Covington & Burling has filed a motion to dismiss the case, in which the firm alleges that the lawsuit filed by 3M is an effort by 3M to deprive the State of Minnesota of its chosen counsel, and to obstruct the litigation of the underlying case.  However, the motion does not address the merits of the claim raised by 3M. It is based on an argument of lack of jurisdiction.  As to the merits of the claim Covington simply states that "[t]he claims against Covington are completely without merit, which Covington will demonstrate at the appropriate time."

For more information and other links on the case go to the ABA Journal and Professor Jonathan Turley's blog.  Also, here is an older article on the case from Reuters which has a lot more information and links (including a link to the waiver mentioned above). 

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