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Applied Technology Limited v. Watermaster of America

March 26, 2009

APPLIED TECHNOLOGY LIMITED, PLAINTIFF,
v.
WATERMASTER OF AMERICA, INC., DEFENDANT.
WATERMASTER OF AMERICA, INC., COUNTER-PLAINTIFF,
v.
APPLIED TECHNOLOGY LIMITED, JOHN FETTER AND FETTER & HENDERSON, LTD., COUNTER-DEFENDANTS.



The opinion of the court was delivered by: Debra Freeman, United States Magistrate Judge

MEMORANDUM AND ORDER

INTRODUCTION

In this litigation, referred to me for general pretrial supervision, plaintiff and counterclaim defendant Applied Technology Limited ("Applied Technology"), together with third-party defendants John Fetter ("Fetter") and Fetter & Henderson, Ltd. ("Fetter & Henderson"), move to disqualify counsel for defendant and third-party plaintiff Watermaster of America, Inc. ("Watermaster") because of an alleged conflict of interest. The counsel in question are Lathop & Gage, L.C. ("Lathrop & Gage") and William R. Hansen, Esq. ("Hansen"), a member of that firm. For the reasons stated below, the motion for disqualification is DENIED.

BACKGROUND

This case involves relationships among a supplier (Applied Technology), a seller/distributor (Watermaster), and a manufacturer (Fetter & Henderson) of battery watering materials. Applied Technology commenced the action against Watermaster, alleging claims for breach of contract, account stated, breach of the implied covenants of good faith and fair dealing, unjust enrichment, and common law fraud. (See Complaint, dated June 15, 2007 ("Compl."), attached as Ex. A to Petition for Removal, dated July 23, 2007 (Dkt. 1).) Watermaster then asserted a number of counterclaims -- including claims for breach of contract, breach of implied warranty, tortious interference with advantageous business relationships, and defamation -- and added Fetter & Henderson and its principal, Fetter, as counterclaim defendants. (See Amended Answer and Counterclaims of Defendant Watermaster of American, Inc., dated Aug. 20, 2007 ("Am. Answer") (Dkt. 6).)*fn1

The pleading of the counterclaims, with the addition of Fetter and his company as third-party defendants, gave rise to the instant motion. According to Applied Technology, Fetter & Henderson, and Fetter (collectively, the "Moving Parties"), they were previously -- and, in fact, remain -- clients of Watermaster's current counsel, Hansen, and Watermaster's claims against them rely on confidential information imparted to Hansen in the course of his representation of them. The Moving Parties seek to disqualify Hansen and his firm on two alternative grounds:

(1) that Hansen currently represents them and they have not consented to his representation of Watermaster, or (2) that Hansen formerly represented them, the subject matter of the pending case bears a substantial relationship to the prior representation, and Hansen had access to relevant privileged information. (See Brief in Support of Motion of Plaintiff and Counterclaim Defendants to Disqualify Counsel of Record for Defendant, dated Oct. 29, 2007 ("Pl. Mem.") (Dkt. 21), at 5-6.)

There is no question that Hansen represented the Moving Parties in the past (see Hansen Decl., at ¶¶ 2, 5-6, 12-14), although whether he currently represents them is disputed, as is the extent and subject matter of any past or current representation. According to the Moving Parties, Hansen began representing them in 1999, in a patent infringement matter. (See Pl. Mem., at 3-5; Hansen Decl., at ¶¶ 5-14.) Later that year, Hansen allegedly counseled Fetter in connection with, inter alia, Fetter's proposed immigration to the United States and the resulting implications for his businesses. (Id.) Finally, Hansen is said to have represented the Moving Parties from 2001 to 2004, in a trademark prosecution. (Id.) As for his representation of Watermaster, on whose behalf Hansen is appearing in this case, it appears that Hansen has represented that company since its formation in 1986. (See undated Declaration of William R. Hansen in Opposition to Motion to Disqualify William R. Hansen and Lathrop & Gage L.C. as Attorneys for Watermaster of America, Inc., filed Nov. 13, 2007 ("Hansen Decl.") (Dkt. 25), at ¶ 3).)

A. Hansen's Alleged Representation of the Moving Parties

1. Trojan Battery Patent Infringement Matter

Beginning in April 1999, at the request of Robert Morris ("Morris"), then President of Watermaster, Hansen's former law firm, Nims, Howes, Collision, Hansen & Lackert ("Nims, Howes"), represented the Moving Parties in a patent infringement matter. (See Hansen Decl., at ¶ 5; Reply Declaration of John Fetter in Connection with Motion to Disqualify Counsel of Record for Defendant, dated Nov. 17, 2007, ("Fetter Reply Decl.") (Dkt. 29), at ¶ 12.) The patent at issue, alleged by Fetter to have been owned by Applied Technology (see Fetter Reply Decl., at ¶ 12; but see also Hansen Decl., at ¶ 5 (contending that the patent was owned by Fetter)), was purportedly being infringed by a company called Trojan Battery. (Id.) The matter was resolved without litigation. (Id. at ¶ 6.)

2. The 1999 Meetings Regarding Fetter's Potential Immigration To the United States

In September of 1999, a series of meetings took place among Fetter, Fetter's wife, Hansen and several attorneys from the law firm of McDermott, Will & Emery. The subject matter of these meetings included, generally, Fetter's potential plans to immigrate and move his business to the United States. (See Pl. Mem., at 3; Hansen Decl., at ¶¶ 8-10.)

The Moving Parties contend that, at these meetings, Hansen counseled Fetter and Fetter & Henderson regarding the legality of various aspects of their "off shore business," including tax matters, business arrangements, and dealings with Watermaster. (See Declaration of John Fetter in Connection with Motion to Disqualify Counsel of Record for Defendant, dated Oct. 22, 2007 ("Fetter Decl.") (Dkt. 19), at ¶ 4.) At the Court's request, and so as to elucidate the nature of the claimed privileged information imparted to Hansen by Fetter during those meetings, the Moving Parties have also submitted, in camera, an additional declaration of John Fetter, dated Aug. 8, 2008, further discussing the content of the 1999 meetings.

Watermaster, however, contends that Hansen attended the 1999 meetings as counsel to Watermaster (not Fetter), and that Fetter did not reveal to Hansen any confidential plans, other than those concerning his proposed immigration and business plans, which he had already shared with Watermaster's president, Morris. (Hansen Decl., at ¶¶ 9-11.)

In support of their respective arguments on this motion, all parties cite to a billing statement from Hansen's law firm, addressed to Morris. (See Hansen Decl., at Ex. B.) The statement, dated December 21, 1999, describes a "meeting with Mr. F[e]tter and his wife, Pamela, general discussion, [a] meeting at McDermott, Will & Emery with Joan Ellen Carpenter regarding immigration issues, notes, conference, [and a] meeting at ...


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