Federal Circuit Disqualifies Firm for Conflict with Corporate Affiliate

A recent Federal Circuit decision, Falk Pharma GmbH v. Generico, LLC (2019), disqualified a large firm from prosecuting three appeals, because, at the same time, the firm was representing a corporate affiliate of the adversary. 

Key to the decision was the fact that the firm’s retainer agreement with the affiliate specified – when read together with the General Counsel’s operating guidelines which were incorporated into the retainer agreement – that the firm had an attorney-client relationship with all of the client’s affiliates. 

Apart from that, the Federal Circuit held that the two adversary affiliates were closely related to the third entity (the firm client) in terms of operations and financial dependence for the purpose of professional ethics to constitute one client.

Counsel for corporations with affiliates are well advised to consider adding language to retainer agreements that specify whether affiliates of the primary “client” also have the status of a client of the retained law firm.  The Falk Pharma case indicates that such will generally be honored and if a conflict arises may result in disqualification.