San Diego A Carlsbad spine surgery company recently sued a law firm, highlighting a thicket of conflict-of-interest issues lawyers wade through in choosing clients.
In February, Carlsbad-based Alphatec filed a breach-of-fiduciary-duty lawsuit against DLA Piper. It alleges the global law firm represented Alphatec for more than a decade, but then sued Alphatec CEO Patrick Miles on behalf of competitor NuVasive in October.
This month, DLA Piper withdrew from the case, though Alphatec still seeks damages through its own lawsuit and stated concerns over new representation’s connections to DLA Piper.
Against this backdrop, law firms must navigate whether to take on competing clients, risking legal action if careless — or loss of business if needlessly paranoid of client overlap. Further complicating matters: merger mania and lawyers’ increasing mobility between firms.
Mobility Changes Picture
Dan Stanford, a San Diego attorney who prosecutes legal malpractice, said conflict of interest allegations have risen.
“It has occurred more frequently over the last 10 years or so, particularly as law firms have increasingly merged. And when I started practicing in 1975, everybody went to a law firm and stayed there until they retired. But that’s no longer the case,” he said.
These lawsuits often turn on whether legal firms wielded a company’s confidential information to benefit a new client.
“You are perfectly free to represent a new client against a former client so long as there’s absolutely no relationship between the current matter and the former representation,” Stanford said. “So in other words, for an egregious conflict of interest to exist, there has to be some nexus or connection to your prior representation.”
Proof of Damages
For companies, proving a conflict isn’t enough — there must be proof of damages, like valuable trade secrets changing hands.
“Without damages, you have no case,” Stanford said. He later wrote in an email Alphatec’s lawsuit appears to be missing this key element, and it looks like the legal action was filed to “get DLA Piper to withdraw and get ‘conflicted out.’”
Compared with decades ago, firms are bound by fewer conflict-of-interest restrictions.
Once a blanket prohibition, attorneys can represent competing firms, provided there’s written consent.
In addition, Stanford said recent cases enabled firms to erect an “ethics wall” — an information barrier dividing attorneys who might have a conflict of interest and the rest of the firm.
“Years ago they (ethics walls) were not permitted at all. They were not deemed sufficient to eliminate conflicts of interest and the law firms were disqualified from continuing representation,” Stanford said.