begins with the fact that the new pharmaceuticals international inc and sailings are both current clients from the captain for we believe the engagement agreement which is exhibit five to the diner declaration is dispositive on the point it is an agreement between executed by valiant pharmaceuticals international banker just the parent company it incorporates by reference the outside counsel guidelines that specifically refer to it governing the relationship between p p i and its affiliates and outside counsel and it offers a list of affiliates to assist in  conflicts now catmull realize on the commentary to a one point seven four a proposition which is true in the abstract that a party representing a sum doesn't necessarily represent the parent but when you look at that commentary specifically comment thirty four it says unless there is an understanding that the lawyer will avoid conflict with affiliates and that is exactly what this contract provides and indeed a b a formal opinion ninety five three ninety which we cited is explicit on the point clearly a corporate affiliate must be treated as a client whether generally or only for purposes of rule one point seven if the lawyer has agreed so to treat it regardless of whether any actual work has been used to be performed for the affiliate now we can win the spin of has been if we agree with jersey because you won there but how about the decisions from the other two tribe you  it seems to me that this problem arose while those cases were in this court in may of twenty eighteen and i believe those appeals were docket would how do you respond to your friends are not on the other side of this because they are not the firm within their own sea guidelines but they're not bound by the loyalty provisions we think that's an irrational reading of the agreement for this reason section one point two which deals with conflicts specific paragraph one specifically requires a conflict check and offers a list of affiliates to help identify conflicts the second paragraph last sentence specifically requires all firms must follow the ethics rules now that includes rule one point seven which requires avoiding concurrent conflicts now the comment six the a b a comment six to rule one point seven makes clear that that does not include economic conflicts so called business conflicts which we've all confronted in law practice where there's no ethical conflict but it's directly and first your client's business relationship and so the first two sentences of the second paragraph of section one point two deal with that and they require something more something more than it here it's to the ethical strictures by so called key firms that are in the million dollar plus per year category and that requires them to avoid any conflict whether ethical or economic with any and to the more affiliate of the p r i and that's the rational reading of that agreement to read out your thing rather than women at one point to  only plea firms that that that second paragraph actually fanned the obligations of of key firms exactly it imposes on key firm something more than the pure ethical obligation extending into economic conflicts  now frankly there's a reason why the engagement agreement includes the p r i and all its affiliates and that's because the evidence before this court has shown that the p r i and its affiliates have operational commonality in terms of sharing many key elements of general and administrative work and support including computer systems and most importantly share a common legal department and also have financial interdependence with loan sales representing fifty seven percent of valiant's revenues and sale excess sales representing twenty percent and those are circumstances that indicate that these affiliates should be considered a client even absent express agreement and as comment we got guidelines the third paragraph seems to define what a significant degree of royalty is not necessary in terms of the the money goes on and so that search firms should not represent sentence the sentence that says that they should not represent any party in any matters any matters not just ethical conflict matters where such parties interest conflict with the interest of any value density in other words it's a blunderbuss limitation on taking on work that's conflicting with the ethical or economic interests of the valiant enterprise it is not that big of a  by the ethical guidelines which prohibit taking on direct adversity to a current client to suggest that that is somehow narrowed that bigger firms have more latitude there than smaller firms is not that we think are rational reading and i would again reiterate the point here is the higher degree of loyalty that's expected here goes to any conflicts even conflicts that night might not be pure ethical conflicts it only makes sense reading this that the obligations of these key firms be broader than the narrow ones not now  valiant's informed consent to be waived for the adverse representation a b a formal opinion ninety six four hundred that we've stated makes it clear that even if disqualification is only a risk but not a certainty the hiring firms client that's us is entitle to constipation to obtain informed consent early in the hiring process now they claimed well we couldn't we couldn't ask for con and the a b a comment to one point seven deals with that common comment nineteen says it may be impossible to obtain consent and if that's the case it says the parties have to be separately represented in other words the fact that you may not be able to get permission to ask for consent doesn't mean you can go forward it means you have to stop now what if you didn't have the engagement letter what's your argument for a conflict with out the other as i said the thapar ational commonality and financial interdependence of the parent with subs which have been proven in the government declarations in this case would with alfie agreement be the circumstances that the rule contemplates as requiring that the affiliate be treated as a client at least for conflict so standard is equivalent to a piercing the corporate veil standard i think there is a middle ground here for any interrelationship which for ethical purposes requires that the entities be treated as the same for conflicts purposes when it is apparent for example that they share a common legal department and on day one that legal department will have to see the lawyer giving advice and on day two will have to see that law firm has an adversary pounding their head and that's the sort of thing that those ethical rules are intended to prevent so yes we believe that we meet the limitations of the g s r case that i cited regardless of whether we have the agreement or not we think the agreement is absolutely crystal clear that the d s i case the quadrant of war of any of the states that are at issue here it was a second circuit case but we think that the rationale is  candidly there aren't that many of these cases really anywhere in the the opinion seem to cite with approval analyses done in different districts and different circuits that seem to make sense and that one seems particularly to make sense in the jenkins of milan in connection with that settlement and that steiner exhibit twenty six the same is true of the repeat the creative matter there was a also a settlement there diner exhibit thirty again with a license again requiring notice to be in allen valiant that's on page twenty five again with notice to the milan lateral attorneys again there was direct communication between them is a pole in a valiant and mr jenkins of milan that steiner exhibit thirty one which says the settlement agreement has been signed by ben i mean my land was well aware of the involvement of valiant and the intellectual property matters of its subsidiaries we believe that the lateral attorneys an obligation to inform milan of a possible limitation on their ability to continue that representation relating to be you know when they decided to move and we believe that the assumption should be that they did so and that milan also was aware of the situation and aware of the possibility of conflict with the involvement of the p r i in the ip matters it stops and we think if you ask too much for this court to ask about we think is the only innocent party here everybody else knew of the problem or should have known about the problem and went ahead anyway we know for a fact that  catton calculated the value of the p p i representation we saw that in the very declination they were never close to one million dollars a year we know for a fact they calculated the value of the lateral attorney acquisitions there's a press release diner  expected to generate significant revenue for the firm and we know they read the engagement agreement that explicitly covered the p r and was signed with d p i and have offered what we contend is an irrational interpretation of it in an effort to justify a headlong dash into the arms of a more lucrative client there is little or no prejudice to milan in the relief or request requesting mr florance of parker posey has indicated he will argue the dr fuck i p r mr florance also filed an entry of appearance in the west virginia appeal i get to find himself as principal counsel on october thirteenth twenty seventeen indeed it is clear from the bo declaration he tried the case below he is perfectly capable of arguing it on appeal without prejudice to my land our new jersey action is an appeal from a partial summary judgment on the obviousness issue related to a single claim the entire evidentiary record on that motion fits in one banker's box and it's a routine practice it is not involved in different yes absolutely and it's a routine practice in this court for clients who have lost the load of the team new appellate counsel and milan in the fifteen appeals in the last year only four of those were with a lateral attorney three of which are the subject of the motion to disqualify here that's something caton should reimburse milan for it's not a ground for punishing innocent valiant and requiring them to accept basically second class citizenship with their lawful but the what is the harm or value or any of  harm here is multi faceted first there is in fact a risk of confidential information contamination and that comes from several things again the agreement is in lightning here section two point four says talks about strategic decisions and litigation that requires consultation with valiant on strategic decisions types of pleadings legal theories even retention experts there's a section one point six on litigation settlements that require risk assessment case evaluation client consultation  declaration paragraph six pointed out the can through its long history has been privy to that sort of information including the claims review process litigation strategies and settlement approaches and strategies and these and the cases are but the fact that an ethical wall was proposed when an ethical wall doesn't solve a real one point seven violation and was proposed limited seemingly irrationally just to lawyers who would work for valiant in the last eighteen months asked them to withdraw mr downer spoke to go to really turn is on the morning of may seventh and that is the day the ethic of was installed was installed late it's only partial and it is somewhat irrational and if that's true it is late i don't quarrel with the fact that there were seventeen days these people had been talking to each other since mid september of twenty sevent to the reason we have the rule in the first place we have these ethical rules to preserve and uncompromising duty of loyalty of lawyers to their clients in the commentary to rule one point seven makes clear that violation of it causes the existing client to feel betrayed it interferes with the quality of the relationship it sufficiently important that it is an ethical requirement it is important to public trust in the legal profession you're representing a field that comment goes on to say unless there's an understanding to the contrary and there was a contract here to the contrary and that ethical so that said well you can represent a client directly adverse as long as that client can't prove that there's material damage to confidential information that is not what life even while in the case has fallen wife recognized a big factor lost in their analysis is the purpose is to be served by the rule and the duty of loyalty and the confidence in the legal system it is unseemly what happened here it is easy to avoid there is an easy remedy without much prejudiced milan that vindicates the rule and makes lawyers follow and the cases that follow why earth like the g e case they rely upon so heavily all look at the nature of the the exceptions as i believe them in comment thirty four are to the ability to represent affiliates which include the circumstances are such that they feel it should also be considered a client of the lawyer which is our argument for operational commonality there is an understanding between the lawyer and the organizational client that the lawyer will avoid representation adverse for the client's affiliates that's our contract and or the lawyers obligations to even  wyeth the movement was in part responsible for the conflict and had no intention of retaining a law firm we want to retain caton the only person that cat and it doesn't like us is mr  in terms of the court's question about the impact on the two appeals one from the p tab and the one from the northern district of west virginia the conflict issue arose  after the briefs had been fully briefed and we were waiting for oral argument so the issue is unique to simply this appeal i'd like to point out that i think mr lipsey already pointed out there is absolutely no harm to milan in this instance because milan is represented by another law firm was throughout the entirety of the i p r proceeding and their other law firm was the lead counsel in the northern district of west virginia action so they have adequate representation and that mr florance from the parker profile firm is designated as the attorney to argue the appeal in the i p r and there's no reason he can't argue the appeal from the northern district of west virginia as he was lead counsel the only other thing that i'd like to add is we cited one case in our briefs as to the standard in the fourth circuit and  united states v clarkson it was no case for michael seventy seven i would just like for the record to bring to the court's attention a later case that indicates that that standard is still the law that the fourth circuit applies the test from us clarkson which is to in order to prevent the appearance of impropriety they resolve all doubts in favor of disqualification and i had a case from the very district judge we were in front of judge healy and that is burgas that lester versus ford motor company six forty three said sup second eight eleven and that's from two thousand and eight where she adopted that standard and finding disqualification under the rules of professional conduct and the west virginia and the remainder of the thank you very  with with the letter even gaijin fight of which i think the court started with and correctly saw the nature of the relationship between a law firm and a client this contractual in nature and engagement letters and outside counsel guidelines adverse to any of our affiliates even though one point seven might make that might make that wall from able to do so so we have been representing bausch alone since two thousand and one to me the company's been around since eight hundred fifty three and so doesn't mean you're not going to write them no absolutely because we are governed by them that we're not going to take on a representation that puts restrictions on us that would be that we could not tolerate so for example we frequently see outside counsel guidelines that say you is it creates a high degree of was people i say you will be barred from representing being adverse to our affiliates even if will one point seven says you can be you will be bored for but it was agreement the default of one point seven comma thirty four controls we can be adverse an affiliate provided the wrong circumstances one of the three sets of sense as indicated that we indicating that they should be treated the same as the as the existing client and therefore we cannot do it with this letter purports to do though is to say that if you one of our key external firms you don't go by rule one hundred seven you will may not be adverse to any of our affiliates as a condition of you working for us and statement we've combined a legal department and we do know that the same attorneys that we have been dealing with on wall since two thousand and one with the same attorneys we were dealing with after they were purchased we don't have insight into how they structure or what they mean by having t know we did but i will tell i will say this and this is a critical point because we get so many out five times the guidelines that simply say you may not be adverse to any of our affiliates and then it's right i mean they say on its face that there are overlaps in operations and critically overlaps in all the legal operations so that the lawyer doing work for waiver because then the client says no and you still think there's no conflict you're basically handcuffed by their first thought would be if there was not a conflict why did they ask for a waiver we just didn't see this is a conflict we had never represented was prior to them receiving the letter from players what happens is it because all ethical walls are driven by the computer system because that's what automatically limits access to documents and information on the system you have to have a ethical or received notice of savers that there was a car because if there was any chance of confidential information between bausch and lomb about being being given to the  while we wrecked it as a prophylactic measure because the work that we were doing for bausch and lomb was only about i care products and only about trademark and advertising issues the workers that  again sale is dealt with patent issues completely different world than trade by the supreme court is i don't need to explain at the school it's a whole different discipline different different considerations different specialties and we were dealing with eye care products for lomb this case involves gastrointestinal drugs for a completely different subsidiary we didn't see there was any way we could possibly that information that was useful the only thing they said they that that family has pointed the national advertising division of the better business bureau has sort of a self policing function is not a government entity where they deal with claims of false advertising that's the bulk of the work we did for vosh alone there's no sentiment quite matter number in order to make a wall effect otherwise the computers don't know what what bodies of material that can it needs to exclude other attorneys from president cried i don't understand how so the fact that milan is willing to go through this process i think itself indicates that they think it's pretty important that as you move your feeling a different patterns and even different so you deal with one when lawful when we think about well that's what they say that's not what we experience either and we didn't get any particular insight into how they dealt with cases they said most of the work we were doing was in for the better business bureau and so it also is not really applicable to this case we're talking about arguments on an appeal so there you know the idea of settlement strategies are ready because that kind of extraneous information that's that's that's and we submit we never have acid test ever having them contact us or doing any legal advice for them or contacting us as their attorney did they approve your legal bills we assume so we were told where to send the legal bills but we don't really know what happened to the bills after that but even if it was in charge of reviewing and even paying the legal bills is tons of  given the fact that the vatican was often the legal department in charge of legal affairs that you were you with him well actually we've given possibly visibility into how a trademark practice war that has nothing to do with the new attorneys coming in who don't patent work so we just don't see how there was any useful information that could have been traded but we did set up a wall just think they somebody would make an accusation as they've done here but all of this us and say we want to consult with you on a legal matter they didn't when they even even even value it doesn't claim they did so we had no contact with them as as as as that counsel the first the first  talks about the relationship between your firm captain and value but it doesn't describe any work that we're going to do this is all about how we're going to bill what restrictions we have unveiling how responsive staff cases what what what kinds of that's all that is there's nothing in here that talks or any specific work whatever supposedly the record indicates that your bills were paid by b p i and that b p ives in house counsel was in charge of legal affairs for all of the  rule one point seven specifically discusses the fact that having someone pay your legal bills doesn't make them the client so if that's the only factor i mean this is a you have to look at the cases to look at all the factors with us is that we would be under the basic rules of one point seven in dealing with their affiliates and we did not see we were not aware of any overlap any risk of confidential information i did  if all bills of a clock close to a million dollars we flagged that we were going to have a completely different set of obligations at that point and would be presumptively not able to be adverse i don't know if we would have a completely different set of obligation adverse to their affiliates even if one point seven says we could as a matter of contract and we do see this a lot and it is i need to stress how critical it was that they didn't say as a condition of of being of working for us that you will  it's we don't get much much traction with it if anything it's small things about high risk for information or how we do bells but on that basic issue we see it more and more special larger companies they're perfectly capable of saying that and that's really important for us if they have told us that here that we take the view you cannot be adverse or affiliates period because of what group one point seven may like you to do i'm not so sure we would have continued working for a we would then have to basically agree not to be adverse to one hundred thirty companies all over the drug market and a company like valiant was continually buying and selling all the i think the only actual reading of this is that we're under one point seven the only reason we wouldn't be is if we were a key xstrata farm and had buildings much larger than we have a had at that point it becomes as a matter of contract we are not able to be adverse that ever we take it quite seriously that's a big deal for us it may be it may prevent us from operating entirely within certain industries as a result so the fact that they didn't say that was quite significant  that's not what one point seven says is that it's up to the why it did the term and whether under the circumstances a cop that was created such that the affiliate and the original client should be treated as one of the same we didn't see anything that indicated we should do that well it i and you don't see a cockroach well we don't see a conflict because there's nothing in here which we're actually doing work for valiant sort of whole international something human we signed a deal with them but again because they may be paying the bills or reviewing our bills that doesn't make them the client eight never came to us and asked us for legal representation on any matter they never consulted with us and legal representation in any matter is one hundred thirty subsidiaries pharmaceutical plant and pharmaceutical inc is in the business of buying and selling companies they're upping the valka back the kind of work that they did was nothing to do with that and again but it seems to me that you agreed that if you were a key firm you're that you're saying that and we never did see a conflict that's word that's hard to understand ok well that was based upon the best information we had we did ask them and they raises it is there anything else that in that you want to tell us now i really am almost out of time i just want to move on to the second part of this this is all about whether valiant is a client or not but under the old west virginia and new jersey law even a valid is the need to be a client that's not the end of the issue it doesn't require a mandate one of magic of this well if occasion as a result you have to look at a series of factors and matter of fact both new jersey and west virginia are very keen about pointing out that these disqualification motion should be looked at with great skepticism and that rather than sort of uphold the integrity of the legal profession can actually turn it can actually work and in the opposite making it look like opportunism and believable the word from only if they could cite actual specific information that he would have a pain that would give him a home for that and the risk they cannot fight anything that it would give him an unfair advantage and so in both cases is when the conflict is such as clearly to call into question the fair or efficient minister just so you have to actually fight something and usually what this boils down to is there some specific generalized erotic specific confidential information that that could have been or actually was given to counsel that would be of relevance to the nucleus and they've not cited anything here under the provisions the affiliates are the clients also the p r i and its affiliates are the clients and as a matter of logic if a small provider would be free under one point seven two  of one point two means i think it requires an additional degree of loyalty beyond that required by the ethical rules addressed in the last sentence that includes not bringing a ctions that are against the economic interests of pharmaceuticals inc even if they are not technically ethical conflicts that's only an example an example is where you have t companies both suddenly cholesterol drugs direct competitors fiercely competing and here representing one in a big time case and all of sudden you decide to take on another to help their direct competitor in a big time case and they come to you and say what are you doing don't you realize that those guys are eating our lunch what on earth are you doing that's an economic conflict we worry about th because you can lose the client over the us but they're not ethical conflicts and what the is the only rational reading of this is that the obligations of the big firm are to give us greater of loyalty than the rules actually require we we don't need them to say oh we won't represent a fair way its affiliates are already the client under the terms legally and then the question of whether they've done anything for value there is a