Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-01629/USCOURTS-ca13-15-01629-0/pdf.json

Parties Involved:
Acacia Research Corporation
Appellant
Acacia Research Group LLC
Appellant
Dynamic 3D Geosolutions LLC
Not party
Schlumberger Holdings Corporation
Appellee
Schlumberger Limited (Schlumberger N.V.)
Appellee
Schlumberger Technology Corporation
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

DYNAMIC 3D GEOSOLUTIONS LLC,

Plaintiff-Appellant

ACACIA RESEARCH CORPORATION, ACACIA 

RESEARCH GROUP LLC,

Nonparties-Appellants

v.

SCHLUMBERGER LIMITED (SCHLUMBERGER 

N.V.), SCHLUMBERGER HOLDINGS 

CORPORATION, SCHLUMBERGER TECHNOLOGY 

CORPORATION,

Defendants-Appellees

______________________ 

2015-1628, 2015-1629

______________________ 

Appeals from the United States District Court for the 

Western District of Texas in No. 1:14-cv-00112-LY, Judge 

Lee Yeakel.

______________________ 

Decided: September 12, 2016

______________________ 

 MICHAEL JAMES COLLINS, Collins, Edmonds, Pogorzelski, Schlather & Tower PLLC, Houston, TX, argued for 

plaintiff-appellant. Also represented by JOHN J. EDMONDS,

SHEA NEAL PALAVAN. 

Case: 15-1629 Document: 3-2 Page: 1 Filed: 09/12/2016
2 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

 STEVEN MARK HANLE, Stradling Yocca Carlson & 

Rauth, P.C., Newport Beach, CA, argued for nonpartiesappellants. Also represented by MARC J. SCHNEIDER, 

TRAVIS PHILLIP BRENNAN. 

 MAXIMILIAN A. GRANT, Latham & Watkins LLP, 

Washington, DC, argued for defendants-appellees. Also 

represented by GABRIEL BELL, THOMAS J. HUMPHREY;

TERRENCE J. CONNOLLY, New York, NY; ANN MARIE 

WAHLS, Chicago, IL.

______________________ 

Before LOURIE, WALLACH, and HUGHES, Circuit Judges.

Opinion for the court filed by Circuit Judge LOURIE. 

Concurring opinion filed by Circuit Judge WALLACH. 

LOURIE, Circuit Judge. 

Dynamic 3D Geosolutions LLC (“Dynamic 3D”), along 

with Acacia Research Corporation and Acacia Research 

Group LLC (collectively, “Acacia”), appeal from the decision of the United States District Court for the Western 

District of Texas disqualifying counsel and dismissing its 

patent infringement complaint without prejudice. Dynamic 3D Geosolutions LLC v. Schlumberger Ltd., No. A14-CV-112-LY, 2015 WL 4578681 (W.D. Tex. Mar. 31, 

2015) (“Order”). Because the district court did not err in 

disqualifying Dynamic 3D’s counsel and in dismissing the 

complaint, we affirm.

BACKGROUND

In 2006, Schlumberger hired Charlotte Rutherford in 

a senior counsel position as Manager of Intellectual 

Property Enforcement, in licensing and litigation; promoted her to Director of Intellectual Property in 2009; 

and then promoted her again to Deputy General Counsel

for Intellectual Property. Her job duties included “developing and implementing the worldwide IP strategy,” 

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DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 3

“protecting and preserving [Schlumberger’s] IP assets 

including patents, trademarks and trade secrets,” and 

“advis[ing] senior [Schlumberger] executives regarding 

risk issues relating to IP.” Joint App. (“J.A.”) 958. She

was also responsible for the company’s worldwide program for enforcing intellectual property, including litigation, and directed and supervised outside counsel on 

intellectual property legal matters. Id.

As part of her work at Schlumberger, Rutherford 

managed a copyright lawsuit involving Petrel, Schlumberger’s software platform for three-dimensional visualization, mapping, and reservoir modeling of oil wells. She

was also involved in a “Goldstar” project that evaluated 

further patentable aspects of Petrel and assessed the risk

of lawsuits against it. One competitor’s product analyzed 

during this project was Austin Geomodeling’s RECON 

software. Austin Geomodeling filed a patent application

in 2007 that eventually issued as U.S. Patent 7,986,319

(“the ’319 patent”) in 2011. RECON is supposedly the 

commercial embodiment of the ’319 patent, which is

directed to systems and methods of combining seismic and 

well log data into a real-time, interactive threedimensional display. 

In mid-2013, after seven years at Schlumberger, 

Rutherford left Schlumberger and soon thereafter began 

working as Senior Vice President and Associate General 

Counsel at Acacia Research Group LLC. Acacia Research 

Group LLC is a wholly-owned subsidiary of Acacia Research Corporation, the parent company of various patent-holding entities, including Dynamic 3D.

Shortly after joining Acacia, Rutherford twice met 

with the inventors of the ’319 patent to discuss Acacia’s 

acquisition of the patent and possible future litigation. 

J.A. 755–56, 760, 762. She also participated in a telephone call with the law firm of Collins, Edmonds, Pogorzelski, Schlather & Tower PLLC (“CEP“) and one of her 

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4 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

subordinates, Gary Fischman, regarding the ’319 patent. 

J.A. 765. Schlumberger’s Petrel product was discussed as 

a potential target of patent infringement litigation, at the 

meetings and in the call. See, e.g., J.A. 759–761, 764, 766, 

828–829, 831. Fischman and CEP then prepared a recommendation to Acacia’s CEO to acquire the ’319 patent 

and to sue Schlumberger and others, and Rutherford 

“approved” or “concurred” in that recommendation. J.A. 

769–71, 774–77. Rutherford and Fischman also jointly 

made the decision to hire CEP as outside counsel. J.A. 

784–85. Acacia subsequently retained CEP for all ’319 

patent-related litigation and acquired the patent. Dynamic 3D was formed as a wholly-owned subsidiary of 

Acacia, and days later was assigned the ’319 patent on 

December 9, 2013. Order at *1. Dynamic 3D, at least as 

of May 2014, had no employees.

In February 2014, Dynamic 3D filed several lawsuits, 

including one asserting that Schlumberger, in its use and 

sale of Petrel, infringed the ’319 patent. The complaint 

alleges actual knowledge of the ’319 patent by Schlumberger as early as the issuance of the patent in July 2011. 

The district court stayed the case except for limited claim

construction discovery. Schlumberger raised Rutherford’s 

potential conflict of interest to the court in April 2014. 

After a stay was lifted in August, Schlumberger filed a 

motion to disqualify Dynamic 3D’s counsel. The district 

court granted Schlumberger’s motion, disqualifying

Rutherford, other in-house counsel for Acacia Research 

Corporation and its subsidiaries, and the CEP firm from 

representing Dynamic 3D in the instant case.

Relatedly, Schlumberger sued Rutherford in Texas 

state court in March 2014, presenting evidence that she 

retained copies of confidential and privileged information, 

including that relating to Petrel, for purposes of providing 

it to Acacia. The court dismissed all but the breach-ofcontract claim for violating her confidentiality agreement, 

finding that the Texas anti-SLAPP statute protected 

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DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 5

Rutherford’s First Amendment rights to petition and 

association, viz., her “communication” of a “concurrence 

with the recommendation by outside counsel and in-house 

counsel to acquire the [’]319 patent and to sue Schlumberger.” J.A. 825, 828. The court sanctioned Schlumberger for bringing the suit, ordering payment of $600,000 

in attorneys’ fees and sanctions. Schlumberger challenged the decision to dismiss almost all of the claims, but 

the state appellate court dismissed that appeal for lack of 

jurisdiction over an interlocutory appeal. These issues are 

not before us in this appeal. 

The district court in this case first found that Rutherford’s work at Schlumberger was substantially related to 

her current work at Acacia. The court found that because 

the accused features of Petrel existed in the older versions 

that Rutherford was exposed to, and because she was 

involved at Schlumberger in efforts to license Petrel to 

other companies, the evidence created an irrebuttable 

presumption that she acquired confidential information

requiring her disqualification. Order at *5. 

The district court then determined that the acquired 

knowledge should be imputed to all Acacia attorneys for 

purposes of participating in Dynamic 3D’s suit against 

Schlumberger. The court noted that conflict rules for 

“firms” also apply to corporate legal departments, and 

that Dynamic 3D depended entirely on Acacia’s legal 

department for its strategy and litigation conduct. Order

at *5–6. The court was persuaded by evidence of Rutherford’s involvement in acquiring the ’319 patent, in deciding to sue Schlumberger, and in retaining CEP. Order at 

*6. The court found that Dynamic 3D failed to rebut the 

presumption of disclosure of Schlumberger’s confidential 

information, and thus disqualified in-house counsel for 

Acacia Research Corporation and its subsidiaries. Id.

The district court lastly extended the disqualification 

to CEP, interpreting Fifth Circuit case law on disqualifyCase: 15-1629 Document: 3-2 Page: 5 Filed: 09/12/2016
6 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

ing co-counsel as shifting the evidentiary burden to Dynamic 3D to prove non-disclosure after Schlumberger met 

its burden to create a rebuttable presumption of disclosure. Order at *7. The court found that the evidence 

showed multiple communications among Rutherford, 

Fischman, and CEP while preparing to file suit against 

Schlumberger. Id. As Fischman continued to not only

actively work with CEP in this case but also communicate 

information regarding the litigation to Rutherford, the 

court also disqualified CEP. Id.

Consequently, because the pleadings were drafted by 

counsel presumed to possess Schlumberger’s confidential 

information, the district court dismissed all of Dynamic 

3D’s claims against Schlumberger without prejudice. Id.

Dynamic 3D and Acacia timely appealed from the district court’s decision to this court. Shortly before the 

scheduled oral argument on August 3, 2016, Dynamic 3D 

and Acacia submitted a motion to dismiss the appeal, 

asserting that the case had been settled. Dynamic 3D 

Geosolutions, LLC v. Schlumberger Ltd., No. 2015-1628, 

ECF No. 76 (Fed. Cir. Aug. 1, 2016). Schlumberger, 

however, opposed the motion. Id., ECF No. 77. Acacia 

subsequently submitted the supposed settlement agreement to us under seal. The agreement appears to consist 

of hastily handwritten notes on two sheets of notebook 

paper along with a typed cover sheet containing minimal

clarifying language and a signature page dated June 17, 

2016. Id., ECF No. 84 (Fed. Cir. Aug. 4, 2016). Although 

a settlement need not be effectuated by a formal document, upon review of the submission, we agree with 

Schlumberger that the appeal was not concluded by the 

agreement as submitted to this court and, based on the 

status of the appeal as of the date of oral argument,

decline to terminate the appeal under Federal Rule of 

Appellate Procedure 42(b). We have jurisdiction over this 

appeal pursuant to 28 U.S.C. § 1295(a)(1).

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DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 7

DISCUSSION

We review a district court’s disqualification and dismissal order under the law of the regional circuit in which 

the district court sits, here, the Fifth Circuit. Atasi Corp. 

v. Seagate Tech., 847 F.2d 826, 829 (Fed. Cir. 1988). 

Because motions to disqualify counsel “are substantive 

motions affecting the rights of the parties,” we apply 

standards developed under federal law. In re Dresser 

Indus., Inc., 972 F.2d 540, 543 (5th Cir. 1992); see also In 

re Am. Airlines, Inc., 972 F.2d 605, 609 (5th Cir. 1992)

(“Federal courts may adopt state or ABA rules as their 

ethical standards, but whether and how these rules are to 

be applied are questions of federal law.”). Applying the 

law of the Fifth Circuit, the standard of review is for 

abuse of discretion, with the underlying factual findings 

reviewed for clear error and the interpretation of the 

relevant rules of attorney conduct reviewed de novo. 

F.D.I.C. v. U.S. Fire Ins., 50 F.3d 1304, 1311 (5th Cir. 

1995); In re Am. Airlines, 972 F.2d at 609. We also review 

the grant of a motion to dismiss without prejudice for 

abuse of discretion. See United States ex rel. Holmes v. 

Northrop Grumman Corp., 642 F. App’x 373 (5th Cir. 

2016) (noting that “abuse of discretion standard applies in 

[an appellate court’s] review of a district court’s dismissal 

of a complaint as a result of ethical violations”); cf. Marts 

v. Hines, 117 F.3d 1504, 1506 (5th Cir. 1997) (en banc) 

(noting that “trial court’s exercise of discretion” for dismissal without prejudice would be focus of appellate 

review). 

Three applicable sets of rules govern the grant of the

motion to disqualify counsel in this case: (1) the ABA 

Model Rules of Professional Conduct, the legal profession’s national ethical rules; (2) the Texas Disciplinary 

Rules of Professional Conduct, the state-specific adaptation of the ABA Model Rules; and (3) the Local Rules for 

the Western District of Texas, which adopt the Texas 

Disciplinary Rules. See, e.g., In re ProEducation Int’l, 

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8 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

Inc., 587 F.3d 296, 299 (5th Cir. 2009); Nat’l Oilwell Varco 

LP v. Omron Oilfield & Marine, Inc., 60 F. Supp. 3d 751, 

758 (W.D. Tex. 2014).

I. Disqualification of Counsel

A. The Disqualification of Rutherford

Texas Disciplinary Rule 1.09(a) provides that: 

(a) Without prior consent, a lawyer who personally has formerly represented a client in a matter 

shall not thereafter represent another person in 

a matter adverse to the former client: 

. . .

(2) if the representation in reasonable probability will involve a violation of [the rule regarding Confidentiality of Information]; or

(3) if it is the same or a substantially related

matter.

Tex. Disciplinary Rules of Prof’l Conduct (“Texas Disciplinary Rules”) r. 1.09 (emphases added). 

Comment 4 to Rule 1.09 notes that representation 

would be improper “if there were a reasonable probability 

that the subsequent representation would involve either 

an unauthorized disclosure of confidential information . . .

or an improper use of such information to the disadvantage of the former client,” and that “[w]hether such a 

reasonable probability exists in any given case will be a 

question of fact.” Id. cmt. 4.

Comment 4B further elaborates that “‘substantially 

related’ primarily involves situations where a lawyer 

could have acquired confidential information concerning a 

prior client that could be used either to that prior client’s 

disadvantage or for the advantage of the lawyer’s current 

client or some other person.” Id. cmt. 4B; cf. In re Am. 

Airlines, 972 F.2d at 618–19 (noting that an attorney’s 

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DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 9

representation “does not need to be ‘relevant’ in the 

evidentiary sense to be ‘substantially related,’” but rather 

“need only be akin to the present action in a way reasonable persons would understand as important to the issues 

involved” (quoting In re Corrugated Container Antitrust 

Litig., 659 F.2d 1341, 1346 (5th Cir. 1981))). 

The corresponding ABA Model Rule similarly prohibits representation that presents a conflict of interest with 

a former client:

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent 

another person in the same or a substantially 

related matter in which that person’s interests 

are materially adverse to the interests of the 

former client . . . .

. . .

(c) A lawyer who has formerly represented a client 

in a matter or whose present or former firm has 

formerly represented a client in a matter shall 

not thereafter:

(1) use information relating to the representation to the disadvantage of the former client 

. . . .

Model Rules of Prof’l Conduct (“ABA Model Rules”) r. 1.9

(Am. Bar Ass’n 1983) (emphasis added). 

Dynamic 3D argues that the district court clearly

erred in finding that Rutherford’s former representation 

was substantially related to her alleged representation in 

this case. Dynamic 3D characterizes her involvement in

the acquisition of the ’319 patent and enforcement against 

other parties as “limited,” and denies any such involvement in the instant suit against Schlumberger. Dynamic 

3D asserts that the court based its finding on descriptions 

of privileged documents rather than on a review of the

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actual documents, and ignored Rutherford’s testimony 

that she was not directly involved in the Goldstar projects. Thus, Dynamic 3D contends, the court failed to 

fully analyze the facts or properly apply Fifth Circuit 

precedent. Dynamic 3D lastly argues that Schlumberger 

failed to establish that Rutherford played anything beyond a limited supervisory role, with some general exposure to earlier versions of Petrel in the copyright lawsuit. 

Schlumberger responds that Fifth Circuit precedent 

imposes an irrebuttable presumption that relevant confidential information was acquired once prior and present 

representations are shown to have been substantially 

related. Schlumberger argues that the district court’s

factual finding that Rutherford’s prior work is substantially related to this suit is based on Rutherford’s personal 

representation of Schlumberger in litigation and licensing

matters, including leading a team that evaluated intellectual property rights and risks relating to Petrel. Moreover, Schlumberger counters, the court correctly declined 

to credit self-serving testimony in light of the contrary

evidence presented. Schlumberger notes that Rutherford 

admitted that she acted in a legal capacity for Acacia at 

the initial meetings concerning the ’319 patent, and that

the assessment of Petrel as being a possible litigation 

target was clearly related to her prior work. Schlumberger further points out that Rutherford would have had 

access to material sensitive information even in her more 

remote supervisory role during her previous employment. 

We agree with Schlumberger that the district court 

did not clearly err in finding that Rutherford’s work for

Schlumberger, and for Acacia and Dynamic 3D, were 

substantially related. Rutherford occupied senior counsel, 

director, and deputy general counsel positions in a large

company’s intellectual property department. The record 

documents her involvement at Schlumberger in a project 

specifically evaluating a product later accused of infringement by Acacia, and the risks of such an infringeCase: 15-1629 Document: 3-2 Page: 10 Filed: 09/12/2016
DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 11

ment suit. Rutherford’s representation at Schlumberger 

included efforts to license Petrel when the later-accused 

features of the product existed in the older versions with 

which Rutherford was involved. We will therefore not 

disturb the district court’s finding that Rutherford’s 

employment with Schlumberger was more than tangentially related to the issues in the present suit. 

We recognize that there are important societal rights

implicated by attorney disqualification, such as the right 

of a party to counsel of its choice and an attorney’s right 

to freely practice his or her profession. However, there is 

an overriding countervailing concern suffusing the ethical 

rules: a client’s entitlement to an attorney’s adherence to 

her duty of loyalty, encompassing a duty of confidentiality. See In re Am. Airlines, 972 F.2d at 616–20; Texas 

Disciplinary Rules r. 1.06 cmts. 1, 2; ABA Model Rules 

r. 1.9 cmts. 4, 7; see also Brennan’s Inc. v. Brennan’s 

Restaurants, Inc., 590 F.2d 168, 172 (5th Cir. 1979) (“The 

obligation of an attorney not to misuse information acquired in the course of representation serves to vindicate 

the trust and reliance that clients place in their attorneys. 

A client would feel wronged if an opponent prevailed 

against him with the aid of an attorney who formerly 

represented the clients in the same matter. . . . [T]his 

would undermine public confidence in the legal system as 

a means for adjudicating disputes.”). Accordingly, the

obligation to protect a client’s confidential information 

exists as part of the larger duty of loyalty owed to clients 

to maintain the integrity of the attorney–client relationship. 

Rutherford herself admitted attending, as legal counsel for Acacia, meetings with the inventors of the ’319 

patent, other in-house counsel, and outside counsel regarding the acquisition of the ’319 patent, and admitted 

that Schlumberger’s Petrel product was a topic of discussion at those meetings. Her admitted “communication,” 

particularly the “concurrence with the recommendation 

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12 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

by outside counsel and in-house counsel to acquire the 

[’]319 patent and to sue Schlumberger,” J.A. 825–28, 

would have entailed assessing the patent’s value as a 

litigation tool against Schlumberger with knowledge of

her former employer’s confidential information. See also

J.A. 3648, 3651–57 (privilege logs from Dynamic 3D and 

Acacia describing litigation-related communications that 

involved Rutherford). Even if we were to reweigh the 

evidence, which in our role as an appellate court would be 

inappropriate, Dynamic 3D’s arguments that Rutherford 

was not involved in the current suit are thus way wide of 

the mark. Acacia itself admitted that it failed to screen 

her from the case, Oral Arg. at 4:48–5:30, and both Dynamic 3D and Acacia provided privilege logs evincing 

Rutherford’s involvement in the present suit, J.A. 3648, 

3651–52. Rutherford is therefore irrebuttably presumed 

to have possessed Schlumberger’s relevant confidential 

information and was properly found to have been disqualified.

The district court affirmed the sound principle of not 

suborning the disloyalty of attorneys. It was inappropriate to hire a senior attorney, one intimately knowledgeable concerning a particular product, its competitors, and 

its associated business strategies and intellectual property, into a position in which she not only participated in 

but in fact played a significant role in acquiring a patent

used to accuse her former employer’s product of patent

infringement.

B. The Disqualification of Other In-House Counsel

Texas Disciplinary Rule 1.09(b) provides that “when 

lawyers are or have become members of or associated 

with a firm, none of them shall knowingly represent a 

client if any one of them practicing alone would be prohibited from doing so by paragraph (a).” Texas Disciplinary

Rules r. 1.09(b). Comment 5 explains that this paragraph 

“extends paragraph (a)’s limitations on an individual 

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lawyer’s freedom to undertake a representation against 

that lawyer’s former client to all other lawyers who are or 

become members of or associated with the firm in which 

that lawyer is practicing.” Id. cmt. 5. The comment 

exemplifies the imputation rule as: “[I]f a lawyer severs 

his or her association with a firm and that firm retains as 

a client a person whom the lawyer personally represented 

while with the firm, that lawyer’s ability thereafter to 

undertake a representation against that client is governed by paragraph (a); and all other lawyers who are or 

become members of or associates with that lawyer’s new 

firm are treated in the same manner by paragraph (b).” 

Id. (emphasis added).

The corresponding ABA Model Rule similarly extends 

the prohibition to members of a lawyer’s new “firm”: 

(a) While lawyers are associated in a firm, none of 

them shall knowingly represent a client when 

any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless 

. . .

(2) the prohibition is based upon Rule 

1.9(a) or (b) and arises out of the disqualified lawyer’s association with a prior firm, 

and

(i) the disqualified lawyer is timely 

screened from any participation in the 

matter . . . ; [and]

(ii) written notice is promptly given to 

any affected former client . . . .

ABA Model Rules r. 1.10. Comment 2 emphasizes that 

each lawyer at a “firm” is “vicariously bound by the obligation of loyalty.” Id. cmt. 2.

Dynamic 3D argues that any presumption of disclosure to Acacia’s other in-house attorneys is questionable 

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under Fifth Circuit law. If it exists, Dynamic 3D contends, that presumption was rebutted by uncontroverted 

evidence that there was no actual disclosure of confidential information from Rutherford to other Acacia attorneys. Dynamic 3D notes that Rutherford, Fischman, and 

Acacia’s CEO all testified that Rutherford’s involvement 

with the patent at Acacia was very limited, and unrelated 

to Schlumberger. Dynamic 3D also faults the district

court for failing to balance the parties’ interests as Dynamic 3D contends is required under Fifth Circuit law; no 

specific harm to Schlumberger was ever identified, compared with the time and resources spent by Dynamic 3D 

on preparing for and prosecuting this case.

Acacia similarly argues that Fifth Circuit law does 

not require a presumption of disclosure for in-house 

attorneys because that presumption should only be 

grounded in the duty of loyalty resulting from personal 

representation. Because none of Acacia’s “licensing 

executives” have worked for Schlumberger and thus 

evidence no appearance of disloyalty, Acacia contends, 

there is no rationale for a presumption, and thus imputation should be analyzed as for co-counsel, i.e., requiring 

actual disclosure. Acacia also asserts that the court’s 

factually unsupported findings contradict sworn statements and corroborating evidence that Rutherford did not 

actually disclose Schlumberger’s confidential information. 

Acacia further faults the court for shifting the burden of 

persuasion to Acacia. According to Acacia, Schlumberger 

never proved that Rutherford acquired confidential information; she was only presumed to have it. Moreover, 

Acacia argues, the disqualification unduly burdens its 

right to counsel; specifically, the decision effectively 

enjoins Acacia from ever asserting the patent against 

Schlumberger. 

Schlumberger responds that under Fifth Circuit law 

on imputation to other in-house counsel, the analysis

turns on whether the conflicted attorney’s representation 

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is personal. Schlumberger notes that the district court 

found that, rebuttable or not, Dynamic 3D failed to rebut 

the presumption of disclosure with any evidence that 

Acacia screened Rutherford from work she performed at 

Schlumberger with others by instructing her not to work 

on related matters. Schlumberger additionally responds 

that Texas law does not require actual disclosure, only a 

genuine threat of disclosure. Schlumberger further 

argues that Rutherford’s prior work made her privy to 

information relating to her later actions for Acacia, and 

thus her communications—in the form of approvals and 

concurrence with recommendations—tacitly disclosed her 

belief, based on Schlumberger’s confidential information, 

that Dynamic 3D’s claims had merit and that Schlumberger’s defenses, including invalidity, were meritless.

Schlumberger also contends that a balancing of interests is not required when imputing a conflict to other inhouse counsel. Even if the court were to explicitly balance 

the parties’ interests, Schlumberger argues that the 

prejudice to Schlumberger greatly outweighs the harm 

that Dynamic 3D inflicted on itself. The potential source 

of the conflict of interest was flagged early on in the case, 

but Acacia’s attorneys continued to work on the suit and 

delayed the filing of Schlumberger’s disqualification

motion by opposing lifting the stay. 

We agree with the district court that regardless 

whether the presumption was irrebuttable or rebuttable, 

there was a presumption that was not rebutted. Dynamic 

3D and Acacia failed to show that knowledge of Schlumberger’s confidential information should not be imputed to 

Acacia’s other in-house counsel. The ethical standards 

are clear that lawyers similarly associated have had 

conflicts imputed to them. See Texas Disciplinary Rules 

r. 1.10; ABA Model Rules r. 1.9(b). Although the Fifth 

Circuit does not subscribe to the “taint” theory for imputing conflicts, it focuses on remaining “sensitive to preventing conflicts of interest” and “rigorously appl[ies] the 

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16 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

relevant ethical standards.” See In re Am. Airlines, 972 

F.2d at 611. Acacia admitted at oral argument that there 

was no ethical screening wall or other objective measures 

implemented to prevent confidential information from

being used, to disadvantage Schlumberger. Here, there 

was a clear conflict of interest for Rutherford, and the 

principles underlying the ethical standards mandate 

extending the disqualification to Acacia’s other in-house 

attorneys. 

Even without imputation, Fischman himself reported 

solely to Rutherford until after the potential conflict was 

raised to the court. In fact, all four Acacia employees in 

the Energy Group in Acacia’s Houston office reported to 

Rutherford. In attending meetings and making decisions 

such as retaining CEP as outside counsel, Rutherford 

communicated to the other in-house counsel that she

supported the litigation strategy and thereby disclosed 

confidential information to the other Acacia attorneys. 

Moreover, we disagree with Dynamic 3D and Acacia 

that a balancing test is required under Fifth Circuit law. 

Although some situations present facts in which an analysis balances the competing interests of the parties in 

order to determine whether disqualification would be too 

harsh a remedy, those situations are inherently factspecific or presented in different procedural postures, e.g., 

in a petition for a writ of mandamus. Even so, we find no 

error when the case was barely litigated before Dynamic 

3D was on notice that Schlumberger identified the conflict. The complaint was filed in February; the case was 

stayed from April to August; the potential issue was

brought to the court’s attention in April during the stay; 

and the motion was filed days after the stay was lifted in 

August. Dynamic 3D and Rutherford should have known 

that their actions were inappropriate. 

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DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 17

C. The Disqualification of CEP

Dynamic 3D lastly disputes the “double imputation” of 

the conflict of interest to CEP on the ground that only

actual disclosure warrants the disqualification of outside 

counsel under Fifth Circuit law. Dynamic 3D argues that 

Rutherford is only presumed to have acquired relevant 

confidential information, and that there is no record 

evidence of any disclosure of such information to CEP or 

any substantive communications between Rutherford and 

CEP. Dynamic 3D faults the district court for failing to 

identify any specific disclosures actually made, and for

ignoring Dynamic 3D’s rebuttal evidence showing the 

absence of disclosures to CEP. Dynamic 3D further

asserts that the decision to sue Schlumberger was made 

by Acacia’s CEO alone, and that Rutherford’s concurrence

with that decision was not a communication substantive 

enough to constitute actual disclosure of confidential 

information. Dynamic 3D thus contends that the district 

court erred because Fifth Circuit law does not provide for 

a presumption of disclosure to co-counsel if there is no 

attorney–client relationship.

Schlumberger responds that the evidence supports 

the district court’s findings of substantive contacts and 

communications among Rutherford, Fischman, and CEP, 

which created a rebuttable presumption of disclosure. No 

such rebuttal was found by the court. Schlumberger 

contends that under the Texas Supreme Court’s interpretation of the Texas Disciplinary Rules, once Schlumberger 

showed sufficient contact or communication between 

Rutherford and CEP, the burden shifted to Dynamic 3D to 

show that there was no reasonable prospect that confidential information was disclosed, and no actual disclosure. 

Schlumberger further responds that even without a 

presumption of disclosure, there was actual disclosure to 

CEP by Rutherford’s concurring in various recommendations. Given her knowledge of Petrel, Schlumberger 

asserts, her opinion carried weight and was not merely “a 

Case: 15-1629 Document: 3-2 Page: 17 Filed: 09/12/2016
18 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

wink and a nod” to encourage Acacia’s business and 

litigation decisions. See S.E.C. v. Rocklage, 470 F.3d 1 

(1st Cir. 2006) (finding that “a wink and a nod” communicated confidential information constituting unlawful 

tipping).

We thus agree that the district court did not err in 

concluding that the disqualification should extend to CEP. 

Even beyond presumptions, there was sufficient evidence 

of Rutherford’s involvement in the selection of CEP as 

outside counsel and in the litigation against Schlumberger to support a finding of communication by conduct. 

Dynamic 3D and Acacia’s arguments focus on presumptions and actual disclosure, ignoring the totality of 

the duty owed to clients. Here, Rutherford disregarded 

the duty of loyalty and communicated confidential information not only to other in-house counsel but also to 

outside counsel, and thus the district court did not clearly 

err in imputing the conflict of interest to outside counsel

as well as to in-house counsel. 

We accordingly find no error in the district court’s 

conclusion that Rutherford, Acacia’s other in-house counsel, and CEP were properly disqualified from representing 

Dynamic 3D in this case.

II. Dismissal Without Prejudice

Dynamic 3D argues that the district court lacked the 

legal authority to dismiss its case as a result of disqualifying its counsel. Dynamic 3D faults the district court for 

not specifying what “significant prejudice” to Schlumberger justified dismissal. Moreover, Dynamic 3D asserts, 

there was no record evidence of any actual disclosure and 

thus the case could not have been “tainted” from Rutherford’s supposed breaches of confidence. The dismissal, 

Dynamic 3D avers, was overly harsh and constituted an 

abuse of discretion for not instead granting the company

time to retain new counsel. Dynamic 3D distinguishes 

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DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 19

other cases that have been dismissed as a result of disqualified counsel as grounded in facts that the disqualified attorney was acting in some capacity as a party or 

that disclosure was clearly and specifically proven.

Schlumberger responds that the Fifth Circuit previously affirmed a district court’s decision to dismiss a case 

without prejudice after disqualifying an attorney based on 

an irrebuttable presumption of using confidential information to a former client’s disadvantage. In support of 

the district court’s decision, Schlumberger cites various 

cases in the Second Circuit and one in the Western District of Louisiana that were similarly dismissed without 

prejudice based on the disqualification of counsel.

Based on the facts of this case, we find that the district court in its abbreviated analysis on this point did not 

abuse its discretion in dismissing all pleaded claims 

without prejudice. The court did not err in finding that 

Dynamic 3D’s pleadings were drafted by lawyers presumed to possess Schlumberger’s confidential information 

and that the significant prejudice that Schlumberger 

would face, if the case were to continue, outweighed the 

harsh result of dismissal. We do not dispute the court’s 

conclusion. All aspects of the case were contaminated by 

Rutherford’s actions, from the purchase of the ’319 patent, 

to preparation for suit against Schlumberger, to the 

actual filing of the suit.

The district court’s decision is not without precedent 

In Doe v. A Corp., the Fifth Circuit affirmed a district 

court’s decision disqualifying counsel and dismissing part 

of the case without prejudice. 709 F.2d 1043, 1045, 1050–

51 (5th Cir. 1983). Some district courts have granted a 

period of time for a party to retain new counsel after 

disqualification, which appears to be typically 45 days. 

See, e.g., McIntosh v. State Farm Fire & Cas. Co., 

No. 1:06-cv-1080, 2008 WL 941640, at *2 (S.D. Miss. Apr. 

4, 2008) (granting 45 days to retain new counsel after 

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20 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

attorney disqualification, after which failure to do so or to 

proceed pro se would make case “eligible for dismissal 

without prejudice”); see also Sumpter v. Hungerford, 

No. 12-717, 2013 WL 2181296, at *11 (E.D. La. May 20, 

2013) (ordering new counsel within 45 days after attorney 

disqualification). Others, however, have found that 

continuing a case after disqualification without dismissal 

would greatly prejudice a party because “the case would 

be tried on a record developed primarily through the 

fruits of [the disqualified attorney]’s unethical labor.” 

United States ex rel. Holmes v. Northrop Grumman Corp., 

No. 1:13-cv-85, 2015 WL 3504525 (S.D. Miss., June 3, 

2015), aff’d, 642 F. App’x 373, 378 (5th Cir. 2016). 

Dynamic 3D itself admits that, because of the disqualification of its attorneys, it would have to hire a new 

employee to manage the re-filing of the complaint, and 

retain new outside counsel. Dynamic 3D Br. 42–43. Not 

only would those actions likely take more than 45 days 

and effectively impact the district court’s docket, but also 

the potential for prejudice would continue from the improper use of Schlumberger’s confidential information in 

preparing the original pleadings. Based on the district 

court’s reasoning, forcing Dynamic 3D to break new 

ground with a fresh complaint and clean docket rather 

than to continue drawing from a poisoned well was not an 

abuse of discretion.

We also note that Dynamic 3D did not expressly request leave to amend its pleadings or substitute counsel, 

see J.A. 1317–18; even if it had, the district court would 

have had the discretion to deny that request, see

Whitmore v. Victus, Ltd., 212 F.3d 885, 887 (5th Cir. 

2000). See also United States ex rel. Willard v. Humana 

Health Plan of Tex., Inc., 336 F.3d 375, 387 (5th Cir. 2003) 

(finding no abuse of discretion in denying leave to amend 

when not expressly requested from district court).

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DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 21

We therefore conclude that the district court did not 

abuse its discretion in dismissing all of the pleaded claims 

in Dynamic 3D’s complaint without prejudice.

CONCLUSION

We have considered the remaining arguments and 

conclude that they are unpersuasive. For the foregoing 

reasons, we conclude that the district court did not err in 

disqualifying Dynamic 3D’s counsel and in dismissing the 

complaint, and we therefore affirm the district court’s 

decision.

AFFIRMED

COSTS

Costs to Schlumberger. 

Case: 15-1629 Document: 3-2 Page: 21 Filed: 09/12/2016
United States Court of Appeals 

for the Federal Circuit ______________________ 

DYNAMIC 3D GEOSOLUTIONS LLC,

Plaintiff-Appellant

ACACIA RESEARCH CORPORATION, ACACIA 

RESEARCH GROUP LLC,

Nonparties-Appellants

v.

SCHLUMBERGER LIMITED (SCHLUMBERGER 

N.V.), SCHLUMBERGER HOLDINGS 

CORPORATION, SCHLUMBERGER TECHNOLOGY 

CORPORATION,

Defendants-Appellees

______________________ 

2015-1628, 2015-1629

______________________ 

Appeals from the United States District Court for the 

Western District of Texas in No. 1:14-cv-00112-LY, Judge 

Lee Yeakel.

______________________ 

WALLACH, Circuit Judge, concurring. 

I concur entirely with the majority’s opinion, but write 

to briefly address the honor of our profession as attorneys. 

In the law, as in life, it is best if one’s conduct is such that 

when accused of malefaction, the community responds as 

one that “Ms. or Mr. __________ simply doesn’t act that 

way.” The standard is always aspirational for we are 

Case: 15-1629 Document: 3-2 Page: 22 Filed: 09/12/2016
2 DYNAMIC 3D GEOSOLUTIONS LLC v. SCHLUMBERGER LTD. 

human, but if we do not strive to reach it, then perhaps 

we ought to consider that the game’s not worth the candle. 

Ms. Rutherford’s conduct failed to meet minimal 

standards necessary to preserve public confidence in the 

legal system, and for that, she and others paid a price. 

That does not mean, however, that she should not, as a 

member of what is supposed to be an honorable profession, have held herself to a higher standard. 

Case: 15-1629 Document: 3-2 Page: 23 Filed: 09/12/2016