Case 5:18-md-02834-BLF Document 760 Filed 06/24/22 Page 1 of 9
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`WEB
`PERSONAL
`RE
`IN
`TECHNOLOGIES, LLC ET AL., PATENT
`LITIGATION
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`AMAZON.COM, INC. and AMAZON WEB
`SERVICES, INC.,
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`Plaintiffs
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`v.
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`PERSONALWEB TECHNOLOGIES, LLC
`and LEVEL 3 COMMUNICATIONS, LLC,
`
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`Case No. 18-md-02834-BLF
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`
`ORDER CONDITIONALLY
`GRANTING STUBBS ALDERTON &
`MARKILES, LLP’S MOTION TO
`WITHDRAW AS COUNSEL FOR
`PERSONALWEB TECHNOLOGIES,
`LLC
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`
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`Case No.: 5:18-cv-00767-BLF
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`Defendants.
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`
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`Case No.: 5:18-cv-05619-BLF
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`PERSONALWEB TECHNOLOGIES, LLC
`and LEVEL 3 COMMUNICATIONS, LLC,
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`Plaintiffs
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`v.
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`TWITCH INTERACTIVE, INC.,
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`Defendant.
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`Before the Court is Stubbs Alderton & Markiles, LLP’s (“SAM”) second motion to withdraw
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`as counsel for PersonalWeb Technologies, LLC (“PersonalWeb”) as to the post-judgment collection
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`proceedings regarding PersonalWeb’s patent infringement claims against Amazon.com, Inc.;
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`Amazon Web Services, Inc.; and Twitch Interactive, Inc. (collectively, “Amazon”). See Motion,
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`ECF No. 728.1 In compliance with this Court’s Order, ECF No. 752, Michael Weiss, as President
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`1 All ECF numbers in this order pertain to In re: PersonalWeb Techs., LLC, No.
`18–md–02834–BLF.
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`and Manager of PersonalWeb, appeared as a representative of PersonalWeb along with specially
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`appearing counsel Robert M. Charles, Jr. at the June 23, 2022 hearing on PersonalWeb’s motion.
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`SAM previously filed a motion to withdraw, which the Court conditionally granted on June 25,
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`2021, holding that SAM could withdraw only if replacement counsel for PersonalWeb filed a notice
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`of appearance. See Order on First Motion to Withdraw, ECF No. 694. Since that order, no notice
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`of appearance for PersonalWeb’s replacement counsel has been filed, so SAM remains as
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`PersonalWeb’s counsel in this case. In its second motion to withdraw, SAM argues that
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`developments in the case since the Court’s order on SAM’s first motion to withdraw have put SAM
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`in danger of committing California ethical violations. See Motion, ECF No. 728; Reply,
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`ECF No. 748. Specifically, SAM points out that PersonalWeb has failed to comply with the Court’s
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`discovery orders, creating potential conflict and competent representation issues on SAM’s part.
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`See ECF Nos. 664, 704. Additionally, SAM points out that a Los Angeles County Superior Court
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`has issued a preliminary injunction in a PersonalWeb receivership action appointing a receiver (the
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`“Receiver”) and enjoining PersonalWeb from interfering with the Receiver’s duties. See Kehr
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`Decl., ECF No. 728-1, Ex. E. SAM argues that it would breach the preliminary injunction if it
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`continued to represent PersonalWeb in this case. Amazon opposes SAM’s motion and makes
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`several requests for affirmative relief against SAM. See Opposition, ECF No. 742.
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` Based on the below reasoning, the Court CONDITIONALLY GRANTS SAM’s second
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`motion to withdraw. As with the Court’s order conditionally granting SAM’s first motion to
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`withdraw, SAM may withdraw (1) once PersonalWeb has filed a notice of appearance for
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`replacement counsel or (2) upon satisfactory explanation of the Receiver’s refusal to authorize
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`substitute counsel and submission of effective contact information for the Receiver and
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`PersonalWeb. Additionally, as outlined at the June 23, 2022 hearing on SAM’s motion to withdraw,
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`the Court DIRECTS SAM to make several requests of the Receiver, as outlined below. Also, the
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`Court STRIKES Amazon’s requests for affirmative relief against SAM and STAYS further motion
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`practice before the Magistrate Judge handling post-judgment discovery.
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`I. BACKGROUND
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`On July 27, 2021, the Court issued an Amended Judgment in favor of Amazon for
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`$5.4 million in attorneys’ fees, costs, and post-judgment interest. See Amended Judgment,
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`ECF No. 708. The Court’s judgment followed a finding on summary judgment that Amazon did
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`not infringe PersonalWeb’s asserted patents. See Summary Judgment Order, ECF No. 578.
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`On May 25, 2021, SAM moved to withdraw as counsel for PersonalWeb, arguing that
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`withdrawal was appropriate because PersonalWeb had discharged SAM as its counsel and retained
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`replacement counsel to represent it in the post-judgment collection proceedings. See ECF No. 688.
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`On June 25, 2021, the Court conditionally granted SAM’s motion to withdraw, allowing SAM to
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`withdraw only upon notice of appearance by replacement counsel. See Order, ECF No. 694 at 4.
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`The Court found that unless replacement counsel filed a notice of appearance, SAM’s withdrawal
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`would unduly prejudice Amazon by thwarting Amazon’s efforts to collect its judgment. See id.
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`In the year since the Court’s June 25, 2021 Order, no notice of appearance for PersonalWeb’s
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`replacement counsel has been filed in this case. SAM now moves to withdraw as counsel for
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`PersonalWeb for a second time. See Motion, ECF No. 728. SAM argues that based on factual
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`developments since the Court’s order conditionally granting SAM’s first motion to withdraw, the
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`prejudice to SAM if it is not allowed to withdraw outweighs any prejudice to Amazon from SAM’s
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`withdrawal. See Motion, ECF No. 728. Specifically, SAM argues that if it is not allowed to
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`withdraw, then it risks violating provisions of the California Business & Professions Code and the
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`California Rules of Professional Conduct. See id. Amazon opposes, arguing that SAM has not
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`identified grounds warranting reconsideration of the Court’s denial of SAM’s previous withdrawal
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`motion. See Opposition, ECF No. 742.
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`SAM points to two main developments since the Court’s order conditionally granting SAM’s
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`first motion to withdraw. First, SAM points to a state court receivership action involving
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`PersonalWeb. On April 27, 2021, creditors filed a receivership action in Los Angeles County
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`Superior Court against PersonalWeb (“Receivership Action”). The Los Angeles County Superior
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`Court issued a preliminary injunction appointing Robb Evans & Associates LLC (the “Receiver”)
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`as receiver on June 1, 2021. See Kehr Decl., ECF No. 728-1, Ex. E. The stipulation enjoined
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`PersonalWeb and its representatives, inter alia, from “[d]oing any act or thing whatsoever to
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`interfere with the Receiver taking control or possession of, or managing the property subject to this
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`receivership; or in any way to interfere with the Receiver; or to harass or interfere with the duties of
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`the Receiver; or to interfere in any manner with the exclusive jurisdiction of this Court over the
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`property and assets of Defendant PersonalWeb, or its subsidiaries or affiliates.” See id. at 5. Further,
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`the stipulation enjoined PersonalWeb and its representatives from “[c]ommencing, prosecuting,
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`continuing, or entering into any suit or proceeding in the name or on behalf of Defendant
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`PersonalWeb, or any of their subsidiaries or affiliates, except for any pending enforcement actions
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`by Defendant PersonalWeb concerning it [sic] intellectual property claims[.]” See id. at 4.
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`Second, SAM points to PersonalWeb’s failure to comply with the Court’s April 27 and
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`July 20, 2021 discovery orders. See ECF Nos. 664, 704. SAM also points to Amazon’s threats of
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`sanctions and contempt motions against SAM and PersonalWeb if PersonalWeb continues to fail to
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`comply with the Court’s discovery orders. See Motion, ECF No. 728 at 7–8 (citing Gersh Decl.,
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`ECF No. 728-6 ¶ 6, Ex. J; Parker Decl., ECF No. 728-2 ¶¶ 3–4; Sherman Decl., ECF No. 728-3
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`¶ 6).
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`II. LEGAL STANDARD
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`Under Civil Local Rule 11-5, counsel may not withdraw from an action until relieved by
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`order of the Court after written notice has been provided, reasonably in advance, to the client and to
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`all other parties who have appeared in the case. Civ. L.R. 11-5(a). A corporation, unincorporated
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`association, partnership or other such entity may appear only through a member of the bar of this
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`Court. See Civ. L.R. 3-9(b); see also United States v. High Country Broad Co., Inc., 3 F.3d 1244,
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`1245 (9th Cir. 1993).
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`“In this district, the conduct of counsel, including withdrawal of counsel, is governed by the
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`standards of professional conduct required of members of the State Bar of California.” Optrics Inc.
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`v. Barracuda Networks Inc., No. 17–cv–04977–RS, 2020 WL 1815690, at *2 (N.D. Cal. Feb. 28,
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`2020) (citation omitted). Before withdrawing for any reason, however, an attorney must take
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`“reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client, including
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`giving due notice to the client, allowing time for employment of other counsel, complying with
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`rule 3-700(D), and complying with applicable laws and rules.” Cal. R. Prof. Conduct 3-700(A)(2).
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`The decision to permit counsel to withdraw is within the sound discretion of the trial court.
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`United States v. Carter, 560 F.3d 1107, 1113 (9th Cir. 2009). Courts consider several factors when
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`deciding a motion for withdrawal, including: “(1) the reasons counsel seeks to withdraw; (2) the
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`possible prejudice that withdrawal might cause to other litigants; (3) the harm that withdrawal might
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`cause to the administration of justice; and (4) the extent to which withdrawal will delay resolution
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`of the case.” Deal v. Countrywide Home Loans, No. 09-CV-01643-SBA, 2010 WL 3702459, at *2
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`(N.D. Cal. Sept. 15, 2010) (citations omitted).
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`III. DISCUSSION
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`A.
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`SAM’s Motion to Withdraw
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`SAM argues that withdrawal is warranted because if SAM continues to represent
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`PersonalWeb in this action, SAM will violate the California Business & Professions Code and the
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`California Rules of Professional Conduct. See Motion, ECF No. 728. First, SAM argues that
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`California Business & Professions Code § 6103 precludes SAM from continuing to represent
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`PersonalWeb because doing so would constitute “willful disobedience or violation” of the
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`preliminary injunction in the Receivership Action. See Motion, ECF No. 728 at 5–6 (citing Kehr
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`Decl., ECF No. 728-1, Ex. E). Second, SAM argues that California Rule of Professional
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`Conduct 1.1 precludes SAM from representing PersonalWeb, because SAM cannot do so “with
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`competence” because of PersonalWeb’s lack of communication regarding the Court’s outstanding
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`discovery orders. See id. at 6 (citing ECF Nos. 664, 704). Third, SAM argues that it cannot continue
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`to represent PersonalWeb under California Rule of Professional Conduct 1.7(b), because Amazon
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`may file a contempt motion or motion for sanctions related to PersonalWeb’s discovery obligations
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`that could create a conflict between SAM and the uncooperative PersonalWeb. See id. at 7–8.
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`Accordingly, SAM asserts that any prejudice to Amazon from SAM’s withdrawal is outweighed by
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`the prejudice to SAM in remaining as PersonalWeb’s counsel. See id. at 8–9. SAM argues that
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`courts have granted motions to withdraw even where they leave corporate parties unrepresented,
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`leaving the party unrepresented and putting “extreme pressure” on it to find new counsel. See Reply,
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`ECF No. 748 at 3–4 (citing Thomas G. Ferruzzo, Inc. v. Sup. Ct., 104 Cal.App.3d 501, 504 (1980);
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`Gamet v. Blanchard, 91 Cal.App.4th 1276, 1284 (2001)). In response, Amazon argues that SAM
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`has not identified a material change to warrant reconsideration; any ethical violations result from
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`SAM improperly taking direction from PersonalWeb, rather than the Receiver; and allowing SAM
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`to withdraw would prejudice Amazon, just as the Court previously held. See Opposition,
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`ECF No. 742 at 6–9.
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`The Court finds that SAM has failed to show that circumstances have changed sufficiently
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`to warrant modifying the Court’s prior order conditionally granting SAM’s motion to withdraw.
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`See Order on First Motion to Withdraw, ECF No. 694. In that order, the Court found that “SAM’s
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`withdrawal presents undue prejudice to [Amazon],” because “newly retained counsel has refused to
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`appear” and “[i]t appears that PersonalWeb is manipulating the situation by claiming that SAM is
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`not authorized to represent it in post-judgment proceedings while stalling on having its new attorney
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`file an appearance.” See id. at 3. Accordingly, the Court granted SAM’s motion to withdraw on the
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`condition that PersonalWeb filed a notice of appearance for replacement counsel. See id. at 4. A
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`year has passed, and PersonalWeb has still failed to file a notice of appearance for replacement
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`counsel.
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`SAM’s arguments are insufficient to make the Court reconsider its prior order without
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`obtaining certain information from the Receiver. As to SAM’s arguments related to the California
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`Rules of Professional Conduct and PersonalWeb’s discovery obligations, if counsel could move to
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`withdraw every time its client failed to meet its discovery obligations, the flood of unrepresented
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`parties would inundate the courts. To minimize any prejudice to SAM while the Court works out
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`the issue of PersonalWeb’s representation in this case, the Court hereby STAYS further motion
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`practice before the Magistrate Judge handling post-judgment discovery.
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`As to SAM’s argument regarding the California Business & Professions Code § 6103 and
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`the preliminary injunction in the Receiver Action, the Court notes that the preliminary injunction in
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`the Receivership Action explicitly carves out PersonalWeb’s intellectual property litigation. See
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`Kehr Decl., ECF No. 728-1, Ex. E at 4. However, the reach of that provision is unclear as is the
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`division of authority vested in the Receiver versus the authority retained by PersonalWeb to fulfill
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`its obligations in these post-judgment proceedings under the jurisdiction of the federal court.
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`It is not this Court’s intention to force SAM to violate the state court preliminary injunction
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`or its ethical obligations. But the Court has serious concerns that PersonalWeb is making a mockery
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`of these judicial proceedings. After all, it was PersonalWeb that invoked the jurisdiction of this
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`Court by filing over 60 patent infringement cases against various Amazon customers. PersonalWeb
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`lost all of those cases and is now left with a judgment against it for over $5 million. Performing a
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`possum act by playing dead before this Court is not acceptable conduct. Thus, before SAM may
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`withdraw from the case, the Court must receive communication from the Receiver on certain issues
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`that will advise the Court on the necessity of allowing PersonalWeb to proceed as an unrepresented
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`party or to order appearance of substitute counsel before SAM may withdraw.
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`To this end, the Court orders PersonalWeb to request that the Receiver provide written
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`responses to the three questions set forth below to be transmitted by PersonalWeb to this Court.
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`B. Amazon’s Requests
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`In its Opposition, Amazon makes several requests. See Opposition, ECF No. 742 at 9–10.
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`First, Amazon requests that the Court direct SAM to comply with certain post-judgment discovery
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`orders. See id. Second, Amazon requests that the Court order the Receiver to appear and show
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`cause why he has failed to cause PersonalWeb to comply with the Court’s orders and why he has
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`not retained substitute counsel in this action. See id. at 10. Third, Amazon requests that the Court
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`retain jurisdiction over SAM regarding potential sanctions. See id.
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`The Court STRIKES Amazon’s requests as improper attempts to seek affirmative relief in
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`its Opposition. See Finjan, Inc. v. Blue Coat Sys., Inc., No. 13–cv–03999–BLF, 2015 WL 3630000,
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`at *13 n.8 (N.D. Cal. June 2, 2015). Moreover, this Court will not interfere with the judicial acts of
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`the Magistrate Judge handling these issues.
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`IV. ORDER
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`For the foregoing reasons, IT IS HEREBY ORDERED that:
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`1.
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`SAM’s second motion to withdraw is CONDITIONALLY GRANTED. SAM may
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`withdraw (1) upon notice of appearance by replacement counsel for PersonalWeb;
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`or (2) upon receipt of the Receiver’s responses to the inquiries listed in No. 2 and
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`submission of effective contact information for PersonalWeb and its assurance that
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`it will be responsive to these judicial proceedings. Satisfaction of No. 2 is not self-
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`executing and will require express approval of the Court;
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`2.
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`within seven days of this Order, PersonalWeb SHALL do the following:
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`a. PersonalWeb SHALL provide a copy of this Order to the Receiver;
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`b. PersonalWeb SHALL request in writing that the Receiver answer the following
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`questions in writing within 30 days and submit those answers to this Court
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`immediately upon receipt:
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`i. Based on the ongoing proceedings before the Northern District of
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`California in In re PersonalWeb Technologies, LLC Patent Litigation,
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`No. 18–md–02834–BLF, will the Receiver retain counsel to appear in this
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`federal court case?
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`ii. If the Receiver is not willing to retain counsel for the Receiver, will the
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`Receiver authorize PersonalWeb to do so and to reasonably compensate
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`that attorney?
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`iii. If the Receiver is not willing to retain counsel, or authorize PersonalWeb
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`to do so, will the Receiver confirm that there are no restrictions under the
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`receivership proceedings barring PersonalWeb from complying with
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`orders issued by the federal court, appearing before the Court, and making
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`statements binding on PersonalWeb?
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`c. PersonalWeb SHALL transmit to the Receiver a copy of this Order within seven
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`days and submit a cover letter requesting a written response within 30 days
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`thereafter;
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`3.
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`within 30 days of this Order, PersonalWeb SHALL file a status update with the Court
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`indicating whether it has received a written response from the Receiver regarding the
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`requests listed above;
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`4.
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`if the Receiver chooses not to respond to PersonalWeb’s requests listed above, the
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`Court will communicate with the Los Angeles County Superior Court directly;
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`5.
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`Amazon’s requests for affirmative relief in its Opposition (ECF No. 742 at 9–10) are
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`STRICKEN; and
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`6.
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`Further motion practice before the Magistrate Judge handling post-judgment
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`discovery is stayed for 45 days.
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`Dated: June 24, 2022
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`______________________________________
`BETH LABSON FREEMAN
`United States District Judge
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