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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE DISTRICT OF IDAHO
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`BALIVI CHEMICAL CORPORATION,
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`Plaintiff,
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`v.
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`JMC VENTILATION REFRIGERATION,
`LLC, a Washington Limited Liability
`Company, JMC ENTERPRISES, INC., a
`Washington Corporation, and JOEL
`MICKA, an Individual,
`
`Case No. CV-07-353-S-BLW
`
`MEMORANDUM
`DECISION AND ORDER
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`))
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`Defendants.
` ___________________________________)
`
`INTRODUCTION
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`The Court has before it a motion to consolidate and a motion to disqualify
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`counsel, both filed by defendants. The Court heard oral argument on January 4,
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`2008, and took the motions under advisement. For the reasons expressed below,
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`the Court will deny the motion to consolidate and reserve ruling on the motion to
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`disqualify.
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`1. Motion To Consolidate
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`Defendants (referred to collectively as JMC) seek to consolidate Balivi v.
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`JMC, CV-07-353-S-BLW with 1,4Group v. JMC, CV-07-354-S-BLW.
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`Memorandum Decision and Order – Page 1
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 2 of 18
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`Consolidation is proper under Rule 42 (a) when the two actions involve “a
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`common question of law or fact.” The Court must “weigh[ ] the saving of time and
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`effort consolidation would produce against any inconvenience, delay or expense
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`that it would cause.” Single Chip Systems Corp. v. Intermec IP Corp., 495 F.Supp.
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`2d 1052, 1057 (S.D.Cal. 2007) (quoting Huene v. United States, 743 F.2d 703, 704
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`(9th Cir.1984)). When actions involving a common question of law or fact are
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`pending before a court, it may order a joint hearing or trial of any or all the matters
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`in issue in the actions; it may order all the actions consolidated; and it may make
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`such orders concerning proceedings therein as may tend to avoid unnecessary costs
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`or delay. Single Chip, 495 F.Supp. 2d at 1057. The party seeking consolidation
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`bears the burden of establishing that the judicial economy and convenience
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`benefits of consolidation outweigh any prejudice. Id.
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`The motion requires the Court to compare the two cases. In Balivi, the
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`plaintiff alleges that JMC infringed the ‘525 patent. The patent describes a
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`mechanical device used to reduce airflow in potato storage buildings. While these
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`buildings usually need a robust ventilation system to keep stored potatoes cool, the
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`turbulent air flow causes problems for applicators spraying the potatoes with
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`sprout-inhibiting chemicals. To reach the potatoes, the sprayed chemicals need to
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`remain as an aerosol suspended in air. However, the fast air flow created by the
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`Memorandum Decision and Order – Page 2
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 3 of 18
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`ventilation system causes the aerosol chemicals to condense on the ventilation
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`machinery, wasting a significant amount of the chemicals and creating a coating
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`that is difficult to remove. To reduce the air flow during spraying, the ‘525 patent
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`describes the use of a variable frequency generator that can alter the power
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`supplied to the fan motors, allowing them to be operated at a reduced speed during
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`spraying and increased thereafter.
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`The 1,4Group case alleges that JMC infringed the ‘660 and ‘888 patents.
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`These patents describe a process for melting solid CIPC and transforming it into an
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`aerosol to be sprayed on stored potatoes as a dormancy-enhancer. The key to the
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`invention, as described in the patents, is that the process does not require that
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`solvents be mixed with the CIPC to aid in its transformation from a solid block to
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`an aerosol. Previously, solvents were added to the CIPC to assist in its melting and
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`ensure that it remain in liquid form as it is turned into an aerosol. But solvents,
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`when heated, can create toxic gases that render the potato storage buildings unsafe
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`for some period of time after spraying. The invention described in these patents
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`allows the use of a block of pure, solid CIPC that is easy and safe to transport, and
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`that can be melted and transformed into an aerosol without creating any toxic
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`gases.
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`To summarize, the Balivi patent involves an electrical device used to reduce
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`Memorandum Decision and Order – Page 3
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 4 of 18
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`the power frequency supplied to air fan motors, while the 1,4Group patents involve
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`a method for heating solid CIPC and forming an aerosol. One case involves a
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`device or apparatus patent; the other involves method or process patents.
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`JMC’s counsel stated at oral argument that he was not advocating
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`consolidation for trial purposes at this time, leaving open whether he would request
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`it later. At this point, the cases appear to lack the sufficient commonalities
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`necessary to warrant consolidation. While that could change, the Court is not
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`inclined at this point to consolidate the cases for trial purposes.
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`JMC’s counsel seeks to consolidate the cases for discovery. There could be
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`an overlap in three main areas: (1) depositions; (2) document production; and (3)
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`site investigations. This overlap, however, is not sufficient to warrant
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`consolidation for discovery purposes. The Court is confident that counsel can
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`stipulate to apply overlapping discovery to both cases without having to engage in
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`expensive and unnecessary duplicative discovery.
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`For all these reasons, the Court will deny the motion to consolidate.
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`MOTION TO DISQUALIFY
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`2.
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`Factual Background
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`JMC seeks to disqualify attorney Edgar Cataxinos and his law firm
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`TraskBritt from representing the plaintiff. JMC asserts that Cataxinos represented
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`Memorandum Decision and Order – Page 4
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 5 of 18
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`JMC, and has violated Idaho’s Rules of Professional Conduct by suing a client.
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`Cataxinos denies this charge.
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`The TraskBritt firm has represented Balivi, 1,4Group, and related entities
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`since 1989 in multiple patent, trademark, and intellectual property matters. See
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`Cataxinos Declaration at ¶ 21. The firm has billed these entities over $8 million in
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`fees since that time. Id.
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`In February of 1999, Cataxinos agreed to represent JMC Enterprises.
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`According to a Legal Representation Agreement, he was “to represent [JMC
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`Enterprises] in certain legal matters including: Trademark Matters (and such
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`additional matters as [JMC Enterprises] may subsequently designate orally or in
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`writing).” See Legal Representation Agreement attached as Exhibit 1 to Micka
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`Affidavit.
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`JMC Enterprises was a Washington corporation. As Cataxinos was
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`preparing the trademark application, he was informed by JMC’s President, Joel
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`Micka, that “the trademark would be owned and used by JMC Ventilation as
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`opposed to JMC Enterprises.” See Cataxinos Declaration at ¶ 17. JMC
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`Ventilation was a Limited Liability Corporation created by Micka. He and his wife
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`were the sole members.
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`On June 24, 1999, Cataxinos filed a trademark application with the Patent
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`Memorandum Decision and Order – Page 5
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 6 of 18
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`and Trademark Office (PTO) on behalf of JMC Ventilation LLC. The PTO issued
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`the trademark on July 10, 2001.
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`To renew the trademark, JMC would need to file papers by certain
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`prescribed deadlines. Micka alleges that to ensure compliance with these deadlines,
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`he “asked [Trask Bitt] to be responsible for monitoring our registration.” See
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`Micka Declaration at p. 5, ¶ 13. Cataxinos denies this: “I did not have any
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`conversation with him [Micka] after the issuance of the . . . trademark in 2001.”
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`See Cataxinos Declaration at ¶ 19.
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`Cataxinos did, however, create a reminder list of the important renewal
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`deadlines through the year 2012. See Exhibit 6 attached to Micka Declaration.
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`When the trademark rules changed in 2002, Cataxinos sent a letter to JMC’s
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`President, Joel Micka (dated July 16, 2002) advising him of the changes, and billed
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`JMC $26.50 for the letter.
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`Consistent with his reminder list of renewal deadlines, Cataxinos sent a
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`letter to Micka on July 12, 2006, reminding him of the renewal deadline of July 10,
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`2007. He also billed JMC about $100 for this reminder.
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`On September 11, 2006, about two months after Micka received this
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`reminder letter, he received a letter from attorney Bill Mauk, stating that “our firm,
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`together with the . . . law firm of TraskBritt, represents the legal interests of the
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`Memorandum Decision and Order – Page 6
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 7 of 18
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`inventors and owners of the above patents,” including the ‘525 patent at issue in
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`Balivi v JMC and the “660 and ‘888 patents at issue in 1,4Group v JMC. Mauk
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`describes each patent in order to “put your company on notice” because “your
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`actions may infringe upon our clients’ patent rights under one or more of these
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`patents.”
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`Mauk admits in the letter that his concerns may be based on incomplete
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`information: “Although we may not yet fully appreciate in every instance how
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`JMC Enterprises uses and applies solid CIPC brick products and other sprout
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`inhibitors, the information our clients have compels raising these concerns.” He
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`invites JMC to share “any information contrary to what is represented by this
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`letter” to “avoid an unnecessary legal dispute.” He also offers to discuss licensing,
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`and finishes by demanding that JMC “please take whatever steps are necessary and
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`appropriate to curtail any activities that directly or indirectly infringe” the three
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`patents.
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`Micka “thought the letter was, at best, a betrayal of our ongoing
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`relationship.” See Micka Declaration at p. 6, ¶ 17. Nonetheless, Micka “spoke
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`with Mr. Cataxinos later in fall 2006 in response to his July 12, 2006, letter
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`regarding the affidavit due in July 2007.” Id. at ¶ 18. Micka describes that
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`conversation as “awkward to say the least.” Id. Micka states that Cataxinos
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`Memorandum Decision and Order – Page 7
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 8 of 18
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`“provided me with additional legal advice regarding the affidavit that was due to
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`the [PTO] in July 2007 regarding our . . . trademark registration.” Id. Micka “also
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`discussed with Mr. Cataxinos certain issues related to copyright protection . . .
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`[and] he briefly advised me regarding the legal requirements for such protection
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`and we discussed future copyright work on behalf of JMC Ventilation.” Id. at
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`¶ 19. Cataxinos responds that after examining all his files, he can find “no
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`evidence of such discussions,” and he specifically denies discussing “any copyright
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`matters with Mr. Micka at any time.” See Cataxinos Declaration at ¶ 19.
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`On June 4, 2007, about nine months after the demand letter, Cataxinos sent a
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`letter to Micka, in his capacity as a member of JMC Ventilation LLC., stating that
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`“TraskBritt will take no further action on your behalf. We are enclosing our files.”
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`See Exhibit 8 to Micka Declaration. Cataxinos enclosed with the letter two files
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`regarding JMC, including a Withdrawal of Counsel form that was submitted to the
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`PTO. See Cataxinos Declaration at ¶ 23. In that Withdrawal, Cataxinos
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`represented to the PTO that JMC Ventilation was “no longer represented by this
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`firm [TraskBritt].” See Exhibit 9 to Micka Declaration. Cataxinos submitted the
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`Withdrawal motion on June 4, 2007, and it was granted the same day. Id.
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`Two months later, on August 21, 2007, Mauk and Cataxinos sued (1) JMC
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`Enterprises Inc., (2) JMC Ventilation LLC., and (3) Micka for infringing the ‘525
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`Memorandum Decision and Order – Page 8
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 9 of 18
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`patent, see Balivi v. JMC, Civ. No. 07-353-S-BLW, and for infringing the ‘660 and
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`‘880 patents, see 1,4Group v. JMC, Civ. No. 07-354-S-BLW.
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`ANALYSIS
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`All attorneys practicing before this Court “must familiarize themselves with
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`and comply with the Idaho Rules of Professional Conduct of the Idaho State Bar
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`and decisions of any court interpreting such rules.” See Local Rule 83.5. Pursuant
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`to the Idaho courts’ interpretation of those Rules, JMC bears the burden of proving
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`that TraskBritt should be disqualified. See Weaver v. Millard, 819 P.2d 110
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`(Id.App.Ct. 1991).
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`The Idaho Rules, pertaining to this case, prohibit an attorney from (1)
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`representing a client “if the representation involves a concurrent conflict of
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`interest,” see Rule 1.7(a); (2) representing a client against a former client in the
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`“same or a substantially related matter,” see Rule 1.9(a); and (3) using information
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`related to the former client to the disadvantage of the former client, with some
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`exceptions, see Rule 1.9(c).
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`The application of these Rules to the facts raise four questions that can be
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`analyzed in a “decision tree” format. First, when did Cataxinos cease representing
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`JMC? If it was in 2001 when he obtained the trademark for JMC, he was clearly
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`not concurrently representing JMC and 1,4Group when those two companies
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`Memorandum Decision and Order – Page 9
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 10 of 18
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`became adversaries much later, and hence Rule 1.7(a) was not violated. Neither
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`was Rule 1.9 violated because the trademark matter and the present lawsuits are
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`not substantially related.
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`However, if Cataxinos did not cease representing JMC until June 4, 2007 –
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`when he formally withdrew – there is an issue whether JMC and 1,4Group were in
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`conflict prior to that time, tarring Cataxinos with a concurrent conflict, and a
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`potential violation of Rule 1.7(a). JMC argues that almost 9 months before
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`Cataxinos withdrew, he and co-counsel Mauk sent the letter of September 11,
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`2006, to Micka, pitting 1,4Group against JMC at a time when Cataxinos
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`represented both.
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`This argument raises the second major issue: When did JMC and 1,4Group
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`become adversaries? If the two companies were in conflict at a time when
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`Cataxinos represented both, there is a violation of Rule 1.7(a) and the third major
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`issue arises: Does the Court have any discretion to fashion a remedy other than
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`disqualification for a violation of Rule 1.7(a)?
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`If the two companies were not in conflict until after Cataxinos stopped
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`representing JMC, the Court reaches the fourth major issue: Is Cataxinos using
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`information he obtained from Micka to the disadvantage of JMC in violation of
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`Rule 1.9(c)?
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`Memorandum Decision and Order – Page 10
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 11 of 18
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`The Court will discuss each of the four major issues below.
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`1. When Did Cataxinos Cease Representing JMC?
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`Cataxinos answers this question by asserting that his representation ended
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`when the trademark was issued in 2001. He asserts that he was hired for that
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`purpose, and that when he obtained the trademark, his duties – and hence his
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`representation of JMC – was over. Micka responds that Cataxinos agreed to a
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`continuing representation to track the trademark deadlines and advise him on
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`renewal issues. Micka believed that Cataxinos was representing JMC at least until
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`June 4, 2007.
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`The Idaho courts have not adopted a single test for determining whether an
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`attorney-client relationship exists. They have instead evaluated claims under the
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`two predominant tests adopted in other jurisdictions: (1) The controlling factor in
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`the first test is the client's subjective belief, which must be reasonable under the
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`circumstances; and (2) The controlling factor in the second test requires a contract
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`analysis, finding that no attorney-client relationship exists absent clear assent by
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`both the putative client and attorney. Warner v. Stewart, 930 P.2d 1030, 1035 (Id.
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`1997).
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`Under either test, an evidentiary hearing is needed. Micka argues that he
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`had continuing contact with Cataxinos until late 2006, receiving both legal advice
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`Memorandum Decision and Order – Page 11
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 12 of 18
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`and fee billings, which he paid. These contacts led Micka to believe that Cataxinos
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`was still representing him when he received the Mauk letter in September of 2006.
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`Micka felt the Mauk letter was a “betrayal” because it placed JMC in direct
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`conflict with 1,4Group, at a time when Cataxinos represented both.
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`Cataxinos denies giving legal advice to Micka after 2001, and characterizes
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`the billings as involving trivial sums for insignificant matters. According to
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`Cataxinos, his representation of JMC was for a single, discrete matter – obtaining a
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`trademark – and there was no continuing relationship.
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`The Legal Representation Agreement seems to contemplate a continuing
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`relationship by stating that Cataxinos would represent JMC on “Trademark Matters
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`(and such additional matters as [JMC Enterprises] may subsequently designate
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`orally or in writing).” (Emphasis added). It is unclear, however, whether JMC or
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`Micka ever designated any further matters for Cataxinos orally or in writing. In
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`addition, the Court’s copy of this Agreement is unsigned, and so there is a question
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`whether the parties intended to be bound by it in any event. These factual disputes
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`will need to be sorted out in an evidentiary hearing.
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`JMC also argues that even as of June 4, 2007, Cataxinos failed to withdraw
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`from representing JMC Enterprises, and only withdrew from representing JMC
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`Ventilation. The Court disagrees. By returning both files, Cataxinos was clearly
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`Memorandum Decision and Order – Page 12
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 13 of 18
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`withdrawing from representing both entities. No reasonable person could believe
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`otherwise. That issue will not be pursued at the evidentiary hearing.
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`2. When Did JMC and 1,4Group Become Adversaries?
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`This issue becomes relevant if Cataxinos did not end his representation of
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`JMC in 2001. The Court will need to determine when JMC and 1,4Group became
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`adversaries to determine if Cataxinos was representing both at a time when he had
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`a concurrent conflict of interest.
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`Under the Idaho Rules, a concurrent conflict of interest exists if “the
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`representation of one client will be directly adverse to another client.” The Rule’s
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`comment section explains that an attorney has a duty not to “act as an advocate in
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`one matter against a person the lawyer represents in some other matter.” See
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`comment 6 to Rule 1.7 (emphasis added).
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`Thus, JMC must show that Cataxinos represented JMC at the same time that
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`he was (1) acting as an advocate, (2) for a client (1,4Group) directly adverse to
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`JMC. JMC argues that it was in direct conflict with 1,4Group when Mauk sent his
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`letter on September 11, 2006. But the letter raises more questions than it answers.
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`Mauk’s letter warns JMC that it might be infringing, but it also invites
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`further discussion and negotiation. It lacks the intimidating tone many demand
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`letters take when litigation is deemed inevitable, i.e., when the parties are directly
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`Memorandum Decision and Order – Page 13
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 14 of 18
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`in conflict. The Court cannot find – as a matter of law – on this record that the
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`Mauk letter so clearly pits the parties against one another that they could be
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`deemed to be in conflict as of September 11, 2006.
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`Obviously, the parties were on conflict on August 21, 2007, when this suit
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`was filed. An adversary relationship may have begun even sooner given the course
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`of discussions between the parties. But from this record, the Court cannot identify
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`the precise time when the companies became direct adversaries. Thus, the Court
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`cannot find as a matter of law – without an evidentiary hearing – that Cataxinos
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`violated Rule 1.7(a) by waiting until June 4, 2007, to withdraw.
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` It is also unclear what role Cataxinos played in representing 1,4Group at
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`the time of the Mauk letter. It is not enough that Cataxinos was simply
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`representing 1,4Group on September 11, 2006, if he knew nothing about Mauk’s
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`letter. Cataxinos must be acting as an advocate pursuing a course against the
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`interests of JMC. The Court cannot tell if that was the case prior to June 4, 2007.
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`What role did Cataxinos – or any TraskBritt attorney – play in drafting the Mauk
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`letter? Was TraskBritt pursuing JMC as an adversary before June 4, 2007? These
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`and other questions remain to be answered. The evidentiary hearing will address
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`these issues.
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`3.
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`Is Disqualification the Only Remedy for a Rule 1.7(a) Violation?
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`Memorandum Decision and Order – Page 14
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 15 of 18
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`If Cataxinos was acting as an advocate for 1,4Group against JMC, he is
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`subject to disqualification under Rule 1.7 even though the trademark matter for
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`which he represented JMC is unrelated to the present litigation. See Rule 1.7,
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`comment 6 (concurrent representation is grounds for disqualification “even when
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`the matters are wholly unrelated”).
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`Cataxinos argues, however, that disqualification is discretionary with the
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`Court. Idaho courts have held that judges generally have discretion to fashion a
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`remedy after finding that an attorney has a conflict of interest under Rule 1.7. See
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`Crown v. Hawkins Co., Ltd., 910 P.2d 786 (Id.Ct.App. 1996). In Crown, the court
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`found a violation of what is now Rule 1.7(a)(2) – prohibiting concurrent conflicts
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`caused by “the personal interests of the lawyer.” The court rejected the argument
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`that the conflicted counsel should be “automatically disqualified,” and held that
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`whether disqualification was warranted was an issue “calling for the exercise of the
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`court’s discretion.” Id. at 795. The court affirmed the district court’s refusal to
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`disqualify the attorney, pointing out the prejudice to the client of losing counsel
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`just three weeks before trial, and the fact that the opposing party did not seek
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`disqualification promptly. Id.
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`While Crown involved a violation of Rule 1.7(a)(2) rather than (a)(1), there
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`is no principled distinction between them for remedy purposes; they prohibit
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`Memorandum Decision and Order – Page 15
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 16 of 18
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`equally pernicious conflicts with current clients. Thus, Crown would apply with
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`equal strength here, giving this Court discretion to fashion a remedy “which will
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`assure fairness to the parties and the integrity of the judicial process . . . [and]
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`[w]henever possible, . . . reach a solution that is least burdensome to the client.”
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`See Weaver v. Millard, 819 P.2d 110, 115 (Id.App.Ct. 1991) (also involving a
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`attorney’s conflict of interest). The Court therefore holds that disqualification is
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`not automatic upon a finding of a violation of Rule 1.7(a)(1).
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`4.
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`Did Cataxinos Violate Rule 1.9(c)?
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`JMC argues that Cataxinos obtained confidential information from Micka
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`that he could use against JMC in this litigation. Cataxinos denies this charge and
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`asserts that he received nothing that was not already public information. This
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`dispute cannot be resolved as a matter of law and hence must await the evidentiary
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`hearing.
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`5.
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`Other Issues
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`Cataxinos argues that he and his firm are immune from Rule 1.7's
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`proscriptions because they withdrew before the lawsuits were filed against JMC.
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`But the filing date is not an “iron curtain” behind which no inquiry may go. Rule
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`1.7 extends back to the time the clients were directly adverse to one another, which
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`could occur before a complaint is filed. See generally Stratagem Development
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`Memorandum Decision and Order – Page 16
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 17 of 18
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`Corp. v. Heron International, 756 F.Supp. 789, 793 (S.D.N.Y. 1991) (applying
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`rule similar to Rule 1.7(a) to disqualify law firm that represented one client while
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`“actively planning” litigation against another client).
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`The parties briefed and argued issues concerning whether Micka was
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`represented by William Britt of the TraskBritt firm at a deposition, and whether
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`Micka’s Power of Attorney established representation by TraskBritt. While those
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`issues remain to be resolved, the Court finds JMC’s arguments unpersuasive, at
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`least on the present record. The real issues in the case are defined by the four
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`questions discussed above.
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`6.
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`Conclusion
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`For all of these reasons, the Court will reserve ruling on the motion to
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`disqualify and set up an evidentiary hearing. The Court will deny the motion to
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`consolidate.
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`ORDER
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`In accordance with the terms of the Memorandum Decision set forth above,
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`NOW THEREFORE IT IS HEREBY ORDERED, that the motion to
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`consolidate (Docket No. 29) is DENIED.
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`IT IS FURTHER ORDERED, that an evidentiary hearing be held on the
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`motion to disqualify (Docket No. 28) on January 24, 2008, at 9:00 a.m. in the
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`Memorandum Decision and Order – Page 17
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`Case 1:07-cv-00353-DVB Document 47 Filed 01/10/08 Page 18 of 18
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`James A. McClure Federal Building and U.S. Courthouse in Boise, Idaho.
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` DATED: January 10, 2008
`
`
` Honorable B. Lynn Winmill
` Chief U. S. District Judge
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`Memorandum Decision and Order – Page 18