Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 1 of 22 PageID #: 1901
`
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`THE HILLMAN GROUP, INC.,
`
`Case No. 2:19-cv-00209-JRG
`
`Plaintiff,
`
`v.
`
`KEYME, INC.,
`
`Defendant.
`
`JURY TRIAL DEMANDED
`
`PLAINTIFF’S MOTION TO DISQUALIFY COOLEY LLP
`
`KEYME EX. 1022, PAGE 1
`
`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 2 of 22 PageID #: 1902
`
`TABLE OF CONTENTS
`
`I. 
`
`II. 
`
`
`INTRODUCTION .............................................................................................................. 1 
`
`BACKGROUND ................................................................................................................ 1 
`
`A. 
`
`Cooley Has a Longstanding Attorney-Client Relationship with Hillman
`and Minute Key, Serving as General Counsel and Regularly Attending
`Board Meetings ....................................................................................................... 1 
`
`1. 
`
`2. 
`
`3. 
`
`4. 
`
`5. 
`
`Cooley Participated in Strategic Discussions for Prior Patent
`Infringement Litigation Against KeyMe on the ’446 Patent-in-Suit .......... 2 
`
`Cooley Participated in Strategic Discussions for the Defense of an
`Inter Partes Review Petition of the ’446 Patent-in-Suit ............................. 3 
`
`Cooley Participated in Strategic Discussions for a Declaratory
`Judgment Litigation Involving a Child of the ’446 Patent-in-Suit ............. 3 
`
`Cooley Was Regularly Updated on Minute Key’s Product
`Development, Patent Acquisition Strategies, Competitive Analysis,
` ........................................................ 4 
`
`a) 
`
`Cooley Received Privileged Information on Another Patent
`at Issue in This Case: the ’179 Patent ............................................. 5 
`
`Cooley Represented Minute Key for Hillman’s Acquisition,
`Continued Its Representation, and Did Not Terminate the
`Relationship ................................................................................................ 5 
`
`B. 
`
`Upon Learning of Cooley’s Representation of KeyMe, Hillman
`Investigated the Conflict and Attempted to Resolve It with Cooley ...................... 6 
`
`III. 
`
`ARGUMENT ...................................................................................................................... 7 
`
`A. 
`
`B. 
`
`Minute Key’s Attorney-Client Relationship with Cooley Passed to
`Hillman ................................................................................................................... 7 
`
`Cooley Has an Impermissible Conflict of Interest Under Rule 1.7 Because
`Hillman Is a Current Client of Cooley and Has Not Waived the Conflict ............. 9 
`
`1. 
`
`2. 
`
`Hillman Is a Current Client ......................................................................... 9 
`
`Cooley Is Adverse to Hillman and Hillman Never Gave Consent ........... 10 
`
`C. 
`
`Alternatively, Cooley Has an Impermissible Conflict Under Rule 1.9
`Because Cooley’s Representation of KeyMe Is Substantially Related to Its
`
`
`
`
`i
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`KEYME EX. 1022, PAGE 2
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`

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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 3 of 22 PageID #: 1903
`
`Past Representation of Minute Key and the Confidential Information It
`Received ................................................................................................................ 10 
`
`1. 
`
`2. 
`
`Cooley’s Past Representation of Minute Key Is Substantially
`Related to Its Current Representation of KeyMe ...................................... 11 
`
`Even If Not Substantially Related, There Is a Reasonable
`Probability Cooley Could Use Confidential Information Against
`Hillman ..................................................................................................... 13 
`
`D. 
`
`Disqualification Is the Appropriate Remedy ........................................................ 15 
`
`IV. 
`
`CONCLUSION ................................................................................................................. 15 
`
`
`
`
`
`
`
`
`
`ii
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`KEYME EX. 1022, PAGE 3
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`

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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 4 of 22 PageID #: 1904
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`CASES 
`
`Commodity Futures Trading Comm’n v. Weintraub,
`471 U.S. 343 (1985) .................................................................................................................... 8
`
`DataTreasury Corp. v. Wells Fargo & Co.,
`No. 2:06-CV-72 DF, 2009 WL 10679840 (E.D. Tex. Dec. 30, 2009) ..................................... 12
`
`Eastman Kodak Co. v. Sony Corp.,
`No. 04-CV-6095, 2004 WL 2984297 (W.D.N.Y. Dec. 27, 2004) .............................................. 8
`
`EON Corp. IP Holdings LLC v. Flo TV Inc.,
`No. CIV.A. 10-812-RGA, 2012 WL 4364244 (D. Del. Sept. 24, 2012) ............................ 13, 15
`
`F.D.I.C. v. U.S. Fire Ins. Co.,
`50 F.3d 1304 (5th Cir. 1995) .................................................................................................... 15
`
`Gen. Elec. Co. v. Mitsubishi Heavy Indus., Ltd.,
`No. 3:10-CV-276-F, 2011 WL 13201855 (N.D. Tex. Sept. 12, 2011) ....................................... 9
`
`Honeywell Int’l Inc. v. Philips Lumileds Lighting Co.,
`No. 2:07-CV-463-CE, 2009 WL 256831 (E.D. Tex. Jan. 6, 2009) .......................................... 10
`
`Hutton v. Parker-Hannifin Corp.,
`No. CV H-15-3759, 2016 WL 4140736 (S.D. Tex. Aug. 4, 2016) .......................................... 15
`
`In re Am. Airlines, Inc.,
`972 F.2d 605 (5th Cir. 1992) .......................................................................................... 7, 11, 13
`
`In re Dresser Indus., Inc.,
`972 F.2d 540 (5th Cir. 1992) ................................................................................................ 7, 10
`
`Islander E. Rental Program v. Ferguson,
`917 F. Supp. 504 (S.D. Tex. 1996) ............................................................................... 11, 14, 15
`
`John Crane Prod. Sols., Inc. v. R2R & D, LLC,
`No. 3:11-CV-3237-D, 2012 WL 3453696 (N.D. Tex. Aug. 14, 2012) .................................. 8, 9
`
`Jones v. Rabanco, Ltd.,
`No. C03-3195P, 2006 WL 2237708 (W.D. Wash. Aug. 3, 2006) ............................................ 10
`
`Lyondell Chem. Co. v. Albemarle Corp.,
`No. 1:01-CV-890, 2004 WL 7332836 (E.D. Tex. Feb. 23, 2004) ............................................ 14
`
`
`
`
`iii
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`KEYME EX. 1022, PAGE 4
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`

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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 5 of 22 PageID #: 1905
`
`Rembrandt Techs., LP v. Comcast Corp.,
`No. CIV.A. 2:05CV443, 2007 WL 470631 (E.D. Tex. Feb. 8, 2007) ............................ 7, 10, 15
`
`Soverain Software LLC v. Gap, Inc.,
`340 F. Supp. 2d 760 (E.D. Tex. 2004) ........................................................................................ 8
`
`TQP Dev., LLC v. Adobe Sys. Inc.,
`No. 2:12-CV-570-JRG-RSP, 2013 WL 3731492 (E.D. Tex. July 13, 2013) ........................... 10
`
`VECC, Inc. v. Bank of Nova Scotia,
`222 F. Supp. 2d 717 (D.V.I. 2002) ........................................................................................... 13
`
`OTHER AUTHORITIES 
`
`Local Rule AT-2 ............................................................................................................................. 7
`
`Local Rule CV-7 ............................................................................................................................. 6
`
`MODEL RULES OF PROF’L CONDUCT r. 1.6 (AM. BAR ASS’N 1983) .............................................. 14
`
`MODEL RULES OF PROF’L CONDUCT r. 1.6, cmt. 3 (AM. BAR ASS’N 1983) .................................. 14
`
`MODEL RULES OF PROF’L CONDUCT r. 1.7 (AM. BAR ASS’N 1983) .............................................. 10
`
`MODEL RULES OF PROF’L CONDUCT r. 1.9 (AM. BAR ASS’N 1983) .............................................. 11
`
`MODEL RULES OF PROF’L CONDUCT r. 1.9, cmt. 3 (AM. BAR ASS’N 1983) .................................. 12
`
`MODEL RULES OF PROF’L CONDUCT r. 1.10 (AM. BAR ASS’N 1983) ...................................... 11, 15
`
`TEXAS DISCIPLINARY R. OF PROF’L CONDUCT r. 1.05 ............................................................. 13, 14
`
`TEXAS DISCIPLINARY R. OF PROF’L CONDUCT r. 1.06 ............................................................. 10, 15
`
`TEXAS DISCIPLINARY R. OF PROF’L CONDUCT r. 1.09 ....................................................... 11, 13, 15
`
`TEXAS DISCIPLINARY R. OF PROF’L CONDUCT r. 1.09, cmt. 4A .................................................... 12
`
`TEXAS DISCIPLINARY R. OF PROF’L CONDUCT r. 1.15 ................................................................... 10
`
`
`
`
`
`
`
`
`iv
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`KEYME EX. 1022, PAGE 5
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`

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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 6 of 22 PageID #: 1906
`
`I.
`
`INTRODUCTION
`
`Cooley has represented Minute Key Inc., a company acquired by and merged into The
`
`Hillman Group, Inc. (“Hillman”), for over eight years, serving as its general counsel. In this role,
`
`Cooley provided and received confidential and privileged information on all aspects of Minute
`
`Key’s singular business: self-service key duplication kiosks. Cooley participated in nearly every
`
`Minute Key Board meeting, including those (1) evaluating its prior patent infringement case
`
`against KeyMe, Inc. on the same patent and products at issue here; (2) discussing privileged
`
`patent prosecution strategies, including for patents at issue here; and (3) involving Minute Key’s
`
`product development, business strategies, and competition with KeyMe. Cooley continued to
`
`represent Minute Key after Hillman acquired it, and after Minute Key subsequently merged into
`
`Hillman. Minute Key’s attorney-client relationship with Cooley transferred to Hillman and
`
`continues to this day, creating an impermissible concurrent conflict of interest. Even if Hillman
`
`is considered a former client, Cooley is still conflicted because its prior representation is
`
`substantially related to Cooley’s representation of KeyMe and because it received confidential
`
`information directly relevant to this case. With the case in its infancy, Cooley’s loyalty to
`
`Hillman and the social interest of enforcing ethics far outweighs KeyMe’s choice of counsel.
`
`II.
`
`BACKGROUND
`A.
`
`Cooley Has a Longstanding Attorney-Client Relationship with Hillman and
`Minute Key, Serving as General Counsel and Regularly Attending Board
`Meetings
`
`Cooley has been Minute Key’s counsel for over eight years. Declaration of Randall
`
`Fagundo (Fagundo Decl.), ¶ 2. Minute Key never had in-house counsel, and instead, Cooley
`
`filled that role. Id. By 2012, Noah Pittard of Cooley acted as Minute Key’s general counsel. Id.,
`
`¶¶ 3-4; Ex. 22 at 233:6-8. He participated in nearly every Board meeting since 2012, provided
`
`counseling in wide-ranging aspects of law, and was a trusted member and integral part of Minute
`
`
`
`
`1
`
`KEYME EX. 1022, PAGE 6
`
`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 7 of 22 PageID #: 1907
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`Key’s leadership. Fagundo Decl., ¶ 5. Mr. Pittard received confidential and privileged
`
`information about Minute Key’s competitor strategies (e.g., against KeyMe), product
`
`development, prosecution of two of the patents-at-issue here and their family, and litigations
`
`involving one of these patents and related patents (e.g., Fagundo Decl., ¶¶ 4-30), including:
`
`Case
`Minute Key v. KeyMe
`(D. Minn., 2015 – 2017)
`
`Patent(s)
`8,979,446 (’446 patent)
`8,634,951 (’951 patent)
`
`Relevance
`’446 patent is asserted against
`KeyMe in this case;
`’951 patent is child of ’446 patent
`’446 patent is asserted against
`KeyMe in this case
`’809 patent is child of ’446 patent
`asserted here (through ’951 patent)
`
`8,979,446 (’446 patent)
`
`8,532,809 (’809 patent)
`
`Hillman v. Minute Key
`(PTAB, 2015 – 2016)
`Hillman v. Minute Key
`(S.D. Ohio, 2013 – 20141)
`
`
`1.
`
`Cooley Participated in Strategic Discussions for Prior Patent
`Infringement Litigation Against KeyMe on the ’446 Patent-in-Suit
`
`Minute Key filed a Complaint against KeyMe in 2015, alleging that KeyMe infringed the
`
`’446 and ’951 patents—the ’446 patent is asserted against KeyMe here and the ’951 patent is a
`
`continuation of the ’446 patent. Ex. 23, ¶¶ 6-7, 13, 17; First Am. Complaint (D.I. 30) [hereinafter
`
`FAC], ¶¶ 16, 23, 26. In its 2015 Complaint, Minute Key alleged that KeyMe’s “Locksmith in a
`
`Box” self-service key duplication kiosk infringed the patents, including through sales to 7-
`
`Eleven, Rite Aid, and Bed Bath & Beyond—the same product and customers at issue in this
`
`case. Ex. 23, ¶¶ 8-9; FAC, ¶¶ 23-24. During the nearly two years that case was pending, Cooley
`
`was an active member of Minute Key’s Board, regularly participating in discussions about the
`
`case. E.g., Fagundo Decl., ¶¶ 10-15; Ex. 12 (Nov. 11, 2015); Ex. 14 (Jan. 27, 2016); Ex. 15 (Apr.
`
`25, 2016); Ex. 16 (Jan. 26, 2017).
`
`
`
`
`
`
`1 The S.D. Ohio Complaint was amended in 2014 to remove patent issues and proceeded on
`unfair competition claims.
`
`
`
`2
`
`KEYME EX. 1022, PAGE 7
`
`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 8 of 22 PageID #: 1908
`
`These discussions were highly confidential and included attorney-client privileged
`
`information about the ’446 patent, its child patent (the ’951 patent), and KeyMe. Fagundo Decl.,
`
`
`
`
`
`
`
`
`
`2.
`
`Cooley Participated in Strategic Discussions for the Defense of an
`Inter Partes Review Petition of the ’446 Patent-in-Suit
`
`When Hillman and Minute Key were separate companies, Hillman filed an Inter Partes
`
`Review Petition seeking to invalidate claims of the ’446 patent in May 2015. Fagundo Decl.,
`
`¶ 18. Cooley’s Noah Pittard participated in Board meetings involving discussions of confidential
`
`and privileged strategy for defending the ’446 patent in this proceeding from May 2015 to
`
`November 2016. Id., ¶¶ 18-19; see also Ex. 12 (Nov. 11, 2015); Ex. 16 (Jan. 26, 2017). The
`
`same validity and strategy issues will likely be at issue in this case because the same patent is at
`
`issue (the ’446 patent) and KeyMe will inevitably raise invalidity as a defense.
`
`3.
`
`Cooley Participated in Strategic Discussions for a Declaratory
`Judgment Litigation Involving a Child of the ’446 Patent-in-Suit
`
`Minute Key’s first-issued patent in the ’446 patent family, the ’809 patent, issued on
`
`September 10, 2013.
`
`
`
`
`
`
`
`
`
` The dispute with Hillman led to Hillman filing a declaratory
`
`judgment case against Minute Key in October 2013, alleging non-infringement and invalidity of
`
`the ’809 patent. Ex. 24, ¶¶ 13, 17.
`
`
`
`
`
`
`3
`
`KEYME EX. 1022, PAGE 8
`
`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 9 of 22 PageID #: 1909
`
`
`
` Minute Key
`
`
`
`
`
`
`
`considered Cooley for the case. Ex. 22, 233:6-8; Fagundo Decl., ¶¶ 24-25; Ex. 5. Minute Key
`
`ultimately chose Jones Day. Fagundo Decl., ¶ 25. Cooley continued its role as general counsel,
`
`as later confirmed by the deposition of Randall Fagundo (Minute Key’s CEO at the time) in that
`
`litigation, describing Cooley as Minute Key’s “general counsel.” Id., ¶¶ 3, 25; Ex. 22, 233:6-8.
`
`Throughout the case, Cooley expanded its knowledge of the patent issues by, inter alia, Mr.
`
`Pittard participating in Board meetings involving confidential and privileged information about
`
`
`
`
`
`the Hillman litigation
`
`
`
`
`
`
`
`4.
`
`Cooley Was Regularly Updated on Minute Key’s Product
`Development, Patent Acquisition Strategies, Competitive Analysis,
`
`
`Cooley regularly communicated with Minute Key and participated in its Board meetings,
`
`discussing Minute Key’s product development, patent strategies, and competitive analysis.
`
`Fagundo Decl., ¶ 29; see also id., ¶¶ 2-5. Minute Key’s sole business was self-service key
`
`duplication kiosks, so all of its correspondence and meetings revolved around these products. Id.,
`
`¶ 29.
`
`
`
`
`
`
`
`
`
`
`
`
`4
`
`KEYME EX. 1022, PAGE 9
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`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 10 of 22 PageID #: 1910
`
`
`
`
`
`
`
`a)
`
`Cooley Received Privileged Information on Another Patent at
`Issue in This Case: the ’179 Patent
`
`
`
`
`
`
`
`
`
`
`
`
`
`5.
`
`Cooley Represented Minute Key for Hillman’s Acquisition, Continued
`Its Representation, and Did Not Terminate the Relationship
`
`Minute Key and Hillman resolved their patent dispute in 2018 when Hillman acquired
`
`Minute Key. Fagundo Decl., ¶ 31. They announced the acquisition in June 2018, completing it in
`
`August 2018. Id.; Ex. 25. After the acquisition, Minute Key continued its operations as a wholly
`
`owned subsidiary of Hillman. Fagundo Decl., ¶ 31. Hillman fully integrated Minute Key into its
`
`operations and continued Minute Key’s business with a combined management team. Id. Then,
`
`in December 2018, Minute Key merged into The Hillman Group, Inc., the plaintiff in this case.
`
`Id. The operations continued as before with the same employees, buildings, and products. Id.
`
`Through all of these transactions, Hillman and Minute Key maintained the Boulder, Colorado
`
`headquarters with substantially the same employees, selling the same Minute Key branded key
`
`duplication kiosks, and with the same intellectual property. Id.; see also, e.g., Ex. 26.
`
`Cooley represented Minute Key (1) in Hillman’s acquisition of Minute Key, (2) after the
`
`acquisition, and (3) after Minute Key merged into Hillman. Fagundo Decl., ¶¶ 31-34. Cooley
`
`
`
`
`5
`
`KEYME EX. 1022, PAGE 10
`
`

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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 11 of 22 PageID #: 1911
`
`remains an approved vendor for legal counsel at Hillman. Id., ¶ 34. Most recently, Cooley
`
`provided legal services for Hillman
`
` on January 30-31, 2019, more than five
`
`months after Hillman acquired Minute Key and more than a month after Minute Key merged into
`
`Hillman. Id., ¶ 32; Ex. 27. Like past invoices, they were addressed to “Minute Key.” Fagundo
`
`Decl., ¶ 32; Ex. 27. When Hillman paid the invoice, Cooley did not object and instead deposited
`
`the check without comment. Fagundo Decl., ¶ 32; Ex. 28.
`
`Before Cooley entered an appearance in this case, Hillman believed Cooley still
`
`represented it. Fagundo Decl., ¶¶ 6-7, 33-34. Cooley has never terminated its attorney-client
`
`relationship with Hillman or Minute Key. Id. Nor has it acted in any way inconsistent with its
`
`attorney-client relationship—until representing KeyMe against Hillman here. Id. Hillman was
`
`shocked to learn of Cooley’s representation of KeyMe here, finding it to violate its trust. Id., ¶ 7.
`
`B.
`
`Upon Learning of Cooley’s Representation of KeyMe, Hillman Investigated
`the Conflict and Attempted to Resolve It with Cooley
`
`Hillman filed this case against KeyMe on June 3, 2019, alleging that KeyMe infringes,
`
`inter alia, the ’446 and ’179 patents based on at least its “Locksmith in a Box” key-making
`
`kiosks. FAC, ¶¶ 23, 26, 51. Hillman first learned of Cooley’s involvement on July 24, 2019,
`
`when a Cooley attorney contacted Hillman’s counsel seeking a Local Rule CV-7(h) conference.
`
`Hillman immediately began investigating and notified Cooley of the conflict with a detailed 10-
`
`page letter on August 7, 2019. Ex. 29. Cooley responded in a short letter on August 15, 2019,
`
`disavowing Hillman as a client and contending it has no conflict. Ex. 30. Hillman responded,
`
`correcting factual misstatements in Cooley’s letter and requesting details on Cooley’s alleged
`
`ethical screen. Exs. 31, 32. The parties met and conferred on August 26, 2019, and exchanged
`
`additional letters. Exs. 33, 34. Cooley refuses to withdraw or to provide any details about what
`
`Hillman confidential documents it maintains in its files.
`
`
`
`
`6
`
`KEYME EX. 1022, PAGE 11
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`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 12 of 22 PageID #: 1912
`
`III. ARGUMENT
`
`The Fifth Circuit is “sensitive to preventing conflicts of interest” and applies ethical
`
`standards rigorously in motions to disqualify. In re Am. Airlines, Inc., 972 F.2d 605, 611 (5th
`
`Cir. 1992). Motions to disqualify are determined under federal law. In re Dresser Indus., Inc.,
`
`972 F.2d 540, 543 (5th Cir. 1992). In the Eastern District of Texas, “[t]he standards of
`
`professional conduct adopted as part of the Rules Governing the State Bar of Texas shall serve as
`
`a guide governing the obligations and responsibilities of all attorneys appearing in [its] court.”
`
`Local Rule AT-2. The Court “is not limited to the state’s ethical rules but may also consider
`
`national norms of professional conduct, including the ABA Model Rules and the Model Code.”
`
`Rembrandt Techs., LP v. Comcast Corp., No. CIV.A. 2:05CV443, 2007 WL 470631, at *2 (E.D.
`
`Tex. Feb. 8, 2007) (citing In re Am. Airlines, 972 F.2d at 610).
`
`A. Minute Key’s Attorney-Client Relationship with Cooley Passed to Hillman
`
`Hillman acquired all of Minute Key in August 2018, making it a wholly owned
`
`subsidiary of Hillman. Fagundo Decl., ¶ 31. Upon the acquisition, Hillman fully integrated
`
`Minute Key into its operations and continued Minute Key’s business together with its pre-
`
`existing business, using a combined management team. Id. Hillman and Minute Key became
`
`members of the same corporate family, operating as a single company. Id. Hillman formalized
`
`this relationship, merging into a single legal entity on December 28, 2018. Id. After the
`
`acquisition, Cooley continued to serve as Minute Key’s counsel, rendering legal services as
`
`recently as January 31, 2019 (after the merger). Id., ¶¶ 31-34.
`
`
`
`
`
` For conflict purposes, however, Hillman is considered a client as
`
`of the completion of the acquisition in August 2018 because Minute Key was a “wholly owned
`
`and operationally integrated subsidiary.” Eastman Kodak Co. v. Sony Corp., No. 04-CV-6095,
`
`
`
`
`7
`
`KEYME EX. 1022, PAGE 12
`
`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 13 of 22 PageID #: 1913
`
`2004 WL 2984297, at *3 (W.D.N.Y. Dec. 27, 2004) (citations omitted) (holding that acquisition
`
`and integration of a current client meant that the acquiring entity became a current client).
`
`Minute Key’s subsequent merger into Hillman continued that relationship. “[W]hether
`
`the attorney-client relationship transfers . . . to the new owners turns on the practical
`
`consequences rather than the formalities of the particular transaction.” Soverain Software LLC v.
`
`Gap, Inc., 340 F. Supp. 2d 760, 763 (E.D. Tex. 2004) (citation omitted). “[W]hen control of a
`
`corporation passes to new management, the authority to assert and waive the corporation’s
`
`attorney-client privilege passes as well.” Commodity Futures Trading Comm’n v. Weintraub, 471
`
`U.S. 343, 349 (1985). Courts consider such factors as “the extent of the assets acquired,
`
`including whether stock was sold, whether the purchasing entity continues to sell the same
`
`product or service, whether the old customers and employees are retained, and whether the same
`
`patents and trademarks are used.” John Crane Prod. Sols., Inc. v. R2R & D, LLC, No. 3:11-CV-
`
`3237-D, 2012 WL 3453696, at *3 (N.D. Tex. Aug. 14, 2012) (citations omitted).
`
`
`
` From before Hillman acquired it to today, Minute Key (and now
`
`Hillman) sells the same products, employs nearly all the same people, maintains the same
`
`buildings, customers, and intellectual property, and operates the same business. Fagundo Decl.,
`
`¶ 31. The merger itself was in corporate form only and did not substantively change how
`
`Hillman operated the acquired Minute Key business. Id. Cooley’s interactions are in accord.
`
`Cooley assisted with the acquisition and provided legal advice afterward. Id., ¶¶ 6, 31-34. Cooley
`
`again provided legal advice after the merger and deposited a check from Hillman for payment of
`
`its post-merger legal services. Id., ¶ 32; Ex. 28. Cooley never suggested it had a different
`
`understanding. Fagundo Decl., ¶¶ 6, 31-34. The practical consequence of the transactions is that
`
`
`
`
`8
`
`KEYME EX. 1022, PAGE 13
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`

`

`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 14 of 22 PageID #: 1914
`
`Hillman continues to run Minute Key’s business under control of new management, transferring
`
`the attorney-client relationship to Hillman. John Crane, 2012 WL 3453696, at *4.
`
`B.
`
`Cooley Has an Impermissible Conflict of Interest Under Rule 1.7 Because
`Hillman Is a Current Client of Cooley and Has Not Waived the Conflict
`1.
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`Hillman Is a Current Client
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`Cooley has a longstanding relationship with Minute Key that continued after Hillman
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`acquired Minute Key and after they merged. See Sections II.A, III.A.
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`Whether an attorney-client relationship terminates upon completion of a project depends on the
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`purpose of the relationship. Gen. Elec. Co. v. Mitsubishi Heavy Indus., Ltd., No. 3:10-CV-276-F,
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`2011 WL 13201855, at *7 (N.D. Tex. Sept. 12, 2011) (citations omitted). When the purpose of
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`the relationship is for the firm “to be on standby” to provide “legal advice and consultations as
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`needed,” an ongoing attorney-client relationship exists even when there are no pending projects.
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`Id. That is precisely Minute Key’s relationship with Cooley that transferred to Hillman. Fagundo
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`Decl., ¶¶ 2-3, 5-7; Section III.A. For over eight years, Cooley served as Minute Key’s general
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`counsel, providing legal advice on a variety of matters, always at the ready. Fagundo Decl., ¶ 2.
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`Cooley attempts to distance itself from that relationship
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`. Hillman certainly understood its relationship with
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`Cooley continued, listing Cooley as an approved legal service provider (vendor number
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`). Ex. 35; Fagundo Decl., ¶ 34; see also Fagundo Decl., ¶¶ 6, 31, 33. Had Cooley
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`intended to end the relationship, it should have “giv[en] reasonable notice” to Hillman and
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`KEYME EX. 1022, PAGE 14
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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 15 of 22 PageID #: 1915
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`surrendered its client files. TEXAS DISCIPLINARY R. PROF’L CONDUCT r. 1.15(d) [hereinafter Tex.
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`R.]; TQP Dev., LLC v. Adobe Sys. Inc., No. 2:12-CV-570-JRG-RSP, 2013 WL 3731492, at *2
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`(E.D. Tex. July 13, 2013) (applying rule to national counsel). Indeed, “an existing attorney-client
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`relationship can definitely continue by implication.” TQP Dev., 2013 WL 3731492, at *2.
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`Cooley did nothing to suggest otherwise and continues to maintain untold amounts of client files.
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`See Sections II.A.5, II.B; Jones v. Rabanco, Ltd., No. C03-3195P, 2006 WL 2237708, at *4
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`(W.D. Wash. Aug. 3, 2006) (maintaining client files supports a continued relationship). Hillman
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`reasonably understood that Cooley represents it. TQP Dev., 2013 WL 3731492, at *2; Jones,
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`2006 WL 2237708, at *4 (“[A] lawyer-client relationship does not terminate easily.”).
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`2.
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`Cooley Is Adverse to Hillman and Hillman Never Gave Consent
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`A concurrent conflict of interest exists under ABA Model Rule 1.7 if “the representation
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`of one client will be directly adverse to another client.” Rembrandt, 2007 WL 470631, at *2
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`(quoting MODEL RULES OF PROF’L CONDUCT r. 1.7 (AM. BAR ASS’N 1983) [hereinafter ABA
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`Model R.]). Cooley’s representation of KeyMe in this litigation is clearly adverse to Hillman,
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`and is forbidden absent consent from both clients. Honeywell Int’l Inc. v. Philips Lumileds
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`Lighting Co., No. 2:07-CV-463-CE, 2009 WL 256831, at *3 (E.D. Tex. Jan. 6, 2009) (citing In
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`re Dresser, 972 F.2d at 545); ABA Model R. 1.7(b).2 Hillman did not give consent, and instead
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`denies such consent. Ex. 29. Cooley has an impermissible conflict.
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`C.
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`Alternatively, Cooley Has an Impermissible Conflict Under Rule 1.9 Because
`Cooley’s Representation of KeyMe Is Substantially Related to Its Past
`Representation of Minute Key and the Confidential Information It Received
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`Cooley has an impermissible conflict of interest even if Hillman is a former client. A
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`2 Texas Rule 1.06 also requires that the two matters be “substantially related.” Rembrandt, 2007
`WL 470631, at *2. The stricter ABA rule applies, id., but even if the Texas rule applied, there is
`a conflict because the matters are substantially related. See Section III.C.1.
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`KEYME EX. 1022, PAGE 15
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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 16 of 22 PageID #: 1916
`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 16 of 22 PageID #: 1916
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`conflict of interest with a former client exists if there is either a substantial relationship between
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`the subject matter of the former and current representation or if there is a reasonable risk of
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`improper use of the former client’s confidential information. Islander E. Rental Program v.
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`Ferguson, 917 F. Supp. 504, 510 (SD. Tex. 1996); In re Am. Airlines, 972 F.2d at 614; ABA
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`Model R. 1.9; Tex. R. 1.09(a). Both tests are met, conflicting all of Cooley because no attorney
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`in the firm “shall knowineg represent a client if any one of them practicing alone would be
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`prohibited from doing so.” Tex. R. 1.09(b); ABA Model R. 1.10. For over eight years, Cooley
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`represented Minute Key, serving as its general counsel. In that role, Cooley assisted with and
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`learned confidential and privileged information3 conceming competition with KeyMe,
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`enforcement of the ’446 patent against KeyMe (at issue here), and the ’ 179 patent at issue here.
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`1.
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`Cooley’s Past Representation of Minute Key Is Substantially Related
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`to Its Current Representation of KeyMe
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`Cooley’s representation of Minute Key implicates the “lmderlying concerns of the
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`substantial relationship test: the duty to preserve confidences and the duty of loyalty to a former
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`client.” In re Am. Airlines, 972 F.2d at 618 (citation omitted). “The tlust a lawyer’s duty of
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`loyalty inspires in clients encourages them freely to confide in the lawyer and freely to rely” on
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`their advice. Id. Minute Key did just that, consulting Cooley over the last eight years-
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`Cooley is factually wrong and too narrowly interprets “substantially related.”
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`E.g., DataTreasmfv Corp. v. Wells Fargo & Co., No. 2:06-CV-72 DF, 2009 WL 10679840, at *2,
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`3 This information is redacted from Board meeting presentations (Exhibits 2, 4, 6, 8, 10, l3, l8,
`and 20). Unredacted versions of these exhibits are available for in camera review.
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`11
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`KEYME EX. 1022, PAGE 16
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`KEYME EX. 1022, PAGE 16
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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 17 of 22 PageID #: 1917
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`8 (E.D. Tex. Dec. 30, 2009) (holding prior representation by a “corporate lawyer” substantially
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`related to patent infringement case). The “substantially related” test “primarily involves
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`situations where a lawyer could have acquired confidential information concerning a prior client
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`that could be used either to that prior client’s disadvantage or for the advantage of the lawyer’s
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`current client or some other person.” Tex. R. 1.09, cmt. 4A; see also ABA Model R. 1.9, cmt. 3.
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`Cooley represented Minute Key in a variety of matters and served as its general counsel.
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`Fagundo Decl., ¶¶ 2-3. In its role as general counsel, Cooley’s Noah Pittard attended nearly
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`every Board meeting, serving as the Secretary. Id., ¶ 5. The nature of this role meant Cooley was
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`privy to important and confidential issues facing Minute Key over the last eight years, including
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`Minute Key’s prior litigation against KeyMe involving the same ’446 patent, products, and
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`matters that are at issue in this case. Id., ¶¶ 4-5, 10-17.
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`. Id., ¶¶ 10-17; see Section II.A.1. Each of these subjects will again be at issue
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`in this case because KeyMe is likely to contest infringement, validity, and what, if any, impact
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` has on Hillman’s damages or ability to obtain an
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`injunction. Accordingly, this information could be used to Minute Key’s disadvantage. See Tex.
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`R. 1.09, cmt. 4A; ABA Model R. 1.9, cmt. 3. Cooley was also privy to privileged information on
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`another patent at issue in this case, the ’179 patent,
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`. Other
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`aspects of Cooley’s longstanding relationship with Minute Key are also relevant to this case,
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`KEYME EX. 1022, PAGE 17
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`Case 2:19-cv-00209-JRG Document 35 Filed 09/06/19 Page 18 of 22 PageID #: 1918
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`Cooley became intimately familiar with all relevant aspects of Minute Key’s business—
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`and its representation of Minute Key is thus substantially related to this case. See EON Corp. IP
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`Holdings LLC v. Flo TV Inc., No. CIV.A. 10-812-RGA, 2012 WL 4364244, at *4-5 (D. Del.
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`Sept. 24, 2012) (holding longstanding broad representation of client, focusing on corporate and
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`regulatory work, substantially related to patent lawsuit when the attorneys were “generally
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`familiar with [client’s] business, and specifically familiar with many aspects