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Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 1 of 38 PageID #: 3178
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`1
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`VS.
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`THE HILLMAN GROUP, INC.
`)(
`
`)(
`CIVIL ACTION NO.
`)(
`2:19-CV-209-JRG
`)(
`MARSHALL, TEXAS
`)(
`JANUARY 21, 2020
`)(
`2:00 P.M.
`)(
`MOTION HEARING
`BEFORE THE HONORABLE JUDGE RODNEY GILSTRAP
`UNITED STATES CHIEF DISTRICT JUDGE
`
`KEYME, LLC
`
`APPEARANCES:
`FOR THE PLAINTIFF: (See Attorney Attendance Sheet docketed
` in minutes of this hearing.)
`
`FOR THE DEFENDANT: (See Attorney Attendance Sheet docketed
` in minutes of this hearing.)
`
`COURT REPORTER:
`
`Shelly Holmes, CSR, TCRR
`Official Reporter
`United States District Court
`Eastern District of Texas
`Marshall Division
`100 E. Houston Street
`Marshall, Texas 75670
`(903) 923-7464
`(Proceedings recorded by mechanical stenography, transcript
`produced on a CAT system.)
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 2 of 38 PageID #: 3179
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`January 21, 2020
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`I N D E X
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`Appearances
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`COURT SECURITY OFFICER: All rise.
`THE COURT: Be seated, please.
`All right. This is the time set for a hearing
`before the Court on a motion to disqualify Cooley LLP in
`the Hillman Group versus KeyMe, LLC matter. This is Civil
`Action No. 2:19-CV-209.
`Let me call for announcements at this time.
`What says The Hillman Group?
`MR. FINDLAY: Good afternoon, Your Honor. Eric
`Findlay and Ryan O'Quinn on behalf of the Plaintiff,
`Hillman. We're ready to proceed.
`THE COURT: And what says the Defendant, KeyMe?
`MR. DACUS: Good afternoon, Your Honor. Deron
`Dacus, here with Mike Rhodes and Steve Smith from the
`Cooley firm on behalf of KeyMe. And we're ready to
`proceed, Your Honor.
`THE COURT: All right. All right. Mr. O'Quinn,
`I'll hear argument from you beginning at -- or at the
`podium whenever you're ready.
`MR. O'QUINN: Good afternoon, Your Honor. May it
`please the Court.
`My name is Ryan O'Quinn from Finnegan LLP,
`representing Hillman, the Plaintiff.
`The Eastman Kodak versus Sony case from the
`Western District of New York, which both cases -- both
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 4 of 38 PageID #: 3181
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`parties cite in this case says, sometimes a case presents
`an opportunity where a Court is required to choose the
`lesser of two unfair options. Respectfully, this is one of
`those cases.
`Hillman didn't want to file this motion, and we
`take this motion seriously and understand how impactful it
`could be.
`Cooley is a good law firm. Every law firm makes
`mistakes, and sometimes those mistakes have serious
`consequences. And, in particular, that's the case when you
`uphold the duty of loyalty and the duty of confidentiality
`that underpin our justice system.
`I want to make clear there's no tactical advantage
`or maneuvering in this motion. In fact, I'm not sure how
`it helps us in some respects. Our job as Plaintiff is to
`get this case in front of the jury as quickly as we
`possibly can. And if the Court grants this motion,
`obviously, there will have to be some sort of reasonable
`transition period, so that would put the brakes on the case
`and keep us from that objective.
`We also can't appeal interlocutorily in the middle
`of this case whatever you might rule, so any tactical
`advantage to us is pretty mooted.
`Why we are here is because of a serious breach of
`the confidentiality that Cooley owed to Minute Key, which
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 5 of 38 PageID #: 3182
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`is now a part of Hillman, and that duty necessitates this
`undue severe sanction and any other circumstance.
`There are two legal frame -- frameworks defined by
`the ABA model rules and the Texas rules that govern our
`case here, and three tests that could impact whether Cooley
`would be disqualified in this case.
`First, if the Court finds that Hillman is a
`current client of Cooley and that Cooley is now directly
`adverse to Hillman, Cooley should be disqualified.
`If the Court, instead, finds that Hillman is a
`former client of Cooley, Cooley can still be disqualified
`if the former and -- if the former representation is
`substantially related to the current representation.
`Third, again, if Hillman is a former client of
`Cooley, Cooley can be disqualified if there's a reasonable
`probability the confidences they possess could be used to
`Hillman's detriment in this case.
`And as I stated, all three of these are impacted
`in this case, and we believe have occurred.
`I thought I might start first just with the former
`client substantially related prong, since that would be
`perhaps most helpful to the Court.
`THE COURT: That's fine.
`MR. O'QUINN: There's a saying in the musical
`Hillman that -- sorry, the musical Hillman Lights called
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 6 of 38 PageID #: 3183
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`Hamilton that you want to be in the room where it all
`happens, and Cooley was in the room for Hillman. Cooley
`represented Hillman for eight years under the guise of
`Minute Key who Hillman acquired in 2018 and who
`operationally continues to control in the business. It's
`all the same people. It's all the same products. It's all
`the same business.
`THE COURT: Can you clarify something for me? It
`seems like in some of the briefing, there's a statement by
`Mr. Pittard or Pittard, I'm not sure of the pronunciation,
`that the first time he learned of Minute Key's merger was
`August of 2019. But my understanding is it's pretty much
`undisputed that Mr. Pittard represented Minute Key in that
`merger.
`
`MR. O'QUINN: That's correct.
`THE COURT: How do you represent them in a merger
`and then not know about it until some period of time in the
`future?
`MR. O'QUINN: That's correct, Your Honor.
`THE COURT: Do you have an explanation for that?
`MR. O'QUINN: Well, that's -- that's Cooley, Your
`Honor. I --
`THE COURT: They're going to get asked the same
`question. I want to know what your -- your understanding
`is.
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 7 of 38 PageID #: 3184
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`MR. O'QUINN: The only understanding I could
`possibly offer for that is that there were two different
`transactions that occurred.
`So in June of 2018, Hillman announced to the
`public that they intended to acquire Minute Key.
`In August of 2018, the initial acquisition went
`through.
`Minute Key became a wholly-owned subsidiary of
`Hillman but still was operational, still had independent
`corporate presence.
`About three months after that, just after
`Christmas of 2018, a series of serial mergers happened
`under Delaware law that basically distinguished Minute Key
`as a stand-alone corporate entity, and Minute Key was fully
`absorbed into Hillman.
`I'm guessing that Mr. Pittard could possibly have
`been referring to the second series of transactions, but as
`you mentioned, Cooley and Mr. Pittard himself worked on the
`initial merger in the summer of 2018.
`THE COURT: So it may be a question of which
`merger is being talked about?
`MR. O'QUINN: It's possible. But I think it has
`the same outcome either way. Minute Key was still
`operating its -- its full and complete business simply as a
`stand-alone subsidiary of the Hillman Group, and that was
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 8 of 38 PageID #: 3185
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`only for a period of the fall of 2018.
`THE COURT: Barring a formal disassociation letter
`where you say I no longer represent you, you're no longer
`my client, how long does a client that a lawyer represents
`and has received fees from remain their client?
`Is there a -- is there a prescribed window by
`which that relationship fades away, or -- I mean, there's
`clearly not a -- a letter formalizing the termination of
`the attorney-client relationship here.
`MR. O'QUINN: That's correct.
`THE COURT: So without that, even if there's not
`ongoing work being done, how long does that relationship
`exist, or does it go on indefinitely?
`MR. O'QUINN: The way the Courts have looked at it
`in other cases -- and, for example, in this district in the
`TQP versus Adobe case, the reasonable expectation is that
`an attorney-client relationship continues until something
`inconsistent with that relationship happens. And it's a
`bit of sliding scale, I think. I think the stronger and
`deeper the relationship, the stronger and deeper that
`inconsistent statement that terminates the relationship has
`to be.
`
`So here, Cooley was Minute Key's basically general
`counsel, their only outside law firm. They did hundreds --
`thousands of hours of work for them over the last decade.
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 9 of 38 PageID #: 3186
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`They never terminated by letter. They never sent back
`Minute Key's files. They continued to do work for the
`Minute Key/Hillman merged entity. And, in fact, Hillman
`paid a Cooley bill just three months before this case was
`filed.
`
`THE COURT: And the -- the calculation -- the
`chronological calculation between the merger and the filing
`of this lawsuit is about a year, give or take; is that
`right?
`
`MR. O'QUINN: It's about six months.
`THE COURT: Six months?
`MR. O'QUINN: The -- the merger -- the final
`merger --
`THE COURT: Well, the announcement of the merger
`and then the completion of the merger?
`MR. O'QUINN: The announcement that the parties
`intended to merge or that Hillman intended to acquire
`Minute Key happened pretty much exactly 12 months before
`this case was filed. Once all the legal mechanisms were
`out of the way, it was about six months.
`THE COURT: So I gather your argument is that
`without a formal termination, given the nature of the
`relationship that existed between Cooley through its
`partner, Mr. Pittard, and Minute Key, that the six-months'
`interval when this suit was filed is not adequate to
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 10 of 38 PageID #: 3187
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`terminate or extinguish the attorney-client relationship.
`And given that in your position, that relationship still
`exists, then this is clearly adverse and should be
`precluded by the rules; is that -- is that pretty close?
`MR. O'QUINN: That is our argument, Your Honor,
`and I would note that in that six-month period that we're
`describing, between December of 2018 and the first week of
`June 2019, Cooley did do work for Hillman and Minute Key.
`So it's not even a six-month rest.
`On January 31st, 2019, Cooley billed time for a
`tariff and business-related issue for the Hillman/Minute
`Key combined entity.
`THE COURT: Is there any dispute or argument here
`that at all relevant times, Mr. Pittard is an equity
`partner in the Cooley firm, and, therefore, owns an
`interest, whatever it might be, in the firm itself?
`MR. O'QUINN: I don't have any visibility on that,
`Your Honor. There has been no shifting of firms over time,
`as you see in some of these cases, where attorneys are
`moving all over the place.
`THE COURT: I've seen him referred to as, quote,
`partner, but in today's world, there are equity partners,
`there's non-equity partners, there's of counsel, there's
`all kinds of labels and flavors that apply.
`In my mind, it's important to establish whether
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 11 of 38 PageID #: 3188
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`Pittard owned an equity interest, no matter how large or
`how small it might be, in the law firm itself. I mean, I
`think that impacts the relationship here, as opposed to
`whether he's simply a non-equity employee. But you don't
`have any direct information about that?
`MR. O'QUINN: No, sir.
`THE COURT: Okay. What else do you want to
`present as far as argument, counsel?
`MR. O'QUINN: Cooley has asserted and KeyMe in
`their briefs that the prior representation was not
`substantially related to this current case. And I wanted
`to give just a brief statement on how that might not be the
`case.
`
`Exhibit 2 to our motion -- this is a board of
`director's meeting for Minute Key in August of 2013 where
`Mr. Pittard was present. There are two slides at the very
`end of that board meeting that are entitled Patent Update.
`And those slides give fairly detailed lists of what --
`different patents that are in the same families, as two of
`the patents-in-suit here, what they cover, what the next
`filings would be, what the steps would be.
`So Mr. Pittard was in the room when patent
`strategy for the patents-in-suit were discussed.
`Now, during this time, Hillman and Minute Key, who
`are now one entity, were actually kind of at war with each
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 12 of 38 PageID #: 3189
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`other. And so in Exhibit 4 of our motion, there's another
`board meeting a few months later in December -- sorry,
`October of 2013. Hillman and Minute Key were in a
`litigation in Ohio by that point. There are slides in that
`presentation talking about an outline of a potential
`settlement and/or mediation agreement between Minute Key,
`Hillman, and their common customer, Walmart.
`That's the sort of intangible privileged
`information that Cooley was privy to for almost a decade.
`It's Hillman's risk tolerance vis-a-vis Minute Key. How
`Hillman conducts litigations, how Hillman settles
`litigations. All those principals for Minute Key that were
`in that room with Mr. Pittard in 2013 are still there today
`and are still an integral part of our client and our client
`group for this litigation.
`It didn't stop there. Exhibit 20 to our motion is
`five years later, November 2017. There are slides in the
`middle of that deck entitled IP Portfolio Development.
`There are otherwise public family trees of patents but
`privileged information about them.
`But most strikingly -- and there's a slide
`entitled Portfolio Updates, and it refers to the patent
`application number of the '179 patent-in-suit in this case.
`And redacted in our motion but unredacted for the Court's
`in camera review if it wishes, it talks about, again, what
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 13 of 38 PageID #: 3190
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`13
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`that patent covers, what will happen next, and the
`strategies for asserting and defending that patent.
`Now, these patents-in-suit have been asserted. In
`fact, one of them has been asserted against KeyMe. And
`Cooley was in that room when that litigation was going on.
`The other patent-in-suit, the '179, they were in the room
`for the development and the prosecution of that patent.
`THE COURT: I assume you're referring to the '446
`when you say one's previously been asserted?
`MR. O'QUINN: That's correct, Your Honor.
`THE COURT: Were there common claims from the '446
`in the prior action that resulted in the settlement back in
`the 2015/'17 time period, as opposed to the current
`litigation, or were they wholly different claims from that
`'446 patent?
`MR. O'QUINN: My understanding, Your Honor, is
`that the Minnesota litigation that asserted the '446 patent
`against KeyMe didn't reach a point where the claims had to
`be narrowed before trial.
`So at least during the relevant time period when
`strategy was being developed, discovery was being gathered,
`witnesses were being interviewed, all the claims, including
`the same ones we're asserting here, were at issue.
`THE COURT: Okay.
`MR. O'QUINN: And I also -- another point on the
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`

`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 14 of 38 PageID #: 3191
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`14
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`'446 patent that was in the briefs, you know, obviously,
`that patent then underwent a post-grant review, an inter
`partes review at the Patent Office --
`THE COURT: Uh-huh.
`MR. O'QUINN: -- and many of the claims were held
`invalid.
`Minute Key had to defend that post-grant
`proceeding, and so strategy about the weaknesses or
`strengths of those claims would have been presented in the
`same board meetings, prior art, possibly potential
`witnesses, all of that is -- is in Cooley's files to this
`day.
`
`Cooley still has all of Minute Key's information
`on its servers. We don't know how much of it they have,
`but it's still there. It's never been returned.
`And we know at least that that IPR is at the
`forefront of their mind because some contentions in this
`case bear striking similarities to the papers filed in the
`IPR.
`
`THE COURT: What's your -- what's your response to
`the notion that Mr. Pittard or Pittard is in a distant
`office, not the same office as the current Cooley lawyers
`involved in the present litigation, doesn't have any direct
`interaction with them, and that there, if not initially, at
`least now has been erected some wall of separation there so
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 15 of 38 PageID #: 3192
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`15
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`that there is no real material risk that whatever
`confidential information Pittard might have would flow to
`and become beneficial to the current counsel that are
`representing Hillman in this?
`MR. O'QUINN: I have a couple of points on that.
`
`So --
`
`THE COURT: Okay.
`MR. O'QUINN: -- Mr. Pittard puts himself out as a
`Cooley lawyer, stating that he's resident in both the
`Broomfield, Colorado office and the Washington, D.C.
`office. The counsel that is representing Cooley in this
`case, many of them are from the Washington, D.C. office.
`In fact, Mr. Pittard says on one of his Cooley web
`pages that he doesn't like to go into his office. He is
`where his clients are.
`I think a lot of the case law talking about
`distance between offices of a large law firm were set down
`back when technology was a little bit different.
`You know, I -- I'm in a different office than some
`of the other attorneys on this case. We're in constant
`communication, telephone, email. We have common computer
`systems. I think any separation based on distance within a
`major U.S. law firm is pretty reasonable.
`As far as the ethical screen, we specifically
`asked for as much detail as we could get about that ethical
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 16 of 38 PageID #: 3193
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`16
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`screen in order to assess it adequately protected our
`client's interest. We asked for it by letter
`correspondence even we before we filed this motion. We
`asked again during the meet and confer before filing this
`motion. We asked a third time in our reply brief. We've
`never gotten any details. We don't know who was screened.
`We don't know what they are screened from. We don't know
`what files they have.
`And so it's virtually impossible for us to assess
`if this Chinese wall is actually protecting our client's
`confidential information.
`And based on the ethical rules, you know, I think
`if we were here today talking about whether Noah Pittard
`could represent KeyMe in this action, it'd be an open and
`shut case. He absolutely has confidential information,
`privileged information about two of the patents-in-suit
`here. It's a matter of can it be imputed to his firm, and
`the ethical rules say that it can.
`THE COURT: All right. Anything further?
`MR. O'QUINN: The only other thing I would say,
`based on the confidential and privileged distinction, is
`one of the points that they raise in their briefs is that
`they're going to get all this material in discovery anyway,
`and so there's no harm.
`I would say they're not going to get from us
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`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 17 of 38 PageID #: 3194
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`material that's covered by the attorney-client privilege or
`the attorney work product. They'll get privilege logs, but
`they're not getting that information in and of itself. And
`so that's a concern to us that they haven't exactly given
`us the assurances we need that the privileged material that
`Cooley indisputably possesses won't be used against us
`later in this proceeding.
`THE COURT: All right. Thank you, counsel.
`Let me hear a response from KeyMe and Cooley.
`MR. RHODES: Good afternoon, Your Honor. I'm
`Michael Rhodes. I'm the senior partner on this file, and
`I'm one of the most senior partners in my law firm.
`Mr. Pittard is, in fact, Your Honor, an equity
`partner.
`THE COURT: I assumed that, but it's good to
`clarify.
`MR. RHODES: Yeah, we don't -- we don't have a
`two-tier partnership.
`Where would the Court like me to begin in
`responding?
`THE COURT: Quite honestly, counsel, I'm here to
`hear your argument. I'm not going to give you all
`afternoon, but I -- you --
`MR. RHODES: I'll be brief, Your Honor.
`THE COURT: Why don't you pick out what you think
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`

`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 18 of 38 PageID #: 3195
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`18
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`are some of the most salient points of the prior discussion
`and touch on those from your perspective.
`MR. RHODES: I appreciate that, Your Honor.
`Let's start with the concurrent representation
`
`issue.
`
`I think the most analogous -- I apologize, I have
`a froggy voice from talking too much.
`THE COURT: That's all fine. That's fine. And if
`you need some water, feel free to have some there at the
`podium.
`
`MR. RHODES: I appreciate that.
`I think the most interesting case in terms of the
`question of concurrent representation is the case that came
`out of this Court, Judge Bryson. This is the Eli Lilly and
`Company case, 2016. And the fact pattern there is
`interesting.
`In Case 1, the law firm represented Brookshire as
`the Defendant in a patent litigation.
`In Case 2, the law firm sued Brookshire in a
`patent litigation. Same law firm, not the same patents,
`but patent litigation.
`There were about nine months between the time that
`the first case was dismissed and the last work entry.
`There were a couple of small entries after the first case
`was dismissed. And the Court went through it. There was
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`

`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 19 of 38 PageID #: 3196
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`19
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`no disengagement letter like here.
`And the Court said that the passage of time and
`the fact that there was no communication really between the
`parties and there was the same declaration in that record,
`Your Honor, that we see here -- an internal counsel in that
`case, Brookshire's in-house counsel, submitted a
`declaration in which she said that she thought after the
`first case, where she said Fish & Richardson learned the
`playbook, learned all the same kinds of things here, that
`she considered them to be her ongoing IP counsel.
`Notwithstanding that, the Court held that it did
`not need to pinpoint an exact time when the relationship
`terminated, but the silence between the parties in the
`Court's mind in that case was tantamount to the cessation
`of the work.
`Now, concededly in that case, there was a slightly
`stronger fact pattern around the fact that the engagement
`letter on the first case seemed to be limited to the first
`case, so you could kind of infer the termination there.
`Here, I think the facts are similar. Mr. Pittard
`last attends a board meeting in -- in or about March of
`2018. The last board call is April of 2018.
`Over the summer, he works on the documents --
`excuse me, Your Honor -- the documents by which Minute Key
`is being sold to Hillman.
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`

`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 20 of 38 PageID #: 3197
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`To answer the Court's question about why he didn't
`know about the merger is because once he signs those
`documents -- think about that, the day before those
`documents are signed, he's acting adversely to Hillman.
`He's against them. The acquisition agreement is signed.
`The day after that, there's a period of time.
`The only work that was done was two hours by a
`different lawyer in the licensing department relative to a
`2016 manufacture agreement. Like the fact pattern in
`Lilly, where there was a little bit of work done after the
`first case ended.
`THE COURT: Let me ask you this. Are you trying
`to tell me that -- that Pittard's relationship and through
`him Cooley's relationship with Minute Key was limited to
`the merger and acquisition by Hillman? I mean --
`MR. RHODES: No, Your Honor, I'm not saying that.
`THE COURT: -- you're not saying this man has been
`going to board meetings for 2012 and 2018, so there's six
`years he's sitting in their board meetings.
`MR. RHODES: I didn't mean to say that, Your
`
`Honor.
`
`THE COURT: Okay.
`MR. RHODES: What I was driving at is a slightly
`different point.
`What I'm driving at is after they signed the
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`

`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 21 of 38 PageID #: 3198
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`acquisition agreement, for the better part of 11 -- almost
`a year, there's nothing in the record that shows any
`communications between the parties because, remember,
`Hillman accedes to Minute Key. And, yes, it's true -- I
`know it sounds somewhat implausible, but it's true that
`Cooley does not know when the actual merger takes place
`because that's now on the Hillman watch.
`That's reflected, Your Honor, in the declaration
`submitted by Hillman in Paragraph 32. Those two hours
`worth of work that were done by Mr. Barrett, the bill went
`to Minute Key after Hillman had already accomplished the
`merger by which act Minute Key no longer exists. There was
`never any relationship between Cooley and Hillman. That
`relationship never formed.
`The only data from which you can imply the
`existence of that relationship is merely the passage of
`time. There's no record evidence of any communication.
`And when they -- when Hillman got the bill, seeing that we
`had addressed it to a company that no longer existed,
`there's no response from Hillman. No one picks up the
`phone and says, hey, you're our lawyers, we have a new
`relationship with a new company, we need to get you into
`our system, we need to get a new engagement letter, there's
`nothing. And what --
`THE COURT: I'm not -- I'm not so much worried
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`

`Case 2:19-cv-00209-JRG Document 115 Filed 01/30/20 Page 22 of 38 PageID #: 3199
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`about the two hours, as you call it, that was billed in
`January of '19.
`What I'm concerned about is the pervasive
`relationship between Pittard and Minute Key that goes on
`for years, and then what is by all accounts either a
`six-month to twelve-month or somewhere in between window
`a

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