It has not been the best of times for Mayer Brown. Last week, the Second Circuit held its (and Simpson Thacher’s) feet to the fire for a billion-dollar error. (See the ABA’s article or the Wall Street Journal’s article for a description of this astronomical error, which will enure to the benefit of the unsecured creditors in GM’s bankruptcy.) This week, although admittedly paling in comparison to last week’s news, Mayer Brown was disqualified from representing Defendant HSBC Finance Corporation in the District of Minnesota. Mayer Brown had previously represented the Plaintiff Residential Funding Company (RFC), and the district court was quick to find a former client conflict: “RFC presented extensive evidence that the matters on which Mayer Brown previously represented RFC were substantially related to the instant litigation and, as a result, Mayer Brown was precluded from representing HSBC against RFC, absent its consent or waiver of its right to seek disqualification.” In light of that conclusion, “the only basis for Mayer Brown’s opposition to the motion to disqualify is that by waiting six months to bring this motion, RFC waived its right seek disqualification.”
As a general matter, if a party knows about the opposing attorney’s conflict of interest or other misconduct and nevertheless delays filing the motion to disqualify, courts often deem the party to have “waived” the disqualification remedy. For this doctrine (often but not invariably called “implied waiver”), the district court looked to the Minnesota Supreme Court’s recent decision in State ex rel. Swanson v. 3M Co., 845 N.W.2d 808, 818 (Minn. 2014). There, in short, the party had arguably known about the conflict for more than a year before moving to disqualify the conflicted firm. Here, Mayer Brown argued that RFC knew about the conflicted representation for six months before RFC moved to disqualify the firm (and to Mayer Brown’s credit, several courts have concluded that a delay of six months, or even less, forfeits the disqualification remedy). The problem, though, is that the district court disagreed with Mayer Brown that RFC had known about the conflicted representation for six months. Mayer Brown premised the knowledge argument on a casual voicemail that its lead partner had left for RFC’s counsel. (Interestingly, Mayer Brown’s partner had stated in an affidavit that his voicemail clearly put RFC on notice that, if RFC did not timely object, Mayer Brown would proceed with the conflicted representation; RFC’s counsel, however, was later able to retrieve the actual voicemail for the court, and the court found the voicemail much more “ambiguous” than the affidavit had indicated.) Once this earlier voicemail was disregarded, RFC took only two months from Mayer Brown’s notice of appearance to file the motion to disqualify. Because RFC did not thereby impliedly waive the disqualification remedy, the court granted the motion to disqualify Mayer Brown.
The decision is available here: Residential Funding Co. v. Decision One Mortgage Co. et al. (D. Minn. Jan. 23, 2015).