Judge, Citing Ethics, Kicks Law Firm Off Case
In a highly unusual action, a major Los Angeles law firm has been disqualified on ethical grounds from a $186-million lawsuit, snarling litigation just three months before trial.
An Orange County judge ruled this week that Irell & Manella had improperly obtained confidential information about the opposing party in its defense of Irvine-based Western Digital Corp. over allegations of selling defective products.
The law firm had worked on the case for more than five years, generating fees of more than $2.5 million.
The conflict-of-interest ruling is an embarrassment for Irell, which built a large practice on its tax-law expertise for celebrity clients such as Lucille Ball, Frank Sinatra, Burt Lancaster and Elizabeth Taylor. Nora Manella, the U.S. attorney in Los Angeles, is the daughter of one of the firm’s founders.
Legal experts say it is unusual for such a prominent firm to be disqualified on ethical grounds.
“Most of the law firms, particularly large ones, are very sensitive to confidentiality and conflict-of-interest issues,” said Gregory Ogden, a Pepperdine University law professor specializing in legal ethics and responsibility.
Lawyers for Irell maintained that they acted properly and hoped to persuade the judge to reverse his ruling or get it overturned on appeal.
Scott Baskin, a Newport Beach-based Irell lawyer working on the case, said Amstrad “is making a mountain out of a molehill, frankly.”
If they can’t reverse the decision, Irell may be obliged to return the legal fees it has earned, Ogden said. At the least, Irell would be expected to pay for a costly scramble to get another law firm up to speed, according to Michael Cornelius, Western Digital’s vice president for law and administration.
The trial date is June 30. The deadline for trial to begin is December, five years after the suit was filed in state court.
“The stakes are very high for both the lawyers and their client,” Ogden said.
Cornelius said he is confident that another firm could get ready for trial sometime during the summer if Irell remains off the case.
The lawsuit by British consumer electronics company Amstrad accuses Western Digital of selling it defective disk drives, the central computer memory storage areas, in 1988 and 1989.
Western Digital, a leading disk drive maker whose largest customers are IBM Corp. and Gateway 2000, contends that any problems lie in the overall design of Amstrad’s computers, not its products.
As part of its defense of Western Digital, Irell had hired Hankin & Co., a Santa Monica consulting firm, as an expert witness to determine possible damages. Amstrad had earlier interviewed Hankin consultants as possible experts of its own.
Irell had been aware of a possible conflict and had hoped to avoid it by hiring consultant Daniel Carter, who joined Hankin after Amstrad’s series of meetings with the firm, according to court documents.
Hankin was supposed to keep Carter away from confidential material disclosed in those earlier meetings, according to the records.
But Superior Court Judge Robert Thomas ruled that the protections were inadequate. He threw Irell, and Hankin, off the case.
“Clearly, the evidence as viewed by this court establishes that confidential information was revealed to the Hankin firm,” Thomas said in an order Tuesday.
Hankin executives Friday declined comment.
Lawyers for Irell and Western Digital argued that there never was any confidentiality agreement between Amstrad and Hankins, that nothing of significance was revealed and that mistakes, if any, were innocent.
