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From Antitrust Law Daily, September 4, 2013

Latham & Watkins not disqualified from representing Union Pacific in antitrust litigation

By Tobias J. Gillett, J.D., LL.M.

Latham & Watkins LLP’s prior representation of an active but unnamed plaintiff in unrelated matters did not require it to withdraw from representation of a railroad in multidistrict price fixing litigation against the railroad and other railroad companies, even though the case could result in precedent adverse to the plaintiff in a separate case asserting similar claims, the federal district court in Washington, D.C. has ruled (In re Rail Freight Fuel Surcharge Antitrust Litigation, September 3, 2013, Friedman, P.).

On June 21, 2012, the court certified a class of approximately 30,000 shippers, that “likely includes” Oxbow Carbon & Minerals LLC and five related companies (“Oxbow”), asserting claims that BNSF Railway Co., CSX Transportation, Inc., Norfolk Southern Railway Co., and Union Pacific Railroad Co. (UP) conspired to impose a fuel surcharge on rail freight that resulted in supra-competitive shipping rates (2012-1 Trade Cases ¶77,945). On August 9, 2013, the U.S. Court of Appeals in Washington, D.C. vacated the certification decision (2013-2 Trade Cases ¶78,481) and remanded it for reconsideration in light of the Supreme Court’s decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), 2013-1 Trade Cases ¶78,316.

Latham & Watkins had represented UP in at least 32 separate matters since 1997, and Oxbow in more than 23 separate matters since 2004, although none of the matters involved Oxbow’s relationship with UP or its domestic rail freight needs. On November 6, 2007, 18 cases in the present multidistrict litigation (MDL) were consolidated and transferred to the court. Latham did not initially represent UP in the litigation. On June 7, 2011, Oxbow filed a separate lawsuit against UP, alleging essentially the same fuel surcharge conspiracy, but asserting monopoly claims as well (Oxbow Carbon & Minerals LLC v. Union Pac. R.R., 2013 WL 673778 (D.D.C. 2013), 2013-1 Trade Cases ¶78,277) (“the Related Case”). Latham again did not represent UP in that case.

On October 6, 2011, Oxbow signed an engagement letter with Latham for representation in acquiring permits for facilities and for future representation. The letter contained an advance conflicts waiver. Following the court’s class certification decision in the present case, Latham began advising UP on its appeal from the court’s class certification decision, and later began advising UP on broader issues of strategy in the MDL. On July 31, 2012, Oxbow filed a motion in the MDL, seeking access to certain sealed records. Latham did not represent UP in opposing that motion. In September 2012, a Latham attorney became UP’s lead trial counsel in the MDL, but Latham did not defend UP in the Related Case.

Upon receiving notice of Latham’s representation, Oxbow demanded that Latham cease representing UP in the MDL, and terminated its relationship with Latham when it refused. When Latham continued to decline to withdraw, Oxbow filed a motion to disqualify Latham from representing UP in the MDL.

The court concluded that Latham’s continued representation of UP did not violate the District of Columbia Rules of Professional Conduct, and denied Oxbow’s motion. Under Rule 1.7 of the D.C. Rules, a lawyer may not represent a party in a matter if the “matter involves a specific party or parties and a position to be taken by that client in that matter is adverse to a position taken or to be taken by another client in the same matter even though that client is unrepresented or represented by a different lawyer.”

The court rejected Oxbow’s contention that its Related Case constituted the “same matter” as the price fixing claim contained in the MDL. The court observed that the “same matter” language in Rule 1.7 “operate[d] narrowly” to address “a situation in which the lawyer the lawyer is representing one client in a matter, such as a litigation.” Moreover, following Oxbow’s “broad reading” would mean swallowing the principle that “the mere fact that advocating a legal position on behalf of one client might create precedent adverse to the interests of a client represented by the lawyer in an unrelated matter does not, without more, create a conflict of interest.” The court concluded that “[w]hile Latham’s defense of UP in the MDL may involve the development of arguments or the taking of positions that ultimately establish negative precedent for Oxbow in the Related Case, the MDL and the Related Case nevertheless constitute distinct matters for the purposes of D.C. Rule 1.7(b)(1).”

Furthermore, the court found that Oxbow’s active participation in the MDL did not require a departure from “the general rule that unnamed class members are not firm clients for conflicts purposes,” an issue it deemed “a question of first impression.” The court noted that the “general rule” responded to the difficulty of locating a law firm without conflicts in a major class action like the present litigation. However, the court observed that Comment 25 to Rule 1.7 stated that “a lawyer seeking to represent an opponent in a class action does not typically need the consent of an unnamed member of the class whom the lawyer represents in an unrelated matter,” which indicated that in “atypical” situations notice or possibly disqualification might be required.

However, the present litigation was not such an “atypical” case, according to the court. Latham’s representation of UP in the MDL provided “no reason to doubt Latham’s loyalty to either UP or Oxbow,” and Oxbow did not claim that it had shared confidential information with Latham that would be relevant to the MDL or the Related Case. Nor did Oxbow’s motion for access to sealed documents in the MDL alter this analysis. A conflict under Rule 1.7 that was unforeseeable at the beginning of the representation would only require a lawyer to withdraw if it arose under certain provisions of Rule 1.7 not applicable here. Even if Latham’s appearance in the MDL were to be considered as a discrete representation, Oxbow’s motion “presented a discrete dispute in a complicated antitrust class action,” and Latham did not oppose the motion. Moreover, depriving UP of its chosen representation would be “disproportionately prejudicial to UP.”

Finally, the court declined to adopt a “totality of the circumstances” test urged by Oxbow and its expert witness, under which the Related Case and the motion for access would be relevant to “establish[ing] Latham’s knowledge that Oxbow was an unnamed class member with a substantial interest in the price fixing claim and that Oxbow was actively pursuing that claim.” The court observed that what set Oxbow apart from other unnamed class members was its pursuit of claims outside the class action, which could not “serve as the basis for deeming Oxbow equal, for conflicts purposes, to a named party within the class action.” Moreover, the “totality of the circumstances” standard would require firms “to evaluate and quantify the degree to which unnamed class members are ‘actively pursuing’ claims,” which “would only invite post-representation litigation.”

The case is MDL No. 1869, Misc. No. 07-0489 (PLF).

Attorneys: James Scott Ballenger (Latham & Watkins LLP) for Union Pacific Railroad Co. Arthur N. Bailey, Jr. (Hausfeld LLP) for Dakota Granite Co.

Companies: Oxbow Carbon & Minerals LLC; Union Pacific Railroad Co.

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