Federal Court Dismisses Bell’s Motion to Disqualify the Law Firm of Bereskin and Parr in Patent Infringement Action

Federal Court Dismisses Bell’s Motion to Disqualify the Law Firm of Bereskin and Parr in Patent Infringement Action

Mediatube Corp. and Northvu Inc v Bell Canada et al, 2014 FC 237

This motion arose in the context of an action by MediaTube and NorthVu, which claims the defendants, Bell Canada and Bell Aliant, collectively the “applicants” in this motion, infringed Canadian Patent No. 2,399,477. MediaTube is represented by Bereskin and Parr (“B&P”). [1]

In this motion, the applicants sought an order removing B&P as solicitors of record for MediaTube on the basis that, due to their past and current relationship as a client of B&P, there is a conflict of interest and B&P must, therefore, be disqualified from representing MediaTube in the main action. [2]

Motion is dismissed. The Court held that “[t]he Bell family of companies as a whole was not the current or former client of B&P. While there may be some circumstances where related companies could be considered as one entity and one client, the circumstances in the present case do not lead to that conclusion.” [8]

BCE Inc. could be described as the parent company for several other separate corporations. Bell Canada is a subsidiary of BCE. Several other companies are direct or indirect subsidiaries of Bell Canada, including Bell Aliant Inc (the parent of Bell Aliant). [5]

The applicants submitted that the Bell family of companies is one client. B&P countered that each company in the family is a separate legal entity and that B&P had retainers with some of those specific entities at various times. [6]

B&P noted that while B&P has acted for individual corporate entities in Bell, it never acted for the “Bell group/family of companies.” [15] However, from time to time Bell Canada, Bell ExpressVu, Bell Media, and Bell Mobility had all retained B&P. Bell Aliant, however, has never been a client of B&P. [18] B&P had also taken on retainers against Bell Canada and Bell Media in the past. [17]

The applicants’ took the position that “B&P acted for the Bell family of companies and owed a duty of loyalty to the family as a whole. The applicants argue[d] that the tests established in McKercher have been satisfied and, as a result, B&P must be disqualified from acting as counsel of record for MediaTube.” [35]

The applicants further asserted that BCE and the Bell family of companies were current and former clients of B&P. [36] The applicants relied on the fact that BCE has a single legal department which provides services to all Bell entities, and whose lawyers acted as instructing counsel to B&P. The applicants pointed to invoices sent by B&P to BCE for retainers with the various Bell entities, and to an e-mail from a B&P partner that identified the client as “Bell, BCE and related Bell companies.” [39] In addition, the applicants argued that through its representation of Bell entities, B&P has information regarding the applicants’ “tolerance for risk”. [42]

B&P, in turn, argued that “Bell Aliant was never its client and Bell Canada was not its client at the time of the MediaTube retainer. Moreover, the notion that all the related companies are one family and one client is a fiction given that each is a corporation in its own right with separate legal personalities.” [45] In addition, B&P asserted that the invoices sent to BCE indicated that they were for work done for Bell Media, and that the e-mail referring to “BCE, Bell and related companies” was in the context of a conflict search which requires a wider scope and is not evidence of who the client was. [46]

B&P further argued that the applicants have not shown that any relevant confidential information was imparted to B&P or that the retainers with the Bell entities are sufficiently related to the retainer with MediaTube. [48] Moreover, B&P disputed that it received any confidential information regarding the applicants’ tolerance for risk. [49]

B&P took the position that “a law firm who advises a client about potential litigation does not thereby acquire confidential general knowledge about the client’s business practices, risk perspective or tolerance that precludes the firm from acting against the client in the future.” [64]

B&P further argued that “when a law firm acts for one corporation in a corporate group, that does not transform other corporations in the corporate group into clients of the firm; corporations have legal personality separate from that of their shareholders and parents.” [79]

The Court held that “[t]he fact that an invoice was sent to an address shared by BCE or to in-house counsel at BCE, in the face of evidence that one consolidated legal department acted for all the companies and that the in-house counsel described themselves as counsel for both the single entity and the larger family, would not be indicative of who the client actually was. Nor does an e-mail from a partner at B&P, which referred to ‘Bell’, support the view that the firm regarded the whole family of companies as its client.” [101]

The Court refused to infer from B&P’s efforts to communicate with Bell’s in-house counsel and to transfer out Bell’s files in an orderly manner that B&P was in a conflict that had to be waived by Bell. [105]

The Court agreed with B&P that “Bell Canada was not a current client at the relevant time and that Bell Aliant was never a client” [106], and stated that the applicants failed to establish that “B&P’s retainers with entities related to or falling under the corporate umbrella established a solicitor-client relationship with BCE or the Bell family of companies.” [106]

The Court held that “no confidential information relevant to the MediaTube retainer was received by B&P; the bright line rule is not engaged in the present circumstances because the applicants are not current clients of B&P; even if the bright line rule were engaged, its scope is narrow because the applicants are professional litigants; and, the disqualification of B&P is not called for.” [107]

The Court also highlighted the importance of utilizing retainer agreements which clearly identify the client and the scope of the engagement: the Court stated that “[c]orporate mergers and restructuring among clients, coupled with the mergers of law firms and movement of lawyers, create complex relationships that pose great challenges for client and conflict identification and highlight the importance of specific retainers that clearly identify the client and the scope of the retainer.” [152]

Further emphasizing the importance of retainer agreements, he Court also noted that if large corporate clients desire exclusive representation by law firms, they should negotiate for this in the retainer agreement. [158]