Law Firm Removed on Patent Infringement Action Due to Conflict of Interest

Maoz Betser-Zilevitch v Nexen Inc and CNOOC Canada Inc, 2017 FC 874

The Federal Court (“FC”) disqualified Aitken Klee LLP (“Aitken Klee”) from representing Mr. Maoz Betser-Zilevitch (“Mr. Betser-Zilevitch”) on a motion brought by Nexen Inc. and CNOOC Canada Inc. (collectively, “Nexen”). [1-2] The issue was whether a law firm hoping to represent the plaintiff in an action can do so, when one of its partners acted for the defendant in the same action while at another law firm. [1] Madam Prothonotary Mireille Tabib held that the presumption that Atiken Klee was disqualified from acting in the matter was not rebutted because there existed confidential information that could be used to the prejudice of Nexen. [52-54]

Background and Timeline

In 2013, Mr. Betser-Zilevitch filed a patent infringement action against Nexen, which retained Heenan Blaikie LLP (“Heenan Blaikie”), where Jonathan Stainsby (“Mr. Stainsby”) was a partner and senior litigator. [2] Mr. Stainsby acted as the sole solicitor of record for Nexen until Heenan Blaikie was dissolved in 2014. [2] Upon dissolution of Heenan Blaikie, the defendant, Nexen, retained another firm as its new solicitors of record, while Mr. Stainsby joined Aitken Klee. [3] In June 2017, Aitken Klee was approached by the plaintiff Mr. Betser-Zilevitch for representation, and Aitken Klee accordingly set up an ethical wall to preclude any communication regarding the matter with Mr. Stainsby or any other former Heenan Blaikie employee. [4] Nexen promptly registered its objection to the retainer on grounds of conflict of interest. [5]

Presumption of Having Confidential Information That Created a Risk of Prejudice Was Not Rebutted

To determine whether Aitken Klee should be disqualified from acting in the matter, the FC applied the test set out by the Supreme Court of Canada in MacDonald Estate v Martin, [1990] 3 SCR 1235. [6] The questions were whether Mr. Stainsby had received confidential information relevant to the matter while working at Heenan Blaikie, and whether there was a risk of using that information to the prejudice of Nexen. [7, 18] The presumption was that Mr. Stainsby, having acted for Nexen, had received privileged information that could be used to the prejudice of Nexen, and the burden of rebuttal that goes beyond the balance of probabilities is on Aitken Klee. [7, 9, 21]

The FC readily found Mr. Stainsby himself to be disqualified. [17] Nexen filed an affidavit showing communications between Heenan Blaikie and Nexen, to the extent of over 300 emails relating to the action where Mr. Stainsby was made privy to confidential information. [10] The FC was not convinced by Mr. Stainsby’s assertion that he had no recollection of these correspondences, [11-14] and inferred that Mr. Stainsby had received confidential information relevant to the action while working at Heenan Blaikie. [15-17]

The question remained whether the other lawyers at Aitken Klee could act on behalf of Mr. Betser-Zilevitch. [18] The FC stated that the test is whether a reasonable and well-informed member of the public would conclude that no unauthorized disclosure of confidential information has occurred. [27] The FC pointed out that before Mr. Betser-Zilevitch approached Aitken Klee, there was no measure taken to ensure that confidential information was not shared between the ex-Heenan Blaikie employees and their new colleagues at Aitken Klee. [23] Although that every member of Aitken Klee filed an affidavit asserting that there had been no discussion regarding this action that could have led to disclosure of privileged information, the FC was not convinced by the reliability of those affidavits. [29-30] Further, Mr. Klee denied any discussions with Mr. Stainsby regarding this action, [31] but Mr. Stainsby conceded, on cross-examination, that there was a discussion about the possibility of bringing the Nexen case along when he was joining Aitken Klee. [32] In addition, the FC found the memories of various members of the firm questionable as they had a hard time remembering the presence of another lawyer who had also worked at Heenan Blaikie and had later joined Aitken Klee. [34] The level of uncertainty led the FC to conclude that a well-informed member of the public would not have been satisfied that no confidential information had been disclosed. [37]

The FC further commented on the ethical wall erected at Aitken Klee. The FC stated that the presumption is that lawyers who work together share confidences, but this presumption can be rebutted if all reasonable measures have been taken to ensure that no disclosure has or will occur, [19] where “reasonable measures” will vary from case to case. [43] The FC considered the nature of the practice at Aitken Klee and the position held by Mr. Stainsby – Aitken Klee has one practice area, which is characterized by teamwork, and Mr. Stainsby is in the position of a senior partner. [28, 45] The FC placed little weight on the fact that Mr. Stainsby was based in Toronto while the lawyers who would be involved with this case work out of the Ottawa office, because the lawyers nonetheless work closely together on other files. [45, 47] For these reasons, the FC found the ethical wall to be insufficient to render Aitken Klee eligible in representing the infringement matter.

Commentary

A transferring lawyer sometimes signs an agreement that guards against any eventual conflicting retainer with the previous employer. In this case, however, the transferring lawyer came from a firm that had been dissolved, and so no such agreement existed. In fact, this was the first time that a court had to consider the risk of confidential information having been shared by a transferring lawyer prior to a conflicting retainer. Unsatisfied with the reliability of the members at Aitken Klee, the FC ordered the solicitor to be removed from the action. In rendering this decision, the FC did not find any countervailing interests to the concern of maintaining the high standards of the legal profession. [50]

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