MADISON, Wis. (Legal Newsline) - One of the nation’s leading law firms is being accused of leaving a client -- a software service provider used by retailers, distributors and media websites -- high and dry in the midst of a costly lawsuit over patent infringement and trade secret misappropriation.
In court documents, Steve Proctor, CEO of Nashville, Tenn.-based Edgenet, called Foley & Lardner LLP’s motion to withdraw from the litigation, filed against EdgeAQ LLC in the U.S. District Court for the Western District of Wisconsin, and a bill for presumably hundreds of thousands of dollars in fees a “complete surprise.” EdgeAQ bought Edgenet in 2014.
In a letter sent to Judge William M. Conley, who himself worked as an attorney for Foley & Lardner in its Madison, Wis., office from 1984 to 2010, Proctor opposed the firm’s motion to withdraw.
“After months of representing us, our current counsel informed us on Dec. 15, 2015 that they intended to file a motion to withdraw on Dec. 18, 2015,” Proctor wrote in a Dec. 28, 2015 filing with the federal court.
“Our current counsel’s statement was a complete surprise to us. We had paid all outstanding invoices fully and in a timely manner.”
According to Proctor’s December letter to the judge, Foley & Lardner stated there was a conflict of interest between the firm and EdgeAQ. Foley & Lardner allegedly told EdgeAQ that the firm felt the company was “second-guessing” its strategy.
“From the record in this case, we respectfully submit that it was warranted for a number of reasons, including, for example, that we have voluntarily dismissed three of our four patent infringement claims after our current counsel filed those claims,” Proctor noted.
“To compound the complexity of the matter, when our current counsel filed the motion to withdraw, they requested an expedited consideration of the motion knowing that the date of the filing left EdgeAQ three business days to find replacement counsel before the Christmas holiday.”
Proctor said in his letter the company was “even more surprised” when Foley & Lardner informed it -- for the first time -- on Dec. 21, 2015 that it also had a conflict due to the firm’s representation of Nate Herbst, the current CEO WTS Paradigm LLC, which is the plaintiff in the case against EdgeAQ.
“Apparently, our current counsel has had an ethical conflict that should have, and perhaps did, have an impact on our current counsel’s representation of us in this case,” Proctor wrote to Conley.
“We view such conflict as a significant issue that should have been disclosed to us long before Foley undertook representation of us.
“Moreover, we have grave concerns that the only real reason for our current counsel’s motion to withdraw is the discovery of this conflict.”
EdgeAQ, in turn, requested that Foley & Lardner not be granted withdrawal from the case until Jan. 8, 2016.
“This should be sufficient time for us to obtain new counsel and begin to get them up to speed,” Proctor wrote to Conley, adding that the company would not seek an extension of the trial date.
The federal judge, in a text-only order Dec. 30, 2015, granted in part and denied in part the motion to withdraw and for stay.
“Foley & Lardner is relieved of its representation of EdgeAQ in this matter and is to cooperate fully in the transfer of its representation of EdgeAQ to Baker Donelson consistent with its ethical obligations,” the order stated. “EdgeAQ’s new counsel is to consult with counsel for WTS Paradigm and advise the court on or before Friday, Jan. 8, whether it wishes to seek any modification in the current case schedule by filing an appropriate motion.”
Jeffrey A. Simmons, a partner in the Business Litigation and Dispute Resolution, Distribution and Franchise, and Intellectual Property Litigation practices at Foley & Lardner, and who helped represent EdgeAQ, could not be reached for comment on the firm’s decision to drop EdgeAQ or its current policy on conflicts of interest.
A lawsuit has not yet been filed by Edgenet against the law firm, likely due to the risk to the ongoing litigation.
Baker Donelson Bearman Caldwell & Berkowitz PC, based in Memphis, Tenn., and Pia Anderson Dorius Reynard & Moss, with an office in Milwaukee, are now serving as EdgeAQ’s counsel.
In January, the federal court denied EdgeAQ’s request to stay discovery; however, the deadline to file dispositive motions was extended to April 11 and the discovery cutoff has been extended to July 29.
EdgeAQ originally filed suit against WTS in the U.S. District Court for the Middle District of Tennessee in November 2014.
EdgeAQ accused WTS of infringing two of its patents -- U.S. Patent Nos. 6,810,401 and 7,461,049 -- trade secret misappropriation, tortious interference with contractual and business relationships, and procurement of breach of contract.
The Middle District of Tennessee dismissed the case for lack of personal jurisdiction in May 2015.
WTS filed a complaint for declaratory judgment in the Western District of Wisconsin soon after.
WTS contends it “has not and is not now” infringing, directly or indirectly, or contributed to infringement by another, or actively induced others to infringe any claim of either patent.
Last month, the company filed a motion for summary judgment against EdgeAQ on all of its pending counterclaims.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.