Unsigned Conflict Waiver Letter Found Enforceable
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An unsigned advance conflict waiver is enforceable, according to a New York appellate court, allowing a law firm to continue to represent a large national retailer in a dispute with another large national retailer over the sale of Martha Stewart products. In Macy’s Inc. v. J.C. Penney Corp., the Supreme Court of the State of New York, Appellate Division, First Department affirmed the trial judge’s denial of J.C. Penney’s motion to disqualify the law firm from representing Macy’s due to a conflict. Specifically, the court held that through a March 2008 engagement letter in which J.C. Penney hired the firm to perform intellectual property litigation and trademark registration in Asia, J.C. Penney waived its right to protest by accepting the engagement—even though it never signed the letter.
Asian IP Engagement Letter Constitutes Advance Conflict Waiver in NY Dispute
The engagement letter informed J.C. Penney about the possibility that the firm’s clients, including future clients, may be direct competitors or have interests contrary to J.C. Penney. The firm warned J.C. Penney that its clients might also seek to retain the firm in transactions and litigation adverse to the retailer.
The law firm’s “conflict waiver was unusually detailed, expressly stating that the law firm would not undertake the J.C. Penney representation unless the client agreed that the firm could handle matters directly adverse to J.C. Penney’s interests,” although not in substantially related matters, says Thomas G. Wilkinson, Jr., Philadelphia, cochair of the Conflicts of Interest Subcommittee of the ABA Section of Litigation’s Ethics and Professionalism Committee.
The court found the “agreement unambiguously explained” that the firm would not represent J.C. Penney unless the retailer agreed to the firm’s arrangement, thereby “waiv[ing] any conflict of interest” and the right to disqualify the firm in potential future matters adverse to J.C. Penney. The agreement also noted that J.C. Penney’s instructions in the 2008 matter “will constitute your full acceptance of the terms” and create an advance conflict waiver.
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