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3M, Minnesota spar over ousted law firm

The argument before the Court of Appeals was whether Covington & Burling could keep representing the state in its suit.

Article by: Jim Anderson , Star Tribune

Updated: April 4, 2013 - 11:21 PM

 

More than two years after the state of Minnesota filed a lawsuit against 3M Co. over alleged pollution damages in east-metro communities, the high-stakes case had one of its most significant court hearings to date on Thursday.

But arguments before the three-judge Court of Appeals were not directly about PFCs — perfluorochemicals, a group of compounds once manufactured by 3M that later found their way into groundwater after being legally disposed of — but whether the state should be allowed to keep the law firm it hired for the case after that firm represented 3M for years. Now, the firm would be arguing on the opposite side of PFC-related issues.

The case took a major detour early last year when 3M moved to disqualify the state’s law firm, Covington & Burling, but not before the firm had put 16 months of work into the case, gathering more than 50 expert depositions on PFCs and amassing more than 6 million pages of documents on the state’s behalf.

Covington took the state’s case on a contingency basis. Aside from expenses like travel and meals, the firm at the top end is to collect 15 percent of any pretrial settlement with 3M exceeding $150 million, and 20 percent of settlement amounts more than $150 million after the trial has started, documents show. The settlement percentage collected by the firm would increase as the potential settlement amount declined.

“This is an extremely important case for the state of Minnesota,” said state Solicitor General Alan Gilbert, urging the judges to overturn a decision last October that had removed Covington from the case.

Covington & Burling, the largest law firm in Washington, D.C., with offices across the globe, counts among its clients such corporate giants as General Electric and Microsoft. It also represented both 3M and the state for many years for its expertise on environmental legal matters.

When advocating for 3M on PFC-related matters to federal agencies like the Food and Drug Administration, Covington argued that PFCs pose no harm to people. Now, representing the state, the law firm is preparing a case against 3M that PFCs are harmful, aided, the company argues, by the inside information the law firm gained while it was representing 3M.

In his ruling in favor of 3M last fall, Hennepin County District Judge Robert Blaeser found that Covington had shown a “conscious disregard” for its legal duties to its former client. “By representing the state,” he wrote, “Covington will benefit by contradicting the very positions it has long advocated on 3M’s behalf.”

Arguments before the Court of Appeals turn on Rule 1.9 of the Minnesota Rules of Professional Conduct, which outlines in detail how lawyers are ethically obligated to their former clients. The rule says, essentially, that a lawyer can’t switch sides on legal matters unless the former client gives written consent, nor are lawyers to use information they had previously gleaned to the disadvantage of a former client. If a lawyer see a conflict, it’s his or her duty to notify those former clients.

Blaeser found that Covington failed to comply with the rule, disqualifying the firm in the state’s case as the only remedy.

In the legal tug-of-war between the state and 3M over Covington, starkly contrasting portrayals of their relationships with the law firm emerged.

Was there a rule violation?

Gilbert, the solicitor general, argued that the state should be able to retain Covington for two reasons: First, that there was no violation of Rule 1.9 and, second, that — even assuming the rule was violated — 3M’s long delay in moving to disqualify Covington effectively waived 3M’s right to seek that disqualification.

As for Covington using confidential information from 3M to its advantage, Gilbert argued, that aspect of Rule 1.9 does not apply because of 3M’s own assertion that it has been forthcoming with all of its PFC data, which is voluminous.

“ ‘We’ve been fully transparent, we have not hid anything from anybody’ — that’s what they’ve told the public, that’s what they’ve told regulators,” Gilbert said of 3M. If 3M is hiding any information on PFCs, it would be subject to fraud charges.

Courts have taken a dim view of using lawyer disqualification as a legal tactic, he said, adding, “Our view is that there was no conflict.”

In his arguments, Covington attorney Michael Sunder­meyer also asserted that the rule had not been broken, and that information his firm gleaned from 3M on PFC-related issues, despite Blaeser’s ruling to the contrary, did not “materially advance” the state’s case against 3M. “That is a plain legal error, and that by itself requires reversal,” he said.

But Minneapolis attorney Michael Nilan, arguing for 3M, said Covington had blatantly violated the rule. Eight days before the state filed its suit, Covington asked 3M for a written termination of its relationship — without disclosing that it was planning to become a 3M adversary in the PFC case.

Several legal ethics experts, including former White House lawyer and University of Minnesota professor Richard Painter, have filed affidavits backing 3M’s assertion that Covington breached its duty to its former client and should be disqualified, Nilan added.

Judges pressed Nilan on the delay in 3M’s move to disqualify Covington. Decisionmakers in the PFC case, Nilan replied, did not realize the extent to which Covington had been involved in PFC-related issues on the company’s behalf.

“How can that be possible?’ asked Judge Randolph Peterson. “How could 3M not be aware of the services it had received?”

Once the conflict was apparent, Nilan said, the response was immediate. In any case, Covington was obligated to make that conflict known long before it did. “3M didn’t realize it, but Covington realized it and should have brought it to the attention of 3M,” he said.

In a separate case, 3M also has filed a suit in U.S. District Court seeking damages against Covington.

The Court of Appeals judges are obliged to render their opinion on the 3M case within 90 days.

 

Jim Anderson • 651-925-5039 Twitter: @StribJAnderson

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