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Hibu Inc. v. Peck

United States District Court, D. Kansas

October 5, 2017

HIBU, INC., Plaintiff,
CHAD PECK, Defendant.


          J. Thomas Marten, Judge.

         This matter is before the court on plaintiff Hibu Inc.'s motion to disqualify attorneys Eric Leon, Kuangyan Huang, and Nathan Taylor from representing defendant Chad Peck, who is employed by Dex Media, in this litigation pursuant to Kansas Rule of Professional Conduct (“KRPC”) 1.9(a), (b) and 1.10(a)[1] (Dkt. 253). These three attorneys were formerly associated with Kirkland & Ellis LLP (“Kirkland”). Plaintiff contends that while Leon, Huang, and Taylor were employed at Kirkland, they could not provide conflict-free representation to defendant. Plaintiff argues that their conflict was not removed after they switched to Latham & Watkins LLP (“Latham”). For the reasons stated below, plaintiff's motion is granted in part and denied in part without prejudice.

         I. Nature of the Case

         Plaintiff employed defendant as a sales manager in Wichita and surrounding markets. Both parties signed an employment agreement on May 23, 2006.

         In January 2015, defendant left plaintiff's employment and began working with Dex Media-plaintiff's direct competitor. Based on defendant's work on Dex Media's expansion into Wichita and other Kansas markets, plaintiff commenced this litigation in February 2016, arguing that defendant breached his employment agreement and tortuously interfered with plaintiff's business expectancy.

         II. Kirkland's Prior Representation of Plaintiff

         Kirkland previously represented plaintiff in a lawsuit against Mr. Joseph Walsh, plaintiff's former Chief Executive Officer (“CEO”), in which plaintiff sought damages and injunctive relief against Walsh for: breach of his employment separation agreement; improper use of plaintiff's confidential information; making untrue, negative and derogatory statements about plaintiff and its management; procurement of plaintiff's confidential information by improper means; conversion of plaintiff's confidential information; aiding and abetting breach of fiduciary duty by other plaintiff executives; and civil conspiracy. Plaintiff claimed that Walsh-who is presently Dex Media's CEO-obtained confidential material from Messrs. James McCusker, Mark Cairns, and John Gregory, three senior executives who were employed by plaintiff at that time. McCusker is now the Chief Revenue Officer of Dex Media. Gregory is a vice president of Dex Media. Cairns is, or until recently was, Dex Media's Executive Vice President of Operations and Client Services.

         During Kirkland's representation of plaintiff in the Walsh matter, Kirkland had extensive communications with plaintiff's senior management and worked closely with its general counsel. Kirkland investigated Walsh's conduct and provided guidance as to the conduct of interviews by plaintiff of potential witnesses, including McCusker and Gregory.

         Kirkland also defended plaintiff in McCusker's (plaintiff's former president) and Cairns's (plaintiff's former Chief Operations Officer) lawsuits against plaintiff for defamation and violation of Pennsylvania's wage law. These lawsuits followed plaintiff terminating McCusker's and Cairns's employment for providing confidential information to Walsh and for other reasons.

         In a fourth matter, Kirkland served as U.S. counsel to plaintiff and Hibu Group in connection with their financial restructuring. In the course of that representation, Kirkland was given access to and reviewed highly confidential, proprietary, and commercially sensitive information, including information pertaining to plaintiff's business strategy, business plans, business practices, historic financial data, financial projections, product strategy, employee data, debt structure, executory contracts, contingent obligations, and pending litigation.

         Plaintiff claims that Leon's practice group at Kirkland handled the Walsh, McCusker, and Cairns cases. Specifically, at least 15 attorneys from both Kirkland's Chicago and New York offices were involved in the Walsh litigation generating over $920, 000 in legal fees. Approximately eight Kirkland attorneys were involved in the McCusker and Cairns matters, and generated over $215, 000 in legal fees. Kirkland withdrew from representing plaintiff in the McCusker and Cairns matters in late 2014. The McCusker and Cairns cases were pending when this current litigation commenced. In the financial restructuring matter, more than 30 Kirkland attorneys were involved, and Kirkland received over $3, 200, 000 in legal fees.

         On April 4, 2017, Leon and Huang were attorneys with Kirkland, and were admitted pro hac vice to represent defendant against plaintiff in this case.[2] One day later, plaintiff advised Kirkland that it objected to its representation of defendant. According to plaintiff, Kirkland referred the matter to its internal committee, and subsequently informed plaintiff that it would withdraw from this case on April 9, 2017. On May 17, 2017, approximately five weeks later, Leon and Huang both filed notices of their withdrawal as counsel for defendant.

         After Leon and Huang withdrew from representing defendant, they joined Latham and again moved to appear pro hac vice on July 7, 2017.[3] Taylor, also associated with Latham, moved to appear pro hac vice. Magistrate Judge James granted all three motions on July 10, 2017.

         III. Legal Standards

         “The court has inherent supervisory powers to control attorneys and motions to disqualify counsel are committed to the court's sound discretion.” Coffeyville Res. Ref. & Mktg. v. Liberty Surplus Ins. Corp., 261 F.R.D. 586, 589 (D. Kan. 2009). When deciding a motion to disqualify, the court reviews the unique facts of the case and balances competing considerations. McDonald v. City of Wichita, Kan., No. 14-1020-GEB, 2016 WL 305366, at *3 (D. Kan. Jan. 26, 2016). Such considerations include: (1) the privacy of the attorney-client relationship; (2) the prerogative of each party to choose its own counsel; (3) and the hardships that disqualification would impose upon the parties and the entire judicial process. Id. The court is mindful that the ...

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