Latham & Watkins argued this morning against an effort that would disqualify the firm from working on one of the largest antitrust class actions in Washington federal district court.
Latham is representing Union Pacific Railroad Co., one of four top freight rail companies in the United States accused of conspiring to raise customer rates through fuel surcharges. After Latham entered the case last fall, several of Latham's now-ex-clients moved to disqualify the firm, arguing there was a conflict of interest.
The former Latham clients, petroleum byproducts distributor Oxbow Carbon LLC and its subsidiaries, were unnamed members of the class. They were also pursuing what they maintained were closely related claims against two of the defendants, including Union Pacific, in another lawsuit.
U.S. District Senior Judge Paul Friedman heard arguments this morning. Oxbow's attorney, John Gerstein of Troutman Sanders, maintained that because Oxbow had brought related claims against Union Pacific and had made its presence known in the multi-district litigation, Latham had a duty to bow out.
Latham litigation partner Daniel Wall said the rules of professional conduct didn't require firms to check unnamed class members for conflicts and that Oxbow was asking the court to create a new rule that would lead to chaos in class actions.
The Oxbow companies were among thousands of plaintiffs that shipped products through Union Pacific and the three other freight rail companies targeted in the litigation. The plaintiffs accused the companies of violating federal antitrust laws by working together to increase rates through "aggressive" fuel surcharges. The rail companies denied wrongdoing. The companies are waiting for a ruling from the U.S. Court of Appeals for the D.C. Circuit on a challenge to the class certification. According to Oxbow, Latham represented its related companies beginning in 2004, earning more than $4.6 million in fees. Oxbow said the firm’s attorneys had access to "sensitive and confidential information."
Latham began representing Union Pacific—another longtime client, according to briefs—in the multidistrict litigation in October 2012, joining Covington & Burling and Jones Day as lead counsel. In February, Oxbow moved to disqualify Latham, arguing the firm's representation of Union Pacific was "directly adverse" to Oxbow.
During today's arguments, Gerstein said the situation represented an exception to the rules of professional conduct, which "typically" wouldn't require lawyers to check all unnamed class members for conflicts. That the word "typically" was in the text of the rules was important, Gerstein said, because it implied there were exceptions.
Gerstein argued there was significant overlap between the multi-district litigation and Oxbow's separate lawsuit, from common allegations to how the parties would calculate potential damages. Even though Latham decided to not represent Union Pacific in the Oxbow-specific case because of a possible conflict, Gerstein said Latham was in a bind: to fully represent Union Pacific, it would need to coordinate on the Oxbow litigation, but to do so would mean the firm would be more directly going up against Oxbow.
Gerstein said antitrust cases by nature can put a party's business operations under a microscope. He said Latham had access to sensitive information about Oxbow and high-level communications, and it wasn't clear what facts Latham may have learned about Oxbow while the company was a client.
Latham’s Wall argued Oxbow was asking the court to create a new rule for disqualification. He said siding with Oxbow would create chaos in class actions and in antitrust litigation because there weren't clear records lawyers could look to showing what actions unnamed class members might be pursuing outside the class action.
Wall also disputed that the multi-district litigation and Oxbow's lawsuit were as similar as Gerstein had argued. He noted that in filing its own lawsuit, Oxbow was distancing itself from the class, and that its lawsuit included other claims not found in the class action. He added that the company had hired litigation powerhouse David Boies of Boies, Schiller & Flexner, another sign it planned to focus on the separate lawsuit and not the multi-district litigation.
When Latham officially entered the case as Union Pacific's counsel, Wall acknowledged that the firm could have handled the situation better by notifying Oxbow in advance as a courtesy. But, he said, that didn't mean the firm committed ethics violations.
Friedman didn't say when he would rule. Wall said Latham would continue working on the case until the firm was told to stop. As the case moved towards trial, though, he said the potential harm to Union Pacific—if Latham were knocked off—would continue to grow.