## Facts

- A law firm represented Heidelberg Digital LLC in at least two employment-discrimination matters.
- Eastman Kodak Company acquired Heidelberg, making Heidelberg a wholly owned Kodak subsidiary, and Kodak’s legal department assumed responsibility for Heidelberg’s legal matters.
- After the acquisition, a partner at the same law firm agreed to serve as local counsel for Sony Corporation in a patent-infringement action brought against Kodak (and in another matter where Kodak was an opposing party).
- Kodak requested that the law firm withdraw from representing parties adverse to Kodak, including Sony.
- The law firm refused and instead offered to withdraw from the Heidelberg/Kodak employment matters to eliminate the conflict.
- Kodak rejected that proposal and moved to disqualify the firm’s partner from representing Sony (and the other adverse party) against Kodak.

## Issues

1. Whether a law firm’s continued representation of a Kodak subsidiary, after acquisition and assumption of control by Kodak’s legal department, created a concurrent-client relationship with Kodak for conflict purposes.
2. Whether the firm could continue representing Sony in litigation directly adverse to Kodak without Kodak’s informed consent.
3. Whether the firm could cure the conflict by unilaterally withdrawing from the subsidiary’s matters after the conflict arose, thereby avoiding disqualification in the Sony litigation.

## Decision

- The court granted Kodak’s motions to disqualify the law firm’s partner from serving as local counsel in matters where Kodak was the opposing party, including the Sony patent-infringement case.
- The court found the acquisition created a current-client conflict because the firm was effectively representing Kodak’s corporate family while also appearing directly adverse to Kodak in active litigation.
- The court rejected the firm’s attempt to resolve the conflict by dropping the subsidiary representation after the conflict arose.

## Legal Principles

- Direct adversity between current clients in litigation generally creates a concurrent conflict of interest that requires informed consent; absent consent, the lawyer must withdraw from at least one representation.
- A parent company and a wholly owned subsidiary may be treated as closely aligned for conflict analysis, particularly when the parent controls the subsidiary’s litigation.
- A lawyer generally may not avoid a concurrent-client conflict by unilaterally terminating one client relationship to recharacterize the conflict as a former-client issue.
- Federal courts have inherent authority to supervise attorney conduct and may order disqualification to prevent conflicts that risk tainting proceedings or impairing the appearance of loyalty and fairness.

## Conclusion

The court disqualified Sony’s local counsel because Kodak’s acquisition of the firm’s subsidiary client created a nonconsented, directly adverse concurrent-client conflict, and the firm could not cure that conflict by unilaterally withdrawing from the subsidiary’s matters after the conflict arose.


Eastman Kodak Co. v. Sony Corp., No. 04-CV-6095, 2004 WL 2984297 (W.D.N.Y. Dec. 27, 2004)