[textbook]Traversing the Ethical Minefield Problems, Law, and Professional Responsibility by Susan R. Martyn (z-lib.org)(1) (1)

the defendants in the Sony action.” By letter dated August 13, 2004, McElheny responded,
asserting that “Heidelberg is our client” and therefore, Woods Oviatt does “not believe the
Code of Professional Responsibility is implicated.” However, in order to alleviate Kodak’s
ethical “concerns,” McElheny informed Van Graafeiland that Woods Oviatt would
withdraw from further representation of Heidelberg in the Jackson and McEwen cases.
. . . Van Graafeiland rejected Woods Oviatt’s request to withdraw from the Jackson and
McEwen cases as “not acceptable” because it would cause “substantial prejudice to
Heidelberg and Kodak, given the firm’s long-term representations in those cases and the
level of activity therein.” The instant motions to disqualify Woods Oviatt from acting as
local counsel in the Sony v. Kodak and ECJ v. Kodak cases followed. . . .
1. Is Kodak a Current Client of Woods Oviatt?: The first issue to be addressed is whether
Kodak’s acquisition of Heidelberg transformed them into one and the same “client” for
conflict purposes. Resolution of this initial issue is critical because if the two entities are to
be treated as a single client, then under the Code of Professional Responsibility, Woods
Oviatt’s representation of ECJ and Sony as local counsel is “prima facie improper.” Cinema
5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1387 (2d Cir. 1976).
Determining the existence and nature of conflicts in the context of “corporate families”
and the appropriate remedy upon the finding of a conflict can be a difficult and
complicated undertaking. The relevant inquiry centers on whether the corporate
relationship between the two corporate family members is “so close as to deem them a
single entity for conflict of interest purposes.” Discotrade Ltd. v. Wyeth-Ayerst
International, Inc., 200 F. Supp. 2d 355, 358 (S.D.N.Y. 2002). See JPMorgan Chase Bank
v. Liberty Mutual Insurance Co., 189 F. Supp. 2d 20, 21 (S.D.N.Y. 2002) (conflict found
where, even though corporations may not be “alter egos” of one another, their relationship
was “extremely close and interdependent, both financially and in terms of direction”).
The evidence of a “close and interdependent relationship” between Kodak and
Heidelberg is compelling here. The Kodak-Heidelberg transaction was neither a merger of
equals, nor an attenuated corporate affiliation. Rather, Kodak essentially swallowed
Heidelberg. Heidelberg is now wholly owned by Kodak. Heidelberg’s “one person” Board
of Directors is a Senior Vice President of Kodak. Three-fourths of Heidelberg’s eight
corporate officers are Kodak employees. After the acquisition, Heidelberg’s technology
system was integrated with Kodak’s. Significantly, Heidelberg shares Kodak’s legal
department. Indeed, Kodak’s Legal Division has direct supervisory responsibility over both
the McEwen and Jackson cases. See Hartford Accident and Indemnity Co. v. RJR Nabisco,
Inc., 721 F. Supp. 534, 540 (S.D.N.Y. 1989) (“If the parent and subsidiary were in fact
distinct and separate entities for representation purposes, then there would have been no
need for the parent’s general counsel to have retained this supervisory role.”). Heidelberg is
unquestionably intertwined with Kodak, both in terms of corporate ownership and
business management. Hence, for conflict purposes, Kodak and its wholly owned and
operationally integrated subsidiary, Heidelberg, are the same client. See Stratagem
Development Corp. v. Heron International N.V., 756 F. Supp. 789, 792 (S.D.N.Y. 1991)
(where “the liabilities of a [wholly owned] subsidiary corporation directly affect the bottom
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