A former tech client of Thelen Reid Brown Raysman & Steiner has filed a malpractice complaint against the firm and one of its partners and contends the firm concealed that it was simultaneously working for a key competitor.
Delaware-based IVI Smart Technologies Inc. and two subsidiaries claim that Thelen, led by San Jose, Calif., partner David Ritchie, "actively assisted" the competitor in the repeated theft of intellectual property resulting in an alleged drop in the companies' market capitalization from $200 million to $20 million, according to the complaint.
"This is a case about the deceit, divided loyalties, and gross violations of professional standards and fiduciary duties by Thelen Reid Brown Raysman & Steiner," the three companies claim in the suit, filed June 12 in New York's Southern District federal court.
A call to Thelen's attorneys in the case was referred to a firm spokesman who said, "We generally do not comment on ongoing litigation, but we believe the claims made in the lawsuit are without merit and we will vigorously defend against the allegation." The firm has not yet responded to the suit.
IVI and its subsidiaries, e-Smart Technologies Inc. and Biosensor LLC -- all of which develop fingerprint verification technologies -- allege in the complaint that Thelen helped siphon their IP to competitor Michael Gardiner and his associates and related companies.
The complaint says Thelen represented IVI beginning in 2004. Patricia Douglas, a lawyer representing Gardiner in a separate action filed by e-Smart, said Thursday that she and the other two attorneys representing him had cited the concurrent representation in asking Thelen to withdraw from representing e-Smart, which Thelen did on Jan. 30, 2007.
E-Smart hired Thelen, according to the complaint, to protect its IP in negotiating a manufacturing agreement with Gardiner and his company, A-Card.
According to the lawsuit, Thelen failed to notify e-Smart that a conflict check revealed that the firm had represented Gardiner or one of his entities twice before. Furthermore, the suit alleges, the attorney assigned to represent e-Smart in the negotiations -- an associate with less than three years of experience who was not named in the suit -- was the same attorney who had previously represented Gardiner.
"As a result, Gardiner was able to use e-Smart's years of research and development and its confidential and proprietary information to launch his competing business," the companies' lawyers, New York Dreier partners Joel Chernov and Brian Dunefsky, wrote in the complaint.
The alleged conflict worsened in March 2006, when, according to the lawsuit, Thelen tried to hide that it had entered into an attorney-client relationship with Gardiner "and/or" Tamio Saito, a lead inventor, officer and director with e-Smart who had allegedly begun working with Gardiner.
"Thelen failed to perform a conflict check and obtained a retainer check from Gardiner, but concealed it by hiding it in a desk drawer," the complaint says, without citing a source for this or several other allegations.
"Because the lawsuit is ongoing," Chernov said in an e-mail Thursday, "e-Smart is not at liberty to discuss the source of its information." Dunefsky did not return a phone call seeking comment.
The suit alleges that Thelen did not enter its relationship with Gardiner into its database but rather kept files related to that work in the associate's office.
The companies also claim that, around May 2006, Thelen transferred one of their patents to Aten, another Gardiner company, an action the suit claims Ritchie later acknowledged was improper. According to the suit, Ritchie wrote in a letter to Saito dated July 12, 2006, that the reassignment was "not proper" given Saito's "status with IVI Smart Technologies." He then allegedly wrote that Saito should seek new counsel with respect to the reassignment and that he could not represent Aten "without permission in writing from another officer of IVI," according to the suit.
Also in May, the lawsuit claims, Thelen replaced Biosensor, one of IVI's subsidiaries, with Gardiner-controlled Polymerbio as a party to a research agreement with Johns Hopkins University.
In June, Gardiner allegedly told e-Smart he had his "own IP" under the auspices of a new company, ID Smart, and had hired all of the company's research and engineering staff and would compete with the company unless certain terms -- unspecified in the suit -- were met.
The companies are suing Thelen for breach of fiduciary duty, legal malpractice, breach of contract and aiding and abetting breaches of fiduciary duty and contract.
Thelen is represented by Patterson Belknap Webb & Tyler. An order filed earlier this month gives the firm until July 31 to file its response.