Toshiba Accuses Paul Hastings of Loyalty Breach

Toshiba Accuses Paul Hastings of Loyalty Breach Jason Doiy / The Recorder Harold McElhinny, Morrison & Foerster partner.

SAN FRANCISCO — Toshiba Corp. is going after its counsel at Paul Hastings, claiming the lawyers have gone behind the company’s back to defend an adversary.

Paul Hastings attorneys have represented Tokyo-based Toshiba for 15 years, including negotiating agreements between Toshiba and SanDisk Corp. as the two companies worked together to produce flash memory technology.

In March, SanDisk accused competitor SK Hynix Inc. of stealing 10 gigabytes of trade secrets, including confidential designs developed jointly by Toshiba and SanDisk. Paul Hastings attorneys are defending Hynix in the trade secrets dispute.

On Monday, Toshiba filed a motion in Santa Clara Superior Court seeking a preliminary injunction that would prevent Paul Hastings from continuing as Hynix’s counsel.

Toshiba lawyer Harold McElhinny, a Morrison & Foerster partner, argued Toshiba’s interests are inextricably tied up with SanDisk’s in this case, and Paul Hastings cannot remain loyal to Toshiba while working for Hynix. What’s more, Paul Hastings lawyers drafted some of the very Toshiba-SanDisk agreements at issue in the trade secrets case, giving them an unfair advantage against their former client, McElhinny wrote.

“By representing the wrongdoer—Hynix—Paul Hastings has and will take positions directly contrary to Toshiba’s interests as owner or joint owner of the technology at issue,” McElhinny wrote.

Toshiba’s legal team also includes Louise Stoupe in Morrison & Foerster’s Tokyo office.

Paul Hastings, represented by Irell & Manella partner Andra Greene of Newport Beach, maintains there is no conflict.

“Toshiba is not a party to the trade secrets litigation in California, and the firm believes this is a dispute between only Hynix and SanDisk,” a firm spokeswoman said in a statement. “We are confident that the court will support this view.”

In defense of Hynix, Paul Hastings lawyers have taken a seemingly inconsistent position, arguing it’s Toshiba, not SanDisk, that technically owns the files in question. “There are serious questions as to whether SanDisk owned the information it claims was misappropriated,” Paul Hastings partner Barry Sher wrote. “The February 2008 agreement that SanDisk relies on makes clear that Toshiba maintains exclusive rights to any technology it contributes to the joint venture.”

The employee accused of stealing trade secrets worked at a SanDisk-Toshiba joint factory in Japan, Sher added, and Toshiba has filed a separate lawsuit against Hynix in Japan.

McElhinny alleges Paul Hastings did not inform Toshiba it intended to represent Hynix in the trade secrets dispute. Toshiba first became aware of the alleged conflict in May, when Paul Hastings partners Sher, Maria Douvas and Robert Masters entered notices of appearance.

Masters has been directly involved in past Toshiba matters, the company alleges, but details as to his work with Toshiba have been redacted from the company’s filing.

Masters withdrew from SanDisk v. Hynix after three weeks. Toshiba claims his withdrawal came after the company raised the issue to Paul Hastings.

Masters declined to comment Wednesday.

Paul Hastings attorneys have already presented arguments that are directly contrary to Toshiba’s interests, McElhinny argued. Sher’s team filed a 300-page expert declaration attempting to show the Toshiba information allegedly stolen by Hynix was generally known and is of no value. The attorneys have also argued Toshiba failed to protect its trade secrets against theft.

Paul Hastings, which also represented Toshiba from 2011 to 2013 in federal patent litigation brought by Talon Research Inc., has received inside information about the company’s flash memory products that make disqualification from SanDisk v. Hynix the only option, McElhinny argued.

“The confidential knowledge that Paul Hastings attorneys acquired from past matters is imputed to the entire firm,” McElhinny wrote, “and no ethical wall can cure the infection.”

Contact the reporter at mkendall@alm.com.

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