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Duane Morris, ordered out of a local arbitration proceeding last month after being sued by health-care giant McKesson Corp. over a conflict of interest, has filed a motion for a new trial and asked that a permanent injunction against it be lifted. McKesson contends that because Duane Morris represented one of its subsidiaries in a Pennsylvania bankruptcy case, it is barred from representing an Atlanta couple suing another McKesson subsidiary. However, in a motion filed last month by Bondurant, Mixson & Elmore partner Emmett J. Bondurant on behalf of Duane Morris (which had represented itself in earlier proceedings), the firm notes that a Pennsylvania bankruptcy case cited as the root of the conflict has been settled, and argues that no attorney-client relationship now exists between Duane Morris and McKesson. In response, Morris Manning & Martin partners Joseph R. Manning and Larry H. Kunin last week filed a brief on McKesson’s behalf resisting the move, asserting that Duane Morris’ arguments fly in the face of legal rules and precedent, amounting to a “hot-potato” stratagem in which a lawyer abandons one client in favor of another whose business may be more lucrative. As reported earlier in the Daily Report, the dispute began when McKesson sought to oust Duane Morris’ Atlanta office from its representation of the former owners of a medical software company against a McKesson subsidiary. The local action involves a high-stakes intellectual property dispute between a Georgia couple, Nan and Alex Smith, and McKesson Information Solutions. The couple are the former owners of a medical software company that was bought by another that itself was purchased by MIS. The Smiths sued MIS, alleging breach of contract and fraud, and in August replaced part of their legal team with the Duane Morris lawyers. But in May, shortly before the local Duane Morris office signed on to that case here, lawyers from its Harrisburg, Penn., office had agreed to assist two other McKesson subsidiaries in a bankruptcy proceeding in that city. When McKesson executives learned of the firm’s involvement in the Atlanta case, they demanded the firm withdraw on conflict-of-interest grounds, retaining the Morris, Manning and Martin attorneys to press their case. In response, Sean R. Smith and John C. Herman of Duane Morris’ Atlanta office argued that an agreement letter between their firm and the companies in the Pennsylvania case, McKesson Automation Solutions and McKesson Medication Management, specifically addressed the possibility “that some of our clients or future clients will have matters adverse to McKesson” and that, in such cases, the company agreed to “waive any actual or potential conflict of interest as long as those other engagements are not substantially related to our services to McKesson.” McKesson challenged that argument by noting, among other things, that the Georgia Rules of Professional Conduct bar any such open-ended waiver and require written, informed consent from a client before a retained attorney may engage in a potential conflict. Fulton County Superior Court Judge Thelma Wyatt Cummings Moore agreed with McKesson and, on Nov. 8, ordered Duane Morris out of the arbitration and permanently barred its representation of the Smiths. McKesson Information Solutions v. Duane Morris, LLP, Fulton County Sup. Ct. No. 2006-CV-121110. In the law firm’s request for a new trial, Bondurant makes no mention of the previous arguments, simply noting the “newly discovered evidence” that the Pennsylvania case had been settled, that Duane Morris had withdrawn as counsel in the case, and asserting that McKesson had agreed to that withdrawal. Not so fast, counter the McKesson lawyers. Not only does case law support their position that the settlement of an underlying case does not resolve a conflict of interest, they say, but McKesson has never consented to Duane Morris’ withdrawal. Duane Morris’ “termination of the prior representation is not �newly discovered’ evidence,” says the response. “It is evidence created by Duane Morris after-the-fact.” It cites U.S. District Judge G. Ernest Tidwell’s opinion in a 2006 case, Snapping Shoals v. RLI Insurance, in which “Tidwell held that representation of one client during the pendency of the instant action makes that client a �current client’ for purposes of conflict of interest analysis” despite the subsequent resolution of that action. Duane Morris general counsel Michael Silverman declined to discuss the request for a new trial, nor would he discuss the rationale for retaining Bondurant this time around. In a brief conversation concerning the case, Bondurant alluded to Duane Morris’ assertions in pleadings and at trial that McKesson was using the conflict charges as “a tactical disqualification” in order to drive the firm out of an arbitration proceeding that could mean millions in adverse judgments if successful. “That bankruptcy only settled for about $20,000 or so,” chuckled Bondurant. (According to the attached order ending that case, an administrative claim of $20,000 was awarded McKesson, along with other claims totaling $195,665. Duane Morris’ fees in that case came to $13,058�more than half of which remained unpaid as of Dec. 6, according to a copy of a letter also attached to the motion.) “Of course we’re going to oppose it strongly,” said McKesson attorney Manning, asserting that the Pennsylvania settlement “doesn’t make any difference at all.” Greg Land can be reached at [email protected]

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