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A Manhattan judge has ruled that recently closed intellectual property law firm Pennie & Edmonds violated state disciplinary rules when it represented clients who later became adverse parties in patent litigation. But the judge declined to grant summary judgment against the firm in a suit by one of the clients alleging breach of fiduciary duty. Drug maker Pfizer Inc., along with G.D. Searle and Pharmacia Corp., both now part of Pfizer, sued New York-based Pennie & Edmonds in Manhattan Supreme Court for procuring a patent for the University of Rochester that later became the basis for patent infringement suits by the university against the drug makers, also clients of the law firm, over their blockbuster drug Celebrex. In a decision released Friday, Justice Charles E. Ramos said Pennie & Edmonds violated New York’s Disciplinary Rule 5-105 prohibiting multiple representations of adverse clients by continuing to represent both parties after it became aware of a potential conflict. “In keeping with the policy of prohibiting multiple conflicting representations without the the clients’ consent, [Pennie & Edmonds] representation of both plaintiffs and [the University of Rochester] on related patent issues, without informing clients, without obtaining plaintiffs’ waiver or consent, constitutes a breach of DR 5-105,” Ramos wrote in G.D. Searle v. Pennie & Edmonds, 602374/00. The judge said he would refer the matter to the Departmental Disciplinary Committee. The committee can recommend punishments, including disbarment for the attorneys in question. Pfizer’s lawyer, Richard Seltzer of Kaye Scholer, said Friday the judge’s decision represented a “very substantial victory” for his client. He said recent case law from the Appellate Division, First Department, established that a lawyer that violated disciplinary rules would have to forfeit fees. Citing Yannitelli v. Yannitelli, 667 NYS 2d 904 (1998), in which a lawyer was forced to forfeit $1.7 million in fees for various disciplinary rule violations, Seltzer said, “that’s what we want.” He said that he was unsure whether a trial would take place, despite Ramos’ denial of summary judgment, and added that he was exploring whether he could now move the matter to a referee to determine damages. Jay Safer of LeBoeuf, Lamb, Greene & MacRae, who represents Pennie & Edmonds, said he was still reviewing the judge’s decision and declined further comment. In declining to grant summary judgment, Ramos noted that a number of factual issues remained in dispute. Pennie & Edmonds has claimed that it has not received discovery on several issues. The degree to which Pennie & Edmonds lawyers actively discussed litigation strategy with the University of Rochester also remains in dispute. The University of Rochester’s patent infringement suit was dismissed in March 2003 by Judge David G. Larimer of the U.S. District Court for the Western District of New York. Ramos noted that most of Pennie & Edmonds’ arguments took the position that the firm never represented the parties in a situation of “actual adversity,” with partners claiming they only had “hypothetical” or “general” discussions about the possibility of litigation or negotiation with Pfizer based on the University of Rochester patent. But the judge noted that the New York disciplinary rules were intended to avoid even “the appearance of impropriety.” Such an appearance seemed to arise in 1998 when Pennie & Edmonds began representing Searle in an patent interference action against Merck, the makers of Vioxx, a drug similar to Celebrex. The University of Rochester patent was issued in 2000. “[Pennie & Edmonds'] arguments seem to be mooted by [Pennie & Edmonds'] decision to continue representing plaintiffs and [the University of Rochester], after the Searle-Merck interference, without informing plaintiffs of the potential for conflict,” Ramos wrote. Pennie & Edmonds closed its doors Dec. 31 after about 100 lawyers opted to join the New York office of Jones Day.

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