One of the few interesting parts of law school Professional Responsibility classes lives on in this article at The Recorder:

A San Francisco Bluetooth headset maker says Fish & Richardson played an unseemly game of hot potato by dropping it as a client and then turning around and suing for patent infringement the very next day.

Aliph Inc. moved to disqualify Fish from representing Bluetooth rival Plantronics in the patent case two weeks ago, arguing that the firm shouldn’t be allowed to sue its own client or get out of the mess by suddenly disowning Aliph at 8:30 p.m. the night before.

Aliph’s lawyers say that Fish’s behavior is condemned by the so-called "hot potato doctrine," which frowns on a law firm creating a conflict so it can drop a smaller client for a more lucrative one.

As part of the engagement letter, Fish did have a prospective conflict waiver, stating, "In the past, when we have been retained for regulatory work only, we have made it an express condition of our representation that the firm not be conflicted from taking any intellectual property work that might otherwise be adverse to our clients."

Although most lawyers know (or at least have heard of) the hot potato doctrine, and law students are told the courts "frown" on it, there are not many cases actually applying it. A quick search reveals fewer than two dozen nationwide, at least of cases that actually refer to it as the "hot potato doctrine."

It’s nonetheless a powerful doctrine, one that can easily get a lawyer disqualified from a lawsuit.

First, a simple question: what good does it do a lawyer or law firm to drop a client on the eve of suing them?

Lawyers have different obligations to current clients than they do former clients.
Perusing the Model Rules of Professional Conduct, a version of which is in place in most states (New York is one exception), we find Rule 1.7 (relating to current clients) strictly prohibits lawyers from representing new clients "directly adverse to another client" whereas Rule 1.9 (relating to former clients) merely prohibits lawyers from working on "the same or a substantially related matter" as they did for the former client.

Fish & Richardson (allegedly) dropped Aliph, a regulatory client, because they were about to take a position "directly adverse" to Aliph, a current client, which is prohibited. They wanted the standard to be that they would be prohibited only if the Plantronics intellectual property matter was "the same or a substantially related matter" to the work they did for Aliph, which it wasn’t, since it was different fields, different lawyers, different everything.

Too bad for F&R: there are good odds the court will apply the "hot potato doctrine" and apply the rules for current clients to them.

Pepper Hamilton was disqualified from a suit in Michigan a year and a half ago because…

Courts that have considered the issue have held that a firm will not be allowed to drop a client in order to shift resolution of the conflicts question from Rule 1.7 dealing with current clients, to the more lenient standard in Rule 1.9 dealing with former clients.

El Camino Res., LTD. v. Huntington Nat’l Bank, No. 1:07-cv-598, 2007 U.S. Dist. LEXIS 67813, at *39–40 (W.D. Mich. Sept. 13, 2007) quoting Ethics Committee of the State Bar of Michigan Opinion RI-139 (Aug. 7, 1992).

Fish & Richardson has plenty of defenses, including that they didn’t summarily drop the client but in fact gave them extended notice of the problem, albeit in a vague form, without identifying the client. And, of course, there’s the big "so what?" question arising from the fact that, in reality, it’s unlikely Aliph will be prejudiced by F&R representing Plantronics.

Moreover, "The finding of an ethical violation, however, does not automatically require disqualification. The court should order disqualification only where some ‘specifically identifiable impropriety’ has actually occurred and the balance of relevant factors requires vindication of the integrity of the legal profession over defendant’s interest in retaining counsel of its choice." Id., at *54.