Professional Documents
Culture Documents
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ROHM AND HAAS COMPANY, :
Plaintiff, :
v. :
C.A. No. 4309-CC
THE DOW CHEMICAL COMPANY and :
RAMSES ACQUISITION CORP.,
:
Defendants.
:
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Page
C. Dow engages in ex parte contacts with the FTC in blatant violation of its
obligations under the Merger Agreement ............................................................... 6
ARGUMENT................................................................................................................................. 9
C. Wachtell’s representation of Rohm and Haas does not violate Rule 1.9.............. 15
1. The nature and scope of the prior representation of Dow and of the
current litigation are entirely distinct........................................................ 16
i
1. Dow acquiesced in and consented to Wachtell’s representation of
Rohm and Haas by failing to express an objection until after
litigation began.......................................................................................... 23
CONCLUSION............................................................................................................................. 25
-ii-
TABLE OF AUTHORITIES
Cases: Page
Deptula v. Steiner,
2003 WL 23274846 (Del. Super. Dec. 15, 2003) ................................................................. 9 n.6
Hendry v. Hendry,
2005 WL 3359078 (Del. Ch. Dec. 1, 2005)....................................................................... passim
In re Appeal of Dunlap,
2008 WL 2415043 (Del. May 6, 2008)................................................................................. 1, 10
-iii-
Kenton v. Bellevue Four, Inc.,
1999 WL 463684 (Del. Super. Apr. 26, 1999) ......................................................................... 23
McAllister v. Kallop,
1993 WL 205037 (Del. Ch. June 8, 1993)................................................................................ 20
Unanue v. Unanue,
2004 WL 602096 (Del. Ch. Mar. 25, 2004)....................................................................... passim
Rules:
Del. Lawyers’ R. Prof’l Conduct 1.7 & cmt. [7] ............................................................... 10-11, 12
Del. Lawyers’ R. Prof’l Conduct 1.9 & cmt. [3] .................................................................... 15, 16
Other Authorities:
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Rohm and Haas Company (“Rohm and Haas”) respectfully submits this brief in
opposition to Dow’s motion to disqualify its chosen counsel, Wachtell, Lipton, Rosen & Katz
(“Wachtell”), from fully representing Rohm and Haas in this litigation. Submitted with this brief
are the affidavits of Robert A. Lonergan, Martin Lipton, Daniel A. Neff, Marc Wolinsky, Jona-
than M. Moses and Gail K. Edelman, to which the Court is respectfully referred.
PRELIMINARY STATEMENT
Dow’s motion to disqualify Wachtell clearly fails the stringent tests applied in our
courts where disqualification of counsel is sought. These motions always carry with them the
risk that they are being made for tactical purposes; this is especially true in expedited proceed-
ings involving sophisticated litigants. Here, Dow has entirely failed to show either that it is a
current client of Wachtell, or that the prior Wachtell engagement involved “the same or a sub-
stantially related matter” such that there is a “substantial risk” that the information Wachtell ob-
tained from Dow would “materially advance” Rohm and Haas’s position here. Hendry v. Hen-
dry, 2005 WL 3359078, at *1 (Del. Ch. Dec. 1, 2005). Dow does not even cite the legal stan-
dard, and has entirely failed to carry its burden to show a conflict by clear and convincing evi-
The notion that Dow is currently a Wachtell client is patently frivolous. The
claim is based on the fact that Dow’s Assistant General Counsel received an automated e-mail
form asking him to confirm his mailing address and the fact that Dow’s General Counsel is on an
e-mail distribution list for legal commentaries. Simply put, these are not the kind of communica-
tions that would “create a reasonable expectation” on Dow’s part that Wachtell was representing
its interests at the very same time that it was negotiating against Dow on behalf of Rohm and
Haas. SBC Interactive v. Corporate Media Partners, 1997 WL 770715, at *4 (Del. Ch. Dec. 9,
Conduct governing conflicts with former clients carries no more weight. Dow’s argument is that
its “transformative strategy” — a strategy that Dow has touted publicly and prominently since at
least 2006 — “lies at the very heart of the instant litigation.” Dow Br. 11-12. 1 That claim
strains credulity. This is a breach-of-contract case where the defendant admits that it has
breached the contract. The issue for trial is whether events that occurred after the contract was
signed allow Dow to avoid specific performance despite the fact that Dow agreed that Rohm and
Haas would be entitled to that remedy. Indeed, it is Dow that trumpets repeatedly that this case
is about what has happened in the last forty-five days. Direct quote: “For Dow, Rohm and
Haas, and the Merger, the world changed beginning December 28.” Answer, p. 13 (emphasis
added). Any secret strategic thinking two or three years ago that started Dow down the long path
Finally, the lack of persuasive merit of Dow’s motion, and its fundamentally tac-
tical nature, is demonstrated by Dow’s own conduct. Dow has of course known that Rohm and
Haas was represented by Wachtell from June 2008 onwards. Dow’s counsel sat opposite
Wachtell at the negotiating table. But never in the course of these inherently adversarial negotia-
tions, or in the months of interactions that followed, did Dow invoke the conflict it relies upon
now. Time and again, the courts of this State have rejected disqualification motions deployed as
“procedural weapons” for “mere tactical gain.” In re Appeal of Infotechnology, Inc., 582 A.2d
215, 220-21 (Del. 1990). Dow’s motion is meritless, tactically motivated, and untimely. It
should be denied.
1
Memorandum Of Law In Support Of Dow’s Motion To Disqualify Wachtell, Lipton,
Rosen & Katz From Conducting Discovery Against Dow And Examining Dow Witnesses, cited
herein as “Dow Br.”
-2-
STATEMENT OF FACTS
Wachtell was asked by Dow to provide advice with respect to its takeover de-
fenses in February 2007. At that time, Martin Lipton sent an internal e-mail to Wachtell’s New
Matter Committee that, as Dow points out, said Wachtell’s representation of Dow was “continu-
ing.” 2 Mr. Lipton proceeded to advise Dow on takeover defenses and certain other confidential
matters unrelated to the acquisition of Rohm and Haas. Mr. Lipton last recorded time spent on
versy surrounding two Dow executives, J. Pedro Reinhard and Romeo Kreinberg, whose em-
ployment was terminated after Dow learned that they were attempting to arrange an LBO of the
company without the authorization or knowledge of Dow’s board of directors. Lipton Aff. ¶ 2.
Jonathan Moses, a litigation partner at Wachtell, led a team that conducted an internal investiga-
tion into Reinhard’s and Kreinberg’s activities, provided advice with respect to litigation be-
tween the executives and Dow (although Wachtell did not appear as counsel to Dow in that liti-
gation), and responded to inquiries from the SEC concerning the episode. Wachtell’s work on
these matters was substantially concluded by January 2008. Moses Aff. ¶¶ 2-3. 3
2
This e-mail describing the then-representation as “continuing” was not sent to Dow. It
was produced by Wachtell in response to a third-party subpoena and provided to Dow’s counsel
in connection with the litigation in which the e-mail was produced. Moses Aff. ¶ 6.
3
After January 2008, Wachtell performed only incidental work arising out of the
Kreinberg/Reinhard affair, mostly consisting of responding to a subpoena served on Wachtell by
Kreinberg. Moses Aff. ¶ 4. The litigation brought by Reinhard and Kreinberg was settled on
June 2, 2008. Moses Aff. Ex. A.
-3-
In the course of the litigation team’s work, Mr. Moses and one associate were
given password access to a database of confidential Dow documents, and Mr. Moses was given
access to Messrs. Reinhard’s and Kreinberg’s e-mails. Moses Aff. ¶ 8. No Wachtell attorney
has accessed the database or the e-mails since 2007. Moses Aff. ¶ 8.
Wachtell has not performed any work for Dow since June 2008. The last bill to
Dow, sent on June 20, 2008, was “[f]or services from November 1, 2007 to May 31, 2008 in
connection with Reinhard/Kreinberg litigation” and totaled $65,000. Moses Aff. Ex. B. Of the
“in excess of $2,000,000” that Dow says it paid Wachtell in “2007 and 2008” (Stuart Aff. ¶ 4),
Rohm and Haas retained Wachtell in October 2007 to provide advice in connec-
tion with Rohm and Haas’s consideration of its strategic alternatives. Neff Aff. ¶ 2; Lonergan
Aff. ¶ 2. In June 2008, Rohm and Haas decided to conduct an auction process. Wachtell repre-
sented Rohm and Haas throughout the auction process, including in the negotiation of the initial
confidentiality agreement with Dow, an agreement that included substantive terms restricting
Dow’s conduct and rights including in the event its bid did not succeed. Neff Aff. Ex. A.
Wachtell also represented Rohm and Haas in the negotiation of the Merger Agreement. Many
aspects of both the confidentiality agreement and the Merger Agreement were vigorously negoti-
ated; contrary to the suggestion in Dow’s brief (p. 14), price was not the only focus of the nego-
tiation. Lonergan Aff. ¶ 3; Neff Aff. ¶ 3. Throughout these negotiations, Wachtell regularly in-
teracted with Dow and its counsel and vigorously represented its client, Rohm and Haas. Dow
never suggested to either Wachtell or Rohm and Haas that there was any supposed conflict. Lon-
-4-
On two occasions during negotiations in late June and early July, Charles Kalil,
General Counsel of Dow, telephoned Mr. Lipton. On the first occasion, Mr. Kalil wanted to ad-
dress an issue that had arisen in the negotiation of the confidentiality agreement; on the second,
Mr. Kalil complained about the manner in which Wachtell was conducting the negotiations. Lip-
ton Aff. ¶ 5. Both times Mr. Lipton made clear to Mr. Kalil that Wachtell was representing
Rohm and Haas, that Mr. Lipton was not involved in the negotiations, and that Mr. Lipton would
not discuss the matter with him. Lipton Aff. ¶ 5. On neither occasion did Mr. Kalil object to
Wachtell’s representation of Rohm and Haas or suggest that there was a conflict. Lipton Aff.
¶ 5.
In the months after the Merger Agreement was signed, Dow and its counsel con-
tinued to deal regularly with Wachtell on diligence, antitrust and other matters. Neff Aff. ¶ 4;
Lonergan Aff. ¶ 4. And again, throughout these pre-closing activities, Dow never raised any
concern about Wachtell’s representation of Rohm and Haas. Neff Aff. ¶ 4; Lonergan Aff. ¶ 4.
Beginning in November 2008, Dow began to make requests for further detailed
due diligence about a variety of topics. Dow indicated that the information it was seeking to
gather was “not intended for integration planning purposes,” but instead was part of Dow’s “due
diligence against the representations and warranties” of the Merger Agreement. Neff Aff. ¶ 5,
Ex. B. During a November 25, 2008 call among Dow, Dow’s counsel, Rohm and Haas, and
Wachtell, Dow again stated that this due diligence was not part of integration planning, but was
intended to assess the accuracy of Rohm and Haas’s representations and warranties review.
Since the closing of the Merger was conditioned upon the material accuracy of these representa-
tions and warranties (as provided in Section 6.3(a)(i) of the Merger Agreement), it was plain that
Dow’s interest in testing the accuracy of Rohm and Haas’s representations was adverse to the
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interests of Rohm and Haas. Wachtell represented Rohm and Haas throughout this process. And
once again, Dow never suggested that Wachtell had a conflict. Neff Aff. ¶ 6.
called Mr. Lipton. Lipton Aff. ¶ 7. Mr. Liveris said that Mr. Kalil had told him that Mr. Lipton
could not speak to him (or words to that effect), but that he, Mr. Liveris, would nonetheless like
to talk about the Rohm and Haas transaction. Lipton Aff. ¶ 7. Mr. Lipton, as he had done with
Mr. Kalil, told Mr. Liveris that he could not discuss the matter with him. Lipton Aff. ¶ 7.4
On December 31, 2008, Rohm and Haas and Wachtell first learned that, in viola-
tion of the Merger Agreement, Dow had made at least one ex parte telephone call to the Federal
Trade Commission (“FTC”) seeking to delay receipt of FTC clearance of the Merger. Lonergan
Aff. ¶ 7; Neff Aff. ¶ 7. Wachtell made clear that Rohm and Haas believed Dow had breached
the Merger Agreement. Id. Then, on January 8, 2009, Rohm and Haas learned that Dow had in
fact engaged in a series of ex parte contacts with the FTC seeking delay of the agency’s clear-
ance of the Merger, including ex parte visits by Mr. Liveris with three FTC commissioners.
Lonergan Aff. ¶ 8; Neff Aff. ¶ 8. On that day, Wachtell again vigorously objected to Dow’s
conduct. Id.
4
Mr. Kalil states in his affidavit that Mr. Lipton spoke to Mr. Liveris “throughout 2008”
without specifying the subject matter of those conversations. Why Mr. Kalil recites this hearsay
in an affidavit as opposed to Mr. Liveris is readily explained: Mr. Liveris is a member of the
Citigroup Board of Directors, and Mr. Lipton was advising the Citigroup Board. In connection
with that advice, Mr. Lipton had a number of conversations with directors of Citigroup,
including Mr. Liveris, throughout 2008. None of those conversations involved the provision of
legal advice to Dow. Lipton Aff. ¶¶ 8-9.
-6-
Only then, on January 9, at a meeting between Daniel Neff and Stephanie Selig-
man of Wachtell, and Dow’s transactional counsel from Shearman & Sterling, did Dow hint at
any purported issue with Wachtell’s representation of Rohm and Haas. Lonergan Aff. ¶ 8; Neff
Aff. ¶ 9. At that meeting, the Wachtell lawyers objected to Dow’s ex parte campaign to delay
FTC clearance, made clear that Dow’s conduct violated the Merger Agreement and asked for an
assurance that Dow would not seek further delay of FTC clearance, an assurance that was not
given at that time. Neff Aff. ¶ 9. At the conclusion of that meeting, John Marzulli, a Shearman
& Sterling partner, stated that he had been asked by Mr. Kalil to ask whether Rohm and Haas
had retained separate litigation counsel. Id. Mr. Neff responded that Wachtell had analyzed the
issue and had determined that Wachtell would be able to represent Rohm and Haas in litigation
against Dow, and that Rohm and Haas therefore did not intend to retain separate litigation coun-
sel. Id. Not another word was heard from Dow on the subject until January 26, the day that suit
was filed.
Wachtell confirmed to Dow’s counsel before the filing of this motion that, with
one exception that did not jeopardize Dow’s client confidences, no Wachtell attorney who has
worked on a matter in which Wachtell represented Dow has had any substantive communication
(whether written or oral) with any Wachtell attorney working on this lawsuit with respect to:
(a) the Rohm and Haas v. Dow lawsuit, before or after the lawsuit was filed, other than in rela-
tion to the instant disqualification issue; or (b) the facts relevant to the Rohm and Haas v. Dow
matter. Wolinsky Aff. Ex. B; see also Lipton Aff. ¶ 10; Moses Aff. ¶ 11. 5
5
The one exception is that on two separate occasions totaling 2.7 hours, Paul Rowe
advised other Wachtell litigators handling the Reinhard/Kreinberg matter with respect to discrete
issues of Delaware law. Mr. Rowe did no further work on Dow matters, was not privy to
privileged communications respecting Dow’s corporate strategy or any other non-public
(footnote continued)
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D. The nature and scope of the present litigation
The premise of Dow’s claim of a conflict is its contention that privileged informa-
tion about its “transformative strategy” constitutes the “factual predicate” of this case. Dow Br.
11-12. But the pleadings make clear that this case turns solely on Dow’s refusal to close the
Merger and whether Rohm and Haas is entitled to an order of specific performance to remedy
that breach. See Compl. ¶¶ 1-5, 41-50. Nothing in the Complaint puts Dow’s historical “trans-
Dow’s Answer does not change this. To the contrary, each of Dow’s defenses re-
lies on what Dow characterizes as the “sudden, historic, unforeseen and unforeseeable events of
the past 45 days.” Answer at pp. 59-60; see also, e.g., Answer ¶ 23 (pleading that “a confluence
of dramatic and unforeseeable shocks” that developed after December 28 “cast a dark shadow of
uncertainty” over the Merger); id. at ¶ 44 (“Only when the Kuwaiti entities unexpectedly pur-
ported to reverse their approval of the K-Dow transaction in late December 2008 and failed to
close, in combination with the contemporaneous and subsequent severe deterioration of the
credit markets and industry-wide financial situation, was the viability of the Merger and Dow’s
Mr. Liveris, speaking on an earnings call on February 3, 2009, the same day that
Dow filed its Answer, pithily summed up Dow’s case: “December changed everything.”
(footnote continued)
information concerning Dow, and has at no time had any contact with Dow personnel in
connection with the Reinhard/Kreinberg or any other matter. Wolinsky Aff. Ex. B. Dow does
not cite Mr. Rowe’s activity as a basis for its motion.
-8-
ARGUMENT
Disqualification motions are generally disfavored “because they often are filed for
tactical reasons rather than bona fide concerns about client loyalty,” Sanchez-Caza v. Estate of
Whetstone, 2004 WL 2087922, at *4 (Del. Super. Sept. 16, 2004), and because “a litigant should,
as much as possible, be able to use the counsel of his choice.” Unanue v. Unanue, 2004 WL
602096, at *2 (Del. Ch. Mar. 25, 2004). The Delaware Supreme Court has counseled the utmost
caution in granting a motion to disqualify, noting that “the purpose of the Rules [of Professional
Conduct] can be subverted when they are invoked by opposing parties as procedural weapons.”
Assocs. v. Ruger, 2000 WL 488562, at *5 (Del. Ch. Apr. 17, 2000). With respect, Del-Chapel
misstated the law of disqualification in Delaware. Since the Delaware Supreme Court’s decision
in Infotechnology, “doubts are now resolved against, rather than in favor of disqualification.”
6
See also, e.g., Deptula v. Steiner, 2003 WL 23274846, at *1 (Del. Super. Dec. 13, 2003)
(“The Court must be wary so as to prevent motions to disqualify from being used as just another
weapon in the litigation arsenal.”); Elonex I.P. Holdings, Ltd. v. Apple Computer, Inc., 142 F.
Supp. 2d 579, 584 (D. Del. 2001) (“It is well known to this court, and many others, that motions
for disqualification are frequently filed as dilatory tactics intended to divert the litigation from
attention to the merits.”).
-9-
Moreover, a violation of the ethical rules by itself is not necessarily sufficient to
warrant the “severe sanction” of disqualification. Unanue, 2004 WL 602096, at *8; accord Ex-
press Scripts, Inc. v. Crawford, 2007 WL 417193, at *1 (Del. Ch. Jan. 25, 2007). The “party
moving for disqualification bears the burden of proof” to show both (1) “a conflict of interest”
under the Rules of Professional Conduct, and (2) “[i]f a conflict is identified,” that “continued
representation by the conflicted attorney would undermine the integrity of the proceedings.”
Hendry, 2005 WL 3359078, at *2 (citing Infotechnology, 582 A.2d at 216-17); see also, e.g.,
IMC Global, Inc. v. Moffett, 1998 WL 842312, at *2 (Del. Ch. Nov. 12, 1998).
And a “motion to disqualify must contain clear and convincing evidence estab-
lishing a violation of the Delaware Rules of Professional Conduct so extreme that it calls into
question the fairness or the efficiency of the administration of justice.” Dunlap, 2008 WL
2415043, at *1 (emphasis added). “Vague and unsupported allegations are not sufficient to meet
this disqualification standard.” Id. To the contrary, the movant must have “evidence to buttress
his claim of conflict because a litigant should, as much as possible, be able to use the counsel of
his choice.” Kanaga v. Gannett Co., 1993 WL 485926, at *3 (Del. Super. Oct. 4, 1993). Factual
disagreements are resolved in favor of the non-moving party. Audio Jam v. Fazelli, 1995 WL
Dow has not met this exacting burden. It has failed to show a conflict under the
ethical rules, much less one so extreme that the fairness of the proceedings would be under-
mined. Its failure of proof makes clear that it seeks precisely the sort of improper tactical advan-
that “a lawyer shall not represent a client if the representation involves a concurrent conflict of
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interest. A concurrent conflict of interest exists if: … the representation of one client will be
directly adverse to another client . . . .” To evaluate a claim of concurrent conflict of interest, the
Court must first determine to what extent the allegedly conflicted lawyer represents adverse par-
ties at the same time. Unanue, 2004 WL 602096, at *3. Dow contends that Wachtell “has been
acting as Dow’s lawyers” throughout the Firm’s representation of Rohm and Haas. Dow Br. 9.
ment of all aspects of the relationship.” Del. Trust Co. v. Brady, 1988 WL 94741, at *3 (Del.
Ch. Sept. 14, 1998) (emphasis added). Absent an express agreement between the lawyer and cli-
ent, “there would have to be, at the very least, a preexisting relationship that would create a rea-
sonable expectation on the ‘client’s’ part that the attorney was representing his interests, and re-
liance by the client upon that expectation.” SBC Interactive, 1997 WL 770715, at *4 (emphasis
added); see also 7 Am. Jur. 2d ATTORNEYS AT LAW § 137 (2008) (“A plaintiff’s subjective belief
that an attorney-client relationship exists, standing alone, cannot create such a relationship, or a
duty of care owed by the attorney to the plaintiff; instead, it is the intent and conduct of the par-
ties that controls the question as to whether an attorney-client relationship has been created.”
(emphasis added)).
Simply put, any “realistic assessment” of the facts shows that Dow could not have
a “reasonable belief” that Wachtell is Dow’s lawyer. Quite the opposite: Dow was told that at
the outset that Wachtell was representing Rohm and Haas when Dow complained to Mr. Lipton
about the manner in which the responsible Wachtell lawyers were conducting the negotiations.
Lipton Aff. ¶ 5. And then, after the Merger Agreement was signed, when Dow’s litigators initi-
ated a round of post-signing due diligence to test the accuracy of Rohm and Haas’s representa-
-11-
tions and warranties in the Merger Agreement, Wachtell openly assisted Rohm and Haas in de-
Wachtell continued to act on behalf of Rohm and Haas and adverse to Dow after
K-Dow collapsed when Dow surreptitiously maneuvered a three-week delay in the closing date
by delaying the receipt of FTC clearance. Neff Aff. ¶¶ 7-9. And once again, during this period,
Mr. Lipton disabused Dow of any notion that Dow was a current Wachtell client. Indeed, Mr.
Liveris knew exactly what the score was, starting the conversation by acknowledging that he had
been told by Mr. Kalil that Mr. Lipton could not discuss the Rohm and Haas matter with him.
Lipton Aff. ¶ 7.
Wachtell’s manifest adversity to Dow throughout this period makes Dow’s sup-
posed belief that Wachtell was still representing it completely unreasonable. The Rules of Pro-
fessional Conduct explicitly recognize that parties to business negotiations such as those that
preceded the execution of the Merger Agreement are adversaries for conflict purposes. See Del.
Lawyers’ R. Prof’l Conduct 1.7 cmt [7] (“Directly adverse conflicts can also arise in transac-
tional matters” and using sale of a business as example). And this Court has repeatedly charac-
terized the parties to corporate acquisition negotiations as adverse. See, e.g., Postorivo v. AG
Paintball Holdings, Inc., 2008 Del. Ch. LEXIS 17, at *20 (Del. Ch. Feb. 7, 2008) (holding that
parties “were in an adversarial relationship” when they negotiated an agreement for the sale of
substantially all of plaintiff’s assets); Zirn v. VLI Corp., 1990 WL 119685, at *8 (Del. Ch.
Aug. 13, 1990) (holding that parties to merger agreement “clearly had adverse interests with re-
spect to the negotiation and documentation” of their contract). The adversarial nature of the par-
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ties is all the more obvious where, as here, multiple companies make competing bids for a target
corporation. See Zirn v. VLI Corp., 1989 WL 79963, at *8 (Del. Ch. July 17, 1989). 7
The “evidence” that Dow presents to support the notion that Dow had a “realistic”
expectation that Wachtell was acting as its counsel and was relying on that expectation after June
2008 is frivolous. The two “WLRK Memos” that Dow cites as evidence of an ongoing attorney-
client relationship were sent to over 4,200 people. Edelman Aff. ¶ 3-4. Recipients included doz-
ens of practitioners, academics, reporters at the Financial Times, Fortune Magazine, The New
York Times, The Wall Street Journal, and members of the judiciary. Edelman Aff. ¶ 2. The
“Key Issues for Directors” memo that Mr. Kalil transmitted to his Board “as the work of Dow’s
attorneys” can be found in its entirety on Harvard Law School’s website. 8 Mr. Stuart, in his turn,
points to a contact update form that a Wachtell paralegal sent to a 1,200 person mailing list — a
mailing list that includes former clients, potential clients, and friends of the Firm in addition to
current clients. Edelman Aff. ¶ 5. None of this constitutes “objective evidence” of an existing
attorney-client relationship.
Dow says that Wachtell has billed Dow over $2 million “[i]n the last two years.” Dow Br. 8.
What Dow fails to disclose is that all but $65,000 of that sum was billed in November 2007 or
7
As an empirical matter, recent high-profile cases make it apparent to any sophisticated
businessperson that the negotiation and execution of a corporate transaction carries with it an
inherent risk of subsequent litigation between the parties. See, e.g., Alliance Data Sys. Corp. v.
Aladdin Solutions, Inc., C.A. No. 3796-VCS (Del. Ch. 2009); Hexion Specialty Chems., Inc. v.
Huntsman Corp., C.A. No. 3841-VCL (Del. Ch. 2008); Clear Channel Broad., Inc. v. Newport
Television LLC, C.A. No. 3550-VCS (Del. Ch. 2008); SLM Corp. v. J.C. Flowers II L.P., C.A.
No. 3279-VCS (Del. Ch. 2007); The Finish Line, Inc. v. UBS Secs. LLC, No. 07-2137-II (III)
(Tenn. Ch. 2007); United Rentals, Inc. v. RAM Holdings, Inc., C.A. No. 3360-CC (Del. Ch.
2007)..
8
See http://blogs.law.harvard.edu/corpgov/2008/12/20/key-issues-for-directors/ (Edelman
Aff. Ex. A).
-13-
earlier, with the remaining $65,000 billed in June 2008. 9 Moses Aff. ¶ 5. The billing evidence
only confirms that Wachtell’s representation of Dow was substantially over by the end of 2007.
Dow’s litany of “interviews and meetings with high-level Dow executives and employees,” Dow
Br. 3, also confirms that Dow is not a current Wachtell client. With the exception of conversa-
tions between Messrs. Liveris and Kalil and Mr. Lipton in 2008 — which, as shown, do not in
any way evidence an ongoing client relationship 10 — everything that Dow lists occurred in
Finally, Dow cites an internal Wachtell e-mail from February 2007 referencing a
then-“continuing” representation of Dow. Dow Br. 6 & Ex. 5. In light of Wachtell’s seven-
month long adverse representation of Rohm and Haas, that two-year-old e-mail cannot support
the weight that Dow would have it carry. 11 There is no current representation, and no conflict on
that basis.
9
Similarly, while Mr. Stuart claims to have 1,300 e-mails exchanged with Wachtell
“during 2007 and 2008” (Stuart Aff. ¶ 3), he is noticeably silent on what proportion of those e-
mails were exchanged in the latter half of 2008.
10
While Mr. Kalil’s affidavit references discussions that he and Mr. Liveris had with Mr.
Lipton in 2008, it is noticeably silent on the subject of those discussions and makes no claim that
Mr. Lipton provided Dow with legal advice in 2008. See Kalil Aff. ¶¶ 9, 12.
11
No one from Dow was copied on this internal Wachtell e-mail. See Dow Br. Ex. 5.
Thus, while Dow argues that Wachtell never “disavowed” its supposed “continuing”
representation (Dow Br. 6), the simple fact is that there was nothing to disavow: no one from
Wachtell ever represented to Dow that the representation was “continuing.” To the contrary, in
June 2008, Mr. Lipton told Mr. Kalil that Wachtell was representing Rohm and Haas, something
that Mr. Kalil already knew because Wachtell lawyers were negotiating against Dow on behalf
of Rohm and Haas. Lipton Aff. ¶ 5.
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C. Wachtell’s representation of Rohm and Haas does not violate Rule 1.9.
Dow also has not met, and cannot meet, its burden on this motion to show by
clear and convincing evidence that Wachtell’s representation of Rohm and Haas violates Dela-
ware’s “former client” rule. Rule of Professional Conduct 1.9 states in pertinent part:
Because it is undisputed that this matter is not the “same” as any matter in which
Wachtell represented Dow, the question is whether the current matter is “substantially related” to
Wachtell’s prior representation of Dow. Comment 3 to Rule 1.9 explains that, for such a rela-
tionship to exist, there must be “a substantial risk” that confidential information learned from one
client in an earlier matter would “materially advance” another client’s position in a later matter.
In determining whether the test is met, “courts consider three factors: (1) the na-
ture and scope of the prior representation; (2) the nature of the present litigation; and (3) whether
in the course of prior representation, the former client might have disclosed confidences that
could be detrimental to it in the present litigation.” Unanue, 2004 WL 602096, at *6; see also
Hendry, 2005 WL 3359078, at *4 (applying test to determine that lawyer was not likely to have
obtained confidential information from former client that “materially could advance” new cli-
these factors shows a “substantial relationship” between the present matter and Wachtell’s prior
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1. The nature and scope of the prior representation of Dow
and of the current litigation are entirely distinct.
The nature and scope of Wachtell’s prior representation of Dow is entirely distinct
from the present representation of Rohm and Haas. This action concerns Dow’s refusal to close
the transaction and Rohm and Haas’s request for an order of specific performance, the con-
tracted-for remedy for that breach. See Compl. ¶¶ 1-5, 41-50. Dow’s defenses to specific per-
formance concern what Dow claims are sudden and heretofore unforeseeable changes in the
economy, chemical industry, financial markets and credit markets, and all explicitly hinge on
events and circumstances that arose in the last forty-five days. See, e.g., Answer at 59-61; see
also pp. 8, supra. Dow cannot go beyond the pleadings to conjure up a theory that its “transfor-
mative strategy” is at the “heart” of this matter. See Manchester v. Narrangansett Capital, Inc.,
1989 WL 125190, at *5 (Del. Ch. Oct. 19, 1989) (“A potential conflict based on a potential de-
the pleadings. Accordingly, the nature and scope of the two representations do not support a
from the prior representation must be specifically relevant to the current representation. Com-
ment 3 to Rule 1.9 explains that “[i]n the case of an organizational client, general knowledge of
the client’s policies and practices ordinarily will not preclude a subsequent representation.” Ac-
cordingly, “the court should not allow its imagination to run free with a view to hypothesizing
conceivable but unlikely situations in which confidential information ‘might’ have been dis-
closed which would be relevant to the present suit.” Satellite Fin. Planning Corp. v. First Nat’l
-16-
Bank of Wilmington, 652 F. Supp. 1281, 1284 (D. Del. 1987). “Without any common issues”
between the two representations, there is no basis for finding that the substantial relationship test
“transformative strategy” falls of its own weight. To begin with, there was nothing remotely
confidential about Dow’s desire to transform itself, through acquisitions and partnerships, into a
specialty chemical-oriented company. Dow has been proclaiming that strategy to the public
since at least 2006. See, e.g., Wolinsky Aff. Exs. L, M. Indeed, when Dow announced the
Rohm and Haas acquisition on July 10, 2008, Mr. Liveris described the acquisition as “the defin-
ing step in Dow’s transformation to a high-growth, diversified chemicals and materials com-
pany” and told investors that “since March of 2006,” that strategy “has been and continues to be
straightforward and consistent.” Wolinsky Aff. Ex. J at 2-3; see also id. Ex. K at 8.
formative strategy” are not at the “heart” of the case. They are not even on the periphery. As
noted above, Dow’s entire defense rests on the premise that the world has changed so dramati-
cally since the signing of the Merger Agreement in July 2008 that enforcement of that agreement
is no longer equitable. Thus, on Dow’s theory, the changing world must have likewise eroded
the relevance of anything Wachtell learned about Dow’s strategy in 2007, rendering the claim
that Dow’s dated strategy is at the “heart” of this case utterly implausible. Cf. Charles W. Wolf-
ram, Former-Client Conflicts, 10 GEO. J. LEGAL ETHICS 677, 732 (1997) (intervening events will
“erode whatever salience might originally have attached even to the former client’s inner-most
secrets”).
-17-
Dow suggests that Wachtell somehow had access to documents about this transac-
tion. Dow Br. 1. For that to be true, Wachtell would have needed a crystal ball. Wachtell was
given access to a database of Dow documents in May 2007, over one year before negotiation of
the Merger Agreement began. Moses Aff. ¶ 8. Only two Wachtell attorneys (neither of whom
has worked on the Rohm and Haas representation) had access to that database, and neither of
them has accessed it since the Fall of 2007. Id. Wachtell could not have seen any documents
Dow’s own conduct gives lie to the assertion that Wachtell’s representation of
Rohm and Haas is materially advanced by supposed confidential information concerning Dow’s
evaluation of Rohm and Haas. If that were true, that information would have most advantaged
Wachtell and Rohm and Haas at the time of the negotiation of the Merger Agreement. Thus,
Dow’s claim that it had “no compelling reason” to address the supposed conflict at the time of
the negotiation has it exactly wrong; if information about Dow’s strategic vision had any value, it
was precisely during the period in which Wachtell was advising Rohm and Haas on how to struc-
ture and conduct a bidding process designed to get the best terms from Dow.
Dow also claims that Wachtell’s purported “knowledge of Dow’s planned and po-
tential acquisitions and divestitures” is relevant because “Rohm and Haas” will take the position
that “Dow can address its financial problems” by selling assets. Dow Br. 12. Of course, this is
not only Rohm and Haas’s position, it is Dow’s position: Dow told its shareholders on February
3 that it was exploring the sale of twelve of its assets in order to facilitate the financing of the
Merger. Wolinsky Aff. Ex. I at 12. And once again, any information that Wachtell may have
-18-
seen about Dow’s divestiture strategies is more than a year old and not relevant in a world in
Finally, the claim that confidential information could be used to Dow’s detriment
is further refuted by the affidavits of Mr. Lipton and Mr. Moses, the Wachtell partners who led
the Dow representation, stating that they have not shared Dow’s client confidences with the
Wachtell lawyers working on the Dow matter. Lipton Aff. ¶ 10; Moses Aff. ¶ 11. Mr.
Wolinsky, the lead Wachtell litigation partner on this matter, has likewise submitted an affidavit
stating that — as he told Dow’s counsel prior to the filing of this motion — the Wachtell lawyers
who worked on the Dow matter have not had substantive communications with the Rohm and
Haas team at Wachtell about this litigation. Wolinsky Aff. ¶ 2. Cf. IMC Global, 1998 WL
842312, at *3 (in Rule of Professional Conduct 1.10 case, court has discretion to rely on attorney
representations as to “the full extent of information flow between them”); Deemer Steel Casting
Co. v. E. Coast Erectors, Inc., 1990 WL 143840, at *4 (Del. Ch. Sept. 28, 1990) (presumption of
shared confidences under Rule 1.10 rebuttable by credible evidence “demonstrating that the at-
Even if Dow could possibly establish a violation of the ethical rules (which, as set
forth above, it cannot), that violation alone is not sufficient to justify the extraordinary remedy of
12
Recognizing that information of that vintage has no bearing on the issues in the case,
neither party has sought discovery of documents or information related to strategic planning in
2007. Dow’s discovery requests call for documents and information from April 1, 2008, while
all but one of Rohm and Haas’s requests seek documents and information from June 1, 2008
forward. The only exception is Rohm and Haas’s request for discrete financial statements for
Dow’s major joint ventures for the past three years. Wolinsky Aff. Exs. C-H.
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disqualification. See Hendry, 2005 WL 3359078, at *4; Sanchez-Caza, 2004 WL 2087922, at
*4; Elonex I.P. Holdings, Ltd. v. Apple Computer, Inc., 142 F. Supp. 2d 579, 583 (D. Del. 2001).
“[D]isqualification does not always serve as an appropriate remedy for violations of Rule 1.9.”
Express Scripts, 2007 WL 417193, at *1. “The Court’s inquiry focuses on whether [the law-
yer’s] continued representation of [the current client] will so undermine the integrity and fairness
of the proceedings that [the current client] should be deprived of the counsel of his choosing.”
Unanue, 2004 WL 602096, at *2; accord McAllister v. Kallop, 1993 WL 205037, at *1-*2 (Del.
cal violation, “this Court measures the interests of the former client in protecting confidences
revealed during representation with the prejudice that would be suffered by the current client
were the attorney or firm to be disqualified.” Express Scripts, 2007 WL 417193, at *1; see also
Sanchez-Caza, 2004 WL 2087922, at *4 (court “must weigh the current client’s choice of coun-
sel with a ‘former client’s right to protect confidences revealed in a prior representation’” (cita-
tion omitted)).
Courts routinely deny disqualification when the risk that there were relevant client
confidences disclosed in the prior representation is slight, but the current client would be preju-
diced. See id. at *5 (denying motion where it “would undoubtedly prejudice the Plaintiff by de-
nying him his choice of counsel and by delaying the adjudication of the merits. . . . The likely
prejudice that would result from disqualification is not warranted given the limited, unrelated
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nature of the prior representation and the minimal risk of [the lawyer’s] access to confidential
pedited proceedings. See, e.g., Express Scripts, 2007 WL 417193, at *2 (disqualification is in-
appropriate remedy in expedited deal litigation “where every tick of the clock counts”); Avacus
Partners, L.P. v. Brian, 1990 WL 27538, at *4 (Del. Ch. Mar. 9, 1990) (presence of “special fac-
tor[s]” such as “an on-going contest for corporate control or a proposed transaction with an early
closing date” amplify non-moving party’s interest in being represented by counsel of its first
choice).
The prejudice Rohm and Haas would suffer if it cannot use its chosen counsel for
key litigation functions is just as severe as the prejudice at issue in Express Scripts, Sanchez-
Caza and the other cases cited above — if not more so. Trial is on March 9 — one month away.
Wachtell’s intimate working knowledge of the transaction cannot be adequately replicated in that
time frame if at all. Lonergan Aff. ¶¶ 9-10. 14 Document discovery is already well under way;
depositions start on February 12 and finish just two weeks thereafter. Excluding Wachtell from
these activities is simply unworkable. Id. In these circumstances, the relief that Dow requests
13
See also Hendry, 2005 WL 3359078, at *4 (same); Elonex, 142 F. Supp. 2d at 584
(denying motion because “[t]here is no doubt that it will be both inefficient and costly for [the
client] to get new counsel up to speed in this matter”); Nemours Found. v. Gilbane, 632 F. Supp.
418, 430 (D. Del. 1986) (noting that it would be prejudicial to deny the client of his choice of
counsel “at this point in the litigation” and taking into account the “excellent working
relationship” that the client had developed with counsel in denying a motion to disqualify).
14
While Rohm and Haas has the utmost confidence in the abilities of its Delaware counsel,
Connolly Bove Lodge & Hutz, Connolly Bove did not participate in the negotiation of the
Merger Agreement, the regulatory approval process, due diligence or the events that led up to the
filing of the suit and is not directly involved in the development of the strategy that Rohm and
Haas has developed to compel Dow to live up to its promises or the day-to-day decision making
implementing that strategy. Connolly Bove therefore does not have the same first-hand
knowledge of the matter as does Wachtell. Lonergan Aff. ¶ 10.
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can in no way be characterized as limited. To the contrary, Dow’s request that Wachtell be dis-
tion of Dow witnesses — the true guts of this litigation — strikes at the very heart of Rohm and
This is not a case where Rohm and Haas can simply hire new counsel or vastly
expand the role of existing co-counsel and accept a delay in adjudication of the merits. As Rohm
and Haas has previously explained to the Court, any delay resulting from disqualification of
Wachtell would severely hamper Rohm and Haas’s ability to vindicate its rights. Lonergan Aff.
¶ 11. And, as is detailed in the Verified Complaint and in Rohm and Haas’s motion for expe-
dited proceedings, every additional day that the closing is delayed is detrimental to Rohm and
Haas, its shareholders and its employees. Compl. ¶ 40; Mem. of Law in Supp. of Pl.’s Mot. for
In weighing the interests of the former and current clients, another “factor to be
considered is the moving party’s timeliness in notifying opposing counsel of the conflict, be-
cause motions to disqualify are often brought less out of concern for confidentiality than as a tac-
remedy in rapidly moving dispute where defendants waited until twenty-one days after learning
the identity of plaintiff’s counsel before giving notice of conflict); see also Sanchez-Caza, 2004
WL 2087922, at *5 (six-month delay between former clients’ learning of the adverse representa-
tion and their objection made it apparent “that the Defendants were not overly concerned about
[the challenged law firm] possessing potentially harmful confidential information”). Dow’s un-
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justifiable delay in raising any objection to Wachtell’s representation of Rohm and Haas itself
defeats disqualification.
conflict of interest — is to be credited, Dow cannot escape the conclusion that the conflict would
have been patently obvious more than seven months ago at the outset of the negotiations between
the parties. And if any credence is to be given Dow’s claim that confidences about its strategy
were significant, those confidences would have been far more useful to conducting the auction
for Rohm and Haas than in an after-the-fact litigation about a breach. Yet Dow claims that it
was silent during the auction and merger negotiations because there was “no compelling reason”
This is simply not an excuse for Dow’s conduct. If Dow were truly concerned
about the use of its confidential information against its own interests, it was incumbent upon
Dow to object to Wachtell’s representation of Rohm and Haas in June 2008. See Kenton v.
Bellevue Four, Inc., 1999 WL 463684, at *1 (Del. Super. Apr. 26, 1999) (failure to make timely
objection upon learning the facts supporting a disqualification motion results in waiver of the
Dow is thus in the same position as the unsuccessful movant in Eli Lilly & Co. v.
Genentech, Inc., 17 U.S.P.Q.2d 1531 (S.D. Ind. 1990). There, Lilly moved to disqualify its for-
mer in-house counsel, Dr. Buting. Dr. Buting, on behalf of Lilly, had negotiated the licensing
agreement with Genentech that was the subject of the litigation, but subsequently became in-
house counsel to Genentech, where his responsibilities included administering that same licens-
ing agreement. Id. at 1532-33. Lilly communicated with Dr. Buting in his new role and raised
-23-
no objection until litigation began. Id. The court concluded that Lilly, by its conduct, had “con-
sented to and acquiesced in” its former lawyer’s “potentially adverse” role ever since Dr. Buting
switched companies. Id. at 1535. Lilly therefore “waived its right to raise disqualification be-
The same is true here. Dow never objected until it became clear that Rohm and
Haas would litigate Dow’s breaches of the Merger Agreement. Dow’s seven-month-long acqui-
escence in Wachtell’s role as counsel to Rohm and Haas demonstrates that the present motion is
nothing more than the “procedural weapon” that the Supreme Court has warned against. Info-
Finally, it is no answer for Dow to claim that its failure to object in June 2008
when the conflict was, on Dow’s theory, most acute can be excused because Dow was presented
by Rohm and Haas with its retention of Wachtell as a fait accompli. If there was an issue, it was
incumbent upon Dow to raise it at that time. At a minimum, Dow could have expressed its ob-
jection and taken the position that while it was consenting to Wachtell’s representation of Rohm
and Haas in the merger negotiation, it would object if Wachtell sought to litigate against Dow in
Dow’s reliance on J.E. Rhoads & Sons, Inc. v. Wooters, 1996 WL 41162, at *5
(Del. Ch. Jan. 26, 1996), for the proposition that a party to a transaction may acquiesce in its for-
mer law firm’s transactional representation of a counterparty, yet still make a timely objection
when litigation later develops is thus completely misplaced. J.E. Rhoads involved the sale of a
business in which all parties to the transaction — buyer, seller, and employees — agreed to be
represented by the same law firm. Id. at *1. When litigation later arose between the employees
-24-
and the buyer, the court held that the litigation was “substantially related to matters in which [the
law firm] previously . . . acted as an intermediary for all parties.” Id. at *4 (emphasis added).
Not even Dow claims that Wachtell represented both parties here in negotiating the Merger
Agreement.
CONCLUSION
tential for abuse. This motion — brought seven months after Dow was faced with its supposed
counsel sitting across the bargaining table — is a perfect example of why that is so. Dow’s mo-
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Respectfully submitted,
Robert A. Lonergan
ROHM AND HAAS COMPANY
100 Independence Mall West
Philadelphia, Pennsylvania 19106
Telephone: (215) 592-3000
Facsimile: (215) 592-3377
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CERTIFICATE OF SERVICE
I, Collins J. Seitz, Jr., Esquire, hereby certify that on February 9, 2009, a copy of the
Lipton, Rosen & Katz From Conducting Discovery Against Dow And Examining Dow Wit-
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