On The Case

Biotech company cries conflict from Bouchard’s past work as counsel to Chancery colleagues

(Reuters) - Before Andre Bouchard was named chancellor of Delaware’s Chancery Court, he was a private lawyer at Bouchard Margules & Friedlander – a firm so well regarded that when a group called the Delaware Coalition for Open Government sued Chancery Court in 2011 to block implementation of a confidential arbitration track within the court, Bouchard was one of the lawyers whom Delaware state officials hired to make their case.

DelCOG, as the coalition was known, eventually prevailed in the litigation, killing off the prospect of closed-door arbitrations before Chancery Court judges. Bouchard’s name doesn’t appear on the 2012 trial court decision granting judgment to DelCOG; that ruling names Widener law professor Lawrence Hamermesh as Chancery’s counsel. The state was not a party in DelCOG’s appeal to the 3rd U.S. Circuit Court of Appeals but Bouchard and his firm remained in the case as counsel to then Chancellor Leo Strine and his Chancery Court colleagues. When the 3rd Circuit affirmed the trial court in 2013, Bouchard was listed as one of the lawyers for the Chancery judges.

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While the DelCOG litigation was underway, a biotech company called Meso Scale Diagnostics was in the midst of a Chancery Court suit against Roche Diagnostics, which Meso accused of breaching a licensing agreement. Andre Bouchard was Roche’s counsel. Meso’s Delaware counsel was Collins Seitz Jr of Seitz Ross Aronstam & Moritz.

In April 2014, Bouchard was confirmed as the new chancellor of Chancery Court. He withdrew, of course, from the Meso case. A couple of months later, then Vice Chancellor Donald Parsons granted judgment for Roche. The Delaware Supreme Court affirmed the ruling in 2015.

In a newly filed complaint in Chancery Court, Meso claims that then Vice Chancellor Parsons was conflicted because Roche counsel Bouchard was his lawyer in the DelCOG litigation. “A reasonable observer would conclude that there is a serious potential for bias when the attorney representing a party is also representing the trial judge in another matter,” the complaint said.

Parsons may have felt a debt of gratitude to Bouchard, the suit posited. Or the vice chancellor may have had such a favorable view of Bouchard’s ability that he was overly deferential to the lawyer’s arguments for Roche. Or, the suit alleged, Parsons and Bouchard may have engaged in private talks about the DelCOG case that veered into communications about the Meso case as well.

“It would be reasonable for an opposing party to be concerned that these communications may touch on that party’s case before the judge,” the complaint said. “At a minimum, a reasonable observer could conclude that there was a special relationship between the judge and his or her attorney that will cause the judge to be predisposed to rule in the attorney’s favor.”

Parsons was required to recuse himself from the Meso case, the complaint alleged, and because he did not, the judgment for Roche must be vacated. The suit does not name Bouchard or Parsons, who is now of counsel at Morris Nichols Arsht & Tunnell, as defendants. Neither the chancellor nor Parsons responded to my requests for comment.

There’s a very interesting discussion in the complaint about how Meso supposedly learned about Vice Chancellor Parsons’ alleged conflict and the company’s difficulty in finding counsel to bring its new suit. The DelCOG litigation was pretty big news in Delaware when the case was being litigated. Meso was represented by a well-known, well-connected Delaware lawyer in the Roche case; C.J. Seitz actually joined the state’s Supreme Court in 2015. Yet according to Meso’s complaint, it only learned that Roche counsel Bouchard was representing Chancery judges in the DelCOG case in early 2018, when Meso’s CEO was conducting an Internet research. Meso said the CEO and the company’s two top in-house lawyers “were all shocked that Vice Chancellor Parsons had never disclosed this fact or recused himself from the Meso litigation.”

Over the next several months, the complaint said, Meso tried to find a Delaware firm to represent the company with regard to the alleged conflict. Six firms said no, according to the complaint. Meso finally found a Washington, D.C., firm, Consovoy McCarthy Park, to take its case. Even with Consovoy on board, Meso needed Delaware counsel. It was rebuffed by five more firms before David Finger of Finger & Slanina accepted the representation. Finger, as it happens, was counsel to DelCOG in the case in which Bouchard represented the Chancery Court. Neither Finger nor William Consovoy responded to my emails requesting comment about the new Meso filing.

If Meso’s theory is correct – if Chancery Court judges should not have heard cases in which lawyers who represented the court in the DelCOG litigation made appearances – the company has opened a Pandora’s box. Bouchard and his partners at the time had a busy, successful firm. Will every party that lost a case in which their firm represented the winner seek to vacate adverse judgments that date back to 2012? Andrew Pincus of Mayer Brown argued for Chancery Court at the 3rd Circuit in the DelCOG case. Can Chancery litigants defeated by Mayer Brown similarly try to undo their losses?

I talked to Widener prof Hamermesh – who, you’ll remember, represented Chancery in the DelCOG case – about these questions. Hamermesh said he sees a couple of flaws in Meso’s theory. Vice-Chancellor Parsons, like his Chancery colleagues, had no personal stake in the outcome of the DelCOG litigation, Hamermesh said. Whether a Chancery Court arbitration regime established by the state legislature went forward was of no personal consequence to Chancery judges, Hamermesh said – and those judges were unlikely to have revealed confidential information to their counsel in the case because they were sued in their official capacity.

“It’s hard to see that theoretical interest as a disqualifying issue,” Hamermesh said. The professor also said that it would be quite a problem for Chancery Court if it had to revisit rafts of cases based on Meso’s conflict theory, which is one of the reasons the professor is skeptical of the theory. “Is that really what the rules of judicial ethics are about?” he said.

The new Meso case has been assigned to Vice Chancellor Joseph Slights, who was not on the court when now Chancellor Bouchard represented Chancery judges in the DelCOG case. It’s not clear who will represent Roche in the new suit.