Prestigious law firm Covington & Burling has found itself in an embarrassing position of having its former corporate client, 3M, charge it with betraying its confidence and switching sides in environmental litigation. There is little affection left in the relationship after Covington decided to represent Minnesota in a claim that could bring millions to the law firm. For 3M, the worse moment came when Covington lawyers deposed the same 3M in-house counsel that the law firm once represented on the same subject matter. The company alleges that Covington orchestrated the move to drop it “like a hot potato” to cash in with Minnesota. The lawsuit could prove the most uncomfortably revealing moment since a Covington partner pulled down his pants before a shocked international audience.
3M filed a motion to remove Covington last week in U.S. District Court in Minneapolis claiming for breach of contract and breach of fiduciary duty — including a demand for injunction relief and disgorgement of all legal fees paid by 3M to the law firm since 1992.
The company quotes Covington on how important confidentiality and ethics rules are to the firm and stated in the complaint below: “The Covington law firm holds itself out as the type of firm on which clients can rely to preserve and protect their most sensitive confidences.1 That was the law firm 3M thought it had retained for parts of three decades.”
The company details how Covington could bring in a huge haul in the litigation with 25 percent of any recovery up to $75 million, 20 percent of the subsequent $75 million and 15 percent of any amount above $150 million. If the case goes to trial the percentage and yield increases. The company alleges a carefully executed plan by Covington to drop 3M:
Although Covington had been 3M’s counsel for more than a decade in connection with issues arising out of 3M’s fluorochemical (“FC”) business, Covington elected to drop its representation of 3M on an unrelated matter for the express purpose of suing 3M on behalf of the State in connection with that FC business. That lawsuit is currently pending in the Fourth Judicial District Court for the State of Minnesota, Hennepin County, and is styled, State of Minnesota, et al. v. 3M Company, Court File. No. 27-CV-10-28862 (“NRD Action”). Covington switched its position from arguing (truthfully) on 3M’s behalf that environmental exposure to FCs do not pose a risk to humans, to now arguing on behalf of the State that environmental exposure to those very same FCs are toxic. The breach of loyalty could not be more sharply drawn.
5. What makes matters worse is that Covington choreographed its scheme to breach its duties to 3M. Knowing that its fee agreement with the State required it to warrant that it had no outstanding matters for 3M—yet concerned about alerting 3M to its plan to represent the State against it, lest 3M object—Covington developed a plan to drop 3M as a client (like a hot potato) shortly before the NRD Action would be filed.
3M current counsel William A. Brewer III charged that “3M believes that Covington & Burling betrayed the most fundamental principles of the attorney-client relationship–the duties of loyalty and confidentiality.”
Covington issued this statement and says that the history in the case is grossly misrepresented:
“The state of Minnesota has been a client of the firm in environmental matters for more than 15 years. Covington agreed to represent the state in its litigation against 3M after confirming that the firm had no active matters for 3M and that there was no conflict based on any prior representation of 3M. The 3M complaint against our law firm has the situation completely backwards in suggesting that the firm dropped a long-time client to represent the state. To the contrary, the state, a long-time client, asked Covington to handle an important lawsuit on which it needed assistance. We reviewed the situation and appropriately decided to proceed with the representation.
“Covington takes its ethical responsibilities seriously, and has acted in accord with all applicable ethical rules in connection with its representation of the state of Minnesota in litigation against 3M. Covington intends to defend itself vigorously against 3M’s lawsuit, which is without merit.”
Being sued by a major company over an alleged conflict of interest and disloyalty is never good for any firm, even one the size of Covington. The discovery is likely to be a painful process with layers of claims of confidentiality and lawyers deposing lawyers. If you come to these things to watch the cars crash, you are unlikely to be disappointed.
Source: ABA Journal