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Asgaard Funding LLC v. ReynoldsStrong LLC

United States District Court, N.D. Texas, Dallas Division

December 9, 2019

ASGAARD FUNDING LLC d/b/a THE AASGAARD COMPANY and THE AASGAARD COMPANY, a Texas Partnership, Plaintiffs,
v.
REYNOLDSSTRONG LLC d/b/a BARBELL LOGIC and BARBELL LOGIC ONLINE COACHING, Defendants.

          MEMORANDUM OPINION AND ORDER

          JANE J. BOYLE, UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant ReynoldsStrong LLC's Motion to Disqualify Brodie M. Butland, Esq., Porter, Wright, Morris & Arthur, LLP (Porter Wright), and, by implication, The Law Offices of Joe B. Steimel, P.C. (Steimel) (Doc. 19). For the reasons that follow, the Court GRANTS the motion as to Mr. Butland and Porter Wright, but DENIES the motion WITHOUT PREJUDICE as to Steimel.[1]

         I.

         BACKGROUND

         ReynoldsStrong seeks to disqualify Mr. Butland, his law firm Porter Wright, and local counsel Steimel from representing Plaintiffs Asgaard Funding LLC and The Aasgaard Company in this case. This case was originally filed by just Asgaard Funding against ReynoldsStrong, alleging (1) trademark infringement in violation of 15 U.S.C. § 1114; (2) unfair competition in violation of 15 U.S.C. § 1125(a); (3) trademark dilution in violation of 15 U.S.C. § 1125(c); (4) violation of Texas's Deceptive Trade Practices Act; and (5) breach of contract. Doc. 1, Compl., 42-51.[2] The dispute stems from an alleged breach of a licensing agreement signed by The Aasgaard Company and ReynoldsStrong in November 2016, wherein ReynoldsStrong was granted the right to use Aasgaard's “Starting Strength” trademarks under certain conditions. Id. ¶¶ 45-46.

         In December 2015, Mark Reynolds, the sole member of ReynoldsStrong, asked Mr. Butland to prepare a liability waiver in connection with ReynoldsStrong's business and a memorandum outlining Missouri's regulation of dietetics. Doc. 19, Def.'s Mot. to Disqualify (“Def.'s Mot.”), 2-3; Doc. 25, Pl.'s Opp. to Mot. to Disqualify (“Pl.'s Resp.”), 2-3. On January 4, 2016, Mr. Butland sent Mr. Reynolds an engagement letter. Doc. 19, Def.'s Mot., 2-3; Doc. 25, Pl.'s Resp., 3. The scope of the representation included drafting a waiver and release agreement for Mr. Reynolds's business, drafting the Missouri regulation memorandum, and reviewing ReynoldsStrong's documents it had sent to clients for compliance with Missouri law. Doc. 25, Pl.'s Resp., 3. The engagement letter was signed the next day. Doc. 26, Pl.'s App., 64. The letter explained that its terms and conditions would “also apply to any additional legal services outside the initial scope of our representation that you [ReynoldsStrong/Mr. Reynolds] request and that we [Porter Wright] agree to provide.” Id. at 61. On January 29, 2016, Mr. Butland produced the liability waiver and memorandum. Id. at 65-95.

         On October 19, 2016, Mark Rippetoe, majority owner of Aasgaard, asked Mr. Butland if he and his law firm could draft “a trademark and web domain license agreement between” Aasgaard and ReynoldsStrong/Mr. Reynolds, in which ReynoldsStrong could use Aasgaard's “Starting Strength” trademarks in connection with its online fitness coaching business. Doc. 25, Pl.'s Resp., 5. On October 24, 2016, Mr. Butland allegedly spoke with both Mr. Rippetoe and Mr. Reynolds to notify the parties that he previously represented Mr. Reynolds in January 2016. Id. On the same day, Mr. Butland emailed both parties to memorialize the phone calls. Id. at 6. The email confirmed that Mr. Rippetoe had asked Mr. Butland and Porter Wright to draft a licensing agreement between Aasgaard and Mr. Reynolds. Doc. 26, Pl.'s App., 99. The email also confirmed that Mr. Butland had spoken to both parties about a potential conflict “in light of [Mr. Reynold's] former attorney-client relationship with” Mr. Butland, that both parties had no objections, and that Mr. Butland saw no ethical issue in his firm drafting the licensing agreement. Id. Mr. Reynolds responded, “No objections here.” Id.

         On the same day that this email was sent (October 24, 2016), Mr. Reynolds emailed Mr. Butland separately to ask him to draft a non-compete agreement for ReynoldsStrong's personnel in connection with its online fitness coaching business. Doc. 19, Def.'s Mot., 3-4; Doc. 25, Pl.'s Resp., 9. Mr. Reynolds attached his own first draft of the agreement. Doc. 19, Def.'s Mot., 4; Doc. 25, Pl.'s Resp., 9. On November 2, Mr. Reynolds asked Mr. Butland for an update on the non-compete agreement. Doc. 17, Def.'s App., 85. Mr. Butland responded that he had to speak with Porter Wright's ethics counsel to determine whether there was a conflict in drafting the non-compete agreement, as the firm was currently drafting Aasgaard's licensing agreement with ReynoldsStrong. Doc. 19, Def.'s Mot., 5; Doc. 25, Pl.'s Resp., 9-10. Mr. Reynolds responded with a copy of his Starting Strength Online Coaching (SSOC) business plan. Doc. 19, Def.'s Mot., 5.

         On November 10, Mr. Butland emailed Mr. Reynolds to explain that there was no conflict because the license agreement and non-compete agreement were “really two different transactions, although they of course relate to a similar subject matter.”[3] Doc. 26, Pl.'s App., 127. Mr. Reynolds responded that he “[a]pproved” of the dual representation. Id. On November 17, Mr. Butland sent another engagement letter to ReynoldsStrong, that explained that Mr. Butland would “draft a noncompetition agreement for trainers that [Mr. Reynolds was] hiring as part of online strength coaching services.” Id. at 140.

         Two final interactions between Mr. Butland and Mr. Reynolds are notable. First, in January 2018, Mr. Reynolds again asked Mr. Butland for information regarding state dietetics laws. Doc. 19, Def.'s Mot., 7; Doc. 25, Pl.'s Resp., 12 n. 6. There was no formal engagement letter for this communication; although Mr. Reynolds refers to this information as “legal advice, ” Doc. 19, Def.'s Mot., 7, Mr. Butland believes this was an “informal request” that “took less than 5 minutes to address.” Doc. 25, Pl.'s Resp., 12 n. 6. Second, on March 7, 2018, Mr. Reynolds contacted Mr. Butland because Mr. Reynolds suspected that a former employee was violating the non-compete agreement. Doc. 19, Def.'s Mot., 8; Doc. 25, Pl.'s Resp., 12-13. No. engagement letter was created for this interaction; Mr. Butland alleges this was because of “the urgency of the matter.” Doc. 25, Pl.'s Resp., 12-13. Neither party has alleged any further attorney-client-like communications since.

         On July 30, 2019, Asgaard Funding LLC filed suit against ReynoldsStrong, with Mr. Butland as one of Asgaard's lawyers. See Doc. 1, Compl.; Doc. 6, Electronic Order. ReynoldsStrong subsequently brought this motion (Doc. 19) to disqualify Mr. Butland, Porter Wright, and Steimel (collectively, Counsel). As this issue is fully briefed, the Court addresses Defendant's motion.

         II.

         LEGAL STANDARD

         Motions to disqualify are substantive in nature and are thus decided under federal law. FDIC v. U.S. Fire Ins. Co., 50 F.3d 1304, 1312 (5th Cir. 1995). “When considering motions to disqualify, courts should first look to the local rules promulgated by the local court itself, ” In re ProEducation Int'l, Inc., 587 F.3d 296, 299 (5th Cir. 2009) (citation and quotation marks omitted), although “[l]ocal rules are not the ‘sole' authority governing motions to disqualify counsel.” U.S. Fire Ins. Co., 50 F.3d at 1312. For example, attorneys practicing in the Northern District of Texas are subject to the Texas Disciplinary Rules of Professional Conduct. See John Crane Prod. Sols., Inc. v. R2R & D, LLC, 2012 WL 3453696, at *2 (N.D. Tex. Aug. 14, 2012) (citing N.D. Tex. Civ. R. 83.8(e)). Moreover, the Fifth Circuit recognizes the American Bar Association (ABA)'s Model Rules of Professional Conduct as the ...


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