Risk Update

Information Security, Cyber Risk & Privilege — Update on Clark Hill Cyberattack / Malpractice Suit

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Beware: The Report Expressly Prepared for Trial Counsel May Not Be Privileged After All” —

  • “Here’s a common scenario: You discover a potential compliance issue and worry about being sued. You hire outside counsel to help prepare for litigation. Trial counsel in turn hires a consulting firm for the express purpose of helping in its litigation efforts by preparing a report addressing how the breach happened, its effects, and how to prevent another breach. Nothing too unusual, right?”
  • “Here’s the catch: if ‘the Report, or a substantially similar document, would have been created in the ordinary course of business irrespective of litigation’ it may not be privileged after all.”
  • “Applying this rule, a federal court in Washington, D.C. just held that a Report prepared for trial counsel as well as the Report’s associated materials are not privileged and must be produced to plaintiffs. See Wengui v. Clark Hill, 2021 U.S. Dist. LEXIS 5395 (D.D.C. Jan. 12, 20201). While Wengui involves a cyber breach, its reasoning applies to any compliance-related investigation.”
  • “During discovery, Clark Hill produced the documents related to its cybersecurity vendor’s work, but claimed the Report prepared for counsel was classic attorney work-product. Clark Hill also argued the Report was subject to the attorney-client privilege.”
  • “The district disagreed. Carefully examining the record, and after conducting an in camera review of the Report, the court determined the Report was in fact an “ordinary course” incident report and ordered its production to plaintiffs. As the court explained, for many entities, ‘discovering how [a cyber] breach occurred [is] a necessary business function regardless of litigation or regulatory inquiries.'”
  • “It did not help Clark Hill’s argument that the Report was not just shared with outside and in-house counsel, but also with Clark Hill’s leadership and IT teams, as well as the FBI. As the court observed, “[t]he Report was probably shared this widely… because it ‘was the once place where [Clark Hill] recorded the facts’ of what had transpired.'”
  • “All compliance officers and outside counsel should heed this observation from the court: ‘Although Clark Hill papered the arrangement using its attorneys, that approach ‘appears to [have been] designed to help shield material from disclosure’ and is not sufficient in itself to provide work-product protection.'”
  • “The court also rejected Clark Hill’s assertion that the attorney-client privilege shielded the Report regarding the data breach from disclosure. The court explained that attorney-client privilege must be ‘applied narrowly,’ to prevent its scope from encompassing “all manner of services” that should not be excluded from litigation.”
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Risk Update

Brexit Risk — Law Firm DAC6 Risk and Compliance Requirements Revised

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2021 marks the beginning of the end of DAC6 in the UK” —

  • “The conclusion of the Brexit post-transition arrangements has brought an unexpected but welcome restriction to the application of the DAC6 rules that has largely repealed its reporting requirements in the UK.”
  • “In January 2020, the UK implemented the EU directive known as DAC6, which came into force on 1 July 2020 and required “intermediaries” (including law firms, accountants and tax advisors) to report to HMRC (from 1 January 2021) cross-border arrangements that met one of a number of “hallmarks” that could be used to avoid or evade tax. The DAC6 rules were particularly onerous as they required intermediaries to disclose relevant arrangements where the first step was taken on or after 25 June 2018 (the “look-back” period).”
  • “Fast-forward one year and, following the conclusion of negotiations between the UK and the EU on a Free Trade Agreement, HMRC made an unheralded announcement on 31 December 2020 that reporting under DAC6 would only be required for arrangements that meet hallmarks under Category D. Category D broadly deals with undermining reporting obligations and obscuring beneficial ownership and shares substantial common ground with the Mandatory Disclosure Rules developed by the Organisation for Economic Co-operation and Development (OECD). Reporting requirements under Hallmarks A, B, C and E have been repealed. Regulations (SI 2020/1649) were made with effect from 31 December 2020 to implement this change and to ensure that the rules work correctly after the end of the transition period.”

Important changes to DAC6 regime in the UK” —

  • “The UK has made important changes to its implementation of the EU Mandatory Tax Disclosure Rules known as DAC6. The changes, which significantly reduce the scope of the rules in the UK, are largely good news for UK taxpayers and their advisers. The effect is that DAC6 reports will be required more rarely from intermediaries or taxpayers in the UK. This applies both on an ongoing basis and to the ‘look-back’ period of reporting for arrangements where the first step of a reportable cross-border arrangement was between 25 June 2018 and 1 July 2020.”
  • “In the short term, however, there is likely to be some additional compliance burden in adapting existing DAC6 reporting processes for real estate transactions which also involve the EU. This is especially so given the last-minute and unexpected nature of the changes.”
  • “Professional advisers such as law firms and accountants, as well as others such as lenders and fund managers are all likely to qualify as intermediaries.”
  • “Many cross-border real estate transactions will therefore involve at least one cross-border arrangement. Where this is the case, the key ‘filter’ for DAC6 reporting will be whether one or more of the hallmarks are present. It is this aspect of the UK rules which has changed.”
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Risk Update

Conflicts — Analysis and Commentary on Navigating Merger Conflicts

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Last-Minute Merger Cancellation Unusual But Not Unheard Of, Analysts Say” –

  • “Nelson Mullins Riley & Scarborough and Redgrave announced on Nov. 17 their intention to merge, with a Dec. 1 effective date. Redgrave had planned to merge with Nelson Mullins’ wholly owned Encompass subsidiary to create one of the largest information governance and e-discovery law practices. This week, the firms confirmed their deal didn’t actually go forward, citing client ‘conflict-related issues.'”
  • “That the deal, which would have created a governance and e-discovery practice with 130 lawyers, technologists and data managers worth more than $70 million in revenue, fell through due to conflicts is not out of the ordinary, legal-world consultants said, but it is odd that it fell through at such an advanced stage — after the firms announced their merger intention.”
  • “Lisa Smith, a principal at Washington, D.C.-based Fairfax Associates, estimated that maybe one out of 10, or one out of every 15 combination discussions actually advances to the merger stage. The top reason so many don’t go further? Conflicts, she said.”
  • “He wrote that key client lists from each side are one of the first pieces of information to be shared, ‘if not the first.’ ‘This must be done early because a horrible outcome for a potential merger is a deal that gains excitement and momentum and then succumbs to a deal-killing conflict,” wrote Short, who was not available for comment. “Spare both parties from the related emotional let-down and get after this task immediately.'”
  • “The market is already full of consolidation, so there is generally a declining number of viable combination partners, said Michael Short, a principal at legal consultancy LawVision, in a September report.”
  • “Short said of those combinations he analyzed that did not combine, conflict was identified as a common reason, but not based on a specific client. ‘Once we got into the details, we found a serious incompatibility in the type of clients each firm represented in a particular practice area.'”
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Risk Update

OCGs — Analysis and Opinions of Outside Counsel Guidelines & Gotchas

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We’ve already looked a bit at news and commentary  about proposed changes to DC rules concerning OCGs. This recent article from two partners at partners at Harris Wiltshire & Grannis LLP caught my eye for highlighting several interesting provisions spotted in the OCG forests out there — particularly about the ownership of developed legal expertise/legal theories, which was a new one for me: “A Look At DC Proposals To Curb Outside Counsel Guidelines” —

  • “In response, the committee issued proposed amendments to the D.C. rules on Nov. 12, 2020, making it the first jurisdiction in the nation to propose amendments to address issues raised by outside counsel guidelines. The committee is also seeking additional comments, which are due by Feb. 11.”
  • “These changes would make it a violation of the D.C. rules for a lawyer to agree to outside counsel guidelines that define the “client” more broadly than the entity the lawyer actually represents, as well as alter egos or affiliates that believe the lawyer was representing them.[6] The committee explained, however, that it was “interested in receiving suggestions as to other, possibly less far-reaching, approaches” to limit conflicts of interest.[7]”
  • “This revision is a significant change that will require lawyers and in-house counsel to reexamine their outside counsel guidelines. Previously, Comment 25 to Rule 1.7 presented an “open-ended invitation to corporate clients to designate the parent and all its affiliates as the ‘client.'”[8] That comment is now being significantly limited, as described above, with the stated goal to provide “free choice of counsel” by limiting the definition of who the client is.”
  • “Comments noted that some outside counsel guidelines state that the client will own its lawyers’ work product, and some state that a lawyer may not even keep a copy of its own work product. Other outside counsel guidelines require that a lawyer not make any use of any information — including nonconfidential information such as legal theories — gained in connection with representation of a client when representing any future clients.”
  • “The committee cited a consolidated comment from 26 large law firms noting that it is “standard practice for lawyers to retain a copy of the client file, including their work product, and to use that work product as a resource for other clients and matters (subject, of course, to their confidentiality obligations to current and former clients.”[15]”
  • “The committee also recommended amending Comment 41 to Rule 1.6, Confidentiality of Information, to clarify that a lawyer is not only permitted, but ethically obligated, to use “growing knowledge of the law on behalf of each successive client.”[19]”
  • “This recommendation would align with existing D.C. ethics opinions concluding that a legal theory is not a client secret, and that lawyers have an ethical obligation to use “growing expertise to represent clients to the best of their ability.”[20]”
  • “This change cuts against what some outside counsel comments described as a belief by some clients that “if they pay for an outside lawyer’s creation of a document or acquisition of knowledge, that document or information should belong to them — just as a purchased machine, building, or vehicle belongs to them.”[21]”
  • “Third, the committee did not propose any amendments to the D.C. rules addressing some clients’ requests to audit lawyers’ internal files, but cautioned both lawyers and clients that any such outside counsel guideline provisions must conform to the D.C. rules’ confidentiality requirements.[27]”


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Risk Update

Terms of Engagement — Client Arbitration Clauses Can Be Cleared with Conditions (in New Jersey)

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Attorney’s Duty to Explain Retainer Agreement Arbitration Clause to Client: Here’s What the New Jersey Supreme Court Held” —

  • “In a unanimous decision, the New Jersey Supreme Court upheld the Appellate Division’s view that for a retainer arbitration clause to be held valid, attorneys should fulfill their fiduciary duty to explain to their clients the advantages and disadvantages of agreeing to arbitrate a prospective dispute.”
  • “The decision delivered by New Jersey Supreme Court Justice Barry Albin in Delaney v. Dickey, stated, ‘We now hold that, for an arbitration provision in a retainer agreement to be enforceable, an attorney must generally explain to a client the benefits and disadvantages of arbitrating a prospective dispute between the attorney and client.’ The court noted that in order to enable the client to make an informed decision, the client must be made aware of the fundamental differences between an arbitral forum and a judicial forum.”
  • “As per the factual submissions made, plaintiff Brian Delany approached Sills to represent him in his ongoing lawsuit with his previous business partners in a real estate business. The Sills attorney who met Delany asked him to sign a four-page retainer agreement. The arbitration clause mentioned on the third page of the agreement stated, ‘In the event that we and you are unable to come to an amicable resolution with respect to any dispute (including, without limitation, any dispute with respect to the Firm’s legal services and/or payment by you of amounts to the Firm), we and you agree that such dispute will be submitted to and finally determined by arbitration in accordance with the provisions set forth on attachment 1 to this retainer letter.'”
  • “As disputes arose between Delany and Sills, Delany terminated his retainer and also refused to pay certain outstanding fees he allegedly owed to the firm. Invoking the arbitration provision, Sills sent the matter to arbitration. However, Delany sued Sills before the Chancery Division for malpractice and asked for a stay on the arbitration proceedings, pending the result of the malpractice lawsuit. The Chancery Division upheld the arbitration clause and found it to be enforceable. Importantly, it noted that a law firm is not under an obligation to explain to its client the clearly written terms of a retainer which can be understood by a layperson. On appeal, the Appellate Division disagreed and found the arbitration clause to be unenforceable. It noted that Sills failed to provide all 33 pages of the JAMS arbitration rules to Delany and also failed to explain the related costs to Delany. It held that the clause is unenforceable under the Rules of Professional Conduct (RPC) and also found the fee-shifting provision to be impermissible under New Jersey law.”
  • “Affirming the decision of the Appellate Division, the New Jersey Supreme Court stated, ‘We conclude, however, that an attorney’s fiduciary obligation mandates the disclosure of the essential pros and cons of the arbitration provision so that the client can make an informed decision whether arbitration is to the client’s advantage.’ It then held, ‘Delaney, therefore, must be allowed to proceed with this malpractice action in the Law Division.’ The court also held that the decision will be applied prospectively, except for Plaintiff Delany.”

For additional detail and commentary, see: “NJ Supreme Court: Attorney-Client arb agreements OK – BUT advantages and disadvantages must be explained” —

  • “The State Bar – which fluctuates between its mission to preserve access to justice and its trade association function – expressed its ‘concern that the Appellate Division’s interpretation of RPC 1.4(c) will require lawyers to engage in ‘an in-depth review of legal services agreements with prospective clients” beyond the present requirement that lawyers provide ‘a reasonable explanation” about a retainer agreement sufficient for clients to make an informed decision about the representation.””
  • “[The New Jersey Association for Justice] argued instead that ‘in light of the imbalance of power between a lawyer and client and the lawyer’s fiduciary obligation to the client, ‘mandatory arbitration clauses in attorney-client retainer agreements [are] inherently unfair and unreasonable.’ The plaintiffs lawyers organization urged the Court to ‘prohibit mandatory arbitration provisions in retainer agreements to protect against ‘unwitting and uninformed prospective waivers of significant rights’ by clients at the very moment they retain counsel.'”
  • “The NJAJ position – which emphasizes the principle of access to justice – posed the risk that if embraced the decision might run afoul of the Federal Arbitration Act 9 USC 2 which declares arbitration provisions “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” In an ordinary “arms-length” commercial contract the Sills retainer would be enforceable, but the fiduciary duties of a lawyer are said to be more demanding.”
  • “In this novel setting the Court was careful to limit its holding to attorney-client contracts and to firmly ground its decision in well established principles so as not to run afoul of the argument that it was particularly burdening and disfavoring arbitration agreements.”
  • “The practical implications of the decision are many. Lawyers will want guidance in how to draft agreements. In recognition of these considerations, the court decided to ‘refer the issues raised in this opinion to the Advisory Committee on Professional Ethics. The Committee may make recommendations to this Court and propose further guidance on the scope of an attorney’s disclosure requirements.'”
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Risk Update

Election Conflicts — Firm Policies, Client Selection/Scope, PR and Press

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Law firm PR risk has always been an interest of mine. We’ve seen a few examples of controversy surface in the legal and mainstream press throughout 2020. This example raises interesting questions in my mind about client selection, scope of engagement, and whether internal policies and practices around client intake and matter scope can be agile enough to give firms enough window to review such issues when things are moving quickly.

With that, see the following a kind reader brought to my attention: “Cleta Mitchell, who advised Trump on Saturday phone call, resigns from law firm” —

  • “Republican lawyer Cleta Mitchell, who advised President Trump during his Saturday phone call with Georgia’s secretary of state in an effort to overturn the election, resigned on Tuesday as a partner in the Washington office of the law firm Foley & Lardner.”
  • “The Washington Post on Sunday published audio and a transcript of the hour-long call in which Trump pressured Georgia Secretary of State Brad Raffensperger to overturn the election results. During the call, Mitchell complained that she had not been given access to certain information from Raffensperger’s office, and Trump relied on her to an extraordinary degree during the call.”
  • “The Post on Monday published a story detailing Mitchell’s transition from being a liberal Democrat to a conservative Republican, culminating in her role advising Trump during the call.”
  • “In the Saturday call, Trump told Raffensperger that he risked facing criminal consequences if he didn’t ‘find’ enough votes to declare that the president had won the state. Raffensperger responded that “the challenge that you have is the data you have is wrong.’ Trump then asked Mitchell, ‘Well, Cleta, how do you respond to that? Maybe you tell me?’ Mitchell complained to Raffensperger that ‘we have asked from your office for records that only you have’ but had not received them.”
  • “Trump said, ‘All we have to do, Cleta, is find 11,000-plus votes.'”

The full text of the statement by the firm firm on January 4:

  • “Foley & Lardner LLP is not representing any parties seeking to contest the results of the presidential election. In November, the firm made a policy decision not to take on any representation of any party in connection with matters related to the presidential election results. Our policy did allow our attorneys to participate in observing election recounts and similar actions on a voluntary basis in their individual capacity as private citizens so long as they did not act as legal advisers. We are aware of, and are concerned by, Ms. Mitchell’s participation in the January 2 conference call and are working to understand her involvement more thoroughly.”

For her part, Mitchell made the following statement:

  • “As you are probably aware, there has been a massive pressure campaign in the last several days mounted by leftist groups via social media and other means against me, my law firm, and clients of the law firm, because of my personal involvement with President Trump, his campaign and the White House, related to the November 3 general election in Georgia. After discussions with my firm’s management, I have decided that it is in both of our interests that I leave the firm.”

See also: “Cleta Mitchell Out At Foley & Lardner After Troubling Donald Trump Call” —

  • “After participating in a phone call where Donald Trump was captured on tape pressuring Georgia election officials to commit what election law experts identified as well within the statutory definition of election fraud, Cleta Mitchell is gone as a Foley & Lardner partner.”
  • “Mitchell’s appearance on the call clearly shocked Foley & Lardner, who were quick to announce that the firm itself was not retained to represent Donald Trump, despite Mitchell’s rhetoric on the call where she spoke of reviewing evidence in the case and explaining allegations that ‘we’ made in Trump’s filings challenging election results.”
  • “Given that attorneys in law firms cannot easily practice side gigs without inviting myriad ethical and insurance coverage issues, Foley & Lardner had reason to be deeply troubled.”

In a separate article: “Stephen Gillers, an ethics expert at New York University Law School, said the issue facing Mitchell is probably one relating to the law firm’s policy, adding, ‘I’m sure the firm is dismayed by the appearance of its lawyer on the transcript.'”

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Risk Update

Conflicts & OCGs — Commentary on Proposed DC Rule Changes

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Happy New Year. May 2021 find us all facing a bit less risk and surprise. With that, let’s start off the new year with an old topic that’s a favorite of many, conflicts, OCGs and terms of engagement. Professional liability lawyer Brian Faughnan offers fresh food for thought on the DC Bar’s proposed changes in: “Protecting lawyers and law firms from themselves” —

  • “And, if you know, then based on the post title you’ve guessed we are going to talk about the D.C. Bar Rules of Professional Conduct Review Committee’s draft Report on proposing changes to the ethics rules to address outside counsel guidelines and client-generated engagement letters.”
  • “Now, to repeat myself on the overriding issue associated with proposed changes to RPC 5.6 and 1.7 that are designed to make it unethical for clients to propose certain approaches to conflicts under an engagement letter, I fail to see how any such effort is at all consistent with the idea that lawyers can also ask clients to waive situations that would otherwise be conflicts.”
  • “It is very, very difficult to find a path where it seems fair to allow lawyers to ask clients to waive conflicts but also say that clients cannot ask lawyers to agree to very broad definitions of what constitutes a conflict in a matter.”
  • “Having repeated myself on that, let me say that the D.C. report does a pretty admirable job of trying to find that path. I’ll let you go read the report for the full treatment of that issue, but the rationale offered is rooted in the notion of not allowing one client to improperly limit a lawyer from being available to represent other clients. I still don’t find it sufficiently persuasive, but they’ve laid it out as well as can be managed, I think.”
  • “Agreements between lawyers/firms and clients involving indemnification. This again is wrapped within the mantle of provisions included by clients in engagement letters or outside counsel guidelines, but this one feels like a more appropriate topic for pushback through rulemaking, at least to me.”
  • “Specifically, the D.C. report proposes revising D.C.’s current rules to add a provision to RPC 1.8 that would prohibit a lawyer from agreeing to any conditions that would impose liability on the lawyer under circumstances where liability wouldn’t flow from either existing common law or existing statutory law.”
  • “Oh, also, there is one other topic that the report addresses on which I cannot control myself to avoid weighing in… The topic addressed is outside counsel guidelines that give the client the right to unilaterally change the guidelines/change the terms of engagement. This is another thing that lawyers could protect themselves against simply by refusing to agree to such a term.”
  • “Now, if you absolutely believe there needs to be a rule revision to protect lawyers from this, why would you want to offer the protection only if a lawyer has already agreed that a client can make unilateral changes? Wouldn’t the better course of action simply be to have the rule say: ‘the client unilaterally makes a material change in the conditions of engagement or other terms of the representation to which the lawyer is unwilling to assent’?”
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Risk Update

Risk Reading — Clients Aren’t Property, Pandemic Ethics and Conflicts, Lawyers Technological Competence & Regulatory Sandboxes

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A few interesting odds and ends I’ve come across recently, spanning a few topics. Starting with: “Looking at Your Firm’s Balance Sheet: Law Firm Clients, and Lawyers, are Not Property” —

  • “It has been almost two years since the California Supreme Court issued its decision in Heller Ehrman v. Davis Wright (2018) 4 Cal.5th 467, holding that a dissolved law firm has no property interest in fees generated after dissolution for hourly matters that were in progress when the firm dissolved. And earlier this year, on February 13, 2020, the District of Columbia Court of Appeals essentially made the same finding in Diamond v. Hogan Lovells US LLP (D.C. 2020) 18-SP-218. These cases put to bed – once and for all – the idea that a law firm is entitled to future profits from the firm’s clients as an ongoing property right.”
  • “In a narrow sense, this means that a lawyer who leaves a dissolved law firm and takes clients to a new law firm does not have to give back profits earned on those matters at the new firm. But in a much broader sense, these courts reaffirmed something that should guide all lawyers and law firms managing partner or group departures: law firm clients are not property. This might sound obvious since clients have the right to choice of counsel and, in fact, this principle is part of what guided the court to reaffirm that law firms do not own clients.”
  • “As the court made clear in Heller, revenue from any client, who can leave the firm at any time, is an expectation interest, but not a property interest. So law firms don’t own clients, although the revenue stream from clients is an asset of the firm, at least until it isn’t.”
  • “On the other hand, law firms have the right to fair competition with departing lawyers for those clients, and should hold the lawyers to their fiduciary duties and their contractual obligations under the partnership agreement.”
  • “For lawyers, the fact that the law firm doesn’t own the clients and doesn’t own the practices doesn’t mean that you have carte blanche to do as you wish when you are departing. You still owe fiduciary duties to your firm and you may have contractual obligations to the firm. Ultimately, you have the right to compete for the clients, just like the firm does, after you give notice of your departure. But you shouldn’t rig the system and compete for clients before the firm knows you are leaving. Also, if you are retiring or selling your interest in your firm, if you have not properly planned for that event, the value of your interest in the firm may be much different than you think.”

A Taxonomy for Lawyer Technological Competence” —

  • “…in October 2019, the Federation of Law Societies of Canada amended its Model Code rule on competence to include explicit reference to technological competence. Several provincial and territorial law societies have incorporated this amendment into their respective codes, and more will hopefully soon follow suit.”
  • “The fact that there now exists a formal duty of technological competence raises the question of what, exactly, does this duty entail? What does this duty require from lawyers? In a strict sense, these questions will only be answered if and when Canadian law societies issue specific guidance or bring public disciplinary proceedings against lawyers for alleged breaches of the duty of technological competence.”
  • “In the meantime, I’ve been thinking about how we might frame our understanding of a lawyer’s duty of technological competence. This column offers an initial, 6-part (alliterative!) taxonomy for thinking about technologically competent lawyering.”
  • See the full article for more details

The Paradigm Shift of Regulatory Sandboxes” —

  • “Earlier this fall, the Law Society of British Columbia made headlines when it announced the creation of an “Innovation Sandbox” that would allow unauthorized providers of legal services to deliver those services in BC on a pilot-project basis while the regulator assesses their reliability and effectiveness.”
  • “The LSBC Sandbox is modelled on a similar project recently launched by the State Bar of Utah, which has already received several applications from innovative legal services providers seeking to close the access-to-justice gap in that state. California has been considering a similar initiative for several months now.”
  • “There are people (primarily lawyers) who think the law society has gone too far and is risking lawyers’ livelihoods by opening the market to non-lawyer providers. There are also people (primarily not lawyers) who think the law society has not gone far enough, that the Sandbox will suffer the same fate as authorized paralegal programs and will fail to really address the A2J crisis.”
  • “The Sandboxes take a different and, I think, better approach. Rather than lawyers generously permitting ‘non-lawyers’ to fill legal needs they’re not interested in serving, the Sandbox opens its doors and says, ‘Anyone who wants to provide legal services, come in and show us what you’ve got.’ They’re offering a new approach to regulating the delivery of legal services — a demand approach (what the market needs), rather than a supply approach (what lawyers are willing to do and allow).”
  • “So these Sandboxes might look, from outside the profession, like a very small step forward. But viewed from the inside, I think they’re something close to a paradigm shift, and their potential impact is significant. They represent the possibility of fundamental change for the better in the underlying premise of legal services regulation.”

New Ethics Opinion Addresses Lawyers’ Obligations When Required To Return To Court In-Person During A Pandemic” —

  • “Nine months ago the COVID-19 pandemic brought court operations in New York State to a near standstill. In the past few months, courts have slowly started to resume in-person appearances, but those plans were recently stalled owing to a spike in COVID-19 cases. Although the courts are understandably eager to resume in-person appearances, a lawyer may be hesitant to return in person owing to the associated health and safety risks.”
  • “A recent ethics opinion from the New York City Bar Association Committee on Professional Ethics (Opinion 2020-5) addresses a lawyer’s ethical obligations when required to return to court in person during a public health crisis. In short, the Opinion concludes that a lawyer’s health and safety concerns may create a conflict of interest which, if the conflict cannot be waived, may require the lawyer to withdraw. As detailed below, the Opinion provides a helpful roadmap for lawyers to analyze the conflict of interest rules as well as other ethical obligations when facing a directive to return to court in person.”
  • “The Opinion also provides some examples of situations where a lawyer’s health and safety concerns could compromise the lawyer’s professional judgment. For instance, a lawyer’s desire to request an adjournment or permission to appear remotely ‘could be in direct conflict’ with the client’s interests in having the lawyer appear in person.”
  • “Because the Opinion concludes that a lawyer’s health and safety concerns could create a conflict of interest, the Opinion next analyzes whether such a conflict is waivable… Whether a conflict based on a lawyer’s health and safety concerns is waivable turns on whether the lawyer reasonably believes that he or she will be able to continue to meet the “minimum standards of competence and diligence” contained in Rules 1.1 and 1.3. If so, the client can waive the conflict in writing after the lawyer explains the conflict to the client including the potential risks and the reasonably available alternatives.”
  • “The Opinion also concludes that if the conflict is not waivable, either because the client refuses to consent or because the conflict prohibits the lawyer from competently representing the client, then the lawyer would be obligated to withdraw under Rule 1.16(b)(1).”
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Risk Update

Disqualification News — Sue Your Client, Get DQ’d, But Misspeak and You Could Be Safe

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McGuireWoods DQ’d In Hartford’s Trade Secrets Case” —

  • “U.S. Southern District of Indiana Judge Sarah Evans Barker on Wednesday adopted a magistrate judge’s recommendation that McGuireWoods couldn’t represent former employees of Hartford Steam Boiler Inspection and Insurance Co., which is suing them for allegedly sharing trade secrets with their current employer.”
  • “‘The Magistrate Judge’s conclusion that McGuireWoods cannot litigate against its own client, which it plainly seeks to do, clearly aligns with the prohibitions set out in the rules of professional conduct,’ Judge Evans Barker said.”
    “McGuireWoods has, according to the order, been representing Hartford for over 10 years as outside counsel, advising on labor and employment issues. In June, the firm notified the company that it would be representing its direct adversaries: former Hartford employees Michael Campbell and Kiah Jacobs, and their new employer OneCIS Insurance Co.”
  • “McGuireWoods said it could do this because Hartford consented to allowing the firm to represent clients that may be competitors or adversarial in some way when both companies signed a waiver that said McGuireWoods could do so as long as the legal matter was not closely related to the work the firm does for the company.”
  • “However, Hartford argued in its motion to disqualify the firm that McGuireWoods was leaving out an important piece of this agreement. The retainer read: ‘McGuire Woods asks you to consent in advance to McGuireWoods accepting future matters for your adversaries where the matters are unrelated to the work we do for you and do not involve you as a party.'”
  • “And while McGuireWoods argued that Judge McVicker Lynch was wrong to determine that Hartford hadn’t consented to the firm representing adversaries, Judge Evans Barker called that reading of the contract ‘plainly wrong and legally untenable.'”
  • “The judge was also unmoved by McGuireWoods’ reliance on a case in which a judge cautioned that ‘a finding of conflict is not automatically grounds for dismissal.’ Judge Evans Barker pointed out that this case did not involve a firm that was representing a direct adversary to one of its current clients.”

Law Firm Can’t Be Disqualified Based on Its Misstatement of Conflicting Representation” —

  • “An attorney’s flub in saying that his law firm represented five employees of a company that was the firm’s client—where those employees, whom it didn’t represent, had interests that were potentially adverse to the client—was not a sufficient basis for disqualifying the firm from representing the company in a Private Attorneys General Act action against it, the Court of Appeal for this district has held.”
  • “Acting Presiding Justice John L. Segal of Div. Seven wrote the opinion, filed Thursday. The opinion, which was not certified for publication, reverses an order by Los Angeles Superior Court Judge Gregory Keosian.”
  • “The order stemmed from a response by a named partner of the firm, Ryan Saba, to Jamie Stein of the Simi Valley firm of Green Law, counsel for Cortez. Stein queried as to contact information for five specific employees, and Saba advised that his firm represented them and that he would make them available for depositions.”
  • “‘I was mistaken when I stated ‘our firm represents these individuals.’ What I meant to say, is that our firm will coordinate with these individuals and any other LandCare employee so that the individuals will appear for a deposition, upon your request.'”
  • “Keosian subsequently issued his disqualification order. Segal wrote:
    • ‘Rosen Saba’s statements that it represented the potentially aggrieved employees were unilateral statements showing, at most, that Rosen Saba believed, at least for a short period of time, it represented the employees. The statements were not substantial evidence of an attorney-client relationship….Rosen Saba’s statements did not show the aggrieved employees intended to retain Rosen Saba as their attorneys, that Rosen Saba obtained confidential information from the employees, or that Rosen Saba provided legal advice to the employees… That is not to say an attorney’s conduct is never evidence of an attorney-client relationship….Rosen Saba, however, did not make a court appearance or file anything on behalf of the aggrieved employees. Rosen Saba opposed Cortez’s request for a temporary restraining order on behalf of LandCare, not the employees. And, at the time LandCare filed the opposition, none of the aggrieved employees was a party to the action or subject to a subpoena or a notice to appear for deposition. Because Rosen Saba was not appearing on behalf of the employees, its statement that it represented the employees did not raise a presumption the employees knew of or had authorized Rosen Saba to make the statement. The trial court erred in ruling that the statements showed Rosen Saba represented the potentially aggrieved employees and that such representation required disqualification.'”
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Risk Update

DQ Denied — Not All Lawyer Contact Creates Conflict

Posted on

Karen Rubin writes: “No DQ for contacting represented party on a different subject, district court says” —

  • “The scope of the ‘no-contact rule’ — barring a lawyer from communicating with represented persons — is spotlighted in a disqualification ruling that a Florida district court handed down earlier this month. The opinion is a reminder that the prohibition against contact (without permission of the person’s counsel) extends only to ‘the subject of the representation.”
  • “The plaintiff sued the defendant collection agency in the Middle District of Florida for allegedly violating the federal Fair Debt Collection Practices Act; she was represented by the Agruss Law Firm. In early November, according to the collection agency, Agruss employees contacted it twice, even though the firm knew that the collection agency was represented by counsel in the plaintiff’s case.”
  • “The law firm explained in its brief in opposition to disqualification that it frequently represents plaintiffs in FDCPA actions. It acknowledged that on one of the dates in question a paralegal of the firm had phoned the collection agency — but it submitted unrebutted affidavit evidence that the call did not relate to the plaintiff’s case in the Florida action. Rather, said the law firm, its paralegal had called the collection agency in order to investigate a potential FDCPA claim against the collection agency by a completely different person. The law firm later filed a separate complaint in the Northern District of Texas against the collection agency on that person’s behalf.”
  • “A second call to the collection agency was made a few days later by a principal of the Agruss firm, who simply listened to the agency’s outgoing voicemail message, and who never spoke to anyone at the agency, according to a second affidavit.”
  • “Although the evidence showed that the Agruss firm had contacted the defendant collection agency directly, the court said, it was about a completely different case. Therefore, the contact was not ‘about the subject of the representation,’ as would be necessary in order to demonstrate a violation of the rule, according to the court.”

For more on the “no contact” rule, see the complete post.

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