Risk Update

Freivogel Findings — Adequate Ethical Screening in Pennsylvania (Playbooks mention), Former Clients, Joint Representations and More

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Friend, BRB reader, and “Conflicts Godfather” Bill Freivogel has been as eagle eyed as ever, keeping up with 2022 developments. Here are some of the latest he’s noted:

Rudlavage v. PPL Elec. Utils. Corp., No. 237 MDA 2021 (Pa. App. Jan. 4, 2022); and, Darrow v. PPL Elec. Utils Corp., 2021 Pa. Super. 245 (Pa. App. Dec. 14, 2021).

  • “One should read these two cases together. They involve two different motorists who were injured at two different times while driving on PPL’s property. They filed separate suits in Lackawanna County Pennsylvania, each claiming PPL was negligent in maintaining its property. The Munley Law firm represented the plaintiffs in both cases.”
  • “The problem was that the Munley firm employed a lawyer, John Mulcahey, who had previously, at another law firm, Lenahan & Dempsey, represented PPL in ‘numerous personal injury lawsuits.'”
  • “In Darrow, Mulcahey and the Munley firm appeared for the plaintiff. PPL moved to disqualify Mulcahey and the Munley firm. The trial court granted the motion as to Mulcahey, but deferred ruling as to the Munley firm. In Rudlavage, two lawyers at the Munley firm (but not Mulcahey) appeared for the plaintiff. In Rudlavage, PPL moved to disqualify the Munley firm.”
  • “The trial court held a joint evidentiary hearing for both cases as to the Munley firm. The trial court denied disqualification, finding the firm’s ‘screening process. . . adequate.'”
  • “In these opinions the appellate court reversed the trial court and ordered the Munley firm disqualified. The focus of the opinions was the adequacy of the firm’s screen between Mulcahey and the rest of the firm. The factors favoring disqualification here included the small size of the Munley firm, the extent of Mulcahey’s work for PPL at the Lenahan firm, the lateness of the screen, and the lack of adequate procedures for screens in the Munley firm.”
  • “These could be important opinions on screening in Pennsylvania, given the lack of, in the court’s words, ‘precedential Pennsylvania authority’ on screening under Pennsylvania’s Rule 1.10(b)(2). Authorities considered by the appellate court included Dworkin v. General Motors Corp., 906 F. Supp. 273 (E.D. Pa. 1995), and Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, 602 a.2d 1277 (Pa. 1992).”
  • “Side note: In both the Darrow and Rudlavage opinions the court gives a nod to ‘playbook,’ noting that Mulcahey’s work for PPL involved working with PPL personnel on similar cases, thus finding that work ‘substantially related’ to these cases.”

H&H Mfg. Co., Inc. v. Tomei, No. A-4209-19 (N.J. App. Div. Dec. 29, 2021).

  • “This is one of two cases involving a family feud and control of the family corporation, H&H. In the first case, in Pennsylvania, Law Firm filed papers on behalf of H&H and a family member, Vincent Tomei, against another family member, Thomas Tomei. That suit failed because the courts found, among other things, that the H&H board never approved retention of Law Firm or the suit’s filing.”
  • “In the second case (this case) filed by H&H against Vincent, Law Firm appeared for Vincent. H&H moved to disqualify Law Firm, under Rule 1.9(a), because of Law Firm’s ‘representation’ of H&H in the Pennsylvania case.”
  • “The trial court granted the motion. In this opinion the Appellate Division disagreed, finding that Law Firm’s earlier, unauthorized, representation of H&H did not amount to a representation under Rule 1.9(a). Thus, Law Firm’s work in the Pennsylvania case was not disqualifying. But, in the face of claims that Law Firm had represented H&H in other matters, the Appellate Division remanded the case for findings on those claims.”

CCUR Aviation Fin., LLC v. S. Aviation, Inc., 2021 WL 6111683 (S.D. Fla. Dec. 27, 2021).

  • “This opinion deals with a temporary receiver’s application for fees and expenses. One objection was that the receiver hired her own law firm to represent her, thus creating a conflict of interest. The court rejected that objection saying that the practice of receivers’ hiring their own law firms is ‘common’ in the S.D. Fla. Plus, in Footnote 4 the court noted that the receiver agreed to a cap on the law firm’s hourly rates, and that the rates were ‘reasonable.'”

Arnold v. Solomon, No. 2053, Sept. Term, 2019 (Md. Spec. App. Unreported Dec. 22, 2021).

  • “Lawyer and others were defendants in this legal malpractice suit. In this “unreported” opinion the court, without discussion, ruled that, absent a conflict of interest, Lawyer could represent himself and other defendants. The opinion did not indicate who the “other defendants” were or what they might have done.”

(Bill, thanks as always for letting me crib your class notes. I’m ready for the day you call on me to “do a service.’ >smile<)

Risk Update

Bankruptcy Matters and Fees — Firm Business Engagement Models and Conflicts, Recent Bankruptcy DQ Discussions

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The Problem With “Zero Down” Chapter 7 Bankruptcy” —

  • “There is no shortage of attorneys advertising on the internet and on television their willingness to file Chapter 7 bankruptcy cases under ‘zero down,’ ‘low money down,’ or ‘file now, pay later’ fee agreements.”
  • “Precisely because lawyers stand in a fiduciary relationship with their clients, they are all bound by rules of professional conduct that prohibit them from doing things that are allowed in many other kinds of business relationships; those same rules require lawyers to do things that are not required in many other kinds of business relationships.”
  • “When you file a Chapter 7 bankruptcy case you have an undeniable conflict of interest with all of your pre-bankruptcy creditors; your creditors want to be paid, and you want to discharge your liability to them in bankruptcy.”
  • “And if, before you file your Chapter 7 case, you enter an agreement with the attorney who files the case for you that obligates you to pay them after the case is filed, then that attorney becomes your creditor. In fact, most courts that have considered this question have concluded that pre-petition debts for legal services are dischargeable in the debtor’s Chapter 7 case just like any other unsecured debt, and have also held that post-petition attempts by the attorney to collect on such debts would be improper.”
  • “If you or someone that you know entered a fee arrangement with an attorney who agreed to file a Chapter 7 bankruptcy case and collect any portion of his or her legal fees after the case was filed, that attorney, in accordance with their fiduciary duties, should have disclosed that the promise to pay the attorney’s legal fees would be discharged in the bankruptcy case, and that attempts to collect the fee from the debtor after the discharge was granted would be prohibited by law.”
  • “Some attorneys in Minnesota, and around the country, try to avoid these consequences by filing ‘no money down’ and ‘low money down’ Chapter 7 bankruptcy cases for clients under so-called bifurcated fee arrangements. Under such arrangements, the full scope of legal services necessary for a client to secure the benefit of a Chapter 7 discharge are “unbundled” and covered under two separate fee agreements:
    • “One fee agreement that is signed pre-petition and covers only services essential to get the case filed; and”
    • “A second fee agreement signed post-petition that covers the additional services necessary to conclude the Chapter 7 case, including preparing the actual schedules and statement of financial affairs, appearing with the client at the meeting of creditors, and other services as may be required to conclude the Chapter 7 case and secure the discharge.”
  • “As of late December 2021 (when this blog is being written), we do not know whether the judges of the Minnesota Bankruptcy Court will approve the use of “file now and pay later” fee arrangements in Chapter 7 cases filed here. But there is compelling evidence that our local bankruptcy judges are concerned that such fee arrangements are improper, and every reason to conclude that bifurcated fee arrangements run afoul of the Local Rules of Bankruptcy Procedure.”

Firm DQ For Bad Disclosure In Del. Bankruptcy Case Upheld” —

  • “A federal judge on Wednesday [October 20, 2021] affirmed Delaware bankruptcy court decisions that disqualified and sanctioned a law firm for failing to disclose it was using a “fictitious trade name” when it served as special counsel to debtor entities that held ownership stake in an office building.”
  • “The bankruptcy court orders took issue with Rubin & Rubin for various disclosure violations, including a failure to provide notice of the fee sharing agreement with the consultant and filing false or materially incomplete information in its retention application, according to the decision.”
  • “After filing for Chapter 11 in 2016 when loan refinancing efforts failed and foreclosure proceedings were initiated, numerous debtor entities that collectively own an office building in Little Rock, Arkansas retained Rubin & Rubin as special counsel. As an adversary suit between the debtors and various lenders proceeded over loan terms and other issues, lenders called into question whether Rubin & Rubin PA is ‘an actual entity or not, and what representations were made to the court regarding the retention of Rubin & Rubin,’ according to a 2019 court filing.”
  • “Although the bankruptcy court did not find an issue with fee sharing by the firms, given the nature of their partnership, it did take issue with the failure to disclose ‘the existence of their firms and Rubin & Rubin’s fictitious name status,’ the opinion said.”
  • “The bankruptcy court ‘correctly held that it had authority to sanction the disclosure violations under’ bankruptcy rules, and such sanctions ‘do not require a finding of bad faith,’ Judge Connolly said.”
Risk Update

Lawyer Ethics and Professional Responsibility — Experts Review Recent Opinions

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The folks at Hinshaw present a look at 2021: “11 Legal Ethics Opinions You May Have Missed in 2021” —

  • California Lawyers Association Ethics Committee Formal Opinion No. 2021-1: Elements of Effective Ethical Screens
    • “Conflicts always top the list of risk management concerns. This opinion discusses six universally mandated elements for an effective ethical screen: 1) prompt imposition of the screen; 2) no fee-sharing; 3) notice to affected clients; 4) prohibiting communications across the screen; 5) limiting access to screened matter’s file; and 6) limiting access to the prohibited person’s documents. The opinion adds that monitoring the ethical screen should be performed on a quarterly basis.”
  • DC Bar Ethics Opinion 380: Conflict of Interest Issues Related to Witnesses
    • “Imagine you are knee-deep in fact discovery for a hotly contested case you have handled for the past two years when the opposition discloses your former client as a key witness. This opinion squarely addresses the thorny legal ethics issues that arise from this simple fact pattern, along with issuing subpoenas to current or former clients, cross-examining clients, and imputation of confidences and secrets of clients. The opinion also highlights how some jurisdictions have reached different conclusions about whether a conflict exists under similar circumstances.”
  • State Bar of Nevada Formal Opinion 58: Advance Waivers
    • “Advance conflict waivers are often a hot topic. In this opinion, Nevada finds that advance waivers may be permitted if they meet all of the requirements for waiving a present conflict of interest under Nevada Rule of Professional Conduct 1.7(b). The attorney must undertake an analysis of whether the conflict can be consented to and whether the client has given actual informed consent.”

And the Clyde & Co team explore an interesting question: “Are In-House Lawyers’ Non-Compete Agreements Enforceable?” —

  • “The recent opinion in Ipsos-Insight, LLC v. Gessel, No. 21-CV-3992 (JMF), 2021 WL 2784634 (S.D.N.Y. July 2, 2021) addressed the topic of whether a former in-house counsel’s non-compete agreement was unenforceable.”
  • “The Court granted the motion to dismiss brought by defendant Gessel, the plaintiff’s former in-house counsel, because the non-compete clause with plaintiff violated Rule 5.6(a).”
  • “Despite its decision here, based on the guiding precedent in New York that such agreements are unenforceable, which it felt compelled to apply, the Court invited plaintiff to appeal to the Second Circuit in order to have the question certified to the New York Court of Appeals.”
  • “However, the ethics opinions generally make clear that an in-house lawyer is still bound by Rules 1.6 and 1.9 to preserve the former employer’s confidentiality and not act adversely towards it, and a drafter would be wise to ensure any non-compete clause contains a savings clause.”
Risk Update

Conflicts and Recusals — Judge Calls Move “Almost Insane,” Convicted CEO Says Conflict Crushed Defense

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‘Almost Insane’: Judge Criticizes Call for Recusal in Handling Amazon Case” —

  • “A federal judge overseeing a lawsuit filed by Amazon, and who recently disclosed his wife held stock in the company, said claims he should recuse due to a conflict of interest are ‘almost insane’ and ‘100% flawed.'”
  • “During a hearing Thursday, O’Grady slammed arguments from WDC Holding’s attorneys that his impartiality is reasonably in question as a result of his wife’s stockholding and that he knew of the conflict.”
  • “‘The argument that even as you suggest, I had to have known about the Amazon stock holdings or put my head in the sand over the last 10 years, is wrong,’ he said. ‘But also the underlying basis for it is absurd. The idea that I would steer this case in Amazon’s favor because I felt that my wife’s $22,000 investment in Amazon’s stock would be at risk if I didn’t is almost insane.'”
  • “‘Amazon is a multi-billion dollar company and this case in no way could ever affect the stock price in Amazon’s stock and nothing I could ever do in this case would have an impact. So the underlying basis for my impartiality being questioned is 100% flawed,’ he continued.”
  • “In defending his impartiality, O’Grady pointed to a counterfeiting suit against Amazon he presided over in which he denied summary judgement for the company, writing “this is simply not a case where Amazon can avoid liability.” The case, Maglula v. Amazon, recently settled. ‘I think that clearly demonstrates my neutrality in handling cases involving Amazon,’ O’Grady said.”

(On first read of the headline, I missed the colon.)

Ex-CEO Says Barnes & Thornburg Conflict Hurt His Defense” —

  • “An Indiana nursing home chain’s former CEO urged the Seventh Circuit on Thursday to vacate the 10-year prison sentence he received for participating in a $16 million kickback scheme, arguing that Barnes & Thornburg LLP’s failure to disclose significant conflicts harmed his defense.”
  • “During oral arguments, James Burkhart, the former CEO of American Senior Communities, urged a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit to help correct the ‘unprecedented’ circumstance in which 14 Barnes & Thornburg lawyers who defended him against federal fraud charges and convinced him to plead guilty never disclosed that the firm had also been representing the Health and Hospital Corporation of Marion County, the victim of his scheme.”
  • “For instance, it prevented his counsel from disclosing powerful impeachment evidence that could have disrupted the portrayal of Health and Hospital as a harmless victim, and it dissuaded his lawyers from sufficiently developing the defense that he never intended to defraud the hospital system, Byrne argued.”
  • “Circuit Judge Diane Sykes pushed back on the argument, saying there seems to be a missing link between Burkhart’s plea and the pre-existing attorney-client relationships he’s targeting. His plea instead appears to have been motivated by certain co-defendants’ decisions to plead guilty and cooperate in the government’s case, including his brother Joshua Burkhart and the nursing home chain’s former chief operating officer Daniel Benson, Judge Sykes said.”
  • “‘We can’t even get to causation without correlation, but we don’t even have correlation,’ she said. ‘The fact that one standing hospital client avoided a risk by your client’s guilty plea has no connection to the plea, in terms of the advice that was given.'”
  • “But Circuit Judge Ilana Rovner pushed back, telling Linder that while she acknowledges all the things the firm did to defend Burkhart, she is ‘very concerned about the one thing they did not do, and that was reveal their representation’ of Health and Hospital Corp. ‘Mr. Burkhart essentially had an office at Barnes & Thornburg,’ she said. ‘He was involved in the smallest minutiae of trial planning, but he didn’t know about the elephant in the room.'”


Risk Update

Law Firm AML News — Firm Failure Forces Fines, Chatham House Report Raises Eyebrows, SRA on AML Governance

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Mishcon de Reya fined £232,500 over numerous AML failings” —

  • “High profile London firm Mishcon de Reya has agreed to pay £232,500 – one of the biggest fines ever imposed by the regulator – over several breaches relating to money laundering rules.”
  • “The firm admitted failing to secure adequate due diligence on four related clients and misplacing the evidence of diligence it had carried out.”
  • “It was also accepted by the firm that inadequate training was provided for the partner relied on to comply with anti-money laundering regulations, and that funds were improperly transferred from a client ledger to discharge fees and disbursements.”
  • “In an agreed outcome published today, the Solicitors Regulation Authority said the financial penalty should be 0.25% of the firm’s £155m turnover – equating to £387,500 but reduced by 40% to take account of mitigating factors.”
  • “Mishcon de Reya said it cooperated with the SRA investigation and acknowledged its due diligence and training failings. New IT systems have been introduced with centralised record-keeping to prevent future similar breaches.”
  • “Following the outcome, a spokesperson for the firm said: ‘We are pleased to have come to a settlement with the SRA relating to two separate and historic investigations in relation to which we have made appropriate admissions. Mitigating factors such as our cooperation with the SRA throughout the investigations and the corrective action we have taken since to prevent a recurrence have been recognised by the SRA in reaching this outcome.'”

Other recent focus on Anti-money Laundering: “Law Society responds to Chatham House AML report” —

  • “The Law Society of England and Wales has issued a response to London-based thinktank Chatham House’s recent report criticising the UK’s anti-money laundering (AML) laws.”
  • “The report states that un-policed and often unenforceable anti-corruption laws have made the UK the global money-laundering capital for a post-Soviet Union elite, severely damaging Britain’s international reputation and the rule of law, and calls for new measures to constrain professional enablers.”
  • “The report also suggests that the Office for Professional Body Anti-Money Laundering Supervision found that 81% of the 22 professional bodies had not implemented an effective risk-based approach, and only one-third of them were effective in developing and recording adequate risk profiles for their sector.”
  • “A Law Society spokesperson responded: ‘Law firms already play an important and significant role in tackling money laundering. This is demonstrated by the substantial costs and resources allocated by the profession to complying with its AML and financial crime obligations, resulting in a substantial public benefit… It is widely recognised by the UK government, law enforcement, the regulator and the UK’s National Risk Assessment that the vast majority of the sector is trying its best to do the right thing. However, the legal sector cannot be complacent or naïve and must remain vigilant against the ever-changing threat of illicit finance.'”

See the Chatham House report.

In parallel, I noted the SRA promoting its recent article: “Money Laundering Governance: Three Pillars of Success” —

  • “Every person in a firm has a responsibility to make sure that it is not used for money laundering, and that relevant reports are made of any suspicious activity. MLCOs and MLROs form the keystone of the firm’s efforts. The success of the firm’s AML regime as a whole is likely to depend on suitably knowledgeable, skilled and authoritative people holding these roles.”
  • “Below, we set out what we consider to be the three main attributes a successful MLCO or MLRO should have:
    • Authority: The ability to command respect, to make decisions and to follow them to completion, and the ability to access and use all information held by the firm.
    • Independence: A focus on the firm’s legal obligations rather than short-term gain, the ability to make decisions without being influenced by other fee earners or by clients.
    • Resources: To be given the time and space to consider what the best course of action should be, to have provision, where possible, for a deputy to cover for them, and supportive colleagues.”
Risk Update

Law Firm Disqualification Denied — Appeals Court Rules Details of “Prior Representation” Matters

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Appeals Court Vacates Disqualification of Lawyer Where Prior Representation Was Unauthorized” —

  • “A lawyer’s past representation of a manufacturing company in litigation is not grounds to disqualify him from representing a former member of the board of directors who is being sued by the company, a New Jersey appeals court has ruled.”
  • “The attorney, Paul Bucco, was disqualified for representing Vincent Tomei, a director of H&H Manufacturing Co., in a suit by the company, based on his prior representation of both H&H and Tomei in a related case. But the appeals court said the trial judge erred in finding that Bucco represented H&H in the earlier case.”
  • “Although Bucco and his firm entered an appearance on behalf of H&H in the earlier case, they were not authorized to represent the company, and therefore the representation cannot serve as the basis for disqualification, Appellate Division Judges Garry Rothstadt and Arnold Natali Jr. ruled.”
  • “Bucco represents Vincent Tomei in the Camden County case, but H&H moved for his disqualification, claiming the attorney is conflicted out based on his prior representation of H&H and because he is a fact witness in the case. The trial judge ruled for H&H, finding the two matters substantially related.”
  • “On appeal, Rothstadt and Natali said that Vincent Tomei lacked standing to file the Delaware County suit against H&H because its board of directors never approved his filing of the suit. In addition, no attorney-client relationship formed between Bucco and H&H in the prior case, based on the Delaware County court’s findings.”
  • “‘Simply put, Paul Bucco and Davis Bucco did not actually ‘represent’ H&H, they merely alleged they did, and whatever consequences may flow from that inaccurate characterization, such self-serving pronouncements cannot serve as the sole basis for the creation of an attorney-client relationship,’ the appeals court said.”
Risk Update

New Year, Continuing Risks — Judicial Conflicts Allegation Costs, Holiday Party Warnings (Casual Conflicts, Attorney Dabbling)

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Be Cautious During Holiday Parties, Lawyers Warn” —

  • “While it is certainly a time to be merry, the holiday season also poses unique risks to lawyers. Being mindful of these issues will help ensure that the New Year starts off on the right foot.”
  • “First, there is a risk that lawyers providing advice, even in a casual setting, can be found to have created an implied attorney-client relationship with the person seeking the advice… Therefore, there can be a risk that even a lawyer providing casual advice at a party has created an attorney-client relationship, which could give rise to a legal malpractice claim, albeit a weak one. Even if there is no implied attorney-client relationship, these casual party situations can implicate potential conflict-of-interest issues.”
  • “Consider this example: A partygoer meets a lawyer at a party and asks the lawyer’s advice on the partygoer’s struggles with his landlord. The lawyer tells the partygoer that local statute entitles the partygoer to withhold rent or to file a suit against the landlord. Upon returning to work after the holidays, the lawyer receives an irate call from another partner, noting that a valued client of the firm (a property management company) is in a dispute with a tenant based on advice provided by the client’s law firm to withhold rent. Even if there is no attorney-client relationship between the lawyer and the partygoer, the lawyer may have created a conflict of interest and a problematic client management issue.”
  • “Another risk for lawyers at holiday parties is that they might be asked for an opinion on a subject that goes beyond their level of expertise. Most family members or friends seek casual advice on common family law, tax, estate or real estate issues. A lawyer may be creating unnecessary risk by answering questions that are outside the lawyer’s expertise, even when speaking casually. Such areas of practice are often highly specialized. And, coincidentally or not, these areas of law are among those that see the highest rates of legal malpractice claims, year after year.”

An Amazon Suit Encounters a Snag: a Judge With a Conflict of Interest” —

  • “For nearly two years, U.S. District Judge Liam O’Grady has handed Amazon.com Inc. a string of court victories in a continuing suit in which it accuses two former employees of taking kickbacks from a real-estate developer and violating Amazon’s conflict-of-interest policies.”
  • “All that time, Judge O’Grady had a conflict of his own: a financial interest that under federal law barred him from hearing the case in the first place.”
  • “Throughout the case, Judge O’Grady’s wife owned Amazon stock. Judges are forbidden by a Watergate-era law to hear cases involving companies in which they or their spouses have a financial interest, however small.”
  • “After The Wall Street Journal contacted Judge O’Grady about the conflict, his wife’s investment adviser earlier this month sold the Amazon shares, valued at more than $20,000.”
  • “‘I should have disqualified myself,’ Judge O’Grady said in a Dec. 1 email. He said he would remove himself from the case if asked to. After learning of the conflict, the defendants—the two ex-Amazon employees and a Colorado real-estate developer—asked the judge to step aside in a Dec. 21 court filing, on which he hasn’t yet ruled. A hearing is scheduled for Jan. 6.”
  • “Judge O’Grady is by all accounts a skilled and accomplished lawyer who has sat on the federal bench since 2007, handling major espionage, drug and government-leak cases, as well as complex patent litigation. Yet by his own admission he misunderstood how federal law applied to his situation. He said he mistakenly believed his wife’s account was a mutual fund, which doesn’t require judges to disqualify themselves.”
  • “A recusal by Judge O’Grady from the Amazon case would create duplication of work and compounded costs as a new judge gets up to speed. The case already has featured about a half-dozen hearings and has nearly 500 docket entries with more than 4,000 pages of court filings.”
  • “A Journal review found 65 additional cases Judge O’Grady has heard in the Alexandria, Va., federal courthouse while his wife was invested in plaintiffs or defendants, among them Bank of America Corp., International Business Machines Corp. and Verizon Communications Inc.”
Risk Update

Positional Conflicts — Clashing Arguments and Clients Cause Attorney Disqualification

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City Attorney Kicked Off HPD Shooting Lawsuit For Creating A Conflict Of Interest” —

  • “In late October, a city attorney representing three Honolulu police officers argued in court that the officers were not liable for the shooting death of Kyle Thomas because they were acting within the scope of their employment.”
  • “That day, the same attorney, who was also representing the City and County of Honolulu in the same civil rights lawsuit, argued that the case against the city should be thrown out because the officers were not acting within their scope of employment when Thomas, 26, was shot to death in Mililani on Feb. 20, 2019.”
  • “This week, Magistrate Judge Kenneth Mansfield removed that city attorney, Kyle Chang, from the case for creating a conflict of interest.”
  • “‘Mr. Chang divided his loyalties when he asserted conflicting legal positions on behalf of his clients,’ Mansfield wrote on Tuesday in the order disqualifying Chang from the case. ‘The Court thus finds that Mr. Chang cannot reasonably believe that he can provide competent and diligent representation to the City and the Officer Defendants under the particular circumstances of this case.'”
  • “The Department of Corporation Counsel, the chief legal adviser and representative of the city and its agencies, is now reviewing Mansfield’s decision to determine whether another member of the city’s legal department can take over the case or if they will have to retain an attorney from outside of the department.”
Risk Update

Law Firm Risk Staffing Trends — Survey Color Commentary on Conflicts, Plus Panel Webinar Recording

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Law.com brings us color commentary on the recently published Intapp risk staffing survey: “Checking for Conflicts Becomes a Team Sport at Growing Law Firms” —

  • “Top-down approaches to conflicts checks are increasingly a thing of the past at law firms as responsibility for analyzing potential conflicts of interest is shifting away from partners to teams of professional analysts, new research from legal tech company Intapp suggests.”
  • “Like many staff roles in the legal industry, those responsible for conflicts analysis are evolving into a specialized team of professionals, often with four-year degrees or J.D.s, rather than clerical personnel serving at the discretion of practice partners, according to survey authors. A similar evolution can be seen in the upskilling of executive assistants and attorney resource specialists in Big Law.”
  • “‘We’re stepping away from an administrative view of that role and talking more substantively about bringing legally trained folks in, whether that’s folks who are certified paralegals or whether that’s lawyers,’ said Makaylia Roberts Binkley, director of risk consulting for Intapp and former director of risk management for Ballard Spahr.”
  • “Survey data shows that practice partners saw their share of the responsibility for analyzing potential conflicts go from 48% in 2018 to 26% in 2020, and associates saw theirs remain steady at 29% then 30% during the same period; meanwhile, the proportion of conflicts analysts, conflicts lawyers and conflicts managers responsible for the same duty grew from 54% to 70%, 49% to 67% and 9% to 42%, respectively.”
  • “These trends reflect the ‘professionalization’ of the conflicts analyst role, giving those staff positions greater clout in determining whether or not a conflict exists, and progress toward an “end-to-end conflicts resolution team,” survey authors said.”
  • “Risk assessment has historically been viewed by law firm fee-earners as a liability, stymying the growth of their business and client relationships, said James Edwards, Intapp’s director of client experience. But Edwards said the shift in responsibility to professionals specializing in conflicts analysis allows them to have more involvement in a firm’s strategic priorities.”
  • “‘Not only are you being responsive to your professional liability requirements, but you’re ensuring the firm is more profitable because you’re ensuring that … you’re not going to be faced with fee write-downs because you weren’t accommodating clients’ requests,’ Edwards said.”
  • “A divide can also be seen in the divergence in conflicts analysts’ professional experience between firms with fewer than 500 lawyers and those with more; data shows small and midsize firms are staffing the conflicts analyst role with professionals who have double the experience than those at large and enterprise firms, which authors chalk up to newly implemented staff roles with higher educational requirements.”

For those who missed the live panel webinar, featuring commentary from Allison Martin Rhodes (Deputy General Counsel at Sheppard Mullin), Brenna Greenwald (Regional Counsel, Head of Business Acceptance at Freshfields Bruckhaus Deringer U.S.) and Meg Block (Intapp Vice President, Risk Consulting), that’s now available here:


Risk Update

Law Firm Risk News — PA Superior Court Cements Lateral Conflicts Standards, Insurer Questionnaire Conflict Question Results in Rescission

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Split Superior Court Panel Rules a Lateral Hire’s Conflict Disqualifies a Whole Firm” —

  • “The Pennsylvania Superior Court has sent a cautionary message to all lawyers who make lateral moves—and their new firms. In a 2-1 split, the court ruled Tuesday that an entire firm must be disqualified from handling a personal injury lawsuit because one of its lawyers formerly represented the defendant while working for another firm years earlier.”
  • “The decision cements a standard for determining whether a firm should be disqualified for an individual lawyer’s involvement with the opposing party.”
  • “Rule 1.10(b) of the Pennsylvania Rules of Professional Conduct addresses circumstances when attorneys’ past clients’ interests conflict with the interests of clients at their current firm. It notes exceptions for circumstances when a lawyer is screened from participation with the potentially conflicting matter and the lawyer gives notice to the former client.”
  • “The Superior Court… weighed the circumstances against five factors: the substantiality of the relationship between the attorney and former client; the time elapsed between conflicting disputes; the size of the involved firm and number of disqualified attorneys; the nature of the attorneys’ involvement; and the timing of the wall. It also took into account the strength of the wall.”
  • “‘Our review reveals no precedential Pennsylvania authority with a controlling analysis for the adequacy of a law firm’s conflict protocol,” Murray said. So the court used “numerous non-precedential Pennsylvania decisions’ to evaluate the effectiveness of a conflict-of-interest protocol the Munley law firm put in place only after hiring Mulcahey and initiating this lawsuit. Murray said the fact that Munley is a small firm of about 10 lawyers makes it harder to avoid sharing sensitive information about previous clients and strategy.”

Law Firm’s Misrepresentations in Insurance Application Warrant Recission Under Utah Statute”

  • “The United States District Court for the District of Utah, applying Utah law, has held that a law firm’s representation in its insurance application that it lacked knowledge of any incident, act, error, or omission that could be the basis of a claim, constituted a material misrepresentation in light of a former client’s threats of a claim against the firm and a judicial finding of improper conduct, warranting recission of the policy under Utah statutory law. Travelers Cas. & Sur. Co. of Am. v. Grimmer Davis Revelli & Ballif, P.C., 2021 WL 5234373 (D. Utah Nov. 10, 2021).”
  • “In June 2018, a former client of the firm filed a motion to disqualify the firm from a series of probate actions in Wyoming, citing conflicts of interest and breaches of professional duties, and stating that the former client had claims against the firm. In December 2018, the former client again stated that she intended to assert claims against the firm and would seek “substantial” damages. In March 2019, a special master issued a report finding improper joint representation and conflicts of interest by the firm and recommending disqualification, which the court accepted. Similarly, the court in a related litigation in South Carolina disqualified the firm based on conflicts of interest.”
  • “In April 2019, the firm sought liability insurance for a retroactive March 20, 2018 to March 20, 2019 policy period. In its application, the firm responded ‘no’ to the question whether ‘you or any member or employee of your firm have knowledge of any incident, act, error, or omission that is or could be the basis of a claim under this proposed professional liability policy[.]’ The firm also provided a letter confirming that ‘we are not aware of any facts, circumstances, or losses from the period of March 20, 2019 to the present as respects our lawyers’ professional lawyers insurance.’ After the policy issued, the former client asserted a malpractice claim against the firm. The insurer sought to rescind the policy based on the firm’s material misrepresentations during the application process and on the underwriter’s testimony that, had the firm disclosed the former client’s assertions and the courts’ findings, the insurer would not have issued the policy.”