Risk Update

Litigation Funding — Renewed Spotlight on Law Firm Risks, Rules and Revelations

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Russian Use of Litigation Finance Needs Scrutiny, Treasury Says” —

  • “The Treasury Department needs to look into the use of the litigation finance in the US by foreign actors, Deputy Secretary Wally Adeyemo said.”
  • “His comments came after Sen. Bob Menendez (D-N.J.) asked whether he believed the lack of transparency in the litigation finance industry could create a gap in sanctions enforcement. Menendez referenced a Bloomberg Law investigation that found a firm established by Russian billionaires tied to Russian President Vladimir Putin has backed lawsuits in New York and London both before and after three of its founders were sanctioned following the 2022 invasion of Ukraine.”
  • “Menendez also referenced a Government Accountability Office report from 2022, which found sovereign wealth funds may be investing in litigation finance, and he raised the issue of patent litigation being financed by foreign companies.”
  • “The Senate Committee on Banking, Housing, and Urban Affairs held the hearing to get an update on efforts to counter illicit finance, terrorism, and sanctions evasion from the Treasury Department. Menendez was indicted last year by federal prosecutors in Manhattan for allegedly providing sensitive US government information and taking steps that secretly aided Egypt. He is a senior member of the banking committee.”
  • “Last year, House Speaker Mike Johnson (R-La.), Sen. John Kennedy (R-La.), and Sen. Joe Manchin (D-W.V.) introduced legislation that would regulate foreign entities’ ability to fund litigation. The proposed Protecting our Courts from Foreign Manipulation Act, which has not been heard in committee, would require disclosure of any foreign agents or investors financing a suit. It also would ban sovereign wealth funds and foreign governments from funding US litigation.”

The General Counsel of Unified Patents weighs in: “As Litigation Funders Skirt Sanctions, It’s Time for Disclosure” —

  • “Unsurprisingly, the US government doesn’t like being in the dark. But they appear to be when it comes to Russian sanctions and litigation financing. That’s in part due to the nature of the litigation financing industry, and lack of laws requiring transparency about who or what is funding the litigation.”
  • “It’s high time that litigation financing be held to similar mandatory disclosure standards that courts already require for insurers and publicly traded investors.”
  • “At times, they will themselves create shell companies, hide their identities, and sue; more often, they will fund others’ cases and do so without transparency. These deals can be for hundreds of millions, and are sometimes worth billions. Yet they claim these private, undisclosed deals worth billions offer them no control. Sure.”
  • “While information is undisclosed and thus scarce, investments in US litigation are a multibillion-dollar industry, comprising a growing share of some types of commercial litigation.”
  • “Class actions, bankruptcy, and patent cases seem to attract much of it, though insurance, workers’ comp, and even high-profile divorces have been financed.”
  • “Unlike buying a house or trading stocks or even private equity investing, litigation funders generally don’t disclose their terms, their involvement, or who their investors might be to anyone—the government, the courts, even the people they’re suing. Right now, the law doesn’t require it.”
  • “If no one is aware it’s happening, couldn’t foreign governments, money launderers, or other bad actors take advantage? What about judicial conflicts? Or companies funding suits against strategic competitors or key industries?”
  • “And if there were some fraud upon the court, how would it ever be identified? The Judicial Conference, the self-governing body of the US Federal Courts—which reports to the Supreme Court—began considering modest disclosure requirements as far back as 2014.”
  • “Funders responded vociferously to these modest calls for transparency, arguing such concerns were overblown, irrelevant, or some kind of sideshow.”
  • “They rejoined that funding cases increased access to justice, so the risk was worth it. And they argued that conflicts of interest would be rare—that there were other, better ways for others to interfere in industry, and there were no national security concerns. They wrote dozens of letters to the Judicial Conference arguing against disclosure.”
  • “So it should no surprise that just last month, investigative reporters revealed that sanctioned Russian oligarchs have been using litigation funding to evade US sanctions in US courts.”
  • “Notably, less than two years ago, some forward-thinking judges began requiring modest disclosures (as others had before them), and soon, it revealed Chinese investors were backing US patent suits against US companies in US courts. And recent government reports showed some of the biggest investors in litigation funds are as-yet-undisclosed sovereign nation wealth funds.”
  • “As it turns out, allowing billions of dollars a year to flow through completely undisclosed, much less unregulated, financial products invites investors seeking to avoid scrutiny.”
  • “The Judicial Conference, which represents all federal judges and makes recommendations on rules changes, has since 2017 been considering mandatory disclosure akin to what courts already require for insurers and publicly traded investors.”
  • “It would be nothing more than a long-overdue tweak to existing Rules 7.1 and 26 of the Federal Rules of Civil Procedure, something the judiciary itself can implement. But they have been characteristically slow to act, giving the issue due consideration over the past seven years.”

Litigation Funders Set to Prosper in Proposed NY Rule Change” —

  • “A New York City bar committee is pushing to change state rules to allow law firms to assign or pledge fees in exchange for outside financing.”
  • “Funding to law firms tied to the results of specific cases should be permitted, the New York City Bar Association’s Professional Responsibility Committee proposed last week in two amendments to Rule 5.4(a). The rule bans lawyers and law firms from sharing fees with nonlawyers.”
  • “If adopted, the amendments would resolve uncertainty over litigation funding deals in New York. Litigation finance has grown to a $13.5 billion industry in which investors fund lawsuits and take a portion of any successful awards.”
  • “The proposed amendments reiterate that lawyers must not allow their judgment be impaired by the relationship with a financial provider. It also would require law firms to notify clients of financial arrangements that could impact the representation of the client and field questions about it.”
  • “The rule has been modified in recent years in some states, which positioned looser restrictions as a way to increase access to legal services for lower and middle income populations. Litigation funders have also benefited from the relaxing of these rules.”
  • “In New York, litigation funding for law firms was stymied by a 2018 opinion issued by the City Bar Committee on Professional Ethics that concluded funding agreements with law firms would violate Rule 5.4.”
  • “The 2018 opinion caused a stir in the litigation funding community and prompted the NYC Bar president to form the Litigation Funding Working Group later the same year. The goal of the group, which consisted of 25 lawyers, academics and funders, was to study litigation finance and provide a report with recommendations regarding its practices.”
  • “Their 90-page report, which was released in March 2020, presented two amendments to Rule 5.4. A separate Professional Responsibility Committee rejected the proposals as too complicated and overly broad.”
  • “‘You get to the same point, but I think we get there in a more straightforward and simpler fashion,’ said Aegis Frumento, former chair of the Professional Responsibility Committee, of the recent amendments.”
  • “The proposed amendments will now go the State Bar Association of New York, which if they agree, will then submit them for approval to the four appellate divisions of the New York State Supreme Court for adoption to the rules of professional conduct.”

 

Risk Update

Client Intake & Insurance Risk — Representation Scope Matters, OCG Indemnity Provisions Prove Painful

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No We Didn’t Agree To Handle That Claim” —

  • “One area that can lead to claims against lawyers occurs when the lawyer accepts one part of a representation but declines to represent the client in another matter. Any declination should be communicated clearly to the client and confirmed in writing. If you don’t do that, the client may later bring a malpractice claim against you.”
  • “In Boukari v. Schwartzberg, LLC, 2024 NY Slip Op 01247 (March 7, 2024), the plaintiff hired the defendant firm to complete a Workers’ Compensation matter. The lawyers declined to represent the plaintiff in any personal injury action. Plaintiff sued alleging that the firm missed the statute of limitations on the personal injury claim. The Appellate Division held that summary judgment for the law firm should have been granted. The explanation:
    • ‘Plaintiff’s legal malpractice action should have been dismissed. Contrary to the motion court’s finding, the record conclusively established, as a matter of law, that defendants had clearly informed plaintiff during their initial meetings in May 2014, by way of unambiguous writings confirmed by plaintiff’s signature, that defendants were only assisting her in substituting counsel in a Workers’ Compensation matter and that they had declined to represent her in any personal injury action against the building owner or any third party arising from her slip and fall. Plaintiff opposed the motion only with an attorney affirmation.’
    • ‘She did not submit an affidavit setting forth her version of the initial conversations with defendants or any other interactions that would support her attorney’s contentions that she was under a reasonable impression that defendants had agreed to represent her on a personal injury claim or that the law firm did not clearly disclaim representation (see Zuckerman v New York, 49 NY2d 557 [1980] [an attorney affirmation is insufficient to put before the court facts of which she has no knowledge]'”
  • “Comment: this problem can come up in any number of matters. Please disclaim in writing any claim you refuse to handle.”

Why You Should Never Minimize the Significance of Client Driven Indemnity Provisions” —

  • “I continue to get the occasional call from a lawyer wanting to know my thoughts about a new business opportunity. It’s a call that often starts out with the lawyer sharing that so and so company wants the lawyer to be their exclusive local point person and the lawyer is hoping I’ll give the idea my risk manager’s stamp of approval. After talking through the issues, I always ask the one question most callers rarely seem to think about. Is there an indemnification provision in the contract? I have yet to hear any lawyer tell me no.”
  • “Truth be told, a number of the lawyers who call about various types of contracts they are considering signing seem surprised when I ask about the presence of any indemnification language. Apparently, they just gloss over certain sections of the contract. Trust me, that’s a misstep. Indemnification provisions are not something to be ignored because they raise very real and potentially significant insurance coverage concerns.”
  • “Have you ever stopped to consider how a malpractice insurer might view client driven indemnity provisions? The language often used significantly expands what the lawyer may ultimately be liable for. Absent said language, the lawyer would be liable for any attorney negligence. However, depending upon the specific language at issue, by agreeing to an indemnity provision the lawyer can become liable for all kinds of client losses that are not the result of any attorney negligence. “
  • “This is what creates the coverage problem. In short, by voluntarily agreeing to contractually expand your exposure, you can create a coverage gap because your malpractice insurance company isn’t going to be subject to the terms of this agreement. In addition, malpractice polices routinely contain language that will exclude coverage for obligations assumed by contract that go beyond the obligation to provide professional services. Often, however, signing an agreement that contains an indemnity provision does exactly that.”
  • “Unfortunately, this concern isn’t limited to contracts a lawyer is thinking about entering into. Suppose a client inserts an indemnification clause into the boiler plate language of their guidelines and sends that to you. Might your continued representation after receiving the guidelines constitute an acceptance of that clause? I certainly wouldn’t want to be the one who ends up having to find out the hard way.”
  • “Today, when more and more lawyers are being treated like general service providers as opposed to trusted advisors, what can you do to avoid this problem? At the outset, read client guidelines and contract proposals front to back. Don’t continue with the representation or sign anything without understanding what your true exposure will be. If you are not comfortable with that exposure, see if the client will remove the problematic language. In the alternative, you could see if inserting language along the lines of “but only to the extent covered by my malpractice insurance policy” at the end of any indemnity clause would be acceptable. Hopefully some clients (your good clients) will understand that the risk they are asking you to take is unfair and they will work to make the agreement acceptable. On the other hand, if any client responds by telling you everyone else signs this so if you want the work, you will too, then I guess you have a decision to make. At least now you know it’s going to boil down to how comfortable you are in self-insuring that risk.”
jobs

BRB Risk Jobs Board — Conflicts Analyst (Quarles)

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I’m always delighted to see repeat participants on the jobs board. This week, I’m pleased to highlight a new open role at Quarles: “Conflicts Analyst” —

  • We are seeking a Conflicts Analyst to support our Chicago, Indianapolis, Milwaukee, Naples, Tucson, Madison, Minneapolis, Phoenix, St. Louis, Tampa, or Washington D.C. office.
  • This position is also open to remote or hybrid schedules.

Responsibilities:

  • Perform corporate research to identify corporate affiliates, principals and nature of business in order to search and identify ethical and business issues in the firm’s conflicts database.
  • Create conflict reports that identify and summarize issues relating to new clients, new matters, lateral attorneys, marketing requests and special projects.
  • Work closely with Conflicts Counsel and take necessary steps to confirm conflicts of interest are resolved including closing dormant matters and working with relationship lawyers to confirm cures are in place.
  • Evaluate and escalate difficult or highly sensitive conflicts and matter opening issues to General Counsel’s Office, senior conflicts personnel and/or Loss Prevention Partners and work with them to address the issues.
  • Review and resolve various issues related to opening legal matters, including business conflicts, area of practice issues, billing and client credit issues, pro-bono related questions and internal Firm policies.
  • Assist Legal Recruiting by summarizing conflicts and business issues, providing clearance assistance and requesting screens related to the onboarding of lateral attorney hires.
  • Maintain current knowledge of trends and developments impacting the conflicts function.
  • Possess knowledge of the Model Rules of Professional Responsibility that apply to conflicts of interest.
  • Recommend new policies and procedures related to conflicts analysis and clearance, business intake and risk compliance.

Qualifications/Experience:

  • Bachelor’s degree or equivalent experience
  • Two years prior conflicts of interest experience in a law firm
  • Experience with a conflicts database preferred, especially Intapp
  • Basic Excel skills
  • Ability to work with diverse populations and resolve issues
  • Excellent sensitivity, confidentiality and judgment when it comes to difficult issues
  • Excellent organizational, interpersonal relations, written and oral communication skills
  • Strong customer service attitude
  • Work well under pressure, good problem solver
  • Ability to work independently required
  • Ability to coordinate many issues/projects at once
  • Accuracy and strong attention to detail required

See the complete job posting for more details on the job and to apply for this position.

About Quarles

Our team of business professionals — across functions such as finance, human resources, marketing and business development, information technology and office administration — plays a pivotal role in the ongoing success of the firm. Our leadership recognizes this and so do our attorneys. That’s why we’re as committed to your growth as you are to ours. At Quarles, you will be surrounded by colleagues who are focused on the success of the team, who want to see you succeed and who are as persistent and hard-working as you. You will be part of a culture where great people are working to achieve great things, together, and where the contributions of every individual — attorney and business professional — are equally valued.

For more detail, see their careers page.

 

And if you’re interested in seeing your firm’s listings here, please feel free to reach out

Risk Update

Relationship Conflicts Concerns — CEO Former Firm Wrap Up, Estate Planning/Non-profit Conflicts Ethics, and an Interesting Referee Removal

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JetBlue Winds Down Relationship With New CEO’s Former Law Firm” —

  • “The longstanding association between Holland & Knight and JetBlue Airways Corp. is tapering down as Joanna Geraghty, who is married to the law firm’s current head of litigation, takes over as the airline’s new chief executive officer.”
  • “JetBlue, which recently paid a $69 million termination fee to Spirit Airlines Inc. after a federal judge scuttled its $3.8 billion bid for the budget carrier, remains a client of Holland & Knight, but the latter is getting closer to being left at the gate.”
  • “A source at Holland & Knight verified that the work the firm has done for JetBlue has been ‘declining year-over-year’ for at least 10 years, so much so that it no longer merits a standard potential conflict of interest disclosure. A spokesman for the airline confirmed it remains a Holland & Knight client. Both parties claim they have crafted protocols to avoid conflicts.”
  • “Publicly traded companies in the US must detail certain ‘related party’ transactions, such as if a vendor or business partner is related to a company’s board member or a senior executive, according to securities rules. Companies and their boards also enjoy some latitude in what they consider ‘material’ information that must be disclosed to shareholders.”
  • “JetBlue first began disclosing what it paid Holland & Knight in fiscal 2018, the first year in which Geraghty was listed as one of its six highest-paid executives. JetBlue’s most recent proxy statement filed March 22 did not include what Holland & Knight received from it in legal fees during fiscal 2023.”
  • “From 2018 to 2022, Holland & Knight’s JetBlue work ranged from between .0025% to .18% of its annual revenue, billables that roughly add up to several million dollars. Holland & Knight’s gross revenue broke the $1 billion mark in 2020 and last year neared $2 billion, per reporting by The American Lawyer.”
  • “In its 2022 proxy, JetBlue stated that Geraghty—then its president and chief operating officer—is married to a Holland & Knight partner. Multiple lawyers at Holland & Knight, including Geraghty’s husband, litigation section leader Christopher Kelly, have performed ‘various legal services for many years,’ JetBlue said. The New York-based company said its relationship with Holland & Knight predated Geraghty coming aboard in 2005.”
  • “JetBlue said in its 2022 proxy that ‘Geraghty’s spouse did not have a material interest’ in Holland & Knight’s relationship with JetBlue as ‘he was no longer involved in providing or supervising services’ that the firm did for the airline.”
  • “Kelly also didn’t receive direct compensation from fees paid by JetBlue to Holland & Knight in recent years, according to disclosures by the airline.”
  • “Holland & Knight had a role on more than 20% of cases involving JetBlue in US federal courts since 2007, according to Bloomberg Law data. Kelly and others represented the company in disputes with passengers and labor-related affairs. Within the last decade, however, Holland & Knight’s work for JetBlue has tapered off as Geraghty’s duties expanded. Bloomberg Law records show that the firm’s handled only two federal court cases for JetBlue in the past five years.”

MA Ethics Opinion 2024-1: Nonprofit organization + Estate planning” —

  • “When a Client asks a Lawyer to draft an estate plan that includes a testamentary gift to a non-profit organization for which the Lawyer serves as an officer or board member, the Lawyer’s relationship with the non-profit creates a conflict of interest necessitating the Client’s informed consent, confirmed in writing, before the Lawyer may proceed. In obtaining the Client’s informed consent, the Lawyer should advise the Client of the enhanced risk that an undue influence claim based on the Lawyer’s relationship with the non-profit may be asserted.”
    ““An estate planning Lawyer is the President of a small non-profit social service agency with limited financial means. The non-profit is not a client of the Lawyer or of the Lawyer’s firm. One of the Lawyer’s clients asked the Lawyer to draft an estate planning document that includes a substantial testamentary gift to the non-profit.”
    “The Lawyer’s role as President of a non-profit organization creates a conflict of interest when working with a Client who wishes to make or alter testamentary gifts to the non-profit. As President, the Lawyer has a personal interest in the non-profit’s success, which is at least partially dependent on charitable gifts to the non-profit. Since the non-profit has limited means and the proposed gift is substantial, there is a significant risk that the Lawyer’s personal interest will influence the Lawyer’s advice regarding the Client’s estate plan.”
    “In this case, the Lawyer has an attorney-client relationship with the Client who intends to make a gift, but not with the non-profit. Accordingly, before going forward with drafting the estate planning document, the Lawyer should fully inform the Client of the potential conflict of interest and obtain the Client’s informed consent confirmed in writing as required by Rule 1.7(b)(4).”
    “Even though the Committee believes that the conflict is consentable, the Lawyer should proceed cautiously. The preparation of an instrument benefitting the non-profit by one of its officers or board members could create the appearance of undue influence, which is one of the grounds on which a will may be contested by a decedent’s heirs or the devisees under a prior will.”
    “Accordingly, in seeking the Client’s informed consent, the Lawyer should point out to the Client that the Client’s testamentary wishes would be less susceptible to a challenge if the Client’s will were prepared by an independent lawyer.”

NCAA removes game official at halftime because of background conflict” —

  • “The NCAA changed one of the officials at the half of the Chattanooga-N.C. State game Saturday because of a background conflict.”
  • “‘There was a switch of game officials at halftime of the Chattanooga-N.C. State first-round game because it was learned after the game had started that Umpire 2 Tommi Paris had a background conflict that, if known, would prevent her from working that assigned game,’ the NCAA said in a statement after an inquiry from The Associated Press.”
  • “An online profile for Paris says that she received a master’s degree from Chattanooga. The NCAA asks all officials who are being considered for the NCAA Tournament to disclose school affiliations to avoid potential conflicts. In this case, it wasn’t disclosed.”
Risk Update

Law Firm Risk Reading — Lateral In-house Counsel Conflicts, Arbitrator Conflicts Standards, Client Acceptance Concerns

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Supreme Court to Review Standard for Showing ‘Evident Partiality’ by Arbitrators”

  • “Conflicts of interest are of great interest to law firms, prosecutors and arbitrators. In two major international arbitrations, parties are seeking review by the U.S. Supreme Court of the standard that courts should apply when considering whether to vacate an arbitration award based on an alleged conflict of interest. The cases are important not only because of the large size of the awards at issue, but also because arbitration is the preferred method by which the world’s commercial disputes are being resolved.”
  • “U.S. courts are divided on how they should apply the “evident partiality” standard contained in the Federal Arbitration Act, which must be demonstrated in order to vacate an arbitration award based on an arbitrator’s alleged conflict of interest. Five circuit courts follow the U.S. Court of Appeals for the Second Circuit standard requiring an award to be vacated only if a court would have to conclude an arbitrator was partial. The Ninth Circuit requires only a reasonable impression of possible bias and the Eleventh Circuit articulates the Second Circuit standard, but applies the Ninth Circuit standard. The litigants petitioning for certiorari arise in different procedural postures, but both cases request clarification of the standard.”
  • “In Occidental Exploration and Production Company (OEPC) v. Andes Petroleum Ecuador Limited (Andes), US Supreme Ct No. 23-506, OEPC filed a similar petition for certiorari in connection with an arbitration in which Andes was awarded more than $550 million award. Like Grupo in the Panama Canal case, OEPC contends that the lower courts applied the wrong standard in reviewing OEPC’s claim of arbitrator conflicts of interest. In opposition, Andes argued that OEPC would have lost under any standard. Andes further notes that the Supreme Court has previously denied petitions for certiorari presenting the same general question at least fifteen times in the last 25 years.”
  • “The U.S. District Court for the Southern District of New York denied OEPC’s motion to vacate the arbitration award and the Second Circuit affirmed. The Second Circuit ruled that, “Unlike a judge, who can be disqualified in any proceeding in which his impartiality might reasonably be questioned, an arbitrator is disqualified only when a reasonable person, considering all the circumstances, would have to conclude that an arbitrator was partial to one side.” The circuit court also noted that it had ruled, in an earlier case, that it did not think that “the fact that two arbitrators served together in one arbitration at the same time that they served together in another is, without more, evidence that they were predisposed to favor one party over another in either arbitration.””
  • “In its petition for certiorari, OEPC argued that the Second Circuit applied too strict a standard in assessing the arbitrator’s alleged conflict of interest. It argued that the standard should not be whether a reasonable person “would have to conclude” the arbitrator was actually biased, but rather whether the arbitrator “might reasonably be thought to be biased.” In response, Andes argued that “whatever differences may exist in terminology are academic,” as OEPC would have lost under any standard.”

The State Bar seeks public comment on Proposed Formal Opinion Interim No. 21-0003 (Ethics of In-House Counsel).” —

  • “Comments should be submitted using the online Public Comment Form. The online form allows you to input your comments directly and can also be used to upload your comment letter and/or other attachments.”
  • “Proposed Formal Opinion Interim No. 21-0003 considers:
    • Is there a conflict of interest when an in-house lawyer moves from one company to another?
    • Does a stock option agreement present a lawyer with any conflicts of interest and, if so, how and when should such conflicts of interest be addressed with the employer?”
  • “The opinion digest states: It is common for in-house lawyers to move from one company to another, often within the same industry. And, although conflicts rules apply equally to in-house lawyers as to law firm lawyers, the conflicts analysis must take into account the unique characteristics of the in-house role, which is typically both an attorney-client and employer-employee relationship.”
  • “A former client conflict of interest under Rule of Professional Conduct 1.9 does not arise simply because an in-house lawyer moves between companies that are economic competitors. A conflict of interest will arise if the lawyer was personally involved in representing their former employer on a matter that is factually and legally identical or similar to a matter the lawyer is to handle for their new employer, and in which the companies are materially adverse.”
  • “Alternatively, a conflict of interest will arise if the lawyer was not personally involved in the representation, but they obtained confidential information during their prior employment concerning the same or substantially similar, adverse matter. The conflict may be imputed to the entire legal department of the new employer unless screening measures may be implemented under rule 1.10.”
  • See also the detailed analysis presented in the PDF: “PROPOSED FORMAL OPINION INTERIM NO. 21-0003

SRA can’t tell us whom to represent, says regulatory specialist”

  • “The Solicitors Regulation Authority should be wary of dictating to firms how they conduct litigation and which clients they choose to take on, a leading regulatory lawyer has said.”
  • “Iain Miller, partner with London firm Kingsley Napley, said there was a danger in the SRA referring to a solicitor’s duty as being to ‘uphold the public interest’ when this was such a broad and unqualified term.”
  • “Speaking at the Law Society’s risk and compliance conference today, Miller said the public interest served by lawyers is different to that of healthcare workers or other professionals.”
  • “‘We all support society but in different ways,’ he said. ‘Once this is understood it becomes much easier to understand what we can and cannot do for our clients. For example, it would be wrong to draft a non-disclosure agreement that inhibited the work of the courts or regulators. It would also be wrong to use our skills as lawyers to advance an unmeritorious claim in correspondence in order to achieve what no court would ever order.”
  • “‘However, these issues are very fact dependant,’ he said. ‘This is particularly because we operate in a common law adversarial system. We are entitled to advance claims on behalf of our clients which are arguable, but think they may not succeed.’”
  • “The SRA has come under pressure from lobby groups and academics to do more to address certain types of abusive litigation, particularly those dubbed strategic lawsuits against public participation (SLAPPs).”
  • “Paul Philip, SRA chief executive, has said that solicitors must act with integrity and not abuse the litigation process, but equally they should ‘act fearlessly in their client’s interest when bringing legitimate claims.’”
  • “Miller told the conference that all members of society were entitled to legal advice ‘in any circumstances’, no matter what societal reservations there may be about, for example, a client’s environmental impact.”
Risk Update

Disqualification Hearing Conflicts — Talc Testimony Gets Heated

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‘I Was Kind of Dumbfounded’: J&J Lawyers Testify in Talc Disqualification Hearing” —

  • “A senior in-house attorney for Johnson & Johnson told a pair of judges on Monday that an alliance between a former member of his legal team and talc plaintiffs’ attorney Andy Birchfield was the ‘most egregious breach of ethical obligations I have ever heard of, ever seen.'”
  • “At an evidentiary hearing, Erik Haas, Johnson & Johnson’s worldwide vice president of litigation, told Steve Brody, a partner at O’Melveny & Myers in Washington, D.C., that he was shocked when his former outside counsel, John Conlan, teamed up with Birchfield, of Montgomery, Alabama’s Beasley Allen, to propose settling the talc litigation for $19 billion.”
  • “‘We were utterly shocked and appalled that our former counsel was conferring with our adversary,’ Haas said, ‘by proposing an alternative transaction based upon the same matter and same issues he had represented us extensively for 21 months.'”
  • “But he and an outside lawyer for Johnson & Johnson, Jim Murdica, of Barnes & Thornburg in Los Angeles, had more recent revelations: they had no idea Conlan began working with Birchfield as early as April 2023, about six months before they originally learned about the alliance, until plaintiffs’ lawyers submitted a privilege log a few weeks ago in the multidistrict litigation describing confidential communications between them.”
  • “‘I was kind of dumbfounded—and I was in close contact with the mediators’” Murdica testified on Monday. ‘I was extremely concerned. In my career, I’ve never seen anything like that.'”
  • “Jeffrey Pollock, a partner at Fox Rothschild in Princeton, New Jersey, who represents Birchfield, objected to testimony about the communications in the privilege logs, calling it ‘rank speculation.'”
  • “The hearing, before Atlantic County Superior Court Judge John Porto and U.S. Magistrate Judge Rukhsanah Singh, both in New Jersey, comes after Johnson & Johnson filed motions to disqualify Birchfield and his firm from leadership of the talc litigation. Beasley Allen principal Leigh O’Dell is co-lead plaintiffs’ counsel in the talc MDL.”
  • “The disqualification motions allege Birchfield partnered with Conlan, who was a partner at Faegre Drinker Biddle & Reath until 2022, to push a talc settlement that was more than double the amount Johnson & Johnson offered as part of the second bankruptcy of its subsidiary, LTL Management.”
  • “Birchfield’s lawyer, Pollock, has called the allegations ‘smear tactics’ and an unprofessional ‘locker-room brawl.'”
  • “Monday’s hearing continued to be contentious, with objections back and forth. ‘Listen to my question for once,’ Pollock told Haas on cross-examination. ‘The process is not the Erik Haas show.'”
  • “Both Porto, the judge in the talc multicounty litigation in New Jersey state courts, and Singh, who is overseeing the talc multidistrict litigation in the U.S. District Court of New Jersey, found that more evidence was needed.”
  • “Haas, on direct examination, said he was ‘intimately familiar’ with Conlan’s work on the Johnson & Johnson talc litigation, calling him a ‘central figure in strategic decision making in connection with this team.'”
  • “‘We would have weekly calls where we were collectively litigating and adjudicating the talc litigation,’ he said. ‘From the very first conversation I had and throughout the entire time Mr. Conlan was representing Johnson & Johnson, we had repeated discussions—many, many discussions—over whether and to what extent the cases should be resolved in bankruptcy or completely outside bankruptcy.'”
  • “He said Conlan, who now runs Legacy Liability Solutions, approached him about a proposal to resolve the talc litigation, but he didn’t know at the time Birchfield was working with him. The idea was for Legacy to administer funds to settle talc claims, absorbing LTL and other entities with talc liabilities. Johnson & Johnson turned him down, citing its auditor’s concerns.”
  • “Conlan’s Oct. 18 letter was the first time he revealed working with Birchfield—that is, until the privilege logs came up a few weeks ago showing a longer relationship between the two of them.”
  • “‘We now know it’s even more egregious, because it wasn’t the first time,’ Haas said.”
  • “Pollock attempted to downplay the accusations that his client was pushing for a settlement with a dollar figure that would provide more legal fees for him. He brought up two experts for Johnson & Johnson in its bankruptcy that estimated the cost to resolve the talc litigation would be $11 billion to $21 billion. He also questioned whether Conlan had breached any ethics.”
  • “‘You accused him of being a side-switching lawyer,’ Pollock told Haas. ‘How can he be a side-switching lawyer if he’s not representing a client in the matter other than himself?’ Haas explained that Conlan is working with Johnson & Johnson’s adversary on the same matters ‘That is a side-switching lawyer,’ he said. Porto previously ordered that both Conlan and Birchfield must testify at the hearing. On Monday afternoon, he said he would schedule another day of the hearing at a later date.”
Risk Update

Risk Q&A — When Lateral Leavers’ Departing Clients Create Conflicts Concerns

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Mark Hinderks, Stinson LLP’s legal ethics and professional responsibility practice writes: “Is It a Conflict of Interest to Be Adverse to a Former Firm Client Who Has Left With a Departing Lawyer?”

  • Question: I am a lawyer with a midsized firm. With the mobility of lawyers moving laterally in recent years, it is not uncommon for a lawyer to join us as a new partner with their own set of clients whose matters they bring with them to the firm. Regrettably, we also sometimes lose partners to other firms, who then depart with some or all of the clients with whom they have built relationships. This type of movement seems to be a part of the modern practice of law but creates sometimes confusing conflict of interest issues.”
  • “Recently, one of our partners left the firm to join another firm. We were able to amicably and jointly communicate to clients for which she was responsible about her departure, some of which chose to stay with our firm and some of which determined to transfer their files and matters to the exiting partner’s new firm. X Company, a client that the partner had earlier brought to the firm chose to move all their matters with her to her new firm. She took all of the client files (paper and electronic), and also took with her the only associate who had worked on any of X Company’s matters. “
  • “Now, a couple of months later, a dispute has erupted between one of my clients and X Company, and they want me to represent them in a suit against X Company. I am concerned that the company was also a client of our firm only about 60 days ago. Does this create a conflict issue for us either under the former client Rule 1.9, or the imputation of conflicts Rule 1.10?”
  • Answer: These facts present an interesting twist on the Model Rules’ protection of the interests of ‘former clients.’ Rule 1.9 duties to former clients seek to prevent a lawyer from using confidential information gained in a previous representation from being used to the former client’s disadvantage when representing a different client, and to prevent a changing of sides. The rule accomplishes this by limiting adversity in the ‘same or substantially related’ matters. See Rule 1.9, Comments 1-2.”
  • “In your situation, however, these interests are not implicated because your firm no longer has in its possession any confidential information relating to the matters of the former client X Company; there is no lawyer remaining at the firm who was exposed to X Company’s confidential information, and there is no lawyer remaining at the firm who would be ‘switching sides’ if you or another lawyer at the firm were to now be adverse to X Company.”
  • “This situation is expressly accounted for in Rule 1.10(b), which provides that when a lawyer has terminated their association with a firm, the firm is not thereafter prohibited from being adverse to a client represented by that formerly associated lawyer, and not currently represented by the firm, unless it is the same matter or substantially related to that in which the formerly associated lawyer represented the client while at the firm; or any lawyer remaining in the firm has confidential information protected by Rules 1.6 and 1.9(c) that is material to the matter, in any form, paper, electronic or in their head.”
  • “Here, all the records are gone, and the only lawyers who had knowledge of the former client’s confidential information in their heads are also gone. Therefore, provided the new matter is not the same or substantially related to a matter for X Company while the partner who left represented them at your firm, neither you nor your firm have a conflict of interest that precludes current adversity. Good luck with the new matter.”

 

Risk Update

Contentious Conflicts — Law Professors Point Fresh Fingers at Continuing Crypto Conflicts Concern, Miami Mayor Reverses “My Client” Under Oath Contention

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Law firm conflicts ‘permeated FTX’s bankruptcy’, professors allege” —

  • “Two law professors have claimed that Sullivan & Cromwell put its own interests before that of FTX’s stakeholders, reviving criticism over the law firm’s role in the bankrupt cryptocurrency exchange’s rise, collapse and unwinding.”
  • “The firm’s ‘apparent conflicts of interest permeated FTX’s bankruptcy filing and every aspect of the case,’ Jonathan Lipson of Temple University and David Skeel of the University of Pennsylvania wrote in a paper published online earlier this month.”
  • “The two academics focused on the 20 M&A and regulatory assignments that S&C worked on for FTX, for which it earned just under $10mn in the months leading up to the exchange’s November 2022 bankruptcy filing. “
  • “Through that work, ‘S&C knew, or was in a position to know, that FTX was co-mingling customer assets,’ the professors contended, referring to FTX founder Sam Bankman-Fried’s misuse of account holder funds. “
  • “John Ray, the chief executive appointed to oversee FTX, said in a statement on behalf of the company and its advisers: ‘The paper is simply not research but uninformed and unsupported allegations’ that ‘grossly mischaracterises the facts.'”
  • “The office of the US Trustee, a part of the Department of Justice that represents the public interest in bankruptcy cases, initially objected to S&C’s retention, arguing that the law firm had failed to properly disclose the full extent of its connections to FTX. Several US senators also voiced concern.
  • “But the trustee eventually lifted its objection after the law firm provided more details of its previous work, and the court approved S&C’s hiring. According to court filings, S&C has reaped $184mn in fees, including billings and reimbursements, between November 2022 and January 2024.”
  • “The professors further contended that ‘S&C may have violated ethical duties of confidentiality, candour, and loyalty by reporting allegations of these crimes to prosecutors . . . by duping Bankman-Fried into giving control of FTX to Ray.'”
  • “‘For well over a year, S&C and Ray had free rein to marshal and manage conflicting claims about the public and private interests at stake as they saw fit,’” the professors wrote. ‘These conflicts appear to have reduced recoveries, even as they have enriched S&C.'”
  • “People close to S&C and FTX noted that all the company’s actions had to be approved by the bankruptcy court with the consent of the US Trustee and creditors, and pointed out that Bankman-Fried had several lawyers personally representing him in November 2022. Moreover, they said account holders could potentially receive the full amount of their claims by the time the bankruptcy was finished.”
  • “Lipson and Skeel said they ran into each other last autumn during oral arguments before an appeals court over the examiner’s appointment. They decided afterwards to collaborate on the article about the duties of lawyers, which is to be published in the Stanford Law Review.”
  • “They said there was a ‘firewall’ in place so Bankman-Fried’s parents, who are Stanford law professors, had no knowledge of the article prior to submission. Skeel said he had no interaction with the Bankman-Frieds and handled all interactions with the Stanford publication. The pair did not call S&C or FTX prior to publication but said they welcomed any feedback. “

In public, Suarez says he’s not Ken Griffin’s attorney. Under oath, he said differently” —

  • “Miami Mayor Francis Suarez has long said that he has no conflict of interest when it comes to his public support for billionaire hedge funder Ken Griffin, a major client of the law firm where Suarez is employed.”
  • “But in an interview conducted under oath in December, Suarez contradicted previous public statements and said he is one of Griffin’s attorneys — a potential violation of ethics laws prohibiting elected officials from working for anyone who has business before their government.”
  • “In his sworn statement to a state ethics investigator, Suarez said Griffin was not just a client of the law firm where he works, but his own personal client. The mayor made that point as part of a successful effort to get the Florida Commission on Ethics to dismiss an unrelated complaint against him.”
  • “But in calling Griffin “my client,” Suarez also raised a possible conflict of interest under Florida law, given that Griffin is lobbying the city for various permissions as he moves his personal residence and company headquarters to South Florida.”
  • “While Florida laws governing outside employment would not prevent the mayor from working for a firm whose clients have official business with the city of Miami, the law prohibits Suarez from doing legal work for those clients, according to a formal ethics opinion issued to Suarez in 2021.”
  • “And Suarez would be in violation of state ethics laws, the letter warned, if ‘any client for whom he is performing legal services is conducting business with [not just the City Commission, but] any subordinate city board or staff.’ The restriction would apply, the ethics officials wrote, regardless of whether Suarez recused himself from any related city matters.”
  • “The mayor’s office is now walking back Suarez’s sworn statement. In response to the Herald’s latest questions, the mayor’s director of communications, Stephanie Severino, said Griffin ‘is not and has never been a personal client of Mayor Suarez.’ Nor, she said, is Suarez on Griffin’s account at the law firm where Suarez works.”
  • “When the Herald asked Florida Commission on Ethics spokesperson Lynn Blais about Suarez’s comment and whether it presented a conflict of interest for him if Griffin were in fact his direct client, she wrote by email: ‘We cannot give an opinion about a person’s conduct… a public officer or public employee who is in doubt about the applicability of the standards conduct to himself or herself may seek an advisory opinion from the Commission'”
intapp

Webinar Recording — Innovating Risk Management with Applied AI (Sponsor Spotlight)

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SPONSOR SPOTLIGHT:

Intapp cloud-based risk and compliance products have included AI capabilities for many years. If you were unable to join the webinar on March 5, you can discover how Intapp compliance solutions can help you leverage recent and upcoming AI enhancements in the cloud by watching the recording here.

This session covered:

  • Key enhancements added to Intapp risk and compliance products in the past year
  • A review of current and upcoming AI capabilities
  • Recommendations and available resources for your journey to the cloud
jobs

BRB Risk Jobs Board — Conflicts Attorney (Vinson & Elkins)

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In this BRB jobs update, I’m pleased to highlight an open role at Vinson & Elkins: “Conflicts Attorney” with unique listings online for their open locations: Dallas, Houston, and Austin

  • This position will be joining the Firm’s growing Conflicts Department, and primarily responsible for analyzing, resolving, and documenting conflicts of interest issues, related compliance issues, and conducting new client background research.

Primary Duties and Responsibilities:

  •  Create and analyze conflicts reports and identify and resolve potential ethical or business conflicts issues relating to new business, lateral attorneys, new staff, and marketing initiatives
  • Draft conflicts waivers and ethical walls as needed to resolve potential conflicts of interest
  • Advise attorneys regarding ethical obligations relating to conflicts of interest and other issues covered by the Rules of Professional Conduct
  • Assist attorneys and secretaries in understanding the firm’s conflicts and business intake policies and procedures.
  • Facilitate intake processes on behalf of attorneys as necessary
  • Conduct background research on new clients
  • Perform legal research and prepare memoranda relating to professional responsibility and risk management
  • Provide on-call coverage for after-hours, weekend, and holiday emergency conflicts checks as scheduled
  • Perform related duties as assigned

Position reports directly to Sr. Director of New Business Intake & Conflicts – position has no subordinate staff

Knowledge/Experience:

  • Three or more years of relevant professional experience working in a law firm conflicts environment – big firm experience preferred.
  • Position requires a working understanding of large law firm processes and procedures as well as a general familiarity with various practice areas handled by the firm.
  • A working understanding of the Rules of Professional Conduct and ethics law and opinions relating to conflicts of interest is critical.


Skills:

  • Attention to detail, and ability to work with autonomy while making sound judgments
  • Effective time management and the ability to independently prioritize and manage multiple job assignments simultaneously
  • Excellent communication and interpersonal skills; Strong customer service skills and ability to interact effectively with a broad range of people in a professional manner
  • Experience with legal writing and research
  • Collaborative mindset and ability to work as part of a larger team

 

See the complete job posting [separate entries for Dallas, Houston, and Austin] for more details on the job requirements and to apply for this position.

Learn more about working at the firm on their careers page:

  • Vinson & Elkins’ business professionals provide high quality client service and support to the various practice groups and are the building block to the success of the firm. We promote an environment where we value and respect each team member’s contribution.
  • Opportunities for training and development allow our business professionals to continue to enhance their skills so that they can continue to grow in their current position or seek other positions within the firm.
  • Our outstanding work environment, competitive salaries and comprehensive benefit package, has resulted in many long-tenured employees.


And if you’re interested in seeing your firm’s listings here, please feel free to
reach out