Bressler Risk Blog

“Plaintiff in DWP Overbilling Suit Loses Follow-Up Battle” —

• “The Ninth U.S. Circuit Court of Appeals has affirmed a summary judgment in favor of the City of Los Angeles in a suit for damages brought by a man alleging that the city’s cover-up of the fact that then-New York lawyer Paul O. Paradis, representing him as named plaintiff in a class action over the Department of Water & Power’s massive overbilling of customers in 2013, was also working at the time for the city.”
• “Affirmance came in a memorandum opinion by a three-judge panel, filed Tuesday, saying that any cover-up did not preclude an action against Paradis because once plaintiff Antwon Jones learned of the perfidy, there was still time to sue before the relevant statute of limitations expired.”
• “Paradis—now disbarred and awaiting sentencing on a federal bribery count in connection with the DWP debacle—in 2015 represented the city, along with Beverly Hills practitioner Paul Kiesel, in pressing claims against the consulting firm of PricewaterhouseCoopers, maintaining that it was responsible for the faulty billing system that resulted in exorbitant amounts being exacted from rate-payers. It was liable, the city contended, for any refunds that the city might be compelled to make.”
• “Jones sued the city and others on Dec. 21, 2020, claiming that because the city had covered-up Paradis’s conflict of interest, an action by him against Paradis became time-barred.”
• “‘[B]ecause the four-year limitation period did not expire before the one-year limitation period had run, Jones had until June 2020 to sue Paradis. Because Jones decided not to sue Paradis and instead waited until December 2020 to file this action against the City, the City was not responsible for Jones losing his ability to sue Paradis within the limitation period.’ The case is Jones v. City of Los Angeles, 22-55612.”

Bill Freivogel notes:

• Hamed v. Diaz, No. 514433/2019 (N.Y. Sup. Ct. Kings County Sept. 6, 2023).
• “In this medical malpractice case, involving a State of N.Y. facility, the Attorney General’s Office (‘OAG’is defending a doctor. In another case, involving the same events, Plaintiff is suing the State of New York. OAG is defending that case, as well. Plaintiff moved to disqualify OAG in this case, claiming both representations are in conflict.”
• “In this opinion the court denied the motion, holding that the doctor’s and State’s interests are aligned. A complication is that the doctor is suing the State for wrongful termination. The OAG is not in that case, however. Plus, the grounds for termination did not involve the alleged malpractice in this case.”

“Kaneland school board votes against approving waiver with law firm involved in Crown development project” —

• “The Kaneland [Illinois] School District board voted unanimously against approving a waiver of conflict of interest with the law firm Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. regarding Crown Community Development’s request for a TIF district for a proposed development at the Interstate 88 and Route 47 interchange.”
• “It is believed that the village of Sugar Grove will be utilizing the law firm for the development of a new tax increment financing district (TIF) for The Grove, a 760-acre master-planned community at the I-88 and Route 47 interchange. Since such representation presents a conflict of interest between Ottosen DiNolfo Hasenbalg & Castaldo, Ltd., the village of Sugar Grove and the Kaneland School District, all board members voted against the waiver of conflict of interest.”
• “‘My biggest concern is it’s a major conflict of interest,’ board member Aaron McCauley said. ‘I’d rather have somebody that’s going to focus on Kaneland, on our school district and they’re going to work with us. If we have to spend an extra couple of bucks, that’s fine. I love my wife [who is a lawyer], I’m taking her advice and going with that.'”

“PwC to curtail consulting work for US audit clients to reduce conflict risk” —

• “PwC is planning to give up tens of millions of dollars of consulting work for its US audit clients to reduce the risk of conflicts of interest, challenging its rival Big Four firms to follow suit.”
• “The accounting firm has begun to tell clients it will stop offering them some advisory services, even though they are permitted under US rules, as part of a wider revamp of its audit work.”
• “The move comes amid a worldwide debate over how to ensure accounting firms remain independent of the companies they audit, after scandals such as the collapse of Carillion in the UK. It follows an abortive attempt by PwC’s Big Four rival EY to spin off its consulting arm. The UK accounting regulator has already pushed the biggest accounting firms to make their audit operations in the country more independent of their consulting arms.”
• “PwC’s US leaders have agreed a package of reforms that also include the introduction of clawback provisions in their executive pay and the promise of new disclosures about how the firm manages conflicts of interest.”
• “The moves are designed to head off concern among clients, whose directors and shareholders are increasingly scrutinizing potential conflicts, and to improve the reputation of a profession that has found it harder to attract young people.”
• “The US drastically curtailed the consulting work accounting firms can do for audit clients in the Sarbanes-Oxley Act, passed in 2002 after the Enron scandal. However, the rules still allow for more non-audit services than allowed in other parts of the world, particularly Europe.”
• “Non-audit work accounts for a smaller proportion of the fees PwC gets from its US audit clients than it does at Deloitte and EY, according to public disclosures collated by Ideagen Audit Analytics.”
• “The Big Four sold $1.5bn of tax and miscellaneous consulting services to their US-listed audit clients last year, on top of $13.5bn of audit and audit-related fees, the figures show. The proportion has been trending down for most of the past two decades.”
• “The move by PwC US is limited to miscellaneous consulting and would not affect tax work, it said. It could affect its consulting revenues outside the country, if its local member firms work for overseas subsidiaries of US audit clients. The work would be phased out by 2025, PwC said.”
• “Details were due to be announced in May but the launch was pushed back while the firm dealt with a scandal in Australia in which partners were revealed to have misused confidential information about the government’s tax plans, according to people familiar with the situation.”
• “PwC US will also next year introduce new audit procedures to improve the detection of fraud and to broaden the range of factors staff must consider when ruling on whether a client is at risk of bankruptcy.”
• “Other measures include expanding the audit report that is published with its US clients’ annual report, which will from 2025 be modeled on the UK, where additional disclosures are required about contentious issues an audit has raised.”

“Ethical Considerations for In-House Lawyers” —

• “Although the Rules of Professional Conduct have many provisions targeted to lawyers who are in private practice, in-house lawyers, who are dedicated solely to representing their corporate client’s—and employer’s—interests, are still subject to those rules.”
• “Notably, the nature of the in-house counsel role can pose some unique ethical considerations for attorneys whose clients also serve as their employers.”
  “Among other things, in-house counsel may wear different hats in the course of their work, acting as both legal adviser and business adviser at times, which can lead to complicated ethics questions.”
• “There may be circumstances, however, in which an in-house lawyer is providing legal support to individual employees of the company. For example, Rule 1.13 allows lawyers to represent an organization and ‘any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7.'”
• “This may come up in a situation in which an in-house lawyer provides guidance to an employee who is about to be deposed in a case involving the organization. The in-house lawyer is permitted to provide advice to the employee, but the lawyer should be wary of any situations that could create a conflict, such as when the individual employee’s interests and the corporate client’s interests are adverse.”
• “In accordance with Rule 1.13(f), in-house counsel will often advise the employee that they represent the company, not the employee as an individual, and that the lawyer is permitted to tell the company anything the employee divulges. Sometimes, for this reason, companies will elect to use outside counsel to conduct sensitive internal investigations, which, among other things, can help avoid any misunderstandings about an in-house lawyer’s role (and any potential awkwardness around the Upjohn warning that an employee’s conversations with in-house counsel are not private from their employer).”
• “As noted above, there may be circumstances in which an in-house lawyer can represent an individual employee in an event like a deposition. However, if the employee is adverse to the company, the conflicts-of-interest rules advise that in-house counsel cannot represent both parties.”

Claire Brown, Partner, Commercial Litigation at JMW Solicitors explains: “How do we regulate conflicts of interests arising out of directorships in competing businesses?” —

• “In law, there is no limit upon the number of companies that any one individual may be a director of. However, where an individual has multiple directorships, particularly where one of those company directorships competes with another, there are several considerations to be mindful of. The consequences for a director who disregards these considerations can be severe.”
• “A company’s Articles of Association will often dictate how directors’ conflicts of interests should be managed. Where the Articles of Association are followed in a situation of conflict, no infringement will be deemed to arise under the Companies Act 2006.”
• “Under the Companies Act 2006, it is possible for the directors to authorise a conflict, in the case of a private company, where nothing within the company’s constitution invalidates such authorisation and, in the case of a public company, where its constitution provides for such authorisation and any prescribed process for obtaining such authorisation is followed. In either case, the authorisation will only be effective if any constitutional voting or quorum requirements are met without counting the director in question (or any other interested director).”
• “In resolving whether or not to approve a conflict of interest, whether in relation to a director’s involvement in a competing business or otherwise, the directors must act in accordance with their general duties and, in particular, their duty to promote the success of the company. Where an industry specialist is brought on board to assist with the growth of a company, for example, the existing board may reasonably determine that any potential risk associated with the conflict is outweighed by the expertise that the incoming director can bring (particularly if conditions are attached to such approval). However, more generally, it will likely be difficult to lawfully sanction such competing interests.”
• “In the inevitable event that the director’s competing directorship gives rise to a breach of the statutory duties above, or any contractual obligations owed to the company, and the breach causes harm to the company in question, the company will be able to bring a claim against the director in respect of such breach.”
• “Where the competing director controls the board of directors in the original company and does not support action being taken against them by the company, it is possible for a shareholder to seek to bring a claim against the director ‘derivatively’ on the company’s behalf.”

Getting close to closing the window on this one. But I wanted to make sure anyone who wants to participate (or is on the fence and wants to connect directly on questions or an extension) has the opportunity. So the window remains open for another ~week, until Wednesday, September 27.

My survey summary report reveals that we now have 110+ participants, sharing data on 350+ positions! Interestingly, we’ve well exceeded 2022 levels in terms of individual contributors (last year we had 80+), but have not quite surpassed data point the mark set last year. My hope is we’ll cross that threshold shortly, we’re very close.

So if you’re an individual contribution looking to understand how your comp compares to your peers, or you’re a risk manager looking to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

And, in case you missed my earlier update, we’re also capturing data on “risk director” level positions as well this year.

SURVEY DETAILS:

• Participation open to law firm risk professionals only
• All responses will be treated confidentially
• Manager/Director participants sharing data on their/their team’s roles and compensation will receive a report summarizing key findings and analysis
  • (The report may be shared internally within your firm, but not redistributed externally. So if you want the results, your best path is to participate!)
• Individual contributor participants sharing personal compensation data will be receive a personal benchmark compensation summary relevant to their specific role and firm demographics.

The survey will be open for at least another week, but the end is nigh, so access it here: 2023 Risk Staffing Compensation Survey.

Feel free to share the link with law firm peers and colleagues — directly via email, via social media, or however you like.

And if anyone has questions, please do reach out to me directly. In particular, if having an “anonymous” path to participation would get you over the line, let’s talk.(Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

Thanks for reading. More risk news and updates tomorrow. Thanks!

“Keith-Agaran to retire from Senate as law firm pursues fire lawsuits” —

• “Central Maui’s longtime state Sen. Gil Keith-Agaran announced he will retire Oct. 31, saying he didn’t want questions over conflicts of interest to be a “distraction” as his law firm prepares to represent clients in lawsuits over the Lahaina fire.”
• “Keith-Agaran’s position as a lawmaker and an attorney could have put him in a questionable spot if his law firm had represented residents or businesses suing the state over the fires. Keith-Agaran’s firm, Takitani, Agaran, Jorgensen and Wildman, is among three firms that filed a lawsuit on Aug. 17 alleging that the Lahaina fire started when Hawaiian Electric’s power lines came in contact with brush. The three firms hosted a presentation and sign-up on Sunday for residents and business owners impacted by the fire.”
• “Keith-Agaran, who faced questions from local media about the potential conflict of interest before announcing his retirement Wednesday, said he spoke to the staff of the state Ethics Commission ‘to get a feel on whether or not there was going to be issues.’ He said based on conversations with the commission staff, he felt he would have had to choose between his family and community and protecting the state.”
• “‘Right now it’s theoretical. But I think they were sort of suggesting that even the appearance of a conflict is enough to raise a violation or create a violation. To me that’s a distraction from the real pain and the real issues that people are going through,’ Keith-Agaran said Wednesday afternoon.”
• “When asked if he stepped down to avoid a potential conflict of interest, Keith-Agaran said, ‘Yeah … Given what we’re all going through right now, that’s just not something that’s worthwhile in the larger scheme of things for my family and for my law partners.'”
• “Colin Moore, director of the University of Hawai’i Public Policy Center, said he wasn’t “terribly surprised” by Keith-Agaran’s decision. ‘I think it’s a pretty clear calculation here where you’re a plaintiffs attorney. This is potentially the case of a lifetime,’ Moore said Wednesday afternoon. ‘There’s just going to be millions and millions of dollars at stake. I’m sure that he doesn’t feel that he can represent his clients and be in the Legislature without questions of the ethical implications of that and just being dogged by reporters. I can’t say I’m terribly surprised.'”

“Otter Says No Conflict For Atty In Phone Case Patent Dispute” —

• “Otter Products says a rival’s effort to disqualify Merchant & Gould as its counsel in a patent dispute doesn’t hold up, arguing in Colorado federal court that there’s no real conflict because the law firm represented a different company from the patent holder and plaintiff when it helped write an application for the same patents in the suit.”
• “…Otter Product LLC said its attorney, James W. Beard of Merchant & Gould PC, had represented Otter in patent suits for more than a decade before the lawsuit filed in June by Jefferson Street Holdings LLC, which does business as Cradl Ltd.”
• “Cradl alleged in a motion filed in July to disqualify Merchant & Gould from representing Otter in the case that the law firm worked on the application for the patents for Elizabeth Inc., predecessor in interest to Cradl, with all the patents sharing the same specification that Merchant & Gould attorneys drafted. Cradl said both Elizabeth Inc. and Cradl are owned by Dining.”
• “But the distinction between the companies is key, Otter said in its brief opposing the motion. ‘Fundamentally, Jefferson Street is not and was not a client of Merchant, and therefore there is no protectible ‘attorney-client relationship’ between plaintiff and merchant,’ Otter said in the brief.”
• “Otter argued that the assignment of a patent doesn’t also transfer an attorney-client relationship related to that patent. Otter also argued that the patents had been transferred through a series of entities before ending up with Jefferson Street Holdings, with two of them not being tied to Elizabeth Inc. and not appearing to sell phone cases. Otter also argued that Elizabeth Inc. still exists as its own entity and isn’t the parent company of Jefferson Street Holdings.”
• “Beyond that, Otter said the engagement letter that Elizabeth Inc. signed stated that ‘representation of the company in this matter will not give rise to any conflict of interest in the event other clients of the firm are adverse to any of the company’s affiliates.'”
• “And just because attorneys who worked on prosecuting the patents for Elizabeth Inc. work at the same firm as Beard doesn’t automatically mean there’s a conflict, Otter said, arguing that ‘the record informs no substantial risk that confidential information obtained by’ Merchant attorneys while prosecuting the patents for Elizabeth Inc. would be useful in the Cradl case.”

“3M Lawsuit Investors Ordered to Be Unmasked Amid $6 Billion Deal” —

• “A federal judge wants to know how much of a $6 billion settlement for military veterans injured by faulty 3M Co. earplugs is set to go to outside investors backing the lawsuits.”
• “Rodgers expressed concern about outside funders’ role in the deal. ‘For at least the past decade, settlements of this size and nature have often attracted the attention of third-party litigation funding entities intending to prey on litigants,” she wrote. Rodgers said she wants to ensure that the claimants are not being “exploited by predatory lending practices, such as interest rates well above market rates, which can interfere with their ability to objectively evaluate the fairness of their settlement options.'”
• “The settlement will resolve roughly 260,000 lawsuits alleging defective 3M combat earplugs caused hearing damage to troops. The company agreed to contribute $5 billion in cash and $1 billion in common stock through 2029, under the terms of the deal.”
• “The plaintiffs lawyers are required to disclose all funding agreements made with any claimant before or after the settlement, within 30 days, according to the order. The lawyers and the claimants are also barred from entering new outside funding deals without court approval.”
• “The funding declarations, which Rodgers said will be filed under seal, will include lender names, loan amounts, and interest rates, among other information. Lawyers will be required to produce financing agreements and be prepared to discuss them, Rodgers said.”
• “Disclosure is a contentious topic in the $13.5 billion litigation finance industry, where investment firms pool money into litigation in exchange for a portion of the award. A federal judge in Ohio made a similar move in 2018 in massive opioid litigation, requiring in camera disclosure of litigation finance agreements.”
• “Funders in mass torts cases typically loan money to law firms against their entire docket of cases. The 3M order does not specify whether such “portfolio deals” are required to be disclosed.”

“3M judge issues extraordinary order to shut down ‘predatory’ litigation funding” —

• “She appears to be the first MDL judge to place significant logistical obstacles in the way of post-settlement agreements between plaintiffs and lenders offering them advances on their settlement money, according to several litigation funding experts I consulted. Like many other federal courts, Rodgers also called for the disclosure of pre-settlement litigation funding deals, citing her authority under the Federal Rules of Civil Procedure.”
• “‘It’s a significant leap,’ said Jack Kelly, managing director of the American Legal Finance Association, a trade group for funding companies that offer non-recourse advances to plaintiffs. Charles Agee of Westfleet Advisors, which issues an annual report on the litigation finance market, said Rodgers’ order is ‘unique,’ adding, ‘I worry about the ambiguity surrounding the standards by which the court would approve any such new transactions or, worse, potentially invalidate or void any historical agreements.'”
• “Rodgers, who did not say what prompted her order, certainly has reason for concern about lenders who contend that double-digit interest rates are justified by the risk that a proposed settlement will take years to win approval or won’t be approved at all. (Plaintiffs who take advances against their anticipated settlement payouts — often because they need quick cash to pay bills or medical expenses — don’t have to pay anything back if they don’t recover any money.)”
• “Rodgers cited a December 2022 study from the U.S. Government Accountability Office, which noted that post-settlement funding deals can create conflicts between plaintiffs and their lawyers and can gum up settlement approval when plaintiffs seek extra money to pay back litigation funders.”
• “But Rodgers’ order, however well-intended, raises two important and related questions: Will the restrictions actually deter funders? And does the judge have the power to block plaintiffs from entering into private contracts with litigation funders?”
• “Rodgers does have power over plaintiffs lawyers in the MDL. And barring them from facilitating funding deals, which typically include a letter in which plaintiffs’ lawyers promise to pay funders from the clients’ proceeds, could chill agreements.”
• “But Peter Buckley of Fox Rothschild, who represents a litigation funder from the NFL case, said funders can structure agreements to work around that part of Rodgers’ order. In fact, Buckley said, Rodgers’ order could turn out to be a boon for good-faith funders, as long as the judge gives fair consideration to proposed deals. His reasoning: Advance court approval of funders’ repayment process will reduce the risk of plaintiffs trying to evade contractual obligations after they receive settlement money.”

For that 2022 report, see: United States Government Accountability Office: “THIRD-PARTY LITIGATION FINANCING: Market Characteristics, Data, and Trends.“

“A Lawyer Prenup Passes Ethical Muster” —

• “The Maryland Appellate Court has upheld the post-departure provisions of an employment agreement between a law firm and an attorney:
  • “This case principally involves a dispute between a law firm and an attorney who was formerly employed by the firm. At the outset of her employment, the attorney and the firm entered into an agreement about how they would divide a contingent fee if she left the firm, was engaged by a client of the firm, and earned the fee after leaving the firm.”
  • “The attorney contends that the agreement violates the Maryland Attorneys’ Rules of Professional Conduct and, thus, is unenforceable. On that premise, she withheld over $700,000.00 in fees that were due to the firm under the agreement. For the reasons stated below, we shall hold that the agreement is not unenforceable on its face or as applied in the circumstances of this particular case. Consequently, we shall largely affirm the judgment of the Circuit Court for Prince George’s County, which upheld the agreement and ordered the attorney to pay the fees that she had withheld in violation of it. We shall, however, vacate the judgment insofar as the circuit court failed to award pre-judgment interest to the firm. We shall remand the case with instructions to amend the judgment to include the undisputed amount of $81,212.10 in pre-judgment interest.”
  • “The Prenuptial Agreement is not an employment agreement; it is a departure agreement. It governs the division of fees between Ashcraft and an attorney if the attorney leaves the firm, is retained by any of the firm’s former clients, and settles the clients’ cases after leaving the firm.”
  • “In the absence of an agreement like the Prenuptial Agreement, the parties’ share of a contingent fee would be governed by principles of quantum meruit, under which the firm would have to show the extent to which it contributed to the client’s success.”
  • “The Prenuptial Agreement uses a sliding-scale formula to apportion the division of fees. The formula considers two factors: (1) the amount of time between when the client retained the firm and when the attorney departed, and (2) the amount of time between when the attorney departed and when a fee was generated.”
  • “Ms. Bennett signed the Prenuptial Agreement, but about six months later she formed the opinion that the agreement was unethical and that it violated the Maryland Attorneys’ Rules of Professional Conduct. She expressed her opinion to Ashcraft’s managing partner.”
  • “We conclude that the Prenuptial Agreement is not unenforceable on its face—i.e., that it is not facially invalid. We are persuaded by the 1989 MSBA ethics opinion, which approved an agreement with a sliding-scale formula, much like Ashcraft’s—one in which the division of fees is “based upon a combination of the length of time that the case was in the law firm prior to the attorney’s termination and the period of time in which the fee is realized after the attorney has left the firm.” MSBA Ethics Comm., Formal Op. 1989-29.”
  • “We are persuaded as well by the Michigan Court of Appeals’ decision in McCroskey, which upheld an agreement under which the attorney received ‘a ratable proportion of a given fee on the basis of the stage of the litigation at the time of departure.’ McCroskey, Feldman, Cochrane & Brock, P.C. v. Waters, 494 N.W.2d at 828-29.”
  • “It is undisputed that for three years thereafter Ms. Bennett adhered to that agreement and paid the percentage of the fee dictated by the Prenuptial Agreement. It is also undisputed that Ms. Bennett ceased making payments in October of 2018, when she commenced this action (by filing a complaint that made no mention of the Barker cases). Finally, it is undisputed that, between October of 2018 and the entry of judgment, Ms. Bennett failed to remit $706,164.83 in fees, not including pre-judgment interest. It would seem, therefore, that Ashcraft has indisputably established all of the elements of its breach of contract claim.”

“Ex-Cadwalader Clients Lose Bid for Legal File in Criminal Case” —

• “Cadwalader, Wickersham & Taft LLP doesn’t have to turn over files related its representation of two former clients now facing criminal fraud charges who it says owe it at least $760,000 in legal fees.”
• “Even assuming an urgent, particularized need for the file, the defendants haven’t demonstrated any prejudice or their inability to either pay the outstanding fees or post security, the US District Court for the Eastern District of New York said.”
• “The defendants also have alternative means of obtaining the file, so denying the motion isn’t the equivalent of denying them access to the information they seek, Magistrate Judge James M. Wicks said.”
• “Cadwalader represented the twins in multiple relevant preindictment matters from August 2021 through November 2022, when a disagreement over billing and nonpayment ended the relationship.”
• “The firm asserted a retaining lien on the client file for the outstanding fees owed. The Kaplans, in turn, sued the firm in state court for legal malpractice and breach of fiduciary duty. That matter remains pending, but no application for a provisional remedy for return of the file had been made there, Wicks said.”
• “The materials the Kaplans want include documents related to Cadwalader’s communications with the SEC, the US Attorney’s Office, and IHT Wealth Management LLC, where the Kaplans used to work.”
• “The Cadwalader file isn’t ‘wholly unavailable’ and there are reasonable steps that the Kaplans could take to obtain it, he said.”

“China’s Regulations Went From Being a Client Problem to a Law Firm Problem, Too” —

• “For months, rising global tensions and toughening cross-border regulations have kept law firms busier than ever advising clients on how to successfully—and legally—operate a multinational organization. Now, law firms could start to feel the pain their clients are experiencing—and one already has.”
• “Dentons’ decision to end its longtime combination with Chinese firm Dacheng came amid regulatory one-upmanship between the U.S. and China that has restricted investment between the nations’ entities. At the same time, new Chinese regulations make certain legal work near impossible to do.”
• “The security risks to client information or the inability to share information, among other difficulties arising from a shifting regulatory landscape, were too great for Dentons to stomach. The firm’s decision to remove itself from the situation is one other firms could soon face.”
• “‘The Chinese regulator tends to be pretty opaque,’ said one Beijing-based partner at a U.S.-headquartered law firm… ‘But I think that’s going to increasingly be a challenge for global law firms to be able to operate in the marketplace. The intrusion of the Chinese government regulator into law firm business will not stop with Dentons.'”
• “Under the broad national security umbrella, Chinese lawyers can be required to divulge explicit client information to the state. Lawyers can also be prohibited from releasing China-related data to their international counterparts, all making basic conflict checks and due diligence on cross-border deals impossible to implement.”
• “The ‘Chinese Wall’—an old term used to describe corporate measures adopted by firms to prevent information leaks internally—is now neither relevant nor adequate.”
• “In 2021, China also started its tech crackdown on companies that have access to and hold data of Chinese users. New cybersecurity laws have also been imposed, making dealmaking onerous and risky. Companies wanting to share data outside of China must now go through a national security review.”
• “Kent Zimmermann, a principal at the Zeughauser Group, told Law.com International that there has been an increasing number of law firm leaders who have been reassessing their China operations in recent months. ‘Dentons is not the first professional services firm practicing law to pull out of China,’ said Zimmermann. ‘It is not going to be the last. Given the conditions, which make it virtually impossible to practice there as a Western firm and comply with the laws and regulations, it wouldn’t be surprising if other firms follow suit.'”

“Arb Seeks Win In Chris Cuomo DQ Bid Amid $125M CNN Row” —

• “The arbitrator overseeing television journalist Chris Cuomo’s $125 million wrongful firing case against CNN has asked a New York state court to shut down Cuomo’s effort to disqualify him over an alleged conflict of interest, saying Cuomo “cannot come close” to meeting the high bar necessary for obtaining that relief.”
• “In a summary judgment motion filed Tuesday, JAMS Inc. arbitrator Stephen P. Sonnenberg said Cuomo’s Hail Mary attempt to disqualify him based on tenuous and decades-old connections between CNN and Paul Hastings LLP — where Sonnenberg worked for 25 years as a labor and employment attorney before becoming an arbitrator — has run its course, and should now be shut down. JAMS itself is also a defendant.”
• “‘This entire proceeding should begin and end with the JAMS rules to which petitioner contractually agreed, and by which he is bound,’ JAMS and Sonnenberg wrote.”
• “Cuomo has already twice failed to disqualify Sonnenberg under those internal JAMS rules, Sonneberg said. To have a New York state court step in,  he needs to show that there are ‘circumstances’ at play or the possibility of ‘injustice.'”
• “Cuomo initiated his arbitration proceeding against CNN in March 2022, seeking $125 million after the network fired him in December 2021 for allegedly violating its journalistic standards by assisting his brother, New York Gov. Andrew Cuomo, during a time of “personal and political crisis” that led to the Democratic politician’s August 2021 resignation.”
• “Both CNN and Cuomo agreed on the choice of Sonnenberg to handle the case, and beforehand Sonnenberg said in a disclosure form that while it’s possible Paul Hastings may have had ties to one or the other party, he didn’t personally recall ever working with either. Sonnenberg left Paul Hastings in 2018.”
• “In the spring of 2023, however, Cuomo claims that some of Sonnenberg’s rulings led him to do a ‘deep dive on Sonnenberg’s background and prior relationships,’ as he put it in a court filing. Cuomo said he was then ‘shocked to learn’ that Paul Hastings had represented CNN in several proceedings before the National Labor Relations Board, the most recent of which wrapped up nine years ago.”
• “Shortly thereafter, CNN disclosed that Sonneberg had ‘personally handled a matter for the CNN parties for approximately three months in 2003,’ and was paid less than $3,000 in fees for that work. Sonneberg claims he still has no memory of that representation.”

“Perkins Can Stay At Defense Table For Intel In Memory IP Suit” —

• “Perkins Coie LLP can continue to defend Intel Corp. in a patent case focused on superconductor memory technology because the firm’s contacts with the plaintiff — including a prior engagement — don’t represent a substantial risk of conflict, an Oregon federal judge has ruled.”
• “In a Friday order denying a disqualification bid by BeSang Inc., the court said there was no dispute that BeSang’s chief executive, Sang-Yun Lee, hired Perkins Coie 14 years ago for a potential manufacturer contract. But that work was limited, the court said. Back in 2009, Lee had only a single, hourlong meeting with Perkins Coie lawyers about the possible deal. They later produced a largely ‘boilerplate’ draft for an agreement that never got off the ground.”
• “Submissions from BeSang and Intel also showed that Lee himself was surprised the firm had produced a draft at that early stage, and that Perkins Coie never got descriptions of BeSang technology or processes, the court concluded.”
• “‘Had the representation proceeded, there might indeed have been a substantial risk that the information [BeSang] outlines … would be shared and would materially advance defendant’s position in this litigation,’ the judge said. ‘But where the record shows only a high-level preliminary conversation, the risk that Perkins Coie obtained such information is not substantial, and the extreme step of disqualification of counsel is not warranted.'”
• “In the Friday decision, U.S. District Judge Marco Hernandez said BeSang had argued that the 2009 representation was related to the current case, and that Perkins likely had information that could aid Intel with ‘claim scope, claim construction, infringement, invalidity, and damages.'”
• “In addition to the 2009 representation, Lee argued that disqualification was also warranted because he’d been in contact in 2020 with Perkins Coie lawyers about a potential IP licensing deal and venture capital fundraising. Separately, he pointed to communications and a meeting in 2021 with another Perkins Coie attorney, Chun Ng, about a potential patent infringement case against a different company.”
• “After a preliminary conflict check and meeting with Lee, Ng said he ‘declined representation early in the conversation’ because many of the patents at issue were about to expire and the potential defendant ‘had no sales in the United States,’ according to the order.”
• “The court concluded that, like the 2009 matter, neither of the more recent contacts resulted in Perkins Coie obtaining information that could be harmful to BeSang in the Intel case.”

“Plaintiffs in Roundup lawsuit drop effort to disqualify prominent St. Louis attorney” —

• “Plaintiffs’ attorneys have withdrawn a motion seeking to disqualify attorney Bob Blitz as a special master in a Roundup lawsuit because of his close legal and business relationship with attorney James Bennett.”
• “Plaintiffs’ attorneys filed the motion to disqualify after learning Aug. 9 that Bennett, a partner with Dowd Bennett, would be the lead trial counsel in the case. Their motion cited Bennett and Blitz serving currently as co-counsel in a federal lawsuit against Ameren Missouri; Bennett representing Blitz and his law firm, Blitz Bardgett & Deutsch LC, in a 2015 lawsuit; and the $276.5 million in fees their firms shared when the lawsuit against the National Football League and the Los Angeles Rams was settled.”
• “Toward the ending of Tuesday’s hearing, May said if he granted the motion to disqualify Blitz, the McCostlin Roundup trial would have to be delayed until Sept. 17, 2025. May stressed to plaintiff attorney Joe Jacobson that he was not telegraphing what his decision would be on the motion to disqualify.”
• “The prospect of a two-year delay in the McCostlin trial is the reason why the motion to disqualify was withdrawn, said Jacobson, a shareholder in Jacobson Press PC. The plaintiffs’ attorneys brought in Jacobson to file the motion to disqualify.”
• “‘Even though we thought it was a good motion – and the judge did not dismiss it out of hand – we felt that it was in the client’s best interests to move forward with the case,’ Jacobson said.”

Brian S. Faughnan writes: “At the intersection of ethics and entrepreneurial acts” —

• “A case written up by Mike Frisch earlier this month caught my eye because it involves a discussion of two still-evolving areas of claims that can get made against law firms.”
• “Most of the case, and most of what Frisch focuses on, is the malpractice claim that was made regarding an alleged lost opportunity to settle a case. Although the Vermont Supreme Court did join a growing list of states to explicitly recognize that lost opportunity to settle can be a variety of actionable legal malpractice, the plaintiff’s loss at the summary judgment stage was affirmed.”
• “The second half of the Vermont case involved overturning a grant of summary judgment in favor of the law firm as to a claim under the Vermont Consumer Protection Act.”
• “The potential application of state consumer protection acts against lawyers and law firms is something I first wrote about back in 2006.”
• “Over the ensuing 17 years, general traction has been obtained for the notion that you cannot sue a lawyer or law firm under such statutes for claims relating to the core things that involve the practice of law such as rendering legal advice but that you can do so for things involving ‘entrepreneurial aspects of the practice of law.'”
• “In the case before the Vermont Supreme Court, the consumer protection act claim turned on the fact that the defendant law firm, in landing the client, had been alleged to have made representations that certain tasks would be delegated to associates and others when appropriate. Now that sounds innocuous out of context, but the allegations were that the entire case was handled primarily by an associate at the firm. While the Court recognized that how a case is staffed is not an entrepreneurial aspect of the practice of law, a promise or representation made about how a case would be staffed to land a case was.”
• “The commercial aspects of the practice of law that many courts will find can be the stuff of a consumer protection act claim are advertising, billing and collection activity, and not only statements made to obtain clients but even methods of keeping or discarding clients.”
• “Those issues are ones that lawyers mostly recognize as bringing ethics and disciplinary risks under rules such as RPC 7.1 and RPC 1.5 or even RPC 1.16 but it is worth keeping in mind that, even though the rules in most jurisdictions set out language in their Preamble or Scope sections to assert that the ethics rules are not designed for the purpose of providing a basis for civil liability, conduct that would violate those rules can also easily become the stuff of civil liability all the same through application of a state’s statutory framework seeking consumer protection or cracking down on deceptive trade practices.”
• “This potential for liability can provide yet another justification for firms to give some scrutiny not only to making sure that their billing practices are reasonable and justifiable but also to reviewing the language their lawyers use in engagement agreements and even in making new client pitches.”

Dentons partners Shari L. Klevens and Alanna Clair always present worthwhile content: “How to Handle Disputes With Sophisticated Clients” —

• “Representing clients who have more familiarity with the law and complex business issues is often a different experience than that of representing a client who is wholly unfamiliar with the law… This difference raises a question—does a lawyer’s duty or the standard of care change in any way when representing a so-called sophisticated client? There are areas where courts will make this inquiry, such as in looking at conflict waivers and other parts of the lawyer-client engagement process. In addition, some courts also take into account a client’s sophistication when addressing disputes between the client and their lawyer.”
• “Another example of courts taking a client’s sophistication into consideration arises in the context of future-conflict waivers, in which, as part of an engagement, a client agrees to waive certain types of conflicts of interest if they arise in the future. In a recent case in Florida, a major national brand filed a motion to disqualify its former law firm (a large national firm) from representing an adverse party.”
• “When the law firm noted that the brand had signed a waiver regarding future conflicts, the court agreed in upholding the waiver. Among other things, the court focused on the sophistication of the client, the size of their in-house legal team, their use of dozens of outside law firms and the fact that the client was represented by independent counsel in executing the waiver. As a “sophisticated consumer of legal services,” the brand’s waiver was enforceable.”
• “A legal-malpractice case sometimes involves an evidentiary review of the client’s understanding of the law or of the selected strategy, especially for more sophisticated clients. Thus, if there is a later dispute over what the client understood or consented to, having evidence in hand showing the client’s understanding, acquiescence or sophistication can go a long way.”
• “Documenting the level of the client’s involvement in close to real time can also be a reminder to the client of the decisions they made and why. Although the absence of such documentation in a subsequent legal malpractice case does not confirm a breach of the standard of care, lacking this evidence could make it harder for the lawyer to explain what really happened.”
• “Even if the evidence does not extinguish liability altogether, it might help to mitigate potential damages. For example, in a recent New York case, the court reviewed a communication by lawyers to their client with a marked-up version of a key lease amendment.”
• “The court concluded that this communication was not sufficient to show that the lawyers adequately advised the client of the significance of their edits, but the court did conclude that the client’s level of sophistication and understanding in reviewing the amendment could be evidence to support mitigation of damages.”

“Ex-Mylan CIO Waives Atty Conflict For Insider Trading Case” —

• “A former Mylan executive told a Pennsylvania federal judge that he could still be defended on charges of insider trading by an attorney who also represented other Mylan higher-ups in a pair of civil lawsuits, waiving any potential conflict of interest in court Tuesday.”
• “Ramkumar Rayapureddy, 55, of Upper St. Clair, Pennsylvania, said he understood that one of his defense attorneys, John A. Schwab, had represented or was actively representing Mylan NV, its successor, Viatris, and several of its current and former executives in a proposed investor class action and in an antitrust lawsuit.”
• “After questioning from U.S. District Judge W. Scott Hardy, Rayapureddy agreed to waive any potential conflict of interest that might arise if some of those executives were called as witnesses in the criminal case against him for allegedly helping a former colleague make millions from stock trades based on insider information he had when he was chief information officer for the company.”
• “After Rayapureddy indicated he was aware of the potential conflict and was still willing to waive it, Judge Hardy had him and his attorneys sign a waiver form at the conclusion of Tuesday’s hearing.”
• “Judge Hardy said that at a hearing in July, he became aware of the potential conflict that Schwab’s representation could raise, and ordered that the defense and the government file sealed briefs on their positions regarding that conflict. Though the briefs remain under seal, Judge Hardy said Tuesday’s hearing on the matter would be public.”
• “Rayapureddy said he had not discussed with Schwab exactly which executives he had previously represented — Schwab said the individual defendants had been dropped from the shareholder suit — but Judge Hardy reminded him that the names were public record and not subject to attorney-client privilege.”
• “After a brief break to review the list — including former CEO Heather Bresch, who left the company when it combined with Upjohn to form Viatris; President and Executive Director Rajiv Malik; Viatris President of Developed Markets Anthony Mauro; and former Chief Financial Officer Kenneth Parks — Rayapureddy again consented to waive that potential conflict.”

“Orrick Herrington Hit with Another Lawsuit from Hacker Attack” —

• “Orrick, Herrington & Sutcliffe LLP was sued Monday for a second time arising from a springtime data breach that allegedly allowed personal information including Social Security numbers of nearly 153,000 individuals to be accessed.”
• “The filing alleges Orrick failed to create and implement reasonable data security practices, including training employees and others who accessed the information. It also alleges that the firm didn’t tell individuals their data had been compromised for four months after the incursion.”
• “Accusing the firm of negligence, breaches of fiduciary duty, confidence, and implied contract, and invasion of privacy, the plaintiff Robert Jensen seeks certification of a class of those who received letters notifying them of the breach.”