Risk Update

Risk Reading — Lawyers-as-Fiduciaries Ethics Rules, Disqualifications and Communication Clashes, Litigation Funding Hazards

Posted Dan Bressler

“Billion-Dollar Estate Suits Show Hazards of Funding Family Feuds” —

  • “A litigation financier’s foray into a battle over a dead Saudi businessman’s multibillion dollar estate is a cautionary tale for outside funders investing in family fights.”
  • “UK-based Therium Capital, eyeing a cut of a potential 10-figure settlement, bankrolled the wife and daughter of the late Saudi billionaire Osama Ismail Abudawood in an estate fight with his brothers. After at least 18 lawsuits in three countries, the pair are settling for a little more than one-third of what they say they were first allotted under Sharia law. Along the way, they stopped showing up in court, cycled through lawyers, and were ordered to pay more than $750,000 after being held in contempt.”
  • “Funders typically stay away from estate cases because they are unpredictable and messy. A rare example of funders wading into family disputes came when Burford Capital, a major player in the industry, earned $103 million in 2021 on an investment in divorce proceedings involving a Russian billionaire.”
  • “The family fight over his estate pitted Eleanor de Leon, Abudawood’s wife of 23 years, and Alaa Abudawood against his brothers, Ayman and Anas, who are directors of the company. De Leon and Alaa fought for a larger share of the estate, valued between $1 billion and $4 billion, after they said they were initially allotted 24% under Sharia law. They accused Abudawood’s brothers and business partners of diluting the company’s value.”
  • “The fight included lawsuits in Saudi Arabia, the US, and the Cayman Islands. Ultimately, a California court in late June ordered de Leon and Alaa to finalize a global settlement worth just $88 million. When the pair refused to comply and skipped court dates, the judge appointed a power of attorney to execute the documents.”
  • “Therium agreed to invest in the litigation in 2019. Litigation funding deals are often confidential. The investment wasn’t disclosed until February, when a lawyer representing the brothers alerted the court that an unidentified funder was backing de Leon and Alaa Abudawood.”
  • “Therium, de Leon, and Alaa Abudawood did not respond to requests for comment. It’s not clear whether delays in the case impact Therium’s share of the settlement proceeds.”

“DQ’d Atty Denied Bid To Have Netflix Atty Held In Contempt” —

  • “A California federal judge rejected a bid by a former Whitestone Law attorney to hold an attorney representing Netflix in a patent infringement case in contempt over harassment allegations, determining that the unwanted contact does not violate the order disqualifying his ex-firm.”
  • “U.S. District Judge Jon S. Tigar rejected Joseph Zito’s allegations that Baker Botts LLP partner Rachael D. Lamkin, who represents Netflix, violated the order disqualifying Whitestone by contacting him with questions about the case.”
  • “Citing 2013’s Am. Semiconductor Inc. v. California Assignments LLC , Judge Tigar said Lamkin was not the subject of the aforementioned order to disqualify and as a result, she cannot be held in contempt of an order that does not apply to her.”
  • “‘Parties who were not parties to the action, were not named in the court’s preliminary injunction order, and were not in privity with, nor successors-in interest to, any entity subject to the injunction, could not be held in contempt for violating its terms,’ Judge Tigar’s order said regarding the Am. Semiconductor case.”
  • “Zito said in his June 27 notice that earlier in the month, Lamkin emailed him and current Whitestone attorney Erik Lund regarding new requests for discovery of fund manager AiPi LLC in a Finnish inventor in his patent infringement case against Netflix and AiPi, a nonparty that paid some of the inventor’s legal bills. He wrote that ‘Netflix Attorney Rachael D. Lamkin is violating this court’s order and should be held in contempt.'”
  • “Whitestone was disqualified from representing AiPi in March when Judge Tigar determined that the firm could not represent both the funder and inventor Lauri Valjakka, who it worked with as fill-in counsel for a deposition when his attorney from Ramey LLP was unavailable.”
  • “Zito added that Lamkin continued to send her and Lund emails, eventually adding Whitestone attorney Ken Sheets to the mix. The content of the subsequent emails included an attempt to serve a notice to AiPi and an inquiry as to who’s currently representing the company, Zito said.”

“Georgia: Ethics Rules Do Not Apply To Lawyers As Fiduciaries” —

  • “The Georgia Supreme Court has rejected a petition for voluntary discipline on the grounds that the ethical rules do not apply to lawyers acting in a fiduciary capacity:
    • “In the petition, Brown, who has been a member of the State Bar of Georgia since 1997, admits that she “may have” violated Rules 1.15 (I) (c) and 1.15 (II) (b) of the Georgia Rules of Professional Conduct (“GRPC”) while serving as the successor trustee of a South Carolina trust—even though the Bar acknowledges that she was acting only in a fiduciary capacity, and not as a lawyer, at the time. The Bar asserts that Brown violated Rules 1.15 (I) (c) and 1.15 (II) (b) and requests a suspension of between three and six months.”
    • “We ultimately conclude that Brown’s conduct did not violate Rule 1.15 (I) (c) or 1.15 (II) (b). As we explain below, the text of Rules 1.15 (I) (c) and 1.15 (II) (b) does not clearly indicate whether these Rules apply to lawyers when they are acting as fiduciaries not in connection with the legal representation of a client or otherwise in the practice of law.”
    • “Even after applying rules of statutory construction, either reading of Rules 1.15 (I) (c) and 1.15 (II) (b)—that they do, or do not, apply to lawyers acting as fiduciaries but who are not engaged in legal representation of a client or in the practice of law—is plausible. However, applying these Rules to lawyers when they are not practicing law would raise serious constitutional concerns, which we set out below.”
    • “As a result, under the canon of constitutional doubt, we interpret Rules 1.15 (I) (c) and 1.15 (II) (b) such that they do not apply to lawyers when they are acting as fiduciaries not in connection with the legal representation of a client or otherwise in the practice of law. Because Brown’s conduct at issue in this matter falls outside our interpretation of Rules 1.15 (I) (c) and 1.15 (II) (b), we conclude that Brown’s conduct did not violate those Rules. We therefore reject her petition for voluntary discipline.”