Risk Update

Varsity Blues Scandal Continues to Reveal Plenty of Rich Risk Reporting (Or: Waves, Walls & Waivers)

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The Varsity Blues college admissions scandal continues to make news, both in the general media and in legal circles. June was quite active on the conflicts front. Let’s catch up, starting with: “Ropes, Nixon, other firms face potential disqualification in college bribery case” —

  • “Federal prosecutors are asking a judge to examine whether more than half a dozen law firms — including ones with a large Boston presence like Ropes & Gray LLP, Nixon Peabody LLP and Latham & Watkins LLP — should be disqualified from representing their clients in the massive college bribery criminal case in Boston.”
  • “In a filing Thursday, the prosecutors said those law firms may have conflicts of interest with their clients. While some of those conflicts may not ultimately pose a problem, others could require the disqualification of the firms, they said, asking for a hearing into the matter.”
  • “The case has been a source of significant business for Boston’s white collar criminal defense bar. Since it’s taking place in federal court in Boston, the dozens of defendants who have faced charges, including celebrities Lori Loughlin and Felicity Huffman, have hired attorneys admitted to the Massachusetts bar.”
  • “Three of the firms — Ropes, Nixon and Latham — represent clients accused of defrauding the University of Southern California, even though all three represent USC in other matters, according to prosecutors. USC recently told the government about the conflict and that it had not waived the conflict, prosecutors said.”
  • “Another group of law firms — among them Ropes, Latham, Hooper Lundy & Bookman PC, Todd & Weld LLP, Duane Morris LLP and Martin Weinberg — represent multiple defendants in the college bribery case. Court rules are clear that if one firm represents multiple defendants in a matter, the court must “promptly” examine whether the simultaneous representations are proper, prosecutors said.”

Followed by some of what has since unfolded: “Boies Schiller Gets OK To Rep 2 ‘Varsity Blues’ Defendants” —

  • “A Boston federal court has decided that Boies Schiller Flexner LLP can continue to represent two defendants in the Varsity Blues college admissions cheating case, despite the fact that one parent is cooperating with the government and may be called upon to testify against the other.”
  • “In an order entered Tuesday, U.S. Magistrate Judge Page Kelley said she was satisfied that Boies Schiller has indeed gone to great lengths to keep the teams representing parents Robert Zangrillo and Davina Isackson totally separate from one another. The government has alleged both parents paid hefty bribes to secure their children’s admission to elite colleges.”
  • “Judge Kelley also said it appears as though Zangrillo, a Miami developer who has pled not guilty to the charges against him, fully understands the tricky situation presented by the fact that Isackson has pled guilty and agreed to cooperate with the government.”
  • “At a hearing earlier on Tuesday, Boies Schiller’s Matthew Schwartz told Judge Kelley that the firm has taken measures ‘about as robust as a law firm could take’ to prevent any potential conflict of interests from arising in its dual representation of Zangrillo and Isackson. Schwartz said files for each client have been ‘locked down’ in the firm’s computer system so that attorneys and staff can only access files for their own client.”

And: “Ropes & Gray Client OKs Rep Of Fellow ‘Varsity Blues’ Parent” —

  • “Ropes & Gray LLP received the blessing of one of the two parents it is representing in the ‘Varsity Blues’ college admissions scheme to take on multiple clients in the same case, following a hearing Monday morning in Massachusetts federal court.”
  • “Elizabeth Henriquez told U.S. Magistrate Judge M. Page Kelley that she had no problem with the BigLaw firm taking on both she and Douglas Hodge, another parent accused of trying to bribe his child’s way into college, in the high-profile case. Henriquez signed a waiver shortly after Judge Kelley pressed her on whether she understood exactly what rights she might be signing away.”
  • “Judge Kelley warned Henriquez she could make her own case more difficult in the event of a future appeal related to her representation and said other issues could arise, including whether her lawyers could conduct an independent investigation, pick a jury or handle a potential sentencing with her best interests in mind while also standing up for another client in the same case.”
Risk Update

Judicial Analytics: Run that Pivot Table and Risk Jail?

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A few weeks back I suggested an interesting analysis exercise, looking at disqualification activity and attempting some analysis. (Perhaps that will be a 2020 New Year’s Resolution…) Of course, there’s an existing market of third-party providers harvesting and distilling judicial activity, looking for trends. You could see this sort of insight potentially shaping disqualification motion strategy, among other existing applications. So this one caught my eye:  “France Bans Judge Analytics, 5 Years In Prison For Rule Breakers” —

  • “In a startling intervention that seeks to limit the emerging litigation analytics and prediction sector, the French Government has banned the publication of statistical information about judges’ decisions – with a five year prison sentence set as the maximum punishment for anyone who breaks the new law.”
  • “The new law, encoded in Article 33 of the Justice Reform Act, is aimed at preventing anyone – but especially legal tech companies focused on litigation prediction and analytics – from publicly revealing the pattern of judges’ behaviour in relation to court decisions.”
  • A key passage of the new law states: ‘The identity data of magistrates and members of the judiciary cannot be reused with the purpose or effect of evaluating, analysing, comparing or predicting their actual or alleged professional practices.'”
  • “However, judges in France had not reckoned on NLP and machine learning companies taking the public data and using it to model how certain judges behave in relation to particular types of legal matter or argument, or how they compare to other judges.”
  • “Unlike in the US and the UK, where judges appear to have accepted the fait accompli of legal AI companies analysing their decisions in extreme detail and then creating models as to how they may behave in the future, French judges have decided to stamp it out.”
  • “Moreover, it’s unclear if a law firm, if asked to by a client, could not manually, or using an NLP system, collect data on a judge’s behaviour over many previous cases and create a statistical model for use by that client, as long as they didn’t then publish this to any third party. That said, it’s not clear this would be OK either. And with five years in prison hanging over your head, would anyone want to take the risk?”

Shades of Minority Report? For more on this, see the full story and the lively commentary posted by a variety of readers.

Risk Update

GDPR and Conflicts of Interest: Ghosts in your files?

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Readers who are expert searchers and analyzers (as many of you are, professionally) may already be aware of a sister site I launched earlier this year called Off the Record. It’s about information governance. (Yes, I like puns.) And we’re starting to do some interesting things there as well.

Ted Graham, formerly the intake director at Brown Rudnick and now looking for new haunts, recently reached out with a topic, title and hook he knew would grab my attention… and thus a tale was spun: “GDPR and Conflicts of Interest: Ghosts in your files?” —

  • “An October 2018 decision issued by the Maryland State Bar Association’s Committee on Ethics was the first of its kind in the US. While the bar did not seek to opine on the obligations of law firms under the EU General Data Protection Regulation (GDPR), it provided an interesting glimpse into how US-based bar associations, and law firms, will need to be mindful of the regulation.”
  • “First, and foremost, it’s important to understand whom the GDPR applies to. In addition to entities located within the borders of the EU, it can apply to, under the “targeting prong,” entities, or individuals, who reside outside the EU as well.”
  • “The Maryland decision (Ethics Docket No 2018-06) was in response to a local attorney’s concern about the GDPR’s Article 17 ‘Right to Erasure,’ often referred to as the ‘right to be forgotten.’ Article 17 states that a data subject has the right to demand ‘erasure of personal information concerning him or her without undue delay’ and that a data controller must thereby erase such personal data.
  • Thus, the concern raised in Maryland was that if a client invoked its Article 17 rights on a law firm, that firm would ‘be unable adequately to check for conflicts for purposes of complying’ with the Rules of Professional Conduct. The Committee’s response suggested that if a client had invoked Article 17, and the law firm complied with the erasure, the data subject thereby became a former client of the firm and that the client’s request to be forgotten acted as a waiver of conflicts ‘that could have been discovered had the data been retained.'”
  • “We do not suggest that either exception under Article 17 makes a law firm immune from the right to be forgotten. Simply put, the law firm and the client must come to an understanding of what a request under Article 17 means for both.”

See the complete article for analysis and approaches to address compliance.

Risk Update

Lawyers Caught Doing Bad Things (Allegedly and Actually)

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Lawyer who secretly changed origination credits to his benefit should be suspended, ethics panel says” —

  • “An Illinois lawyer who inadvertently discovered he was able to alter origination credits on his office computer should be suspended for making changes that added more than $200,000 to his book of business, according to an ethics hearing board.”
  • “Michael Joseph Shifrin should be suspended for one year for making the unauthorized changes through the law firm’s office management software, according to the Hearing Board of the Illinois Attorney Registration and Disciplinary Commission.”
  • “Shifrin made the changes between May 2014 and April 2018 when he was a nonequity partner… The law firm discovered the problem after another lawyer asked why some matters were not reflecting a split in origination credit. Shifrin was fired after first denying then admitting he had made the changes. He later repaid the amount of money he made from the scheme.”
  • “In aggravation, Shifrin’s misconduct involved more than 200 acts in which he changed the credits. ‘We saw no indication that he would have ceased his actions had he not been caught,’ the hearing board said.”

Ex-Willkie Co-Chair Faces Prison After College Scandal Plea” —

  • “The former co-chairman of Willkie Farr & Gallagher LLPpleaded guilty to conspiracy and faces the possibility of going to prison after admitting he bribed a consultant with $75,000 to have him rig his daughter’s college board scores.”
  • “‘I would like to emphasize that my daughter had absolutely nothing to do with this,’ Caplan told U.S. District Judge Indira Talwani in Boston federal court. ‘This was all mine.'”
  • “When federal prosecutors unveiled the sprawling case in March, Caplan came to personify the extent some of the 33 parents charged were willing to cheat to get their kids into elite schools. Another 17 college coaches and test proctors were also charged in what the government said was the largest college-admissions scandal they’ve prosecuted.”
  • “‘To be honest, I’m not worried about the moral issue here,’ Caplan, a graduate of Cornell and Fordham Law School, told Singer. ‘I’m worried about the, if she’s caught doing that, she’s finished.'”
  • “Both Caplan and Huneeus pleaded guilty to one count of conspiracy to commit mail fraud and honest-services mail fraud. Under the plea deal, prosecutors said they’ll recommend that Caplan serve a term as low as eight months in prison and pay a fine of $40,000. He is scheduled to be sentenced Oct. 3. Huneeus, who will be sentenced Oct. 4, faces 15 months and a $95,000 fine.”

California lawyer suspended for 30 days for failure to disclose client’s death while continuing to litigate matter” —

  • “According to the stipulated facts, ‘Respondent learned of Alfeo Mattei’s death in or about June 2016 after the Court of Appeal remanded the case but failed to inform the court or opposing counsel, as required by Sonoma County Superior Court Local Rule 4.1(A). Local Rule 4.1(A) states “When a party to a case dies, the attorney for that party shall promptly serve and file a notice with the court.'”
  • “The lawyer failed to inform the court (or opposing counsel) of the death of Alfeo, even though Alfeo was the only person who could testify about the landlord’s contractual intent since he other landlord (Leann) was not involved in the lease. The lawyer stated that he believed that he could establish intent by legal argument, by cross-examination or by use of an expert. He successfully opposed the tenants’ motion for summary judgment, and a trial was scheduled for April 2017.”
  • “On the first day of the trial, opposing counsel asked the lawyer why Alfeo was not on the witness list and the lawyer did not answer… Opposing counsel then conducted an internet search during a break in the proceedings, learned that Alfeo had died, and informed the judge. The judge asked the lawyer if that was true, and the lawyer responded: “He has passed, yes.”. The judge sanctioned the lawyer approximately $31,000.00 for continuing to litigate the case for more than a year without informing the court or the opposing counsel of the death and the judge also reported the order to the California State Bar.”
Risk Update

Client Files, Confidential Information, Protective Orders & Conflicts (Part 2)

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And now, part two:

Entire South Florida Firm Removed From Case for Keeping File Meant for Opposing Counsel” —

  • “The firm had been removed from the case by a trial court after it failed to disclose to the opposing side that it had received a document sent to it in error. Instead, court records show it got — and kept — a handwritten statement the plaintiff had meant to send his lawyers but accidentally had transmitted to the other side. Plaintiff Kevin McCrea had intended to fax interrogatory answers to his attorneys but inadvertently sent them to the defense in July 2013.”
  • “The Shapiro Blasi firm waited years before alerting opposing counsel to the error, according to court documents. Lead counsel for the defense, Stuart Weinstein, filed the appeal following Miami-Dade Circuit Judge Abby Cynamon’s 16-page order against him and his firm, finding Weinstein had not complied with rules of professional conduct.”

Atty Posted Confidential Info In Face Of DQ Bid, Rival Says” —

  • “An attorney representing families of banana farmers accusing Chiquita Brands International Inc. of funding murderous South American paramilitaries is blasting the class’ lead counsel for allegedly posting confidential material in response to his attempts at disqualifying the counsel.”
  • “According to Wolf, the confidential deposition was improperly placed into the record earlier this month by lead counsel Terrence P. Collingsworth of International Rights Advocates, whom Wolf says should be disqualified for failing to establish an attorney-client relationship with more than 140 plaintiffs.”
  • “Collingsworth on April 10 told the court that he posted the deposition in response to Wolf’s allegations that Collingsworth had bribed witnesses in the case. Collingsworth said the deposition illustrates that Wolf has stateda that he has no personal knowledge of any bribes paid by Collingsworth.”


Risk Update

Client Files, Confidential Information, Protective Orders & Conflicts (Part 1)

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Some interesting stories to share touching themes of client files, confidential information, and information risk management:

Ex-Attys Seek To DQ New Counsel Handling $350M Shire Deal” —

  • “The former lawyers of a whistleblower who helped reach a $350 million settlement with biotech company Shire over its marketing of a skin product asked a Florida federal court Monday to disqualify two attorneys and their firm for allegedly using stolen confidential emails to cut the former counsel out of a fee award.”
  • “In his motion, Darken said Vinca’s current counsel have improperly used confidential emails from Barry A. Cohen PA, who also previously represented Vinca in the whistleblower suit, to challenge the charging lien filed by Darken, Cohen and Saady & Saxe PA for a cut of the attorney fees.”
  • “McDonell and Hill have argued that the former counsels’ fee should be reduced because they ‘committed malpractice and malfeasance’ by employing Domenic Massari, a disbarred attorney, as a law clerk in the underlying litigation with Shire.”
    “Vinca claims his former counsel’s failures forced him to share the whistleblower award of the Shire settlement with the five other relators who filed FCA suits after his.”
  • “Generally, the first whistleblower to file gets about 20 percent of the government’s recovery and any subsequent whistleblowers do not receive a cut, but in this case, U.S. District Judge James Moody Jr. decided to divvy up the proceeds, in part because of deficiencies in the initial eight-page complaint from Vinca and Sweeney, according to McDonell.”

Cotchett Pitre Lawyers Deride Apple’s Sanctions Request as ‘Manufactured Controversy‘” —

  • “Apple Inc. has sought sanctions against principals Joseph Cotchett and Mark Molumphy for what it claims was their ‘blatant and very serious violation’ of a protective order in lawsuits coordinated before U.S. District Judge Edward Davila of the Northern District of California. Apple proposed removing both lawyers from their appointed posts as co-lead plaintiffs counsel and barring them from viewing confidential documents in the case.”
  • “The lawsuits alleged that Apple purposely slowed the speeds of certain iPhones, but Apple has countered that doing so was necessary to prevent the devices from having unexpected shutdowns.”
  • “In their sanctions motion, Apple’s lawyers, Theodore Boutrous and Christopher Chorba, of Gibson, Dunn & Crutcher in Los Angeles, accused the Cotchett Pitre lawyers of disclosing ‘highly confidential’ documents, filed as sealed exhibits to their opposition to dismiss, in open court at a March 7 hearing over its renewed motion to dismiss the lawsuits. The documents involved internal discussions among Apple employees about how to respond to issues relating to the problems with iPhone batteries.”
  • “Cotchett and Molumphy denied they violated the protective order. In an attached declaration, Cotchett insisted that he told Chorba at the start of the hearing that he planned to read from portions of the sealed exhibits. Chorba did not object but, at the end of the hearing, requested sealing the transcript of the hearing.”
Risk Update

Nerd Conflicts Risk — Game of Thrones (Lessons) and Buck Rogers (IP)

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Longtime readers are no doubt aware that I am a huge nerd. (Arguments of whether being in the field of risk itself makes that self evident for us all implied but not stated, less I offend any readers.) Thus titles and topics touching culture consistently catch my eye. And these are no exception.

First: “Buck Rogers Publisher’s Heirs Call IP Settlement A Fraud” —

  • “The heirs to the publisher who popularized the sci-fi character Buck Rogers asked a Pennsylvania federal judge on Thursday to revive a case involving a rival family trust, arguing a settlement signed by the woman who claimed to represent their family’s interest was fraudulent.”
  • “Robert Flint Dille and Lorraine Dille Williams said U.S. District Court Judge Wendy Beetlestone should set aside the March 4 settlement and dismissal of a case between the Dille Family Trust and the Nowlan Family Trust over the rights to Buck Rogers, claiming trustee Louise Geer had been removed from that role in February and that the attorney representing Geer had been improperly admitted to the case because of a conflict of interest.”
  • “‘Louise Geer falsely contends that she was trustee of the trust when she and her husband Dan Herman authorized David Kloss’ retention to secretly and immediately thereafter ‘authorize’ the sale of trust assets to the Nowlan Family Trust in a settlement resulting in a stipulation to voluntarily dismiss on or about February 28, 2019,’ the brief supporting their motion says. ‘Mr. Kloss’s ‘retention’ as well as the ‘settlement’ reported to the court, prompting an ordered judgment by dismissal of this action on March 4, 2019, were all undertaken without the beneficiaries’ knowledge, authority or approval, and were antithetical to their interests. As such, the transaction was fraudulent and without force or effect.'”
  • “Geer’s husband also had a conflict of interest and could not properly sponsor out-of-state attorney David Kloss’ appointment to represent the trust in Pennsylvania, the heirs said. Kloss also had a conflict of interest because Herman had represented Kloss’ firm in the bankruptcy action against the trust, the brief said.”

Having almost made it without mentioning Dr. Theopolis, we now turn to a wonderful essay, boldly authored by US General Counsel and Partner at Dentons Edward J. Reich: “Real-Life Lessons For Lawyers From ‘Game Of Thrones.'”

If I were a knight, I would knight him Ser Reich, for such a wonderfully creative and illustrative exercise, which I’ll share some of my favorites from:

  • “But then I got to thinking: What if the various hands, maesters, council members and other advisers were attorneys? What possible lessons can these colorful characters impart to real-life lawyers? As it turns out, a great many. Provided that we assume — just for purposes of this article, of course — that the Model Rules of Professional Conduct were adopted by each of the Seven (ahem, Six) Kingdoms.”
  • Lord Varys. From the outset, the Spider claimed to be loyal to the realm, as opposed to any particular monarch. That’s a noble sentiment, but he didn’t quite convey that to any of the various rulers (or would-be rulers) that he purportedly served. Model Rule 1.13 requires a lawyer representing an organization (or, presumably, a realm) to make clear to the organization’s officers and directors (or king/queen) that the lawyer owes duties to the organization, not the individual. And to the extent that a conflict arose between the interests of the monarch and those of the realm (that is, the CEO and the company), then Varys should have disclosed that and possibly withdrawn from his counsel role. That said, when he finally was forced to come clean, you could say he got ‘fired.'”
  • Ser Davos. This guy switches sides faster than you can say valar morghulis. After first serving as Stannis Baratheon’s hand, he joined Jon, then professed loyalty to Daenarys, then ended up on King Bran’s Small Council.From a conflicts standpoint, we’d have to look at Model Rule 1.9 (duties to former clients) to see whether Ser D would land in hot water again (as if his experience with the wildfire wasn’t enough). While it’s hard to say that the successive representations aren’t substantially related, the better argument against a conflict is that there is no adversity (what with Stannis and Dany being defunct and Jon banished to a place beyond the Wall).”
  • Bronn. This guy also has a serious side-switching problem. But unlike Ser D, Bronn dropped his client (Tyrion) like a hot potato when Cersei offered him a wagon full of gold to off Tyrion and Jaime. Most jurisdictions are pretty clear that lawyers can’t get around a Model Rule 1.7 current-client conflict by dropping the client in favor of a more lucrative one. And his “ownership, possessory, security, or other pecuniary interest” in Highgarden came at the point of a crossbow, not with “fair and reasonable” terms and written disclosure about the advisability of getting “independent legal counsel on the transaction” as required by Model Rule 1.8.”
  • “Lord Baelish. Model Rule 8.4 defines professional misconduct; Littlefinger just perfected it.”

(Now if only some creative soul out there would draft me a version of this for The Expanse… which I recommend for any GoT fans jonesing for a new show…)

Risk Update

DQ Roundup — Disqualifications (and Attempts) in the News

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A few weeks ago a lawyer working on a conflicts presentation asked me if it felt like there were more disqualifications in the air these days versus “back then.” I said my sense was that the flow is pretty constant, at least over the past decade. There was a time where firms may have opted to forgo a motion, but today conventional wisdom is that disqualification pursuits for reasons including tactical disruption of opponent efforts are common.

But I wonder what the true picture looks like. Sounds like an opportunity for any enterprising data analysts or scientists out there to dig in. (If you’re out there reading, let’s chat.)

Meanwhile, here are a host of interesting DQ activities I’ve noted in my propriety risk story queue, starting with: “In Huawei Case, Prosecutors Ask Judge to Remove Lead Lawyer” —

  • “Federal prosecutors want to disqualify the former deputy attorney general who is defending the Chinese telecommunications giant Huawei Technologies in a bank fraud case because the government believes his previous work for it poses a conflict of interest.”
  • “…prosecutors said the attorney, James M. Cole, should not be permitted to represent Huawei because he had been briefed on an undisclosed investigation while serving as a top prosecutor in the Obama administration.”
  • “The filing is redacted, making it difficult to ascertain the exact nature of the investigation. But Mr. Cole’s tenure at the Department of Justice — from the end of 2010 to the beginning of 2015 — may have overlapped with the period when federal authorities were gathering information on Huawei and its business dealings.”
  • “Mr. Cole is now co-head of the white-collar and investigations practice at the Sidley Austin law firm… The 26-page redacted motion said that Mr. Cole had refused a request to recuse himself, and that his representation of Huawei ‘poses real and irresolvable conflicts of interest.'”

Four Lewis Brisbois Lawyers Excluded From Bias Case” —

  • “Four attorneys with Lewis Brisbois Bisgaard & Smith LLP retained to take over a sex discrimination investigation from the director of human resources at Newman University are barred from defending the school against her whistleblower claims.”
  • “The attorneys are disqualified because they possess evidence material to the determination of the claims and defenses in the case brought by the Wichita-based university’s former HR director, Mandy Greenfield, the U.S. District Court for the District of Kansas said May 24.”
  • “Newman asserts that the reasons for her firing were discovered during the independent investigation by the law firm, making the lawyers Newman’s only witnesses.”
  • Note: Only the lawyers, not the firm were disqualified.

Pierce Bainbridge DQ’d From Manilow Films Copyright Suit” —

  • “A California federal judge on Tuesday disqualified Pierce Bainbridge Beck Price & Hecht LLP from representing a production company suing a management company for Barry Manilow over the copyrights of two films featuring the singer performing, finding the firm has a conflict of interest involving the parties.”
  • “U.S. District Judge Dale S. Fischer granted the disqualification bid by intervenor Garry Kief, as Pierce Bainbridge cannot represent the production company, Stiletto Television Inc., in the copyright case while also representing two owners of the company in separate litigation initiated by Kief, according to Tuesday’s order.”
  • “Kief argued in his disqualification bid last month that because a California state court has disqualified Pierce Bainbridge from representing Stiletto Television in the separate litigation because the company’s interests are conflicted with that of Grove and Queen, the firm may not represent the production company in this case, according to court documents.”

And, stretching the above reference of a certain musician to conjure an admonition not forget about an influential music producer, here is the latest from Mr. Freivogel, who is always in my reading queue:

  • “Chingee v. Canada, 2019 FC 532 (CanLII) (Fed. Ct. Canada May 1, 2019). Lawyer No. 1 did work for Indian Band in the 1980s on a title claim, and in the 1990s on an election dispute regarding interpretation of Indian Band’s election law. Lawyer No. 1 brought this action on behalf of Plaintiff against Indian Band seeking a declaration that Plaintiff is a “Headman” under a certain treaty. Lawyer No. 2 substituted for No. 1 under a notice of change of solicitor. Indian Band moved to disqualify No. 1 and No. 2. In this opinion the court denied the motion. In a fact-intensive analysis the court found that No. 1 did not learn anything confidential and relevant to this case in his earlier representations of Indian Band. It would appear that whatever information possibly relevant to this case held by Indian Band had been public for many years. Thus, No. 1 was not in a position to relay to No. 2 any confidential Indian Band information relevant to this case.”
  • “Encore Energy, Inc. v. Morris Ky. Wells, LLC, No. 1:18-CV-00180-GNS-HBB (W.D. Ky. May 7, 2019). In this case Encore seeks a declaration that it is a “financial institution” within the meaning of 15 U.S.C. § 6801. Law Firm appeared for Morris. About seven years ago Law Firm represented Encore regarding enforcement of a covenant not to compete in an employment contract. Encore moved to disqualify Law Firm in this case. In this opinion the court granted the motion. The court said that in the earlier case Law Firm would have to show the nature of Encore’s business in order to establish the scope of the covenant not to compete. Thus, the matters are substantially related.”
Risk Update

Engaging on Engagement Letters — (You Should Use Them, Carefully)

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The Limited Engagement Letter and Legal Malpractice” —

  • “One hires an attorney to handle a case and expects that the attorney will handle the entire case at a level of good practice to which a competent attorney should adhere. No? Well not necessarily, as Attallah v Milbank, Tweed, Hadley & McCloy, LLP 2019 NY Slip Op 00583 [168 AD3d 1026] January 30, 2019 Appellate Division, Second Department tell us.”
  • “‘This engagement does not, however, encompass any form of litigation or, to the extent ethically prohibited in this circumstance, the threat of litigation, to resolve this matter. This engagement will end upon your re-admittance to the College or upon a determination by the attorneys working on this matter that no non-litigation mechanisms are available to assist you. The scope of the engagement may not be expanded orally or by conduct; it may only be expanded by a writing signed by our Director of Public Service.'”
  • “The letter of engagement conclusively demonstrated that there was no promise to negotiate. There was only a promise to investigate and consider whether there were any options possibly available to urge the school to reconsider the plaintiff’s expulsion. Anything else, including the defendant’s failure to commence litigation against the school and the defendant’s alleged rendering of legal advice regarding the efficacy of the plaintiff’s commencing a defamation action against others, was outside the scope of the letter of engagement.”
  • After various facts played out and an unhappy client sued, said the Court: “‘An attorney may not be held liable for failing to act outside the scope of a retainer (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428 [2007]). Therefore, since the defendant’s alleged failure to negotiate with the school, its alleged failure to commence litigation against the school, and its alleged failure to properly advise the plaintiff on the efficacy of a defamation action against nonschool parties fell outside the scope of the parties’ letter of engagement, dismissal of the cause of action alleging legal malpractice was warranted, pursuant to CPLR 3211 (a) (1), on documentary evidence grounds.'”

Are Pre-Engagement Lawyer-Client Arbitration Agreements Enforceable?” —

  • Hypothetical: “A former client brought a legal malpractice claim against Bob… After he read the state-court complaint, Bob was pleased and even felt a little vindicated because he was certain the court would send the malpractice case to arbitration. Why? Because Bob’s carefully crafted engagement letter attached a document titled ‘Engagement Terms and Policies.'”
  • “That document included the following: ‘Any dispute, claim or controversy arising out of any fees, billing practices or this engagement shall be settled by binding arbitration before a single arbitrator in Philadelphia, in an arbitration that ABC Co. administers. The arbitrator’s decision shall be final and binding on the parties. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.'”
  • “American Bar Association Formal Ethics Opinion 02–425 likewise states that ‘mandatory arbitration provisions are proper unless the retainer agreement insulates the lawyer from liability or limits the liability to which she otherwise would be exposed under common or statutory law.'”
  • “Courts that have considered whether to enforce a pre-attorney client relationship arbitration agreement, including Mackin Medical v. Lindquist & Vennum, 2018 Phila. Ct. Com. Pl. LEXIS 146 (C.P. Phila. Dec. 26, 2018), have put teeth into Explanatory Comment 14 of Rule 1.8. Not by vaguely pontificating that ‘the client be fully informed of the scope and effect of the arbitration agreement.’ But by identifying the requirements for an agreement that satisfies their concerns.”
  • “The result: a detailed road map for an enforceable pre-engagement lawyer-client arbitration agreement, which will allow the prospective client to make an informed decision regarding the proposed representation.”
  • That roadmap comprises 11 elements. For that detail, see the full article.
Risk Update

Let’s Look at Laterals — Conflicts-influenced Moves, New #MeToo Risks

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These lawyer lateral movement stories never come as a surprise: “Clifford Chance Paris trio form partnership” —

  • “A trio from Clifford Chance have launched their own firm, flagging freedom from conflict of interests associated with larger firms.”
  • “The new independent firm will focus on preventing and resolving business-related disputes, through litigation and arbitration, as well as alternative negotiated solutions. Grandjean Avocats aims to provide corporations and their managers value added, highly personal, creative and efficient legal services.”
  • “In addition to acting as counsel, all three partners aim to develop their roles as arbitrators and mediators, particularly since they say the size of their firm will enable them to avoid certain conflicts of interest inherent to larger firms.”

And: “2 Blank Rome White-Collar Partners Move to Norton Rose Fulbright” —

  • “Two white-collar defense partners from Blank Rome in New York, including the former head of its white-collar and investigations practice, have decamped to Norton Rose Fulbright.”
  • A client conflict played a role in their decision to leave Blank Rome, said the two lateral partners, Carlos Ortiz and Mayling Blanco. Still, they said, Norton Rose’s team of lawyers around the world was the key selling point in their move to the firm.”
  • “Ortiz said another ‘significant’ factor in the move was an opportunity to work with a client whose name he would not divulge that would have posed a ‘huge conflict’ at Blank Rome. He said he still had a great deal of respect for his former colleagues but stressed that the opportunities afforded by Norton Rose’s international reach and reputation were the most important factor in his and Blanco’s move.”
  • “Grant Palmer, Blank Rome’s managing partner and CEO, wished the departing partners well in a statement. ‘Carlos and Mayling left the firm due to a potential client conflict issue, and we parted ways on excellent terms,” he said. “They are our friends and we look forward to continuing our strong relationship with them moving forward.'”

What’s interesting, but not suprrising, is the increasing focus on lateral due diligence generally across the profession: “In the MeToo Era, Lateral Candidates Are Going Under the Microscope” —

  • “When assessing a prospective lateral partner candidate, those in charge of hiring at a law firm tend to consider a few common factors—ongoing work and client relationships and whether the candidate’s personality and approach will fit within the firm’s culture. But these days, in light of the MeToo movement that has called attention to workplace sexual harassment and misconduct, there are a few more questions that hiring partners might want answered before inviting a lateral on board, according to industry experts.”
  • “The issues facing law firms in the MeToo era are not just academic. In the recent past, several reports have emerged about lawyers who switched firms, only to be dogged by sexual misconduct allegations soon after.”
  • “…it’s unclear how common it is for a lateral hire to leave a new firm in the wake of a harassment or misconduct allegation. According to a recent survey of 50 firms by ALM Intelligence, 8 percent of respondents said that within the past five years they have had a lateral hire leave the firm because of actions the firm thought were unethical. A larger number, 40 percent, said they had lateral hires leave because of ‘behavioral issues’ involving staff or junior lawyers at the firm.
  • “The only way you can diligence this in a lateral context is asking the person if they’ve ever been accused of harassment,” Innocenti [Recruiter] says.
  • “Ninety-two percent of firms said they have had a lateral leave within the past five years because he or she failed to bring the expected book of business, while 80 percent of firms pointed to an inability to form new client relationships as an issue that drove away laterals. Seventy-four percent of surveyed firms said they have had laterals leave because of issues fitting in with other partners.”