Bressler Risk Blog

We covered this matter in May, and now an update: “As writers battle their agents, finding a judge becomes a challenge” —

• “It’s a judicial dilemma that could only happen in Los Angeles. As Hollywood writers take their fight against talent agents to court, the two sides are contending with an unforeseen challenge: finding a judge who doesn’t have personal ties to the entertainment industry.”
• “In the month since writers sued Hollywood’s four biggest agencies, challenging the legality of packaging fees, two Los Angeles Superior Court judges have removed themselves from the case after it was revealed both had personal connections to the TV and movie businesses, which the Writers Guild of America argued would constitute a conflict of interest.”
• “While judicial recusals are common in entertainment cases, experts say that the personal nature of the WGA’s objections is unusual. Litigators typically seek to remove judges from a case based on past rulings, not personal ties.”
• “The writers’ lawsuit focuses on packaging, a lucrative, decades-old practice in which studios pay agencies money for putting together talent on a show. Writers allege that packaging fees violate state fiduciary law, which requires agents to represent clients with undivided loyalty. They claim agents have prioritized packaging over traditional client representation.”
• “L.A Superior Court Judge Marc D. Gross withdrew from the case last month after the Writers Guild of America filed a peremptory challenge, noting that his wife once worked for Endeavor Talent Agency, now a part of WME. The agency is one of the four firms named as defendants in the case.”
• “The case was then assigned to Judge Craig D. Karlan. But the guild lodged another objection, saying that Karlan himself has worked in Hollywood as a writer. In addition, the guild wrote that the judge has been in discussions with CAA about potential projects.”
  “Some legal experts have questioned the ability of lawyers to get judges thrown off cases, saying that it amounts to judge shopping. Some say a personal connection to an industry shouldn’t be an automatic disqualifier.”

And we noted this one, earlier in June, and now: “Judge Removes Lead Prosecutor In Navy SEAL War-Crime Case” —

• “A military judge has removed the lead prosecutor in the high-profile case of a decorated Navy SEAL accused of war crimes in Iraq. The rare ruling comes a week before the trial is scheduled to begin and after President Trump said he is considering pardons for members of the military who are charged with war crimes.”
• “Lawyers defending Special Operations Chief Edward Gallagher accused prosecutors of spying. They uncovered a digital tracking device that was sent in an email to defense attorneys and a journalist covering the case.”
• “The lead prosecutor, Navy Cmdr. Christopher Czaplak, admitted in court to emailing the hidden software. He said the code simply tracked the location and time of messages as recipients opened their emails.”
• “Prosecutors said they were trying to uncover the source of leaked court documents, which persisted despite a gag order. They enlisted the Naval Criminal Investigative Service to look into the leaks.”
• “But the judge, Navy Capt. Aaron Rugh, said he had not been made aware of the prosecutor’s plan to use trackers on the defense’s emails. The judge ordered Czaplak to step away from the case on Monday because of a potential conflict of interest.”
• “Rugh said in a motion that he could not conclude whether the prosecutor had violated rules, but that ‘the danger of investigation is sufficiently real,’ according to Navy Times.”

“Boston Firm Gets $1.2M In Trade Secret Dispute With Ex-Attys” —

• “A Massachusetts law firm specializing in asbestos and toxic tort litigation has won nearly $1.2 million in its suit alleging that several former attorneys stole its trade secrets and started a rival firm, after a state jury returned a verdict in its favor.”
• “…the jury generally concluded that CMBG3 Law LLC — another Boston-based law firm — and certain accused attorneys had conspired to steal electronic databases from Governo Law, converted files and documents the firm owned, and breached their duty of loyalty by misusing confidential information.”
• “Governo Law had alleged in its December 2016 complaint that six attorneys stole proprietary databases, information collections and other files after they failed to negotiate a purchase of the assets from David Governo. The attorneys then resigned en masse after David Governo declined a ‘lowball’ offer for the assets, and converted the stolen electronic data to help them start CMBG3, the suit claimed.”
• “But CMBG3 and the attorneys argued in a pretrial brief that though they had initially hoped to purchase the assets so they could continue operating Governo Law if David Governo retired, they eventually realized that the risk of staying at the firm likely outweighed the benefits of leaving. The attorneys contended that they only took certain files so that they would have access to client materials if necessary once they departed from the firm, saying that they couldn’t ‘risk harm to client interests.'”

“Avoiding Inadvertent Disclosures of Privileged Information” —

• “Difficult privilege issues often arise in litigation, including evaluating whether a party has impliedly waived privilege through its litigation conduct, and the extent to which a party can use a privileged document that has been inadvertently produced. Southern District Judge Nelson Roman and Magistrate Judge Henry Pitman recently addressed two such issues in Barbini v. First Niagara Bank, N.A., 2019 WL 1922041 (April 29, 2019), and In re Keurig Green Mountain Single Serve Coffee Antitrust Litigation, 2019 WL 2003959 (May 7, 2019).”
• “In Barbini, Judge Roman addressed whether a party had impliedly waived its attorney-client privilege by making statements during discovery that implicated its counsel’s advice. In Keurig, Judge Pitman addressed whether a party to whom an allegedly privileged document was inadvertently produced could refer to the contents of the document for the limited purpose of challenging the claim of privilege. Roman found that a privilege waiver had occurred and Pitman found that the recipient of the allegedly privileged document could refer to its contents in challenging the claim of privilege.”
• “‘Although a close call,’ Roman concluded that the HR rep’s testimony coupled with the bank’s above-described defense impliedly waived the privilege, as ‘the bank indirectly assert[ed] reliance on [in-house counsel’s] legal advice as a defense to plaintiffs’ employment discrimination claims.'”
• “In Keurig, defendant inadvertently produced a privileged document to plaintiffs and then clawed it back pursuant to the protective order governing the case. Thereafter, plaintiffs sought to use the contents of the putatively privileged document for the limited purpose of challenging defendant’s assertion of privilege.”
• “In resolving the parties’ dispute, Judge Pitman observed that in several prior Southern District cases, courts have allowed parties who reviewed inadvertently disclosed documents before they were clawed back to use what they learned prior to claw back to challenge the asserted claim of privilege.”
• “Against this backdrop, and notwithstanding the tension between the above-quoted sentences in the protective order, Judge Pitman concluded that the protective order permitted plaintiffs to use the contents of the putatively privileged document to challenge defendant’s claim of privilege, ‘to the extent that [plaintiffs] learned of the contents of the document…prior to the… assertion of privilege.'”

“Kelley Drye Attys’ ‘Bad Decisions’ Don’t Merit DQ, Judge Says” —

• “A Florida federal judge on Friday recommended denying a bid to disqualify Kelley Drye & Warren LLP for passing confidential discovery information to its client, calling the firm’s conduct ‘disappointing’ but suggesting in a strongly worded report that it should instead face sanctions and pay the legal fees stemming from the scuffle.”
• “U.S. Magistrate Judge Thomas B. Smith took the Kelley Drye attorneys to task for the breach, and the firm’s failure to report the breach to the opposing party, Local Access LLC — chiding their ‘sloppiness’ and ‘bad decisions.’ But he ultimately found that there was “no monster under the bed” and that the actions can be solved through sanctions rather than a disqualification.”
• “Its second violation — the firm’s failure to follow the order’s prohibition against sharing highly confidential information with unauthorized employees — is ‘more problematic,’ Judge Smith said.”
• “The firm argued that the information in question — call detail records — is inherently not confidential and that Local Access was wrong to label it as such. ‘This argument would have more teeth if Kelley Drye had bothered to open and review the information produced before transmitting it to Peerless,” the judge said. “I don’t know how the lawyers at Kelley Drye could form a reasonable belief that information was mis-designated when they were unaware of the designation in the first place.'”
• “In a prior but related case, one of the Kelley Drye attorneys had written that ‘playing fast and loose might have worked well for William Shakespeare, but in this court, it should not be tolerated.'”
• “The third violation — the firm’s failure to promptly disclose its violations and take steps to remedy them — is ‘most troubling,’ the judge said… ‘Kelley Drye had an affirmative duty to promptly disclose what it knew to Local Access and the court and its failure to do so until well over a month had passed from discovery of the violation is an intentional violation of the protective order.'”

“Future Conflict Waivers – Simultaneous Adverse Representation of Current Clients” —

• Southern Visions, LLP v. Red Diamond, Inc., 2:18-cv-02039-RDP (N.D. Ala. 2018)
• “Can a law firm convert a current client into a former client in order to take on a new client adverse to the now former client without falling foul of the “hot potato” rule?”
• “At the outset of most of these matters, Red Diamond signed an engagement letter which purported to provide consent to Law Firm for the undertaking of future representations of other clients. This consent applied to “any matter that is not substantially related” to Law Firm’s work for Red Diamond, ‘even if the interests of such clients in those other matters are directly adverse’ to Red Diamond, and ‘even if such representations would be simultaneous.’ Law Firm did not advise Red Diamond to seek, and Red Diamond did not retain, independent legal counsel with respect to these advance conflict waivers.”
• “In 2018, Southern Visions, LLP, a competitor of Red Diamond, filed a patent infringement action against Red Diamond. On December 18, 2018, Southern Visions’ owner contacted Law Firm, seeking to have it represent Southern Visions in the suit against Red Diamond. At that time, certain debt collection matters remained pending in which Law Firm represented Red Diamond. Red Diamond learned Law Firm was considering representing Southern Visions in the suit on December 19, 2018.”
• “On December 21, 2018, Red Diamond informed Law Firm that Red Diamond did not consider itself to have waived any conflict created by Law Firm’s representation of Southern Visions and, regardless, Red Diamond revoked any alleged consent, effective immediately.”
• “In granting Red Diamond’s motion to disqualify, the court determined the following: Law Firm represented two clients directly opposed to one another in pending litigation for three days; Red Diamond did not consent to Law Firm’s representation of Southern Visions; and despite the broad language, the advance waivers did not permit Law Firm to undertake the representation of Southern Visions because there was no consent “after consultation” and Red Diamond unequivocally revoked any alleged consent before Law Firm began representing Southern Visions; and Law Firm could not have reasonably believed suing Red Diamond on behalf of its competitor, Southern Visions, would not adversely affect its relationship with Red Diamond.”

While not directed at the legal profession, still relevant and worth noting: “When disclosing conflicts of interest, wiggle words like ‘may’ may not be good enough” —

• “The Securities and Exchange Commission and journalists have something in common. Both are leery of wiggle words like “may.”
• “The SEC’s problem with ‘may’ revolves around disclosures of conflicts of interest. If the conflict is there, investment advisers better say so, rather than describing the potential conflict as something that “may” affect their recommendations to clients.”
• “A case pending in the U.S. Court of Appeals for the D.C. Circuit focuses on this situation. The Robare Group, a registered investment adviser, has appealed an SEC administrative decision to sanction the firm for failing to disclose conflicts connected to a revenue sharing arrangement it had with Fidelity Investments for the sale of certain mutual funds.”
• “‘[I]t appears many firms used the word ‘may’ in good faith, believing the term was consistent with industry practice and regulatory guidance,’ the law firm Eversheds & Sutherland said in a legal alert on the Robare case. ‘Regardless of how the Circuit Court decides this case, its decision will likely affect how firms draft disclosure documents in the future.'”

“No Fee If Ethics Breach”

• “The claim to disgorge legal fees was reinstated by the New York Appellate Division for the Second Judicial Department: ‘An attorney who violates a disciplinary rule may be discharged for cause and is not entitled to fees for any services rendered” (Jay Dietz & Assoc. of Nassau County, Ltd. v Breslow & Walker, LLP, 153 AD3d 503, 506; see Matter of Montgomery, 272 NY 323, 326; Saint Annes Dev. Co. v Batista, 165 AD3d 997, 998; Doviak v Finkelstein &Partners, LLP, 90 AD3d 696, 699; Quinn v Walsh, 18 AD3d 638; Brill v Friends World Coll., 133 AD2d 729). A cause of action for forfeiture of legal fees based on an attorney’s discharge for cause due to ethical violations may be maintained independent of a cause of action alleging legal malpractice or breach of fiduciary duty, and does not require proof or allegations of damages (see Jay Dietz & Assoc. of Nassau County, Ltd. v Breslow & Walker, LLP, 153 AD3d at 506; Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1).'”

“As NYC Bar considers ethics of litigation finance, it will keep secret the comments it received from the public” —

• “The New York City Bar Association won’t be disclosing comments it solicited as it decides whether to modify ethics rules around third-party litigation finance.”
• “The New York City Bar, one of the nation’s most influential legal associations, is studying how ethics rules and the law treat the fast-growing legal funding industry, which includes loans to plaintiffs and lawyers. Last year, the New York City Bar issued an ethics opinion prohibiting lawyers from borrowing money under contracts in which the return to the lender was a percentage of fees collected in the underlying litigation.”
• “The bar association said it “will not be revisiting” Ethics Opinion 2018-5 banning fee-splitting with outside firms, but it is “open to exploring potential revisions to the ethics rules and/or legislation.” The comment period for its Litigation Funding Working Group has been extended to July 31. Eric Friedman, a spokesman for the bar association, said it won’t make comments public.”

“Second state adopts ABA model rule barring discrimination and harassment by lawyers” —

• “Maine has adopted an ABA model rule that bars discrimination and harassment by lawyers. Maine is the second state to adopt Rule 8.4(g) of the ABA Model Rules of Professional Conduct, according to Bloomberg Law. Vermont was the first.”
• “The ABA rule says it is professional misconduct to ‘engage in conduct that the lawyer knows or reasonably should know is harassment or discrimination on the basis of race, sex, religion, national origin, ethnicity, disability, age, sexual orientation, gender identity, marital status or socio-economic status in conduct related to the practice of law.’ The Maine ethics rule does not bar discrimination based on marital and socio-economic status.”

“Texas Attorney General sides with lawyers challenging mandatory bar membership” —

• “In one way or another, all the lawsuits are claiming that the states’ requirement that attorneys join the state bar association is an unconstitutional violation of attorneys’ First Amendment rights to free speech and association. More specifically, they argue that lawyers shouldn’t be forced to subsidize the state bar’s activities through mandatory membership dues if they don’t agree with those activities for ideological or political reasons.”
• “For example, in the lawsuit in Texas, the plaintiffs are alleging they do not want to be forced to subsidize the state bar’s diversity initiatives, access to justice programs and programs that help prevent deportations, and that promote legislative drafting and advocacy.”
• “The most recent development on this topic is that Texas Attorney General Ken Paxton has filed an amicus brief that sides with the plaintiffs in the case in Texas. He is the only AG to have taken this step so far in all the states where lawsuits have been filed.”

“When Drafting Online Bio, Beware of Client Confidentiality and Advertising Rules” —

• “Attorneys often use their online bios as a way to highlight their successes. However, attorneys need to balance that interest with their obligation of confidentiality under Rule 1.6 of the ABA Model Rules of Professional Conduct.”
• “While most attorneys know not to include privileged information in a public publication, such as an online bio, many attorneys are additionally scrubbing their bios of any confidential information unless the client has specifically consented, particularly in light of a 2018 opinion from the ABA Standing Committee on Ethics and Professional Responsibility. In Formal Opinion 480, the ABA noted that ‘[l]awyers who blog or engage in other public commentary may not reveal information relating to a representation, including information contained in a public record, unless authorized by a provision of the Model Rules.'”
• “Some attorneys may assume that they are free to write about client representations where the representations are a matter of public record. However, relying on Formal Opinion 480, more attorneys and law firms are not including case details or client names on their bios without express client consent. Indeed, may critics have opined that Formal Opinion 480 is not revolutionary but simply confirms the language of Rule 1.6.”

“Don’t Do Me Like That: Sheppard Mullin and Venable Litigators Clash in Tom Petty Estate Battle” —

• “Remember the nasty fight between Tom Petty’s widow and daughters over control of his estate? It just got nastier—and now the mud is splattering the lawyers, too.”
• “In a 335-page filing on Wednesday afternoon, the late singer’s widow, Dana York Petty, and her lawyers from Sheppard, Mullin, Richter & Hampton accused Venable, which represents Petty’s daughters from his first marriage, of having a conflict of interest. Not only that, Dana York Petty asserted the right to fire Venable and demanded that the firm hand over its files.”
• “One thing is clear: There’s no lost love between Sheppard Mullin’s Adam Streisand, who represents the widow, and Venable’s Alex Weingarten, who represents the daughters. They’ve tangled before. Streisand, for example, represented Alan Thicke’s widow Tanya Callau when she was sued by the late actor’s two sons, represented by Weingarten. In 2017, a Los Angeles judge tossed the suit—a win for Streisand.”
• “So is this an actual conflict? It’s hard to say based on the information available. Certainly, you can’t disqualify potential opponents just by cold-calling one of their partners under the pretense of teaming up as co-counsel. If so, an enterprising lawyer could use the strategy to knock out dozens of top-tier adversaries. (Hello? Is this David Boies?)”
• “But there’s a point where a line gets crossed. The key questions here are likely to be whether confidential information was disclosed and whether there was any agreement—written or verbal—to work together.”
• “Another interesting wrinkle: Weingarten doesn’t just represent the daughters in probate matters. He also represents Petty Unlimited, the initial business entity created by Dana to hold Tom’s artistic property—the one she and her step-daughters are fighting over, in the civil suit.”

“Some (Tentative) Good News For Alan Dershowitz… And Some More Bad News” —

• “It took awhile, but Professor Alan Dershowitz has finally gotten some good news, however tentative, in the looming defamation case brought against him by a sex trafficking victim of Dershowitz’s buddy and former client Jeffrey Epstein. To recap, a few of Epstein’s underaged victims claim that Epstein directed them to have sex with Dershowitz. Dershowitz strenuously denies the claim and goes on television demanding that his accusers take him to court if they really believe these claims. So one of his accusers has taken him to court.”
• “Dershowitz kicked off the proceedings by immediately moving to have Boies Schiller, the pro bono attorneys for the now-adult woman, disqualified. This move took her attorneys aback since the filing violated all manner of Judge Preska’s individual rules and was promptly struck from the docket.”
• “Upon hearing from Boies Schiller, Judge Preska has determined that a pre-motion conference would be a waste of her time given the clearly unresolvable conflict and asked the parties to set up a briefing schedule.”

“Michael Flynn situation comes into focus with ex-lobbying partner case” —

• “President Donald Trump’s former national security adviser Michael Flynn ‘certainly’ will testify against his ex-lobbying partner Bijan Kian at a trial this summer, a Virginia-based federal prosecutor said in court Thursday.”
• “The assertion comes amid a week of turmoil for Flynn, after he fired the lawyers who advised him on foreign lobbying issues and helped him cut a plea deal with special counsel Robert Mueller. He hired a bevy of new attorneys this week. Two came to the federal court hearing in Northern Virginia on Thursday to watch the arguments about Kian’s case — which often turned to discussion of Flynn. Speculation has mounted this week over whether Flynn will continue to help prosecutors, given one of his new attorney’s criticisms of the Mueller investigation and willingness to share conspiracies about the Justice Department.”
• “Kian’s attorneys said Thursday that Covington mistepped by continuing to advise both Flynn and his lobbying group after December 1, 2017, when Flynn pleaded guilty in the Mueller investigation and agreed to cooperate with that and other investigations, like the one into Kian. The firm should have ended its representation of the Flynn Intel Group then, instead of helping both Flynn and the company determine when they could share information with prosecutors.”
• “Kian’s attorney Mark MacDougall called it a ‘textbook conflict of interest’ when Covington continued to represent both Flynn and the lobbying group. The firm shouldn’t have been able to counsel Flynn on sharing details about Covington’s work for the Flynn Intel Group with prosecutors, MacDougall said.”
• “At least one attorney from Covington may be called to testify at the Kian trial, if the judge allows it, a prosecutor said Thursday. Covington has declined to comment on the situation and the firm’s representation of Flynn. Prosecutors say the firm lawyers did nothing wrong. It’s likely that Kian’s team could try to attack both the law firm’s work and undermine Flynn’s credibility before the jury.”

A few recent draft publications of note from the Sedona Conference related to information governance issues:

“The Sedona Conference Commentary on Legal Holds, Second Edition: The Trigger & The Process” —

• “This Commentary provides practical guidelines for determining (a) when the duty to preserve discoverable information
  arises, and (b) once that duty is triggered, what should be preserved and how the preservation process should be undertaken.”
• “The preservation obligation typically arises from the common-law duty to avoid spoliation of relevant evidence that may be used at trial6 and is not explicitly defined in the Federal Rules of Civil Procedure. Nonetheless, the Federal Rules and state counterparts governing the scope and conduct of discovery provide a framework for interpreting the duty to preserve, which the guidelines set forth below interpret and apply.”

“Commentary and Principles on Jurisdictional Conflicts over Transfers of Personal Data Across Borders” —

• “The goal of this Commentary is to provide: (1) a practical guide to corporations and others who must
  make day-to-day operational decisions regarding the transfer of data across borders; and (2) to provide a framework for the analysis of questions regarding the laws applicable to cross-border transfers
  of personal data.”
• “The Underlying Tension. Data lies at the crossroads of the inherent tension between the free flow of information on the one hand and security and privacy on the other… others value security and privacy highly and believe that free flow needs to be limited based upon principles such as consent, data minimization, and security by design. For example, whereas the U.S. generally distinguishes between public and private data, and affords the latter protections in specific areas, Europe protects the underlying right of a natural person to determine the disclosure and use of his or her personal data and affords such right general constitutional protection.”
• “What is therefore needed, and what this Commentary hopes to achieve, is to distill and update key choice-of-law principles with respect to personal data. In our view, comity is the bulwark against chaos, and how comity should be applied is one of the goals of this guide. When comity cannot be the answer, the Commentary proposes steps on how conflicts should be resolved. This paper outlines the complex data and legal backdrops that cause conflict and proposes a set of principles to help achieve resolution.”
• “At present, there is no universal framework for cross-border data transfers in a globalized context. There are, however, certain generally recognized International Law Principles that apply to all nations, which can serve as a starting point for mitigating the conflict-of-laws issue with respect to personal data.”

Let’s look at some of the latest making news, starting with a side-switching accusation: “Advocates Seek To DQ Jones Day In Calif. Homelessness Suit” —

• “Advocacy groups suing several Southern California cities over their treatment of homeless residents have asked a California federal court to disqualify Jones Day from representing three of the cities, saying the firm previously represented a related advocacy group in a similar suit.”
• “Housing is a Human Right and others told the court Wednesday that Jones Day previously represented People’s Homeless Task Force pro bono in a similar lawsuit, saying that the two organizations comprised substantially the same people and had overlapping missions. One affidavit described the relationship as akin to The Sierra Club and The Sierra Club Foundation.”
• “‘Jones Day is switching sides and attacking former clients on the very matters the firm represented them on, mandating disqualification without a signed and knowing waiver of the conflict by PHTF,’ the motion said.”
• “The motion also said that the attorneys for Housing is a Human Right went forward with the motion without finishing the usual prefiling process of conferring because one of the cities, San Clemente, was reportedly moving ahead with a plan to build a homeless shelter on land that had previously been ruled too unsafe for an animal shelter. It seeks to disqualify not only Jones Day, but also the city attorneys in San Clemente and city attorneys for Jones Day’s other clients.”

“Lewis Brisbois Properly Disqualified Based on Conflict” —

• “The Court of Appeal has affirmed an order disqualifying the law firm of Lewis Brisbois Bisgaard & Smith from representation in three consolidated cases involving a family trust because it once represented the law firm for the other side and the conduct of one of its lawyers is in issue in the present litigation.”
• “Lewis Brisbois had represented Bohm Wildish (then Bohm, Matsen, Kegel & Aguilera LLP)—but not Bohm, individually—in a professional negligence action against it, Olson v. Grad. Although Bohm Wildish was dismissed without prejudice in 2016, as Heisler saw it, that was of no consequence… Responding to Lewis Brisbois protest that James Bohm was never its client, he [Judge] wrote: ‘The assertion that Lewis Brisbois breaches no duty to Bohm Wildish—the law firm—by making allegations against Bohm as an individual ignores the fact that Bohm Wildish acts through the attorneys it employs. Consequently, an allegation of professional misconduct against Bohm is also an allegation against Bohm Wildish.'”
• “Heisler relied on the Court of Appeal’s 2003 decision in Hernandez v. Paicius, which emanated from a differently constituted panel of the Fourth District’s Div. Three. There it was held that a judge should have granted a mistrial after the defendant’s lawyer vigorously cross-examined the plaintiff’s expert witness, a medical doctor, as to allegations against him of malpractice and unethical conduct. The doctor was a client of the defendant’s attorney.”

“Takeda loses ‘spurious’ bid to DQ Baker Botts in antitrust case” —

• “Takeda Pharmaceutical Company on Thursday lost a bid to disqualify Baker Botts from representing generic drug company Zydus Pharmaceuticals Inc in a lawsuit accusing Takeda of an antitrust violation.”
• “Affirming a magistrate judge, U.S. District Judge Freda Wolfson in Trenton, New Jersey rejected Takeda’s argument that it had an implied attorney-client relationship with Baker Botts because of the firm’s previous representation of Takeda’s co-plaintiff in related patent litigation.”
• The judge wrote: “Takeda’s argument that it nonetheless had a reasonable or objective belief that Baker Botts was acting as its attorney — in the face of the agreement’s plain language evidencing the contrary — is spurious at best…. The plain terms of the agreement make clear that the parties did not intend an attorney-client relationship, implied or express, to arise.”

Interesting intersection of issues. Here in California, many point to the prohibition against non-competes as a significant factor in the rise of Silicon Valley. But there have always been clever workarounds, some of them “golden handcuff”/incentive based in nature. But the practice of including uneforceable terms is facing the spotlight: “A Call For An Ethics Opinion On California Lawyers Drafting Non-Competes” —

• “The center’s letter says including a non-compete clause in an employment contract could deceive a California employee into thinking the language is enforceable in court, prompting them to change their behavior.”
• “The center claims such concerns are not just theoretical. It cites academic research indicating that 19 percent of employees in California are subject to non-compete clauses, roughly the same percentage as workers in states where such contract provisions are permissible.”
• “The Center for Public Interest Law also wants the State Bar committee to examine the propriety of attorneys assisting employers with the drafting or reviewing of arbitration clauses with unenforceable terms, such as requiring that arbitration must occur in an out-of-state forum or allowing for the employer to unilaterally select the arbitrator.”
• “‘A lawyer advising a client to adopt an illegal or unenforceable term, who knows or should have known about its unenforceability, would seem to be in violation of Rule 8.4(c) prohibiting conduct involving dishonesty, deception, and fraud,’ the letter states.”
• “The center argues that a lawyer engaging in such activity would also seem to violate Rule 1.2.1, which prohibits counseling a client to engage in conduct that the lawyer knows is fraudulent or a violation of law. The group backs up this claim by noting it is a violation of California’s Labor Code to ‘require any employee or applicant for employment to agree, in writing, to any term or condition which is known…to be prohibited by law.'”

“New Scrutiny For NDAs In Sexual Harassment Matters” —

• “In the wake of the #MeToo movement, legal and regulatory scrutiny regarding the use of nondisclosure agreements by companies to resolve allegations of sexual harassment and misconduct continues to increase. Such scrutiny has recently featured prominently in two high-profile sexual harassment matters: the Wynn Resorts investigation and the various legal proceedings following the allegations against Harvey Weinstein.”
• “Both in-house and outside counsel for companies with senior executives facing such allegations should take note of these developments, as they call into question whether the use of NDAs could in certain circumstances amount to investigatory obstruction, or a violation of ethical obligations.”
• “The report focuses in part on Wynn Resorts’ use of nondisclosure agreements. It concludes that the company’s efforts to keep the allegations against Wynn secret — thereby potentially avoiding reporting the settlements to the company’s shareholders and various regulators — included executing various NDAs with alleged victims of harassment and sexual misconduct.”
• “As detailed in the commission’s final report, the Massachusetts Gaming Commission took the extraordinary step of requesting that Wynn Resorts waive both its confidentiality rights and any rights to recover for breach of the nondisclosure provisions of any NDAs related to the commission’s investigation, which Wynn Resorts agreed to do. Following the release of the report, the Massachusetts Gaming Commission announced that it would be initiating adjudicatory proceedings against Wynn Resorts, after which the commission will determine what, if any, penalties to levy against the company.”
• “Weinstein Investigation… Based on public coverage of the NDA, it appears to have prevented Weinstein’s former personal assistant from discussing the allegations with her friends, family, colleagues, medical practitioner or legal representative, and required her to provide advance notice to Weinstein’s counsel and use ‘all reasonable endeavors’ to limit any disclosures against Weinstein in any future criminal proceedings. She also stated that she was not permitted to retain a copy of the agreement. While the NDA has not been publicly released, the former assistant described the NDA as ‘a morally lacking agreement on every level.'”
• “This month’s developments reinforce the need for companies to reevaluate the use of NDAs as part of this process, suggesting that even in the absence of any legislation, companies and their counsel may risk significant legal and regulatory exposure for their use of NDAs. In particular, both the Wynn and Weinstein investigations feature careful scrutiny of the terms of the respective NDAs, the manner in which the NDAs were ultimately negotiated and whether the confidentiality provisions of the NDA were designed to thwart future criminal investigations.”