Bressler Risk Blog

“Risk Management Issue: Is e-mail ‘spoofing’ covered under the computer fraud provision in an insurance policy?” —

• “Medidata submitted a claim for the loss under its insurance policy issued by the Defendant Federal Insurance Company (‘Federal’). The policy included a Computer Fraud Coverage provision, which covered ‘direct loss of Money, Securities or Property sustained by an Organization resulting from Computer Fraud committed by a Third Party.’ The policy defined ‘Computer Fraud’ as ‘the unlawful taking or the fraudulently induced transfer of Money, Securities or Property resulting from a Computer Violation.’ In turn, ‘Computer Violation’ included both ‘the fraudulent: (a) entry of Data into . . . a Computer System; [and] (b) change to Data elements or program logic of a Computer System.'”
• “On appeal, the Second Circuit rejected Federal’s argument that the spoofing attack was not covered and affirmed the lower court’s ruling. In particular, the Court held that “the spoofing code enabled the fraudsters to send messages that inaccurately appeared, in all respects, to come from a high-ranking member of Medidata’s organization. Thus the attack represented a fraudulent entry of data into the computer system, as the spoofing code was introduced into the email system. The attack also made a change to a data element, as the email system’s appearance was altered by the spoofing code to misleadingly indicate the sender.” Id. at 118-119. The Court further concluded that spoofing attack “clearly amounted to a violation of the integrity of the computer system through deceitful and dishonest access, since the fraudsters were able to alter the appearance of their emails so as to falsely indicate that the emails were sent by a high-ranking member of the company.” On this basis, the Court concluded that Medidata’s losses were covered by the terms of the computer fraud provision. Id. at 118.”

“How Law Firms Can Preserve In-House Privilege” —

• “arlier this decade, there were several high-profile decisions in states like Georgia and Massachusetts examining the extent to which law firms enjoy the protections of the in-house privilege. The complicating factor, according to courts, was that if a law firm is seeking internal advice about an ongoing client factor, there may be a conflict of interest between the law firm’s interests and the client’s interests. Indeed, some critics maintained, if a lawyer is seeking legal advice internally while a client representation is ongoing, is it possible that the lawyer is thinking about his or her own interests before the client’s? However, most jurisdictions have soundly resolved this issue in favor of law firms to protect their privilege with their in-house general counsel—with some parameters and caveats.”
• “Although general counsel or the risk manager of a firm is often part of the firm’s management or leadership, it is helpful to remember to treat the general counsel or risk manager as counsel to the firm, both in form and in substance. For some firms, this means having a specifically-identified general counsel or deputies. A constant pro hac assignment of GC responsibilities for a revolving door of firm attorneys may cause a third-party to question whether the firm is truly treating their in-house attorney as an attorney to the firm.”
• “Ensuring the effectiveness of in-house counsel typically involves the assignment of responsibilities to that counsel, including the investigation and analysis of matters that might involve attorney exposure and generally advising firm attorneys on risk management. In-house counsel’s role may also include purchasing legal malpractice insurance, identifying and resolving conflicts of interests, advising attorneys on ethical obligations, reporting potential claims and actual claims, and updating the status of the firm’s partnership agreement or corporate structure.”

“Podcast on paralegal ethics” —

• “Because paralegals hold vulnerable information in trust, competence in ethical rules is crucial to protecting their firm, cients, and even themselves. But what exactly are paralegal ethics and why do they matter?”
• “Those are some of the questions that are addressed in this recent podcast of the Paralegal Voice, in which the hosts discuss a broad overview of basic ethics definitions and then zero in on best practices for conscientious adherence to ethics rules.”

“O’Melveny Legal Malpractice Drama Heads Back to Court” —

• U.S. District Judge Christina Snyder is presiding over a long-running case that pits Aletheia Research and Management’s Chapter 7 estate trustee, Jeffrey I. Golden, against the BigLaw firm.
  But Golden likely will face an uphill battle to convince Snyder that arbitrator Gary Feess “disregarded” the law in June when he found that O’Melveny’s joint representation of Aletheia and its founders didn’t violate conflict of interest rules.
  Golden now argues that public policy demands vacating the Feess’s ruling because it ignores state law prohibiting attorneys from jointly representing clients with conflicting interests without informed written consent.
  O’Melveny argues that Golden’s allegations are baseless. Feess found no conflict in the firm’s joint representation and Golden “has not proved that anything O’Melveny did or failed to do caused damage to Aletheia,” it said.

“Firm DQed After Repping Both Sides In Business Sale Dispute” —

• “A New York federal judge has disqualified Tannenbaum Helpern Syracuse & Hirschtritt LLP in a business sale dispute involving a marketing company that was acquired by a rival and the company’s previous owners, finding the law firm had concurrently represented both sides.”
• “As the dispute was ripening in October 2018, Tannenbaum Helpern counseled both the Stephensons and Mission Media, including its then-chief operating officer and general counsel, according to the opinion.”
• “‘It very may well be that there is an innocent explanation for [Tannenbaum Helpern’s] conduct in October 2018 while it represented both Mission Media and the Stephensons, but the Stephensons have not provided it to this court,’ the opinion said.”

“Insys Exec Trial Fair Despite Alleged Weil Conflict, Judge Says” —

• “A convicted former Insys Therapeutics Inc. executive ‘got a fair trial’ despite Weil Gotshal & Manges LLP representing him during his criminal trial while guiding the company through its bankruptcy, a federal judge said following a fiery Thursday afternoon hearing over the alleged conflict.”
• “At one point during the hearing, one of Simon’s new attorneys, William Fick of Fick & Marx LLP, questioned why Weil Gotshal “billed $3 million to ride the coattails” of one of the lawyers for Insys founder John Kapoor.”
• “‘My gut reaction here is, he got a fair trial in this courtroom,’ Judge Burroughs said at the end of a contentious, hourlong sparring match between Simon’s new legal team and federal prosecutors. “He got a fair trial, they all did,” the judge said. ‘I don’t love what Weil did here and I think it could have been handled other ways, but I am not sure whether it rises to the level of a new trial.'”

“Waivable Conflict Not Validly Waived, Leads To Remand for New Trial” —

• “In United States v. Arrington, 17-4092-cr (October 18, 2019) (Lynch, Lohier, Judge Brian M. Cogan of the United States District Court for the Eastern District of New York, sitting by designation), the Second Circuit vacated Defendant-Appellant Roderick Arrington’s convictions for murder in aid of racketeering and related convictions, and remanded for a new trial, holding that he was not provided with adequate information prior to waiving his attorney’s actual conflict of interest.”
• “While defendants should have their counsel of choice, and have the right to waive most conflicts of interest, the defendant needs to have sufficient information and independent advice to make a knowing and intelligent waiver of the right to conflict-free counsel. The Court of Appeals has long policed the boundaries of this issue and Arrington will give courts and counsel further guidance about how to approach these notoriously tricky Sixth Amendment questions.”

“Pa. Examples Show How Vendor Data Breaches Are Putting Law Firms at Risk” —

• “While law firms are often considered a weak point in the security of corporations’ sensitive information, firms or their employees have frequently suffered potential leaks through their own third-party vendors, according to Law.com’s investigation of law firm data breaches across the country. The breaches that law firms reported to state authorities varied in severity, and some incidents were unrelated to the strength of the law firm’s cyber defenses and didn’t risk or relate to client data.”
• “The Law.com investigation also revealed that three Pennsylvania firms—Philadelphia-based Blank Rome and Goldberg, Miller & Rubin, as well as Pittsburgh-based Cipriani & Werner—reported breaches, albeit not in Pennsylvania. All three of those incidents involved vendors as the access point.”
• “At Blank Rome, it was an outside accounting and consulting firm; at Goldberg Miller, it was a vendor contracted to maintain the firm’s electronic files ‘for backup and disaster recovery purposes’; and at Cipriani & Werner, the breach was believed to have originated with an online portal set up by a payroll software vendor.”
• “Jon Washburn, the chief information security officer at Stoel Rives, said the legal community has become more attuned to the risk of vendor threats, with many firms ramping up their efforts to address third-party risk. Some law firms now require that vendors that access, store, process or transmit confidential information be able to demonstrate through certifications or reports that the vendor has strong controls in place to reduce the risk of a data breach, Washburn said.”

“Lawyers are failing at cybersecurity, says ABA TechReport 2019” —

• “‘In fact, the results are shocking and reflect little, if any, positive movement in the past year or even in the past few years,’ reads the article on cybersecurity released Wednesday. ‘The lack of effort on security has become a major cause for concern in the profession.'”
• “Since 2018, the number of respondents reading vendor privacy policies fell from 38% to 28%. While a mere 23% investigated a vendor’s history, even though 94% said vendor reputation mattered when deciding who to contract with.”
• “Among other findings, the 2019 survey reports that lawyers using cloud-based technology increased slightly, from 55% to 58% since the 2018 report. Only 25% of respondents reported that they are reviewing ethics opinions related to cloud technology. Ironically, the survey indicates that lawyers are tepid about the cloud because of cybersecurity concerns.”

“Feds Fight To Keep Judge Whose Ex-Clerk Works On Case” —

• “The government urged a Pennsylvania federal court Friday not to disqualify the judge presiding over its decades-old Clean Water Act lawsuit, arguing that the judge can be impartial even though an assistant U.S. attorney working on the case once clerked for her.”
• “In a 12-page response brief, the federal government argued that the defendant, property owner Gizella Pozsgai, filed a ‘meritless’ motion seeking to disqualify U.S. District Judge Anita B. Brody due to her relationship with Assistant U.S. Attorney Landon Y. Jones III, who clerked for the judge 14 years ago. ‘The fact that a judge’s former law clerk is representing a party in a case before the judge is not sufficient to make a reasonable person question the judge’s impartiality,’ the brief said.”
• “Jones declined to recuse himself or provide a list, but he admitted that he’s interacted with the judge on a few social occasions over the years and he’s attended a few ‘law clerk reunion’ events, including the judge’s portrait unveiling.”
• “Shortly afterward, Pozsgai’s counsel filed a motion to disqualify the judge, pointing out Jones’ own admissions and multiple public ‘extra-judicial statements’ that Judge Brody made expressing her strong familial sentiments toward former law clerks.”
• “The government noted that courts routinely conclude that a former law clerk’s appearance does not create a ‘reasonable appearance of partiality.’ Also, the government argued disqualifying such judges would burden the courts and lead to a flood of frivolous disqualification motions.’Disqualification would penalize law clerks for their service to the judicial system, and cause judges to suffer a limitation in their recruitment of future law clerks,’ the brief says.”

And from the always insightful Professor Alberto Bernabe: “Wisconsin Appellate Court disqualifies judge because of a ‘Facebook friendship’” —

• “At the end of last year, I reported that the Florida Supreme Court issued an opinion holding that sometimes, the relationship between a judge and a litigant or lawyer might be a basis for disqualification of the judge but that there is no reason that Facebook “friendships” should be singled out and subjected to a per se rule of disqualification.”
• “I am writing about this today because I just read that the Wisconsin Appellate Court has issued an opinion disqualifying a judge because of an undisclosed ‘Facebook friendship.'”
• “The case is called In re Paternity of BJM, and you can read the opinion here.”

Yesterday we highlighted departure rules. Today we look at the other side (upside down?) of the coin. First: “Attorney takes client information from law firm and is ordered to return the data and pay $775,000.” —

• “Attorney Chelsea Merta was ordered to pay more than $775,000 to the Stange Law Firm where she was employed for expenses incurred in its attempt to get her to return electronic files she was accused of taking before her she resigned. The funds are being requested to cover the law firm’s costs of investigating the matter, including an exam conducted by a forensics expert to determine exactly what information had been hijacked and associated attorney fees. This was reportedly more than $100,000. Merta was also ordered to either destroy or return the stolen files to the firm. She served a two-day jail sentence for contempt earlier this year.”
• “In a confession of judgment recently filed, Merta admitting to taking no less than 22,000 data files from the law firm in February 2018, a week before her resignation. She had indicated she wanted to contact the clients she had previously represented with the firm and urge them to work with her again at her own firm. She said she had made contact with a number of clients, notifying them of her resignation. However, this wasn’t entirely true.”

“Cokinos Young, Former Marketing Director Settle Suit Over Confidential Client Info”

• Cokinos Young has settled a suit it filed in July against its former marketing director, Brittany O’Brien, that alleged she kept confidential client contact information when she resigned and threatened to use client cellphone numbers to ‘make this a war.'”
• “On Wednesday, 113th District Court Judge Rabeea Collier of Houston signed an agreed permanent injunction and final judgment that restrains O’Brien from disclosing or using any confidential or trade secret information she obtained from Cokinos Young, a midsize construction law firm based in Houston.”
• “It also requires O’Brien to return any confidential information she has from the firm “to the extent she has any,” including promotional materials and all documents she used as director of client and external relations for Cokinos Young. And she was ordered to return or delete any private contact information for the firm’s clients other than those who contact her. The order does not prevent O’Brien from communicating with people or companies who contact her on their own.”
• “O’Brien’s attorney, Gregg Rosenberg of Rosenberg & Sprovach in Houston, said his client is pleased the litigation settled. He said O’Brien left Cokinos Young because she did not want to sign a non-compete agreement. ‘This case is very unique because we never felt she did anything wrong. All Brittany did was refuse to sign a noncompete when she was working there,’ he said. The settlement frees O’Brien to seek another job in her field, he said, noting that nothing in the order precludes her from working in the legal industry.”

Excellent and comprehensive article from the co-chair of the firm’s legal ethics and malpractice group, and two associates from Harris Wiltshire & Grannis LLP: “6 Ethics Tips For Attorneys Making Lateral Transfers” —

• “Every year, approximately 3,000 partners at AmLaw 200 law firms will lateral to a new firm. That number is rising: Law360 reported that in the first half of 2019, there was an 18% overall increase in the number of attorney hires across all tiers, with partner lateral moves rising by 8%.Given these trends, it is more important than ever for partners to understand the steps they must take to adhere to the ethics rules when making a transition. This article outlines those steps and provides a practical overview of the pertinent rules.”
• “First, review your firm’s partnership agreement…Notice: How much advance notice of a departure is required? Typical provisions call for 30-60 days. What are the consequences of a departure before the end of the notice period? Can the notice period be waived?”
• “Notification of clients: While the ethics rules provide guidance on how to notify clients, you should also be cognizant of what, if anything, your partnership agreement says about notification… Do not solicit associates or staff members while you are still a partner at your current firm.”
• “Once you have decided to move, you should begin the process of getting your client files in order. To do this, save all documents and emails in designated client folders. Do not download any files or email any documents to yourself. Any manipulation of a client’s file — downloading documents onto a USB, emailing correspondence to a personal email account, etc. — will leave a record. Your current firm could be alerted to the manipulation, and could misconstrue it as an effort to remove client files without firm or client authorization.”
• “Remember that the client file is the client’s property — it does not belong to you or your firm. The firm acts as the custodian of the client file if and until the client requests her file. Accordingly, your current firm is obligated to maintain the client’s file until instructed in writing to provide the file elsewhere… If your client intends to follow you to your new firm, have her request her file upon your departure… As a general matter, a lawyer cannot contact clients in advance of informing her current firm of the departure… Some jurisdictions offer guidance or impose requirements regarding the content of your departure notice to clients. “
• “Pursuant to ABA Model Rule 1.7, among others, a lawyer has an ethical duty to check if conflicts exist at the new firm before making the move. To do that, you’ll need to provide the new firm with a list of all your clients, and all clients about whom you learned information even if you did not perform work for them.
  But note that pursuant to ABA Model Rule 1.6,[11] you cannot provide that information until “substantive discussions regarding the new relationship” have begun. ABA Model Rule 1.6(b)(7) allows for a lawyer to disclose nonprivileged information about her clients and the nature of her representation, provided disclosure does not prejudice the client.”

And more from Ethical Grounds: The Unofficial Blog of Vermont’s Bar Counsel: “Leaving a Law Firm” —

• “As for a ‘to do’ list, I’ve included several helpful resources at the end of this post. Many draw from ABA Formal Opinion No. 99-414: Ethical Obligations When a Lawyer Changes Firms.”
• “The key takeaway from ABA Opinion: both the firm and the departing lawyer must ensure that the lawyer’s departure does not have a ‘material adverse effect on the interests of the clients with active matters upon which the lawyer is currently working.'”
• “Here’s an outline of the rest of the ABA Opinion:
  • Notice to clients. The firm and lawyer should provide notice of the lawyer’s “pending departure in a timely fashion to clients for whose active matters (s)he currently is responsible or plays a principal role in the current delivery of legal services.”
  • Who sends it? When possible, joint notification from the firm & departing lawyer is preferred.
  • Include:
    • when the lawyer is leaving & where the lawyer is going;
    • whether the firm & lawyer are able & willing to continue representing the client;
    • that the client has the absolute right to choose to remain with the firm, to go with the lawyer, or to secure new representation altogether.
  • Do not include: The departing lawyer “should not urge the client to sever its relationship with the firm . . . [or] disparage the firm.”
  • Other considerations. The departing lawyer should be mindful not to:
    • engage in any conduct that is deceitful or dishonest (secreting files is big no-no);
    • do anything that would put client property, data, information, or confidences at risk; or,
    • improperly solicit business from clients with whom the lawyer has no prior working relationship.”

“PTAB Axes Nasdaq Patents Under Alice, Won’t DQ Fish” —

• “The Patent Trial and Appeal Board on Tuesday cleared Fish & Richardson PC to represent Miami International Holdings Inc. as it lodges covered business method reviews of patents owned by a subsidiary of its former client, Nasdaq, and then invalidated claims from two of those patents.”
• “While Fish & Richardson did prosecute patents for Nasdaq, it was not involved in these specific Nasdaq ISE LLC patents, and there’s no evidence that confidential information has been changing hands, a panel of six judges overseeing the various CBMs said.”
• “Fish & Richardson is representing Miami International Holdings, which operates electronic trading exchanges such as MIAX, in these various reviews. The firm had represented Nasdaq from February 1998 through October 2011, prosecuting several patents, but not the ones in suit here, according to the PTAB. In 2016, Nasdaq acquired International Securities Exchange Inc., which later became Nasdaq ISE, and Fish & Richardson has never represented the subsidiary, according to the board.”

“Fake law firm boss disqualified for a second time” —

• “The director of a bogus law firm which falsely claimed to be registered with the Solicitors Regulation Authority has been banned from running a company for 10 years.”
• “French Fox Limited was incorporated in 2016 and promoted itself as a solicitors’ firm, claiming on its website it had experience in several sectors and could provide a number of services.”
• “But in reality the outfit was not registered with the SRA and did not have permission to display the Legal500 logo. Following complaints, French Fox was wound up in the High Court last year after a petition was submitted by the Insolvency Service.”

(Part of the joy in this blog are the surprising little details…  and people ask me the story behind my LLC name…)

“L’Oreal Seeks DQ Of Lerner David In Cosmetics IP Row” —

• “L’Oreal USA Creative Inc. urged the Western District of Texas to disqualify Lerner David Littenberg Krumholz & Mentlik LLP from representing Drunk Elephant LLC in the case involving a patent that covers cosmetic compositions, as the firm represented parent company L’Oreal USA Inc. from 2003 to 2016 in numerous patent matters, gathering confidential information along the way, according to Tuesday’s motion to disqualify.”
• “Lerner David is still listed as the attorney of record with the U.S. Patent and Trademark Office for at least 72 L’Oreal patents; it worked on patents directly related to the patent in question, U.S. Patent No. 7,179,841; and it gathered numerous bits of confidential information about the cosmetic giant that could be used in the present litigation, according to a memorandum accompanying L’Oreal’s motion to disqualify. That meets the criteria for disqualification under the Texas Rules of Professional Conduct, according to the memorandum.”

“Water-Sewer Lawsuit Against City Has New Attorney, Carlos Moore” —

• “Earlier this week, attorney Carlos Moore of the Cochran Firm stepped in to represent Jackson residents who are suing both Siemens Inc. and the City of Jackson. Moore, who has offices in Ridgeland and Grenada, entered the case following a judge’s order last month to dismiss former City Attorney Pieter Teeuwissen due to a conflict of interest.”
• “The lawsuit represents six plaintiffs whose water service was cut off after they could not pay exorbitantly high and inaccurate water bills. One of the plaintiffs had a water bill for $34,000. The lawsuit alleges that the City knew that the water-sewer billing system was faulty but did not alert account holders. Some were making payments when their service was cut.”
• “Judge Tiffany Grove disqualified Teeuwissen, who filed the lawsuit along with his co-counsel, because of his past role as city attorney, a position he held from July 1, 2009, to Sept. 30, 2013. He is currently counsel for the Hinds County Board of Supervisors.”

But then: “City of Jackson wants two more attorneys disqualified from water billing lawsuit” —

• “In the court filing, the city argues Carlos Moore and James Bryant, both members of the Cochran Law Firm, should not be allowed to represent three plaintiffs in a lawsuit against Jackson.”
• “According to the documents the City is represented by another member of the Cochran firm in the Siemens lawsuit. The filing also states Moore, Bryant and plaintiffs intentionally violated the Mississippi Rules of Professional conduct and the order of the court which was an explicit warning not only to attorneys but also to Plaintiffs in the case.”

“Judge Denies Motion to Disqualify Former Major Leaguer’s Law Firm” —

• “On the eve of trial of former Major League Baseball All-Star outfielder Lenny Dykstra’s malpractice suit against a law firm he hired after he was allegedly beaten by deputes in the Men’s Central Jail in 2012, a judge Friday denied that firm’s motion to disqualify the current group of lawyers from representing him.”
• “Los Angeles Superior Court Judge Patricia Nieto stated in a written ruling that although the action of an attorney for Dykstra’s current firm, Pierce, Bainbridge, Beck, Price & Hecht LLP, regarding an email communication was ‘improper and potentially warrants punishment,’ disqualification was not the proper remedy.
  The suit alleges Boucher LLP lawyers did not conduct meaningful trial preparation and discovery during a 14-month period, actions amounting to ‘attorney misconduct and client abandonment.'”
• “Dykstra is suing the firm Boucher LLP. On Sept. 29, Pierce Bainbridge lawyer Thomas D. Warren sent an email — a copy of which is contained in Pierce Bainbridge’s court papers — to attorneys representing the Boucher LLP firm stating that he would like to speak to the head of the firm, Raymond Boucher, about potentially resolving the case ‘unless you have any objection.’ A copy of the email was sent to Boucher, according to the Pierce Bainbridge court papers. In their court papers, the Boucher attorneys called the email a ‘calculated move to help Dykstra extract money from defendants by getting between them and their attorneys.'”
• “Lawyers for Boucher LLP state in their court papers that Dykstra repeatedly lied to the Boucher attorneys and that they eventually realized they had little or no chance of winning his case. When the Boucher attorneys met with Dykstra in September 2016 to tell them they were withdrawing their representation, he fired them shortly after the meeting began, according to the Boucher attorneys’ court papers.”

“Judge Won’t DQ Foley & Lardner Attys Yet In Family Biz Fight” —

• “A Wisconsin federal judge has refused to disqualify two Foley & Lardner LLP attorneys in a yearslong shareholders dispute between extended family members but is making the pair submit to a deposition, warning that they may have to step down as trial counsel if their testimony is required during that proceeding.”
• “U.S. District Judge J.P. Stadtmueller on Wednesday referred to the dispute over whether or not the attorneys could be deposed and should be disqualified as ‘tangled’ and arguments on both sides ‘precarious,’ writing in his order that there was currently not enough basis to disqualify Foley attorneys Bryan House and Thomas Shriner Jr.”
• “However, he said House and Shriner had made themselves potential fact witnesses by supplying information personally in support of a motion filed by their clients in August, and the pair should, therefore, be deposed.”
• “House and Shriner, who represent the Bechthold contingent, each submitted a declaration in support of the motion for summary judgment in August, though the court noted they could have had other parties supply the same information. Not long after, the Deweys filed a motion to disqualify the pair, saying House and Shriner were involved in the conduct at the heart of their suit, including efforts to allegedly hide real estate assets from the Deweys and holding conversations about a vote for a 2014 bylaw amendment that places certain restrictions on selling shares in the companies.”
• “‘Attorneys who inject themselves as fact witnesses in the proceedings cannot claim harassment and undue burden when the opposing party seeks discovery from them,’ Judge Stadtmueller wrote.”