Bressler Risk Blog

The ABA Law Practice’s “Law Practice Today” magazine issue focused on ethics my queue thanks to Alberto Bernabe of the Professional Responsibility Blog: “Law Practice Today Issue on Ethics“–

• “When the Rules Stagnate Innovation, Change the Rules: Is the profession of law its own worst enemy when it comes to innovation?” — “Would it be simpler, more effective and perhaps more equitable if lawyers could affiliate with other allied professionals to deliver legal and related services? Many lawyers and those delivering legal services go through major machinations to comply with the Rules of Professional Conduct that dictate business structure or the economics of practicing law. The efforts are becoming more acute as technologists and others who aren’t licensed lawyers seize on inefficiencies and opportunities in the market.”
• “Cybersecurity for Attorneys: Addressing the Legal and Ethical Duties: Neglecting your legal and ethical duties to protect client data carries profound risks.” — “A number of state ethics opinions, for over a decade, have addressed professional responsibility issues related to security in attorneys’ use of various technologies. Consistent with the Ethics 20/20 amendments, they generally require competent and reasonable safeguards… In addition to complying with any applicable ethics and legal requirements, the most prudent approach to the ethical duty of protecting electronic communications is to have an express understanding with clients (preferably in an engagement letter or other writing) about the nature of communications that will be (and will not be) sent electronically, and whether or not encryption and other security measures will be utilized. It has now reached the point where all attorneys should have encryption available for use in appropriate circumstances.”
• “Keep Your Mouth Shut!: Why lawyers must avoid revealing confidential client information in an age of open mouths.” — “In the case, IRTH Solutions, LLC v. Windstream Communications, LLC, the court examined the Rules of Evidence, the attorney-client privilege and other relevant sources, concluding that ‘the privileged documents represent more than 10% of the documents produced; only 2200 total pages were produced and Defendant had months to produce the first production; and the review process ‘mistake’ was not the result of a technical error or mistake borne from hours and hours of review for this case.’ The court concluded that the production was reckless and that the privilege had been waived.”

Thought it worthwhile to highlight several interesting issue-focused stories and articles that have been fermenting in my story library, waiting for their respective moments in the risk sun. Let’s start with and excellence piece by Amy Richardson (partner and co-chair of the legal ethics and malpractice group) and Hilary Gerzhoy (an associate) at Harris Wiltshire & Grannis: “ABA Rules For Departing Attys Set Unprecedented Limits” —

• “ABA Opinion 489, titled ‘Obligations Related to Notice When Lawyers Change Firms,’ is bold: It states that fixed notice periods can be unenforceable, and that firms cannot prohibit a departing lawyer from contacting clients absent client consent.”
• “ABA Opinion 489 is the first opinion to provide an unequivocal statement that a firm’s fixed notice period can be unenforceable. The opinion holds that the actual time a firm can hold a lawyer and prevent her from starting at a new firm is dictated solely by her, and her firm’s, compliance with their obligations to transition client matters. Where those obligations are satisfied prior to the expiration of a fixed notice period, the notice period is unenforceable.”
• “For example, if a firm imposes a 30-day notice period, as most do, but the lawyer’s client files are up to date and the lawyer promises to help in the transition going forward — even if that transition is not complete — the firm cannot hold the lawyer for 30 days or dock the lawyer financially.”
• “That is a significant change. The opinion states that ‘notification periods cannot be fixed or rigidly applied without regard to client direction, or used to coerce or punish a lawyer for electing to leave the firm, nor may they serve to unreasonably delay the diligent representation of a client.’ In other words, fixed notice periods cannot do what many — perhaps most starkly those that exceed 30 days — were designed to do.”
• “ABA Model Rule 5.6(a) prohibits, among other things, partnership agreements that restrict ‘the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.'”
• “The opinion also holds that a firm cannot separate a departing lawyer from her clients while the lawyer remains at the firm without the client’s consent. This is because clients ‘are not property … [and subject] to conflicts of interest considerations, clients decide who will represent them going forward when a lawyer changes firm affiliation.’ A firm cannot, as many historically have, restaff a case to remove a departing lawyer without client consent.”
• “However, ABA Opinion 489 states for the first time that the preference for a joint communication cannot preclude a departing lawyer from unilaterally communicating her move to her clients.[18] It states that: ‘In the event that a firm and departing lawyer cannot promptly agree on the terms of a joint letter, a law firm cannot prohibit the departing lawyer from soliciting firm clients.'”
• “In other words, a firm cannot drag its feet on agreeing to a joint communication and simultaneously prevent the departing lawyer from notifying her client.”

“Ex-Sichenzia Ross Partner Sues Baker Botts for $35M, Alleging Extortion on Behalf of Ex-Client” —

• “Harvey Kesner, a former partner at New York-based securities litigation firm Sichenzia Ross Ference, is suing Baker Botts and one of its partners for $35 million, accusing the Am Law 100 firm of extortion for its threats to sue on behalf of his former client, who is separately suing Kesner for alleged conflicts and fraud.”
• “The allegations center on Shapiro’s work for Kesner’s former client, California biotech company MabVax. That company is now represented by a different law firm, Block & Leviton, in ongoing litigation against Kesner and Sichenzia Ross.”
  Asked for comment on Kesner’s suit, Baker Botts denied the allegations, also noting the litigation currently pending against Kesner and Sichenzia Ross. ‘This complaint has no basis in fact or law,’ a Baker Botts spokesperson said in a statement Friday.”
• “Kesner, after being sued separately by MabVax in California without Baker Botts representation, lost his partnership at what was Sichenzia Ross Ference Kesner, the complaint said. The punitive damages Kesner is seeking stem from him being forced out of his firm.”
• “MabVax sued a group of defendants including Kesner, Sichenzia Ross Ference and other lawyers from the firm in September 2018, alleging that they failed to disclose conflicts of interest, failed to maintain client confidentiality, and failed to provide proper legal advice on financial reporting requirements.”
• “This is not the first time Kesner’s removal from a law firm led to litigation. He sued Haynes and Boone in federal court in 2010 after he was asked to leave the firm, and the firm struck back by suing him in Texas state court. They later settled the dispute.”

And for more historical detail and context on the issues and players: “Judge says Honig’s attorney Harvey Kesner can be Sued for Fraud and Malpractice” —

• “A California federal judge has ruled former Sichenzia Ross Ference LLP attorney Harvey Kesner can be sued for fraud in a malpractice suit filed by biopharma firm Mabvax. Mabvax says whiles attorney Kesner was working for them he didn’t disclose a conflict of interest in his role advising Barry Honig who was an investor in MabVax.”
• “On top of that Kesner stands accused of leaking confidential company information that benefited Honig financially and for charging MabVax to help them in their SEC investigation while recommending decisions that benefited Honig who was also being investigated. The fraud claim against Sichenzia Ross Ference also survived the motion to dismiss.”

And more at: “Haynes and Boone Dueling with Former Partner” —

• “When Haynes and Boone hired Harvey Kesner for its fledgling New York office in 2006, the firm welcomed his corporate group as an illustration of its ‘careful selection’ of laterals who shared its ‘collegial and entrepreneurial spirit.’ Relations between the law firm and Mr. Kesner can hardly be called collegial these days.”
• “Haynes and Boone asked Kesner to leave last year. Kesner sued the firm last month in New York federal court for wrongful termination, demanding $15 million in damages. Haynes and Boone then filed suit in Texas state court last week accusing Kesner of breaching firm policy. In its complaint, the firm accuses Kesner of accepting stock and other benefits through an undisclosed business.”

“Court Found No Conflict of Interest with Dual Representation of Law Firm and Partner Against Claims from Departing Partner Shareholder” —

• “Earlier this year [2016], California’s Fourth District Court of Appeal found that a partner’s status as 50% shareholder of a law firm did not give rise to a conflict of interest which would preclude the firm’s counsel from defending the firm and another partner against the departing partner’s lawsuit. (See Coldren v. Hart, King & Coldren (2015) 239 Cal.App.4th 237.)”
• “The Court also found that under the facts specific to that case, the departing partner did not have standing to bring a motion to disqualify the firm’s counsel based on an alleged conflict of interest. The Court’s analysis in this matter is helpful in guiding not only attorneys who are considering whether there is a conflict with such dual representations, but for law firm’s handling the transition of departing partners and who want to avoid potential conflicts in representing the firm’s interests in such disputes.”
• “Coldren brought a motion to disqualify the law firm of Grant, Genovese & Barratta LLP (“Grant Genovese”) from representing both Hart and HKC, claiming it was a conflict of interest for Grant Genovese to represent HKC in claims against Coldren since he was also a 50% shareholder of HKC. The trial court granted the motion to disqualify, but a writ was taken by Hart and HKC and the Court of Appeal ultimately reversed that order.”
• “Although the Court of Appeal reversed the order on two grounds – both due to lack of standing and finding there was no conflict of interest with the dual representation – the conflict of interest analysis is particularly instructive as it relates to partner departures and recurring issues that can arise during shareholder disputes.”
• “In this case, the Court found that no actual conflict existed because Hart’s interests were aligned with HKC’s interests, and that even though Coldren was still a 50% shareholder in the firm, Grant Genovese’s duty was to HKP, not its shareholders and HKC was free to defend Coldren’s lawsuit and assert any relevant counterclaims.”

“Pierce Bainbridge Wants To DQ Ex-Partner’s Atty” —

• “Pierce Bainbridge has asked a New York state court to disqualify an opposing firm in a bitter lawsuit over alleged fraud at an infrastructure investment fund, saying that practice also represents a disgruntled former partner who claims Pierce Bainbridge inflates the value of its contingency cases to secure loans.”
• “Brickman began representing Ahmad a few weeks ago, but he also represents former Pierce Bainbridge partner Don Lewis in a sprawling and intensely personal series of lawsuits against his old firm.”
• “Lewis claims he was fired and falsely accused of sexual assault in late 2018 for threatening to blow the whistle on sketchy financial dealings at Pierce Bainbridge, chief among them the firm’s alleged practice of dramatically overstating the value of contingency fee cases in order to secure the loans that Lewis says are the fast-growing firm’s financial lifeblood.”
• “In Friday’s motion, Pierce Bainbridge said Brickman must be disqualified from the suit because Lewis had full access to the IFG Fund case file and chatted freely with his former colleagues about the case before he was fired, giving him confidential info that could be provided to Brickman, if it hasn’t been already.”
• ““It has nothing to do with the merits of this case. Apparently they don’t like litigating against me,’ Brickman said. ‘It’s the sincerest form of flattery, I suppose.'”

“Ex-Pond Lehocky Partner Wants Court To Stop ‘Client Theft’” —

“The ousted co-founder of Pond Lehocky Stern Giordano LLP on Thursday asked a Philadelphia state court to stop his former partners from allegedly poaching his clients and using the firm’s resources to fight his efforts to break up the partnership, and sought to appoint a receiver or special master to run the firm during the dispute.”
“David Stern, who helped co-found the prominent Philadelphia-based employment firm in 2010, said his former partners were sending ‘client selection’ letters to his clients that allegedly misrepresented his separation from the firm, pressured them into staying with the firm instead of with Stern, and failed to give them his contact information, he said in a brief accompanying his motion.”
“‘The client selection notices are vague and wholly insufficient. The Pond defendants have made it appear that Stern’s whereabouts are ‘unknown,’ causing some clients to believe Stern has been physically harmed and others to believe he stopped practicing law and otherwise causing extreme confusion and upsetment amongst his clients,’ the brief said. ‘At least one of Stern’s clients, and likely others, inadvertently selected to remain with Pond Lehocky believing that he had no other choice but to do so, given the lack of information provided about Stern in the notice.'”
“‘The Pond defendants are using a new ‘Pond Lehocky’ logo and operating the revamped website that has been scrubbed of any mention of Stern, one of its founders,’ the brief said. ‘The Pond defendants are using the partnership’s assets, including its off

“In-House Attorneys Cannot Be Bound By Non-Competes In Ohio” —

• “If you’re an Ohio in-house attorney and you value your freedom to make career moves, then you’re in luck. On Feb. 7, the Ohio Board of Professional Conduct issued an opinion letter stating that in-house counsel cannot be bound by non-compete agreements.”
• “Ohio Rule of Professional Conduct 5.6(a) states that a lawyer may not participate in an ‘agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.’ There is a strong public policy allowing parties to be represented by the counsel of their choice, and any agreement that restricts an attorney’s ability to practice would undermine that public policy.”
• “The board clarified that if an in-house attorney has both business and legal job functions, the attorney may still agree to a non-compete that covers their business services, so long as it does not prevent them from practicing law after their separation of employment.”

“SD Supreme Court suspends Avon attorney for violating conflict of interest rules”

• “https://www.mitchellrepublic.com/news/crime-and-courts/4961338-SD-Supreme-Court-suspends-Avon-attorney-for-violating-conflict-of-interest-rules.”
  “The court found that Scott Swier violated three professional conduct rules by taking cases in conflict with the interests of former clients and failing to properly ensure the attorneys he employed didn’t also participate in misconduct.”
• “The decision rendered by the court and written by Chief Justice David Gilbertson is blistering regarding Swier’s behavior and management of his law firm, which was described as ‘haphazard,’ and described his oral arguments to the court as resembling an infomercial for his law firm and his time before the court as ‘lacking in sincerity and remorse.'”
• “One of the complaints regarding Swier was over a Chamberlain woman’s contested will, brought forward by Mitchell attorneys Jack Theeler and Richard Rylance. A judge in the case had ordered that Swier’s firm stop representing Shirley Hickey’s daughter, Kristina Lippert, in the case, because Hickey herself had been a former client of Swier’s firm. Theeler had previously provided legal services to the Hickey family and was contacted in 2017 to review Hickey’s estate plan.”
• “The judge in that case said the actions of the Swier Law Firm were a ‘slam dunk’ conflict of interest and disqualified the Swier firm from the case. After Theeler was appointed as Hickey’s counsel by court order, Swier’s firm did not withdraw from representing Lippert and later billed the estate of Shirley Hickey and her living trust more than $144,000 in legal fees over an 18-month span in 2017 and 2018. Two associates of the firm were also disciplined by the State Bar’s Disciplinary Board.”
• “‘Our review of the record left the Court with the impression that Swier ignored what he knew were conflicts, was too slow to take corrective measures, and showed no true remorse,’ Gilbertson wrote.”
• “The court decision said Swier admitted the allegations in the formal accusation and does not dispute the facts.”

“Atty’s Chat With Rival Not Enough For DQ Bid In Cabinet Row” —

• “A Washington federal judge has denied a bid to disqualify a law firm after one of its attorneys inadvertently spoke with a lawyer who represented a cabinetmaker involved in a trademark dispute with the firm’s client, determining that the shared information was not shown to be ‘significantly harmful.'”
• “AAA Cabinets & Millwork Inc. failed to show that the information that Lee & Hayes PC learned about the dispute involving its client, the Kitchen Cabinet Manufacturers Association, amounted to more than “de minimus harm” and crossed the threshold of ‘significantly harmful,’ according to Wednesday’s order by U.S. District Judge Salvador Mendoza Jr.”
• “AAA alleged in November that Matthew Ries, its outside counsel, called Chris Lynch, the Lee & Hayes attorney, in May; Ries had once been a student of Lynch. Ries ‘divulged detailed confidential information’ after Lynch assured him that a conflict check was not necessary before they spoke, as he purportedly was personally aware of all trademark matters at the firm, according to AAA’s motion to disqualify.”
• “When Lynch began to speak with another Lee & Hayes attorney about his conversation with Ries, he quickly realized Ries’ client was likely involved in a trademark dispute with the KCMA, so he screened himself from further participation in the matter, according to the opposition brief.”

“Defendants in DST Systems Lawsuit Say Plaintiffs’ Attorneys Have a Conflict” —

• “A Memorandum of Law in Support of the DST Defendants’ Motion to Disqualify Conflicted Counsel says the plaintiffs’ counsel concurrently represent approximately 420 participants in the DST Systems Inc. 401(k) Profit Sharing Plan together with three plan fiduciaries whom they allege in these and other actions committed a series of Employee Retirement Income Security Act (ERISA) violations that caused losses to the plan accounts of their other clients.”
• “‘In other words, plaintiffs’ counsel represent three individuals that they accuse of wrongdoing at the same time as they represent the supposed victims of that very alleged wrongdoing,’ the memo states.”
• “The memorandum in support of the motion to dismiss plaintiffs’ counsel says they represent three former members of the DST Advisory Committee—the named fiduciary of the plan. And its members owed fiduciary duties to plan participants, including the plaintiffs’ counsel’s other clients, to oversee the plan in the best interests of the participants. The memo points out that all the alleged conduct occurred during the period between 2010 and 2013 when the plaintiffs’ counsel’s clients served on the Advisory Committee.”
• “However, the plaintiffs’ counsel now assert that their claims are supposedly limited to ‘breaches occurring in or after 2014’ — three months after the last of their three clients ended their service on the Advisory Committee. Yet, the memo says, the complaint obviously alleges ‘misconduct that began and continued prior to 2014 — whether the selection and retention of Ruane, supposedly excessive fees, the investment strategy employed by Ruane or the Valeant investment itself—during the time when plaintiffs’ counsel’s clients were plan fiduciaries.'”

“Ex-United Worker Seeks To DQ Reed Smith Over Medical Docs” —

• “A former United Airlines flight attendant who contends the company wrongfully terminated him has asked a California federal court to disqualify Reed Smith LLP from the litigation after its attorneys purportedly viewed his confidential medical records without permission.”
• “Chagas contends that attorneys for both sides had agreed that his lawyer would get the first look at certain medical records before Reed Smith saw them, according to the motion. Yet a process server forwarded the documents to United’s attorneys in early February before Chagas’ lawyer had a chance to redact them, according to the motion.”
• “Chagas’ attorney, Martin I. Aarons, asked that Reed Smith either destroy or sequester the documents, but United’s attorneys contended that Aarons had missed an agreed-to deadline for performing the redaction work, according to emails attached to Thursday’s motion.”
• “Chagas contends that Reed Smith violated California’s conduct rules for attorneys, as the firm was aware that the documents had been inadvertently produced and had received a request that it not review them, yet went ahead and purportedly reviewed them anyway, according to the disqualification motion.”

“Biglaw Partner’s (Alleged) Butt Shaking Gets Him In Hot Water“–

• “Dennis Duffy, a partner in the Houston office of BakerHostetler, represents Chevron in an employment discrimination case… during the August mediation session Duffy’s alleged behavior included ‘shaking his behind’ in front of Kennard. Additionally, the filing alleges that Duffy mocked Kennard’s ponytail and intimated that because of the hairstyle Kennard would want to have sex with Duffy.”
• “Because of this alleged display of unprofessional behavior, Kennard is asking the judge to remove Duffy from the case.”
• “For their part, BakerHostetler is denying the allegations made in the filing: ‘While we are unable to comment on anything discussed in a confidential mediation, we strenuously deny the assertions made in Mr. Kennard’s filing,’ BakerHostetler said in a statement.”

Shortly after news of this motion for sanctions and disqualification came to pub light, the story developed: “Atty Accused Of Shaking Butt At Adversary Replaced” —

• “The petrochemical company, a joint venture between Chevron Corp. and Phillips 66… is now represented by Norton Rose Fullbright. [It writes]: ‘CP Chem deeply regrets and apologizes that the encounter which is the basis of plaintiff’s motion now burdens the court… CP Chem intends that its counsel represent it zealously and professionally.'”
• “CP Chem said the allegations advanced by White’s attorney Alfonso Kennard Jr. are ‘not substantiated’ and suggested Kennard waited until the eve of an upcoming deposition to file the motion in a bid for ‘leverage in this case through press attention unrelated to its merits.'”
• “At any rate, CP Chem said, the fact the incident took place during mediation meant that under the Texas Alternative Dispute Resolution Act and the court’s local rules the whole matter is confidential and shouldn’t be before the court in the first place. Litigating the issue would mean introducing more inadmissible evidence, the company said.”