Bressler Risk Blog

“Judge Won’t Bar IP Law Firm Fish in Semiconductor Patent Fight” —

• “A Delaware district court judge has refused to disqualify Fish & Richardson PC from representing Volterra Semiconductor LLC in a patent lawsuit against rival semiconductor company Monolithic Power Systems Inc.”
• “Judge Colm Connolly of the U.S. District Court for the District of Delaware said the infringement dispute wasn’t substantially similar to patent work that the intellectual property boutique firm had done for Monolithic.”
• “The decision Wednesday illustrates how courts consider whether a firm’s work for a former client rises to the level of a conflict that creates issues in a future case.”
• See: Full Decision

And the latest spotted by Bill Freivogel:

• Corporate Family: Sempiturno in Motion, LLC v. Cajun 417, LLC, No. 20-681 (E.D. La. Aug. 25, 2020).
  • “The Bader family owns a number of bars and restaurants in New Orleans. In March 2019 the Baders formed the defendant Cajun. Cajun operates under the name ‘House of the Rising Sun.'”
  • “In this suit Plaintiff claims that ‘House of the Rising Sun’ infringes Plaintiff’s trademarks. Cajun moved to disqualify Plaintiff’s law firm (‘Law Firm’) because a member of Law Firm earlier had represented the Bader family and their companies on trademark matters. That representation ended in 2014.”
  • “In this opinion the court denied the motion. The court held that Lawyer never represented defendant Cajun because Cajun did not exist until 2019. Thus, Rule 1.9 did not apply, and the court did not need to get to the substantial relationship analysis.”
  • “The court’s analysis of the corporate family issue suggests that had Cajun existed while Lawyer represented the Bader family, and given the tight-knit nature of the Bader organization, the court might have disqualified Law Firm.”
• Current Client: Bohm Wildish & Matsen, LLP v. Selfridge, No. G058327 (Cal. App. Unpub. Aug. 24, 2020).
  • “The Kenneth faction of the Sacher family (“Kenneth”) was fighting with the Fred faction of the family (“Fred”). Kenneth was represented by Lewis Brisbois. Fred was represented by James Bohm and the Bohm Wildish law firm.”
  • “In three related cases Kenneth and Lewis Brisbois were claiming that James Bohm exercised undue influence over Fred, and committed other ethical violations, in family trust matters.The problem was that Lewis Brisbois was representing the Bohm Wildish firm in an unrelated matter. Thus, Fred and James Bohm moved to disqualify Lewis Brisbois in the Sacher family cases. The trial court granted the motion, and the appellate court affirmed.”
  • “That brings us to this case: Bohm Wildish is suing Lewis Brisbois for breaching its duty of loyalty to Bohm Wildish by accusing Bohm Wildish of misconduct in the Sacher family cases. Lewis Brisbois moved to strike the complaint under California’s anti-SLAPP law. The trial court denied the motion. In this opinion the appellate court affirmed.”

Earlier this month the Ohio Board of Professional Conduct published: “OPINION 2020-06” —

• Issued August 7, 2020 Withdraws Adv. Op. 98-0
• “A law firm and a lawyer leaving the firm have an ethical obligation to ensure that affected clients are informed of the lawyer’s departure.”
• “A law firm and departing lawyer may jointly or separately notify affected clients of the lawyer’s departure from the law firm. The notice may indicate the availability and willingness of the lawyer or law firm to continue to provide legal services to the client.”
• “A lawyer and the law firm must accept a client’s choice of counsel prompted by the departure of a lawyer from the firm. A law firm cannot prevent a departing lawyer from notifying affected clients for whom he or she has principal responsibility.”
• “The Board recommends that a departing lawyer’s notice to affected clients be undertaken at the same time or after, but not before, the law firm is informed of the lawyer’s impending departure.”
• “Because the departing lawyer in most cases may be actively representing the affected client at the time he or she gives notice of his or her departure, the lawyer may indicate his or her willingness to continue the representation. Even if the representation of the client terminates, the lawyer may directly solicit the client for employment since the client had a prior professional relationship with the lawyer.”
• “If a joint notice from the departing lawyer and law firm is neither feasible due to timing nor desirable because the separation is unamicable, notices from either party should be sent to those clients for whom the departing lawyer is principally responsible.”
• “The separate notices should instruct the affected client that the decision concerning the choice of counsel is within the sole direction of the client and should not encourage the client to sever ties with either the firm or the lawyer or disparage either party.”

“Utah embraces nonlawyer ownership of law firms as part of broad access-to-justice reforms” —

• “The Utah Supreme Court has unanimously approved a slate of reforms that allow for nonlawyer ownership or investment in law firms and permit legal services providers to try new ways of serving clients during a two-year pilot period.”
• “In Utah, nontraditional legal services entities will have the opportunity to operate in a regulatory sandbox the state supreme court has established. The court also created an Office of Legal Services Innovation that will evaluate and recommend sandbox applicants to the court, as well oversee the applicants that are approved for entry into the sandbox.”
• “Sandbox participants that are able to demonstrate their legal services ‘do not cause levels of consumer harm above threshold levels’ established by the innovation office may receive approval to exit the sandbox and continue practicing law, according to the court’s standing order.”

“Arizona approves nonlawyer ownership, nonlawyer licensees in access-to-justice reforms” —

• “Arizona has become the second state in recent weeks to approve opening its doors to nonlawyer ownership or investment in law firms, concepts that previously have faced strong resistance in the United States.”
• “The Arizona Supreme Court announced Thursday its unanimous vote to eliminate its ethics rule barring nonlawyers from having an economic interest in a law firm or participating in fee sharing, one of two major rules changes it adopted this week in hopes of expanding access to justice.”
• “The court also approved a new category of nonlawyer licensee called ‘Legal Paraprofessionals’ who will be able to represent clients in court, joining a couple other states in broadening the pool of permitted legal practitioners.”
• “Both regulatory reforms, which were recommended by Arizona’s Task Force on the Delivery of Legal Services, take effect Jan. 1.”

ILTA’s annual conference is next week. They’ve invested tremendous energy in mobilizing a virtual event, and I hope it’s a great success. (I’ll be attending a few sessions, so if we cross paths, please feel free to say hello, or send a poke or emoji or whatever their hosting platform provides for.)

As I took a moment to look over their published agenda, I thought I’d share the risk sessions that caught my eye:

ILTA Transformation Project of the Year Award Finalist Presentations (two risk related):

• Monday 10:30 – 11:15 — Wilmer Hale: Audit Response Letters: Improving Efficiency Through Automation
• Monday at 3:30 – 4:30 — Perkins Coie: “Wash Rinse, Repeat: Intaking Volume-Based Matters”

Is Your Firm Ready for CCPA and its Domino Effect? Data Privacy Compliance in the United States; What Your Firm Needs to Know

• Wednesday 11:30am – 12:15pm
• With CCPA in effect as of July 1, 2020 – what do legal marketers need to be aware of to ensure their marketing and technology platforms are in compliance? This session will also explore wider data privacy issues impacting a firm’s external communications products. It will provide a practical checklist for attendees to use to audit their programming.

Case Studies in Modern Information Governance

• Thursday 2:30pm – 3:15 pm
• Join us at this exciting spark talk session as our most innovative peers in the business share how they are leveraging technology in exciting ways to tackle their information governance challenges and initiatives.

Retention: Getting from a Policy to a Program

• 3:45pm – 4:30pm
• Putting retention policies in place can be challenging and there are a lot of movingparts to consider. From getting your firm management to agree and promote the importance of destruction of client files to the actual work of destroying what could potentially be historical in nature. In this session, the panelists will discuss their successes and failures in trying to implement and stick to a retention policy that involves destroying both physical and electronic records.

Assessing the ROI of Lateral Attorney Candidates {session has financial focus, but relevant topic}

• Thursday 11:30am – 12:15pm
• Making a decision to hire a lateral attorney candidate is a huge financial risk. Is their book of business what they say it is, have conflicts been vetted, are they as marketable as they say they are? Firms that have mastered the process of accessing the ROI of their lateral candidate prospects will reveal their secrets in this must-attend session.

For more information, see the conference web site.

This month’s sponsor thank you and spotlight tips a hat to Accuity and features new podcasts they’ve published. These feature discussions with Hdeel Abdelhady. She sits on the ABA Task Force on Gatekeeper Regulation and the Profession, which focuses on U.S. government and multilateral efforts to combat international money laundering and the implications of these efforts for lawyers and the profession.

These podcasts explore the challenges firms are facing in establishing efficient anti-money laundering (AML) and counter-terrorism financing (CTF) compliance programs, delving into issues including:

• Lawyers as gatekeepers in the fight against financial crime
• Why should lawyers and law firms be concerned about financial crime?
• What does it mean personally and to their firm
• What is around the corner for law firms and financial crime
• What are firms not talking about that they really should be

You can access these here:

• “Episode 1: The regulatory landscape for legal firms in the U.S.“
• “Episode 2: The regulatory landscape for legal firms in the U.S.“

I was curious about the ABA task force and found it interesting to explore their resource page and publications.

And all of this lead me to discovering a good written interview (for those less audio inclined) with Abdelhady: “Ask the Expert: Q&A with Principal Attorney Hdeel Abdelhady (Part 1)” —

• “OFAC has made it unmistakably clear on a number of recent occasions that sanctions compliance is expected of all U.S. persons and foreign parties engaged in business with the United States, or using “U.S.-origin” goods or services.”
• “More recent OFAC enforcement actions have reached across industries – from insurance to agriculture to cosmetics – and applied to ‘run of the mill’ transactions, such as the provision of services or benefits under individual health and life insurance policies.”

“Lawmaker Says He Told Netanyahu Before Asking to Nix Judge in His Case” —

• “Shlomo Karhi admitted he notified the prime minister before he demanded one of the judges in Netanyahu’s corruption trial be disqualified for a conflict of interest, after saying he hadn’t.”
• “Karhi claimed that the son of Jerusalem District Court Judge Rivka Friedman-Feldman once worked in a law firm where one of the senior partners will be called to testify for the prosecution in Netanyahu’s case, disqualifying Friedman-Feldman from the case. In addition, Karhi claimed that this witness is a ‘harsh, blunt critic of the prime minister.'”
• “When asked whether he had coordinated his request with Netanyahu’s lawyers, he said no. Later, when asked if he had told Netanyahu of his intention to submit the disqualification request to Hayut, Karhi said he had, adding that he ‘I didn’t wait for his permission.'”

“Likud MK demands recusal of judge in PM’s trial for alleged conflict of interest” —

• “In Case 4000, the premier is accused of approving regulatory moves benefiting the controlling shareholder of the Bezeq telecommunications company in exchange for positive news coverage from the company’s Walla news site. Netanyahu, who denies wrongdoing, faces charges of bribery, fraud and breach of trust in the case.”
• “The secondary argument made by Karhi is that Hayut recently formulated the rules on recusal to specifically ensure that Friedman-Feldman would not need to step aside. He said that from the moment the judge’s son left the law firm, the two were theoretically able to discuss the case, while other cases would require a 5-year cooling-off period.”
• “According to the report, Hayut is expected to reject the request. It said the letter is an attempt by Netanyahu and his team to delegitimize the judge and delay the next stage of his trial — if successful, it could take at least a year to replace the judge presiding over such a high-profile case. The evidentiary stage of the trial is set to begin in January. “

“Steven Donziger, Who Battled Chevron in Ecuador, Has Been Disbarred” —

• “After helping indigenous Ecuadorians win a $9.8 billion verdict against Chevron for polluting the Amazon rainforest, Steven Donziger’s decades-long advocacy ended in his disbarment on Thursday.”
• “Chevron has long claimed that the multibillion-dollar verdict that Donziger obtained for his Ecuadorian clients was fraudulent, and today’s disbarment ruling relies upon the findings of a U.S. judge who ruled in the oil giant’s favor.”
• “Roughly three years after the judgment against Chevron, U.S. District Judge Lewis Kaplan blocked Donziger from collecting the proceeds on the grounds that it was ‘obtained by corrupt means,’ including bribery and witness tampering.”
• “Federal prosecutors declined to charge him with any offenses, but Judge Kaplan deputized a private law firm to criminally pursue him for contempt of court, in an extraordinarily rare and controversial for-profit prosecution.”
• See also more on “for-profit prosecution” and earlier conflicts allegations in the mix.

Comprehensive overview of issues and recommendations from three lawyers at Munger Tolles: “Safeguards Against Legal Malpractice Liability As Claims Rise” —

• “According to an annual survey by insurance broker Ames & Gough, the magnitude and number of legal malpractice claims in the U.S. had already increased significantly in 2019. Now with COVID-19 resulting in a severe economic slowdown and remote work conditions across the country, business interruption is on the rise, as are novel challenges for clients and lawyers alike.”
• “Remote Work. A shift to remote work has disrupted the day-to-day practices of firms across the country, and lawyers have been forced to change the way they communicate with clients and colleagues. These changes could result in inadvertent divulgence of confidential client information, inadequate communication with clients, missed deadlines or miscommunication among colleagues regarding assigned tasks and deadlines — all of which could lead to a malpractice claim.”
• “Tightening Client Budgets. Economic disruption often leads to shirking legal budgets. You may find clients pushing you to do more with less in terms of time spent on research or filings. This budget pressure may result in inadvertently missing legal issues or forgoing arguments that could have benefited the client in hindsight.”
• “Conflicts of Interest. Another danger of increased corporate restructuring is heightened difficulty determining whether legal representation would result in a conflict of interest. Conflicts of interest, either actual or perceived, are consistently the most commonly alleged error in malpractice claims. As companies change in shape and scope, it is not always easy to know whether one corporation may be adverse to another such that a conflict would result, which might lead to an increase in malpractice claims based on actual or perceived conflicts of interest.”
• “Expanding Client Base. The economic challenges of the pandemic may encourage lawyers and law firms to accept clients they might previously have declined. These clients may work in industries outside the scope of the lawyers’ general practice areas — and thus be more likely to encounter legal challenges unfamiliar to the lawyers — or may operate in more questionable ethical or legal territory than a lawyer’s long-standing client base.”
• “Be hyperaware of conflicts. Just because a conflict does not exist at the outset of representation does not mean that a conflict will not arise down the road, especially if the client undergoes corporate restructuring. Someone on the team should be in charge of monitoring for changes in clients’ ownership or corporate structure. Anytime there is a change, this person should map the new structure to identify any new entities — such as subsidiaries and parent companies. Circulating this information through the entire conflicts process will help flag conflicts that arise out of a complex corporate structure that may not be otherwise apparent.”

Latest of note from Bill Freivogel.

(Chuck Lundberg dropped me a note, noting “Freivogel on Conflicts, the online Bible of conflict of interest, is 20 years old this month.” Congrats, Bill!):

• Warner v. Google LLC, 2020 BCSC 1108 (CanLII) (S. Ct. B.C. July 29, 2020).The claim is that Google improperly gathered data from certain Canadians using Android phones. As a settlement was being negotiated, before class certification, Plaintiff and his law firm (“Law Firm”) got into a disagreement about where cy-pres funds should be distributed. Plaintiff wanted those funds to go to Free Software Foundation, an American not-for-profit.
  • Other parties wanted the funds to go to Canadian bar-related foundations. In this opinion the court was faced with whether Plaintiff should be replaced, and, if so, whether Law Firm should be replaced.
  • First, the court determined that Plaintiff should go because of Plaintiff’s possibly advantageous relationship with the Free Software Foundation and its leader(s), and Plaintiff’s difficult conduct during the cy-pres dispute. As to Law Firm, the court ruled it could stay.
  • The court noted the “bright line” Canadian conflicts rule might otherwise mean that Law Firm could not continue because of its disagreement with Plaintiff. However, the court looked at prior Canadian decisions suggesting that class actions can be different in this respect. Thus, even though no class has yet been certified, with the only relationship being Law Firm’s representation of Plaintiff, keeping Law Firm in the case would be in the best interests of the future class.
• In re Vascular Access Centers, L.P., Bankruptcy No. 19-17117-AMC (E.D. Pa. April 6, 2020).Debtor sought to have Law Firm approved as Debtor’s counsel. The U.S. Trustee objected because Law Firm had a conflict under Section 327(a) of the Bankruptcy Act and because Law Firm violated Bankruptcy Rule 2014(a) by failing to disclose all Law Firm’s relationships to Debtor’s principal owner.
  • The court approved the retention, finding that the conflict really existed only three days and was inconsequential. The court was very troubled by the disclosure failure and ruled that Law Firm would receive no compensation for work prior to when Law Firm finally did make the disclosures.

“Lumber Exec Wants Rival Firm In IP Suit DQ’d For Estate Work” —

• “In a motion filed Thursday in Arkansas federal court, FiberPro LLC Founder Joshua Krauss said his legal relationship with Friday Eldredge & Clark LLP has given the firm access to his private information, making it unethical for the firm to represent Timber Automation LLC in its suit alleging Krauss and his associates stole confidential information and used it to start their own rival lumber company.”
• “To back up the claim he is still a client of the firm, Krauss noted that he has remained in touch with Duke to share updates on the estate through email exchanges in 2017 and 2018. Duke specifically asked to be informed of any changes to the estate so he could keep the couple’s documents up to date in the case of changes to the tax code, according to the brief.”
• “But even if Friday Eldredge can show he is no longer its client, Krauss said, disqualification is still in order because the parties’ previous relationship has given the firm access to information that would provide Timber Automation with an unfair advantage in litigation.”
• “Timber Automation originally sued Krauss, FiberPro and two other former employees in Arkansas state court on July 15. Timber Automation alleged that Krauss, a former vice president of sales for one of its subsidiaries, convinced project engineer Jeremy Hutson and designer Henry Meyers to join him in starting a competing business. Before jumping ship, the complaint alleges, the three conspired to download thousands of files from Timber Automation’s servers — including equipment designs, vendor catalogs and proprietary spreadsheets — for use in creating their rival company.”

“Leading firm rebuked over client account misuse” —

• “Leading transatlantic law firm Womble Bond Dickinson (WBD) has been rebuked for providing a banking facility to a client by receiving and paying out more than £2m that did not relate to any legal work it was doing.”
• “The firm blamed the actions of a single partner for the misconduct.”
• “A regulatory settlement agreement published today by the Solicitors Regulation Authority (SRA) said that WBD acted for a ‘Client A’ in relation to a commercial scheme under which the firm held funds at Client A’s instruction. The money was deposited by three individual clients of Client A who were not WBD clients.”
• “Over a five-year period, the firm ‘allowed payments to be made, on the instruction of Client A and the clients of Client A,’ from this money – in all, around £2.3m.”

“ABA Adopts Best Practices for Third-Party Litigation Finance” —

• “In its first guidance on the booming tool since 2012, the group urged lawyers working with outside funders to be exacting and detail all arrangements in writing. But they stopped short of saying the arrangements should be disclosed to the court.”
• “The American Bar Association’s House of Delegates overwhelmingly voted to approve a new set of best practices for litigation funding arrangements Monday, updating their guidance on the increasingly popular tool for the first time since 2012.”
• “The report, which outlines a list of issues lawyers should consider before entering into agreements with outside funders, cleared the body by a vote of 366 to 10.”
• The report notes:
  • “The litigation should be managed and controlled by the party and the party’s counsel. Limitations on a third-party funder’s involvement in, or direct or indirect control of or input into (or receipt of notice of), either day-to-day or broader litigation management and on all key issues (such as strategy and settlement) should be addressed in the funding agreement.”
  • “Positions on fee splitting, however, are far from unanimous; the New York City Bar Opinion is not the ‘law of the land’ outside of its reach, nor are opinions or approaches that contradict the New York City Bar Opinion,”
  • “A careful lawyer will assure that the written undertakings accurately reflect that the client retains control of the litigation, that disclosures to the funder are limited so as not to create risks of waiver of attorney-client privilege or work product, and that the attorney retains and protects his or her ability to exercise independent professional judgment.”

For other opinion from the funding side of the equation see: “ABA’s new guidance on litigation funding misses the mark” —

• “Unfortunately, the ABA’s new best practices were drafted without a similar opportunity for comment and with the glaring omission of commercial legal finance providers. Not surprisingly, the resulting best practices do not reflect how legal finance actually works and could create confusion among lawyers considering it—the opposite of what was intended.”
• “The ABA attempts to provide a single set of best practices for the funding of disputes between commercial entities and consumer litigation funding, in which funding companies provide individual lawsuit loans to people with personal injury or other individual claims. These are entirely different practices.”
• “Commercial legal finance companies provide multimillion-dollar nonrecourse investments to companies and law firms represented by world-class counsel. Consumer litigation funders make small-dollar cash provisions to individuals in economic distress who may not be experienced in or savvy about negotiating legal transactions. It is as illogical to treat them in the same document as it would be to offer a single set of best practices to cover both investment banking and payday lending.”

“Lawyers withdraw from representing Larry Householder in bribery case” —

• “The exact nature of the conflict of interest, but defined the reasoning the to court as there being ‘a substantial risk that the lawyer’s ability to consider, recommend, or carry out an appropriate course of action for that client will be materially limited by the lawyer’s responsibilities to another client, a former client, or a third person or by the lawyer’s own personal interests.'”
• “Householder was indicted last Thursday for his part in what the U.S. Department of Justice is calling the largest bribery case in Ohio history. After the indictment he was voted out of his House leadership role.”

According to the filed brief, Householder was being represented by Taft Stettinius & Hollister. For more on the broader matter, see: “Not guilty pleas for 4 indicted in $60M Ohio bribery probe.”

“Third lawyer joins Netanyahu defense team in his corruption trial” —

• “Boaz Ben Tzur, a well known litigator, has also represented two other people tied to one of the prime minister’s cases, one of whom is a witness for the prosecution.”
• “A renowned defense lawyer, Ben Tzur, has previously represented billionaire movie mogul Arnon Milchan, a central figure in Case 1000, one of the trio of cases against the prime minister. There were conflicting reports in Hebrew media as to whether or not Ben Tzur still represents Milchan’s personal assistant Hadas Klein, who will be a key prosecution witness in Case 1000.”
• “Before taking on the job, Ben Tzur asked the State Prosecution if there were any legal issues with him representing Netanyahu but no objections were raised, Channel 12 news reported.”
• “Klein has said the approach constituted a conflict of interest and violated her rights, the report said.”

We’ve seen a few high profile stories about troublesome hacking/phishing and other fraud causing losses and embarrassment for firms. Here’s a podcast (with convenient transcript) from ALPS, covering the basics, how to manage these risks, and the growing threat of fake/deepfake attacks entering the mix: “ALPS In Brief — Episode 49: Would You Send All Your Money to a Scammer? Maybe You Just Did.” —

• “A lawyer was waiting on a fax with all the information she needed to complete a wire transfer. Fax received, money sent. What she didn’t know? Her email had been hacked. Cybercriminals had intercepted the fax and edited the wire transfer details before sending it. The money was gone. The worst part? This new cybersecurity scam is really easy to execute and happening everywhere. ALPS Risk Manager Mark Bassingthwaighte lays out the details and how to spot the breadcrumbs so you and your firm’s employees won’t be caught off guard.”
• “We have had a number of lawyers impacted by this with literally millions of dollars, in total together, stolen. And certainly, this problem is not limited to lawyers, but there is one very easy way to avoid falling victim to these types of attacks. And I’d really like to explore that a little bit.”
• “And unbeknownst to anyone at the firm, the firm’s email accounts, all of them, were breached and someone was monitoring what was going on. And this is not uncommon in terms of having someone monitor your email and those kinds of things. It often will go easily, maybe a couple of weeks to several months. And what they are doing is, as their monitoring offices, they’re looking for opportunity, of course, but they are also learning who talks, who the players are, how they communicate in writing and just understand sort of the business model, what’s going on.”
• “The bad guy, if you will, was monitoring and very interested in the eFax account because these lawyers happen to do real estate. And there were a lot of instructions coming through via fax. If a fax had… Was of no interest it would kind of be forwarded along really quickly so no one was aware that these emails were being intercepted and looked at. At one point, a fax came through authorizing… Wiring instructions or whatnot, for a significant amount of money on the sale of a home. And all the hacker had to do was just take that fax and change the routing number, the wiring instructions here on this document. Made that change, set it on.”
• “At the beginning of representation, you verify with all the parties, what is the trusted contact information? What is your real email? What is your phone number? What is your address? And then, you go back and you look that up so that you know you’re using the correct phone number. You don’t want to look at a phone number that’s in an email coming to you and use that, because the scammer will give you a fake…”
• “So, that should also catch your attention as to the value of implementing a firm wide policy, with a little training here, that says, no one, I don’t care if it’s the most senior attorney down to the new bookkeeper, is authorized to move any money under any circumstances unless an out-of-band communication has occurred, so that we know we are sending the money to the correct legitimate recipient.”