Risk Update

Kanye Conflict? — (I’m Going to Let Them Finish…)

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Biglaw Leaders Reassure Firm That Representation Of Kanye West And Donald Trump Is Not A Conflict Of Interest. Nothing unethical to see here!” —

  • “Husch Blackwell has heard your concerns and wants to assure you everything is just fine. As you may recall, earlier this week news broke that an attorney at Husch Blackwell, Lane Ruhland, was spotted delivering to Wisconsin officials signatures to put Kanye West on the presidential ballot.”
  • “Apparently working for multiple presidential candidates raised some questions among the rank and file at Husch. According to an email circulated internally, firm leadership made clear that a conflicts check was run for the representation of Kanye West and/or his 2020 presidential campaign.”
  • “They make no mention of how, exactly, this squares with representing another 2020 presidential candidate — and not just representing him on a firm level, the same attorney is apparently working for multiple candidates — for example if conflicts were disclosed and waived or if there’s a limited scope to the representation. Just trust that the conflict has been cleared.”
  • “But the firmwide email also makes clear that the ‘controversial’ aspect of the representation (though it isn’t clear if they’re talking about the Kanye campaign or the Trump campaign) isn’t something they particularly care about. And ‘representation of clients is not an endorsement of said clients’ cultural or political viewpoints.'”

Bar Complaint Claims Kanye West’s Campaign Lawyer is Violating the Rules by Simultaneously Working For Trump” —

  • “A government watchdog group on Friday filed a complaint against Lane Ruhland with the Wisconsin Office of Lawyer Regulation (OLR) alleging the attorney has been violating ethics and conflict of interest obligations by working for both the presidential campaigns of both Kanye West and Donald Trump. Ruhland – the former general counsel for the state Republican party and senior counsel at law firm Husch Blackwell…”
  • “And because West and Trump would be running against each other and vying to win the same potential voters, such dual-representation presents a clear conflict of interest that violates the Wisconsin Bar’s rules, the complaint says.”
  • “‘Simultaneous legal representation of two candidates competing for the same office is a paradigmatic example of a conflict of interest,’ CfA Executive Director Michelle Kuppersmith wrote in the complaint…’“As an attorney for the Trump campaign, she simply cannot show the ‘loyalty and independent judgment’ representing the West campaign that are an “essential element” in a lawyer’s relationship to a client.'”
  • “West recently told Forbes that his campaign is intended to hurt Joe Biden, not Trump. The Forbes report says ‘GOP operatives’ were working ‘to get [West] on state ballots.'”
Risk Update

Conflicts PR — When Conflicts Allegations are Promoted via Press Release

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While I don’t have hard data, I’m finding myself coming across more instances of aggrieved parties issuing formal press releases specifically focusing on lawyer/law firm conflicts allegations.

Like many have said about disqualification motions in general, the use of such communication tactics may be strategic. Clearly, exposure via reprint on Yahoo News (see below) and similar sites, and associated search engine implications are a bit different from coverage of these matters by the legal press.

And excerpting these here gives me pause as they understandably lack the “we asked the other side for a response [and they either did or did not response]” portion.

Still, this may be a trend that grows as we watch. And, regardless, it’s an interesting data point. Here’s a recent example that caught my eye: “Ebony Magazine Files Grievance With State Bar of Texas Against Attorney David Abner for Conflict and Ethics Violation” —

  • “ATLANTA, July 31, 2020 /PRNewswire/ — Immediately after Ebony ownership filed a complaint with the SEC against Jacob Walthour and Blueprint Capital LLC (“BPC”) alleging insider trading; they filed another SEC complaint against John Robinson and Consequent Capital (“CC”) CRD # 285262 for violating the very same privacy policy and fiduciary responsibilities they list on CC’s website by providing Parkview Capital Credit’s (“PCC”) confidential information to media outlets for financial gain. Today Ebony Magazine filed a third SEC complaint and legal Grievance with the Texas Bar against David Abner.”
  • “Ebony accused Abner, a licensed attorney, of conspiring with Walthour and Robinson to force Ebony into Bankruptcy invalidly. David Abner and Associates is on record as PCC’s General Counsel but also a creditor for Ebony. ‘This is an absolute conflict between a lender and their lawyer to conspire to do an illegal takeover,’ says Ebony spokesperson Michael Wilcox.”
  • “David Abner has an Ethical responsibility not to create legal conflicts, especially when it can be detrimental. Also, by joining as a creditor when the lender hired him is borderline illegal. Lawyers should be a cut above. Consequent allowed their manager, Jacob Walthour, to provide confidential information to the media, and Parkview had their Lawyer lose his Ethics, says Ebony spokesman.”
Risk Update

Conflicts Accusations — MoFo ‘Skullduggery’ Suggested & A Confidential Conflict

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MoFo Accused of ‘Skullduggery’ in Divorce of Google Search Engine Programmer” —

  • “The wife of Scott Hassan, robotics entrepreneur and principal programmer of the Google search engine, is suing Morrison & Foerster for being a ‘willing architect and facilitator’ of Hassan’s scheme to ‘cheat’ her out of millions of dollars after she filed for divorce in 2015.”
  • “In a suit filed Tuesday in Santa Clara County Superior Court, Allison Huynh alleges that Morrison & Foerster violated its ethical and fiduciary duties when the firm picked sides after representing the couple individually in separate business matters.”
  • “The complaint alleges that Paul ‘Chip’ Lion, a Palo Alto MoFo partner, and the firm continued to represent Hassan and some of the couple’s jointly owned businesses even after a family court judge disqualified them from advising him on the dissolution of their marriage.”
  • “Huynh says the firm ‘orchestrated a fire-sale’ of the assets of robotics company Suitable Technologies, which she has a half interest in, according to the complaint. She alleges the deal was an effort to score a personal tax benefit of more than $90 million for Hassan.”
  • “‘We deny all the allegations made by the Plaintiff against the Firm and its representatives and we will address them in the proper forum,’ a firm spokesperson said via email.”

Conflict arises in synagogue shooting defense” —

  • “More than a year into the prosecution of the man accused of firing on a Poway synagogue — killing one person and injuring three others — a conflict of interest has arisen on his defense team.”
  • “Attorneys Kathryn Nester, who is executive director of the federal public defender office, and Kimberly Trimble conferred with three experts, all of whom have vast experience in trying death-penalty cases, and all came to the conclusion that this was not a conflict that can be waived by Earnest, they said in a court filing. They declined to give more details on the conflict.”
  • “‘The nature of the conflict is protected by attorney-client privilege,’ they wrote.”
  • “Attorney and judge conflicts of interest are carefully vetted at the beginning of each case. For one to arise this late is unusual.”
Risk Update

Postal & Remote Edition — MP Conflicts Accusation, Proposed FLA Bar Opinion on Cross-border IP Practice

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Now MP targets Herbert Smith over Post Office work” —

  • “An MP has urged both the justice and business select committees to investigate the role of law firms – and in particular Herbert Smith Freehills (HSF) – in helping client companies accused of wrongdoing set up compensation schemes.”
  • “As we reported earlier this month, that complaint concerns in part HSF’s work on the Griggs review, which dealt with compensating victims of the fraud but was ultimately deemed flawed and is now being re-run.”
  • “Mr Hollinrake said he was “astonished” that the firm was also advising the Post Office on its recently announced compensation scheme for subpostmasters who suffered a “shortfall” in using the flawed Horizon computer system that led to many being wrongly accused and convicted of theft.”
  • “HSF acted for the Post Office last year in settling group litigation brought by some of the subpostmasters. The firm denies any conflict of interest.”
  • “In his letter to justice select committee chair Sir Bob Neill MP, Mr Hollinrake said: ‘The mere fact that HSF acted on behalf of the Post Office in the legal action with the responsibility to minimise losses should prohibit them from taking any role in a compensation scheme.'”
  • “An HSF spokeswoman said: ‘There is no conflict with the firm acting for the Post Office on this matter.'”

Florida Bar UPL Committee issues proposed opinion stating that out-of-state lawyer may practice federal law remotely from Florida home” —

  • Florida Bar’s Standing Committee on the Unlicensed Practice of Law: Proposed UPL Advisory Opinion FAO #201904
  • “The proposed advisory opinion states that an out-of-state licensed attorney who is working remotely on federal intellectual property rights matters (and not Florida law) from his or her Florida home for an out-of-state law firm and no public presence or profile in Florida as an attorney would not be engaging in the unlicensed practice of law. The advisory opinion will be filed with the Florida Supreme Court on August 17, 2020.”
  • “It is the opinion of the Standing Committee that the Petitioner who simply establishes a residence in Florida and continues to provide legal work to out-of-state clients from his private Florida residence under the circumstances described in this request does not establish a regular presence in Florida for the practice of law.”
  • “Consequently, it is the opinion of the Standing Committee that it would not be the unlicensed practice of law for Petitioner, a Florida domiciliary employed by a New Jersey law firm (having no place of business or office in Florida), to work remotely from his Florida home solely on matters that concern federal intellectual property rights (and not Florida law) and without having or creating a public presence or profile in Florida as an attorney.”
Risk Update

“Endless Risk” — A Taxing (Tainted) 401(k) Law Firm Disqualification

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Yesterday we highlighted recent writing from the professional responsibility practice at Clyde & Co. Today, sauce for the gander (as my favorite first officer would say) — Here’s the latest from Karen Rubin at Thomson Hine:

Citing “endless risk,” district court DQ’s firm from 401(k) case” —

  • “A New York district court judge earlier this month disqualified a firm representing hundreds of 401(k) plan participants based on a conflict of interest. The judge called the risks posed “endless,” and requested additional briefing on whether the firm would be allowed to remain as counsel in related arbitration proceedings in Missouri. The ruling spotlights the sometimes-thorny conflict issues that can arise in ERISA litigation.”
  • “In two of the actions, The Klamann Law Firm represented profit-sharing plan participants who alleged ERISA violations based on several breaches of fiduciary duty against the participants’ employer, the trust investment manager and the plan advisory committee along with the advisory committee’s individual members.”
  • “At the same time, in Missouri, The Klamann Law Firm was representing a number of claimants, including three individual former members of the plan advisory committee, in arbitration proceedings against the employer and the trust investment manager. Claimants’ claims in the arbitration were nearly identical to the litigation claims asserted in the two New York district court cases.”
  • “Citing its broad discretion to invoke the ‘drastic remedy’ of disqualification whenever a lawyer’s conduct ‘tends to taint the underlying trial,’ the district court noted that the Second Circuit considers adverse representation of current clients improper per se. The burden is on the lawyer to show that there will be no actual or apparent conflict in loyalty or ‘diminution in the vigor of [the lawyer’s] representation.'”
  • “The court noted that claims in the New York District court complaints made it ‘evident’ that plaintiffs intended to sue both the employer and the plan advisory committee for fiduciary breaches committed while two and possibly all three of the individual members were on the committee — the same members The Klamann Firm was representing as claimants in the Missouri arbitration.”
  • “Under many circumstances, a current-client conflict is waivable if each client gives informed consent. Timing is everything, however. Here, the firm said it had obtained consent of its clients — but only too late, wrote the court. Consent ‘needed to be obtained prior to… undertaking representation of adverse interests, not in response to a motion to disqualify.'”
Risk Update

Money Matters (and Conflicts) — Lack of Firm Financial Controls “Not Unusual” & Wealth Management Services a Poor Practice

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Clyde & Co have launched a new risk newsletter: “Lawyers’ Risk Management Newsletter, July 2020” —

  • “Mr. Wetterman cheated the firm out of USD 361,646.47 by submitting and obtaining reimbursement for 382 separate sham travel expense requests between 2015 and 2019. Unfortunately, this story is not unique or even particularly uncommon.”
  • “This story, and other incidents of similar ilk, demonstrate the importance of the adage ‘trust – but verify.’ The story exemplifies the fact that law firms often repose trust in their lawyers – and even in non-lawyer employees with roles involving access to the firm’s finances – without having in place the appropriate controls to fulfill the firms’ ethical and fiduciary obligations to “verify.” The ethical duties relating to managing client funds are found in Rule of Professional Conduct (“RPC”) 1.15, and the duty not to “engage in conduct involving dishonesty, fraud, deceit or misrepresentation” is found in RPC 8.4 (c). In addition, lawyers owe their firms, and their firms’ clients, fiduciary duties to the same effect. Also important are RPC 5.1 and 5.3 – the duty of supervision.”
  • “It is not sufficient for a firm to place trust in its attorneys and staff, and thereby possibly enable them to steal or embezzle the firm’s or its clients’ funds, without having appropriate oversight policies and procedures in place. Here, the scheme was possible because the firm permitted its lawyers to submit travel expense claims for reimbursement without requiring any appropriate proof of the validity of the claims.”
  • “Regrettably, Thomas Wettermann’s case is not unusual. A strong internal control environment is not just a best practice but a way to protect the law firm, its clients and its employees. Although no set of policies and procedures can prevent fraud completely, putting in place appropriate financial controls will significantly reduce the opportunities for wrongdoing and will help to protect the assets of the firm, not least its good name. The policies and procedures described above are not a comprehensive list. Rather, firms should consult with their outside accountants and advisors on the policies, procedures and controls best suited to their own particular needs.”

N.Y. Lawyer Can’t Also Provide Wealth Management Services” —

  • “A non-practicing New York lawyer who’s been working in wealth management for 20 years and now wants to open a law office and provide investment advisory services to law clients can’t ethically do so, the state bar said.”
  • “‘The conflict between the legal and non-legal services is so severe that informed consent cannot cure it,’ the bar’s ethics committee said in an opinion.”
  • “A state professional conduct rule ‘expressly allows’ lawyers to provide legal and non-legal services to the same client, like lawyer-accounting services, the opinion said. But some ‘dual practice conflicts’ can’t be remedied with informed client consent because of the conflict, it said. The opinion cited the example of lawyers acting as real estate brokers for the same transaction.”
  • “The lawyer could, however, provide wealth management services to non-legal clients if a disclaimer is provided that no lawyer-client relationship is being formed, the opinion said.”