Risk Update

Law Firm Ethical Walls — DOJ Puts One Firm’s Screening Policies and Practices Under Scrutiny

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Fifteen years and no gray hair ago, as firms were investing in replacing memoranda-driven screening with electronically-enforced ethical wall software, I had a few discussions with firms about the implications of the move from paper to digital.

Specifically, I recall discussions regarding how electronic paper trails and logs can capture a great deal of (sometimes surprising to lawyers) information — and that questions of “what was possible” versus what “actually happened,” or even what system configuration were in place at what times —  were sure to follow as the arguments caught up to technology and practice.

I recall a story or two about about a brief, accidental access to a document in a shared library created a disqualifying data point for a firm, permanently logged. So I’m not surprised to see the “how” behind the why under the microscope as firms engaged in walls-related disqualification fights. Without judgement on the specific to this one, I noted: “DOJ Wants More Info On Morgan Lewis’ Glenmark, Teva Work” —

  • “Prosecutors urged U.S. District Judge R. Barclay Surrick to require Morgan Lewis to answer a series of questions about its ability to ethically represent Glenmark Pharmaceuticals Inc. USA in the generic-drug price-fixing case. The department has taken issue with the firm’s prior representation of fellow defendant Teva Pharmaceutical Industries Ltd. in the criminal probe and its continued representation of both companies in parallel civil litigation.”
  • “Morgan Lewis has rejected the DOJ’s conflict of interest concerns, arguing that it has strict safeguards in place to prevent attorneys assigned to each client from accessing confidential information about the other. But the government said in a Friday letter that the firm must explain exactly how these safeguards work and answer explicitly whether any of its attorneys have performed overlapping work on the two companies.”
  • “‘[The U.S. requests] additional details regarding the ethical wall put in place at Morgan Lewis to address the firm’s representation of both Glenmark and Teva, including whether any Morgan Lewis attorneys working on this criminal matter on behalf of Glenmark had access to Teva’s confidential information, either during the pre-indictment stage of this criminal matter, during the time when Morgan Lewis attorneys were representing Teva after Teva was indicted in this matter, or in relation to the pending parallel civil matters,’ the DOJ wrote.”
  • “Glenmark’s attorneys at Morgan Lewis and Wilkinson Stekloff LLP urged the court to reject the DOJ’s request in a response letter on Monday, saying the government’s ‘overbroad, intrusive and entirely unnecessary’ list of questions is wrongly attempting to elicit its trial strategy.”
Risk Update

Conflicts Allegations — Judicial Edition

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“‘Not a Close Question’: 5th Circuit Trump Pick Faced Recusal Bid in Voting Case” —

  • “Judge S. Kyle Duncan, appointed by former President Donald Trump to the U.S. Court of Appeals for the Fifth Circuit, appears to have stepped aside Friday from hearing a dispute between Texas and voting rights lawyers over nearly $7 million in attorney fees in a major civil rights case.”
  • “In the case Veasey v. Abbott, lawyers for a number of state and national civil rights and voting rights organizations filed a motion just 24 hours earlier in which they called on Duncan, appointed to the bench in 2018, to recuse because of his prior participation in the case as a private lawyer at a law firm in Washington. The original litigation was a challenge to a Texas voter ID law.”
  • “‘This is not a close question,’ Ezra Rosenberg of Lawyers Committee for Civil Rights Under Law wrote in the recusal motion. ‘Judge Duncan was a lawyer who advocated against [the plaintiffs] in this case. He cannot also be a judge in this case. Given the standard—requiring disqualification in close cases—disqualification is mandatory here.'”
  • “Lawyers for Texas on Friday had opposed the request that Duncan recuse, arguing essentially that Duncan was not presiding in the identical matter in which he had earlier participated. The dispute now is over legal fees, and not the merits of the voter ID law.”
  • “Besides citing the judicial recusal statute and the Code of Conduct for U.S. Judges as reasons for recusal, Rosenberg wrote that Duncan, during his Senate confirmation hearing, had committed to recuse from any matter in which his former firm had submitted an amicus brief. The motion also stated that recusal was warranted to avoid the appearance of partiality.”

Ex-Littler Client Wants Substitute From Judge’s Old Firm” —

  • “After lies from a Littler Mendelson PC partner to an Alabama federal judge resulted in a five-figure sanction for the employment powerhouse and an Atlanta partner being scrubbed from the Littler website, the firm’s former client is seeking to substitute in a lawyer from the judge’s old law firm.”
  • “In a defense filing Wednesday, steel mill operator Outokumpu Stainless USA LLC asked U.S. District Judge Jeffrey Beaverstock of the Southern District of Alabama to let it to be represented by an attorney from Burr & Forman LLP after the court kicked out its former lead counsel, Littler partner Gavin S. Appleby.”
  • “The reason: Judge Beaverstock practiced at Burr & Forman, of Birmingham, Alabama, before being tapped for the bench and taking over the case three years ago.”
  • “Moreover, Outokumpu acquired a facility at issue in still-pending litigation from ThyssenKrupp Stainless USA LLC. Burr & Forman has also represented that company ‘extensively,’ according to a plaintiffs filing in 2018, as well as Outokumpu in various other litigation. And Judge Beaverstock himself was listed as a Burr & Forman counsel on two active cases for Outokumpu at the time he went on the bench, according to court filings.”
  • “At that time, the plaintiffs agreed that the judge’s work for Outokumpu and the company’s ongoing relationship with Burr & Forman did not represent a conflict of interest or necessitate Judge Beaverstock’s recusal. But following Appleby’s misconduct and the Thursday substitution bid, they changed their tune, saying that hiring the Burr firm ‘creates a very significant, and very obvious, issue about potential recusal’ for the judge.”
  • “In a revised position filed Thursday, plaintiffs’ counsel then softened that position, saying it would only object to the substitution if Judge Beaverstock decided on his own that his recusal ‘would be a consequence of that substitution… If there is no recusal, then plaintiffs do not oppose the substitution of counsel. Plaintiffs’ position reflects the substantial delay that would result from recusal and reassignment,’ the filing states.”
Risk Update

Conflicts Complexities — PI Lawyer Expert Witness Twist, Cross-border California Casino Clash

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Disqualification Sought for Connecticut Lawyer in Personal Injury Case” —

  • “A new twist in a case involving the alleged poaching of clients from one law firm to another now has one attorney—citing a conflict of interest—trying to disqualify a fellow lawyer from a separate case.”
  • “The attorneys at Cicchiello & Cicchiello have been fighting with a former associate who allegedly absconded with the firm’s client list. But now that fight has come back to haunt them in separate litigation.”
  • “The defense lawyer opposing Cicchiello & Cicchiello in a car accident tort case is asking a Connecticut judge to remove the attorney serving as the plaintiff’s expert witness.”
  • “Now, Adler’s motion for disqualification notes that Connelli, the expert that Dzialo Pickett hired for his client’s case, is also opposing counsel against Dzialo Pickett in the Cicchiello & Cicchiello litigation.”
  • “It claims Connelli is therefore an unsuitable expert witness in the car accident case. It argues that Connelli has a conflict in the accident case, where he is on the Dzialo Pickett payroll as a legal expert, while litigating against it as opposing counsel in the Cicchiello dispute.”

NJ Firm Faces DQ Bid For ‘Abusing’ Ability To Work In Calif.” —

  • “A New Jersey law firm is ‘abusing’ the system that allows lawyers to temporarily practice in California, applying at least 22 times since last year on behalf of the same client in similar putative class actions alleging accessibility violations, a casino services company has contended.”
  • “The Northern District of California should disqualify Marcus & Zelman LLC from a case in which Bruce Begg alleges that an online casino owned by Sutter’s Place Inc. lacks certain accessibility options for the visually impaired, as the firm has sought temporary admission in at least 22 different cases in California since lasClt year, all on Begg’s behalf, the company argued Friday… Zelman has applied for temporary admission in California at least 64 times since 2017, according to Sutter’s Place.”
  • “Begg alleges that Sutter’s Place has violated the federal Americans with Disabilities Act and California’s Unruh Civil Rights Act. When he attempted to use its website in June 2020, Begg was not able to learn about casino locations, hours of operation and contact information because the technology the site uses is not accessible to him, according to an amended complaint he filed in March.”
  • “Sutter’s Place contended in its motion to disqualify Friday that Marcus & Zelman uses the same accessibility technology on its own website as the casino services company.”
Risk Update

More Financial Risk — Fraudulent Billing Scandal, Insurance Premium Management

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Biglaw Partner’s Suspension Quadrupled On Appeal Following Fraudulent Billing Scandal” —

  • “Back in 2019, we told you about the hot water Duane Morris partner Doreen Zankowski was in. The issue stems from her time at Saul Ewing — specifically her time entry in 2015, the year she made equity partner. Zankowski billed 3,173 hours and worked more than 720 non-billable hours that year, but during a compensation review, the firm became concerned with her hours. And though Zankowski left Saul Ewing in 2016 and joined Duane Morris, the investigation into her timesheets continued.”
  • “According to the initial ethics opinion, Zankowski ‘falsely inflated the number of hours on final bills sent to several clients, improperly entered her time as work by her associates, and knowingly billed clients for taking depositions that she did not attend.'”
  • “But after an appeal to the Massachusetts Supreme Judicial Court, the suspension was quadrupled to two years… ‘[Associate Justice David A.] Lowy — writing for a four-judge panel of the top court — increased the penalty to two years on Thursday. ‘Our focus, however, is not on the quantum of excessive fees that were billed, but on the fundamental dishonesty inherent in the respondent’s client billings themselves,” Justice Lowy wrote. “It is not the sheer number of unworked hours that establishes the misconduct but, rather, the dishonesty manifested by billing for them at all.””

For more, see Legal Profession Blog: “Billing Misconduct Sanction Increased

Next up: “Five Things You Can Do to Help Keep Your Malpractice Insurance Premium in Line” —

  • “Unfortunately, for some lawyers, there is an elephant in the room, which is failing to accept the reality that there really is a strong correlation between aggressive collections actions and malpractice claims. If you regularly sue for fees, meaning 2-3 times or more every year, that decision is costing you money. Thus, tip number two is if you regularly sue for fees, consider stopping this practice and focusing on finding ways to prevent serious delinquencies from ever developing in the first place.”
  • “Accordingly, tip number four is to encourage you to proactively manage your firm’s claims history by way of a robust risk management program. Insurers prefer to insure firms that consistently use engagement and closure letters, rely on effective rules-based calendaring and docket control systems, have deployed a state-of-the-art conflict checking system, and regularly conduct file reviews just for starters. Time spent on developing and maintaining risk management processes and procedures will be well worth it in the long run.”
Risk Update

Financial Risk — Inflated Billing Accusation & Engagement Letter Interpretations

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Suit alleges BigLaw firm used LexisNexis product to inflate bills for flat-fee legal research” —

  • “A corporate litigant disputing the legal bill charged by Squire Patton Boggs has filed a third-party complaint alleging that LexisNexis helped the law firm inflate its fees.”
  • “The suit alleges that LexisNexis charged Squire Patton Boggs a flat rate, but the law firm billed more than $100,000 for what appeared to be separate searches with the help of a LexisNexis product. The product, called PowerInvoice, can be used to generate customized reports. The product was used ‘to construct sham bills,’ according to the suit, filed in Florida’s 15th Judicial Circuit.”
  • “‘We believe LexisNexis aided and abetted Squire in a breach of fiduciary duty and a fraud against my client,’ said Michael Smith, a lawyer for the Armor Screen Corp., in an interview with Law.com. ‘We think the PowerInvoice product is a product created and designed in a way that enabled that kind of fraud.'”
  • “A LexisNexis representative told Law.com that it does not comment on pending litigation. Squire Patton Boggs told Law.com in a statement that its billing for legal research complied with ABA rules.”

Law.com adds commentary from cost recovery consultant Rob Mattern:

  • “Mattern said most of his law firm clients spell out their legal research billing terms in their engagement letters. The Squire letter, however, allowed the firm to change clients’ rates from the bulk agreement prices it received from its vendors.”
  • “‘The only fair reading of it is they’re asserting that they are negotiating these arrangements to give the client a better rate,’ Smith said. ‘Instead what internal memoranda show is they used the PowerInvoice product and other aspects of the arrangement to generate documents that look like the actual bills charged from Lexis—the amount charged from Lexis to Squire—when there’s no relationship to the amount charged.'”
Risk Update

Event Report — Risk and Compliance Conference Highlights (AML & InfoSec)

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Law Society Risk and Compliance Conference” —


  • “Anti-money laundering (AML) compliance is a ‘messy and complicated area’, Amasis Saba, chair of the Law Society’s money laundering taskforce, told the conference. He added: ‘But nonetheless, the government has said it will not relax its efforts to identify and penalise those firms that are not on top of it.’”
  • “Colette Best, the SRA’s director of AML, endorsed Saba’s comment about the area’s complexity. ‘The biggest challenge,’ she said, ‘is the pace of change. There were new regulations in 2017 and then again in 2019. And now a 212-page newly revised and updated guidance was published in January 2021. It’s difficult to keep up.’”
  • “Saba turned his attention to what every firm must have in place: written risk assessments. ‘You must show what you, the firm, have actually done. It is not a generic, tick-box process. Consultants can be useful, but you need to own what you have done.’”
  • “Risk assessments should be both firm-wide and related to specific matters, he continued. Everyone should be involved, including fee-earners and anyone else who has access to the files. ‘We should also all be asking ourselves whether there are factors that make any particular transaction more complex than usual or different. Does what the client tells you make sense? What precisely did the client do to earn all this money?”

Information Security & Cyber:

  • “The Pentagon, with the resources to invest in state-of-the art cybersecurity, is not the only high-profile victim. US law firm Jones Day, which numbers former president Donald Trump among its clients, also had data compromised. ‘The vulnerability in this instance was that older systems were buried in modern updates,’ explained Wright, ‘which highlights the dangers of hanging on to legacy technology.’”
  • “What can you do to minimise the risk to your firm? Fleming urged you to test your defence systems with ‘simulated attacks’ launched by yourself against yourself. ‘Fraudsters typically try to tempt you with offers that, upon reflection, are too good to be true. They also try to make you panic and act recklessly out of fear of being prosecuted or missing out on an opportunity. Teach colleagues to recognise such scams or simply to pick up the phone and check that the email they’ve just received is genuinely from an established client or somebody else they think they can trust.’”
  • “Working from home has its own hazards. ‘Even automated vacuum cleaners can be hacked,’ said Wright, ‘as can smart fridges, lights and speakers. On top of this, of course, a colleague’s personal laptop probably won’t offer the same level of protection as the office’s system of firewalls and alerts. Best practice would be to get an expert to go to colleagues’ homes and verify the protective measures in place.’”
Risk Update

Ethical Wall Works — Firm Survives Lateral-driven Disqualification Attempt

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White & Case Fends Off Effort to Oust It From YPF Pollution Litigation” —

  • “Law firm White & Case LLP will stay in charge of a $14 billion bankruptcy lawsuit against Argentina’s YPF SA, a judge said, rejecting complaints that a lawyer’s career move had undermined the state oil giant’s defense.”
  • “The ruling said YPF failed to show why White & Case should be ousted as counsel to the bankruptcy trust that has sued YPF in the litigation, which seeks to hold the Argentine oil company responsible for the costs of cleaning up New Jersey’s contaminated Passaic River. Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Del., issued the ruling Tuesday.”
  • “Judge Sontchi said White & Case had erected sufficient safeguards after hiring Jessica Lauria, a former top legal strategist to YPF, in October 2020. Ethical and law firm procedures will protect against disclosure of information that could be used against YPF, he found.”
  • “The dispute took a detour in December when YPF moved to disqualify White & Case, saying its star hire, Ms. Lauria, knew too much about YPF’s legal strategy, which she helped design. With so much at stake, YPF needed to force White & Case out of the litigation to guarantee its corporate confidences would be protected, YPF company lawyer Victor Hou said during arguments last week.”
  • “The company said she had met with top YPF leaders and was in possession of crucial confidential information that could be disclosed inadvertently. Her role was so important that the standard law firm screens used to avoid information leakage and conflicts wouldn’t be sufficient to guarantee its information wouldn’t get into the wrong hands, YPF argued.”
  • “Judge Sontchi disagreed, and found White & Case had followed proper procedures. Ms. Lauria’s marriage to Thomas Lauria, the global head of White & Case’s restructuring practice, isn’t relevant to the disqualification motion, the judge said.”

Curious about the underlying matter, I found: “The New Jersey Chemical Spill That Could Pollute U.S.-Argentine Relations“.

Risk Update

Disqualifications Done & Connections Called — Dr. Dre (Not Forgotten), Judge (Questioned)

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Judge rules Dr. Dre must find a new lawyer in Nicole Young divorce case” —

  • “A judge has ruled that power divorce attorney Laura Wasser — and Dre’s lawyer Howard King — cannot represent him in his blockbuster split from estranged wife Nicole Young. Wasser is known as one of LA’s biggest divorce attorneys, repping clients including Kim Kardashian.”
  • “But Young and her attorney argued in court papers that King had previously repped Dre and Young throughout their marriage. Wasser was ‘vicariously disqualified’ from repping the rap mogul because she was working with King.”
  • “Dre and Nicole were married for 24 years. But they split on March 27, 2020, according to court papers. He is reportedly worth about $800 million.”

DiFiore Didn’t Disclose Greenberg Traurig Connection During Arguments, Raising Questions” —

  • “New York’s top judge did not disclose her connection to the law firm Greenberg Traurig as two attorneys from the firm appeared before the Court of Appeals for arguments earlier this year, transcripts of the virtual proceedings showed.”
  • “At the time of the arguments in early January, Chief Judge Janet DiFiore was being represented by a separate attorney from Greenberg Traurig in two lawsuits over the court system’s decision to force out dozens of older judges.”
  • “But DiFiore made no mention of that connection as judges heard arguments in four mortgage cases Jan. 5, according to the transcripts. A spokesman for the court system said a judge has no obligation to recuse from a unrelated case when a private law firm represents them in their ‘official capacity.'”
  • “Gary Spencer, a spokesman for the Court of Appeals, declined to say if DiFiore disclosed her connection to Greenberg Traurig in any form. Instead, he issued a statement saying the court ‘does not address these matters through ‘disclosures.’'”
  • “Judges on the Court of Appeals gathered for a virtual meeting Jan. 5 to hear arguments in four separate mortgage cases. Greenberg Traurig represented companies in two of those cases and argued before the state’s high court. Weeks later in February, the Court of Appeals court handed down a single opinion in response to all four mortgage cases. The majority opinion, which was written by the chief judge, sided with the companies represented by Greenberg Traurig. Both Greenberg Traurig cases were unanimous rulings.”
  • “The chief judge should have divulged her connection to Greenberg Traurig through some channel, according to several experts on legal ethics. There’s some debate among experts over whether the chief judge had an ethical duty to disclose the information or if her providing the information would have simply been a best practice.”
  • “Judges should avoid ‘the appearance of impropriety’ under the judicial conduct rules. But legal ethics experts advise it’s unclear specifically whether DiFiore had an obligation to recuse herself from the cases.”
Risk Update

Judicial Disqualification — Relations, Ethical Walls, and Respectful, Reluctant Notice

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Opioid Judge Withdraws After AbbVie Elevates His Atty Sister” —

  • “Despite drugmaker warnings of “harmful and unwarranted” disruption, an Illinois magistrate judge withdrew Thursday from Chicago’s bellwether case against drugmakers in multidistrict opioid litigation after the city flagged his sister’s new role overseeing thousands of opioid cases for AbbVie Inc.”
  • “U.S. Magistrate Judge Young B. Kim, who started managing discovery and other issues in the case more than six years ago, recused himself in response to the city’s concerns about his sister — longtime AbbVie in-house counsel Nancy Kim — recently being designated to manage the company’s vast docket of opioid-crisis lawsuits.”
  • “According to the entry, Chicago and the public might question ‘the newly arisen conflict of interest’ involving his sister, and drug companies could perceive ‘that the court will overcompensate to appear to be unbiased’ against the city.”
  • “Illinois-based AbbVie’s involvement in the case stems from its acquisition of Allergan PLC, which is facing more than 3,000 lawsuits alleging unlawful marketing and sales of prescription narcotics. Shortly after the acquisition last year, Judge Kim notified the city and the drugmakers that he now had a family connection to the case, but the parties said they had “no issues or objections,” according to a June docket entry.”
  • “More recently, however, Nancy Kim was tapped to replace a departing AbbVie lawyer in charge of the company’s opioid cases. In an email last month, Kirkland & Ellis LLP partner Donna Welch, counsel for Allergan, informed the city that Nancy Kim ‘will work closely’ with Kirkland and other firms ‘to develop and oversee the litigation and settlement strategy regarding opioid litigation at a national level.'”
  • “According to Welch’s email, Allergan was willing to erect ‘an ethical wall’ between Nancy Kim and Chicago’s case, ensuring that she would have no role ‘other than being informed of key developments.’ Last Friday, Chicago filed a “notice of these new facts for consideration of recusal,” averring that Nancy Kim’s managerial role means that she would be ‘acting as a lawyer’ in the city’s case.”
  • “Despite the proposal for an ethical wall, ‘Allergan’s national litigation strategy, settlement positions and defenses will necessarily carry over to the Chicago litigation,’ the city wrote, adding that it filed the notice ‘respectfully and reluctantly.'”
Risk Update

The Disqualification and The Dispute — Follow that (Privileged?) Email…

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Gibson Dunn disqualification over privileged email could be headache for Calif. lawyers” —

  • “On Tuesday, a divided California state appeals court refused to reverse a trial court decision to disqualify Gibson Dunn & Crutcher from defending McDermott Will & Emery in a malpractice suit brought by the patriarch of a family investment business. Gibson Dunn’s fatal mistake, according to the Fourth Appellate District of the California Court of Appeal, was relying on an email distributed by the patriarch, which Gibson Dunn found in McDermott’s own files and produced to the other side.”
  • “If that strikes you as a strange rationale for disqualification, you are not alone. In a strongly worded dissent from the majority opinion by Judge Richard Aronson, Judge David Thompson said the majority had twisted California’s rules for handling disputed discovery material beyond recognition and reason.”
  • “The majority opinion ‘upsets the delicate balance,’ Judge Thompson wrote. ‘It imposes on Gibson Dunn an obligation to respect their opponent’s interests which is greater than and in direct conflict with their primary obligation to zealously represent their own client’s interests.'”
  • “But among the new wrinkles in the Gibson Dunn case, as you will see, are that the disputed email ended up in McDermott’s files before McDermott was in litigation with its former client. Gibson Dunn didn’t trick anyone to get hold of the email to gain a litigation advantage. Nor did McDermott’s former client mistakenly produce the email in discovery in the malpractice case. The email was already sitting in the files of Gibson Dunn’s client when the malpractice case began.”
  • “The backstory on the disputed email is so uniquely convoluted that I doubt any other lawyers will find themselves in precisely the same circumstances as Gibson Dunn in the McDermott case. But as Judge Thompson warned in his dissent, the ruling puts all California lawyers on notice that their own clients’ records may contain privilege pitfalls.”
  • “When Dick’s lawyers realized McDermott had the email, they asked Gibson Dunn to return all copies. Gibson partner James Fogelman refused, asserting that the document was not privileged because Dick had disclosed it to non-lawyers.”
  • “Dick eventually settled his dispute with Rick without any resolution on whether the email was privileged. But the issue came back when he sued McDermott for malpractice, claiming the firm was conflicted in representing various members of the Hausman family. Dick first moved for a ruling that the email was privileged. After the trial judge overseeing Dick’s malpractice actions, Orange County Superior Court Judge Sheila Fell, agreed that it was, Dick asked her to disqualify Gibson Dunn for using the document. The judge did so in a minute order.”
  • “More broadly, the opinion said lawyers don’t have discretion to consider whether the facts strip privilege from presumptively privileged documents. Once the protocol for presumptively privileged material is triggered, the majority said, lawyers don’t have discretion.”