Risk Update

Conflicts Contentions — “Blatant Ethics Breach” Accusation in Arbitration Proceeding

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Crowell Denies ‘Blatant’ Ethics Breach as Walgreens Broadens Lawsuit” —

  • “Lawyers for Walgreens on Tuesday filed an amended complaint that asked a District of Columbia Superior Court judge to disqualify Crowell from an arbitration proceeding in which the firm is representing the insurance carrier Humana Inc. against Walgreens. The attorneys also urged the judge, Hiram Puig-Lugo, to strip legal fees ‘that Crowell has received or in the future will receive in connection with actions in which it is acting adversely to Walgreens.'”
  • “The company’s original lawsuit, first published by The National Law Journal, was docketed in March and sought documents related to work the law firm did years ago for Walgreens on a prescription drug benefit program. In 2008, Crowell provided legal services as part of a Walgreens initiative called the ‘prescription savings club,’ or PSC. Crowell, representing major U.S. insurance carriers, last year sued Walgreens in Illinois federal district court in a case that confronts the prescription savings club and accuses Walgreens of fraud.”
  • “‘Law firms cannot advise a client on a legal issue, then turn around and sue that client over the same issue. This represents a clear conflict of interest and a breach of Crowell & Moring’s ethical and fiduciary obligations,’ a spokesperson for Walgreens said in a statement. ‘Walgreens has given Crowell & Moring every opportunity to do the right thing. They refused, leaving Walgreens no alternative but to seek relief in court.'”
  • “Just weeks ago, lawyers at Crowell had resisted disclosing internal law firm documents to Walgreens’ attorneys at Reed Smith, according to court filings. Crowell had maintained the firm had not been counsel to Walgreens at the time legal services were provided on the prescription savings club. Crowell argued it had represented a Walgreens subsidiary that was later sold to a third party.”
  • “That company, however, consented to the disclosure of the Walgreens files, the lawsuit said, and Walgreens recently obtained requested documents from Crowell. Lawyers for Walgreens contend, however, that Crowell still is holding onto relevant documents related to the work the firm did on the prescription savings club.”
  • “Rebecca Carr, a spokesperson for Crowell, said in a statement: ‘Crowell denies the assertions in Walgreens’ amended complaint and looks forward to achieving vindication in court.'”
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Risk Update

Risk & Client Compliance Videos — Law Firm GC Perspective on Risk, Client Audit Roundtable

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For those of you who are ILTA members, you may be interested in two recent relevant webinar recordings from events held late last year:

General Firm Risks: A General Counsel’s Perspective” —

  • “If you are interested in learning ways to strengthen your relationships with your general counsel, or are a GC yourself, this roundtable will provide insights into multiple areas and questions to ask, no matter the side of the table you are on. This roundtable will cover topics such as: Meeting/Messaging Services, Cyber Insurance, Cloud: Legal Considerations while Using and eDiscovery/eBilling.”
  • Moderators & Participants:
    • Matthew Roskoski – Deputy General Counsel at Latham & Watkins LLP
    • Martin Kaminsky – Chief Legal Officer and General Counsel at Greenberg Traurig LLP
    • Corey Reitz – E-Discovery Project Lead at Sandia National Laboratories
    • Michele Gossmeyer – Global Director, Information Governance, Risk and Compliance at Dentons

Client Audits” —

  • “Client audits (like them or not) happen, and you have to be prepared for them. As we become ever more reliant on technology, the complexity of our systems increases; clients know this and want to be ensured that the data they provide us is well-protected. Most of us are regularly subjected to client audits, which can range from being as simple as a couple of security-related questions to the equivalent of a TSA pat-down. Similarly, outside counsel guidelines and representation agreements are becoming more and more complex, covering a wide range of insurance, governance and security requirements.”
  • “So how can we best prepare for and respond to client audits? Bring your friends (and your questions and experiences) and join us in an open mic discussion as we try to chart a better course through the chaos of client audits.”
  • Participants:
    • Matt McKinley – Chief Information Officer, Holland & Knight LLP
    • Jon Washburn – Chief Information Security Officer, Stoel Rives LLP
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Risk Update

Lawyer Departure Risk — Information Governance, Firm IP, KM, “Secret Downloads”

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Treasure Trove On Thumb Drives: Remand Ordered In Dispute Over Conduct Of Departing Attorneys” —

  • “The Massachusetts Supreme Judicial Court has remanded in a suit brought concerning the conduct of departing law firm attorneys.”
  • “Over the course of more than two decades representing clients in asbestos litigation, the plaintiff Governo Law Firm LLC (GLF) systematically created the contents of a research library, a treasure trove of materials amassed from GLF’s own matters as well as other sources, that gave it a competitive edge in attracting and providing legal services to clients in this specialized field.GLF also built electronic databases to render the library readily searchable, facilitating retrieval of the information.”
  • “In the fall of 2016, these proprietary materials were taken by a group of nonequity employees at GLF (attorney defendants) as they prepared to start a new law firm, the defendant CMBG3 Law LLC (CMBG3), in case their planned purchase of GLF proved unfruitful.”
  • “The attorney defendants took turns secretly downloading the library and databases, as well as GLF’s employee handbook, other administrative materials, and client lists, onto high-capacity ‘thumb drives’; the attorneys then surreptitiously removed these materials from GLF’s offices.”
  • “They subsequently made an offer to GLF’s sole owner, David Governo, to buy GLF, stating that they would resign if the offer were not accepted that day. Governo rejected the offer that same day and locked the attorney defendants out of GLF’s computer systems. The next day, the attorney defendants opened for business under the previously incorporated CMBG3, where they used the stolen materials and derived profits therefrom.”
  • “The materials copied included three different types of information: a research library, databases, and administrative files. The research library contained over 100,000 documents relevant to asbestos litigation, including witness interviews, expert reports, and investigative reports… The library was developed by GLF over a period of twenty years, at a cost of more than $100,000. According to testimony by GLF’s expert, these materials were ‘extremely valuable’ and provided a competitive advantage to GLF over other law firms within the field of asbestos litigation.”
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Risk Update

Risk Webinar — Virtual Risk Round Table (Focus on New Business Intake)

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My friends and colleagues at InOutsource are hosting their latest virtual risk round table webinar. I’ve enjoyed these past sessions and will be in the audience again at: “VIRTUAL ROUND TABLE: Successful New Business Intake” —

  • DATE: April 22nd at 1 pm Eastern.
  • “As partnerships, law firms are complicated organizations. The greatest challenges of the partnership model often are associated with getting the partners to do things associated with running the business of the firm. Lawyers like to practice law, not handle business administration.”
  • “One of the key pieces of the business of a law firm is new business intake. Get it right and important downstream processes like timekeeping, billing, collections, and profit analysis will go smoothly. Get it wrong and not only will it jam up those gears but it also could expose the firm to ethical, financial, and reputational risks.””
  • “So, if new business intake is so important, why do so many law firms struggle to get it right? What does successful new business intake look like? We have some ideas but we also want you to share yours!”
  • Conversation topic starters will include:
    • What works really well? What really doesn’t work?
    • Is this just a hoop to jump through or is there meaningful consideration of new work?
    • Are there creative workflow strategies you’ve employed to get better information from submitters, get better involvement from reviewers (answering the “should we” question), and speed things up?
    • What are the “new” things your firm has asked to know about new matters? (Marijuana businesses, Pricing, LPM, OCGs, etc.”
  • Registration link
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Risk Update

Law Firm Conflicts Waivers — When Can Consent be Revoked?

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Court of Appeals Issues Rare Decision on Revoking Consent to Conflict Waiver” —

  • “Earlier this year, Division I of the Washington Court of Appeals issued a decision touching on an area of the Rules of Professional Conduct (RPC) that is rarely litigated: revoking consent to conflict waivers. The decision was “unpublished” under General Rule 14.1, but is instructive nonetheless—both for its illumination of this comparatively “unplumbed” area of conflicts law and as an illustration of the result.”
  • R.O. by and through S.H. v. Medalist Holdings, Inc., No. 81040-5-I, 2021 WL 672069 (Wn. App. Feb. 22, 2021) (unpublished), was painted against the backdrop of parallel federal criminal and state civil proceedings against two groups of related companies, Medalist and Backpage, and their executives. A law firm represented both corporate groups and the executives in the civil case under a set of joint representation agreements. In the criminal litigation, Backpage and its CEO pleaded guilty and, as a part of the plea deal, agreed to cooperate with the government against Medalist.”
  • “After the guilty pleas, Backpage’s CEO notified the law firm that he was withdrawing from the joint representation agreement. The law firm, in turn, moved to withdraw from representing all of the Backpage defendants while continuing to represent the Medalist defendants. The CEO, however, objected to the law firm continuing to represent Medalist. The trial court granted the law firm’s motion to withdraw from representing the Backpage defendants—but also disqualified the law firm from continuing to represent the Medalist defendants. The Medalist defendants sought discretionary review, but the Court of Appeals affirmed the law firm’s disqualification.”
  • “The Court of Appeals examined whether the CEO had validly revoked consent under Comment 21. It focused primarily on the phrase “material change in circumstances.” The Court of Appeals found that the guilty pleas met that standard. That left the law firm with an unwaived former client conflict. The Court of Appeals then concluded that the trial court was within its discretion in disqualifying the law firm as a remedy for the unwaived conflict notwithstanding the impact on the Medalist defendants.”
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Risk Update

Conflicts Allegations, Disqualification — Ethical Wall Fail, Disclosure Deferred Debate

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Goulston & Storrs Faces $300M Suit Over Role in Failed Boston High Rise Project” —

  • “Am Law 200 firm Goulston & Storrs is facing a $300 million lawsuit based on allegations the firm failed to disclose client conflicts and relevant information to a construction client in Boston, ultimately causing a major real estate development project to flounder. The firm says the claims are without merit.”
  • “The complaint, filed Friday by construction magnate John Fish and his company JFF Cecilia in Massachusetts State Court, centers on a billion-dollar, mixed-use high rise project in Boston’s Back Bay neighborhood, referred to in the complaint as the St. Cecilia’s Project. Also involved in that project was Stephen Weiner and his firm, Weiner Ventures, which conceived the project, according to Fish’s complaint.”
  • “According to the complaint, Goulston & Storrs has contended that it never represented Fish or JFF Cecilia in the project, and that it only represented the joint venture entity, ADG Scotia Holdings LLC.”
  • “But Fish’s complaint referred to ‘five years of emails,’ including screenshots of some of them, that refer to representation of Fish. It alleges that Goulston & Storrs collected about $12 million in fees from Fish, and that Goulston & Storrs formed the entity JFF Cecilia on Fish’s behalf.”
  • “In its statement Friday, Goulston & Storrs added, ‘We made clear at the outset of our engagement that we represented the joint venture entity, not the individual interests of Mr. Fish or the other participants relative to the project. In fact, each party signed a conflict waiver letter with our firm acknowledging this agreement, and our team of attorneys fulfilled their professional and ethical obligations at all times. Neither party received preferential treatment; we treat all of our clients with the same respect and superior service.'”
  • “In a footnote of the complaint, Fish alleged that ‘Goulston & Storrs itself has confirmed that it failed to obtain a relevant conflict waiver.’ It said when a new lawyer representing Fish asked Goulston & Storrs for engagement letters or conflict waivers related to the project in 2019, the firm responded that it did not have any, according to the footnote.”

Gibson Dunn DQ’d From Military Contractors’ Copyright Fight” —

  • “A California federal judge on Wednesday disqualified Gibson Dunn & Crutcher LP from representing military helicopter maker MD Helicopters Inc. in its copyright infringement suit against government contractor Aerometals, finding that the firm is conflicted in light of its past representation of Aerometals in related fraud litigation.”
  • “In an 18-page order, U.S. District Judge Troy L. Nunley agreed with Aerometals Inc. that Gibson Dunn ‘clearly still possesses confidential and possibly privileged information’ from representing Aerometals in prior litigation from 2002 through 2005, and that none of the actions that Gibson Dunn took after learning of the possible conflict could cure the issue.”
  • “‘A number of California courts have found vicarious disqualification of a firm to be required where a substantial relationship is proven, ‘even if the firm erects an ethical wall around the attorney who possesses the opponent’s confidences,” the order says. ‘Accordingly, this court too finds Gibson Dunn’s ethical wall insufficient to prevent the firm from vicarious disqualification.'”
  • “Gibson Dunn sought to serve as co-counsel for MD Helicopters in July 2019, but Aerometals asked the judge to disqualify Gibson Dunn the following September. Aerometals argued that roughly 12 attorneys at the law firm had represented the company in four related matters from 2002 to 2005, and had charged Aerometals more than $1.1 million in fees and costs.”
  • “Aerometals had expressed concerns to Gibson Dunn about its past representation of the company, but the firm argued in response that most of the attorneys who worked on those cases no longer practice at Gibson Dunn and that none of the attorneys working on the instant suit worked on the prior cases. Gibson Dunn also said that it had implemented an ethical wall since receiving Aerometals’ objection, and that disqualifying the firm at this stage of litigation would be highly prejudicial.”

 

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