Risk Update

Risk Grab Bag — Risk Webinar, Deadline Risk, and Dam Analysis

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A little bit of everything, and everything new today. First, an interesting webinar from Clyde & Co: “Where next for the professions? Unintended consequences and unexpected opportunities in the new era: a keynote lecture

Tuesday June 8 (12pm EDT)

  • “This event should be of interest to senior management, GCs and those in risk roles at professional service firms and to GCs running in-house teams, as we all reflect on the challenges and opportunities which lie ahead.”
  • “Professor Laura Empson [is] one of the world’s leading academic specialists in the management of professional services. Professor Empson is a Director and Professor at Cass Business School, Senior Research Fellow at Harvard Law School, was formerly an Independent Non-Executive of KPMG LLP and acts as an advisor to many of the world’s leading professional organisations. She is the author of books including ‘Leading Professionals: Power, Politics, and Prima Donnas,’ presenter of a BBC Radio 4 documentary ‘Insecure Overachievers’ about elite professionals and she co-hosts the podcast series ‘Empson & Morley – Leading Professional People.'”
  • “Her speech will examine the changes to professional life and work which were prompted or accelerated by the pandemic. While many practical changes were made of necessity – and with speed and agility – by professional service firms in response to the lockdown, their unintended consequences present a profound challenge to some established ‘truths’ about professionals and the way they work together. Laura will explore the implications for both organisations and individuals, focusing on issues of knowledge, ethics, governance, organisational culture, and what it means to be a professional. The lecture will be followed by a Q&A facilitated by Simon Konsta, our global Head of Clients and Markets and former Senior Partner.”

Next a reminder that calendaring, docketing and deadline risk is real: “Milberg Clients Get Cert. In Recently Revived Malpractice Row” —

  • “U.S. District Judge Raner C. Collins said in an order filed Wednesday that the negligence and breach of fiduciary duty claims brought by plaintiff Philip Bobbitt could proceed with class status on behalf of investors who hired Milberg years ago to represent them in a securities suit against an AIG subsidiary, only to lose class certification in that case after their attorneys missed the deadline for disclosing expert witnesses.”
  • “‘In the very least, the factual basis for all the putative plaintiffs’ claims is the same,’ Judge Collins said. ‘For the legal malpractice allegations, defendants’ offensive actions are applicable to all putative plaintiffs: Milberg missed the expert witness deadline, so the class was decertified, and Milberg failed to notify the putative class.'”
  • “First filed in 2009, the lawsuit claims Milberg dropped the ball on an underlying investor class action against AIG subsidiary Variable Annuity Life Insurance Co. Investors had accused Variable of illegally selling them tax-sheltered annuity contracts to be included in individual retirement plans that already qualified for favorable income tax treatment, such as a 401(k).”

And, unrelated to law firm risk but an interesting story about risk management, mitigation, and more, I found this video a fascinating exploration and analysis, for those who might be interested on engineering risk: “What Really Happened at the Oroville Dam Spillway?” —

  • “February 2017 saw one of the most serious dam-related engineering incidents in history with the failure of the service spillway at Oroville Dam. Whether they realized it or not, the people living and working downstream of Oroville Dam put their trust in the engineers, operators, and regulators to keep them safe and sound against disaster. In this case, that trust was broken. This video provides a summary of the event, including an explanation of the engineering details behind the failure.”
Risk Update

Risk News & Opinion — Dealing with “Problem” Clients, Insurer Ransomware Payment Resolution

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Why It’s Worthwhile to Look for the Learning with Problem Clients” —

  • “When it comes to problem clients, we all have a story or two to share; but what if it becomes more than that? What if a lawyer comes to realize that he or she is dealing with a problem client far more than once in a blue moon? It can happen, and if and when it does, it’s time to stop and do a little problem solving. It’s time to look for the learning.”
  • “Problem clients are often described as having several of the following characteristics. They can be demanding, confrontational, disrespectful, angry, unreasonable, needy, highly emotional, entitled, vengeful and the list goes on. They may have unrealistic expectations, have a personal agenda, be difficult to stay in touch with, and they are often problem payors at a minimum.”
  • “What am I to look for? Start by reviewing your intake process. This is where the “fail to establish” problem arises. While I believe most lawyers have learned to effectively screen potential new matters, not as many are quite as effective when it comes to screening potential new clients. Every new matter comes with a client and taking the time to try and determine if the potential new client is someone you can create a productive attorney-client relationship with is going to be time well spent. Understand that relationships that start out on the wrong foot rarely improve over time and accept the fact that no one is able to work well with everyone that walks through the office door. Look for and learn to recognize when it simply isn’t a match. That’s when you should be thinking about to saying thanks but no.”
  • “In order to address the “failure to maintain” problem one needs to go a bit further. Step back and ask yourself whether your own actions throughout the representation helped create the problem client. Perhaps the client had some legitimate emotional needs (e.g., recently received some devastating news such as a cancer diagnosis) and you’re not one who relates well to highly emotional individuals. In other words, could your own inability to meet your client’s legitimate, yet non-legal needs have caused the client to be dissatisfied enough to become a highly volatile problem client? Have this discussion with everyone at your firm that interacted with the problem client. Be open to identifying communication shortfalls. Try to determine how the relationship went south. Take any learning that’s to be had from the experience and use it to improve your skills in successfully managing effective attorney-client relationships.”

With the Colonial Pipeline attack making front page news, this caught my eye: “CNA Financial Paid $40 Million in Ransom After March Cyberattack” —

  • “CNA Financial Corp., among the largest insurance companies in the U.S., paid $40 million in late March to regain control of its network after a ransomware attack, according to people with knowledge of the attack.”
    “The Chicago-based company paid the hackers about two weeks after a trove of company data was stolen, and CNA officials were locked out of their network, according to two people familiar with the attack who asked not to be named because they weren’t authorized to discuss the matter publicly.”
  • “In a statement, a CNA spokesperson said the company followed the law. She said the company consulted and shared intelligence about the attack and the hacker’s identity with the FBI and the Treasury Department’s Office of Foreign Assets Control, which said last year that facilitating ransom payments to hackers could pose sanctions risks.”
  • “In a security incident update published on May 12, CNA said it did ‘not believe that the systems of record, claims systems, or underwriting systems, where the majority of policyholder data – including policy terms and coverage limits – is stored, were impacted.'”
  • “According to the two people familiar with the CNA attack, the company initially ignored the hackers’ demands while pursuing options to recover their files without engaging with the criminals. But within a week, the company decided to start negotiations with the hackers, who were demanding $60 million. Payment was made a week later, according to the people.”
  • “Hades was created by Evil Corp. in order to bypass U.S. sanctions placed on the hacking group, according to research published in March by the cybersecurity firm CrowdStrike Holdings Inc. In December 2019, the Treasury department announced sanctions on 17 individuals and six entities linked to Evil Corp. At the time, the Treasury department said Evil Corp used malware “to infect computers and harvest login credentials from hundreds of banks and financial institutions in over 40 countries, causing more than $100 million in theft.” The designation by the Treasury Department made it illegal for a U.S. company to knowingly pay a ransom to Evil Corp.”

And for those who read to the end, and worry about Ransomware, see: “Try This One Weird Trick Russian Hackers Hate” from security expert Brian Krebs.

Risk Update

Lateral Movement Fight — “Poached” Partner and Arbitration Agreements, Lawyer Impairment Response Ethics Opinion

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Jones Day Loses Bid to Squeeze Rival Orrick Over Firm’s Paris Partner Poach” —

  • “A District of Columbia judge has refused to force Orrick, Herrington & Sutcliffe to disclose certain internal information to Jones Day, which accused a former longtime practice-leading partner in Paris of breaching his partnership agreement after he departed for the rival law firm two years ago.”
  • “Jones Day lawyers asked a District of Columbia Superior Court judge in November to enforce an arbitral subpoena against San Francisco-based Orrick as part of an underlying proceeding involving the former partner. Many of the filings in the court case were redacted, leaving very little information available publicly. A judge sealed a telephonic hearing in April, denying ALM the opportunity to listen to the proceedings.”
  • “Bühler, according to the newly filed court order, ‘transacted his employment arrangement with Orrick around the time he was representing a Jones Day client before an arbitral tribunal.’ An Orrick partner was a member of the arbitral tribunal. Jones Day asserted that Bühler did not tell the firm about a potential conflict of interest.”
  • “One of the parties involved in the arbitration—the court ruling did not reveal any client names and attorney names—questioned the fitness of the arbitrator to remain on the panel, and the arbitrator was replaced. The arbitrator’s name also was not revealed in court papers.”
  • “Jones Day has accused Bühler of a material breach of his partnership agreement and has argued he must forfeit any compensation that is due to him. Jones Day also contends that the firm is entitled to a ‘set-off of all costs incurred and damages arising out of Mr. Bühler’s purported actions.'”
  • “The Williams & Connolly team for Orrick asked D.C. Superior Court Judge Alfred Irving Jr. to spurn Jones Day’s effort to enforce the arbitral subpoena. Irving concluded he did not have ‘general jurisdiction’ over Orrick and could not therefore compel the firm to respond to the subpoena Legg issued.”

Lawyers, Colleagues Can’t Ignore Impairment, Ethics Opinion Says” —

  • “Lawyers whose mental impairment affects their ability to practice law, as well as their colleagues who are aware of the problem, can’t ignore it because of ethical duties to firm clients, a California State Bar ethics advisory opinion said.”
  • “‘These ethical obligations may include, but are not limited to, communicating significant developments related to the lawyer’s conduct to the client and promptly taking reasonable remedial action to prevent or mitigate any adverse consequences resulting from an impaired lawyer’s actions,’ the bar said.”
  • “The California opinion proposed a scenario involving a rainmaker at a law firm who appeared confused about a client matter that had been ongoing for two years, couldn’t argue a motion on the client’s behalf; and didn’t communicate a settlement offer to the client. A subordinate attorney at the firm noticed the behavior and approached the impaired attorney, who denied any problems existed and stressed that the firm couldn’t lose the client.”
  • “The impaired lawyer’s “proposed course of conduct involves, at a minimum, reckless, grossly negligent or repetitive violations of the duties of competence and diligence,” the opinion said. Further ethics rules that may be implicated include ones on client communication; conflicts of interest; and terminating representation, it said.”
  • “Even though the impaired attorney won’t take any steps to deal with the issue, every lawyer in the firm who knows about it has an ethical obligation to protect the firm’s clients, the opinion said.”
Risk Update

Conflicts — Decisions of Note (Advance Consent, Withdrawal, Screening) & Alleged Accounting Conflict

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The latest conflicts updates and analysis from friend of the blog Bill Freivogel:

  • Wis. Memo. Op. EM-19-02 (Feb. 2, 2021).
    • “Bank #1 hires Law Firm to document a loan. The deal will involve a number of yet-unidentified additional lenders. As the deal progresses, Banks 2, 3, and 4 agree to participate. Law Firm is representing Bank 2 on other matters. Bank 2 may, or may not, wish to negotiate special terms for this deal.”
    • “Under what circumstances may Law Firm participate in such a negotiation for Bank 1? That is one of several scenarios discussed by this opinion. When is this a conflict? What if anything can be done about it? (advance consent, concurrent consent, withdrawal, etc.)”
    • “Your situation may not fit any of the scenarios neatly, but the opinion provides a list of issues likely to arise. A companion pair of opinions considers a law firm’s malpractice liability to the other lenders in a syndicated loan. Are they clients with privity? The cases are Leonard v. Dorsey & Whitney LLP, 553 F.3d 609 (2009), and McIntosh County Bank v. Dorsey & Whitney, LLP, 745 N.W.2d 538 (2008). Context for all this is in the article cited by the Wisconsin opinion, Reade H. Ryan, Jr., The Role of Lead Counsel in Syndicated Lending Transactions, 64 Bus. Law. 783 (May, 2009).”
  • Feinstein v. Freedman, 2021 ONSC 1493 (CanLII) (Ont. Super. Ct. April 12, 2021).
    • “Lawyer is acting as trustee of a family trust. This case involves Lawyer’s compensation as trustee. One objection to his compensation is that Lawyer had a conflict of interest in hiring his own law firm to do work for the trust. The trial judge approved Lawyer’s compensation. In this opinion the Divisional Court affirmed, holding, among other things, that ordinarily, it is not a conflict for a trustee to hire his own law firm to do work for the trust.”
  • Stevens v. Brigham Young Univ. Idaho, 2021 U.S. Dist. Lexis 78879 (D. Idaho April 23, 2021).
    • “Lori Stevens is suing BYU Idaho (“BYU”) for sexual harassment arising out of Stevens’ intimate relationship with a now-deceased professor. BYU is seeking discovery of Stevens’ communications with LDS Church (“Church”) leaders relating to that relationship. Church intervened to protect those communications from discovery under the priest-penitent privilege. The church is represented by the Kirton Firm. Initially, BYU was represented by the Anderson Firm.”
    • “In the fall of 2020 the lawyers at the Anderson Firm, representing BYU, moved to the Kirton Firm. The Kirton Firm formed a screen between the lawyers representing BYU and Church. Stevens moved to disqualify the Kirton Firm from representing BYU in this case. In this opinion the court denied the motion with unremarkable conditions fortifying the screen at the Kirton Firm.”

An interesting story from the accounting world: “Grant Thornton in conflict of interest as was forensic auditor for Greensill-GAM investigation” —

  • “The collapse of Greensill Capital, the supply chain financing firm, is still having repercussions with Grant Thornton, the administrator appointed to probe the collapse, facing the conflict of interest charges. Grant Thornton was apparently also involved in the investigation of Greensill’s relationship with Swiss asset manager GAM, according to sources.”
  • “A trail of associations has come to light that ties Grant Thornton to the long chain of misdoings of Greensill. While conducting a forensic audit of GAM’s dealings with Greensill in 2018, Grant Thornton was also working for one of Greensill’s biggest customer, GFG Alliance, for which it was paid nearly £6 million(€6.96 million ) from 2016 to 2020. Grant Thornton has not publicly disclosed its role in the GAM investigation.”
  • “GAM was a major investor in supply chain finance deals arranged by Greensill, including investing millions of dollars in metals magnate Sanjeev Gupta’s GFG. Sanjeev Gupta earlier had some share in Greensill too. There are questions about Grant Thornton’s role and involvement in GFG, Greensill and GAM’s triangular relationship. GFG’s relationship with Greensill is now subject to a Serious Fraud Office probe.”
  • “Grant Thornton told the High Court in London after being appointed to audit Greensill that it had undertaken about 80 “diligence related instructions” in the past few years for GFG, for which it was paid £5.8 million from 2016 to 2020 for this work. Grant Thornton also reiterated before its appointment as administrator that it had given ‘careful consideration to the code of ethics relating to such matters’ and satisfied itself that there was ‘no threat to its independence as a result of any prior relationships.'”
Risk Update

Law Firm Malpractice Insurance Claims — Industry Survey Shows Latest Trends, Risks and Results

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I always take note of the annual insurer survey report produced by Ames & Gough. The Insurance Journal offers an excellent summary: “Law Firms and Their Insurers Feel the Pain of Bigger Malpractice Claims” —

  • “Even as law firms made adjustments to sustain their operations through the COVID-19 pandemic, they were unable to avoid the rising costs of malpractice claims. Indeed, the time period beginning in 2019 through mid-2020 marked the worst two years on record for legal malpractice claim payouts, according to a new survey by insurance broker Ames & Gough.”
  • “The survey also found insurers apprehensive about claims that may mature post pandemic; most reported a significant volume of claims last year with substantial reserves and large payouts.”
  • “Nine of the 11 insurers surveyed had participated in a claim payout in excess of $50 million in the past two years; two paid a claim between $150 million – $300 million and four paid a claim over $300 million. Altogether, the survey found the number of claims resulting in larger multi-million dollar payouts, and the amounts of these payouts, had increased year over year.”
  • “Nine of the 11 insurers indicated their claims frequency decrease or stabilize between 2019 and 2020. Of the remaining insurers, one saw claims increase by 6-10% and the other, by 11-21%. By contrast, in 2019, 80 percent of the insurers surveyed indicated their claim frequency was the same or higher than the previous year, the first time since 2013 that frequency rose.”
  • “Insurers surveyed traced the largest numbers of malpractice claims to three key practice areas: Trust & Estates; Business Transactions, and Corporate & Securities.”
  • “The survey findings also underscored the value of effective communication. Ten of the 11 insurers polled indicated that poor communication – such as not getting client consent, poor documentation of a file, not using or updating an engagement agreement, or saying something derogatory about a client or colleague – was a contributing factor in legal malpractice claims.”
  • “Among the most common legal malpractice errors, conflicts of interest remains the leading cause of malpractice claims with seven of the 11 insurers surveyed ranking it the first or second cause.”
  • “This year, survey participants were asked to list the three most useful risk management techniques for law firms to mitigate legal malpractice risk. Seven of the 11 insurers cited a well-crafted engagement agreement focusing on the scope of work as essential to avoiding risk, along with revisiting it whenever there is a change in direction of the services needed.”
  • “In addition, five insurers also listed peer review and supervision of work, good client intake, and detailed communication among the most important techniques to avoid malpractice claims.”
Risk Update

Disqualification Discussion — Facebook Faces Off Firm, Canadian Lawyer-Expert Witness Survives DQ

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Facebook Seeks to DQ Antitrust Plaintiffs’ Firm Over New Hire” —

  • “Facebook Inc. is seeking to disqualify one of the law firms leading a case over its alleged scheme to squash rival startups, arguing in California federal court that Keller Lenkner LLC should step aside after hiring an attorney who spent six months preparing the tech giant’s antitrust defense.”
  • “‘Notwithstanding the obvious conflict of interest created by an attorney switching sides,’ Keller Lenkner didn’t screen its new hire until four months after he started, the company says. ‘Facebook can never know which of the firm’s actions are tainted by that ethical violation.'”
  • “The lawsuit, consolidated in the U.S. District Court for the Northern District of California, involves claims by consumers and advertisers that have accused the tech giant of monopolizing social media by exploiting its troves of user data to identify potential competitors to buy, copy, or kill.”
  • “Facebook says the firm waited too long before honoring its ethical duty to put up a wall between the case and a former Facebook attorney it hired from Kellogg, Hansen, Todd, Figel & Frederick PLLC. The lawyer came over from Kellogg Hansen in June 2020—after six months of ‘deeply involved’ work on Facebook’s defense against the government antitrust probes—but Keller Lenkner didn’t put up a screen until November, the disqualification motion says.”
  • “The firm then ‘overstated’ the screen, including in court, according to Facebook, which claims its concerns were “exacerbated” because Keller Lenkner was removed from a case involving Uber Technologies Inc. for playing ‘fast and loose with this same ethics rule.'”
  • “‘This was not an insignificant or incidental representation’ but an attorney who worked closely with Facebook and ‘was frequently entrusted with’ its ‘confidential and privileged information,’ the motion says.”

For more detail on the screening argument and beyond, see the complete disqualification motion.

Ontario court rejects motion to disqualify counsel in proceedings arising from medical care action” —

  • “The Ontario Superior Court of Justice recently considered whether a firm could act for a defendant when one of its lawyers generally discussed his potential retention as an expert witness for the plaintiff relating to a previous civil trial.”
  • “The plaintiffs sought to disqualify Adair Goldblatt Bieber LLP (AGB) from representing the defendants in the present action. The plaintiffs argued that AGB possessed confidential information attributable to the solicitor-client relationship between the plaintiffs and the plaintiffs’ counsel, Falconeri Rumble Harrison LLP (FRH), following a discussion participated in by Mr. Adair, Mr. Falconeri and Mr. Rumble.”
  • “In April 2019, Adair was at the offices of FRH to discuss an unrelated legal matter in which Adair was retained to provide an expert opinion in a legal malpractice action involving FRH. Adair was asked whether the fact that Mr. Bieber, Adair’s partner at AGB, was acting on behalf of LawPro would interfere with Adair’s ability to provide opinions for FRH in legal malpractice actions, to which Adair replied that it would not.”
  • “Falconeri then began to discuss a case in his office relating to a possible legal malpractice claim against a lawyer based on the lawyer’s involvement in a medical malpractice action. Adair indicated that he would be open to offering an opinion in the future if he was asked and provided with enough information.”
  • “The Superior Court of Justice of Ontario dismissed the motion to prevent AGB from representing the defendants in the present action, finding that this was not a proper case that justified granting the extreme remedy of disqualifying counsel. The court noted that it could only interfere with the litigant’s right to choose counsel
Risk Update

“Speechless” Conflicts Allegation — Firm Investigating Its Former Client?

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‘I Was Speechless’: Law Firm Investigated Its Own Ex-Client For Trump VOA Chief” —

  • “Early last June, the Open Technology Fund was scrambling for survival. The nonprofit fosters technology that enables people who live under repressive regimes to communicate securely. It is wholly dependent on the U.S. government for money. And the new CEO of the federal agency that subsidizes the fund had declared war on it.”
  • “So Lauren Turner, the fund’s general counsel, turned to a familiar name for help: the powerhouse law firm McGuireWoods. The firm had been advising the fund pro bono, or without charge, for several months. Its lawyers met with the fund’s board and president to discuss a potential lawsuit against the federal agency.”
  • “And then, word came down from the law firm’s headquarters in Richmond, Va., that McGuireWoods would not represent the fund in this matter. Senior partners suggested the case might be too political, according to three people with knowledge.”
  • “Eight weeks later, the firm made an about-face. McGuireWoods signed a confidential, no-bid contract with the man threatening to take away the nonprofit’s money for the year: U.S. Agency for Global Media CEO Michael Pack, an appointee of President Donald Trump. The agency also oversees Voice of America and other international networks sponsored by the federal government.”
  • “Eight weeks later, the firm made an about-face. McGuireWoods signed a confidential, no-bid contract with the man threatening to take away the nonprofit’s money for the year: U.S. Agency for Global Media CEO Michael Pack, an appointee of President Donald Trump. The agency also oversees Voice of America and other international networks sponsored by the federal government.”
  • “‘I was speechless,’ says Turner. ‘I had no idea that they would ever turn around and represent our actual adversary in a lawsuit, after an attorney in their practice had spoken to our board about our strategy and asked me for internal documents to help frame up the theory of our case.'”
  • “McGuireWoods attorney Greg Guice, who had been giving the fund pro bono advice, says he was blindsided, too. ‘I was shocked to learn of this other work that McGuireWoods was doing,’ Guice says.”
  • “Several McGuireWoods staffers involved with the pro bono effort soon left the firm under duress from senior lawyers, according to two people with knowledge, though the Open Technology Fund work was not cited as a reason for their departures.”
  • “Over the course of less than five months, McGuireWoods partner John D. Adams and his team earned well over $2 million in taxpayer money for work typically done by government employees, according to law firm billing records and exchanges between U.S. Agency for Global Media staffers reviewed by NPR.”
  • “Several outside lawyers tell NPR that McGuireWoods’ handling of the Open Technology Fund appears deeply problematic. ‘This needs to be investigated,’ Richard Painter, the former chief ethics lawyer for President George W. Bush’s administration, said. ‘This needs to be looked into by the government and by the bar association. This is a potentially very serious matter.'”
  • “The contract McGuireWoods sent for Pack’s signature, released under the Freedom of Information Act, stated, ‘We are not aware of any conflicts that disqualify us from representing You.’ The firm also said it retained the right to accept future legal or consulting services for people whose interests were against the agency in matters unrelated to the investigation.”
  • “Revelations about the no-bid contract last week generated sharp criticism; Walter Shaub, a former top White House ethics official under President Barack Obama, suggested on Twitter they might reflect violations of the federal contracting procedures.”
  • “In a comment to NPR, USAGM’s new leadership noted that a federal watchdog called the Office of Special Counsel has found ‘a substantial likelihood of wrongdoing’ over Pack’s suspensions of senior executives and hiring of McGuireWoods to investigate them.”
Risk Update

Conflicts Allegations — Bombing Attack Judicial Conflict, LA City Attorney Collusion Conflict Conversation

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Fluor Says Conflict Requires Transfer of Afghan Bombing Case” —

  • “Fluor Corp. said someone else must preside over a lawsuit accusing it of failing to stop a November 2016 suicide bombing attack in Afghanistan because the current judge has a presumed conflict of interest involving a family member, and 11 related cases have already been transferred to the other judge.”
  • “Hencely, a U.S. army specialist severely injured in the attack, says Fluor negligently employed bomber Ahmad Nayeb as a private contractor at the base, while knowing he was a former Taliban member.”
  • “Fluor said the court advised the parties by email May 3 that Judge Bruce H. Hendricks—whose niece by marriage is one of the plaintiffs’ lawyers in those cases—has a presumed conflict of interest that disqualifies her from presiding over the othercases.”
  • “The court said disqualification is mandatory because Hendricks’ impartiality might be reasonably questioned, according to Fluor.”
  • “Hendricks’ niece has an interest that could be substantially affected by the outcome of this case. And the resolution of any issue in the case could affect the resolution of all the other cases in which her niece is counsel, Fluor said.”

Mike Feuer and the fallout of the highly questionable LADWP settlement” —

  • “There are political scandals, and there are corruption scandals, and then there’s the level of scandal that becomes a movie starring Jack Nicholson…
  • “Advocacy group Consumer Watchdog has called for the release of the videotape of a deposition Feuer gave in the city’s lawsuit against PricewaterhouseCoopers, the firm that was hired to modernize the LADWP’s billing system. “He [Feuer] recited, ‘I don’t recall’ over 60 times,” according to a statement posted on the organization’s website on January 23 that accused Feuer of ‘withholding the video tape of the deposition from the public because it would no-doubt show the insincerity on the face of a man notorious for his micromanagement.'”
  • “The video of the deposition is ‘safely locked in a court reporter’s cabinet’ because Feuer dismissed the city’s case against PwC in September 2019. Feuer said it was too hard to gather evidence because some of the lawyers who were witnesses in the case were invoking their Fifth Amendment right against self-incrimination and refusing to testify.”
  • “PwC accused City Attorney Mike Feuer’s office of secretly controlling the outcome of the class-action suit, digging up evidence that the attorney representing Antwon Jones and LADWP ratepayers had been retained by Feuer’s office at around the same time he represented the ratepayers. A few months later, the FBI raided the city attorney’s office and the LADWP.”
  • “Are you following this? The middle of these movies can lose you if you step out for popcorn. The lawyer representing you, the ratepayer, had a conflict of interest because he also worked for the city that you, the ratepayer, were suing. Actually, there were a few lawyers involved in this, but Robert Towne would probably consolidate them into one character for dramatic simplicity.”
  • “Antwon Jones has recently filed a federal lawsuit against the city of Los Angeles alleging violation of civil rights and waste of taxpayer funds. The lawsuit says the city and others used Jones as an ‘unwitting pawn’ to reach a settlement that ‘was the product of collusion and a fraud on the court.’ Jones’ lawsuit asks the court to stop the city and Feuer from ‘illegally expending and wasting more taxpayer funds to conceal and cover up their misconduct.'”
  • “Feuer released a statement saying, ‘I’ve always acted with complete integrity, and always will. Any claim that even remotely suggests otherwise is not only absolutely false, it’s malicious.'”
  • “In October, Feuer’s office was hit with a $2.5 million fine by the same judge for ‘serious abuse of discovery by the city and its counsel,’ lawyer-speak for hiding evidence from the court, in the LADWP case.”
  • “Feuer’s running for mayor in 2022.”


Risk Update

Legal Industry Merger Musings — Conflicts, Consolidation and Other Considerations

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I enjoy a good thought exercise and this one was definitely worth the read: “Law Firm Consolidation — Perpetually Out Of Reach?” —

  • “The notion that consolidation could be the panacea for challenges facing less profitable firms has always been questionable. But whether you buy into that particular narrative or not, it is incontrovertible that the legal industry remains remarkably fragmented in comparison to other professional services sectors. So what are the barriers to a wave of mergers? And if the barriers were removed, would significant consolidation actually happen?”
  • “How can it be that the legal industry remains so fragmented in relation to peers in fields like accounting and management consulting? Ethics rules are a big part of the story.”
  • “When clients engage a law firm, they engage not just the firm as an entity but the individual lawyers leading the matter. If the lead lawyer on a case decides the grass is greener at a new firm, there is little the old firm can do to prevent the client from following the lawyer. And indeed, lawyers are very mobile. Over the past 12 months alone, Am Law 200 law firms have made 7,385 lateral hires: 4,635 associates, 1,685 partners, and 1,065 counsel. Almost all of these lateral moves involved a departure from another Am Law 200 firm. A carousel of attorneys move from Am Law firm to Am Law firm, churning winners and losers on a quarterly basis.”
  • “Even if partner departures were not a concern, potential law firm mergers can also be disrupted by client conflicts. For some comparative perspective on conflicts, consider the management consulting firm McKinsey & Company. McKinsey, as a firm, routinely serves competing clients in the same industry. It navigates conflicts by ensuring that individual consultants do not serve competitors and by safeguarding confidential information internally, such that McKinsey teams serving competitors do not share with each other the details of their work. In this way, the firm manages to sell its services to multiple competitors in a given sector.”
  • “Legal ethics constraints make it impossible to apply the McKinsey model in a law firm context. For conflicts purposes, a client of an individual lawyer is a client of every lawyer in the firm, albeit there are ways to wall off attorneys and use client waivers to navigate conflicts.”
  • “Let’s imagine that these ethical barriers were suddenly removed, making consolidation more viable. What would happen? The basic logic undergirding consolidation in any industry is economies of scale: if two companies can operate more efficiently as a combined entity, a merger will create value. Does law practice exhibit economies of scale? Hugh A. Simons and Nicholas Bruch believe it does not:”
    • ‘Markets, where rivals focus on specific segments or seek to compete through differentiation rather than on cost, tend to remain fragmented. Haute couture is an example of such a market. Law is less like commodity chemicals and more like haute couture. It’s an amalgam of distinct services offered by very different providers in settings that have widely varying balances of power between buyers and sellers. Law exhibits no economies of scale. The notion that law must consolidate is simplistic and misleading.’
  • “Others commentators take a different view, arguing that law practice is suboptimally fragmented, and that the industry’s fragmentation prevents it from matching the innovation seen in other sectors. As Dan Packel recently put it:”
    • ‘That fragmentation matters when we get to the question of why law firms are behind the curve on innovation. No one has market share anywhere comparable to the Big Four accounting firms, who collectively audit more than 80% of U.S. publicly traded companies. And it’s no coincidence that these businesses are far ahead of law firms when it comes to improvements in process management. Their revenues give them the capacities to invest, and the lack of fragmentation makes it easier to discern what works and what doesn’t.’
  • “Let’s end by putting aside the inevitable conflicts and other obstacles and imagining a hyper-consolidated legal market with a closer resemblance to accounting’s Big 4. In this world, the current Am Law 100 would have merged into four megafirms based on broadly similar profits per equity partner. What would the combinations look like?”
  • “Will this happen anytime soon? Definitely not. But it’s a fun thought exercise.”
Risk Update

Risk Roundup — Client Poaching as Tortious Interference, Liability Insurance, and Police Suing Prosecutors (Canadian Conflicts)

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A few interesting risk updates that have caught my eye. First, in Canada: “Police cannot sue Crown attorneys over handling of criminal cases, SCC rules” —

  • “Police cannot sue Crown attorneys over their handling of criminal cases, the Supreme Court of Canada ruled today in a decision that reinforced the mutually independent relationship between police and Crown attorneys.”
  • “In an 8-1 decision in Ontario (Attorney General) v. Clark that concerned Crown liability, the Supreme Court found that police cannot sue Crown attorneys for misfeasance of public office, i.e., for the misuse or abuse of power in public office.”
  • “‘Piercing the immunity of Crown prosecutors to make them accountable to police officers puts them in perpetual potential conflict with their transcendent public duties of objectivity, independence and integrity in pursuit of ensuring a fair trial for the accused and maintaining public confidence in the administration of justice,’ wrote Justice Rosalie Abella in her reasons for the majority.”
  • “‘Beyond the risk of actual conflict between the prosecutors’ core duties and their risk of liability to the police, the appearance of such a conflict would be equally damaging to the integrity of the administration of justice,’ wrote Justice Abella. ‘As the joint interveners the Canadian Association of Crown Counsel and the Ontario Crown Attorneys’ Association put it, permitting police lawsuits against Crown prosecutors would suggest to the public and to accused persons that police were ‘policing prosecutions’ through the use of private law, imperiling public confidence in the independent and objective ability of prosecutors to conduct fair trials.'”
  • “The case in question involved three Toronto police officers who in June 2009 arrested two men in connection with a complaint of armed robbery and forcible confinement. After they had each given statements, the accused claimed the officers had assaulted them during their arrests; the officers denied the allegations and provided the Crown Attorney with exculpatory evidence supporting their position.”
  • “…The police officers then commenced an action against the Attorney General for Ontario, alleging that the Crown Attorneys didn’t pursue or put forward available evidence that contradicted the assault claims of the accused, and that the Crown’s actions and omissions caused irreparable harm to their reputations. They alleged negligence and misfeasance in public office.”
  • “Two exceptions have been recognized to Crown liability: first, where the Crown has acted with malice in the context of a malicious prosecution claim, and second, where the Crown has intentionally withheld disclosure in a criminal proceeding, which is contrary to an accused person’s constitutionally protected right to full disclosure. So, the accused does have a right to sue Crown attorneys through the tort of malicious prosecution, Cavalluzzo notes.”

And two interesting catches by the Legal Profession Blog: “Poaching Of Clients As Tortious Interference” —

  • “A defamation claim has failed but a tortious interference claim survives in a suit brought against attorneys who had taken cases from the plaintiff law firm. So held the New York Appellate Division for the First Judicial Department”
  • “As to the tortious interference claim, the parties do not challenge the court’s articulation of the elements of such a claim in the context of terminable-at-will retainer agreements, namely, that the defendant’s conduct must constitute a crime or an independent tort (see e.g. Steinberg v Schnapp, 73 AD3d 171, 176 [1st Dept 2010]).”
  • “We find that the complaint, as augmented by affidavits submitted in opposition to defendants’ motions to dismiss, and in conjunction with the undisputed proof of the four clients who substituted plaintiff for either the Schweitzer firm or the Garcia firm, states at a minimum a cause of action for tortious interference premised on violations of Judiciary Law §§ 479 and 482, which are unclassified misdemeanors (Matter of Ravitch, 82 AD3d 126, 127 [1st Dept 2011]; Matter of Boter, 46 AD3d 1, 3 [1st Dept 2007]).”
  • “Affidavits show that defendants’ efforts to lure away plaintiff’s clients involved the use of case runners to solicit business on their behalf. Although the affidavits by the unnamed Clients 1-5, who remained plaintiff’s clients, do not alone support the tortious interference claim, they shed light on the tactics to which defendants were apparently willing to resort, as does the affidavit by the Schwitzer firm’s former employee, which is consistent with those by Clients 1-5.”

No Privity, No Recovery, When Law Firm Seeks Payment From Client’s Insurer” —

  • “A law firm may not recover its legal fees from its client’s insurer according to a decision of the New York Appellate Division for the First Judicial Department”:
    • “Plaintiff law firm lacks standing to recover its legal fees under the insurance policy, to which it is not a named party (Miller & Wrubel, P.C. v Todtman, Nachamie, Spizz & Johns, P.C., 106 AD3d 446 [1st Dept 2013]). Plaintiff was merely an ‘incidental beneficiary to its client’s malpractice insurance policy’ (id.). Thus, the motion court properly found that plaintiff’s sole recourse was against the insured, its client, and not its client’s insurance provider.”
    • “Plaintiff’s argument that it had a direct contract with defendant on account of the various correspondence between itself and one of defendant’s employees also fails. Indeed, these letters merely confirm, consistent with the policy’s requirement that the insurer’s consent of the insured’s choice of counsel not be “unreasonably withheld,” that defendant consented to the insured’s continued retention of plaintiff.”
    • “The motion court also properly dismissed plaintiff’s claim for unjust enrichment, which required a showing, among other things, that defendant was enriched (Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 [2011]). It is undisputed that defendant will pay the full limit of the policy to reimburse the insured for its defense and settlement costs of the covered claims, regardless of whether those costs were incurred by plaintiff or the other lawyers that the insured retained. Further, the retainer agreements between plaintiff and the insured govern this dispute, which provides a further basis for affirming the order (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]).”