Bressler Risk Blog

“Florida Supreme Court holds that an insurer may pursue malpractice claims against lawyer retained to defend the insured” —

• “Under the terms of the professional liability insurance policy, Arch Insurance Company (Arch) had a duty to defend Spear Safer in the accounting malpractice lawsuit and the insured had the right to retain legal counsel with Arch’s approval. The policy also included a subrogation provision, which stated that Arch was subrogated to all of Spear Safer rights of recovery against any person, organization, or entity, and that Spear Safer was required do whatever necessary to secure such rights.”
• “Arch retained the Kubicki Draper law firm to defend Spear Safer in the accounting malpractice action. That litigation was settled within Spear Safer’s policy limits for $3.5 million before trial. Arch then filed a legal malpractice lawsuit against Kubicki Draper, alleging that the law firm breached its duty of care by failing to timely raise a statute of limitations defense in the underlying litigation.”
• “The Florida Supreme Court agreed with the trial court and 4th DCA that defendant was in privity with Spear Safer and not Arch; however, Arch had standing to maintain a legal malpractice action against the defense counsel retained to defend its insured where Arch was contractually subrogated to the insured’s rights under the insurance policy.”
• “The opinion found that Arch’s right to contractual subrogation was expressly provided for in the insurance policy, which included claims for legal malpractice against counsel retained to defend the insured. The opinion found that where an insurer has a duty to defend and counsel breaches the duty owed to the insured, contractual subrogation permits the insurer to pursue the same claim the insured could have pursued and, since the insured was in privity with defendant, Arch could step into the insured’s shoes and pursue the malpractice claim.”
• “Bottom line: In this case, the Florida Supreme Court adopted the reasoning that a malpractice lawsuit alleging breach of care can be brought against a lawyer not only by the former client, but also by the former client’s insurer, if a duty to defend and subrogation rights are included in the policy.”

“AT&T Wants Ex-BigLaw Attys DQ’d From $450M Patent Case” —

• “AT&T on Tuesday asked a New York federal court to disqualify a former Baker Botts attorney and two former Akin Gump attorneys from representing a company that hit the telecom giant with a $450 million patent infringement suit, arguing that the lawyers previously provided extensive legal services for AT&T.”
• “According to the motion to disqualify opposing counsel, attorneys Kevin Cadwell, David Clonts and Michael Reeder worked with AT&T for more than a decade, billing nearly 25,000 hours. Cadwell alone billed nearly 13,000 hours, ‘the equivalent of working full-time for six and a half years,” AT&T said in the filing, which was heavily redacted.'”
• “‘In addition, beyond the overwhelming volume of counsel’s work for AT&T, there is substantial direct factual overlap between this case and prior cases with respect to the AT&T network systems, technology and witnesses,’ the company said.”
• “The lawyers represented AT&T in more than 100 patent infringement cases over the years, the telecom said. Reeder provided legal services for AT&T as recently as late 2019, per the motion. And Cadwell defended AT&T in patent cases as recently as 2017, it said.”
• “And the attorneys had access to AT&T’s employees, files and confidential information that makes them conflicted in the case, it added. They were also actively representing AT&T when Network Apps brought an earlier, “strikingly similar” case against AT&T in 2016, according to the motion.”
• “Cadwell, Clonts and Reeder and counsel for AT&T didn’t immediately return requests for comment Wednesday.”

“Jay-Z’s Lawyer and Damon Dash Clash Over Truth, NFTs and Conflict of Interest” —

• “On June 22, a judge sided with Roc-A-Fella Records in the label’s lawsuit against co-founder Damon Dash, filing a temporary restraining order prohibiting Dash from his alleged attempt to sell a portion of the copyright to Jay-Z’s 1996 debut album Reasonable Doubt as an NFT. The case continues to stir up drama, as Dash is now trying to disqualify Roc-A-Fella’s legal counsel.”
• “Roc-A-Fella is represented in the lawsuit by Alex Spiro, a partner at the New York office of law firm Quinn Emanuel Urquhart & Sullivan. Spiro is also Jay-Z’s personal lawyer. In court documents filed on June 25, Dash claims that Spiro is currently representing Jay-Z in shareholder governance hearings taking place at Roc-A-Fella (referred to in court documents as RAF), and that Spiro’s representation of Roc-A-Fella itself in this case therefore represents a conflict of interest.”
• “Spiro — who has also represented Meek Mill, 21 Savage and Bobby Shmurda — fired back in court documents filed on June 28, claiming that no conflict of interest exists since Jay-Z’s and Roc-A-Fella’s interests are directly aligned. A conflict of interest would only arise, he argues, if he had previously represented the opposition (meaning Dash himself).”
• “‘Dash was trying to steal RAF, Inc.’s property — to the detriment of the company and its other shareholders. Jay-Z and RAF, Inc.’s interests are therefore directly aligned,’ he writes. ‘Nor does Quinn Emanuel have ‘privileged information concerning the other side through prior representation.’ The firm has never represented Dash, and it has not represented RAF, Inc. in any matters through which it acquired any of Dash’s privileged information.'”

“Attys DQ’d For Using ‘Twisted Logic’ In Calif. Pot Co. Dispute” —

• “A California appeals court on Monday upheld a decision to disqualify a law firm involved in a multipronged dispute involving control of a cannabis cultivator, saying the lawyers used ‘twisted logic’ to justify representing multiple parties in the matter.”
• “Specifically, the appeal focused on Catanzarite’s work as counsel for shareholders in a derivative action against CTI, as well as its representation — purportedly on behalf of the same company — in another lawsuit with a lender.”
• “As described in the decision, a schism in CTI leadership led to one group of shareholders, called the Probst Faction, asserting power within the company. Attorneys from Catanzarite filed multiple lawsuits on behalf of the other group of CTI investors, called the O’Connor Faction, as well as other shareholders between 2018 and 2019.”
• “Catanzarite, which was at the time representing various disgruntled CTI investors against the company and its principals, filed counterclaims against FinCanna, purporting to represent CTI itself. According to the decision, Catanzarite attorneys apparently copy-and-pasted material from one of their derivative shareholder actions into their cross-complaint against FinCanna.”
• “‘Catanzarite appears to be arguing concurrent representation was possible because after the O’Connor Faction asserted control of the corporation, these shareholders effectively became insiders of the corporation,’ the court said. ‘This is twisted logic.'”
• “The appellate panel found that Catanzarite’s representation of investors in a derivative shareholder action against CTI was untenable while the law firm also purported to represent the company in its dispute with FinCanna.”

Hat tip to diligent reader Simon Chester (Counsel, Head – Client and Matter Acceptance Team at Gowling WLG) for sending in: “Boom Times for Lawyers as Washington Pursues Big Tech” —

• “The mounting legal and regulatory scrutiny facing Big Tech has led to a wave of lawsuits, investigations and proposed legislation aimed at ending the dominance of Amazon, Apple, Facebook and Google. Whether those efforts succeed may take years to sort out, but there is already one clear winner: the nation’s legal industry.”
• “The cost is minimal for the giant tech companies. But it has widened the divide in resources between regulators and the companies they police, making it harder for the government to recruit and keep talent to take on the industry. It has also raised fresh concerns about Washington’s revolving door, since many of the lawyers used by the tech companies recently worked for the government.”
• “In 2019, when the Justice Department searched for a lead investigator into Google and other tech giants, officials came up with a list of candidates from about 10 law firms, according to two people with knowledge of the search. But one by one, they said, potential candidates had to be crossed off the list because they already worked for Big Tech clients, leaving few options.”
• “More recently, conflicts of interest have complicated the Biden administration’s search for the head of the Justice Department’s antitrust division. Several times, critics of the industry have criticized a potential candidate because of the person’s ties to Big Tech.”
• “‘What’s striking is the number of people going to work directly for tech companies from the agencies,’ said William Kovacic, a former chairman of the F.T.C. ‘That reflects a real change.'”
• “Jonathan Kanter, a longtime antitrust lawyer who has been rumored as a possible nominee to lead the Justice Department’s antitrust division, built his career largely around working for the rivals of Google, Facebook, Amazon and Apple. His client list included both big companies like Microsoft and News Corporation and smaller firms like Yelp and Spotify.”
• “In 2016, he moved to Paul, Weiss, Rifkind, Wharton & Garrison, a prominent corporate litigation firm. But last year, Mr. Kanter’s work criticizing Big Tech started to present conflicts with other parts of the firm’s sprawling portfolio, said two people with knowledge of the matter. Specifically, his practice was at odds with work being done by Bill Isaacson and Karen Dunn, two lawyers the firm had just hired who are known to represent Apple and Amazon, said another person with knowledge of the situation.”
• “Mr. Kanter faced a choice: Drop some of his clients or leave the firm. He left. ‘Jonathan made this decision due to a complicated legal conflict that would have required him to discontinue important and longstanding client representations and relationships,’ the firm said in a note circulated at the time.”

“Recent Federal Cases Signal Increased Scrutiny of Ethical Wall Procedures” —

• “In this article, we discuss best practices for effective implementation of ethical walls in light of two recent developments—the decision by the U.S. Attorney’s Office for the Southern District of New York (S.D.N.Y.) to proactively seek a special master to review materials seized from Rudy Giuliani’s home, and the Department of Justice Antitrust Division’s recent request for a federal court to probe the adequacy of an ethical wall at the law firm of Morgan, Lewis & Bockius related to their representation of co-defendants Glenmark and Teva in a price-fixing prosecution pending in the Eastern District of Pennsylvania, which led to Morgan Lewis’s withdrawal from the matter.”
• “The other recent prominent proceeding involving ethical walls stems from a DOJ Antitrust price-fixing prosecution against Glenmark and Teva pending in the Eastern District of Pennsylvania. In that case, in connection with a conflict of interest hearing, the DOJ asked the court to assess the adequacy of ethical walls that the law firm of Morgan, Lewis & Bockius put in place as a result of its current representation of Glenmark and prior representation of Teva in the criminal matter, as well as its current representation of both companies in parallel civil cases.”
• “The DOJ requested that the court ask Morgan Lewis to submit written answers to over 40 questions about the details of its internal ethical wall procedures, including how it is staffing and managing its ethical walls in light of Pennsylvania ethical rules and how it is handling the issue of fee-sharing between attorneys working on both matters.”
• “The government also requested that Glenmark and Teva answer similar sets of questions regarding their understanding of these procedures, including whether each company had consulted with independent counsel. See id. at 3-6. Glenmark initially opposed the government’s request, noting that it was prepared to waive any conflict of interest and calling the government’s proposed requests unprecedented, ‘overbroad, intrusive, and entirely unnecessary.’ Glenmark further argued that the government ‘seems to be attempting to impose broad restrictions on Glenmark’s trial preparation and use of its chosen legal team.'”
• “This extensive inquiry, especially the questions directed to Morgan Lewis concerning its own internal procedures for implementing ethical walls, went beyond the typical Curcio hearing procedure and signals that firms may have to implement stricter procedures in certain cases to assure the government and courts of their ability to follow ethical rules and guidelines.”
• “Second, the Morgan Lewis matter provides guidance for firms looking to construct ethical walls that will withstand heightened scrutiny. In addition to taking standard precautions such as limiting information-sharing and personnel overlap, firms should consider segregating fees where circumstances may justify taking such steps, and should consider formulating specific procedures to educate and advise clients about the procedures being followed to ensure that no conflicts arise. In such cases, firms may also evaluate whether it is appropriate for clients to consult with independent counsel (as the government suggested was appropriate for Glenmark and Teva to do), and if so, how best to effectuate that process.”