Bressler Risk Blog

“King & Spalding faces plaintiffs’ grilling over new associate in San Francisco” —

• “King & Spalding’s rehiring this month of an associate in San Francisco has become a flashpoint in a long-running antitrust lawsuit just weeks before the trial is set to begin in California federal court.”
• “The law firm said it is taking steps to wall off the associate, who had served as a law clerk to the judge overseeing the antitrust case against longtime client Sutter Health, the Northern California health system.”
• “The dispute came to light on Wednesday night in a series of emails and letters filed with the court among the firms handling the case. The correspondence indicates concerns plaintiffs’ lawyers have about potential conflicts of interest arising from the associate’s work for the judge.”
• “The dustup began on Jan. 4, when a partner at King & Spalding notified the parties and Beeler that the judge’s former clerk, Meghan Strong, was returning to the firm. Strong earlier worked at the firm prior to the start of her clerkship last year.”
• “‘Counsel has an obligation to get to the bottom of this issue on behalf of the class,’ Constantine Cannon partner Matthew Cantor said in a letter on Monday to Beeler about questions he posed to King & Spalding.”
• “King & Spalding’s Stephen Goff in Sacramento, a lawyer for Sutter, told the court Strong is disqualified from representing parties in matters she worked on as a clerk. The firm said it has played a limited role in the Sutter case, with Jones Day attorneys serving as lead trial counsel.”

“As John Pierce’s Jan. 6 Client List Grows, Conflict of Interest Concerns Follow” —

• “Right-wing attorney John Pierce’s fiery pro-Trump and anti-establishment persona, and his reputation for backing causes championed by conservatives, has helped him amass nearly two dozen clients charged in the Jan. 6 attack on the U.S. Capitol. But as his client list grows, so too are concerns about potential conflicts of interest in his cases.”
• “Judges in at least two multi-defendant cases have appointed a conflicts counsel in recent weeks to examine whether Pierce’s representation of multiple co-defendants charged together for allegedly breaching the Capitol presents ethical issues that may require Pierce to withdraw. Pierce is representing at least 22 people charged in the Capitol riot, according to a review of court documents, the most of any defense attorney.”
• “But the sheer number of Pierce clients makes conflict issues more likely, experts said, leaving it to judges and conflicts counsel to sort out potentially thorny issues, such as how to proceed if arguments in one case may undermine potential defenses in other cases involving the same attorney.”
• “Additionally, given his political posturing, Pierce will need to take care to avoid pushing an ideological agenda over the interests of his clients, ethics experts said.”
• “Pierce maintains an active Twitter presence where he frequently lambasts the Biden administration, COVID-19 vaccine mandates, and the D.C. establishment. He earned significant attention on the right for his role in defending Kyle Rittenhouse, the Wisconsin teenager who shot and killed two people during a Black Lives Matter protest and was later acquitted after arguing self-defense. Pierce left Rittenhouse’s defense team before trial, reportedly over a bitter financial dispute with Rittenhouse’s family.”
• “‘I have seen no such conflict to date. The court, which I greatly respect, is simply doing its job under Federal Rule of Criminal Procedure 44 to ensure the rights of defendants are protected,’ Pierce said. ‘That is entirely appropriate.'”
• “The final decision will rest with the judge. And while Gillers said experienced trial court judges have likely dealt with similar issues in the past, it can be a difficult decision. If a judge disqualifies an attorney, a defendant can argue on appeal that they were denied counsel of their choosing. If, on the other hand, a judge allows a lawyer with a conflict to remain on the case, a conviction can be overturned due to ineffective assistance of counsel.”

“Litigation Trendspotter: Federal Judge Recusals Could Soon Be On the Rise—But Requesting Them Remains Risky” —

• “A bipartisan push in Congress for greater transparency on federal judges’ financial ties, a proposed rule change for amicus filers and a vow by Chief Justice John Roberts Jr. to ensure the judiciary’s compliance with ethics canons could soon combine to cause an uptick in recusals and disqualifications.”
• “But, as demonstrated by one jurist’s reaction to recent allegations of a conflict of interest, lawyers who question a judge’s impartiality do so at their own risk.”
• “The legislation is a direct response to the Wall Street Journal’s recent findings that, between 2010 and 2018, 131 federal judges failed to recuse from 685 cases in which they held a financial interest. The WSJ investigation itself has led to an increase in federal recusal motions and conflict-of-interest disclosures since its release in the fall.”
• “The decision of whether to push for a judge’s recusal is often tactical. As Philadelphia-area criminal defense attorney Steven Fairlie told me a few years ago: ‘I could see a possible basis for recusal and keep my mouth shut because I think that judge is good for my case. I’d want to get my client’s approval. I don’t think you can do something like that without bringing your client into the loop.'”
• “Conversely, a party and its attorneys may decide that pushing for recusal is worthwhile where a particular judge is considered to be less favorable to that party’s interests in the case. But recusal-motion-as-litigation-strategy can easily backfire if the motion is ultimately denied.”
• “Judges are, of course, expected to remain impartial even when parties and/or attorneys get under their skin. But most litigators still go to great pains not to offend the judges they appear before—particularly when those appearances are frequent.”
• “As James Sample, a constitutional law professor at the Maurice A. Deane School of Law at Hofstra University, noted in his 2007 paper, ‘Making Judicial Recusal More Rigorous,’ fear of reprisal is one of the chief deterrents of recusal motions. ‘…[L]itigants may be afraid of bringing recusal motions for fear of angering their judge. This fear may be particularly acute for parties and lawyers who are likely to be repeat players before the court,’ Sample wrote.”

“School District Wants BB&K Disqualified From Cleanup Suit” —

• “The school district that oversees the only school on an island off the coast of Los Angeles wants a California federal court to disqualify opposing counsel Best Best & Krieger LLP in a dispute over contamination on school property, arguing the district previously hired the firm for advice regarding the pollution.”
• “The Long Beach Unified School District told the court in a motion to disqualify Tuesday that BB&K attorneys can’t represent the city of Avalon in the litigation over contamination at the Avalon School because the firm was previously retained as the school district’s sole environmental counsel for pollution at the site. The district told the court it only recently became aware of the apparent conflict and the law firm never requested, nor did the district sign off on, a conflict waiver that would have authorized the law firm ‘switching sides.'”
• “According to the motion, the district’s counsel ‘ironically’ discovered the law firm’s previous work for the district while they were defending a claim for work product privilege over certain documents. The documents were communications between the district, its consultants, and counsel dating back to when the California Department of Toxic Substances Control issued an order regarding the pollution at the Avalon School site a decade ago. ‘This led the district’s counsel to discover that certain documents were privileged as a result of BB&K’s prior representation,’ the motion said.”
• “The district told the court it asked BB&K to bow out of the lawsuit after it discovered the previous representation but the firm ‘refused to withdraw.'”

“McKinsey Foe’s Chapter 11 Conflict-of-Interest Lawsuit Revived by Appeals Court” —

• “A federal appeals court revived a McKinsey & Co. critic’s lawsuit alleging the consulting giant concealed conflicts of interest to obtain lucrative appointments advising bankrupt companies at the expense of rival firms.”
• “Wednesday’s ruling by the Second Circuit Court of Appeals in New York revived a racketeering lawsuit accusing McKinsey of submitting false and misleading statements in 13 bankruptcy cases to hide financial conflicts that could have disqualified the firm from being retained.”
• “Bankruptcy advisers legally are required to be disinterested and to disclose connections to other parties to a chapter 11 case that could give rise to a conflict of interest. In many bankruptcy cases that McKinsey worked on, the firm didn’t name any interested parties with whom it had a relationship, relying instead on broad references to unnamed clients. An investigation by The Wall Street Journal found McKinsey routinely disclosed far fewer potential conflicts than other bankruptcy advisers and that the firm’s investment unit held undisclosed financial stakes that gave it a direct interest in the outcome of several bankruptcy cases.”
• “In 2020, McKinsey reached a settlement without admitting wrongdoing with the Justice Department’s bankruptcy division over how the firm discloses potential conflicts of interest. As part of the settlement, McKinsey agreed to walk away from $8 million in fees for work it did advising a bankrupt coal company. The firm also agreed to broaden the scope of disclosures made in future cases, including the names of confidential clients and potential conflicts involving its many affiliates.”

“Second Circuit Revives Jay Alix’s RICO Claims Against McKinsey” —

• “Had the bankruptcy engagements not been awarded to McKinsey, the judges reasoned, it was ‘entirely plausible’ that AlixPartners would have received about 24% of the work and resulting revenue, consistent with its historical market share in the niche advising space.”
• “‘The loss to AlixPartners and the other large advising firms is plausibly alleged to flow directly from McKinsey’s fraud on the bankruptcy court,’ U.S. Circuit Judge Barrington D. Parker wrote for the court.”
• “The ruling sent the suit back to the district court, allowing Alix to build out his allegations that McKinsey had violated the Racketeer Influenced and Corrupt Organizations Act and had employed an illegal pay-to-play scheme to secure work in large corporate bankruptcy cases.”
• “A spokesman for McKinsey cautioned on Wednesday that the Second Circuit’s decision ‘solely addresses technical pleading standards and not whether Mr. Alix’s claims are true…To date, Mr. Alix has lost all six of his lawsuits against McKinsey, and we are confident the evidence will ultimately show that this lawsuit is similarly meritless.'”

“COA reverses disqualification of Fishers attorney representing ex-wife in child support matter” —

• “An Indiana attorney who was disqualified from representing his ex-wife in her post-dissolution matter from a previous marriage was not prevented from doing so a second time because the basis for his first disqualification no longer existed, the Court of Appeals of Indiana has ruled.”
• “Fishers attorney Robert E. Duff of Indiana Consumer Law Group entered an appearance for Lydia in the matter in 2020 before Brian moved to disqualify Duff on grounds of violation of professional conduct rules. Lydia was married to Duff from 2013 to 2019 and at the time was pregnant with Duff’s child.”
• “Specifically, Brian alleged that Duff’s representation of Lydia violated Professional Conduct Rule 3.7 and that Duff had spoken to the GAL on Lydia’s behalf about parenting time and would likely be a ‘necessary’ witness at the parenting-time hearing.”
• “The Hamilton Circuit Court disqualified Duff and the parties subsequently came to an agreement about parenting time, eliminating the need for a hearing.”
• “Eight months later, in June 2021, Brian sought reimbursement for his alleged overpayment of child support. Duff again entered an appearance for Lydia, to which Brian moved to disqualify Duff on the sole basis that he had been ‘previously disqualified from representing’ Lydia. However, he raised no new grounds to support his motion.”
• “The trial court again entered an order disqualifying Duff and certified the issue for interlocutory appeal. But the Court of Appeals of Indiana in a Tuesday decision reversed and remanded, finding the trial court abused its discretion in Robert E. Duff and Lydia Rockey v. Brian Rockey, 21A-DR-1750.”
• “‘…Because the second post-dissolution matter is different from the first post-dissolution matter and the basis for the first disqualification no longer existed, the trial court abused its discretion in disqualifying Attorney Duff from representing Mother in the second post-dissolution matter,’ Vaidik concluded.”

“Norton Rose Avoids DQ In $340M COVID Coverage Suit In NY” —

• “A New York federal judge gently chided Norton Rose but said it was time to move on from an issue that’s been delaying an insurance case…U.S. District Judge John G. Koeltl said that while a conflict certainly existed, Gartner had failed to show that it was likely to have any effect on the insurance coverage litigation. Judge Koeltl also noted there were several signs that ‘tactical considerations may have played a role’ in Gartner’s decision to highlight the issue.”
• “U.S.-based Gartner Inc.’s disqualification bid centered on the fact that while Norton Rose’s Australia unit was helping subsidiary Gartner Australasia with pandemic-related layoffs in spring 2020, Norton Rose Fulbright US LLP was representing U.S. Specialty Insurance Co. and another insurer that sued Gartner Inc. in May in Texas federal court.”
• “Those Texas lawsuits, as well as the New York lawsuit filed by Gartner, concern whether or not the insurers must cover up to $340 million worth of losses caused by the cancellation of dozens of Gartner events due to COVID-19.”
• “‘While [Norton Rose US] should have obtained a waiver from Gartner Australasia or Gartner when it undertook to represent [U.S. Specialty], that conduct does not warrant disqualification on the facts of this case,’ Judge Koeltl said.”
• “Judge Koeltl said under the relevant guidelines the situation laid out by Gartner does technically amount to a conflict, due to how closely Gartner and its Australasia unit are interconnected, the research giant failed to show that it amounts to anything in practice.”
• “Judge Koeltl said there was no evidence that any information had been shared between the attorneys handling the insurance dispute and the Gartner Australasia layoff work, and in any case the layoff information isn’t relevant at all to the insurance litigation.”
• “Judge Koeltl also noted Gartner had floated the idea of dropping the disqualification issue if U.S. Specialty would agree to move all the cases to New York, among other things, and concluded that ‘tactical considerations’ were at least in part driving the disqualification dispute.”

I guess it was only a matter of time before Elon appeared on the risk blog… and maybe he’s just created his own new conflicts category. Here’s the latest: “Elon Musk’s Tesla asked law firm to fire associate hired from SEC” —

• “A partner at law firm Cooley LLP got an unexpected call late last year from a lawyer for one of the firm’s most famous clients, Elon Musk’s Tesla Inc., with an ultimatum.”
• “The world’s richest man wanted Cooley, which was representing Tesla in numerous lawsuits, to fire one of its attorneys or it would lose the electric-vehicle company’s business, people familiar with the matter said.”
• “The target of Mr. Musk’s ire was a former US Securities and Exchange Commission lawyer whom Cooley had hired for its securities litigation and enforcement practice and who had no involvement in the firm’s work for Tesla. At the SEC, the attorney had interviewed Mr. Musk during the agency’s investigation of the Tesla chief executive’s 2018 tweet claiming, wrongly, to have secured funding to potentially take the electric-vehicle maker private.”
• “Cooley has declined to fire the attorney, who remains an associate at the firm, the people said. Since early December, Tesla has begun taking steps in several cases to replace Cooley or add additional counsel, legal documents show. Mr. Musk’s rocket company Space Exploration Technologies Corp., also known as SpaceX, has stopped using Cooley for regulatory work, according to people familiar with the matter.”
• “The interaction with Cooley points to a bigger pattern for Mr. Musk: Long dismissive of regulators, he has recently aimed his ire at individuals with ties to regulatory agencies with which he has sparred.”

Bloomberg Opinion Columnist Matt Levine offers his always fresh commentary:

• “One assumes that Musk was operating out of pure emotional grudge here, but I suppose it’s worth asking if that phone call was a good strategic move. Of course Cooley can’t actually fire the associate, which would be disastrous for its reputation. But that’s not the goal here. Other law firms that do a bunch of work with Tesla might have to ask prospective hires, like, ‘hey you haven’t done anything to annoy Elon Musk have you?’ And so current government regulators might think ‘hmm, I should go easy on Elon Musk so he doesn’t ruin my future career.'”
• “But, look, if a regulator started an investigation into Elon Musk, and Musk called her up and said ‘do you know who I am, I will ruin your career,’ that would definitely make things worse for him, don’t you think? Like she’d tell her bosses and they’d throw the book at him, add charges of interfering with an investigation, etc. Threatening to ruin a regulator’s career for investigating you is a very bad look! Of course Musk didn’t do that. Instead he actually tried to ruin a regulator’s career for investigating him. Arguably that’s a smarter move? Like, the Cooley associate is no longer at the SEC and that investigation is closed, so Musk’s direct risk is lower.”
• “And yet … if you’re at the SEC now, and you’re conducting a different investigation of Tesla, wouldn’t this make you want to be tougher on him? Or if you’re at the Justice Department, or some other government agency? His odds of actually ruining your career are low; there are a lot of law firms, most of them don’t work with Tesla, and Musk didn’t even succeed in getting this associate fired. As a matter of regulatory solidarity, and of punishing Musk for trying to intimidate regulators, wouldn’t you go a bit harder now?”

“TechReport: 2021 Cybersecurity” —

• “The ABA’s 2021 Legal Technology Survey Report explores security threats and safeguards that reporting attorneys and their law firms are using to protect against them. As in past years, it shows that many attorneys and law firms are employing safeguards covered in the questions in the survey and their use is generally increasing over time. However, it also shows that many law firms report that they are not using security measures that are viewed as basic by security professionals and are used more frequently in other businesses and professions.”
• “Significantly, 25% of respondents overall reported this year that their firms had experienced a data breach at some time… This year, the reported percentage of firms experiencing a breach ranged from 17% of solos and firms with 2-9 attorneys, about 35% for firms with 10-49, 46% with 50-99, and about 35% with 100+.”
• “This Cybersecurity TechReport reviews responses to the security questions and discusses them in light of both attorneys’ duty to safeguard information and what many view as standard cybersecurity practices. It breaks down the information by firm size and compares it to prior years. This gives attorneys and law firms (and clients) information to compare their security posture to law firms of similar size.”
• “While a dedicated, full-time chief information security officer is generally appropriate (and affordable) only for larger law firms, every firm should have someone who is responsible for coordinating security… A chief security officer has primary responsibility in some large firms, 13% of firms with 100-499 attorneys, and 16% of firms with 500+. A small percentage (.9%) report that nobody has primary responsibility for security.”
• “According to the 2021 Survey, 53% of respondents report that their firms have a policy to manage the retention of information/data held by the firm, 60% report a policy on email use, 56% for internet use, 57% for computer acceptable use, 56% for remote access, 48% for social media, 32% personal technology use/BYOD, and 44% for employee privacy. The numbers have generally increased over the years and generally increase with firm size.”
• “Incident response is a critical element of a cybersecurity program. Overall, 36% report having an incident response plan. The percentage of respondents reporting that they have incident response plans varies with firm size, ranging from 12% for solos and 21% for firms with 2-9 attorneys to approximately 80% for firms with 100+ attorneys.”
• “The other reported consequences of data breaches are significant. Downtime/loss of billable hours was reported by 36% of respondents; consulting fees for repair were reported by 31%, destruction or loss of files by 13%, and replacement of hardware/software reported by 18% (percentages for firms that experienced breaches).”
• “About 24% overall responded that they notified a client or clients of the breach. Formal opinion 483 addresses the duty to notify clients under Model Rule 1.4. The percentage reporting notice to clients ranges from 33% for solos and firms with 2-9, 9% for firms with 10-49, none for firms with 50-99, 18% for firms with 100-499, and 70% for firms with 500+.”
• “The increased use of security assessments conducted by independent third parties has been a growing security practice for businesses and enterprises generally. Law firms have been slow to adopt this security tool, with only 27% of law firms overall reporting that they had a full assessment. Affirmative responses generally increase with the size of the firm.”

“Judge removes himself from Amazon case after questions about financial conflict” —

• “A judge removed himself from a case involving Amazon after questions about potential financial conflict arose.”
  “U.S. District Judge Liam O’Grady removed himself from a 20-month civil case he had been overseeing between Amazon and two former employees after it was discovered his wife owned around $22,000 in Amazon stock, The Wall Street Journal reported on Tuesday.”
• “O’Grady commented in a hearing that the ‘idea that I would steer this case in Amazon’s favor because I felt that my wife’s $22,000 investment in Amazon’s stock would be at risk if I didn’t is literally – is almost insane.'”
• “…he would do so to remove any hint of impropriety. ‘However, perception of the fair administration of justice-both by the public and by the parties in the case-is of the highest importance to the Court,’ O’Grady wrote.”

“Bid To DQ Firm In NJ Malpractice Suit Meets Skepticism” —

• “A New Jersey state appellate panel on Tuesday challenged a woman’s argument that Wilentz Goldman & Spitzer PA should be barred from representing Mazie Slater Katz & Freeman LLC in her malpractice suit against Mazie Slater on the grounds that a retired jurist and current Wilentz Goldman attorney is a witness.”
• ” During a remote hearing, the panel expressed skepticism over plaintiff Noemi Escobar’s bid to overturn a trial court ruling denying her motion to disqualify Wilentz Goldman over how ex-state Appellate Division Judge John E. Keefe is a witness after having served as a mediator in an underlying case where a $102 million child abuse judgment was thrown out on appeal.”
• “The dispute centers on the meaning of the word ‘participation’ in New Jersey’s Rule of Professional Conduct 1.12(b). Under that provision, a firm in such a scenario would be barred unless ‘the disqualified lawyer is timely screened from any participation in the matter.'”
• “Escobar’s attorney, Robert Solomon of Nagel Rice LLP, argued that the ‘any participation’ language extended to Keefe’s role as a witness and told the panel that Wilentz Goldman must be disqualified since Keefe cannot be screened from participating in the case.”
• “One of the appellate judges, however, noted that all the RPCs deal with individuals’ activities as lawyers, and indicated that she didn’t see that the rule at issue encompassed serving as a witness.”
• “In denying the motion, Superior Court Judge Keith E. Lynott in July found that the phrase ‘any participation’ meant taking part in a case as an attorney and not as a witness. Wilentz Goldman also has implemented adequate measures to screen Keefe from acting as a lawyer in the action, the judge said.”

Friend, BRB reader, and “Conflicts Godfather” Bill Freivogel has been as eagle eyed as ever, keeping up with 2022 developments. Here are some of the latest he’s noted:

Rudlavage v. PPL Elec. Utils. Corp., No. 237 MDA 2021 (Pa. App. Jan. 4, 2022); and, Darrow v. PPL Elec. Utils Corp., 2021 Pa. Super. 245 (Pa. App. Dec. 14, 2021).

• “One should read these two cases together. They involve two different motorists who were injured at two different times while driving on PPL’s property. They filed separate suits in Lackawanna County Pennsylvania, each claiming PPL was negligent in maintaining its property. The Munley Law firm represented the plaintiffs in both cases.”
• “The problem was that the Munley firm employed a lawyer, John Mulcahey, who had previously, at another law firm, Lenahan & Dempsey, represented PPL in ‘numerous personal injury lawsuits.'”
• “In Darrow, Mulcahey and the Munley firm appeared for the plaintiff. PPL moved to disqualify Mulcahey and the Munley firm. The trial court granted the motion as to Mulcahey, but deferred ruling as to the Munley firm. In Rudlavage, two lawyers at the Munley firm (but not Mulcahey) appeared for the plaintiff. In Rudlavage, PPL moved to disqualify the Munley firm.”
• “The trial court held a joint evidentiary hearing for both cases as to the Munley firm. The trial court denied disqualification, finding the firm’s ‘screening process. . . adequate.'”
• “In these opinions the appellate court reversed the trial court and ordered the Munley firm disqualified. The focus of the opinions was the adequacy of the firm’s screen between Mulcahey and the rest of the firm. The factors favoring disqualification here included the small size of the Munley firm, the extent of Mulcahey’s work for PPL at the Lenahan firm, the lateness of the screen, and the lack of adequate procedures for screens in the Munley firm.”
• “These could be important opinions on screening in Pennsylvania, given the lack of, in the court’s words, ‘precedential Pennsylvania authority’ on screening under Pennsylvania’s Rule 1.10(b)(2). Authorities considered by the appellate court included Dworkin v. General Motors Corp., 906 F. Supp. 273 (E.D. Pa. 1995), and Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, 602 a.2d 1277 (Pa. 1992).”
• “Side note: In both the Darrow and Rudlavage opinions the court gives a nod to ‘playbook,’ noting that Mulcahey’s work for PPL involved working with PPL personnel on similar cases, thus finding that work ‘substantially related’ to these cases.”

H&H Mfg. Co., Inc. v. Tomei, No. A-4209-19 (N.J. App. Div. Dec. 29, 2021).

• “This is one of two cases involving a family feud and control of the family corporation, H&H. In the first case, in Pennsylvania, Law Firm filed papers on behalf of H&H and a family member, Vincent Tomei, against another family member, Thomas Tomei. That suit failed because the courts found, among other things, that the H&H board never approved retention of Law Firm or the suit’s filing.”
• “In the second case (this case) filed by H&H against Vincent, Law Firm appeared for Vincent. H&H moved to disqualify Law Firm, under Rule 1.9(a), because of Law Firm’s ‘representation’ of H&H in the Pennsylvania case.”
• “The trial court granted the motion. In this opinion the Appellate Division disagreed, finding that Law Firm’s earlier, unauthorized, representation of H&H did not amount to a representation under Rule 1.9(a). Thus, Law Firm’s work in the Pennsylvania case was not disqualifying. But, in the face of claims that Law Firm had represented H&H in other matters, the Appellate Division remanded the case for findings on those claims.”

CCUR Aviation Fin., LLC v. S. Aviation, Inc., 2021 WL 6111683 (S.D. Fla. Dec. 27, 2021).

• “This opinion deals with a temporary receiver’s application for fees and expenses. One objection was that the receiver hired her own law firm to represent her, thus creating a conflict of interest. The court rejected that objection saying that the practice of receivers’ hiring their own law firms is ‘common’ in the S.D. Fla. Plus, in Footnote 4 the court noted that the receiver agreed to a cap on the law firm’s hourly rates, and that the rates were ‘reasonable.'”

Arnold v. Solomon, No. 2053, Sept. Term, 2019 (Md. Spec. App. Unreported Dec. 22, 2021).

• “Lawyer and others were defendants in this legal malpractice suit. In this “unreported” opinion the court, without discussion, ruled that, absent a conflict of interest, Lawyer could represent himself and other defendants. The opinion did not indicate who the “other defendants” were or what they might have done.”

(Bill, thanks as always for letting me crib your class notes. I’m ready for the day you call on me to “do a service.’ >smile<)

“The Problem With “Zero Down” Chapter 7 Bankruptcy” —

• “There is no shortage of attorneys advertising on the internet and on television their willingness to file Chapter 7 bankruptcy cases under ‘zero down,’ ‘low money down,’ or ‘file now, pay later’ fee agreements.”
• “Precisely because lawyers stand in a fiduciary relationship with their clients, they are all bound by rules of professional conduct that prohibit them from doing things that are allowed in many other kinds of business relationships; those same rules require lawyers to do things that are not required in many other kinds of business relationships.”
• “When you file a Chapter 7 bankruptcy case you have an undeniable conflict of interest with all of your pre-bankruptcy creditors; your creditors want to be paid, and you want to discharge your liability to them in bankruptcy.”
• “And if, before you file your Chapter 7 case, you enter an agreement with the attorney who files the case for you that obligates you to pay them after the case is filed, then that attorney becomes your creditor. In fact, most courts that have considered this question have concluded that pre-petition debts for legal services are dischargeable in the debtor’s Chapter 7 case just like any other unsecured debt, and have also held that post-petition attempts by the attorney to collect on such debts would be improper.”
• “If you or someone that you know entered a fee arrangement with an attorney who agreed to file a Chapter 7 bankruptcy case and collect any portion of his or her legal fees after the case was filed, that attorney, in accordance with their fiduciary duties, should have disclosed that the promise to pay the attorney’s legal fees would be discharged in the bankruptcy case, and that attempts to collect the fee from the debtor after the discharge was granted would be prohibited by law.”
• “Some attorneys in Minnesota, and around the country, try to avoid these consequences by filing ‘no money down’ and ‘low money down’ Chapter 7 bankruptcy cases for clients under so-called bifurcated fee arrangements. Under such arrangements, the full scope of legal services necessary for a client to secure the benefit of a Chapter 7 discharge are “unbundled” and covered under two separate fee agreements:
  • “One fee agreement that is signed pre-petition and covers only services essential to get the case filed; and”
  • “A second fee agreement signed post-petition that covers the additional services necessary to conclude the Chapter 7 case, including preparing the actual schedules and statement of financial affairs, appearing with the client at the meeting of creditors, and other services as may be required to conclude the Chapter 7 case and secure the discharge.”
• “As of late December 2021 (when this blog is being written), we do not know whether the judges of the Minnesota Bankruptcy Court will approve the use of “file now and pay later” fee arrangements in Chapter 7 cases filed here. But there is compelling evidence that our local bankruptcy judges are concerned that such fee arrangements are improper, and every reason to conclude that bifurcated fee arrangements run afoul of the Local Rules of Bankruptcy Procedure.”

“Firm DQ For Bad Disclosure In Del. Bankruptcy Case Upheld” —

• “A federal judge on Wednesday [October 20, 2021] affirmed Delaware bankruptcy court decisions that disqualified and sanctioned a law firm for failing to disclose it was using a “fictitious trade name” when it served as special counsel to debtor entities that held ownership stake in an office building.”
• “The bankruptcy court orders took issue with Rubin & Rubin for various disclosure violations, including a failure to provide notice of the fee sharing agreement with the consultant and filing false or materially incomplete information in its retention application, according to the decision.”
• “After filing for Chapter 11 in 2016 when loan refinancing efforts failed and foreclosure proceedings were initiated, numerous debtor entities that collectively own an office building in Little Rock, Arkansas retained Rubin & Rubin as special counsel. As an adversary suit between the debtors and various lenders proceeded over loan terms and other issues, lenders called into question whether Rubin & Rubin PA is ‘an actual entity or not, and what representations were made to the court regarding the retention of Rubin & Rubin,’ according to a 2019 court filing.”
• “Although the bankruptcy court did not find an issue with fee sharing by the firms, given the nature of their partnership, it did take issue with the failure to disclose ‘the existence of their firms and Rubin & Rubin’s fictitious name status,’ the opinion said.”
• “The bankruptcy court ‘correctly held that it had authority to sanction the disclosure violations under’ bankruptcy rules, and such sanctions ‘do not require a finding of bad faith,’ Judge Connolly said.”