Bressler Risk Blog

One could make the case for an internal “New Speaking Intake” workflow/clearance process: “Martin Rogers of US law firm Davis Polk withdraws from Hong Kong national security law forum following criticism” —

• “The Asia chairperson of US-based law firm Davis Polk & Wardwell has withdrawn from a Hong Kong forum on the national security law following criticism that it was a ‘propaganda event.'”
• “Partner Martin Rogers said in a LinkedIn post on Saturday that his agreement to participate did not reflect support for any topics discussed: ‘I was invited to speak, and accepted the invitation, in my individual capacity alongside other independent experts on specific matters including procedural challenges that could arise related to the national security law and laws in other jurisdictions.'”
• “‘My agreement to participate did not reflect an endorsement or support of any topics discussed or individuals or organisations involved,’ he added. However, Rogers has openly expressed support for the security law at a previous government forum.”
• “In a LinkedIn post last week, he tagged his law firm and said it was his honour to take part in the event to commemorate the second anniversary of the security law.”
• “Samuel Bickett, a US lawyer who was forced to leave Hong Kong after serving a jail sentence over the 2019 protests, questioned how Davis Polk had approved the event.”
• “‘Lawyers can and should provide commentary on the [security law] at professional and academic conferences, but that’s not what this event is. It’s a propaganda event intended to validate the NSL as ‘just another law,’ and [Davis Polk] is being used as a tool in service of that goal,’ he said on Twitter last Friday.”
• “He later tweeted: ‘I hope int’l law firms will take a hard look at their human rights oversight procedures across the world. What are your lawyers doing in your firm’s name that you don’t know about?'”

The Law Society’s Gazette brings us commentary from Jonathan Goldsmith, Law Society Council member for EU & international and a former secretary general of the Council of Bars and Law Societies of Europe: “AML laws have failed: it is time to start again” —

• “I want to focus here on the elaborate structure which they foisted on us to stop the servicing of corrupt money – the anti-money laundering laws proliferating around the world. These have failed, too. It is not an exaggeration to say that those laws lie in ruins, having failed to stop the penetration of Western economies by corrupt Russian money.”
• “Yet there seems no recognition that the AML regime is fatally flawed. As with all mistakes, its supporters believe that it was just not applied strictly enough, and needs to be reinforced.”
• “To understand the depth of wrongness of the current AML concept, one need only read Catherine Belton’s book, ‘Putin’s People,’ which was published in 2020. This documents in some detail the various criminal dealings which led to the rise of the Russian billionaires whose money flooded the West. She conducted dozens of interviews over many years. Even so, there are large gaps because so much took place behind an impenetrable veil of secrecy, and through multiple layers of shell companies in tax havens which lack transparency.”
• “Yet the OECD, the EU, the UK government and others behind the construction of the AML laws expect every solicitor to conduct his or her own investigation as part of customer due diligence and ‘know-your-client’. The investigation is thus privatised and fragmented, having to be done over and over again by each solicitor or law firm as it is consulted.”
• “Yet the depth of knowledge required – of Russian politics, of the Russian language, of the many varied players, of the multiplying companies and fronts and transactions, of Russian laws, and of historical events – is beyond the resources of a law firm. It is ridiculous to expect law firms to investigate what takes years, many interviews, and much academic knowledge.”
• “It is also a very inefficient way of going about things, because it requires the background to be re-investigated over and over again by separate lawyers and law firms… It so happens that there is now a ‘Putin’s People’ to help with Russian investigations. But that stops in 2020, and has understandable gaps. Is there a ‘Putin’s People’ for Kazakhstan, China and whatever other countries fall within the same category?”
• “A system which privatises and fragments the need to research the most complex events imaginable is both inefficient and unworkable. And we have just seen the results: huge compliance departments failed to stops serious penetration of our economies, with dire results.”
• “The legal profession made a mistake in its opposition to the laws when they were first introduced. We opposed it on the basis that it made us breach lawyer-client confidentiality through reporting suspicious transactions. We got nowhere with these claims, which were rejected by the courts.”
• “We would have been better off by pointing out that the system being set up, with its requirement for solicitors to investigate complexities and historical events which are beyond reasonable reach, is unworkable, and for them to be re-investigated by each player in the chain over and over again is completely inefficient.”

“Alberta Court of Queen’s Bench Finds Conflict of Interest for Class Counsel Also Representing Individual” —

• “In Smith v Lafarge Canada Inc, 2022 ABQB 289 [Smith], the Court of Queen’s Bench considered a preliminary application arising out of a proposed class action which involved claims advanced on behalf of the proposed class as well as individual claims specific to the proposed representative plaintiff.”
• “The Court found that the individual claims should be stayed pending certification and found an inherent conflict in counsel for the proposed class also representing the proposed representative plaintiff with his individual claims. The case demonstrates a strong presumption that class counsel should not act for plaintiffs in pursuing individual claims related to the class action before or after certification.”
• “Smith, a former employee of Lafarge Canada, brought an action on behalf of all current and former Lafarge employees, alleging that Lafarge underpaid amounts due to employees under employment standards and purposely omitted information from pay statements, depriving employees of the information required to ascertain whether their pay was properly calculated.”
• “The plaintiff also advanced an individual claim that he had been terminated on the basis of his age, constituting discrimination on grounds prohibited under the Alberta Human Rights Act.”
• “Justice Eamon found that the inherent nature of a class action creates sufficient risk of a conflict to bar counsel from joint representation of both the proposed class and individual claims.”
• ” Since the class included employees of various ages, age discrimination was not a common fact among all class members. As for issues of law, Justice Eamon found that a claim for age discrimination could only give rise to discrete damages under the Alberta Human Rights Act, which lack any obvious link to the common issues of systematic underpayment or mental distress arising from wrongful termination. The age discrimination claim bore only superficial connection to the class claims, and as such was discrete and severable.”
• “On the basis of this potential for conflict, Justice Eamon ordered that the plaintiff’s counsel of record be removed from either the class action or the discrimination claim, at the plaintiff’s choice.”

“Fox Rothschild Faces New DQ Bid In Athlete Startup Case” —

• “A startup seeking to ‘tokenize’ and sell shares of professional athletes said Fox Rothschild LLP should be disqualified from representing investors in a $1 million fraud lawsuit against the company, claiming the firm was ‘preparing to file the current complaint’ while simultaneously representing those now being sued.”
• “Cypress Holdings sued startup SportBLX, parent company GlassBridge Enterprises and the startup’s founders George Hall and Joseph DePerio in February, claiming investors were duped into pouring $1 million into the venture in 2019 based on misrepresentations of a business plan that never materialized.”
• “In a letter Friday to U.S. District Judge Lorna G. Schofield, Hall and DePerio said Fox Rothschild attorneys repeatedly reassured them in emails throughout 2019 that the firm and attorney Marc Gross were not also representing Cypress.”
• “DePerio said he alerted Fox Rothschild partner Pamela Thein to a letter from Gross about ‘certain potential claims of Cypress in connection with its investment,’ prompting Thein to respond that the firm was withdrawing from representing the investor group.”
• “DePerio wrote to Fox Rothschild again several times over the coming months asking why Gross was still being copied on emails from Cypress.”
• “GlassBridge said it paid Fox Rothschild almost $850,000 in legal fees before the firm ended representation in early November 2021, two months before Cypress sued. ‘Essentially, GlassBridge spent nearly a million dollars on Fox Rothschild’s services during the same time the firm was apparently preparing to file the current complaint. GlassBridge was also a significant owner of Sport-BLX,’ Friday’s letter said.”
• “Gross said he was not concerned about the latest letter or the emails. ‘I know what occurred,’ he said. ‘So I suspect that if a motion is filed, the defendants are going to lose and usually defendants do this when they think that changing counsel will impact the way the case is going to develop.'”

“U.S. judge recuses himself from Archegos fraud case, citing wife’s ties to banks” —

• “Archegos Capital Management founder Bill Hwang will get a new judge for his U.S. fraud trial, after the judge assigned to the case recused himself on Thursday due to his wife’s ties to banks that could have been caught in the investment firm’s meltdown.”
• “U.S. District Judge Andrew Carter said in a Manhattan federal court hearing that his wife is a lawyer for Bank of New York Mellon (BK.N) and used to work for JPMorgan Chase (JPM.N), and that he would have a conflict of interest if either bank were a victim of the alleged fraud.”
• “Archegos, which had $36 billion in assets, collapsed last year when it was caught short on highly leveraged trades, leaving global banks with $10 billion in losses. Prosecutors say Hwang lied to banks to increase Archegos’ credit lines. “
• “Carter’s decision came amid heightened attention by lawmakers and court reform advocates to judicial recusals due to conflicts. President Joe Biden last week signed into law a bill subjecting federal judges to tougher disclosure requirements for their financial holdings and stock trades.”

“Miami-Dade Judge Steps Down From Litigation Over Attorney Fees” —

• “Miami-Dade Circuit Judge Beatrice Butchko stepped down from a case over attorney fees and costs, hours after a litigant filed a verified disqualification motion.”
• “Litigant Sarah Lazow claimed in a disqualification motion that her former attorney, Robert Zarco, a partner at Zarco Einhorn Salkowski & Brito in Fort Lauderdale, allegedly pitched his legal services by boasting he had a ‘very close relationship’ with Butchko, who might allegedly ‘role play as angry on the record.'”
• “But Lazow’s opponents describe her as a ‘desperate litigant,’ ready to defame the judge and other side.”
• “Lazow claimed in the motion that Butchko could not be impartial in the litigation, in which one of Lazow’s former attorneys sued for legal fees, stemming from a larger lawsuit involving Setai Hotel Acquisition LLC, the operator of the Setai Hotel in Miami Beach.”
• “‘She hates you,’ Zarco allegedly said to Lazow, according to the motion for disqualification. ‘She asked me why I would get involved in this case when you have already been through six lawyers. She said you were crazy.'”
• “Bob Jarvis, an ethics professor at Nova Southeastern University Shepard Broad College of Law, who is not involved in the litigation, said the Judicial Qualifications Commission might want to examine if the allegations are true.”
• “‘I am not surprised that Judge Butchko granted the recusal motion,’ Jarvis said. ‘I am surprised that she waited until there was a motion. In my opinion, she should have recused herself when she first realized she had developed negative feelings toward the defendant, or, at the very latest, when she spoke with Zarco.'”
• “However, Zarco pushed back Wednesday against what he called ‘fabricated’ allegations Lazow put forth in the motion. He said Lazow has a history of recklessly filing motions for disqualification of judges without legal basis, to forum shop a jurist more sympathetic to her case. Zarco also said he declined to refute each ‘fabricated’ statement in court.”

“Novartis’ DQ Bid Sinks In Gilenya Row” —

• “A federal judge in Delaware has rejected a legal effort to prevent a Washington, D.C., patent lawyer from representing an Indian pharmaceutical company in a patent fight with Novartis over the blockbuster multiple sclerosis drug Gilenya.”
• “The latest word from the Delaware court came Tuesday in Novartis’ bid to disqualify Chidambaram Iyer of Sughrue Mion PLLC from representing Shilpa Pharma Inc., the Pennsylvania arm of a generic drugmaker based in Raichur, India. Shilpa sued Novartis last year, alleging that an active ingredient in the drug the Swiss giant has been approved to sell since 2010 did some of the same things that are described in the language of a patent that Shilpa landed from the U.S. Patent and Trademark office six years later.”
• “The same year Shilpa had secured the patent — in late 2016 — representatives from Shilpa tried to convince Novartis to license the patent but were rebuffed. Since last November, Novartis’ lawyers have been trying to prevent Sughrue Mion’s Iyer from representing Shilpa in the case because Shilpa identified him ‘as the only named Shilpa witness to several 2016 discussions with Novartis about licensing the patent.'”
• “Earlier this month, Robinson came down on the side of Shilpa’s lawyers. She wrote that Iyer’s “personal knowledge is not a basis for the allegations of willful and induced infringement. ‘There is no evidence that Mr. Iyer would so testify,’ she added in her 7-page report.”

“As R. Kelly’s Chicago trial nears, things get testy between defendants” —

• “With less than two months to go until ex-R&B superstar R. Kelly and two of his former associates go on trial in Chicago, the sparks are starting to fly.”
• “On Wednesday, lawyers for former Kelly manager Derrel McDavid blasted claims by the singer’s attorney that there may be a conflict of interest with McDavid’s legal team as ‘either woefully uninformed or purposely mendacious.'”
• “The response also criticized Kelly’s lawyer, Jennifer Bonjean, for what they called a ‘disingenuous’ attempt to link one of McDavid’s current attorneys, Vadim Glozman, to famed Chicago defense attorney Edward Genson, who represented Kelly in his child pornography trial in Cook County in 2008 that ended with an acquittal.”
• “Glozman worked for Genson’s law practice from 2012 to 2017, when it was closed due to Genson’s failing health. Genson died of cancer in 2020.”
• “Bonjean also pointed to an interview Genson gave to a Chicago Sun-Times columnist in 2019, when he was in the advanced stages of terminal cancer, in which Genson said Kelly was ‘guilty as hell’ and that he’d helped keep the singer out of trouble for a decade after his acquittal.”
• “‘Because Glozman arguably owes a duty of loyalty to Kelly because he was a member of the firm that represented Kelly, he is in a conflicted position,’ Bonjean wrote. ‘This potential conflict may be an actual conflict if Glozman possesses privileged information that he may or can use to the benefit of his client or to the detriment of Mr. Kelly at a joint trial.'”
• “In response, McDavid’s legal team called that assertion ‘disingenuous, insulting, and perhaps worse: pointless.'”
• “The Sun-Times column, their motion said, omitted that a heavily medicated Genson was ‘rushed to the hospital shortly after the interview took place and that the interviewer only entered Mr. Genson’s home through false pretenses.'”
• “In an emailed statement Wednesday, Sun-Times interim Editor-in-Chief Steve Warmbir said the newspaper ‘completely stands by its 2019 interview of Ed Genson… The columnist did nothing remotely improper regarding the interview of Mr. Genson, who was quite lucid at the time,’ Warmbir said.”

“Judge Tosses BofA Bias Suit And Bid To DQ McGuireWoods” —

• “A Georgia federal judge on Monday permanently dismissed a discrimination suit filed against Bank of America stemming from a foreclosure case and rejected the plaintiff’s bid to oust the bank’s attorneys at McGuireWoods LLP from the case, finding there is no basis for disqualification.”
• “Judge William M. Ray II of the U.S. District Court for the Northern District of Georgia said in an order that plaintiff Keith Thomas’ argument that McGuireWoods and the law firm Rubin Lublin should be disqualified because they were also defendants in the case did not pass muster, noting that it did not appear that the relevant Rule of Professional Conduct applies to entire law firms.”
• “‘In addition, it does not appear Rule 3.7 applies at this stage of the case,’ Judge Ray said of the relevant rule. ‘The rule states only that a lawyer may ‘not act as advocate at a trial in which the lawyer is likely to be a necessary witness’ … but this case has not progressed to a trial.'”
• “Thomas, who is representing himself, initiated the case in August, arguing that McGuireWoods helped Northstar Mortgage Group LLC, mortgage database company Mortgage Electronic Registration Systems Inc. and Bank of America engage in mail fraud and in violating the Civil Rights Act of 1866 and various federal regulations.”
• “Judge Ray further found that Thomas didn’t show that either law firm or any of their lawyers are likely to be a necessary witness. And the court rejected Thomas’ argument that McGuireWoods should be disqualified for allegedly engaging in fraudulent activity that it didn’t disclose to the court, saying Thomas ‘wholly fails to cite any evidence that McGuireWoods in fact knew about any supposed fraudulent activity,’ as required by Rule of Professional Conduct 3.3.”

“The financial arrangements between lawyers and Indigenous clients” —

• “Recent decades have seen an explosion of Indigenous case law in Canada, with precedent-setting decisions like R v. Sparrow and Delgamuukw v. British Columbia vastly increasing activity in what used to be a specialized field.”
• “More cases mean more opportunities for conflict between lawyers and their clients over financial arrangements. The past few decades also have seen a significant number of those conflicts make their way to court — disputes over hourly fees, retainers and contingency fees, arguments over who has the right to act for a particular First Nation.”
• “Some professionals in the Indigenous law field say those conflicts are the result of a power imbalance between Indigenous communities and the lawyers they hire. They’re calling for reforms to the model code of conduct to protect Indigenous clients from bad actors in the legal profession.”
• “Lafond said the IBA [Indigenous Bar Association] is partnering with the Federation of Law Societies of Canada to review and modify the model code to protect Indigenous clients — starting with changes to the way contingency agreements work.”
• “Contingency fee agreements can get cases off the ground for cash-poor clients, but unless their lawyers are transparent about the work’s nature, they can lead to unfair outcomes.”
• “University of Windsor law professor Noel Semple says one sensible way to protect vulnerable clients is to develop standards for time-based billing, a practice he said is largely unregulated in Canada.”
• “‘And there are ways retainer agreements themselves can be structured to prevent a First Nation from retaining another law firm to examine the fees charged by another,’ said Lafond. ‘In some cases, these retainer agreements prevent the client from hiring another firm until the original firm has been made whole on the bill it sent the client.'”

“D.C. Opines On Disclosure Issues” —

• “In April 2022, the Legal Ethics Committee issued Opinion 383 finding that, absent informed consent, a lawyer generally may not disclose to a client or prospective client information about another client or prospective client that is a protected secret or confidence under Rules 1.6 or 1.18. Such protected information often includes (1) the identity of another client or prospective client and (2) the nature of the other person’s matter.”
• “LEO 383 cautions that even requesting or agreeing to a commitment to make such disclosures pursuant to an outside counsel agreement or otherwise may constitute a prohibited attempt or inducement to another to violate the Rules. The opinion also concludes that Rules 1.7(d) and 1.16 — and not an advance agreement between one client and outside counsel — govern whether a lawyer must or may withdraw from her representation of another client if a ‘midstream’ conflict arises. Finally, a lawyer may not permit a client to access the lawyer’s records if such access might disclose confidences or secrets of other clients. Read the full opinion here.”

“Lawyers Urge 2nd Circuit to Vacate Decision by Judge Who Owned Exxon Stock During Litigation” —

• “Lawyers for an insurer Tuesday urged a Second Circuit panel to abandon a ruling by a Manhattan federal district judge, arguing it was wrong on the merits but also clouded by his ownership of stock in Exxon.”
• “The U.S. Court of Appeals for the Second Circuit heard oral arguments in a $31 million case pitting ExxonMobil Oil against TIG Insurance.”
• “TIG attorney Daniel Sullivan, a partner at Holwell Shuster & Goldberg, said the failure of U.S. District Judge Edgardo Ramos of the Southern District of New York to disclose his stock ownership was the very first example cited in a 2021 Wall Street Journal investigation that reported that 131 federal judges had heard cases involving a party in which they or their family members owned stock, a violation of federal law.”
• “Ramos attributed the failure to disclose to a problem with the court’s conflict-screening software, the Journal reported at the time. Federal legislation to toughen judges’ financial disclosure requirements recently passed both houses of Congress.”

“Conflict Claim Can’t Sink $2.75B Cisco Loss, Centripetal Says” —

• “Centripetal Networks has told an appeals court that tossing out a $2.75 billion patent judgement in its favor against Cisco Systems Inc. because a district judge’s wife owned Cisco stock would prove “unjust,” robbing the company of a “David-versus-Goliath” win despite that jurist having no obvious bias. “
• “Centripetal and Cisco on Friday filed another round of competing briefs over why Virginia Federal Judge Henry C. Morgan Jr.’s failure to recuse himself from the case after learning that his wife owned 100 shares of Cisco stock should or shouldn’t result in tossing out the decision and starting the case over with a new judge.”
• “Near the end of the initial trial, on Oct. 17, 2019, Judge Morgan discovered that his wife had purchased a handful of shares of Cisco stock. Before he found out, the judge said he had already decided ‘virtually every issue’ on the case, and ultimately decided to disclose the financial interest but stay on the case. He put the stock in a ‘blind trust’ as a way of remedying the potential conflict.”
• “Cisco argues this blatantly breaks the federal disqualification statute, and if the Federal circuit does not vacate Judge Morgan’s judgment, it ‘would seriously undermine public confidence in the judiciary.”‘ Centripetal, on the other hand, argues that the injustice the smaller company would suffer in having to re-litigate the case would be far greater than the injustice of the judge’s minor financial conflict.”
• “The company could face prejudice if the case were to be litigated because evidence will have gone stale and witness’ memories could be lost, the company said. Therefore, the court should practice discretion, as it has in the past, and determine that the small financial conflict created no bias in the case, Centripetal said.”
• “Cisco also attacked argument that Judge Morgan had already decided the case before learning of his wife’s stocks, pointing out that Judge Morgan had issued a lengthy opinion on merits of the case, entered judgment on the case, and written a 49-page opinion denying Cisco’s post-judgement motions all after he had learned of the financial conflict.”

“Texas housing agency board member voted for deals that paid his law firm” —

• “At one of his first meetings as a member of a state housing board, Dallas attorney Paul Braden voted to approve renovations on a low-income apartment complex in a small town southeast of Houston. When the project was finalized, his law firm earned $70,000 for doing legal work on the deal.”
• “Over the next three years, Braden voted to approve another dozen housing proposals that earned Norton Rose Fulbright more than $2 million, The Dallas Morning News found.”
• “Braden did not report that his firm held a contract to do the work as a conflict of interest, records and video archives reviewed by The News show. State law requires board members with a personal interest in any agency matter to publicly disclose it and abstain from voting.”
• “The firm said Braden had received assurances from the Texas Department of Housing and Community Affairs that no conflict existed. ‘We are confident that Paul Braden complied with all legal and ethical duties while serving on the TDHCA board,’ the firm said in a statement.”
• “Two days after The News asked Braden about the fees, he stepped down from the board ‘to avoid even an appearance of a conflict,’ the firm said. In an April 28 resignation letter to Gov. Greg Abbott, Braden wrote that “certain professional matters” made it challenging for him to continue on the board. Braden declined requests for an interview.”
• “Housing agency spokeswoman Kristina Tirloni said the agency did not believe Braden had a conflict because he was doing legal work for a nonprofit that helped finance the deals, not for developers who submit applications to the housing agency.”
  “Braden’s requirement to disclose his firm’s role is clear, said Andrew Cates, an Austin attorney who specializes in Texas ethics law. ‘He has a business interest in the votes that he’s taking,” Cates said. “And that should have been disclosed.'”
  “”

“McKinsey Faces Conflict Disclosure Deadline in Puerto Rico Work” —

• “McKinsey & Co. is in the spotlight as the consulting giant faces a deadline to disclose potential conflicts of interest in advising Puerto Rico‘s $120 billion restructuring.”
• “A new law signed by President Biden on Jan. 20—the Puerto Rico Recovery Accuracy in Disclosures Act (PRRADA) —requires certain key professionals who worked on the island’s bankruptcy-like case to disclose if they have any previously hidden investments or business connections that could be considered a conflict of interest.”
• “McKinsey, a market leader in bankruptcy consulting, in particular faces scrutiny as one of the case’s top billers with over $100 million in fees. Revelations that a McKinsey subsidiary held millions in Puerto Rico bonds provided the impetus to Congress’ push to enact PRRADA—a process in which McKinsey also engaged as a lobbyist to shape certain technicalities in the legislation.”
• “The events highlight McKinsey’s penchant for confidentiality and multiyear fight against accusations that it intentionally conceals conflicts of interest from federal overseers.”
• “McKinsey’s travails in Puerto Rico fit into a pattern of other accusations the firm has faced in recent years that it flouts federal disclosure laws to hide conflicts of interest.”
• “In recent years, McKinsey has agreed to multimillion-dollar fines or settlements related to the adequacy of its disclosures as a bankruptcy consultant for SunEdison Inc., Westmoreland Coal Co., and the mining company Alpha Natural Resources.”
• “And in November 2021, McKinsey paid the U.S. Securities and Exchange Commission $18 million to settle an investigation into potential insider trading risks stemming from MIO’s investments in Puerto Rico and McKinsey’s other bankrupt clients.”
  “Since 2018, when it started lobbying Congress on bankruptcy matters, McKinsey has paid more than $6 million to the three law firms lobbying on Puerto Rico and bankruptcy oversight, according to federal lobbying records. The onset of that lobbying effort marked the first time the firm filed lobbying disclosures in 15 years.”