Bressler Risk Blog

Hat tip to Bill Freivogel for noting a recent opinion issued by the Advisory Committee on Professional Conduct (New Jersey): “OPINION 743: RPC 1.10(a) – Imputing Conflicts of Interest That Are Based on a Personal Interest of the Lawyer” —

• The Advisory Committee on Professional Ethics received an inquiry regarding a law firm that was retained to advise a client entity in a commercial loan refinancing. The client entity is fully owned by a parent limited liability company that has two members who each own equal shares. A shareholder in the law firm is one of the two members of the parent company.
• “The Committee found that the lawyer with the financial stake has a conflict of interest based on a personal interest of the lawyer, Rule of Professional Conduct 1.7(a)(2), and that the affected lawyer’s conflict of interest is imputed to the firm under Rule of Professional Conduct 1.10(a).”
• “The exception for imputing ‘personal interest’ conflicts in Rule of Professional Conduct 1.10(a) is narrow and generally includes only interests arising due to family relationships or personal beliefs, not business or investment interests.”
• “See Michels, K., New Jersey Attorney Ethics, § 24:3-1(a), p. 618 (Gann 2022) (the ABA comments suggest that the RPC 1.10(a) exception for imputing personal conflicts ‘does not apply when the affected lawyer’s interest is pecuniary or proprietary’).”
• “Family-based or belief-based personal interests ordinarily are not considered to present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm. Conflicts arising from a lawyer’s personal business interests – particularly when those business interests affect the client’s objectives of legal representation – ordinarily would present a significant risk of materially limiting the representation of the client by the other lawyers in the firm.”
• “If, however, the lawyer with the relationship is not handling the case, the conflict is not likely to materially and adversely impair the representation of the client by the remaining lawyers in the firm. This personal interest conflict generally is not imputed to the firm 5under RPC 1.10(a), though the affected lawyer should be screened from the matter. Ibid. In this case, the client need not be informed of the relationship or provide consent to a conflict.”

“Judicial Ethics Opinion 21-164” —

• “Provided the judge is satisfied they can be fair and impartial, the judge may preside in a case where (1) the plaintiff is an attorney who frequently appears before the judge and was previously co-counsel with the judge’s sibling on several discrete cases and (2) plaintiff’s counsel rents office space in the same office as the judge’s sibling and also is an elected county legislator representing the district where the judge resides.”
• “We note, initially, that there is no indication here that the judge’s sibling has any involvement or interest in the case before the judge. Nor does the inquiry suggest that any litigant or attorney in the case is the partner or associate of the judge’s sibling (see Opinion 06-111) or has a current, ongoing business relationship with the judge’s sibling (cf. Opinion 95-35 [judge should recuse in cases involving appearances by a law firm, where the judge’s spouse, who is a lawyer, has a continuing counsel relationship with the law firm, and not merely a retainer interest in occasional, separate, discrete cases]).”
• “We do not believe the judge’s impartiality can reasonably be questioned merely because plaintiff’s counsel “rents office space in the same office” as the judge’s sibling (see e.g. Opinion 14-91).”
• “We have also advised that a judge is not disqualified in a matter merely because a litigant or witness before them is an attorney who regularly practices before the judge (see e.g. Opinions 17-130; 14-120; 14-62; 09-239; 07-122; 92-49). We likewise conclude here that the judge’s impartiality cannot be reasonably questioned merely because plaintiff is also an attorney who regularly appears before the judge.”
• “Finally, we believe the judge’s impartiality cannot reasonably be questioned merely because the plaintiff was previously co-counsel with the judge’s sibling “on several high-profile criminal cases.” We note that a judge is disqualified, subject to remittal, when their sibling’s law partners or associates appear before the judge (see Opinion 06-111).”

“Judicial Ethics Opinion 22-16” —

• “A judge need not disqualify from a custody case merely because the judge’s confidential secretary has connections to both parties through marriage, but must insulate the secretary from any involvement in the matter. If a party objects to the judge’s participation in the case, the judge has the sole discretion to decide whether to exercise recusal.”
• “A judge is presiding in a custody case in which the judge’s secretary has personal connections to both sides through marriage. Specifically, the secretary was formerly married to one party and formerly married to an ex-partner of the other party.”
• “Where a judge’s staff member has a conflict, ‘it is ordinarily sufficient to insulate the staff member and disclose the insulation’ (Opinion 19-72).”
• “Here, too, we believe the judge’s impartiality cannot ‘reasonably be questioned’ based on the secretary’s personal connections with both sides in the custody case (22 NYCRR 100.3[E][1] [emphasis added]). Accordingly, this judge need not disqualify merely because the judge’s confidential secretary has connections to both parties through marriage, but must insulate the secretary from any involvement in the matter. Because disqualification is not mandatory here, the judge ‘is the sole arbiter of recusal’ (People v Moreno, 70 NY2d 403, 405 [1987]) even if a party objects to the judge’s participation.”

“Samsung Wants Former In-House Atty DQ’d From Patent Suit” —

• “Samsung has asked a federal judge in Texas to disqualify its former top in-house IP attorney from participating in a suit over smart speaker technology being pursued by the lawyer’s new patent-rights venture.”
• “The tech giant filed a disqualification motion on Thursday arguing that Dr. Seung-Ho Ahn, the founder of the Singapore-based Synergy IP Corp., should be barred from involvement in the case as he could unfairly leverage information he gained during his nearly two decades of service for Samsung.”
• “Synergy, which Ahn founded shortly after his departure from Samsung in 2019, is suing the company alongside co-plaintiff Staton Techiya LLC for alleged patent infringement related to Samsung’s Bixby smart speaker platform.”
• “But Samsung argued on Thursday that Ahn and another former Samsung lawyer, Sungil Cho, who joined Synergy not long after its founding, needed to be ‘walled off’ from participating in the case.”
• “Neither Ahn nor Cho is listed as counsel for Synergy or Staton Techiya, although Samsung claims they’re providing legal guidance and information they only have because of their previous employment there.”
• “‘Synergy’s business model is essentially legal in nature, as it makes money by acquiring patent rights with the goal of convincing counsel at target companies to take a license — and sues those companies if they refuse to pay,’ the disqualification motion said.”
• “While the motion’s heavy redactions make murky some of the specific allegations against Ahn and Cho, it is clear Samsung wants to level a playing field it claims has been tilted by the use of its former lawyers’ deep understanding of the company’s inner workings.”
• “‘Ahn’s actions violate his obligations under Texas and national ethical standards that prohibit attorneys from participating in matters that are both adverse to a previous client and substantially related to matters in which they previously represented that client — standards that apply to Ahn’s conduct in this case regardless of whether he chooses to enter a formal appearance,” Samsung argued. “It would severely prejudice Samsung to be forced to litigate this case against its own former in-house IP attorneys, and Samsung therefore requests that the court disqualify them and order them to refrain from any input, decision-making, or advice related to the patent infringement claims in this litigation.'”
• “Samsung argued that Synergy can’t disguise Ahn’s alleged legal work for Synergy by giving him the title of CEO rather than general counsel or legal chief, and that Cho shouldn’t be permitted to sidestep ethical tenets either.”
• “According to court records, Synergy and Staton Techiya have agreed to put voluntary measures in place to screen Ahn and Cho from communications regarding the patent infringement claims being raised as part of the litigation.”

[h/t to Simon Chester for noting]: “Ernst & Young splits into separate audit and advisory businesses” —

• “Bosses at the ‘big four’ accountancy firm Ernst & Young have decided to move ahead with a radical break-up plan to separate its audit and advisory businesses, which will now be put to a vote by its 13,000 partners.”
• “Voting at EY, which has offices in more than 150 countries and employs 312,000 people globally, is expected to begin on a country-by-country basis towards the end of this year and conclude early next year.”
• “The industry has come under pressure for a major overhaul to tackle potential conflicts of interest to avoid future accounting scandals and business failures.”
• “Its leaders hope the audit and advisory arms can grow faster once they have been separated, as the break-up will remove conflicts of interest and operational challenges.”
• “EY’s chief executive, Carmine Di Sibio, has said a global split could bring in an extra $10bn a year for the consulting arm in advisory fees from big technology companies, as the firm is barred from selling advice to audit clients.”
• “The proposed split has received support from Sir Jon Thompson, the chief executive of the Financial Reporting Council, the UK accounting regulator.”

“Tether wants Roche Freedman off case over founder’s alleged conflict” —

• “Tether wants Roche Freedman removed from a case against the cryptocurrency company after allegations that one of the law firm’s founders abused investor lawsuits to aid a corporate client.”
• “On Thursday, Roche pulled out of other cases in California, including one against Binance U.S. over the collapse of stablecoin Terra USD.”
• “The move came after a website called Crypto Leaks published video clips purportedly showing Roche admitting to using investor lawsuits to target competitors of Ava Labs, a crypto company in which he and other partners at the firm had a financial stake.”
• “He said in a statement that the report contains falsehoods and that the video was illegally obtained by a person working for someone he sued and edited to remove context.”
• “Founded in 2019 by a group of attorneys who left Boies Schiller Flexner, Roche Freedman is known for suing big crypto issuers and exchanges on behalf of investors. In withdrawal notices, Roche said he is ‘no longer involved’ in the firm’s class action practice.”
• “Nonetheless, Tether asked U.S. District Judge Katherine Polk Failla on Thursday to remove Roche Freedman from the case against the company, saying that Roche’s withdrawal alone would not eliminate the conflict.”
• “‘Even if he is no longer counsel of record, he would still have access to discovery materials, would retain the ability to direct the conduct of other lawyers at his firm and would profit from any potential recovery in this lawsuit,’ the company said in a letter.”

“SEC Seeks Early Win In FOIA Fight Over Crypto Conflict Docs” —

• “The Securities and Exchange Commission asked a Virginia federal judge on Wednesday to give it an early win in its records dispute with a watchdog group over documents that might reveal former high-ranking SEC officials’ conflicts of interests associated with their oversight of cryptocurrency.”
• “The SEC argues that any withholding or redaction of documents was legally justified, and that its search process need not be perfect, just reasonably designed to find all relevant records.”
• “Empower’s records requests focused on three former SEC officials – chairman Jay Clayton, corporate finance head William Hinman and acting enforcement leader Marc Berger – and decisions they made with respect to certain cryptocurrencies.”
• “Clayton, for example, stated publicly in June 2018 while head of the SEC that Bitcoin was not a security, leading its value to skyrocket, according to the lawsuit. He later left the SEC and joined One River Asset Management, a cryptocurrency hedge fund that focuses on Bitcoin and Ether. The lawsuit raised similar concerns relating to Berger and Hinman, both of whom are now employed at Simpson Thacher & Bartlett LLP, which is part of an industry group that seeks to ‘drive the use’ of Ethereum blockchain technology.”
• “‘The SEC produced some records at the last minute ahead of its motion for summary judgement,’ Empower president and founder Jason Foster said in a statement. ‘Given the SEC’s pattern of bad faith negotiations on search terms and history of incomplete productions, we are skeptical that this production is fully responsive.'”
• “In one instance, the commission cites the exemption covering trade secrets and confidential commercial or financial information to justify its decision to withhold parts of documents that have the ‘non-public name of a Simpson Thacher client, Simpson Thacher’s billing practices, and confidential information about the business operations of AT&T submitted to the SEC,’ that were provided as part of a confidential SEC investigation.”
• “The commission also cites the exemption for deliberative process records, saying it redacted parts of records that showed internal discussions between the SEC’s Office of Ethics Counsel and the U.S. Office of Government Ethics about Hinman’s payments from a retirement plan. The agency said the records also showed internal talks between Hinman and OEC staff about whether he could attend a meeting of the London arm of a group of securities law firms.”

“Why Lowenstein Sandler Was Barred From Representing a Client” —

• “A New Jersey appeals court granted a motion to disqualify Lowenstein Sandler from representing one of the executors of the estate of a pharmaceuticals executive.”
• “The appeals court overturned a ruling denying a motion by Angela Krivulka to disqualify Lowenstein Sandler from representing an attorney from the firm, Michael Lerner, as co-executor of the estate of Krivulka’s late husband, Joseph. But the panel also affirmed a lower court ruling removing Krivulka from her post as co-executor.”
• “Krivulka sought to disqualify Lowenstein from administration of her late husband’s estate based on the firm’s representation of both her and her husband in their estate planning matters, beginning in 2009. And the appeals court, in an unsigned opinion, said her husband deliberately structured his estate, and concealed information from Krivulka, so that certain of his assets, as community property, would not pass to her.”
• “‘Thus, we are satisfied that Lowenstein’s obligations to Mrs. Krivulka as her estate planning attorney presented a clear conflict that should have precluded Lowenstein from representing Mrs. Krivulka and Lerner jointly as coexecutors,’ the appeals court said.”
• “Lowenstein, noting that the couple asked the firm to provide them joint representation, advised them about a potential conflict in that type of representation, and obtained waivers of the conflict. However, two weeks after signing the waiver, Angela Krivulka raised concerns about a conflict arising over Lerner’s relationship to Lowenstein. Later, in July 2020, Krivulka sued Lowenstein and Lerner for malpractice in federal court in New Jersey, claiming Lerner failed to provide her certain information about the estate.”
• “Joseph Krivulka’s will gave Lerner the authority to appoint a third co-executor, and he named Harriet Derman, a former state judge now with DiFrancesco Bateman Kunzman Davis Lehrer & Flaum in Warren to that post. Derman proceeded to file a complaint in Monmouth County Probate Court, seeking confirmation that two out of three of the co-executors could authorize use of estate assets to pay administrative expenses of the estate.”
• “The panel said Lerner’s interest in administering Joseph Krivulka’s estate consistent with his will ‘is clearly adverse to Mrs. Krivulka’s individual interest to obtaining the maximum financial benefit from the estate.'”

“El Paso County sex assault convictions overturned due to lawyer’s offenses” —

• “A defense lawyer had an actual conflict of interest when he represented an El Paso County defendant at the same time the lawyer’s own drunk driving cases were pending before the same prosecutor’s office, Colorado’s second-highest court determined on Thursday.”
• “Because the U.S. Constitution guarantees the right to conflict-free legal representation and District Court Judge David A. Gilbert failed to ensure the defendant knowingly gave up that right, a three-judge panel for the Court of Appeals reversed the convictions of Matthew Rodolfo Vansant Lopez.”
• “‘Here, the court only asked if Lopez was aware of ‘current circumstances,’ and made no mention of the fact that defense counsel had been criminally charged,’ wrote former Supreme Court Justice Alex J. Martinez, who sat on the panel at the chief justice’s assignment. ‘Thus, the court’s inquiry was procedurally deficient.'”
• “Unusually, at the same time he was representing Lopez, prominent defense attorney Dennis Hartley had cases pending against himself in El Paso County. Court records show a lengthy series of charges for driving under the influence, driving without a license and other traffic infractions. Most recently, Hartley pleaded not guilty in March of this year to five other driving-related charges.”
• “The Court of Appeals previously recognized that when a defendant and his lawyer are both being prosecuted by the same district attorney’s office, there is a danger prosecutors ‘might take umbrage at a vigorous defense’ from the attorney and treat them more harshly in their own criminal case. Therefore, a conflict of interest is not hypothetical, but real.”

“Coaching an Attorney’s Kid Doesn’t Automatically Disqualify Judge, Ethics Panel Says” —

• “Judges who coach should watch for curveball facts that might lead someone to reasonably wonder if they can be impartial in a case involving an attorney whose child is a player on their team, the Supreme Court Committee on Judicial Ethics Opinions wrote.”
• “The Supreme Court Committee on Judicial Ethics Opinions warned in a formal opinion, however, that judges who coach should disclose on the record ‘reasonably relevant’ information about why they did not step away from such a case.”
• “San Joaquin County Superior Court Judge Barbara Kronland and Bryan Borys, director of research and data management at the Los Angeles County Superior Court, both raised concerns about the draft opinion’s use of the phrase ‘discretionary disqualification.’ The formal opinion includes a footnote discussing the differences between a judge stepping away from a case for ‘mandatory’ or ‘discretionary’ reasons.”
• “As long as a judge-coach does not have a shared financial interest with the athlete’s parent, an insider’s knowledge of facts in a case or some other obviously disqualifying trigger, he or she can hear the parent-attorneys case, the formal opinion said. But the judge-coach must consider three other questions: Does the judge believe disqualification is in the interest of justice? Does the judge doubt his or her ability to be impartial? Would the average person doubt the judge’s impartiality?”
• “The 12-page opinion does not say who or what prompted a review of the issue. The committee posted a draft version of the opinion in June and received just three responses.”
• “‘THIS IS ABSOLUTELY RIDICULOUS TO BE SPENDING TIME DEALING WITH THIS ALLEGED ISSUE!!!!!!’ Los Angeles County Superior Court Judge Kelvin Filer wrote. ‘as a judge, let’s just NOT get involved in our children’s activities?'”

“The ‘Conflict of Interest’ Defense to Shareholder Derivative Standing” —

• “In shareholder derivative litigation, defendants occasionally argue that the plaintiff – who ostensibly sues on behalf of the company and its owners in a fiduciary capacity – has some form of conflict of interest with the company or its remaining owners, so the court should disqualify the plaintiff from serving as plaintiff.”
• “The classic, most simple conflict of interest is where the plaintiff herself has engaged in some form of wrongdoing against the company, for which the entity or its owners have lodged (or may lodge) counterclaims.”
• “The theory is that if the plaintiff is herself a bad actor, she cannot be expected to be an adequate steward and representative of the legal rights and interests of the entity she herself has harmed.”
• “Other disqualification cases in New York followed Steinberg. A fairly comprehensive discussion of the state of New York law (up to that time) of shareholder derivative plaintiff conflicts of interest was found in Pokoik v Norsel Realties, 55 Misc 3d 1208[A] [Sup Ct, NY County 2017]), in which former Manhattan Commercial Division (now Appellate Division – First Department) Justice Jeffrey K. Oing ruled that there was a ‘prototypical conflict of interest’ requiring disqualification because the plaintiffs purported to sue on behalf of an entity’s partners while at the same time suing them as defendants.”
• “Similarly, in Delaware, there is a line of case law emanating from Katz v Plant Indus., Inc. (an unpublished 1981 Delaware Chancery Court decision) and Youngman v Tahmoush, 457 A2d 376 [Del Ch 1983]), both holding that Delaware’s class action statute, Court of Chancery Rule 23.1, applies to shareholder derivative suits, and that Delaware courts should under Rule 23 examine the plaintiff’s adequacy as a derivative plaintiff (both at the pre-answer dismissal stage and at the final approval of any derivative settlement), including whether any conflicts or ‘economic antagonism’ between the plaintiff, the entity, or the other owners.”
• “Youngman announced the Delaware standard that ‘purely hypothetical, potential or remote conflicts’ are not enough, and that to prove the need to disqualify a derivative plaintiff, ‘a defendant must show that a serious conflict of interest exists, by virtue of one factor or a combination of factors, and that the plaintiff cannot be expected to act in the interests of others because doing so would harm his other interests.'”
• “The Youngman standard has worked its way into New York jurisprudence, including a decision last fall from Manhattan Commercial Division Justice Joel M. Cohen, TNJ Holdings, Inc v Rubenstein (Decision and Order [Sup Ct, NY County Sept. 13, 2021]), in which the Court, applying Delaware law, dismissed a shareholder derivative suit for lack of standing under CPLR 3211 (a) (3) because the plaintiff brought a mix of direct and derivative claims, the value of the direct claims eclipsing the derivative claims.”
• “In the past month and a half, a pair of decisions in both New York and Delaware have thrown cold water on the “conflict of interest” defense to shareholder derivative standing.”
• [See the complete article for more detail on]:
  • “The first was Larsen v Larsen (2022 NY Slip Op 32415(U) [Sup Ct, Kings County July 18, 2022]“
  • “Less than a month after Larsen, the Delaware Supreme Court, in Griffith v Stein (___A3d ___ [Del Aug. 16, 2022]“

“Trump’s Lawyers May Become Witnesses or Targets in Documents Investigation” —

• “Two lawyers for former President Donald J. Trump are likely to become witnesses or targets in the investigation into how he hoarded documents marked as classified at his Florida estate — and secretly held onto some even after they claimed all sensitive materials had been returned, legal specialists said.”
• “During the visit, Mr. Trump’s representatives turned over 38 documents with classified markings and indicated that all the records had been kept in a storage room, that no other records were stored elsewhere and that all available boxes had been searched, prosecutors said.”
• “According to the statement, Ms. Bobb signed on behalf of Mr. Trump that ‘based upon the information that has been provided to me,’ all documents responsive to the subpoena were being returned after a ‘diligent’ search.”
• “The sequence of events raises the question of whether the two lawyers knowingly misled the Justice Department. If so, they could be charged with crimes like obstruction and making false statements. But they could defend themselves by saying they in turn had been lied to by someone else and so did not know the statements were misleading.”
• “It is not clear whom Ms. Bobb was referring to — Mr. Corcoran, Mr. Trump, both, or someone else — when she qualified her statement with the phrase “based upon the information that has been provided to me.” Investigators may seek to ask her that. If Ms. Bobb were to single out Mr. Corcoran, the focus would shift to him.”
• “Notably, if either of them were to say that Mr. Trump had assured them that no other documents marked as classified remained at Mar-a-Lago, that would create a conflict of interest, specialists said: Mr. Trump’s defense would likely be to deny he had said that. If such a clash arises, it is doubtful they could continue representing him as a matter of legal ethics.”

In the United States: “Lawyers Fight Bill Forcing Them to Report Suspicious Client Acts” —

• “Lawyers are pushing back against anti-money laundering legislation that would require them to report suspicious transactions by clients, as banks already must do.”
• “Opponents worry the plan would disrupt attorney-client privilege and empower the Treasury Department to conduct random audits. ‘The audit power really is quite broad and unconstrained,’ Covington & Burling partner Nikhil Gore said in an interview.”
• “The legislation, prompted in part by Pandora Papers disclosures last year, is aimed at shutting down what supporters see as loopholes in the Bank Secrecy Act that let oligarchs such as those allied with Vladimir Putin take advantage of US entities to launder money.”
• “The American Bar Association said the legislation would regulate services law firms provide, such as trust formation and company registration, and interfere with attorney-client relationships.”

In Australia: “90% of lawyers concerned with money laundering” —

• “More Australian lawyers are concerned about money laundering than ever; new research has revealed.”
• “A new report conducted by anti-money laundering (AML) and counter-terrorism financing (CTF) platform First AML has shown that 90 per cent of lawyers and accountants are more concerned about money laundering since discussions around Tranche 2 — the name of the part of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 that applies to legal professionals, accountants, real estate agents and trust and company service providers.”
• “According to the research, the two main reasons for this are that 79 per cent of Australian companies are increasing their focus on customer transparency and ethical customer onboarding, with 70 per cent preparing for expected Tranche 2 implementation. Other reasons include reducing siloed documentation (64 per cent), increased risk of fines (61 per cent) and external risks (47 per cent).”
• “In addition, a whopping 95 per cent of respondents admitted that a money laundering incident would impact their company’s ability to attract new clients and retain existing ones and 89 per cent said they are proactively putting more rigid AML policies in place.”
• “Compliance steps being put in place include technology, outsourcing services such as a policy consultant or external training and hiring AML experts.”

“Baker McKenzie DQ’d From Russian Bank Case” —

• “A Georgia federal judge has disqualified Baker McKenzie from representing a Russian bank in its loan fraud fight against an agricultural supply business that the law firm had advised on restructuring, affirming a magistrate judge’s decision in July.”
• “Discovery for the bank fraud case will be placed on hold until VUZ-Bank JSC finds new counsel, as Baker McKenzie has a conflict of interest with the defendant in the case, Dubai, United Arab Emirates-based Hakan Agro DMCC, U.S. District Judge Victoria Marie Calvert found on Wednesday.”
• “The bank filed the suit in Atlanta to get discovery from Anderson in its bid to bolster criminal proceedings against Hakan Agro and affiliates in Dubai. But its chosen law firm Baker McKenzie had met with Hakan Agro’s agent in June 2021 to discuss the company’s insolvency and possible liquidation following Bahceci’s death in May 2020.”
• “The firm received ‘at least some confidential information’ from the agent during the consultation, Judge Calvert said, at a time when its client VUZ-Bank had interests ‘materially adverse’ to Hakan Agro.”
• “‘It is also undisputed that neither VUZ Bank nor Hakan Agro gave informed consent in writing to the conflict, particularly given that Baker McKenzie lawyers had represented that there were no conflicts with the representation of Hakan Agro,’ the judge said.”
• “Baker McKenzie said it had not officially represented Hakan Agro and had not shared or misused any of the company’s information.”
• “The firm had represented VUZ against the Hakan entities since September 2020, case filings show. Baker McKenzie provided insolvency advice to Hakan Agro several months later, claiming that it had no conflicts. However, by the time the firm was giving advice to Hakan Agro on its liquidation, it had already won judgments against Hakan Holdings on that very issue.”

“Top Ohio Court Rejects Dentons Appeal Testing Big Law Model” —

• “Dentons on Tuesday lost a bid to have the Ohio Supreme Court review a $32.3 million malpractice verdict in a case with implications for law firms that use a Swiss verein model.”
• “The decision means Dentons remains on the hook for a malpractice award given to the plaintiff in the case, RevoLaze Inc., an Ohio company that uses lasers for denim products.”
• “RevoLaze argued that Dentons shouldn’t have taken on the company’s patent case in 2015 because one of the firm’s Swiss verein affiliates in Canada had represented Gap Inc., which RevoLaze sued for patent infringement.”
• “The verein structure lets law operations affiliate to market services under one brand while avoiding a full-on merger. Affiliates limit liability between offices and keep separate on matters such as profits, pay and taxes.”
• “The RevoLaze case tests whether firms using the Swiss verein model must do conflicts checks with all affiliates in their networks before deciding to take on a client.”
• “Verein firms risk losing business if they’re required to disclose conflicts related to affiliates’ work. Existing clients may balk at other representations, and potential clients could decide to go elsewhere.”
• “At least six major U.S. law firms adopted the Swiss verein model, including DLA Piper, Squire Patton Boggs, Baker McKenzie, Norton Rose Fulbright and Littler Mendelson. Clients of the six firms may raise new questions about the process to ferret out possible conflicts, said Cassandra Burke Robertson, director of the center for professional ethics at Case Western Reserve University School of Law. The clients may find new firms if they don’t like the answers, she said.”
• “‘What’s more important is that these law firms be more proactive with their clients’ about conflicts, Robertson said.”
• “Dentons said in a statement that the case isn’t about its structure but whether a firm can rely on a client’s consent regarding a future conflict of interest.”

“Boies Schiller tripped up in apparent conflict in FirstEnergy derivative suit” —

• “The weirdest shareholder litigation saga I’ve ever encountered has snagged Boies Schiller Flexner in what appears to be a conflicts kerfuffle.”
• “On July 26, David Boies filed an application before U.S. District Judge John Adams of Akron, asking Adams to appoint Boies Schiller to represent shareholders pursuing derivative claims against directors of the Ohio utility FirstEnergy Corp, which has admitted to paying millions of dollars in bribes to Ohio lawmakers in exchange for favorable legislation. In the application, Boies emphasized his firm’s stellar record in complex litigation and pledged that Boies Schiller would expend whatever time and money is needed to hold the company’s officers and board members to account.”
• “What Boies did not mention in the July 26 filing with Adams is that Boies Schiller is actually defending a former FirstEnergy vice president, Eileen Mikkelsen, in parallel derivative litigation before a different Ohio federal judge, U.S. District Judge Algenon Marbley of Columbus.”
• “Boies Schiller, in other words, sought appointment to launch a big new discovery push for shareholders in a case it had already settled on behalf of a defendant.”
• “That is, um, not something you see every day.”
• “Adams said in the Aug. 15 order that one applicant had withdrawn its bid ‘following the discovery of a possible conflict of interest.’ He did not name the possibly conflicted firm, but it was presumably Boies Schiller.”
• “It would have been interesting to see how Bernstein Litowitz, Saxena and Cohen Milstein would have reacted if Boies had been appointed. As veterans of countless lead counsel battles, shareholder firms like these are great at impugning competitors. I can only imagine the sputtering indignation that would have greeted Boies’ appointment as shareholder counsel after the firm signed a global settlement releasing the very claims being investigated.”

“Walmart Gets Plaintiff’s Lawyer Disqualified in Negligence Suit” —

• “Walmart Inc. convinced a federal judge in Wisconsin to disqualify the law firm of a plaintiff suing over a slip and fall at a Walmart store, due to a conflict of interest.”
• “Jennifer Gnaciski sued Walmart and subsidiaries in January, saying their negligence caused the plaintiff to slip and fall at a store in Fond du Lac, Wisconsin. The suit was removed to federal court, and the defendants moved to disqualify Eric L. Andrews of Dunk Law Firm due to his previous employment with MHW Law Group LLP, which represents Walmart in that action.”
• “Judge Pamela Pepper of the US District Court for the Eastern District of Wisconsin granted that disqualification bid on Tuesday, noting that Andrews had been employed with MWH Law Group as recently as December 2021.”
• “The court highlighted the fact that Andrews regularly represented Walmart in slip-and-fall cases, many of them with similar fact patterns as this one.”
• “‘There is a substantial risk that Andrews obtained information about the defendants’ confidential litigation strategies obtained through his representation of the defendants that would materially advance the plaintiff’s position in this case,’ Pepper wrote in the court’s opinion. ‘He has had access to the defendants’ settlement pay ranges, payment thresholds, internal interests and motives and nonpublic information about store operations.'”

“District Court Must Reconsider Legal Mal Suit Against Cozen O’Connor Over $20M Deal, Third Circuit Says” —

• “A Pennsylvania appeals court improperly dismissed a legal malpractice suit against Cozen O’Connor, the U.S. Court of Appeals for the Third Circuit has ruled in a precedential decision that sheds new light on standing principles in shareholder litigation.”
• “Wading into an open question of law, the appellate court ruled Wednesday in Potter v. Cozen O’Connor that the U.S. District Court for the Eastern District of Pennsylvania improperly analyzed and dismissed the case on jurisdictional grounds, when in fact it should have viewed the defendants’ challenge as a merits-related standing issue.”
• “In remanding the case for further review, Judge Cheryl Ann Krause, who wrote the court’s 18-page opinion, drew a distinction between ‘Article III standing and ‘prudential’ standing for shareholders.”
• “The dispute stems from allegations that an alleged conflict of interest by Cozen O’Connor attorneys during a $20 million deal led to significant losses for shareholders of the company that was sold. Specifically, the plaintiff Adam Potter alleged that attorneys Anne Blume and Anne Madonia were involved in the sale, and that, unbeknownst to him and the only other shareholder, Moxie HC LLC, Cozen O’Connor had represented the company called The Institutes LLC, which ended up making the purchase.”
• “Potter further alleged that, when he asked Blume directly if there was a conflict, the lawyer ‘brushed aside the question and continued to provide legal advice.'”
• “However, after the close, the shareholders allegedly learned their company had been sold substantially below market value, and that confidential information Blume learned while working with Potter had been used to aid the purchaser.”
• “Focusing on that discrepancy, Cozen O’Connor sought to dismiss the case, arguing that under the “shareholder standing rule” the shareholders did not have the legal right to bring the corporate entity’s claims in their own names. Potter, however, countered, arguing that Cozen O’Connor was attacking their Article II standing to be in federal court.”
• “Krause said the district court took elements of both arguments, and ultimately determined that, because only the corporate entity suffered the harm, the shareholders lacked Article III standing. On appeal, Krause, who was joined by Judges Kent Jordan and David Porter, looked to whether the shareholder standing rule can actually deprive a party of Article III jurisdiction.”