Bressler Risk Blog

“Bankruptcy Trustee Moves for Debevoise Disqualification in Delaware” —

• “The liquidating trustee in a bankruptcy case has moved to disqualify Debevoise & Plimpton attorneys from representing a private equity firm, claiming the law firm previously worked on the other side of the deal that spurred the bankruptcy.”
• “Debevoise represents Clayton Dubilier & Rice, which personal care wholesaler High Ridge Brands claims pushed its investors to purchase $250 million in High Ridge bonds despite knowing the now-bankrupt company was headed downhill.”
• “Alan Halperin, the liquidation trustee for High Ridge who is represented by Grant & Eisenhofer’s Gordon Novod, moved Sept. 30 to disqualify Debevoise, alleging at least nine Debevoise attorneys worked with High Ridge on the same 2017 transaction that ultimately resulted in the suit that now alleges fraud, fraudulent transfer, violation of multiple securities laws and a breach of fiduciary duty.”
• “Having represented both sides in the case filed under seal in December 2021, Halperin argued, keeping Debevoise on the winddown in Delaware bankruptcy court presents a clear conflict of interest. Halperin is asking U.S. Bankruptcy Judge Brendan L. Shannon to bar Debevoise from further representing Clayton Dubilier or switching to represent the other side.”

“Opioid MDL’s Verdict Watchdog Deserves DQ, Pharmacies Say” —

• “The watchdog overseeing implementation of a verdict against CVS Pharmacy, Walgreens and Walmart in multidistrict opioid litigation has a conflict of interest because he’s already a special master tasked with impartial dispute resolution in the MDL, the drugstore chains said on Wednesday.”
• “According to the motion, [Special Master] Cohen’s role as administrator will give him ‘broad access’ to the companies’ files, employees and internal systems. That sort of access “is inappropriate for a special master to have — especially one like special master Cohen” who “works hand in hand” with Judge Polster and decides important matters involving discovery, jury instructions and motions for summary judgment, the motion asserts.”
• “‘Most fundamentally, those with personal knowledge of matters in a case are disqualified from being neutral judicial arbiters,’ the nation’s three largest pharmacy businesses argue Wednesday, citing the official Code of Conduct for United States Judges.”
• “Whereas a special master is expected to be ‘a neutral adjunct’ who assists Judge Polster in an evenhanded manner, an administrator is obligated to enforce Judge Polster’s verdict benefiting Lake and Trumbull counties in northeastern Ohio, and Cohen’s role as administrator ‘cannot be reconciled with his role as special master,’ the motion states.”
• “CVS, Walgreens and Walmart Inc. characterize the purported conflict of interest as a form of irreparable harm, which is one of several factors Judge Polster would weigh when considering whether to stay the appointment. The administrator’s oversight powers implicate another type of harm because they will allow ‘intrusive and sweeping access to highly sensitive and private patient health information,’ the pharmacies say.”
• “After a jury last year found the pharmacies liable for an oversupply of opioid painkillers, Judge Polster held a bench trial to determine remedies. He ultimately issued a verdict that ordered the pharmacies to pay $650 million and adopt various business practices aimed at ensuring safe sales of controlled substances.”

Quite excited to share that the Law Firm Risk Staffing Compensation Survey report is now fresh off the presses.

The 14-page report is now on its way to the inboxes of the 80+ participants (who contributed data on 375+ individual risk staff positions).

I’d like to thank everyone who participated. I hope the results and analysis provide fresh insight and support to those looking for greater clarity on industry compensation practices.

Today, there is plenty of anecdotal evidence suggesting a “tightening” of the risk staffing market. (Witnessed a bit on the blog, in the form of more sponsored risk job posts.) As I’ve said to several colleagues — it’s not just your law firm facing these issues and challenges.

We’re witnessing increasing “lateral movement” of risk staff, attracted to positions and opportunity at other firms — sometimes via headhunter recruitment. Similarly, we’re seeing firms facing new challenges in attracting experienced staff, particularly in today’s more “remote friendly” working environment. And we’re watching firms explore options
and approaches to develop, retain, and create compelling career paths for existing staff.

As more than one risk leader shared with me, several of you are looking to this data to benchmark your existing team’s compensation, inform potential adjustments, and support future recruitment efforts. I hope the report doesn’t disappoint.

I’m quite interested in community response and feedback — particularly if there’s appetite and interest in a 2023 follow up exercise.

Finally, if you did not participate in the survey, we’re making copies available for a fee. Please get in touch for details.

“Lawyers Lose Out on Millions in Twitter-Musk Legal Fees” —

• “Not everyone’s a winner in Elon Musk’s decision to go through with the Twitter Inc. deal.”
• “More than 70 lawyers were admitted to Delaware Chancery Court to represent various parties in the case — about 30 for Twitter, most of them from Wachtell Lipton Rosen & Katz, the most profitable firm in the country, and about 20 for Musk from firms including Quinn Emanuel Urquhart & Sullivan LLP and Skadden Arps Slate Meagher & Flom LLP.”
• “Since Musk is involved in a myriad of businesses, he’s created some conflict-of-interest problems among lawyers over the years.”
• “In the Twitter fight, both Musk’s main Delaware lawyers from Skadden Arps and Twitter’s lead firm, Wachtell, had to hire so-called conflict counsel to put out subpoenas to parties they’d represented in the past, according to court filings.”
  “For the Musk side, conflict counsel was the law firm of Chipman Brown Cicero & Cole LLP. For Twitter it was the Delaware office of Ballard Spahr LLP and the local law firm of Kobre & Kim LLP.”

“Fulton County asks judge to disqualify lawyers for 11 alternative electors” —

• “Fulton County prosecutors examining efforts to overturn the 2020 election in Georgia are trying to disqualify a pair of lawyers representing 11 alternative electors in the special grand jury’s crosshairs.”
• “In a partially redacted motion to disqualify attorneys Holly Pierson and Kimberly Bourroughs Debrow, Fulton County argued their representation was ‘rife with serious ethical problems.’ Many details of the rationale for the petition were redacted, but the lawyers appear to have ties to the state GOP. “
• “‘Should Pierson and Debrow be allowed to continue in their representation of even just one of the 11, there is a serious possibility of future ethical problems concerning confidentiality of information obtained in the course of their representation thus far,’ prosecutors wrote in a 20-page motion filed on Monday.”
• “Fulton County prosecutors laid out 12 ‘facts that are material to demonstrating a conflict of interest’ — all but two of which were redacted. The points that were left visible noted that one of the 11 alternative electors, David Shafer, serves as the head of the state GOP and that another, Shawn Still, served as the secretary of the Georgia GOP.”
• “While the filing redacted key parts of its rationale, recent reporting from Yahoo indicated both Pierson and Debrow have done work for the state Republican Party. Campaign finance filings showed the state GOP paid the two lawyers $35,419 last July, per the report.”
• “Prosecutors for Fulton County are imploring the court to bar the two lawyers ‘from any further participation in this matter.’ This marks a flip from August, when Pierson and Debrow prodded a court to disqualify Fulton County District Attorney Fani Willis from the investigation due to her attendance at a fundraiser for a political rival of state Sen. Burt Jones, one of the ‘fake electors’ being targeted.”
• “Allies of Trump sought to use the existence of the alternative electors to sow confusion about the 2020 election and justify calls for Vice President Mike Pence to decertify the election.”

Fascinating comparison and contrast of ABA model vs. New Jersey lateral screening rules. [In short, to misquote the play, everything is new legal in New Jersey]: “Follow the (Right) Rules on Lateral Hire Conflicts” —

• “A recent Third Circuit precedential opinion discusses the detailed requirements under the ABA’s Model Rules of Professional Conduct. But New Jersey’s RPCs differ in several important respects. Read with caution.”
• “For better or worse, lawyers switch firms with increasing frequency and, when they do, they carry with them various conflicts of interest. In particular, under the New Jersey Rules of Professional Conduct, a lawyer may not represent Client A at the lawyer’s new firm if (1) the lawyer’s prior firm had represented Client B in the same or a substantially related matter, and (2) Client A’s interests are materially adverse to Client B’s interests. (NJ RPC 1.9). That prohibition, moreover, applies to the entire new firm unless the lawyer is ‘screened.’ (NJ RPC 1.10)”
• “A recent Third Circuit precedential opinion (In re Maxus Energy Corp.) discusses the detailed requirements of that screening process under the ABA’s Model Rules of Professional Conduct (as adopted by the U.S. District Court in Delaware). But New Jersey’s RPCs differ from the ABA’s model rules in several important respects. The Third Circuit’s opinion, therefore, should be read with caution.”
• “The model rules and the New Jersey rules define the screening process similarly. Both require the ‘isolation’ of the lawyer ‘from any participation’ in the matter, through procedures that are ‘reasonably adequate under the circumstances to protect information that the isolated lawyer is obligated to protect.’ (Model Rule 1.0(k), NJ RPC 1.0(l)). But under the New Jersey rule, the screening procedures must be in writing (NJ RPC 1.10(f) and NJ RPC 1.0(l)), whereas the model rule has no such requirement. Another difference is that the New Jersey rule obligates ‘all attorneys and other personnel in the law firm’ to screen the lawyer, clearly requiring the firm to include both lawyers and non-lawyers in the screening process, whereas the model rule requires only that ‘the disqualified lawyer is timely screened.'”
• “The New Jersey rules specify that screening is not an option when the lawyer had ‘primary’ responsibility for the matter at the prior firm. (NJ RPC 1.10(c)(1)). The model rules do not include that limitation. Thus, in jurisdictions following the model rule (such as the District of Delaware), the ‘primary’ lawyer can be screened when they switch firms, but in New Jersey (and in the District of New Jersey, which follows the New Jersey rules), the ‘primary’ lawyer cannot be screened. When the primary lawyer cannot be screened, the law firm must either obtain a written conflict waiver or withdraw from the case.”

“DraftKings Loses Bid To DQ Firm From Patent Suit” —

• “A New Jersey federal judge Tuesday rejected DraftKings’ request to kick Shore Chan LLP off a patent infringement lawsuit it’s fighting due to the firm’s lawyers being inventors, saying third-party competitors do not count as a third person under rules of professional conduct concerning conflicts of interest.”
• ” AG 18 LLC – a gaming company that does business as Arrow Gaming – accuses DraftKings of violating five patents. DraftKings motioned to disqualify Shore Chan from the case, saying Shore and Alfonso Chan are the inventors of issued patents and pending patent applications related to location-based restrictions on networked gaming over mobile devices, according to court documents. DraftKings raised concerns about Shore Chan accessing its confidential information during the discovery process.”
• “In the time since DraftKings filed the motion in March, Chan left Shore Chan to join McKool Smith.”
• “In its motion, DraftKings pointed to rules of professional conduct that preclude lawyers from representing clients when the representation would be “materially limited” by their other obligations to a third person, but U.S. Magistrate Judge Jessica Allen said DraftKings misinterpreted ‘third person’ to include third-party competitors.”
• “‘DraftKings instead asks this Court to broadly interpret RPC 1.7(a) to impose, on litigating lawyers, an ethical obligation to their adversaries and/or purported competitors to avoid creating a risk of misusing confidential information received in discovery,’ Allen states in her order. ‘Such an expansive interpretation of Rule 1.7(a) is inconsistent with the primary concern of the rule, which is to protect a lawyer’s ethical obligations to his or her clients and those to which counsel owes a fiduciary duty.'”

“Texas Attorney Prevails in Appeal Over Withdrawal Request” —

• “A Texas lawyer who says he would face a conflict of interest if he is compelled to continue representing a client successfully argued that his withdrawal bid has remained pending for an unreasonable period of time.”
• “Robinson attempted to withdraw as Walker’s counsel in the trial court in October 2021, saying there were irreconcilable differences between the two. In a later filing, Robinson said conflicts between he and his client prevent continued representation.”
• “In June, Robinson filed a petition for writ of mandamus to a Texas court of appeal regarding the trial court’s failure to rule on the bid for withdrawal. He said the lower court failed to act for an unreasonable amount of time, and that he needed to withdraw to properly defend himself from allegations brought against him by his client.”
• “The Court of Appeals of Texas, Dallas division, sided with Robinson Sept. 23, saying there are no ‘special docket conditions or other matters that might have prevented the trial judge from ruling on the motion to withdraw.'”
• “The appeals court refused to adopt a bright-line rule on the time to act on a withdrawal request, but said that, based on the facts, 10 months from filing the motion to withdraw and six months from the trial court’s hearing of the motion without ruling is ‘an unreasonable time warranting mandamus relief.'”
• “Without ruling on the merits of the motion, the appeals court said the trial court must make a ruling one way or the other. The appeals court said it is confident the lower judge will comply.”

“As War Rages on, Cyber Insurers’ ‘War Exclusion Clauses’ Face Reckoning” —

• “Russia’s invasion of Ukraine is a reminder that modern conflicts can spur cyberthreats well beyond a war’s frontlines.”
• “As businesses face more cyberthreats than ever before, many are seeing higher premiums. Meanwhile, insurance companies are looking for ways to skirt coverage obligations that end up proving far too expensive. In fact, some providers are losing profit at a high enough rate to leave the marketplace altogether, adding even more pressure on the remaining players.”
• “To be sure, cybersecurity experts don’t see the tension between the two sides easing any time soon. This environment is likely to spur more lawsuits against insurance providers denying coverage. One central focus of litigation is likely to be the ‘War Exclusion Clause,’ which exempts the insurer from covering damages from war-like acts between sovereign entities.”
• “However, businesses are succeeding in separating acts of war from cyberattacks, forcing insurance companies to pay high amounts in coverage despite their war exclusion clauses. Take, for example, pharmaceutical company Merck’s lawsuit against insurer Aetna, or cookie manufacturer Mondelez’s dispute with insurer Zurich, both regarding the NotPetya ransomware attack.”
• “Cyber insurance companies aren’t backing down either. The largest global insurance marketplace, Lloyd’s of London, issued a mandate last month that all cyber insurers selling through its platform must rewrite their policies to specify that they will stop selling insurance for cyberattacks sanctioned by government entities—essentially expanding the war exclusion to avoid a Merck-like win that hinged on the ambiguity of whether the NotPetya attack was a ‘traditional form of warfare,’ as per the language in the war exclusion clause.”
• “Additionally, for law firms and businesses trying to find the right coverage, the situation is getting more complex, and Simek and Nelson stress the use of an insurance broker to help consumers navigate the expensive market. ‘Because even with the cost of cyber insurance, they can’t drop their coverage, because the damage from a breach would be catastrophic,’ Nelson said. ‘And again, it is going to be very hard to prove if a particular attack is coming from a particular place or what the attacker’s motivation was even with litigation. So, the industry is in considerable turmoil at this point.'”

“Clark Partington Facing DQ Bid In Fla. Whistleblower Case” —

• “A former client of Clark Partington Hart Larry Bond & Stackhouse PA has asked a federal judge to disqualify the firm from representing a commercial pilot in a whistleblower case against him over his alleged illegal monopoly control of a northwest Florida airport.”
• “Clark Partington currently represents commercial pilot Robert Smith in a False Claims Act suit accusing businessman Jay Odom of using a strawman scheme to take full control of the Destin Executive Airport in violation of laws prohibiting monopolies at airports that receive state and federal funds.”
• “But Odom argued in a brief Wednesday that Clark Partington’s work on his behalf in 2011 in the negotiation of a loan and the creation of entities to hold assets at issue in Smith’s suit meant the firm should be barred from handling the case.”
• “‘Given the law firm’s prior role as counsel in facilitating one of the schemes cited in the amended complaint as evidence of the fraud alleged as to the Destin airport, disqualification is proper,’ Odom said.”
• “The request to disqualify Clark Patington in the federal False Claim Acts suit notes that a judge in a related state court case in the First Judicial Circuit Court of Okaloosa County granted a motion to disqualify on Sept. 23 based on the same arguments about the firm’s prior representation of Odom and his companies.”
• “In reaching that decision, Circuit Judge John T. Brown found that Odom and Clark Partington had an attorney-client relationship and that the law firm’s prior work for Odom was ‘substantially related’ to Smith’s claims of wrongdoing in the current case.”
• “Smith, representing the federal government and the state of Florida as relator, claims Odom used a group of strawman LLCs he controls to take control of both fixed-base operators at the airport in 2012, and that Okaloosa County officials have been aware of the situation since at least 2014 while accepting millions in state and federal grants.”

Clearly from a source with an agenda. And they do not appear to cite examples of actual conflict or adversity, focusing on appearances. Still, interesting reading in the context of PR and positional risk: “WNN Exclusive: SEC FOIA Documents Reveal Big Law Defense Firms are Confidentially Representing Dodd-Frank Whistleblowers” —

• “Documents obtained under the Freedom of Information Act (FOIA) from the U.S. Securities and Exchange Commission (SEC) reveal that large “Big Law” corporate law firms are confidentially or quietly representing whistleblowers in whistleblower reward cases filed under the highly successful Dodd-Frank Act.”
• “‘The revelation that the most notorious anti-whistleblower law firms are quietly representing whistleblowers in SEC enforcement cases came as a shock,’said Stephen M. Kohn. Kohn is a whistleblower attorney who filed the FOIA request on behalf of Whistleblower Network News (WNN) and the National Whistleblower Center (NWC). ‘The potential for massive conflicts of interest is obvious,” Kohn said, “as these firms base their practices on defending corporations accused by whistleblowers of engaging in bribery, money laundering, and securities frauds.'”
• “WNN reviewed the 1034 pages of FOIA documents released by the SEC and carefully compiled a list of the 64 law firms that successfully obtained a reward on behalf of a whistleblower. Among those firms were six that primarily represent corporations and individuals accused of corporate crimes.”
• “‘Whistleblowers need to know that corporate firms that make millions of dollars by defending corporate criminals are also trying to represent them. Whistleblowers’ interests may conflict with big law’s major client base. It appears as if some of the defense firms have tried to take advantage of Dodd-Frank’s confidentiality rules in order to hide their representation of whistleblowers from their corporate clients. I hope this is not the case,’ Nelson said.”
• “The number of defense firms now representing whistleblowers may be significantly larger than the six firms identified in the SEC FOIA documents. The vast majority of Dodd-Frank cases are still under review by the SEC, and the corporate defense firms involved in those cases were not revealed in the FOIA responses.”
• “All of the cases handled by the corporate defense firms resulted in significant sanctions leveled against companies or individuals who violated the Securities and Exchange Act. The Dodd-Frank Act only permits a reward to be paid if sanctions ordered to be paid exceed $1 million.”
• “‘It is hard to understand how a corporate defense firm can have ‘undivided loyalty’ to whistleblowers who disclose large corporate frauds. When a whistleblower files a case, it is often impossible to determine how far the frauds may go and what companies may be involved in a conspiracy. Whistleblowers need lawyers who do not fear following the facts wherever they may lead,’ Kohn said.”

“Judicial Ethics Opinion 22-29” —

• “The Advisory Committee on Judicial Ethics responds to written inquiries from New York state’s approximately 3,600 judges and justices, as well as hundreds of judicial hearing officers, support magistrates, court attorney-referees, and judicial candidates (both judges and non-judges seeking election to judicial office)”
• “A full-time judge may preside over cases involving an insurance company for which the judge had previously served as in-house counsel once two years have elapsed since the end of the relationship or the final payment of any fees to the judge, whichever is later, provided the judge had no involvement in the case before them as counsel.”
• “The inquiring full-time judge, prior to taking the bench, worked for a law firm that served exclusively as in-house counsel to an insurance company. Approximately three years ago, the judge left that law firm and ceased handling any cases involving that insurance company. All business and financial connections between the judge and the law firm terminated at that time, and the judge has no retirement/pension plan with them. The judge asks if they may preside in cases involving the insurance company.”
• “Applying these principles here, it appears that the attorney-client relationship between the inquiring judge and the insurance company completely ended approximately three years ago, as did the business/financial relationship between the judge and the law firm that served as in-house counsel to the insurance company. Accordingly, since more than two years have elapsed since the end of the judge’s attorney-client relationship with the insurance company and the final payment of any legal fees, the judge may now preside in cases involving the insurance company, provided the judge had no involvement in the matter as an attorney.”

“Court agrees to remove San Luis Obispo D.A. from case over Black Lives Matter comments” —

• “On the same day San Luis Obispo County District Attorney Dan Dow began filing charges against marchers protesting the killing of George Floyd by police in Minneapolis, Dow met on Facebook with a group that described the Black Lives Matter movement as ‘domestic terrorism.'”
• “Also on that day, Dow and his wife asked supporters to contribute to his re-election campaign ‘so he can keep leading the fight in SLO County against the wacky defund the police movement and anarchist groups that are trying to undermine the rule of law and public safety in our community.'”
• “A state appeals court says those and other comments justified disqualifying Dow and his office as prosecutors of the protest marchers, and turning the case over to the state attorney general’s office.”
• “The district attorney did not surrender his rights of free speech and freedom of association when he took office, but his exercise of those rights ‘cannot deprive those he prosecutes of their own right to a fundamentally fair trial,’ said the Second District Court of Appeal in Ventura, in a ruling published Wednesday as a precedent for future cases.”
• “Dow sought to remain on the case, and said the comments created, at most, an appearance of a conflict of interest. Attorney General Rob Bonta’s office supported him. But Superior Court Judge Matthew Guerrero said the evidence supported the protesters’ claims of political motivation, and the appeals court upheld his decision.”