Risk Update

Conflicts News — Conflicts “Adversity” Adversity, Consulting Conflicts Clash Continues, Lawyer Special Master Conflicts Allegation

Posted on

Hacker and His Victim Can Employ Same Lawyer, NJ Court Rules” —

  • “In a case testing the bounds of attorney conflicts of interest, a New Jersey court is allowing a lawyer to represent both a hacker who stole online social media account information and the victim he targeted.”
  • “The Thursday ruling pits the international World Mission Society, Church of God against a church attendee who alleges a plot in which the church sought to investigate dissenters. The lawsuit claims the hacker—a third party defendant—was coerced by the church into creating web message boards for criticizing the organization and then using posters’ log-in information to access their social media accounts and find out their identities.”
  • “The decision is a win for lawyers who seek joint-representation agreements, allowing them to coordinate between diverging, but not adverse, parties in litigation. The unanimous ruling took a narrow view of what could make these seemingly conflicting parties ‘directly adverse,’ which can bolster litigators’ arguments for wide latitude to represent multiple players in a broader dispute.”
  • “There’s ‘no ‘significant risk,’’ that the plaintiff or the hacker ‘will be ‘materially limited’’ by the attorney’s responsibility to the other, the court’s unauthored opinion said.”
  • “The church argued that if it’s found liable, it will turn around and blame the hacker, and this would make the attorney’s representation of the hacker and plaintiff at odds. The church used the example of a car crash—an attorney can’t represent both an injured passenger plaintiff and the driver of the car she was injured in unless the driver isn’t at fault for the damage.”
  • “The court rejected this reasoning: ‘If plaintiff prevails against defendants on liability, it does not automatically follow’ that the hacker ‘will be held liable by a finder of fact if defendants pursue the third-party complaint against him to completion.'”

McKinsey Must Face Bankruptcy Racketeering Lawsuit” —

  • “McKinsey and several of its executives must face a critic’s lawsuit alleging the consulting firm concealed conflicts of interest from bankruptcy courts to win business advising on major corporate restructurings.”
  • “Judge Jesse Furman of the U.S. District Court in New York declined on Monday to dismiss the bulk of claims filed against McKinsey by the founder of a competing firm accusing it of submitting false disclosures to bankruptcy courts that omitted potentially disqualifying financial conflicts.”
  • “The judge’s ruling allows Jay Alix, the retired founder of turnaround consulting firm AlixPartners, to advance his claims that McKinsey’s disclosures were part of a racketeering conspiracy to boost its restructuring advisory practice at the expense of competing firms.”
  • “Judge Furman granted McKinsey’s motion to dismiss one of the four racketeering counts Alix alleged, while finding the other three were plausible enough to proceed against the firm. It has denied the allegations and said Alix wants to use the lawsuit to drive McKinsey out of the lucrative marketplace for restructuring advice.”
  • “The firm has also faced years of private lawsuits by Alix and government probes into its restructuring group’s practices, including whether it failed to disclose potential conflicts and guard against insider trading involving clients.”
  • “McKinsey paid $18 million in 2021 to resolve a government probe into its policies meant to prevent insider trading, and $15 million in 2019 to settle a separate investigation into the firm’s conflict-of-interest disclosures in bankruptcy court, in each case without admitting wrongdoing. Private litigation has dragged on with Alix, who has brought claims in several courts that the firm profited by misrepresenting its conflicts of interest, which it denied.”
  • “The lawyers, bankers and consultants who steer major chapter 11 cases must file declarations in bankruptcy court disclosing any connections to the business, its creditors and any other interested parties when they seek court approval to be retained. Restructuring advisers are required to be disinterested and to disclose connections they have to parties in a chapter 11 case that could give rise to a conflict of interest.”
  • “Alix alleged in his lawsuit that as McKinsey sought retentions in 14 bankruptcy cases, it concealed connections that could have disqualified it from the assignment. He claimed that if bankruptcy courts had been aware of McKinsey’s connections, they wouldn’t have approved the firm to serve as a restructuring consultant. McKinsey obtained business that would have otherwise gone to competing firms including AlixPartners, he argued.”
  • “Judge Furman said that Alix’s allegations are ‘particularly strong’ with respect to several bankruptcy cases. He noted that in the bankruptcy of metallurgical coal company Alpha Natural Resources, McKinsey allegedly concealed that it also served U.S. Steel, one of Alpha’s major customers. In energy company GenOn’s bankruptcy case, McKinsey allegedly concealed that it also served GenOn’s parent NRG, with whom the company had an adverse interest, the judge wrote.”

Plaintiffs in Roundup lawsuit seek to disqualify high-profile St. Louis attorney” —

  • “Plaintiffs’ attorneys are seeking to disqualify attorney Bob Blitz as a special master in a Roundup lawsuit, arguing that his close legal and business relationship with attorney James Bennett presents an ‘appearance of impropriety.'”
  • “In a motion filed Aug. 17, attorney Joe Jacobson, a shareholder in Jacobson Press PC, wrote that attorneys representing 90 plaintiffs in the lawsuit against Monsanto learned Aug. 9 that Bennett will be the company’s lead trial counsel in the case. The plaintiffs’ attorneys brought in Jacobson to file the motion to disqualify.”
  • “Special masters are routinely assigned to handle technical, scientific and medical issues in a case and can handle pre-trial motions. They also can rule on matters during a trial, but the judge has the final say.”
  • “Jacobson wrote in the motion that Blitz and Bennett are co-counsel representing the city of St. Charles and St. Charles County in a lawsuit against Ameren Missouri. That lawsuit, pending in federal court in St. Louis, seeks millions of dollars in damages from the utility company over well-field contamination.”
  • “Bennett represented Blitz personally and his law firm, Blitz, Bardgett & Deutsch LC when they were sued in 2015 by a group of clients, Jacobson wrote. While the claims against Blitz individually were settled, Bennett continued to represent Blitz’s law firm on appeal until at least March 2020, according to Jacobson.”
  • “Jacobson also cited Blitz and Bennett’s roles in representing the city of St. Louis, St. Louis County and the St. Louis Regional Convention and Sports Complex Authority in the 2017 lawsuit filed against the National Football League and the Los Angeles Rams.”
  • “Jacobson wrote that the relationship between Blitz and Bennett creates a ‘conflict of interest such that Blitz is not qualified to serve as special master in any case in which Bennett is trial counsel.’ The Missouri Code of Judicial Conduct applies to special masters to the same extent as judges and they must avoid ‘even the appearance of impropriety,’ he wrote.”
Risk Update

OCGs, Privacy & Security — Law Firm Outside Counsel Negotiator Shares Insights on Prudent Policies and Practices

Posted on

Mark G. McCreary, co-chair of the Privacy and Data Security Practice at Fox Rothschild LLP, writes this piece, worth reading in full: “Privacy and Data Security Obligations: Law Firms Have an Outside Counsel Guidelines Problem” —

  • “Yet, often OCGs contain privacy and data security obligations that do not match the reality of practicing law and servicing a client. These obligations often come from an IT department or compliance professional who goes to extreme lengths to ensure they cannot be blamed if there is a data incident. This attitude and approach have created an OCG problem for law firms.”
  • “I am responsible for reviewing and negotiating the privacy and data security obligations of OCGs for my law firm. I enjoy that responsibility because I often get to collaborate with in-house counsel that, in most cases, have never read these requirements.”
  • “The things that I hear from in-house counsel most often are ‘they really say that,’ ‘that makes no sense, how could you agree to that,’ and ‘nobody has ever raised these concerns.’ Protecting data is outside most in-house counsel’s job responsibility, so these responses are normal.”
  • “My firm takes data security extremely seriously, and we are supported by firm management. When I speak with the employees responsible for ensuring the data security of a client, they leave that conversation knowing that their data is adequately protected. We have never failed to successfully negotiate OCGs so that they accurately reflect our practices and procedures, while at the same time meeting the client’s requirements.”
  • “But that does not mean every conversation and negotiation is without its challenges. Clients would benefit greatly from the following suggested approaches. While the list is not exhaustive, it is based on the terms in OCGs that I most commonly encounter that do not match the reality of practicing law and servicing a client.”
  • Deletion of Data. …work product from a previous matter can be immensely helpful and efficient when working on subsequent matters… we also have a Records Retention Policy with data retention schedules. We do not want to be in possession of client data longer than necessary… Lastly, some data simply cannot be deleted. Data that is contained in backups cannot be retrieved, data in databases often cannot be isolated without ‘breaking’ the database, and the process of removing email from disaster recovery solutions is often the equivalent of launching a nuclear weapon, if possible, at all.”
  • Notification of Data Incidents. Often OCGs will say the law firm will ‘immediately’ notify the client of a data incident, or within 24 hours. This is arbitrary and not in line with the accepted international standard of 72 hours”
  • Forbidding Disclosure of a Data Incident. Similar to notification of a data incident, at times client will say that unless required by law we cannot notify any third party of a data incident unless the client approves the notification and its content… we cannot have an outside party dictating the timing, messaging and approach of an incident response when those things can impact potential claims against us.”
  • Audits and Assessments. Firms should agree to complete periodic data security questionnaires and assessments. They should also agree that clients can come on premises and conduct and review those questionnaires and assessments. They should not agree that clients can do a physical audit of their systems. Those systems contain the data of all of clients, and it would be a breach of ethical duties… Similarly, firms should agree to provide an executive summary of a data security audit, an ISO 27001 certification, or a penetration test. Under no circumstance should the firm provide a full copy of an audit, an ISO 27001 certification, or the results of a penetration test to a client – really any third party.”
  • Approval of Third-Party Vendors. My solution has been one of two approaches. I will carve out vendors that have access to the data of many clients, such as Microsoft, Mimecast, Relativity, and reprographic and trial service vendors. I agree that if the vendor is a client-specific solution, the client should be involved in that decision.”
  • No Client Data Outside of US Borders. My solution has been (1) to agree not to store client data outside of the U.S., as long as I can have it processed temporarily outside of the U.S. (excluding regulated data), and (2) create an exception that we can allow individuals to travel with client data as long as it is encrypted (which it would be on our laptops, mobile devices and external media).”
Risk Update

Risk Reading — Divorce Fight DQ Motion Fails to Convince, Law Firm Fiduciary Conflict in UK Matter, Visiting Lawyer Insider Trading Allegations

Posted on

Pa. Superior Court Denies Bid to DQ Husband’s Counsel From Divorce Case Over Brief Meeting With Wife in 2014” —

  • “The Pennsylvania Superior Court has affirmed a lower court’s denial of a wife’s motion to disqualify her husband’s attorney from their divorce proceedings, determining the wife failed to prove her brief meeting with the attorney years prior had created a conflict of interest.”
  • “In an Aug. 22 opinion, authored by Judge Judith Ference Olson, the court affirmed the order denying Tracy A. Cunningham’s motion to disqualify counsel for her husband Michael Spinneweber. Cunningham had alleged that her 2014 consultation with the attorney, Jill Sinatra, about potentially divorcing Spinneweber had created a conflict of interest in the current case. But the appeals court said Cunningham failed to show Sinatra acquired any significantly harmful information during that consultation.”
  • “Cunningham sought to disqualify Sinatra and her firm, alleging that Sinatra and the firm had a conflict of interest because Spinneweber and Cunningham had allegedly met with Sinatra regarding litigation involving Spinneweber’s business in 2013. Further, Cunningham alleged that, in 2014, when Sinatra was associated with Lisa Marie Vari & Associates, she consulted with Sinatra about potentially divorcing Spinneweber. Cunningham alleged that, during the consultation, she ‘provided detailed and privileged information concerning the parties’ marriage, business assets and income,’ according to the opinion.”
  • “But Sinatra said she had no recollection of the meeting and did not retain any documents from the consultation, according to the opinion.”

High Court Rules That City Law Firm Breached Duties By Acting For Client Despite Conflict Of Interest And By Failing To Provide Adequate Costs Information Under CFA: Forster V Reynolds Porter Chamberlain [2023] EWHC 1150 (Ch)” —

  • “In its recent decision in Forster v Reynolds Porter Chamberlain LLP, the High Court found that City law firm, RPC, had breached its duty of care to its client, Ms Forster, after failing to keep her adequately informed of costs incurred under a conditional fee agreement (‘CFA’).”
    “The Court also held that RPC were conflicted in acting for Ms Forster, and that in failing to enforce the settlement agreement in accordance with Ms Forster’s wishes, it caused her to suffer loss.”
  • “The decision serves as a useful reminder that whilst a CFA governs the solicitor’s remuneration, it does not alter the duties owed to the client. Insofar as solicitors prioritise their own interests under a CFA, or the interests of one client at the expense of another, they risk incurring liability for negligence and for breach of fiduciary duty (in addition to possible regulatory exposure).”
  • “RPC acted for Ms Forster under a CFA with a 100% uplift on their fees, as did the three Counsel who represented her at trial. Ms Forster arranged ‘after the event’ insurance (the “ATE Policy”) which covered limited adverse costs, non-lawyer disbursements payable to RPC and repayment of a loan taken out by Ms Forster at a late stage of the proceedings to fund her expert witness, a forensic accountant from Deloitte (the “Loan Agreement”). Ms Forster had reluctantly agreed to instruct Deloitte, having been persuaded by RPC.”
  • “Ms Forster commenced proceedings against RPC for negligence. Her claim was essentially for loss of the opportunity to enforce the Tomlin Order by first converting the Order terms into a judgment debt and then promptly enforcing it and the costs order against the Opponents’ assets in 2010 and 2011. It was Ms Forster’s case that RPC had become conflicted in continuing to act for her given their interest in the Loan Agreement, and that they had preferred their own interests to hers in delaying enforcement action.”
  • “In response to Ms Forster’s further claims of breach of duty, the Court concluded that RPC had not adequately advised Ms Forster in relation to the Loan Agreement, and that in failing to enforce the terms of the settlement agreement, it had preferred Mr Deacon’s interests over hers. Fancourt J found that RPC had ‘a clear conflict of interests in advising Ms Forster to borrow money from Mr Deacon and … acting for Mr Deacon in preventing Ms Forster from enforcing [the settlement agreement].'”
  • “To properly advise or act for Mr Deacon and Ms Forster, RPC should have obtained both parties’ informed consent. On the matter of RPC’s failure to enforce the settlement agreement, it was irrelevant whether its strategy in delaying was well-intentioned or likely to result in a more substantial recovery, as ‘RPC were not entitled to refuse to act in accordance with [Ms Forster’s] instructions’. In doing so, RPC breached its duty and caused Ms Forster loss of opportunity to recover under the settlement agreement. Fancourt J awarded damages of £192,500, being 55% of the £350,000 settlement amount, on the basis that Ms Forster’s likelihood of full recovery would have been approximately 55% if enforcement action had been taken in 2011 and 2012.”

Ex-Attorney at Gibson Dunn Charged With Insider Trading” —

  • “A Brazilian attorney who was working at Gibson, Dunn & Crutcher has been arrested and charged with insider trading, accused of accessing internal law firm files to trade ahead of a major merger and acquisition.”
  • “Federal prosecutors in D.C. said Romero Cabral Da Costa Neto, 33, of Rio de Janeiro, Brazil, was arrested on Tuesday in Washington, D.C., by agents with the FBI’s Washington Field Office. Costa is separately facing an SEC lawsuit over similar allegations.”
  • “A spokesperson for Gibson Dunn said they are cooperating with authorities on the matter. ‘We are cooperating with authorities and have terminated our relationship with the individual, who was an international visiting attorney from another law firm,’ the spokesperson said in a statement to the National Law Journal.”
  • “According to court documents, Costa is an attorney licensed to practice in Brazil and had been working in the United States for the law firm since September 2022. During that time, Costa has executed multiple stock trades in companies represented by the firm.”
  • “During Costa’s one-year employment as a visiting attorney, he allegedly accessed confidential information about the law firm’s work on biopharmaceutical company Swedish Orphan Biovitrum AB’s acquisition of CTI BioPharma Corp (CTIC), according to the SEC complaint. According to a press release, Gibson Dunn served as legal counsel to CTIC in the transaction.”
  • “As a non-U.S. Citizen, Costa was hired as a ‘visiting attorney’ from Brazil, and the law firm sponsored his temporary work visa, allowing him to reside and work in the United States during the time period of his employment, according to court documents. His term of employment with the firm was one year.”
  • “On May 8 and 9, 2023, the SEC complaint alleges, Costa accessed the firm’s document management system and obtained nonpublic information about the CTIC impending merger with Sobi. Specifically, the SEC claims, Costa accessed and viewed draft SEC filings, board minutes, and other documents relating to the transaction. The law firm’s access logs show that Costa viewed as many as 25 unique documents relating to the Sobi transaction over 100 times in the week leading up to the public announcement.”
Risk Update

Risk Reading — Lawyer Departure Ethics Opinion Issued, IG Thinking on AI Risk Management, Firm Hit With Class Action Over Data Breach

Posted on

Leigh Isaacs, Sr Director Info Governance at DLA Piper US, sends word of this report produced by the Law Firm Information Governance Symposium (LFIGS), which she authored with several colleagues: “Generative AI and Law Firm Information Governance” —

  • “This paper covers the use of artificial intelligence (AI), and in particular, Generative AI in law firms. Whereas AI usage is similar across industries, law firms have some unique characteristics because much of the data belongs to the clients and there is an extra obligation to keep it safe and private. This paper covers both unique and non-unique challenges of AI as it pertains to information governance (IG) in the legal community. It begins with a brief definition of AI, followed by benefits to the legal community, information governance-specific considerations, policy considerations, general advice, and guidance.”
  • “Another important consideration is balancing privacy rules and regulations with system capabilities. Currently, there is no way to remove data from the system. This has led to concerns about ethical issues, IP usage, bias, and consent. As a result, many firms are taking a conservative approach to using generative AI technologies. Some firms have banned the use of their data, while others have not yet adopted the technology. As the technology evolves, so too will the restrictions and usage guidelines around it… A good  resource that offers insight into the early views on regulation between the EU and the US can be found HERE. In fact, using proprietary data is best done through APIs, as described in section 5.”
  • Clients are starting to issue requirements around AI usage guidelines and/or restrictions where their data is involved. Audit and assessment questions will quickly start to include AI usage queries, as will cyber insurance renewal applications.”

Orrick Hit With Class Action Over Breach Affecting 153,000” —

  • “Orrick, Herrington & Sutcliffe LLP failed to protect the personal information of nearly 153,000 people that was exposed in a March data breach, a proposed federal class action said.”
  • “Dennis Werley alleged that the international law firm failed to implement reasonable measures to ensure their computer systems were protected, take adequate steps to prevent and stop the breach, or provide timely notice to victims.”
  • “Information exposed in the incident included names, addresses, dates of birth, and Social Security numbers, according to a complaint filed Aug. 11 in the US District Court for the Northern District of California.”
  • “Orrick declined to comment.”
  • “Werley and class members have suffered damages in the form of an increase in spam telephone calls, an increased risk of fraud and identity theft, invasion of privacy, reduced value of personal information, and lost time and out-of-pocket costs incurred mitigating the effects of the breach, the complaint said.”
  • “The lawsuit brings claims of negligence, negligence per se, breach of fiduciary duties, breach of confidence, breach of implied contract, invasion of privacy, and declaratory relief.”

Brian Faughnan notes and opines on: “Breaking? BPR Issues Two Formal Ethics Opinions” —

  • “The opinion now confirms certain core concepts in Tennessee as to departing lawyers and what the rules of the road are, including:
    • “That a joint notice to the client is preferred and that the departing lawyer and the firm should “attempt to agree” on a joint communication to the clients ‘with whom the departing lawyer has had significant contact.'”
    • “That firms ought to develop policies in advance so that lawyers can know what measures the firm will expect to implement address such situations, including issues of what kind of notice period prior to departure a firm will expect of its lawyers.”
    • “While firms can impose notice period requirements, they cannot then kneecap the departing lawyer’s ability to continue to represent clients during that time period by cutting them off from access to files or access to technology.”
  • “In other words, this opinion attempts to establish rules of the road that have as their primary purpose ensuring that clients both have full choice of counsel and are not harmed or burdened by lawyer against lawyer disputes.”
  • “Nevertheless, situations where lawyers depart firms for other private practice arrangements will likely always remain plagued by economic pressures and cutthroat instincts. Lawyers or firms that want to push the envelope may find some solace in certain parts of the opinion whether that be arguing over what ‘significant contact’means or playing coy about what constitutes attempting to agree, but this opinion offers much needed guidance.”
  • “As a lawyer who represents lawyers making moves as well as firms dealing with departing lawyers, the existence of this opinion will be very helpful in counseling lawyers.”


Risk Update

AML Again — More Detail and Commentary on ABA Anti-money Laundering Push, Real Estate Rules On the Horizon

Posted on

Hat tip to the reader who sent in this WSJ piece containing additional detail commentary on last week’s update: “American Bar Association Votes to Amend Rule on Client Due Diligence” —

  • “Supporters of the change hope the move will help ward off more stringent regulation from lawmakers concerned about the use of lawyers to facilitate financial crimes.”
  • “U.S. lawyers on Tuesday voted to adopt a revised rule that imposes a more explicit obligation to vet potential clients, as part of an effort to quell concerns about the use of lawyers to facilitate money laundering and other financial crimes.”
  • “In a speech ahead of Tuesday’s vote, Kevin Shepherd, the ABA’s Treasurer, said that the U.S. Treasury Department recently had informed him that a failure to pass the resolution would cause the agency to take immediate regulatory action as well as to lobby for legislation imposing additional obligations on lawyers. ‘It’s simple political reality, and we ignore it at our peril,” Shepherd said.'”
  • “The ABA last year lobbied against a bill in the U.S. Congress that would have extended anti-money-laundering regulations for the financial sector to lawyers, accountants and other professional-service providers involved in company formation and money transfer.”
  • “Lawyers who aid criminals can be criminally prosecuted, but critics have argued that a lack of enforceable regulation enables some lawyers to continue working for potentially problematic clients while ignoring red flags.”
  • “Although the amendments approved Tuesday are only a slight change to the ABA’s existing rules, they proved controversial, with a number of the group’s most prominent members giving speeches both for and against the proposal. The group’s two largest sections, representing business and litigation attorneys, voted before the annual meeting to oppose the resolution. Critics argued that the amendments were vague and exposed lawyers to discipline.”
  • “‘The proposed rule opens every lawyer up to potential liability,’ Paul “Chip” Lion, a delegate for the ABA’s Business Law Section, said during a speech before the vote. ‘The presumption will be that the lawyer should have known that the lawyer’s services were being used to commit a crime, had the lawyer just delved a little deeper into the facts and circumstances.'”
  • “It isn’t clear how far the new rules will go in convincing the industry’s critics that further regulation is unnecessary. Scott Greytak, the advocacy director for Transparency International U.S., which seeks to fight corruption, called the new rules ‘window dressing,’ saying they would have little effect.”
  • “The rules don’t spell out specific steps that lawyers should take in vetting a client, and several observers pointed out that they don’t appear to create a definitive obligation to determine the true identity of a client, such as the beneficial owner of a corporation or limited liability company that seeks a lawyer’s services.”
  • “Instead, the amendments add guidance advising lawyers that their due diligence should vary based on the perceived level of risk represented by a client. Under the new guidance, a lawyer’s familiarity with a client might be one factor that gives assurance that less due diligence is needed.”

Same subject, different context, like worth tracking for real estate practices: “US set to unveil long-awaited crackdown on real estate money laundering” —

  • “The U.S. Treasury Department will soon propose a rule that would effectively end anonymous luxury-home purchases, closing a loophole that the agency says allows corrupt oligarchs, terrorists and other criminals to hide ill-gotten gains.”
  • “The long-awaited rule is expected to require that real estate professionals such as title insurers report the identities of the beneficial owners of companies buying real estate in cash to the Treasury’s Financial Crimes Enforcement Network (FinCEN).”
  • “While banks have long been required to understand the source of customer funds and report suspicious transactions, no such rules exist nationwide for the real estate industry.”
  • “Instead, FinCEN has operated real estate purchase disclosure rules, known as geographic targeting orders (GTOs), in just a handful of cities including New York, Miami and Los Angeles. The new rule is expected to effectively expand GTOs nationwide.”
  • “Transparency advocates pushing for a nationwide rule point to the example of Guo Wengui, an exiled Chinese businessman who, according to prosecutors, used an anonymous shell company to channel illicit profit from a fraud scheme into the $26 million purchase of a 50,000-square-foot New Jersey mansion in December 2021.”
  • “Had Guo brought property across the Hudson River in Manhattan, it would have been subject to a GTO and likely flagged immediately to law enforcement.”
  • “Guo, a onetime business partner of former Donald Trump adviser Steve Bannon, has pleaded not guilty to fraud charges. His lawyers did not respond to a request for comment.”
Risk Update

Compensation Survey — FAQ & Update on BRB Law Firm Risk Staffing Survey

Posted on

Great response to the 2023 Risk Staffing Compensation Survey

I always appreciate the notes, questions and thoughts from readers. So with this update, I wanted to not only remind folks to participate (if they want to see and benefit from the eventual output) but also to address a few community questions.

“I have data sensitivity.”

  • I feel you. I would too.
  • To be clear, this data is confidential and kept private. The eventual report will not identify firms or individuals. Last year we collected 375+ data points from 80 participants and hopefully that experience put people at ease.
  • But if you’re itching to participate but have concerns about privacy, please feel free to drop me a direct note. I’ve worked with a few firms on creative approaches here.

“What Kind of Roles?”

  • Risk is a broad category, but we’re typically focused on roles associated with the general arena of client due diligence (e.g. intake, conflicts, terms/OCGs, and the operational roles supporting that). Perhaps next year we’ll go broader. I know we have an IG reader contingent out there…
  • I’ve gotten a few of these “where do you draw the line on role/seniority” questions. In particular, I’ve had a few “director” level colleagues ask if they get to play (and see industry data) as well. And the answer is: yes!
  • I suspect I may have just internalized “if you’re not a partner, you’re staff” in terms of naming this survey. But if you’re a director-level risk leader, please do feel free to submit data. (Depending on the volume collected, we might just see an national average in the final report vs breakouts by geography/firm size. But if every leader reading this blog participated, we’d certainly have a rich data set. The BRB reader squad out there contains multitudes…)
  • When you take the survey, as an individual or a manager/director of staff, it will ask you not only for “titles” but also for a general classification of “role type” (to help best consolidate and compare apples-to-apples across roles, as best we can).
  • If you’re already taken the survey providing staff details, you can just re-take it again. All the inputs are additive to the consolidated report/export used for analysis.

“Oh Canada?”

  • Hat tip to those readers residing outside of US borders. I know we have an international contingent with a respectable set of Canadian, UK and event APAC subscribers.
  • In terms of data, this exercise last year collected a slice of Canadian data. And we’ve received some again in 2023. So I want to encourage Canadian readers to participate. We’ll see if we collect enough inputs to generate some valuable output.
  • And if there’s demand and interest from other geographies, feel free to get in touch and let’s see if we can be of help there as well.


Please keep those questions and comments coming. (Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

And please do take the survey by clicking here: 2023 Risk Staffing Compensation Survey.


Risk Update

Conflicts & Disqualification News — “Partial” DQ of Parent-Child Lawyers v. Client, AG Legal Advice Pre Investigation

Posted on

Court of Appeal: Ethics Rule Didn’t Justify Total Disqualification of Lawyers” —

  • “The two members of a father-and-son law firm were properly barred from representing the firm in its fraud/breach-of-contract action against two former clients who failed to pay for services and a lawyer, the Fifth District Court of Appeal held yesterday, but declared that there was no reason to order that they play no role in the trial preparation.”
  • “Presiding Justice Brad Hill said in an unpublished opinion: ‘We hold the trial court acted within its discretion in disqualifying the Firm’s attorneys from representing the Firm at trial because they will likely be called as witnesses, carrying a significant risk of juror confusion and prejudice to the defendants. However, the trial court abused its discretion by disqualifying the Firm’s attorneys from representing the Firm in all pretrial phases of the litigation without making any findings as to how their continued behind-the-scenes activities preceding trial would undermine the purposes of the advocate-witness rule.'”
  • “It was Stanislaus Superior Court Judge John D. Freeland who barred Michael J. Dyer and Dustin J. Dyer from doing any legal work for their Stockton firm, The Dyer Law Firm, in its action against ex-clients Karla Sam-Sin and Fernando Sam-Sin and Modesto attorney Mark S. Nelson. The Dyer Law Firm was representing the San-Sins in litigation. Nelson was allegedly in complicity with the San-Sins in causing the Dyers to change a portion of their retainer agreement with the Sam-Sins to mirror the arrangement the clients supposedly had with their previous lawyer not to charge for a certain portion of the work, although there was no such arrangement.”
  • “In his opinion partially reversing and partially affirming the order, the presiding justice said: ‘[T]his is not a matter of the Dyers representing themselves, as Nelson often puts it; nor is this a matter of the Firm representing itself, as the Dyers sometimes frame it. Despite the Firm being a closely held corporation owned and directed exclusively by the Dyers, this is still a case with a client (the Firm) being represented by counsel (the Dyers). This is not a case of self-representation. The distinction matters because, if the Dyers were truly representing themselves in propria persona, there would be a good argument that the advocate-witness rule would not apply. Various appellate courts around the country—though none in California, to our knowledge—have held that a ‘lawyer-litigant’ has a right to appear pro se and should not be disqualified from doing so under the advocate-witness rule.'”
  • “Hill noted that when Nelson represented himself, he did so as a ‘lawyer-litigant.'”
  • “Rejecting the contention that Nelson waived a disqualification motion by waiting 21 months before bringing it, the jurist said that ‘[a]bsent a prima facie showing of extreme prejudice caused by the delay, there was no waiver of the right to seek ‘ and no such showing was made. He remarked: ‘This was not an eleventh-hour, eve-of-trial motion (nor a midtrial motion…).New counsel will have plenty of time to get up to speed, and the Firm will not be duplicating any expenses in the process of replacing counsel because the Dyers had been representing the Firm for free.'”
  • “He declared that Nelson’s motion ‘clearly has merit with respect to protecting the integrity of the judicial process at the forthcoming trial” because “having the Dyers serve as both attorneys and witnesses at trial carries an unnecessary risk of confusing the jury and biasing the jury.'”

‘Conflict of interest’: Idaho AG gave officials legal advice, then investigated them” —

  • “An Ada County judge ruled Thursday that Idaho Attorney General Raúl Labrador had a “notable conflict of interest” when his office began investigating officials with the Idaho Department of Health and Welfare over how it distributed federal child care grants.”
  • “The health officials were the attorney general’s clients. And a lawyer under Labrador had advised them that the grants in question were legally distributed.”
  • “‘The attorney general provided an opinion to a client and cannot now seek to investigate whether… the client violated the law on the same issue,’ 4th Judicial District Judge Lynn Norton wrote in Thursday’s ruling.”
  • “Labrador’s office demanded that the health officials hand over records related to the program around the same time Idaho lawmakers approved an audit of the grants, amid concerns that the federal funds weren’t distributed properly. Lawmakers dictated that the funding go to programs serving kids 5 to 13. Labrador previously told the Idaho Statesman that he’s investigating whether those directions were followed.”
  • “Central to the health officials’ case are two legal opinions, written by former deputy attorney general Daphne Huang, who advised health department officials that the child care grants were distributed legally.”
  • “Huang issued one opinion in November, during former Attorney General Lawrence Wasden’s tenure, and a nearly identical opinion in January, after Labrador assumed office and lawmakers questioned Jeppesen about the grants.”
  • “But the legal advice created ‘a client relationship’ with health department officials and a “duty to act in protection” of the department’s interests, Norton wrote. Idaho State Bar ethical rules prohibit attorneys from advocating against their clients’ interests.”
  • “Norton also wrote that an attempt by Labrador’s aides to seize the work phone of a former attorney assigned to the department shows that the attorney general’s office failed to create a sufficient ethical firewall between investigating attorneys and the lawyers advising the Department of Health and Welfare.”
  • “Thursday’s ruling is the first time a judge has publicly analyzed the unique conflict between the executive branch officials and their own attorney. It’s among a handful of clashes between Labrador and state agencies that have marked the Republican’s first term in office.”


Risk Update

Conflicts Allegations & News — More Mar-a-Lago Allegations, Adjudicator Conflicts Concerns, Conflict & Client-drive Billing Clash

Posted on

Quinn Emanuel sues Los Angeles over legal tab for embattled ex-sheriff” —

  • “Quinn Emanuel Urquhart & Sullivan has sued Los Angeles to recoup more than $280,000 in fees for its work defending a top law enforcement official, marking a new flashpoint in a long-running fight stemming from an employment scandal at the county sheriff’s office.”
  • “California-based Quinn Emanuel filed the lawsuit in Los Angeles Superior Court on Aug. 10, seeking compensation for the legal fees it incurred in its 2019 representation of then Los Angeles County Sheriff Alex Villanueva.”
  • “The county sued Villanueva in 2019 over his reinstatement of a deputy sheriff who had been fired over domestic violence allegations. An appeals court said last year that the rehiring was unauthorized.”
  • “Quinn Emanuel contends Villanueva was authorized to hire the firm as outside counsel because of a conflict of interest between the sheriff’s office and the Los Angeles county board.”
  • “The firm’s new lawsuit follows its defeat in a previous fight with the county over Villanueva’s legal fees. In that 2021 case, Los Angeles sued Quinn Emanuel, alleging that the firm did not have a valid and enforceable engagement agreement because the county did not approve its contract with the sheriff.”
  • “Los Angeles County Judge Holly Fujie granted summary judgment to Los Angeles in May. She also said Quinn Emanuel could not file a ‘cross complaint’ as part of that litigation. Quinn Emanuel last month filed an appeal.”

Ontario lawyers’ auto insurance tribunal allegations – ‘at least’ three insurers hired adjudicators” —

  • “In the aftermath of allegations around ‘conflicts of ‘ risk relating to a Tribunals Ontario LAT adjudicator who made decisions in favour of Aviva prior to joining the insurer, the Ontario Trial Lawyers Association (OTLA) has set out three more instances of LAT adjudicators moving to insurance companies that it claims warrant investigation, though it has not alleged any definite bias risk.”
  • “This August, the Ontario Trial Lawyers Association (OTLA) called for an immediate investigation after an adjudicator, who had received an offer of employment from Aviva, went on to render at least nine decisions for the LAT before starting work with the insurer. OTLA has set out that all decisions went in favour of insurers, including Aviva – though this has been disputed by the ex-adjudicator in question, who has said that one went in partial favour of a claimant and that most decisions typically do go in insurers’ favor.”
  • “OTLA has claimed to have unearthed three other cases of LAT adjudicators moving to insurers, named as Aviva, Definity Insurance, and Intact Financial Corporation, and it has called for further investigation into these people moves. However, in an interview with Insurance Business, OTLA president Laurie Tucker stopped short of levelling accusations of definite bias risk. Rather, she claimed that further information on the people moves was needed to assuage any potential conflicts of interest concerns.”
  • “‘At least three other adjudicators we know of have left the LAT and gone to work for these insurance companies,’ Tucker said. “‘We don’t know the details of when they applied [for roles], when they accepted employment with those companies, when they left the LAT, and whether they were rendering decisions during that period. We’ve asked the LAT for information, and we are continuing to look into this matter.'”
  • “Reilly has contended that she was unaware of any potential conflict of interest concerns from the insurer prior to her June 2023 split from the business. The ex-adjudicator has called on both the LAT and Aviva to bring in more comprehensive policies and people moves procedures to prevent any potential ‘appearance of bias.'”
  • “She has denied any bias in decision making in the interim period between a conditional offer of employment being received from Aviva in June 2022 and her move to the company later that year and set out in a statement that she operated ‘based on the facts, evidence, and law as presented.'”

Mar-a-Lago worker’s lawyer has conflicts of interest in documents case, prosecutors say” —

  • “Special counsel prosecutors asked on Wednesday for a hearing to inform the Mar-a-Lago club’s maintenance chief, charged with helping Donald Trump to obstruct the government’s attempt to retrieve the classified documents at the property, that his lawyer might be hamstrung at trial due to potential conflicts of interest.”
  • “The issue, according to prosecutors, is that De Oliveira’s lawyer, John Irving, represents three other witnesses who provided incriminating evidence against Carlos De Oliveira and could be called to testify against him at trial.”
  • “In an 11-page court filing, the prosecutors explained the potential conflicts could mean Irving might not be able to defend De Oliveira as forcefully as he would have otherwise because he needed to protect the interests of those other clients, described as ‘Witness 1,’ ‘Witness 2’ and ‘Trump employee 3.'”
  • “‘An attorney who cross-examines a client inherently encounters divided loyalties,’ prosecutors in the office of the special counsel Jack Smith wrote. ‘A hearing would permit colloquy with Mr Irving’s clients to inform them of potential risks and inquire into possible waivers.'”
  • “Wednesday’s request to the US district court judge Aileen Cannon is the second for a conflict-of-interest hearing in the classified documents case after prosecutors revealed last month that Nauta’s lawyer Stanley Woodward also had three potential conflicts of interest.”
  • “De Oliveira told prosecutors in April that the reason he was on tape taking photos of the surveillance cameras in the tunnel outside the storage room was because he was looking for a shutoff valve after a a water pipe rupture and also wanted to document a broken door below one of the cameras.”
Risk Update

Risk Reading — Judge’s Judgement on Realtionship-driven Recusal, Attorney Public Bio Risks and Responsibilities, Regulator Risk, Accountant-Client Privilege

Posted on

The aptly named Meatingplace, which bills itself as “the premier multimedia information source for the red meat and poultry processing industry” noted: “Federal judge offers to step down in poultry antitrust case” —

  • “A federal judge offered to recuse herself from an antitrust case after a lawyer from the judge’s husband’s former law firm made an appearance on behalf of Cargill Meat Solutions, which is a defendant.”
  • “Maryland District Judge Stephanie A. Gallagher submitted a letter last week disclosing the connection and offered to step down if either side felt her objectivity was compromised.”
  • “Judge Gallagher said her husband has not worked for WilmerHale for more than three years, but made a capital contribution to the firm, of which a small percentage remains. She added that will be fully paid back to him by the end of this calendar year and that the capital contribution has not affected in any way by the firm’s success or profits.”
  • “The judge said she believes this connection does not disqualify her from presiding over the case but wanted to leave it up to the parties to decide.”
  • “The United States Department of Justice filed a lawsuit against Cargill and several other poultry producers for allegedly monopolizing trade. The DOJ claimed the poultry processors agreed that they would assist each other by discussing and sharing information about how to compensate their plant workers.”

Avoiding Ethical Risks in Your Online Bio” —

  • “Whether through a law firm’s website or through a social media platform like LinkedIn, a lawyer’s online profile is often the first resource available to potential clients, opposing counsel, or others in the field when they want to learn more about a lawyer… But there are also ethical requirements that lawyers should keep in mind when revising and publishing their online bios. Here are three issues every lawyer can consider when reviewing and updating their online bios.”
  • “California has some of the strictest rules on client confidentiality in the country. Business and Professions Code Section 6068(e) requires every lawyer ‘to maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.’ Rule 1.6—the ethical rule on confidentiality—then incorporates that obligation, providing that lawyers shall not reveal information protected by that statute.”
  • “For lawyers drafting their online bio, they may need to consider whether publishing information about their prior representations runs afoul of this rule. The ABA’s Standing Committee on Ethics and Professional Responsibility’s Formal Opinion 480, from 2018, confirms the need to protect clients’ confidential information in online formats. The opinion states that, even if there is information about a client in a court’s order or other public record, the lawyer’s duty of confidentiality still applies to ‘information related to a representation, whatever its source and without regard to the fact that others may be aware of or have access to such knowledge.'”
  • “Thus, just because a fact relating to a representation is publicly available does not mean that the lawyer is free to publish it in a bio absent express or implied client consent. The opinion advises: ‘Rule 1.6 does not provide an exception for information that is ‘generally known’ or contained in a ‘public record.'”
  • “Notably, even an accurate statement about a past representation could still be viewed as misleading to prospective clients, if the statement suggests that the results could be repeated for another client. The comments to Rule 7.1 indicate that, in order to avoid creating an ‘unjustified expectation,’ lawyers generally exclude from their bios information about a specific amount of damage award, the lawyer’s record in obtaining favorable results, and client endorsements. Lawyers who describe the outcomes of their cases in this way (which is more common for plaintiff’s-side lawyers) may also consider using a disclaimer or other clarification to note that the outcome of any single representation will depend on the facts and circumstances.”

You Keep Using That Word, I Do Not Think It Means What You Think It Means: Accountant-Client ‘Privileged’ Communications May Not Be Privileged as a Conflict of Law Matter” —

  • “In Florida, the legislature deemed open dialogue between an accountant and a client so important that, in 1978, it adopted a privilege nonexistent in the common law: the accountant-client privilege.”
  • “Akin to the attorney-client privilege, the privilege permits a client ‘to refuse to disclose, and to prevent any other person from disclosing, the contents of confidential communications with an accountant when such other person learned of the communications because they were made in the rendition of accounting services to the client.'”
  • “Cases applying section 139 to a conflict of law regarding the accountant-client privilege, in Florida state court, are nearly nonexistent. In fact, the authors of this article are aware of only one such decision, in which they participated — Schaeffer v. Dowling & Hales LLC.”
  • “The court began its analysis by noting that a conflict existed because Florida (the forum) recognized the accountant-client privilege while California (the state where the communications occurred) did not. From there, the court noted that Florida applies the “‘interest analysis methodology’ for determining choice of law questions,” and then quoted section 139.[6] The court went on to apply section 139 in the context of the accountant-client privilege, and relied on an example given by section 139 of when not to recognize a privilege.”
  • “There is a sizeable body of case law from courts across the country applying section 139 of the Restatement (Second) of Conflict of Laws.[9] Importantly, section 139 favors disclosure when there is a conflict. Thus, litigants should be aware of the pitfalls and opportunities presented when faced with privileges arising in a conflict-of-law context.”

“‘Conflict of interest’: Watchdog berates Holyrood plan to keep Law Society as regulator” —

  • “Britain’s senior consumer watchdog has strongly criticised plans by the Scottish government to allow the Law Society of Scotland to carry on regulating the nation’s 13,000 solicitors. The Competition and Markets Authority reiterated its call for a new regulator north of the border that is properly independent of both the legal profession and government.”
  • “The CMA’s plea is contained in its consultation response to The Regulation of Legal Services (Scotland) Bill, which was introduced to the Scottish Parliament in April this year. The bill aims to ‘modernise’ the regulation of legal services in Scotland, informed by a Scottish government-commissioned independent review led by governance expert Esther Roberton.”
  • “Crucially, the Scottish government rejected a principal recommendation of Roberton – the creation of a single independent regulator – in favour of an approach that would ‘seek to develop the existing regulatory framework.'”
  • “In truth, the 2018 Roberton report was merely the latest chapter in a saga that has lasted for nearly three decades. As the CMA acknowledges, there have been many alleged examples where conflicts of interest ‘may have led the Law Society of Scotland and the Faculty of Advocates to prioritise the interests of their members over those of consumers.'”
  • “The Society and Faculty have lobbied ferociously to retain control of regulating their members, occasionally in the face of allegations of a conflict of interest from disgruntled clients. Such allegations have been periodically raised in the Scottish Parliament, including by John Swinney MSP who rose to become deputy first minister. So far the bodies, which wield considerable power in Scottish civil society, have succeeded in their aim. This marks a stark contrast with their counterparts in England and Wales, where the representative and regulatory functions were formally split more than 15 years ago.”
  • “The Scottish government’s chosen model contains new safeguards, including bolstering the independence of the Society’s regulatory committee. But the CMA says today: ‘The experience in England and Wales illustrates that any incomplete separation has the potential to give rise to an inherent conflict between the responsibility to regulate in the consumer interest and the responsibility to represent the interest of their members. That has the potential to affect regulatory outcomes.'”
Risk Update

Commercial Arbitration Conflicts Analysis — Lawyer Analysis on Understanding and Navigating International Risks and Rules

Posted on

Charles Russell Speechlys Lawyers Dalal Alhouti and Georgia Fullarton write an excellent and detailed piece on: ” Conflicts of Interest in International Commercial Arbitration” —

  • “Conflicts of interest can arise when an arbitrator has a connection to one of the parties or has otherwise conducted himself or herself in a manner that may give rise to justifiable doubt as to their impartiality. International commercial arbitration is largely a private process but the adage that justice must not only be done but be seen to be done holds true just as much as in litigation. Without this essential principle arbitration would stop being an effective means of commercial dispute resolution as users would lose faith in the process.”
  • “In this Practice Note we explore the general principles applicable to conflicts of interest in international commercial arbitration, and how such conflicts are assessed and resolved.”
  • “International commercial arbitration is not a single uniform system, it arises from the operation of national arbitration systems and the ability to enforce awards in different countries (mainly as a result of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958[8 p.8]). A variety of different rules simultaneously apply to an arbitration, chief among them is the law of the seat (or legal place) where the arbitration is occurring and any institutional rules that the parties have agreed should be applied.”
  • “It is not possible in this Practice Note to survey all national arbitration laws to determine what they say about conflicts of interest, but most will contain language to the effect that an arbitrator must be impartial and independent.”
  • “Parties do not have to use an institution to help manage the arbitration process, but it is almost always recommended given the significant benefits using an institution brings. Most institutional arbitral rules address conflicts of interest, for example…”
  • “Whilst the law of the seat and the institutional rules are the primary sources for rules concerning conflicts of interests, there may be other rules to consider. For example, an arbitrator may be a professional (such as a lawyer) with professional rules to avoid conflicts of interest and anything that may bring the profession into disrepute.”
  • “There is also ‘soft law’, being guidance and rules generated by industry bodies which are not mandatory, but which parties either choose to follow or which are taken to reflect best practice and so may be consulted when determining whether there is a conflict of interest. The main soft law in this area is the International Bar Association’s ‘Guidelines on Conflicts of Interest in International Arbitration’, first issued in 2004. The IBA Guidelines divide possible conflicts into three traffic light categories…”
  • “The IBA Guidelines divide possible conflicts into three traffic light categories:
    • Red list items, being situations where there is clearly a conflict. This is divided further into ‘Red Non-waivable’ situations which result in automatic disqualification of the arbitrator, and ‘Red Waivable’ situations which require notification of the parties and their express consent to be given (i.e., a specific waiver provided) for the arbitrator to act.
    • Orange list items, being situations which ‘in the eyes of the parties give[s] rise to doubts as to the arbitrator’s impartiality and independence’. These require notification of the parties and an invitation to the parties to make an informed decision whether to request that the arbitrator be disqualified on the basis that there is an objective, justifiable doubt as to an arbitrator’s impartiality and/or independence.
    • Green list items, being situations ‘where no appearance of, and no actual, conflict exists from an objective point of view’. No obligation to disclose arises or a limit to disclosure applies based on reasonableness.”
  • “Conflicts of interest can arise in many different forms, but perhaps the three most common are where… connection with one of the parties can arise where, for example, the arbitrator has previously substantively advised one of them in a professional capacity or has a financial interest in one of them…. A common source of conflict is where an arbitrator has a connection with one of the lawyers in the case.”
  • “Issue conflict arises where an arbitrator has previously expressed a view on a particular legal problem that also arises in the arbitration, such that it may be argued that the arbitrator is no longer impartial or open-minded on the issue. This is traditionally hard to prove and doesn’t arise as often as the other conflicts referred to above.”
  • “Arbitrators should also take care to understand as fully as possible the relevant corporate structure of the parties to the dispute so that any conflict check is complete. In carrying out this assessment, an arbitrator may look to the IBA Guidelines to understand the General Standards (Part 1 IBA Guidelines) as well as guidance on their practical application and specifically which situations do and do not constitute conflicts of interest and should be disclosed (Part 2 IBA Guidelines) using the IBA Guidelines’ traffic-light system.”
  • “Conflicts of interest are a fact of life that will continue to occur, they just need to be properly identified and managed. Although as detailed above, the exact test to be applied can vary between different laws and arbitral rules, the key points are that arbitrators should confirm their impartiality and identify any possible conflict as soon as they can, using the IBA Guidelines for guidance. After that any challenge should be made promptly to minimise the delay to the arbitral process as far as possible.”