Risk Update

BRB Law Firm Risk Staffing Compensation Survey (2023 Edition) — Now Open!

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I’m pleased to invite our law firm risk readers to participate in the 2023 Risk Staffing Compensation Survey!

Last year’s exercise proved to be a great success. We saw participation from 80+ individuals, who contributed data on 375+ individual risk staff positions. (Let’s see if we can’t top that figure this year, shall we?) The final report came in at 14 pages and certainly proved popular.

I also received many encouraging notes of feedback and input from risk staff, risk managers, and firm leaders.

  • Kudos to those managers using this industry data to advocate for and ensure that their team’s compensation is kept in line with industry averages.
  • It was great to see several firms using the data to inform their staff recruiting and offer processes
  • And it was particularly nice to hear from several individuals who were able to use the data to self benchmark and support their personal career efforts and growth.

This year’s exercise incorporates some lessons learned from 2022.

So if you’re an individual contribution looking to understand how your comp compares to your peers, or you’re a risk manager looking to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.


  • Participation open to law firm risk professionals only
  • All responses will be treated confidentially
  • Manager participants sharing data on their/their team’s roles and compensation will receive a report summarizing key findings and analysis
    • (The report may be shared internally within your firm, but not redistributed externally. So if you want the results, your best path is to participate!)
  • Individual contributor participants sharing personal compensation data will be receive a personal benchmark compensation summary relevant to their specific role and firm demographics.

The survey will be open for the next month or so and can be accessed here: 2023 Risk Staffing Compensation Survey.

Feel free to share the link with law firm peers and colleagues.

And if anyone has questions, please do reach out to me directly. (Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

Let’s see what we learn this round!

Risk Update

Law Firm Conflicts Updates — Dentons’ Conflicts-influenced China Breakup, Trump Conflicts Concerns Continue

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Will Dentons’ China Breakup Trigger a Domino Effect?” —

  • “Dentons has decided to end its combination with Dacheng Law Offices, the mainland China arm of the firm… Dentons said in an email alert to its clients that its decision to end the combination is due to ‘an evolving regulatory environment for Chinese law firms in China—including new mandates and requirements relating to data privacy, cybersecurity, capital control and governance.'”
  • “The breakup puts an abrupt end to Dentons’ long-touted tagline of being the world’s largest law firm. As of last year, the firm reported a headcount of over 12,000 lawyers. It will force an inevitable reduction to Dentons’ $2.94 billion gross revenue intake reported in 2022.”
  • “The Big Four firms and their affiliated Chinese law firms have reportedly suffered raids from Chinese authorities, as did corporate investigations firm Mintz Group and American management consulting firm Bain & Company, according to The New York Times.”
  • “‘The Chinese regulator tends to be pretty opaque,’ said one Beijing-based partner at a U.S.-headquartered law firm. ‘But I think that’s going to increasingly be a challenge for global law firms to be able to operate in the marketplace. The intrusion of the Chinese government regulator into law firm business will not stop with Dentons.'”
  • “For international law firms that have substantial practices in mainland China, the country’s focus on national security and the broader geopolitical issues has major implications. Under the broad national security umbrella, Chinese lawyers can be required to divulge explicit client information to the state. Lawyers can also be prohibited from releasing China-related data to their international counterparts, all making basic conflict checks and due diligence on cross-border deals impossible to implement.”
  • “The ‘Chinese Wall’—an old term used to describe corporate measures adopted by firms to prevent information leaks internally—is now neither relevant nor adequate.”
  • “According to Kent Zimmermann, a U.S.-based principal at Zeughauser Group, there has been an increasing number of law firm leaders who have been reassessing their China operations in recent months. ‘Dentons is not the first professional services firm practicing law to pull out of China,’ said Zimmermann. ‘It is not going to be the last. Given the conditions, which make it virtually impossible to practice there as a Western firm and comply with the laws and regulations, it wouldn’t be unsurprising if other firms follow suit.'”
  • “American law firms will not risk having their lawyers go to jail over conflict checks, due diligence and their right to act in their clients’ interest, Zimmermann said. They will also not tolerate having Chinese authorities barge into their offices unannounced.”
  • “‘The solution may be exactly what Dentons is doing—to have an independent Chinese firm with which the Western firm has a close relationship, but they’re independent entities.'”

Trump’s Legal Team Is Enmeshed in a Tangle of Possible Conflicts” —

  • “Former President Donald J. Trump’s growing cast of lawyers is marked by a web of overlapping interests encompassing witnesses, co-defendants and potential targets.”
  • “M. Evan Corcoran, a lawyer who accompanied former President Donald J. Trump to court this week for his arraignment on charges of trying to overturn the 2020 election, has given crucial evidence in Mr. Trump’s other federal case — the one accusing him of illegally hoarding classified documents.”
  • “Another lawyer close to Mr. Trump, Boris Epshteyn, sat for an interview with prosecutors this spring and could be one of the former president’s co-conspirators in the election tampering case.”
  • “And Mr. Epshteyn’s lawyer, Todd Blanche, is defending Mr. Trump against both the documents and election case indictments.”
  • “While it is not uncommon for lawyers in complex matters — like large mob cases or financial inquiries — to wear many hats or to play competing roles, the Gordian knot of intertwined imperatives in the Trump investigations is particularly intricate and insular.”
  • “Some of the lawyers involved in the cases are representing both charged defendants and uncharged witnesses. At least one could eventually become a defendant, and another could end up as a witness in one case and Mr. Trump’s defender in a different one.”
  • “All of that sits atop another thorny fact: Many of the lawyers are being paid by Save America PAC, Mr. Trump’s political action committee, which has itself been under government scrutiny for months. Some of the witnesses those lawyers represent work for the Trump Organization, Mr. Trump’s company, but their legal defense has not been arranged by the company, but rather by Mr. Trump’s own legal team, a person with knowledge of the matter said.”
  • “Although clients might choose to stick with their lawyers despite a conflict, just this week, prosecutors under Mr. Smith sent up a warning flare about these issues. They asked Judge Aileen M. Cannon, who is overseeing the documents case, to conduct a hearing ‘regarding potential conflicts’ arising from the complex client list of one lawyer, Stanley Woodward Jr.”
  • “‘This is boundary breaking,’ Bruce Green, who teaches legal ethics at Fordham Law School in New York, said about the totality of the issues involved. ‘What I’m most curious about is why these lawyers want to play so many roles. Usually, lawyers just want to be lawyers.'”
  • “Many potential objections to conflicts in these cases could be waived by the clients or otherwise mitigated by the courts, Mr. Green said. But he cautioned that judges often lean toward avoiding conflicts at all costs — up to and including disqualifying lawyers who face them — because the consequences of allowing them to continue could result in the dismissal of the case.”
Risk Update

AML and More — US Law Firm AML Rules on the Move, Anti-money Laundering Allegations Hit Prominent Firms, UK SC Nixes Litigation Funding

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UIC School of Law, Chicago Professor Alberto Bernabe notes: “Breaking news: ABA House of Delegates approves changes to Model Rule 1.16” —

  • “Last February, the ABA House of Delegates, which is comprised of 597 delegates from ABA entities and state, local and specialty bar associations, adopted a measure that updates the ABA’s policy that endorsed for the first time ‘reasonable and appropriate’ federal government efforts aimed at combating money laundering. The policy seeks to balance the longstanding attorney-client privilege with the demands of governmental entities seeking access to information on criminal activities.”
  • “Following this policy, yesterday, the HoD adopted an amendment to Model Rule 1.16 ‘to protect lawyers from unwittingly becoming involved in a client’s or prospective client’s criminal and fraudulent activities.'”
  • “Reportedly, there was a lengthy debate on the proposal but it was eventually approved by a vote of 216-102.”
  • “The amendment creates a duty to ‘inquire into and assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation’ and adds a new (a fourth) case in which lawyers are obligated to refuse to represent a client or to withdraw from representing a current client.”
  • “This section of the amendment states that the a lawyer shall not accept the representation or shall withdraw from representation if ‘the client or prospective client seeks to use or persists in using the lawyer’s services to commit or further a crime or fraud, despite the lawyer’s discussion pursuant to Rules 1.2(d) and 1.4(a)(5) regarding the limitations on the lawyer assisting with the proposed conduct.”
  • “As you probably know, Model Rule 1.16(a) lists the circumstances when a lawyer is required to withdraw, while 1.16(b) lists the circumstances in which a lawyer may withdraw. Model Rule 1.16(b)(2) states that a lawyer may withdraw if ‘the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent.'”
  • “The original proposal before the House of Delegates eliminated this discretionary duty and essentially converted it to an obligation. But, at some point in the process it was decided to keep section 1.16(b)(2), so now we have a mandatory duty related to a client’s intent to engage in fraud, etc, and a separate discretionary duty.”
  • Read: Resolution and Full Report


Dentons accused of AML regulation breach” —

  • “Dentons has been accused of violating anti-money laundering (AML) regulations in a case set to go before the UK Solicitors Disciplinary Tribunal, reported the Law Society Gazette.”
  • “The firm allegedly failed to conduct an adequate check on a client’s source of wealth when it represented a ‘politically exposed person or his associated entities’ from May 2013 to June 2017, as per a notice published by the UK’s Solicitors Regulation Authority (SRA). The tribunal certified the validity of the case brought against Dentons.”
  • “In particular, the firm was accused of violating the Money Laundering Regulations 2007 with respect to compliance with legal and regulatory obligations, effective operation of the business in line with ‘proper governance and sound financial and risk management principles’ and compliance with AML legislation, the Gazette indicated.”
  • “The conduct, according to the allegations, broke the public’s trust in Dentons and its legal services.”
  • “Dentons confirmed in a statement that had ‘co-operated fully with the SRA throughout this investigation, which relates to a former client, and we will continue to do so.'”
  • “‘As a firm we are committed to strict compliance with all laws, regulations and professional standards of the jurisdictions we operate in’, the firm said.”
  • “The tribunal is set to hold a hearing later in the year.”

Clyde & Co to Face SDT Over Alleged Breach of Money Laundering Regulations” —

  • “Clyde & Co has been referred to the U.K.’s Solicitors Disciplinary Tribunal (SDT) for allegedly breaching money laundering regulations.”
  • “In a decision published on the Solicitors Regulation Authority (SRA) website, the regulator said that the allegations related Clydes’ handling of a number of matters on behalf of a client and companies used by the client involving a ‘failure to comply with anti-money laundering procedures and breach of Money Laundering Regulations’.”
  • “The SRA added that the alleged failures were ‘in relation to a number of matters spanning a period of over four years’.”
  • “In a separate decision, also published on Wednesday, the SRA also referred former Clydes’ partner Edward Mills-Webb to the SDT, after concluding there was a case to answer in respect of allegations which also relate to matters arising from the handling of a number of matters on behalf of a client.”
  • “In a statement, Clyde & Co commented: ‘In early 2019 we suspended a partner, Ed Mills-Webb and referred him to the Solicitors Regulation Authority of England & Wales in relation to matters concerning the application of the SRA Code of Conduct 2011 and the SRA Accounts Rules 2011. We assisted the SRA fully with its investigations and during that time Ed Mills-Webb resigned from the firm.”

‘Shockwaves’ as [UK] Supreme Court rules litigation funding deals unenforceable” —

  • “Litigation funders will have to redraft the terms of their agreements following a widely awaited ruling by the Supreme Court this morning. In PACCAR Inc & Ors v Competition Appeal Tribunal & Ors, four out of five justices ruled that such agreements fall within the statutory definition of damages-based agreements (DBAs). As they had been entered in to without satisfying conditions for DBAs, they were therefore unenforceable.”
  • “In lead judgment today, Lord Sales ruled that litigation funding falls within the express definition of ‘claims management services’ – which includes ‘the provision of financial services or assistance’ – in the Compensation Act 2006. Lord Reed, Lord Leggatt and Lord Stephens agreed.”
  • “Experts said the ruling would have significant implications for litigation funders. ‘The decision will send shockwaves through the funding industry and may lead to number of smaller operators going out of business,’ said Glenn Newberry, head of costs and litigation funding at international firm Eversheds Sutherland. ‘The decision is potentially a blow for the government as the collective funding of consumer claims has helped bridge the gap caused by the erosion of state funded legal assistance for civil claims. Funders themselves may well start to actively lobby to seek legislation which effectively reverses this decision.'”
  • “Alice Darling, senior associate at magic circle firm Clifford Chance, said the decision ‘has rendered many funding agreements currently in place unenforceable.'”
  • “Funders however said the industry would rapidly adapt. In a joint statement, the International Legal Finance Association and the Association of Litigation Funders of England and Wales said: ‘We are disappointed by this decision as it runs contrary to the accepted understanding that financing agreements are not damages based agreements.”


Risk Update

Ethics & Rules Updates — Non-lawyer Law Firm Ownership in Florida, California Misconduct Reporting Rule

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Ethics opinion to allow Florida lawyers to passively invest in out-of-state firms that include nonlawyer owners to be published for comment” —

  • “The Board of Governors has approved publishing proposed Advisory Opinion 23-1, which would allow a Florida lawyer to be a passive investor in an alternative business structure (ABS) in another state that allows non-lawyer ownership of law firms.”
  • “Last October, the PEC voted 26-9 to direct committee staff to work on a draft opinion using ABA Formal Ethics Opinion 499 for guidance. The committee was scheduled to hear the draft at the Bar’s Winter Meeting in January, but a lawyer for the inquirers requested more time to gather additional information to support the position.”
  • “Meeting the day before, the Board Review Committee on Professional Ethics voted 6-0 to recommend that the board approve publishing the proposed opinion.”
  • “As approved, the proposed advisory opinion states that a Florida lawyer may passively invest in an ABS in another jurisdiction, so long as: the ABS satisfies certain requirements. Specifically, the proposed opinion says the ABS cannot have any presence in Florida nor can it provide Florida legal services, the ABS must comply with all requirements of the jurisdiction that permits it, the Florida investor cannot have a managerial role, or provide legal services through the ABS, the Florida lawyer cannot be involved in the daily operations of the ABS, and the Florida lawyer may not have access to any confidential information regarding the ABS.”
  • “The staff’s draft opinion also cautions that ‘it does not address the propriety of investing Florida lawyer’s firm receiving referrals from the alternative business structure as those referrals may implicate concerns regarding solicitation, impermissible ‘feeder’ arrangements, and payments in exchange for referrals,’ according to a staff analysis.”

California Supreme Court Approves New Rule Compelling Attorneys to Report Misconduct by Other Attorneys” —

  • “The California Supreme Court has approved a new rule of professional conduct, rule 8.3 of the California Rules of Professional Conduct, that requires California attorneys to report any lawyer who commits a criminal act, engages in fraud, misappropriates funds or property, or engages in conduct involving ‘dishonesty, deceit, and reckless or intentional misrepresentations.'”
  • “The court’s decision was based on one of two recommendations (Alternative Two) approved for submission to the court by the Board of Trustees of the State Bar of California on May 18. The court modified the State Bar’s proposal by adding additional provisions and comments to the proposed rule, including:
    • Adding the courts as an additional avenue to report misconduct. When misconduct occurs during litigation, the court may have the power to investigate or act upon the alleged misconduct and to take appropriate corrective action.
    • Adding commentary to the new rule to note that a court’s finding of misconduct may be used as evidence to facilitate subsequent State Bar disciplinary proceedings.
    • Requiring attorneys to report others if their misconduct “raises a substantial question as to that lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects,” which is the same standard employed by other states with a similar reporting rule.
    • Citing another rule of professional conduct that requires a lawyer to take remedial measures if the lawyer knows someone who has or will engage in criminal or fraudulent conduct related to pending litigation.
    • Adding commentary to the new rule to make clear that a false report to the court, like a false report to the State Bar, can subject the lawyer to discipline or other criminal penalties.”
  • “The new rule follows several other directives from the court for the State Bar, including on noticing about attorney suspensions; updating its conflict of interest code for the Board of Trustees; and to develop new rules requiring candidates for the Board of Trustees and State Bar Court be screened for potential conflicts of interest.”
Risk Update

Conflicts News — Insider Trading Sentencing Stalled Due to Conflict Call, Judicial Conflict Called Out

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Ex-Congressman’s Insider Trading Sentencing Delayed Due to Last-Minute Notice of Conflict” —

  • “U.S. District Judge Richard Berman of the Southern District of New York on Monday ordered a last-minute adjournment of former U.S. Rep. Stephen Buyer’s sentencing on insider trading charges, citing a potential conflict of interest issue that came to light in the days leading up to the scheduled proceeding.”
  • “Berman said Buyer’s defense counsel, Orrick Herrington & Sutcliffe partner Henry Asbill, informed the court that Orrick also represents T-Mobile.”
  • “Buyer, who was elected as an Indiana Republican and served from 1993 to 2011, was found guilty in March of insider trading in connection with the 2020 merger of Sprint and T-Mobile, along with a separate insider trader scheme involving the consultant firms Navigant and Guidehouse. He worked as a consultant for both T-Mobile and Guidehouse, according to his indictment.”
  • “Assistant U.S. Attorney Kiersten Fletcher said Asbill represented that he was not aware of the potential conflict during Buyer’s trial.”
  • “‘Mr. Asbill has represented that this was just brought to his attention in the last few days,’ Fletcher said.”
  • “Asbill said attorneys at Orrick are working ‘as fast as we possibly can’ to sort out the issue and determine whether the conflict can be waived and whether negotiations ‘between us and Mr. Buyer or between us and T-Mobile’ will be required.”

Judge Who Thought His Obvious Conflict Of Interest Wasn’t A Conflict Of Interest Told In No Uncertain Terms: Yea, It Was A Conflict of Interest” —

  • “It has been a very long time since Alvin Hellerstein graduated from law school (67 years, to be precise), and it shows in at least one aspect of his jurisprudence: Conflicts of interests.”
  • “As we’ve discussed, the aged Manhattan federal judge got more than his fair share of the voluminous proceedings emanating from ethically- and legally-challenged (albeit, on the latter, not quite as legally-challenged as prosecutors thought) hedge fund Platinum Partners.”
  • “As it turns out, Hellerstein knew all about the Platinum mess, on account of the indictment and subsequent cooperation of his sort-of surrogate son, the hedge fund’s marketing chief, having advised the boy on his situation and options. None of that latter bit seemed to Hellerstein worth mentioning when first he landed the bribery trials of Platinum co-founder Murray Huberfeld and former New York City corrections union chief Norman Seabrook, and later the sentencing hearing for the literal leather bagman standing between the two, Jona Rechnitz.”
  • “Seabrook was duly tried, convicted and sentenced to just a hair under five years in prison. In the meantime, Huberfeld pleaded guilty, with Hellerstein sending him up the river for five times as long as prosecutors asked. Finally, 10 months later, he got around to Rechnitz. In spite of prosecutors praising Rechnitz as ‘one of the single most important and prolific white collar cooperating witnesses’ and insisting he had no idea that Platinum was up to no good, ‘or even that it was a bad investment,’ Hellerstein rejected the Probation Office’s suggestion that Rechnitz pay only the $1.2 million the corrections’ and NYPD unions paid in management fees to Platinum and insisted on half the $19 million lost when Platinum eventually collapsed.”
  • “Then Huberfeld found out about Hellerstein’s relationship to Andrew Kaplan, the ex-Platinum executive. Well-versed as he was in matters of facilitating them via bribery, that sounded an awful lot like a conflict of interest to Huberfeld.”
  • “Meanwhile, Rechnitz got wind of Huberfeld’s reassignment, and decided he’d like a new judge, too. Just 16 days after decided not to resentence Huberfeld, however, Hellerstein said he saw no reason to hand off Rechnitz’s sentencing, even if he had given Kaplan a few pointers on how to negotiate with prosecutors and judges, and even if for unstated reasons he’d decided not to resentence Huberfeld. And even after Kaplan asked him to think it over a while, Hellerstein still said there wasn’t even the appearance of impartiality in Rechnitz’s restitution order, and what’s more he wasn’t allowed to appeal the matter to those nitpickers on the Second Circuit. And with good reason, ‘cuz when they heard about in spite of the lack of writ of mandamus, they were not pleased:
    • ‘We conclude that the district judge abused his discretion by not reassigning the case…. That relationship was not only remarkably close; it was with a person who was directly involved in Rechnitz’s bribery case. Kaplan was mentioned in Rechnitz’s testimony—both in the initial joint trial of Seabrook and Huberfeld and in the retrial of Seabrook before Judge Hellerstein—several times as one of the Platinum employees involved in securing the COBA investment. That relationship alone, in light of these factual circumstances, was sufficient to raise serious questions about the need for recusal.
    • ‘But the facts here are even more complicated. The district judge did not merely have a close personal relationship with Kaplan; he advised Kaplan on his criminal case arising out of the Platinum collapse…. This close relationship, and the district judge’s advisory role, is further problematic in light of the restitution question, because Kaplan and Rechnitz’s interests are plausibly adverse on that issue. COBA, of course, can recover its losses only once, even though two groups—those involved in the bribery scheme and those involved in the fraud—arguably caused them. It therefore remains uncertain from whom COBA will recover the $19 million it lost. Because Kaplan is a defendant in the Platinum case, it is possible that he will be ordered to pay restitution. There is thus a reasonable and apparent relationship between COBA’s recovery from Rechnitz, Seabrook, and Huberfeld (the defendants in the bribery case) and its possible recovery from the defendants in the Platinum case (including Kaplan): the more COBA recovers from the bribery defendants, the less it will need to recover from the Platinum defendants.'”
Risk Update

Public Conflicts — Trump Co-defendants Counsel Faces Conflicts Concerns,

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Special counsel asks if Nauta’s attorney has too many Mar-a-Lago clients” —

  • “Special counsel Jack Smith has asked Judge Aileen M. Cannon for a hearing to discuss whether the lawyer who represents one of Donald Trump’s co-defendants in the classified documents case has too many conflicts to provide adequate legal advice to his client.”
  • “In a court filing Wednesday, prosecutors said Stanley Woodward — the lawyer for Trump valet Waltine ‘Walt’ Nauta — has represented at least seven other clients whom prosecutors have interviewed about Trump’s alleged efforts to keep classified documents in defiance of the government’s demand they be returned. Two of Woodward’s clients could be called as government witnesses in the trial, the filing said.”
  • “‘The conflict may result in the attorney’s improper use or disclosure of the client’s confidences during the cross-examination,’ the filing reads. ‘The conflict may cause the attorney to pull his punches during cross-examination, perhaps to protect the client’s confidences or to ‘advance the attorney’s own personal interests.’”
  • “Smith asked Cannon to hold a hearing in which the judge would inform Nauta and the two witnesses, whose names have not been made public, of their legal rights and the potential conflicts their attorney poses. Lawyers are generally required to flag to a judge any potential conflicts of interest they encounter.”
  • “If there is a conflict, Nauta would be asked if he still wants Woodward to represent him and if he waives his right to conflict-free representation. Cannon should then determine whether to accept that waiver. Smith suggested that Cannon arrange for an independent lawyer to be at the hearing to advise Nauta and the witnesses if they want.”
  • “‘How is Woodward going to cross-examine the Trump employee when he is not waiving his rights?’ said Joseph A. DeMaria, a former federal prosecutor in Miami who now works as a private attorney.”
  • “The potential conflict highlights how a relatively small group of lawyers are representing a large share of the people entangled in Trump’s legal battles. In addition to the classified documents indictment, the former president was charged Tuesday with conspiracies in connection with the effort to overturn the 2020 election results. He also faces state charges of falsifying business records, and is under investigation in Georgia for trying to block Joe Biden’s victory in that state.”

Conflict of interest draws suspension for West Des Moines lawyer” —

  • “A lawyer who has spent two decades representing various Iowa cities and counties has agreed to a 30-day suspension of his law license due to admitted conflicts of interest.”
  • “In an affidavit filed with the Grievance Commission of the Supreme Court of Iowa, Brick acknowledges that while representing the city of Muscatine, he shared with the then-city administrator, Gregg Mandsager, information about the City Council’s plans to fire Mandsager. Brick also acknowledges he counseled Mandsager on how to set up the mayor and council for a claim of retaliation Mandsager could file against them.”
  • “Court records indicate that the situation grew out of a 2017 case in which a district court judge ruled the City Council had illegally removed the mayor, Diane Broderson, from office, and Mandsager filed a defamation lawsuit against Broderson and the city.”
  • “In April 2019, aware that some council members wanted him fired, Mandsager contacted Brick asking for advice about settling his defamation claim against the city. In his affidavit, Brick admits that he outlined a few options as to how the city administrator could proceed and then wrote, ‘Either way, you would want to make a big public statement about how much you look forward to working with the mayor and the council so you can set them up for a retaliation claim.'”
  • “Brick admits that in the months that followed, as the lawsuit was settled and the council moved forward with plans to fire Mandsager, he provided advice to the council but also continued to communicate with Mandsager, sharing information about the council’s plans and providing advice to Mandsager on how best to proceed with a lawsuit against his client, the city.”
  • “Despite that, Brick states in his affidavit, he wrote to a council member and assured him that if Mandsager was to ask for any legal assistance he would tell Mandsager he worked for the council and so Mandsager would need to obtain his own attorney.”
  • “Brick acknowledges that even as he provided such assurances to the council, he continued to give advice to Mandsager. At one point, Mandsager was watching a livestream of a council meeting and texting Brick at the meeting, asking Brick to address certain matters. ‘Hold on,’ Brick texted back, ‘I’m trying to save your job.'”
  • “A few weeks later, Brick admits, he texted Mandsager to alert him to the fact that one council member ‘just outed me as someone working behind the scenes on your behalf. I’m not sure any of them would be surprised by that, but it certainly makes it even less likely that they would take my advice.'”
  • “In his affidavit, Brick admits that when the council drafted, with Brick’s help, an order terminating Mandsager’s contract with the city, Brick didn’t tell the council that the order’s wording was, in his opinion, legally insufficient — but he did alert Mandsager to that fact.”
  • “In response to Brick’s affidavit consenting to a 30-day suspension, the Iowa Supreme Court Attorney Disciplinary Board agreed that such a penalty was warranted.”
  • “The board said Brick’s ‘more than 20 years of experience as an attorney’ and his ‘deliberate deception of his client’ were aggravating factors in the case.”
Risk Update

Client Due Diligence — Perspectives on Risk, Costs and Concerns Tied to Law Firm New Business Intake and CDD

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Due Diligence Missteps Are Costly, and Smaller Firms Are Often Less Prepared” —

  • “Skimping on due diligence when it comes to working with new clients can bear heavy consequences for law firms, such as Eckert Seamans Cherin & Mellot, which is in the midst of negotiating a $45 million settlement to make up for a former attorney’s alleged role in helping a merchant cash loan business and an investment services firm defraud investors of nearly $500 million.”
  • “The law firm and former partner John Pauciulo are in hot water for their representation of an investment firm that solicited investors for Par Funding, a Philadelphia lending outfit whose owners are now subject to a raft of criminal charges. In the process of going after Par and investment firm A Better Financial Plan, the Securities and Exchange Commission censured Pauciulo for omitting details of risks in materials he prepared for potential investors.”
  • “Meanwhile, the owner of the investment firm says in a malpractice suit that Eckert Seamans was negligent in its oversight of Pauciulo, who himself was allegedly negligent in either knowing and not disclosing or else not knowing about the criminal history and shady business practices of the owner of Par.”
  • “However, not every firm has the same resources available to conduct proper and thorough due diligence when it comes to clients or affiliated businesses; according to law firm leaders and consultants, smaller firms have fewer resources to dedicate to diligence efforts, often resulting in added risk for the firm. Eckert Seamans, ranked No. 187 in the most recent Am Law 200 rankings, declined to comment on its own due diligence approach for this report.”
  • “The firm is also fighting a long-running breach-of-fiduciary-duties lawsuit brought by a former gaming client in Pennsylvania federal court, which alleges it also represented a competitor in matters where the two had adverse commercial interests.”
  • “Conversations with consultants and law firm leaders indicated that there is no set industry standard when it comes to law firms conducting due diligence.”
  • “Even with fewer resources, there are several warning signs early on in an interaction with a client that might flag future problems for the firm, including one’s ‘Spidey sense’ about a client and its legal needs.”
  • “Eileen Garczynski, senior vice president and equity partner at business insurance and risk management firm Ames & Gough, added that she felt ‘firms should be using checklists’ to make sure they address all concerns with a client.”
  • “Her checklist of red flags included lack of information about an organization or client, a client having inexplicable revenue growth, a client’s refusal to provide information, stalling tactics, including rescheduling meetings early on, and having an advisory board full of people who don’t actually play a real role in the business.”
  • “Garczynski also said that a client having frequent changes in professional relationships, such as switching counsel on a regular basis, might be an indicator of an issue.”
  • “Even when attorneys are well-versed in spotting these red flags, however, things might still be missed when firms conduct due diligence. Garczynski pointed to a desire for speed as a possible reason behind neglecting or skipping thorough intake procedures.”
  • “‘[There’s] a lot of motivated reasoning that can prevent the lawyer from seeing the warning signs,’ she said. But even larger firms are subject to missteps too. Levin pointed to the stress of the ‘eat-what-you-kill model,’ flagging it as a reason why attorneys may look the other way when red flags pop up.”
  • “‘The problem with intake is it’s always so early… there may be a rush to it, so you might not get as much information as you really need,’ [University of Connecticut School of Law professor Leslie] Levin said. ‘Every firm in this country, big, little, no exceptions, has been unpleasantly surprised by a client engaging in fraudulent activity.'”
Risk Update

Complex Conflicts — Freivogel’s Fascinating Findings, Rhode Island SC on Simultaneous Representation Conflicts, Lawyer Corporate Board Seats & Conflicts

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With a hat tip, as always, to the “Godfather of Conflicts,” here are the latest sightings of interest from Bill Freivogel:

  • Medtronic, Inc. v. Becton, Dickinson & Co., 2023 WL 4370686 (D. Kan. July 6, 2023).
    • “Medtronic made a motion to compel Becton to produce certain materials. Becton defended the motion to compel, in part, by claiming Medtronic’s lawyers had a Rule 1.7 conflict of interest.”
    • “In this opinion the magistrate judge rejected that defense, saying Becton could have made a motion to disqualify those lawyers. Because Becton did not, the court said it was ‘unnecessary’ to resolve the conflict issue. The court went on to grant in part, and deny in part, Medtronic’s motion to compel on other bases.”
  • Boozer v. Fischer, No. 22-0050 (Tex. June 30, 2023).
    • “This opinion is a mini-treatise on escrow agreements. We will focus on the one conflicts-related issue: Whether a lawyer for one party may act as an escrow agent for both parties.”
    • “Party A put $1 million in escrow for later payment to Party B if Party B prevailed in court. A’s lawyer (‘Lawyer’) was the escrow agent. Lawyer stole the money.”
    • “In this opinion the court ruled that the risk of loss fell on Party A. In the course of the opinion the court ruled that one party’s lawyer can be the agent in an enforceable escrow arrangement, provided, in part, that the agent’s interests do not conflict with those of the principal (in this case, Party A).”
  • In re Valentino, 2023 IL App (1st) 221155-U (Ill. App. 1st Dist. July 14, 2023).
    • “Son petitioned for guardianship for Son’s 90-year-old father (‘Father’), against Father’s wishes. Lawyer represented Father. The case settled, and Lawyer petitioned for fees. Son objected.”
    • “The trial court granted the fee request, and Son appealed. Son claimed that Lawyer had a conflict because Lawyer had done some things at Father’s request that benefitted Father’s lady-friend (‘Ms. G’). An issue in the case is whether Ms. G had wrongfully taken money from Father.”
    • “In this opinion the appellate court affirmed the fee order, holding that there was no evidence of a lawyer-client relationship between Lawyer and Ms. G, and that Lawyer’s doing things at Father’s request that benefitted Ms. G did not make Ms. G Lawyer’s client.”
  • Wheatley v. County of Orange, 2023 WL 4443011 (Cal. App. Unpub. July 10, 2023).
    • “The Wheatley law firm (‘Wheatley’) had a contract with Orange County to defend workers’ compensation cases. The county terminated the contract, and, in this case against the county, Wheatley is claiming the contract termination was wrongful.” The Lynberg law firm (‘Lynberg’) is defending the county.”
    • “As a result of the county’s termination, Wheatley let go one of its lawyers. That lawyer sued Wheatley for wrongful employment termination. Wheatley hired Lynberg to defend that case before this case went to court.”
    • “For a time, Lynberg was representing the county in anticipation of this case against Wheatley and representing Wheatley in the employment case. The opinion does not reveal how Lynberg missed the conflict. In any event, Wheatley moved to disqualify Lynberg in this case. The trial court granted the motion to disqualify. In this unpublished opinion the appellate court affirmed. Because this case involves a current client conflict, the court said rules relating to successive representation or screening are not applicable.”

It’s the ‘Golden Age’ for Lawyers Seeking Corporate Board Seats” —

  • “Public companies are increasingly looking for lawyers to become corporate directors, bringing legal expertise to the boardroom and prestige to attorneys who can navigate potential conflicts.”
  • “Lawyers have long served on the boards of privately held companies and nonprofits. US public companies are coming to see the value of having more legal know-how in the boardroom as the web of compliance and regulatory requirements grows, said Susan Hackett, a former top lawyer for the Association of Corporate Counsel.”
  • “Jeh Johnson, the former Homeland Security Department chief, is a prominent example. He serves as director at three companies—United States Steel Corp., MetLife Inc., and Lockheed Martin Corp.—while also working as a partner at Paul, Weiss, Rifkind, Wharton & Garrison. Robert Kimmitt, another former government official, serves on the board of Facebook parent Meta Platforms Inc. while working as senior international counsel for Wilmer Cutler Pickering Hale and Dorr.”
  • “Roughly 1,500 board seats become available each year, many of them with annual cash-and-stock compensation packages averaging $300,000, said Wendeen Eolis, a veteran legal recruiter.”
  • “Law firms have become more open to the potential business opportunity that comes with putting their lawyers on corporate boards, and less worried about conflicts that could impact current business.”
  • “‘You’re going to be in the presence of a significantly credentialed, capable, and highly respected group of fellow board members, many of whom are CEOs of other companies,’ Eolis said.”
  • “Williams and Eolis said the conventionally understood threshold for maximum number of directorships a lawyer can hold is likely three for public companies. While many firms appear to have loosened their restrictions, Williams said lawyers still ‘have to be very cautious on the conflicts side.'”
  • “Increased exposure fueled by merger mania in Big Law and an uptick in lateral hiring has compelled firms to address and resolve all kinds of conflicts, including those that arise from board service, Eolis and Hackett said.”
  • “Some companies require that lawyer-directors wall off or recuse themselves from legal matters involving their firm to ensure independence. But partners are compensated from the shared revenue of the firm where they work, said Goldstein. They could also supervise or oversee other lawyers that could be doing work for a company on whose board they serve, he said.”
  • “ISS recommends that companies avoid choosing directors from firms that are also their outside counsel. Providing legal services requires ‘close collaboration with senior management,’ Goldstein said.”
  • “Lawyers who retire from a firm can be considered for a board seat with a firm client, Goldstein said. This workaround allows some former Big Law partners to take on board roles and retain of counsel, senior counsel, or other roles with their firm that doesn’t include a share of the firm’s revenue and does not receive any form of compensation from the firm in excess of $10,000 a year.”

Rhode Island Supreme Court Ethics Advisory Panel Op. 2023-4 (Lawyers Weekly No. 75-016-23) (2 pages) (July 17, 2023): “Attorneys – Conflict of interest – Simultaneous representation” —

  • “Where (1) an attorney’s law firm was recently appointed as the town solicitor for a municipality and (2) the law firm is also legal counsel to a management agency that makes consistency determinations for certain development projects, the law firm’s simultaneous representation of the municipality and the agency does not present a conflict of interest despite the Town Council’s approval of a resolution in opposition to the certain type of development project that the agency is tasked with reviewing.”
    • ‘The inquiring attorney’s law firm was recently appointed as the Town Solicitor for a municipality (‘Town’). The law firm is also legal counsel to a management agency with regulatory functions (‘Agency’). As part of its regulatory functions, the Agency reviews and makes consistency determinations for certain development projects. It has recently conducted one such review and anticipates it will be conducting another such review in the future.’
    • ‘At a recent Town Council meeting, the Town Council approved a resolution in opposition to the certain type of development project that the Agency is tasked with reviewing. The inquiring attorney was present at this meeting, along with an associate from his/her law firm and both submitted a recusal form to the clerk and recused from the matter. The inquiring attorney advises that the resolution did not mention the Agency and was not forwarded to the Agency. Rather, it was forwarded to other municipalities and certain elected officials.’
    • ‘The inquiring attorney asks whether his/her law firm’s simultaneous representation of the Town and the Agency presents a conflict of interest.’
    • ‘It is the Panel’s opinion that there is no conflict of interest because, on the facts presented, the Agency and Town do not have adverse interests.’
    • ‘The inquiring attorney’s law firm has a lawyer-client relationship with the Town. Therefore, under Rule 1.7, he/she may not represent clients with interests adverse to the municipality. However, based on the facts described by the inquiring attorney, it is the Panel’s opinion that the Agency’s interest is not adverse to the Town or its Town Council. The Town Council simply took a position on the type of development project that the Agency is tasked with reviewing. In the absence of competing interests, there is no concurrent conflict of interest.’
    • ‘The Panel emphasizes, as it has done in the past, that whether a conflict of interest exists is determined on a case by case basis. While the Panel sees no conflict of interest based on the facts presented, it does caution the inquiring attorney to be mindful of the possibility of such a conflict arising in the future.’
  • PDF of the full opinion here.
Risk Update

Conflicts Considerations — Late Caught Arbitrator Conflict Causes Varian Vacatur, Judge’s Past Relationship Results in New Criminal Trial, Limiting Malpractice Liability, Conflicts & Rule 1.8(b)

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Fascinating find and analysis from Baker McKenzie partners Jacob M. Kaplan and David Zaslowsky: “Arbitration. Vacatur of Award. District court vacates arbitration award due to evident partiality because one of the arbitrators failed to disclose that he was a former client of the attorneys for one of the parties to the arbitration” —

  • Equicare Health Inc. v. Varian Med. Sys., Inc., 5:21-mc-80183-EJD, (N.D. Cal. April 19, 2023) [click for opinion]
  • “When sales of Equicare’s software plummeted, Equicare claimed that Varian breached this duty and alleged that Varian instead promoted its own competing product. Equicare therefore initiated arbitration proceedings against Varian through the American Arbitration Association (the ‘AAA’).”
  • “The AAA appointed a three-member panel to adjudicate the dispute, including Mark Dosker. As per its rules, the AAA required each arbitrator to respond to a series of conflict-of-interest questions. Mr. Dosker responded ‘NO’ to all thirty-one conflicts questions, including ‘Do you have, or have you had any attorney-client relationship with a party or lawyer for a party?'”
  • “However, this statement was not true. Counsel for Varian, Ms. Quyen Ta, had served as counsel to Mr. Dosker and his law firm, Squire Sanders, five years prior, in a 2013 legal malpractice suit. Ms. Ta immediately disclosed this potential conflict of interest to the AAA. Despite Ms. Ta’s disclosure, the AAA did not share this information with Equicare or its counsel. Neither party objected to Mr. Dosker’s appointment to the panel.”
  • “The arbitration proceeded to a hearing, after which the panel issued a final award in favor of Varian. The panel found that, while Varian breached the ‘commercial best efforts’ clause in the contract, there was insufficient evidence of damages. In so ruling, the panel chose not to accept an independent auditor’s findings that Varian owed about $1.9 million to Equicare.”
  • “After receiving this decision, Equicare began an investigation into the background of the panel and independently discovered the former attorney-client relationship between Mr. Dosker and Ms. Ta. Equicare therefore filed a petition in the United States District Court for the Northern District of California to vacate or correct the arbitration award based on evident partiality arising out of the former attorney-client relationship.”
  • “The court granted the petition and vacated the arbitration award. The court applied the legal standard found in Section 10(a)(2) of the Federal Arbitration Act (the ‘FAA”), which permits a district court to vacate an arbitration award where, inter alia, “there was evident partiality or corruption in the arbitrators.” 9 U.S.C. § 10(a)(2).”
  • “The court also noted that Mr. Dosker’s failure to conduct an adequate investigation in the first instance breached the independent duty on arbitrators to investigate for potential conflicts, a violation that ‘may result in a failure to disclose that creates a reasonable impression of partiality.'”

Sexual relationship between judge and prosecutor entitles murder defendant to new trial, court rules” —

  • “The top criminal court in Oklahoma has ruled that a defendant convicted of murder in 2021 is entitled to a new trial because the judge and one of the prosecutors had a prior sexual relationship.”
  • “The judge, Judge Timothy R. Henderson, had admitted to consensual ‘sexual conduct’ with the prosecutor that ended before the trial but said the relationship didn’t affect his rulings. The prosecutor was identified only as ‘K.C.’ in the Oklahoma Court of Criminal Appeals’ decision.”
  • “Because of the undisclosed relationship, Hashagen was deprived of the right to a fundamentally fair trial that created a potential for bias, the appeals court said.”
  • “Henderson resigned his judgeship in spring 2021—after the prosecutor and two other lawyers accused him of sexual misconduct, according to Law & Crime.”
  • “Henderson acknowledged a sexual relationship with two prosecutors, but he said it was consensual, according to past coverage by the Associated Press. A special prosecutor declined to bring charges in connection with the allegations.”

Amy G.McClurg, Assistant Counsel at Thomson Hine writes: “Rule 1.8(h): Permissibly limiting your malpractice liability or unwittingly violating ethics rules?” —

  • “Rule 1.8 addresses conflicts that can arise between a lawyer and client (as opposed conflicts between clients). Prior to the adoption of Model Rule 1.8 in 1983, the ABA Model Code flatly prohibited agreements limiting liability.”
  • “This rule was in stark contrast to the rules governing many others, including large accounting firms and lawyers in Europe, who often had agreements limiting their liability to clients for their work on deals alongside American lawyers who could not limit their liability (which raised numerous problems with potential disproportionate liability for deals gone bad).”
  • “In 2002, the ABA again amended Model Rule 1.8(h)… Model Rule 1.8(h)(1) now states that ‘A lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement.'”
  • “Approximately 28 states have adopted the language in Model Rule 1.8(h)(1) entirely. Seven states have similar language to that of the Model Rule but have added the requirement that such agreement must also be “permitted by law”. Nine states still outright prohibit such prospective agreement. The seven remaining states have language that does not squarely fit into any of the aforementioned categories.”
  • “The reasons for wanting to limit your liability in any given situation are likely obvious, but whether or how you should pursue such endeavor is far less clear.”
  • “Choose your language wisely . Attorneys licensed in multiple jurisdictions and law firms spanning across multiple states must be keenly aware of any differences in the applicable rules… Using the wrong language could subject the lawyer to additional rule violations.”
  • “Merely refraining from plugging in prospective agreements into your engagement letters will not ensure Rule 1.8 compliance. Lawyers barred in jurisdictions like DC, where such agreements are forbidden, must still examine less obvious conduct that may constitute a Rule 1.8 violation.”
  • “While New York similarly prohibits lawyers from prospectively limiting malpractice liability, one New York opinion found that 1.8(h) is not violated simply due to a lawyer advising a client to accept a plea deal that includes waiving an ineffective assistance of counsel claim on appeal.”
  • “Prospectively limiting malpractice liability is a conflict of interest and compliance requires satisfaction of the Rule 1.8 conditions. Lawyers must be careful in choosing which words should or shouldn’t be used in the agreement.”