Bressler Risk Blog

“China’s Regulations Went From Being a Client Problem to a Law Firm Problem, Too” —

• “For months, rising global tensions and toughening cross-border regulations have kept law firms busier than ever advising clients on how to successfully—and legally—operate a multinational organization. Now, law firms could start to feel the pain their clients are experiencing—and one already has.”
• “Dentons’ decision to end its longtime combination with Chinese firm Dacheng came amid regulatory one-upmanship between the U.S. and China that has restricted investment between the nations’ entities. At the same time, new Chinese regulations make certain legal work near impossible to do.”
• “The security risks to client information or the inability to share information, among other difficulties arising from a shifting regulatory landscape, were too great for Dentons to stomach. The firm’s decision to remove itself from the situation is one other firms could soon face.”
• “‘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.'”
• “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.”
• “In 2021, China also started its tech crackdown on companies that have access to and hold data of Chinese users. New cybersecurity laws have also been imposed, making dealmaking onerous and risky. Companies wanting to share data outside of China must now go through a national security review.”
• “Kent Zimmermann, a principal at the Zeughauser Group, told Law.com International that 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 surprising if other firms follow suit.'”

“Arb Seeks Win In Chris Cuomo DQ Bid Amid $125M CNN Row” —

• “The arbitrator overseeing television journalist Chris Cuomo’s $125 million wrongful firing case against CNN has asked a New York state court to shut down Cuomo’s effort to disqualify him over an alleged conflict of interest, saying Cuomo “cannot come close” to meeting the high bar necessary for obtaining that relief.”
• “In a summary judgment motion filed Tuesday, JAMS Inc. arbitrator Stephen P. Sonnenberg said Cuomo’s Hail Mary attempt to disqualify him based on tenuous and decades-old connections between CNN and Paul Hastings LLP — where Sonnenberg worked for 25 years as a labor and employment attorney before becoming an arbitrator — has run its course, and should now be shut down. JAMS itself is also a defendant.”
• “‘This entire proceeding should begin and end with the JAMS rules to which petitioner contractually agreed, and by which he is bound,’ JAMS and Sonnenberg wrote.”
• “Cuomo has already twice failed to disqualify Sonnenberg under those internal JAMS rules, Sonneberg said. To have a New York state court step in,  he needs to show that there are ‘circumstances’ at play or the possibility of ‘injustice.'”
• “Cuomo initiated his arbitration proceeding against CNN in March 2022, seeking $125 million after the network fired him in December 2021 for allegedly violating its journalistic standards by assisting his brother, New York Gov. Andrew Cuomo, during a time of “personal and political crisis” that led to the Democratic politician’s August 2021 resignation.”
• “Both CNN and Cuomo agreed on the choice of Sonnenberg to handle the case, and beforehand Sonnenberg said in a disclosure form that while it’s possible Paul Hastings may have had ties to one or the other party, he didn’t personally recall ever working with either. Sonnenberg left Paul Hastings in 2018.”
• “In the spring of 2023, however, Cuomo claims that some of Sonnenberg’s rulings led him to do a ‘deep dive on Sonnenberg’s background and prior relationships,’ as he put it in a court filing. Cuomo said he was then ‘shocked to learn’ that Paul Hastings had represented CNN in several proceedings before the National Labor Relations Board, the most recent of which wrapped up nine years ago.”
• “Shortly thereafter, CNN disclosed that Sonneberg had ‘personally handled a matter for the CNN parties for approximately three months in 2003,’ and was paid less than $3,000 in fees for that work. Sonneberg claims he still has no memory of that representation.”

“Perkins Can Stay At Defense Table For Intel In Memory IP Suit” —

• “Perkins Coie LLP can continue to defend Intel Corp. in a patent case focused on superconductor memory technology because the firm’s contacts with the plaintiff — including a prior engagement — don’t represent a substantial risk of conflict, an Oregon federal judge has ruled.”
• “In a Friday order denying a disqualification bid by BeSang Inc., the court said there was no dispute that BeSang’s chief executive, Sang-Yun Lee, hired Perkins Coie 14 years ago for a potential manufacturer contract. But that work was limited, the court said. Back in 2009, Lee had only a single, hourlong meeting with Perkins Coie lawyers about the possible deal. They later produced a largely ‘boilerplate’ draft for an agreement that never got off the ground.”
• “Submissions from BeSang and Intel also showed that Lee himself was surprised the firm had produced a draft at that early stage, and that Perkins Coie never got descriptions of BeSang technology or processes, the court concluded.”
• “‘Had the representation proceeded, there might indeed have been a substantial risk that the information [BeSang] outlines … would be shared and would materially advance defendant’s position in this litigation,’ the judge said. ‘But where the record shows only a high-level preliminary conversation, the risk that Perkins Coie obtained such information is not substantial, and the extreme step of disqualification of counsel is not warranted.'”
• “In the Friday decision, U.S. District Judge Marco Hernandez said BeSang had argued that the 2009 representation was related to the current case, and that Perkins likely had information that could aid Intel with ‘claim scope, claim construction, infringement, invalidity, and damages.'”
• “In addition to the 2009 representation, Lee argued that disqualification was also warranted because he’d been in contact in 2020 with Perkins Coie lawyers about a potential IP licensing deal and venture capital fundraising. Separately, he pointed to communications and a meeting in 2021 with another Perkins Coie attorney, Chun Ng, about a potential patent infringement case against a different company.”
• “After a preliminary conflict check and meeting with Lee, Ng said he ‘declined representation early in the conversation’ because many of the patents at issue were about to expire and the potential defendant ‘had no sales in the United States,’ according to the order.”
• “The court concluded that, like the 2009 matter, neither of the more recent contacts resulted in Perkins Coie obtaining information that could be harmful to BeSang in the Intel case.”

“Plaintiffs in Roundup lawsuit drop effort to disqualify prominent St. Louis attorney” —

• “Plaintiffs’ attorneys have withdrawn a motion seeking to disqualify attorney Bob Blitz as a special master in a Roundup lawsuit because of his close legal and business relationship with attorney James Bennett.”
• “Plaintiffs’ attorneys filed the motion to disqualify after learning Aug. 9 that Bennett, a partner with Dowd Bennett, would be the lead trial counsel in the case. Their motion cited Bennett and Blitz serving currently as co-counsel in a federal lawsuit against Ameren Missouri; Bennett representing Blitz and his law firm, Blitz Bardgett & Deutsch LC, in a 2015 lawsuit; and the $276.5 million in fees their firms shared when the lawsuit against the National Football League and the Los Angeles Rams was settled.”
• “Toward the ending of Tuesday’s hearing, May said if he granted the motion to disqualify Blitz, the McCostlin Roundup trial would have to be delayed until Sept. 17, 2025. May stressed to plaintiff attorney Joe Jacobson that he was not telegraphing what his decision would be on the motion to disqualify.”
• “The prospect of a two-year delay in the McCostlin trial is the reason why the motion to disqualify was withdrawn, said Jacobson, a shareholder in Jacobson Press PC. The plaintiffs’ attorneys brought in Jacobson to file the motion to disqualify.”
• “‘Even though we thought it was a good motion – and the judge did not dismiss it out of hand – we felt that it was in the client’s best interests to move forward with the case,’ Jacobson said.”

Brian S. Faughnan writes: “At the intersection of ethics and entrepreneurial acts” —

• “A case written up by Mike Frisch earlier this month caught my eye because it involves a discussion of two still-evolving areas of claims that can get made against law firms.”
• “Most of the case, and most of what Frisch focuses on, is the malpractice claim that was made regarding an alleged lost opportunity to settle a case. Although the Vermont Supreme Court did join a growing list of states to explicitly recognize that lost opportunity to settle can be a variety of actionable legal malpractice, the plaintiff’s loss at the summary judgment stage was affirmed.”
• “The second half of the Vermont case involved overturning a grant of summary judgment in favor of the law firm as to a claim under the Vermont Consumer Protection Act.”
• “The potential application of state consumer protection acts against lawyers and law firms is something I first wrote about back in 2006.”
• “Over the ensuing 17 years, general traction has been obtained for the notion that you cannot sue a lawyer or law firm under such statutes for claims relating to the core things that involve the practice of law such as rendering legal advice but that you can do so for things involving ‘entrepreneurial aspects of the practice of law.'”
• “In the case before the Vermont Supreme Court, the consumer protection act claim turned on the fact that the defendant law firm, in landing the client, had been alleged to have made representations that certain tasks would be delegated to associates and others when appropriate. Now that sounds innocuous out of context, but the allegations were that the entire case was handled primarily by an associate at the firm. While the Court recognized that how a case is staffed is not an entrepreneurial aspect of the practice of law, a promise or representation made about how a case would be staffed to land a case was.”
• “The commercial aspects of the practice of law that many courts will find can be the stuff of a consumer protection act claim are advertising, billing and collection activity, and not only statements made to obtain clients but even methods of keeping or discarding clients.”
• “Those issues are ones that lawyers mostly recognize as bringing ethics and disciplinary risks under rules such as RPC 7.1 and RPC 1.5 or even RPC 1.16 but it is worth keeping in mind that, even though the rules in most jurisdictions set out language in their Preamble or Scope sections to assert that the ethics rules are not designed for the purpose of providing a basis for civil liability, conduct that would violate those rules can also easily become the stuff of civil liability all the same through application of a state’s statutory framework seeking consumer protection or cracking down on deceptive trade practices.”
• “This potential for liability can provide yet another justification for firms to give some scrutiny not only to making sure that their billing practices are reasonable and justifiable but also to reviewing the language their lawyers use in engagement agreements and even in making new client pitches.”

Dentons partners Shari L. Klevens and Alanna Clair always present worthwhile content: “How to Handle Disputes With Sophisticated Clients” —

• “Representing clients who have more familiarity with the law and complex business issues is often a different experience than that of representing a client who is wholly unfamiliar with the law… This difference raises a question—does a lawyer’s duty or the standard of care change in any way when representing a so-called sophisticated client? There are areas where courts will make this inquiry, such as in looking at conflict waivers and other parts of the lawyer-client engagement process. In addition, some courts also take into account a client’s sophistication when addressing disputes between the client and their lawyer.”
• “Another example of courts taking a client’s sophistication into consideration arises in the context of future-conflict waivers, in which, as part of an engagement, a client agrees to waive certain types of conflicts of interest if they arise in the future. In a recent case in Florida, a major national brand filed a motion to disqualify its former law firm (a large national firm) from representing an adverse party.”
• “When the law firm noted that the brand had signed a waiver regarding future conflicts, the court agreed in upholding the waiver. Among other things, the court focused on the sophistication of the client, the size of their in-house legal team, their use of dozens of outside law firms and the fact that the client was represented by independent counsel in executing the waiver. As a “sophisticated consumer of legal services,” the brand’s waiver was enforceable.”
• “A legal-malpractice case sometimes involves an evidentiary review of the client’s understanding of the law or of the selected strategy, especially for more sophisticated clients. Thus, if there is a later dispute over what the client understood or consented to, having evidence in hand showing the client’s understanding, acquiescence or sophistication can go a long way.”
• “Documenting the level of the client’s involvement in close to real time can also be a reminder to the client of the decisions they made and why. Although the absence of such documentation in a subsequent legal malpractice case does not confirm a breach of the standard of care, lacking this evidence could make it harder for the lawyer to explain what really happened.”
• “Even if the evidence does not extinguish liability altogether, it might help to mitigate potential damages. For example, in a recent New York case, the court reviewed a communication by lawyers to their client with a marked-up version of a key lease amendment.”
• “The court concluded that this communication was not sufficient to show that the lawyers adequately advised the client of the significance of their edits, but the court did conclude that the client’s level of sophistication and understanding in reviewing the amendment could be evidence to support mitigation of damages.”

“Ex-Mylan CIO Waives Atty Conflict For Insider Trading Case” —

• “A former Mylan executive told a Pennsylvania federal judge that he could still be defended on charges of insider trading by an attorney who also represented other Mylan higher-ups in a pair of civil lawsuits, waiving any potential conflict of interest in court Tuesday.”
• “Ramkumar Rayapureddy, 55, of Upper St. Clair, Pennsylvania, said he understood that one of his defense attorneys, John A. Schwab, had represented or was actively representing Mylan NV, its successor, Viatris, and several of its current and former executives in a proposed investor class action and in an antitrust lawsuit.”
• “After questioning from U.S. District Judge W. Scott Hardy, Rayapureddy agreed to waive any potential conflict of interest that might arise if some of those executives were called as witnesses in the criminal case against him for allegedly helping a former colleague make millions from stock trades based on insider information he had when he was chief information officer for the company.”
• “After Rayapureddy indicated he was aware of the potential conflict and was still willing to waive it, Judge Hardy had him and his attorneys sign a waiver form at the conclusion of Tuesday’s hearing.”
• “Judge Hardy said that at a hearing in July, he became aware of the potential conflict that Schwab’s representation could raise, and ordered that the defense and the government file sealed briefs on their positions regarding that conflict. Though the briefs remain under seal, Judge Hardy said Tuesday’s hearing on the matter would be public.”
• “Rayapureddy said he had not discussed with Schwab exactly which executives he had previously represented — Schwab said the individual defendants had been dropped from the shareholder suit — but Judge Hardy reminded him that the names were public record and not subject to attorney-client privilege.”
• “After a brief break to review the list — including former CEO Heather Bresch, who left the company when it combined with Upjohn to form Viatris; President and Executive Director Rajiv Malik; Viatris President of Developed Markets Anthony Mauro; and former Chief Financial Officer Kenneth Parks — Rayapureddy again consented to waive that potential conflict.”

“Orrick Herrington Hit with Another Lawsuit from Hacker Attack” —

• “Orrick, Herrington & Sutcliffe LLP was sued Monday for a second time arising from a springtime data breach that allegedly allowed personal information including Social Security numbers of nearly 153,000 individuals to be accessed.”
• “The filing alleges Orrick failed to create and implement reasonable data security practices, including training employees and others who accessed the information. It also alleges that the firm didn’t tell individuals their data had been compromised for four months after the incursion.”
• “Accusing the firm of negligence, breaches of fiduciary duty, confidence, and implied contract, and invasion of privacy, the plaintiff Robert Jensen seeks certification of a class of those who received letters notifying them of the breach.”