Bressler Risk Blog

Coming in at about 100 pages, CNA has published its latest set of law firm risk guidance, best practices, and templates: “Lawyers’ Toolkit 5.0: A Guide to Managing the Attorney-Client Relationship” —

• “The new Lawyers’ Professional Liability Toolkit 5.0 is now available. A consistently popular Risk Control resource, the new Toolkit contains sample materials that will better enable lawyers to mitigate risks that may arise in their practice.”
• “The CNA LPL Risk Control team has designed these assets to establish client expectations, reduce client misunderstandings, improve client communications and address a multitude of challenges faced by attorneys each day.”

The SRA kindly posted videos and resources from its recent event: “Compliance Officers Virtual Conference 2023” —

• VIDEO: “Anti-money laundering – what your firm needs to know“
• Anti-money laundering guidance
• Client and matter risk template
• Client and matter risk assessments
• (Many more videos and resources worth a look, via the top link)

Travelers Insurance shares: “UK: What’s Behind Large Losses in Law Firms?”

• “In a time of economic instability, a law firm that experiences a large loss may find itself in an especially difficult position. In addition to having to ride the waves of the current business environment, the firm could also face higher insurance premiums following the loss, then find less competitive options for professional indemnity cover as a result.”
• “Mitigating large losses can help smooth the waters for firms. Insurers, of course, also have a vested interest in helping their law firm clients anticipate their risks and take action to contain them – and the loss patterns they identify can say a lot about the exposures of a profession.”
• “Large losses are persistent, becoming more costly, and happen for law firms of all sizes: Smith noted that there have been a high number of claims for large losses in recent years and the total severity of those claims has been trending up. While one might assume large firms are responsible for the largest losses, these claims tend to spread across all sizes of firm, not just the large or small firms.”
• “The top five areas driving large losses in law firms appear consistently over time: From 2001-2023, commercial work represented 30% of claims notifications and 50% of damages claimed. The remaining four areas included commercial litigation, commercial property, residential property, and trust & probate. However, commercial work remains a clear outlier in the severity and frequency of its risks to firms.”
• “There are patterns in the kinds of errors that lead to claims for large loss: Firstly, large loss cases tend to involve more failures of advice than in the overall book. Secondly, the most frequently notified errors pertain to retainer management failure. These errors are often very simple, such as not following instructions, taking the wrong step in a process, or missing a time limit. Finally, dishonesty has been on an upward trajectory since 2020 and involves a mix of methods, such as identity theft, fraudulent sellers, or the interception of payments and the changing of bank details.”
• “Mapping legal work areas onto errors reveals more specific risk management targets: Commercial work presents the main challenge for firms looking to reduce errors in retainer management, drafting and advice as all three areas are claim hotspots. Commercial property and commercial litigation generate claims in retainer management and advice. In residential conveyancing, claims involving dishonesty (whether the dishonesty is by an employee or a third party) are a hotspot where firms could focus their attention.”
• “Retainer management errors, for example, tend to be simple mistakes and tend to be the result of human error, such as distraction, in turn caused by stress, pressure or fatigue. Where slips and lapses in procedure occur, a firm should ask whether this is possibly a reflection of the culture of a firm as a whole and whether steps could be taken to address or improve the work environment. While many firms have taken steps to support the mental wellbeing of their employees, recent research has found that these changes haven’t gone deep enough. Indeed, while nearly three-quarters of law firms report having initiatives in place to support employees’ mental health, this year there has been a 24% increase in the number of people contacting LawCare, the mental health and wellbeing charity for legal professionals.”

“Law firm Anderson Kill wants ex-CFO’s lawyer tossed in employment clash” —

• “U.S. law firm Anderson Kill is seeking to disqualify a lawyer representing its former chief financial officer in an employment lawsuit that accuses the firm of forcing the CFO out after he suffered a fall and concussion last year.”
• “New York-founded Anderson Kill said Friday it plans to call plaintiff Paul Schwartz’s lawyer Tiffany Ma as a ‘necessary witness’ as part of its defense in the Manhattan federal case.”
• “Ma began representing Schwartz in his negotiations over his return to work after he hit his head taking out the garbage in February 2022, the firm said.”
• “Anderson Kill said in its filing that Schwartz stopped talking to the firm in May 2022 and spoke only through Ma until June 2022, when the firm fired Schwartz. Professional rules prohibit Ma from serving as both a witness and as Schwartz’s lawyer, the firm argued.”
• “‘To the extent plaintiff might be temporarily inconvenienced by the need to retain new counsel if Ms. Ma were disqualified, he has only himself – or Ms. Ma – to blame,’ the firm said.”
• “Schwartz sued Anderson Kill and two of its employees in August, claiming the firm harassed him into coming back to work before he was ready and then fired him in violation of federal and New York discrimination laws.”
• “When Schwartz proposed reasonable accommodations in May, the firm allegedly demoted him from chief financial officer — with a $302,000 base salary and significant annual bonus — to billing manager, with a $122,900 salary and a far smaller bonus.”

[Previously on this on.] “Law Firm Did Not Breach Client Confidentiality With Press Release About Med Mal Verdict, State High Court Rules” —

• “The Illinois Supreme Court disagreed with an appellate court’s finding that a Chicago plaintiffs law firm’s press release, which detailed its former client’s mental health diagnoses in the course of announcing a $4.2 million medical malpractice verdict, violated the Mental Health Developmental Disabilities Confidentiality Act.”
• “The state high court’s opinion reversed the appellate court’s decision and affirmed the Cook County Circuit Court’s dismissal that alleged the defendant law firm, Burke Wise Morrissey & Kaveny and its former attorney, Elizabeth A. Kaveny, violated the Mental Health and Developmental Disabilities Act by commenting on the case and disclosing details about the mental health history of a former client, John Doe, for an article published in the Chicago Daily Law Bulletin.”
• “During oral argument before the Illinois Supreme Court in September, Kimberly A. Jansen, a partner at Hinshaw & Culbertson in Chicago who represented Kaveny and the firm, argued that Doe’s complaint was properly dismissed he voluntarily disclosed the information at an underlying medical malpractice trial. ‘[N]othing in the medical malpractice case was sealed,’ she had argued.”
• “On the contrary, Thomas M. Paris, a solo practitioner, argued on behalf of Doe—who has been identified in court papers as an attorney—that the information about his client’s diagnoses, suicide attempt, the effects of his injuries, and the ‘redisclosure of that information to the press’ violated his confidentiality.”
• “‘We find that Doe waived his claims of confidentiality under the Act by voluntarily and publicly disclosing his private health information in a public trial, and the qualified protective order under HIPAA did not preclude such waiver,’ Justice P. Scott Neville, Jr., wrote, citing Novak v. Rathnam (1985). ‘We also find that the defendants are not liable under the Act, as the evidence and testimony divulged during Doe’s medical malpractice trial were not records or communications made in the course of mental health services; therefore, the Act does not apply to the defendants’ posttrial discussion of said evidence, records, or communications.'”
• “Furthermore, contrary to the appellate court’s reasoning in Doe’s case, the state high court said that a qualified protective order under the Health Insurance Portability and Accountability Act privacy rule ‘does not regulate how a person may choose to use his own medical information once it is received from a covered entity.'”
• “‘Moreover, there is nothing in the HIPAA privacy rule that prevents legal counsel from discussing facts that were voluntarily revealed in a public trial,’ Neville wrote. ‘In fact, the public nature of the proceeding not only removes the confidentiality of the voluntarily disclosed mental health information (Novak, 106 Ill. 2d at 485), but it also exempts from punishment anyone who speaks about the publicly released information. See Craig v. Harney, 331 U.S. 367, 374 (1947).'”

“After $97 million med-mal verdict, doctors sue insurer for making them tort reform ‘pawns’” —

• “The Iowa Supreme Court was supposed to hear oral arguments next week in the appeal of a record-setting $76 million medical malpractice judgment against an obstetrics and gynecology clinic accused of causing an infant’s severe brain injuries.”
• “That appeal is now stayed amid a blitz of accusations and counterattacks, in both state and federal court, by the medical clinic and the company that provided its malpractice insurance. A case that began as a dispute over the tragic consequences of one infant’s birth has transformed into a high-stakes examination of an alleged conflict between the interests of a policyholder that allegedly wanted to settle and avoid trial and an insurance company that was dedicated to changing malpractice law.”
• “The clinic at the center of the litigation, Obstetrics and Gynecological Associates of Iowa City and Coralville, had a $12 million malpractice insurance policy from MMIC Insurance, a subsidiary of Curi Holdings. Under the terms of the policy, MMIC led the clinic’s legal defense, hiring law firm Shuttleworth & Ingersoll to represent the clinic during the 2022 trial that resulted in a $97 million damages verdict for the family of the injured child. (The verdict was later reduced to a $75 million judgment.)”
• “The clinic now contends in a state-court lawsuit that MMIC had an ulterior motive for refusing to settle the malpractice case: The insurer, which had spent years lobbying for Iowa to pass legislation capping noneconomic damages for medical malpractice victims, wanted to use the clinic and its doctors for its own “propaganda” purposes.”
• “The clinic’s Nov. 21 complaint also named Shuttleworth & Ingersoll as a defendant, alleging that the law firm breached its fiduciary duty and committed malpractice by deferring to MMIC and refusing to engage in pretrial settlement talks with the plaintiffs in the malpractice case.”
• “The insurer, meanwhile, has moved in federal court to enjoin the clinic’s new lawyer, Rowley, from representing the doctors and from engaging in settlement talks with lawyers for the injured child’s family. Alternatively, the insurer said, the court should order the clinic to pay back the $12 million policy proceeds it received from MMIC and should declare the clinic’s insurance contract to be void.”
• “Rowley and his clients previously told the federal judge, in a filing last July, that MMIC was acting in bad faith and should be deemed to have lost the right to control the defense of the malpractice case. That filing — an answer to MMIC’s original federal-court complaint seeking an injunction to block Rowley from dismissing the Iowa Supreme Court appeal — presaged the clinic’s claim in its Nov. 21 lawsuit that MMIC had refused to settle the underlying malpractice case in order to capitalize on the doctors’ plight as it lobbied for Iowa to pass a cap on damages.”
• “MMIC’s new motion for a preliminary injunction argued that Rowley and the clinic had done exactly what the insurer feared when it first filed the federal court suit, manufacturing a conflict for the Shuttleworth firm in order to seize control of the malpractice appeal from MMIC.”
• “If anyone is conflicted, according to the insurer, it is Rowley, whom MMIC accused of colluding with the plaintiffs’ lawyer in the underlying case to sandbag the appeal. It’s all unquestionably a big mess to be unsorted by Rose and the Iowa judge who oversees the clinic’s case against MMIC and the Shuttleworth firm.”

“Calif. Roundup Trial Kicks Off After Monsanto Loses Bid to Boot Judge” —

• “Another Roundup trial started on Monday in California after Monsanto failed to disqualify the judge.”
• “Jury selection began in San Benito County Superior Court, where Monsanto, now owned by Bayer, attempted to remove Judge Patrick Palacios from the trial. After Palacios rejected the disqualification motion, Monsanto filed a Nov. 29 petition for writ of mandate before California’s Sixth District Court of Appeal, insisting that ‘if this court does not immediately stay the case below and issue the requested writ of mandate, Monsanto will be forced to go to trial with a judge who Monsanto believes is prejudiced against it and one of its attorneys.'”
• “‘Unless this court stays the case below, grants this writ, and reverses the Superior Court’s order, the trial in the matter below will proceed under the supervision of a judge who Monsanto and its counsel believe is prejudiced against them,’ wrote Monsanto attorney Shook, Hardy & Bacon partner Jessica Grant in the petition, which didn’t give specifics about the judge’s alleged bias.”
• “‘Bayer believes that the California Court of Appeal for the 6th District should grant its petition for a writ, immediately stay the case, and ultimately reassign the Jones case to a new judge,’ Bayer said in a statement prior to the Sixth District Court of Appeal’s decision. ‘The company believes that the current judge is prejudiced against the company and one of its attorneys and should not preside over the trial. California law provides that peremptory challenge should be ‘liberally construed’ in favor of ensuring public trust in the courts.'”
• “Last month, a jury in San Diego County Superior Court awarded $332 million in a Roundup trial. That verdict was one of four that hit Bayer in the past month, ending a streak of nine defense wins in a row. The others included awards of $1.25 million and $1.56 billion, in separate Missouri state courts, and a $175 million verdict in the Philadelphia Court of Common Pleas, where another trial is wrapping up on Monday.”
• “In California, Bayer insisted that Palacios should be disqualified because he wasn’t an “all purpose” judge assigned to the case… ‘Specifically, Judge Palacios repeatedly emphasized over many months that he would not try this case,’ Grant wrote in Monsanto’s petition. ‘he advised that consistent with the practice of San Benito County Superior Court for long trials, this case would be assigned to a temporary or visiting judge for trial.'”
• “‘The method of assigning cases did not instantly pinpoint Judge Palacios as the judge whom the parties could expect to ultimately preside at trial; and Judge Palacios himself repeatedly confirmed that he was not expected to process the case in its totality,’ she wrote.”

Amy G. McClurg & Jennifer S. Roach at Thompson Hine remind us: “Corporate Transparency Act: Ethical Considerations for 2024” —

• “If you have not heard of the Corporate Transparency Act (CTA), now is the time to become familiar.”
• “The CTA, which Congress passed as a component of the Anti-Money Laundering Act of 2020, was created to enable the government to prevent, detect, and combat money laundering, the funding of terrorism, and other prohibited activity by requiring certain companies to report their beneficial ownership information to the Financial Crimes Enforcement Network division of the U.S. Department of the Treasury (‘FinCEN’). There are still some moving parts with the CTA. For example, the reporting form is not yet available. However, the ethical implications inherent in CTA compliance must be considered now.”
• “Companies that are deemed to be ‘Reporting Companies’ are required to report beneficial ownership to FinCEN. There are two types of ‘Reporting Companies’: Domestic Reporting Companies and Foreign Reporting Companies. There are currently twenty-three (23) exceptions that exempt entities that would otherwise be considered a Reporting Company. Lawyers and law firms alike will want to consider whether they intend to assist clients in ascertaining whether the client is a ‘Reporting Company.'”
• “Of specific interest to attorneys – the CTA also requires up to two ‘company applicants’ to be identified for entities formed after January 1, 2024. This may implicate law firms if they are involved in the preparation or filing or formation documents for clients. The lawyers or paralegals providing those services would have the corresponding obligation under the CTA to register with FinCEN as a company applicant for the client.”
• “The effect of the CTA is far-reaching. Many practitioners will feel the impact it has on their practice, but all practitioners should know about it. Lawyers have a duty to stay abreast of changes to the law and the reporting requirements found in the CTA certainly qualify as a change. For example, the CTA likely implicates the provisions you want to include in employment agreements, shareholder agreements, or LLC operating agreements to require beneficial owners to provide the information needed by the entity to comply with the CTA’s reporting requirements. In addition, due diligence for loans, mergers and acquisitions will likely need to include CTA compliance.”
• “Lawyers also have a duty to keep their current clients reasonably informed about the representation. While there is no duty to notify former clients, lawyers will want to be diligent in notifying current clients about the CTA. Now is the time to determine if the client is former or current.”
• “Don’t wait until January to determine your firm’s capacity or desire to handle CTA related engagements and how it impacts various practice areas. Limitations on the scope of your representation will need to be clearly communicated with your clients. You will want to evaluate any third-party referrals for CTA filings and corporate formation filings. If your firm will play a role in corporate formations and filings, you will want to consider who will be responsible for such filings and how to track and update FinCEN registration for those individuals. Finally, you will want to start thinking of changes in firm policy and procedure that align with your level of involvement in CTA related representations, and ensure all staff are properly trained and supervised to comply accordingly.”

“National firm fined over £100,000 by Solicitors Regulation Authority” —

• “National firm Ashfords LLP has been fined more than £100,000 by the Solicitors Regulation Authority for money laundering compliance failures reported by the firm itself. The fine, the fourth largest imposed by the SRA, was agreed despite the regulator stating that there was no suggestion that any money laundering or other financial crime took place.”
• ‘”In published details of an agreed outcome, the SRA said Ashfords has agreed to pay a penalty of £101,357 plus investigation costs of £1,350. The regulator said it had identified areas of concern in relation to compliance with the 2017 AML regulations and the SRA principles and code of conduct.”
• “Three conveyancing transactions carried out between October 2017 and March 2018 were highlighted as matters of concern. Two of the transactions related to the purchases of properties worth £3.2m and £550,000 on behalf of a limited company. The third transaction related to the purchase of a property worth more than £3m on behalf of a UK registered charity.”
• “In relation to the first transaction, the SRA said customer due diligence revealed conflicting information as to the ultimate beneficial owner and the source of funds was ‘not fully understood or evidenced and had changed during the transaction’. The firm’s compliance raised the issues but there was no written record as to if they were fully resolved before the transaction was completed.”
• “A retrospective search by Ashfords during its own investigation ‘identified a potential link between one of the purported beneficial owners and an entity subject to UK sanctions’, the SRA said.”
• “The firm admitted it failed to behave in a way that maintains public trust and failed to carry out the business effectively and in accordance with proper governance and sound financial and risk management principles.”
• “In considering mitigation, the SRA said the firm ‘had procedures and controls in place; however they were not followed in these matters’. It added: ‘There is no suggestion that the transactions actually involved money laundering or any financial crime.’ There was no evidence that any harm had been suffered, the SRA said. It also noted that the firm had brought the matter to its attention initially, assisted throughout the investigation, admitted breaches, made changes to systems, policies and procedures and ensured that regular training to all relevant employees is provided.”
• “An Ashfords spokesperson said: ‘We self-reported in 2019 to the Solicitors Regulation Authority potential breaches of the money laundering regulations on three transactions that were carried out in 2017 and 2018.”

“Federation of Law Societies launches online program to combat money laundering risks” —

• “The Federation’s of Law Societys has launched an online learning program entitled ‘Anti-Money Laundering and Terrorist Financing in the Canadian Legal Profession.’ The program is free and the Law Society of Ontario has accredited the program for 3 hours and 45 minutes of Professionalism content. From the website:
  • The practice of law exposes legal professionals to unique risks in relation to money laundering and terrorist financing. Although some practice areas present higher risks, any legal professional engaged in financial transactions may be targeted by criminals seeking to launder money or finance terrorist activities.
  • To combat these threats, legal professionals must understand the risks that may arise in their legal practice and be aware of their legal and regulatory obligations. Without such risk-based awareness and knowledge of the rules, they may find themselves unwittingly facilitating or participating in criminal activity.
  • Using interactive tools like scenarios, videos, and quizzes, the Federation has developed this online learning program to provide guidance to legal professionals on how to mitigate money laundering and terrorist financing risks and comply with their legal and regulatory obligations. The program supplements the Federation’s written anti-money laundering and terrorist financing resources for the profession…”
• Access the online learning program directly here.

“California Supreme Court Approves Conflict of Interest Rules for the State Bar of California” —

• “The California Supreme Court on Tuesday approved three measures to identify and prevent conflicts of interest involving the State Bar of California.”
• “The California Supreme Court approved, with significant modifications, amendments to rule 9.11 of the California Rules of Court to ensure those who seek to serve as State Bar Court judges are screened for actual and potential conflicts of interest.”
• “The court modified the State Bar’s proposal to require the screening committee to determine whether a candidate for the State Bar Court has financial or nonfinancial interests or relationships with other attorneys that would impact the applicant’s ability to serve ‘in a manner that avoids impropriety, the appearance of impropriety, or frequent disqualification.'”
• “The court also made modifications to the State Bar’s proposal for screening applicants for the State Bar Board of Trustees under rule 9.90 of the California Rules of Court. Those changes require the screening committee to determine whether a candidate’s ‘relationships with other attorneys’—and not just their financial or nonfinancial interests—would impact the applicant’s ability to serve as a trustee with “disinterested skill and undivided loyalty” to the State Bar.”
• Text of the rules here.

Professor Alberto Bernabe writes: “Does Georgia not have a rule about prospective clients? — CORRECTION!” —

• “Does Georgia not have a rule equivalent to Model Rule 1.18 on the duties owed to prospective clients? … That’s a rhetorical question because I looked it up and they do. But you wouldn’t know it if you read the news about a recent case decided by the state Supreme Court.”
• “According to the story, published in the ABA Journal online, the Georgia Supreme Court recently tossed a disciplinary case against a lawyer who had been charged with using information revealed by a potential client in a consultation.”
• “What I find interesting about this story is that the court apparently ruled that the lawyer could not be disciplined because the rule at issue in the case only applies to actual clients. In other words, the court apparently said that the duty against using confidential information (in rule 1.8) does not apply to prospective clients.”
• “That’s fine and dandy but what about rule 1.18? If the conduct was improper use of confidential information obtained from a prospective client, that would have been the proper rule to apply, and it sounds like the lawyer did violate it.”
• “UPDATE 11/7/23: As I said above, my comment was based on the story about the decision, not on the decision itself, which I had not located (and therefore had not read). Now I have heard from a friend [Bill Freivogel] who did just that and he reports that there is a footnote in the opinion that explains that Rule 1.18 was adopted in Georgia after the conduct in question happened. Now that helps make more sense of the story.”