Bressler Risk Blog

“Legal Malpractice Claims Grow in Size as Clients Turn on Counsel” —

• “Law firms are being targeted with increasingly expensive lawsuits, as large insurance policies, client resistance to paying fees and the role of investors in litigation put legal operations on the defensive.”
• “Law firms are being hit with client suits that allege missteps such as conflicts of interest or failure to timely file a document. The clients bringing the suits are turning to attorneys who have developed specialties in suing law firms.”
• “‘There’s a greater willingness for clients to turn against their lawyers,’ said Bethany Kristovich, a litigation partner in the Los Angeles office of Munger, Tolles & Olson who defends Big Law firms against suits. Clients often see the firms ‘as simply as another pot of money,’ she said.”
• “Law firm insurance claims resulting in multimillion-dollar payouts increased year over year, insurance broker and consultant Ames & Gough said in a 2023 report. Of 10 companies that insure about 80% of Am Law 100 firms, seven paid a claim of more than $50 million in 2021 or 2022—and two paid a claim that topped $150 million, according to the report.”
• “Trusts and estates, followed by business and commercial transactions, are the leading practice areas for malpractice claims against law firms, Ames & Gough’s report found. The role of litigation finance in client suits—with investors paying the cost of a litigation while seeking a return—is boosting the risk of large payouts, the broker said.”
• “Law firms’ appearance of being backed by deep-pocketed insurers helps make them malpractice targets, said Leslie Corwin, managing partner of Eisner LLP, who represents law firms in malpractice cases.”
• “Market pressures and economic turmoil also make law firms more vulnerable to legal attacks, Corwin said. Clients are more likely to contest a big bill when business is tough, he said.”
• “TerraForm Power LLC sued Orrick, Herrington & Sutcliffe and Cleary Gottlieb Steen & Hamilton in 2021, claiming the company faced $300 million in payments because lawyers at the firms allowed the word ‘buyers’ instead of ‘buyer’ into a purchase agreement.”
• “Lawyers who once hesitated to bring legal actions against the industry that employs them are take cases today without fear of repercussions and reputational harm.”
• “Bill Reid, a lawyer on Musk’s team suing Wachtell, said attorneys used to fear bringing actions against law firms ‘in part based on the notion that they will soon become a pariah in the legal world and that other law firms won’t send them business.’ But Reid said that hasn’t been his experience since he took on the work that ‘no one else was willing to do’ two decades ago.”
• “Few of Reid’s cases end up on a public docket. He said he engages in a pre-suit process that allows firms’ and their insurance carriers to engage with a client. The discretion, he said, buys Reid good favor with insurance carriers and the law firms, which, he said, still send him referrals.”
• “Law firms will face more legal claims in the coming year alleging breaches of fiduciary duties and breach of conflicts, said Kristovich of Munger, Tolles & Olson. ‘The size of the claims continue to grow as lawyers and law firms handle bigger and bigger transactions and deals,’ she said.”

“UK: What’s Behind Large Losses in Law Firms?” —

• “Paul Smith, Senior Risk Management Consultant at Travelers Europe, studies data about losses in solicitor firms in an effort to identify such patterns which hopefully shines a spotlight on where risk management can help. Recently, he reviewed sets of solicitors’ data between October 2000 and September 2023 to gather a significant data set of large loss claims, which the insurers defined as being over £250,000. While that figure in 2001 would represent a much larger amount than it does in 2023, due to inflation, there are still some clear themes that emerged from the research.”
• “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.raudulent sellers, or the interception of payments and the changing of bank details.”

“States Hiring Outside Lawyers Need to Ask Who Else They Represent” —

• “O.H. Skinner, former solicitor general of Arizona, lays out best practices state and local governments should implement to stop outside counsel from unethically profiting by representing other governments and private plaintiffs.”
• “A federal opioid case in Ohio involving a law firm and the City of Chicago has drawn needed attention to a problem that arises when government lawyers outsource enforcement to outside trial lawyers: ethics and conflicts of interest.”
• “My former office—the Arizona Attorney General’s Office—offers a clear and easily implementable way forward that can protect against the problems in Ohio.”
• “The core problem being addressed in Ohio is that, in interrelated opioid litigation, trial lawyers at law firm Motley Rice are simultaneously representing not only various state attorneys general, but also city prosecutors in places like Chicago, as well as various private clients.”
• “This led OptumRx, one of the defendants in the high-profile Ohio opioid matter, to file a motion formally seeking to disqualify lawyers from Motley Rice from the case. Citing Motley Rice representation of the D.C. Attorney General, the Hawaii Attorney General, and the City of Chicago, the motion claims Motley Rice attorneys obtained confidential information from OptumRx in connection with various government subpoenas, then ‘weaponized that knowledge against the same companies in separate private litigation for other clients and for their own financial gain.'”
• “On the surface, the attorneys at Motley Rice, who were given titles as special government attorneys and signed various confidentiality agreements in that role, appear to be in a position where they are simultaneously receiving confidential government information about defendants in the Ohio opioid matter, and representing private clients against the same defendants in an adversarial posture where the private interests are adverse to the defendants.”
• “At a minimum, Motley Rice seems to have a problem on their hands and some explaining to do. And it could be much worse if they have no magic bullet defense and end up being disqualified by the judge in the case.”
• “Regardless of the motion for disqualification’s outcome, the conflict of interest issue is a broad concern. I saw this firsthand in the Arizona Attorney General’s Office. In that role, more than once, outside counsel seemed to see representation of a state as a gateway to increasing their return on investment in a related private action against the same defendants.”
• “This was a problem we saw as so important that we found a structural solution. The office changed its standard outside counsel contract for consumer contingency cases to have clear limits on dual representations. Under the new contractual language, potential outside counsel had to notify the office if counsel was serving as counsel in a private class action. And, we made such a notification the basis for termination “for cause,” as in termination without entitlement ‘to compensation or reimbursement of any kind under this Agreement.'”
• “The approach the office put in place under Arizona Attorney General Mark Brnovich sets a path others can follow. It moves beyond background application of various ethical canons and imposes a clear contractual limit on representing private parties at the same time and on the same topic as a representation of the state.”
• “Knowing what I know now, I would go further than we did originally. I would make dual representation a mandatory termination situation, rather than simply have it serve as an allowable basis for terminating a contract ‘for cause.’ And I would expand the list of potential conflicts to cover representation of local governments, as the conflicts that have come to light between cities, counties, and states over various pools of settlement money in recent years really underline the importance of avoiding conflicting loyalties for outside counsel in those situations.”

“Third Circuit Orders Independent Examiner in FTX Bankruptcy” —

• “An outside investigation into FTX Group is mandatory under the US bankruptcy code, a federal appeals court ruled Friday, reversing a Delaware judge’s original order denying an independent examiner.”
• “The Third Circuit ordered US Bankruptcy Judge John Dorsey to appoint an examiner to investigate the collapse of the FTX crypto exchange. FTX commenced Chapter 11 bankruptcy in November 2022 amid widespread fraud allegations.”
• “‘In addition to providing much-needed elucidation,’ the panel wrote, ‘the investigation and examiner’s report ensure that the bankruptcy court will have the opportunity to consider the greater public interest when approving the FTX Group’s reorganization plan.'”
• “The independence of an examiner is relevant, the circuit panel said, given the law firm Sullivan & Cromwell’s work for FTX prior to the bankruptcy and the conflict of interest issues that have been raised over it. The US Trustee has also pushed for an outside investigation to determine whether any employees or officers of FTX who engaged in wrongdoing are still with the company.”

“EY Oceania accused of potential conflict of interest over government contracts on climate policy” —

• “Consultancy firm EY Oceania was supporting the oil and gas industry’s lobbying efforts while being paid by the federal government for independent advice on its signature climate policy and gas emissions.”
• “The firm, which is a member of the oil and gas lobby and audits Santos, insists there was no conflict of interest between its work for industry and government. But a bipartisan group of politicians and transparency advocates is not convinced and has demanded more information.”
• “In late October, EY Oceania was hired by Australian Energy Producers (AEP) to publish a report on the future of the gas industry…EY Oceania was also hired to support AEP – formerly known as the Australian Petroleum Production & Exploration Association – and prepare a submission outlining concerns about the government’s future gas strategy, which was being developed by the industry department. The submission, also submitted on 27 November, frequently cited EY’s analysis and conclusions.”
• “While EY was working for AEP, it was also contracted by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) to provide “analysis and advice on emission outputs for oil and gas facilities”, “analysis and advice under the safeguard mechanism” and “professional advice on market modelling services electricity”. These contracts were worth $510,000, according to government records.”
• “EY did not tell the government it was a member of the AEP. ‘There is no overlap of subject matter nor is there a risk of one EY team reviewing the work of another EY team,’ the spokesperson said. ‘When a conflict of interest exists, or arises during an engagement, we will disclose this to the client, which may result in EY declining to act, as required by professional standards.'”
• “Despite claiming there was no conflict of interest, EY was required to sign a non-disclosure agreement while working on the safeguard mechanism and to submit written assurances about how internal conflicts would be managed with regard to staff and other engagements.”
• “‘It’s not a good look to have the government paying hundreds of thousands of dollars to a consultancy firm for independent advice on the oil and gas industry while the same firm is also on the payroll of the oil and gas industry,’ [chief executive of Transparency International] Moore said.”

Mark Hinderks, head Stinson LLP’s legal ethics and professional responsibility practice writes:  “Navigating a Tricky Matter-Intake Problem Involving a Conflict and Confidential Information” —

• “A former law school classmate newly appointed as a corporate general counsel called to ask me to represent his company to file a preemptive suit in a favorable forum against a competitor.”
• “He told me confidentially that based on internal documents, they believe the suit probably only has a 40-60% chance of success, but by getting to the favorable forum, they hope there will be sufficient pressure on the opponent to lead to an early and more favorable settlement.”
• “I ran a conflict check and discovered that the firm (not involving me) currently represents the opposing party in a small, unrelated real estate matter. What can I do to be able to go forward? This could be a really big ongoing client.”
• “At first read, this appears to be a straightforward Model Rule 1.7 concurrent conflict concerning unrelated matters that could be ameliorated by an appropriate waiver request to each client, with approvals confirmed in writing. The twist here is that you may be unable to effectively ask for the waiver. In order for a waiver of a conflict to be effective under Rule 1.7(b), there must be ‘informed consent.’ That requires that ‘each affected client be aware of the relevant circumstances and of the material and reasonably foreseeable ways that the conflict could have adverse effects on the interests of that client.’ Rule 1.7, Cmt.18.”
• “Here, the company that wishes to hire you is trying to beat the competitor to the courthouse (and thereby establish the first filing in a favorable forum different than the one the competitor (the firm’s current client) would choose.”
• “This puts you in a bit of a ‘Catch-22.’ You would have to disclose to your firm’s existing client the nature of the matter and the prospective client’s identity to obtain ‘informed consent’ and, therefore, an effective waiver.”
• “Because the prospective client’s strategy here is a preemptive surprise attack that requires confidentiality until executed, you would need your prospective client’s consent to disclose the relevant information to your existing client. But it is likely that your prospective client will not agree to your disclosure of that information to their opposition, because their opponent will then be able to withhold consent long enough, or otherwise act quickly to file their own action in a different forum.”
• “This likely means you must decline the matter, at least for now. It is possible that you could seek informed consent from the existing real estate client to be involved later (with the approval of the prospective client to make necessary disclosures) after the suit has already been filed and the reason for secrecy about the identity of the client and the matter has passed.”
• “But, you also have another issue. You have received confidential information from the prospective client about their race-to-the-courthouse strategy and their in-house assessment of the strength of their case before running a conflict check, and before specific agreement to be their counsel. By doing so, you have already placed yourself and the firm in a dilemma concerning duties to the existing real estate client.”
• “The best practice when discussing a new matter with a prospective client (or a current client) is to perform and clear a conflict check before acquiring any information the prospective client considers to be confidential. The most direct way to do this is to state to the prospective client at the time of initial contact to only provide you with the basic information necessary to perform the conflict check…”

“Burr & Forman Faces Data Breach of Health Care Client Information” —

• “Am Law 200 law firm Burr & Forman experienced a data breach that affected nearly 20,000 people, according to a public notice that said the incident occurred when ‘an unauthorized actor gained access to certain documents and information’ on the firm’s systems.”
• “The firm said it was the victim of an October data breach that was ‘quickly contained.’ However, the firm said its analysis indicated the breach impacted the data of two health care clients subject to HIPAA. ‘We continue to address this matter with those clients directly and to comply with all required notices and actions,’ said Kathryn Whitaker, chief marketing officer, in a statement.”
• “The firm, represented by Constangy, Brooks, Smith & Prophete, said it received the personal information in connection with its legal services for client Oceans Healthcare, according to the report. Another client was not identified.”
• “An investigation determined the affected data included some protected information, such as names, Social Security numbers, medical coding information with dates and insurance data, according to a breach incident report.”
• “In a ‘Notice of Data Security Incident’ posted on its website, the Birmingham, Alabama-based law firm said it ‘enhanced its network security’ and reported the incident to the FBI after learning of the incident.”
• “It then began conducting an investigation and began notifying affected individuals of the incident earlier this week, including providing ‘resources’ to assist them, the notice stated.”
• “Burr & Forman is one of the latest Am Law 200 law firms reporting a data breach. As The American Lawyer reported this month, 2023 saw a rise in law firm data breaches, as well as class action litigation tied to the events. Bryan Cave Leighton Paisner, Cadwalader, Wickersham & Taft and Smith, Gambrell & Russell were all sued over data breaches last year. Cadwalader and Smith Gambrell had their suits dismissed; Bryan Cave was dismissed as a defendant in one lawsuit as another is ongoing.”
• For more see their: “Notice of Data Security Incident“

“Are you ready for the Law Society’s new client ID requirements on January 1, 2024?” —

• “As of January 1st, 2024, the Law Society of Ontario requires lawyers who only meet with clients virtually to verify their clients’ identity online by authenticating their identification documents, or using an alternate, approved verification method. This ends the emergency virtual-verification measures that permitted verification through simply viewing identification documents online.”
• “The virtual authentication of identity is done via technology that does multiple searches/verifications of the client’s identity. For examples of such technology, the Law Society of Ontario refers lawyers to a directory maintained by the Digital Identification and Authentication Council of Canada.”
• “The Law Society does not restrict lawyers to only using the suppliers in the DIACC directory, provided the technology satisfies the Law Society’s criteria to determine whether an individual’s government-issued photo identification document is true and genuine.”
• “If you will not be meeting your client in person, you will be required to virtually verify their identity and authenticate their identification documents if your legal services include the receipt, payment or transfer of funds. The Law Society has created several resources to provide additional details.”
• “Are you ready to authenticate your client’s identification? What technology will you be using?”

The SRA has several February relevant risk webinars in the works, see their events page for registration details: “Events and speakers” —

• Completing your firm-wide risk assessment (7 February 2024)
• Speakers: Mandeep Sandhu, Head of Proactive AML Supervision, SRA, Kati Kalia-Hona, AML Proactive Supervision Team Leader, SRA, Susannah Eaton, AML Team Manager, SRA
• Having a firm-wide risk assessment in place is not only the foundation on which all your anti-money laundering processes are built, it’s also a legal requirement.
• We published updated guidance on preparing and completing your firm-wide risk assessment in September, and also published an updated template which may help you in devising your own assessment.
• In this free webinar, we will discuss:
  • Provide tips and information on completing a firm-wide risk assessment
  • Work through examples of how you might use/adapt the template we have published
• We recommend you have your firm-wide risk assessment with you during the webinar, so you can review it alongside the session.
• You will also get the chance to put your questions to our expert panel, in particular on any queries you may have about devising and completing your own assessment. Questions for our panel can be submitted in advance when you book your place, or you can submit them live during the webinar.

• Completing client/matter risk assessment – A practical guide (12 February 2024| YouTube)
• Speakers: Mandeep Sandhu, Head of Proactive AML Supervision, SRA, Declan Brown, AML Regulatory Manager, SRA, Michelle Clement, AML Regulatory Manager, SRA
• Our recent thematic review of client/matter risk assessments found that less than half of those produced within firms were compliant with the rules. This led to us issuing a warning notice on the issue.
• In this free webinar, we will discuss:
  • Why it is important that you have compliant client/matter risk assessments
  • Common areas of non-compliance
  • Hints and tips on completing your own assessments
• We will also illustrate how you might use and personalise the client/matter risk assessment templates we published in October 2023.
• You will also get the chance to put your questions to our expert panel, in particular on any queries you may have about devising and completing your own assessment. Questions for our panel can be submitted in advance when you book your place, or you can submit them live during the webinar.

“Judge Declines to Disqualify Attorney Accused of Paying Client’s Living Expenses, Matter Referred to Disciplinary Committee” —

• “A federal judge declined to disqualify an attorney accused of paying for his client’s living expenses, an alleged violation that will be referred to the Disciplinary Committee for further evaluation.”
• “U.S. District Judge Wendy Beetlestone of the Eastern District of Pennsylvania held that the issue of counsel paying for their client’s living expenses didn’t warrant disqualifying the attorney, concluding a potential ethical violation didn’t require disqualification.”
• “In a Jan. 10 opinion, the court denied defendant Tasty Baking Co.’s motion to disqualify plaintiff Jose Ayala Sr.’s counsel, who is alleged to have been paying for the plaintiff’s living expenses, referring the matter to the disciplinary committee to investigate the potential ethics violation.”
• “…[Pennsylvania] Rule 1.8(e) provides that, “A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that: 1. a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and, 2. a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client,” the opinion said.”
• “‘The ethical considerations underlying rules on attorneys’ paying their clients’ living expenses aim to prevent financial entanglements that incentivize frivolous litigation (or at least that may monetarily incentivize litigants to make litigation decisions they might not otherwise make),’ Beetlestone noted. However, she ruled that given the factual record, disqualification wasn’t currently warranted.”
• “The court cited its 1999 ruling in Shade v. Great Lakes Dredge & Dock Co., which addressed Pennsylvania Rule 1.8(e) in the context of a client’s living expenses, noting the decision’s key principle that disqualification wasn’t warranted, ‘even if an ethical rule was violated—when it ‘is not necessary to effectuate the purposes of the rule or protect the integrity of the legal process’ in a particular case.'”

“Avoiding Conflicts With a Joint Defense Member Who Flips” —

• “A decision last week from the U.S. District Court for the Southern District of Florida, United States v. Vuteff, illustrates a benefit of utilizing a written joint defense agreement properly tailored to limit future conflicts, rather than relying on the oral agreements that are common among many practitioners.”
• “The court in Vuteff disqualified a lawyer whose former client was in an oral joint defense agreement with another individual who later ‘flipped’ to cooperate with the government. It held that the agreement imposed a duty of confidentiality on the lawyer, which would be violated by the lawyer’s use of information obtained through the joint defense to attack the cooperator’s credibility.”
• “This unfortunate scenario likely was avoidable. Applicable ethical guidance and case law indicate that such a disqualifying conflict can be obviated by a written joint defense agreement that expressly permits such use.”
• “United States v. Vuteff, 22 Cr. 20306, Dkt. No. 119 (S.D. Fla. Dec. 6, 2023), affirming 2023 WL 4202644 (S.D. Fla. June 27, 2023), a recent case out of the Southern District of Florida, serves as a cautionary reminder that, in some circumstances, courts may deem obligations to a non-client arising from a prior JDA to pose a conflict of interest for future representations.”
• “The case concerns an alleged bribery and money laundering conspiracy whereby individuals allegedly paid Venezuelan officials in return for the diversion of hundreds of millions of dollars from the Venezuelan state-owned oil company Petroleos de Venezuela S.A. (PDVSA). Several individuals employed by European financial institutions then allegedly helped launder the PDVSA funds using the international banking system.”
• “In the original criminal complaint filed in July 2018, two brothers were anonymously identified as part of the conspiracy but not named as defendants: Adolfo Ledo Nass and Alvaro Ledo Nass. After being identified in the complaint, each brother retained separate defense counsel, and Adolfo retained an experienced Miami-based criminal defense lawyer (hereinafter, Lawyer-1). Adolfo and Alvaro decided to work together to pursue a common defense strategy; accordingly, the brothers and their counsel entered into an oral JDA in August 2018.”
• “Over the next six months, the brothers and their counsel—including Lawyer-1—had several in-person meetings and conference calls where both brothers’ involvement in the alleged conspiracy was discussed. In early 2019, Adolfo discharged Lawyer-1 and retained new defense counsel.”
• “Over three years later, Lawyer-1 became involved in the PDVSA case once again—only this time representing a different alleged conspirator. On July 12, 2022, Luis Fernando Vuteff was indicted in the Southern District of Florida for conspiring to launder money as part of the PDVSA bribery scheme, and he retained Lawyer-1 as his defense counsel.”
• “As it happened, at some point after Adolfo discharged Lawyer-1, Alvaro agreed to cooperate with the government. As part of his cooperation agreement, Alvaro agreed to testify at any hearings or trials in the several cases relating to the PDVSA conspiracy—including Vuteff’s case.”
• “After it became clear that Alvaro would serve as a government witness against Vuteff, the government moved to disqualify Lawyer-1 and his firm from representing Vuteff.”
• “The government argued that, even though Lawyer-1 had not previously represented Alvaro, Lawyer-1’s previous participation in the JDA between Adolfo and Alvaro—and the fact Alvaro shared confidential information with Lawyer-1 as part of that JDA—created a conflict of interest precluding Lawyer-1 from representing Vuteff in a case involving the same criminal conspiracy. The government further emphasized that Alvaro refused to waive any conflicts of interest posed by the previous JDA.”
• “The court agreed with Lawyer-1 that he did not ‘owe an ethical obligation’ to Alvaro because he never represented Alvaro directly at the time he represented Adolfo. Vuteff, 2023 WL 4202644, at *6. Nonetheless, referencing ABA Formal Opinion 95-395, the court concluded that Lawyer-1 did owe Alvaro a fiduciary duty of confidentiality.”
• “Thus, because it was undisputed that Lawyer-1 learned confidential information from Alvaro as part of the JDA, and because Lawyer-1 sought to represent a co-defendant in the same case who was undoubtedly now adverse to the interests of Alvaro, this created a conflict of interest that precluded Lawyer-1 from representing Vuteff.”
• “Practitioners who commonly rely on oral JDAs may point to the time and energy required to negotiate the precise terms of a written JDA, and counsel’s ability to limit information sharing in situations where they perceive risk that a joint defense member may desert the group. The significant likely benefit of such express waiver language, however, provides a forceful counterargument in favor of a written JDA.”

“Appellate Court Rejects Attempt to Disqualify Law Firm Representing Plaintiffs in Separate Matters With Care One Management” —

• “‘Inference and innuendo’ are not enough to disqualify law firm Castronovo & McKinney from representing a plaintiff in a suit against Care One, while the firm also represents a former employee fired by the company over documents related to discovery in the case, according to the Appellate Division.”
• “In an unpublished opinion, the appeals court upheld a trial court ruling denying the senior care provider’s motion to disqualify law firm Castronovo & McKinney from representing the plaintiff in McCarthy v. Care One Management after the firm was retained by another former Care One employee to represent him in negotiating his severance package.”
• “Howard Tepper, Care One’s former senior vice president, also retained Castronovo & McKinney to negotiate his severance package after Care One allegedly fired him. Care One argued that Castronovo & McKinney violated 4.4(a) of the Rules of Professional Conduct by obtaining information on the company’s privileged litigation strategy in the punitive damages retrial and their confidential financial documents. The company asserted the Tepper emailed those documents to himself and then shared them with Castronovo & McKinney, according to the opinion.”
• “Counsel for Care One, Bruce H. Nagel of Nagel Rice, called the opinion ‘illogical and disturbing.’ … ‘The panel now permits a firm who is seeking financial information to establish punitive damages to also represent the very person at the defendant who was the highest ranking financial officer who was charged with litigation strategy and the production of the financial documents,’ Nagel said in an email to the Law Journal. ‘And to make matters worse, secretly emailed himself the same financial information that plaintiffs counsel has been seeking in the underlying case. The decision is simply inexplicable.'”
• “Nagel also stated that the panel rejected multiple emails from both in-house and outside counsel, which included Tepper in the litigation strategy decisions. The attorney said despite the fact the record was disputed, the court accepted Tepper’s certification that he was not privy to privileged information.”
• “Counsel for Rebecca McCarthy, Paul R. Castronovo of Castronovo & McKinney, did not immediately respond to a request for comment.”
• “‘To the extent Castronovo & McKinney might consider using documents related to Care One’s financial condition which were not produced by Care One’s counsel, unless the documents were otherwise publicly available, the potential consequences to the law firm could be far more severe than disqualification,’ stated the per curiam opinion.”

“Motion To Disqualify Denied” —

• “The United States District Court for the District of Columbia (Judge Nichols) has denied a motion to disqualify counsel (and for injunctive relief) to a party in an employment dispute in which the party (Shrensky) claimed wrongful discharge from the company ‘he helped found a half a century ago'”
• From the decision:
  • “A final issue remains: Shrensky’s motion to disqualify. ‘A motion to disqualify counsel is committed to the sound discretion of the district court.’ Ambush v. Engelberg, 282 F. Supp. 3d 58, 61 (D.D.C. 2017) (citation omitted). Disqualification of an attorney ‘is highly disfavored,’ and any motion to disqualify ‘is therefore examined with a skeptical eye.’ United States v. Crowder, 313 F. Supp. 3d 135, 141 (D.D.C. 2018). That is because disqualification “negates a client’s right to freely choose his counsel’ and can be sought ‘to advance purely tactical purposes.’ Ambush, 282 F. Supp. 3d at 62 (citations omitted).”
  • “Shrensky’s motion to disqualify Connie Bertram and Bertram LLC is based on his theory that Bertram and her firm are or were simultaneously representing Fort Meyer and some of the company’s ‘directors, officers, employees, members, [and] shareholders’—specifically, Rodriguez and his daughter. Mot. to Disqualify at 6 (citation omitted). But Fort Myer has persuasively represented that neither Bertram nor her firm have engaged in any such concurrent representation. Mem. in Opp. to Mot. to Disqualify at 2–3, 5–6, ECF 10. Rather, ‘Bertram LLP ceased representing Mr. Rodriguez and Ms. Rodrigues before being retained by [Fort Myer]’ and ‘[n]either Ms. Bertram nor Bertram LLP represent either Mr. Rodriguez or Ms. Rodrigues in connection with this litigation.’ Id. at 6. Shrensky has not adduced any evidence that convinces the Court otherwise.”
  • “In any event, Shrensky is not impacted by any potential conflict of interest. He was never a client of Bertram or Bertram LLC, so neither would have any information obtained from him via an attorney-client relationship that could harm him in this litigation. Thus, any concurrent representation would risk harm only to the company or Rodriguez and his daughter. It is not Shrensky’s place to step in and assert their rights. See Colyer v. Smith, 50 F. Supp 2d 966, 968 (C.D. Cal. 1999). Regardless, the Court perceives no ‘serious question as to counsel’s ability to act as a zealous and effective advocate for the client, nor a substantial possibility of an unfair advantage to the current client because of [a] prior representation of the opposing party.’ Koller v. Richardson-Merrell Inc., 737 F.2d 1038, 1056 (D.C. Cir. 1984) (citations omitted), vacated on other grounds, 472 U.S. 424 (1985). Thus, Shrensky’s concerns do not justify disqualification.”

With thanks to Cooley Conflicts Attorney George Bremner, and risk superstar Bill Frievogel, comes this from the New York City Bar: “Formal Opinion 2024-1: Ethical Issues Arising from the Representation of Two or More Bidders Competing for the Same Asset” —

• “The Professional Ethics Committee issued a formal ethics opinion analyzing a lawyer’s and a law firm’s ethical obligations when they consider representing two or more bidders competing for the same asset. The applicable New York Rules of Professional Conduct include Rules 1.4, 1.6, 1.7, 1.9, and 1.10(a).”
• “The opinion finds that, under these rules, in most situations, the lawyer and/or law firm would have a conflict of interest; however, again in most situations, the conflict is likely to be waivable in the law firm setting.”
• “Part I of the opinion concludes that a conflict of interest arises where a lawyer or law firm represents two or more bidders competing for the same asset.”
• “Part II presents a permutation of this situation in which the lawyer or law firm represents one bidder for the asset, but becomes aware that another client (which the lawyer is representing in an unrelated matter) is also bidding for the asset. (This permutation is unlikely to result in a conflict of interest unless the lawyer is asked to analyze or critique the other client’s bid.)”
• “Part III concludes that a multiple-bidder conflict is often waivable with consent from the affected competing bidder clients.”
• “And Part IV addresses other related ethics issues, including the lawyer’s duty to maintain the confidentiality of the work the lawyer (or the lawyer’s associates) performs for each of the competing bidder clients, and the possibility of using advance waivers to manage possible competing bidder conflicts ahead of time.”
• See the full opinion for all the details and discussion.

“Clyde & Co fined £500,000 after admitting due diligence failure” —

• “Top-50 firm Clyde & Co has been fined half a million pounds after admitting failing to carry out due diligence on a corporate client for more than four years.”
• “The firm’s former partner Edward Henry Mills-Webb was also fined £11,900 by the Solicitors Disciplinary Tribunal after admitting that he ‘materially contributed’ to the failure to check more than a dozen transactions as required by anti-money laundering regulations. There was no evidence that the client or its principals were involved in money laundering or financial crime.”
• “It is the second sanction levied on Clyde & Co in the past seven years. The international firm was previously fined £50,000 and three partners £10,000 each for accounting failures and breaches of AML rules.”
• “The tribunal heard earlier this week that both Clyde and Mills-Webb admitted that they should have obtained more complete documents for the former client, a shipping company incorporated in Liberia. The only documents obtained when the client was taken on in 2014 were six years old, and the firm and Mills-Webb accepted that they should have done more to understand the nature and structure of the business.”
• “Clyde blamed Mills-Webb for failing to identify what due diligence was required when the client was taken on and for failing to pay attention to emails from the firm’s business acceptance unit about steps that needed to be taken.”
• “For Clyde, Ben Hubble KC said: ‘The firm apologises for and very much regrets its failings. The firm has acknowledged the need to, and has worked to, strengthen its systems and processes.’”
• “Matter opening forms must now be signed off by the relevant fee-earner, who must expressly confirm that the information on the form is correct. Clyde said it had also increased the level of scrutiny that it applies to work classed as high risk.”
• “Helen Evans KC, for shipping expert Mills-Webb, said her client had not been ‘acting blindly and in a vacuum’ and believed his team had checked the client’s status.”
• “Mills-Webb accepted he had been ‘too detached’ from the due diligence process but stressed that his misconduct was an error and inadvertent, she said. Evans added: ‘He has done nothing inappropriate and always submitted there should be shared responsibility.’”
• “In a statement, the firm said it ‘sincerely regrets any compliance failings’ which it identified in 2018. It said: ‘Having reported the issue to the SRA, we fully assisted with its investigation and have sought to learn appropriate lessons.”
• “‘Under the firm’s current leadership, we have significantly enhanced our risk management and regulatory compliance. We hold ourselves to the highest professional and ethical standards and take responsibility for ensuring we meet them. This SDT determination is a reminder that regulatory compliance and risk management requires continuous, diligent attention.’”

“Conflicts of Interest under Conditional Fee Agreements” —

• “Two recent cases reveal that conflicts of interest can arise at the settlement stage of a claim, particularly where a Conditional Fee Agreement (‘CFA’) applies. This reiterates the age-old lesson that solicitors must not prioritise their own interest (or the interests of one client at the expense of another) otherwise they risk incurring liability for negligence and breach of fiduciary duty, as well as possible regulatory exposure.”
• “In Forster v Reynolds Porter Chamberlain [2023] EWHC 1150 (Ch) the High Court found that the duties solicitors owed to the client, even when acting under a CFA agreed on a ‘no win no fee’ basis, remain unaltered.”
• “RPC acted for the client in litigation and following an agreed settlement with the opponent. Under the terms of the CFA all sums recovered from the opponent were payable to RPC and counsel in priority to the client. The client also had the benefit of an after the event (ATE) insurance policy, which covered repayment of a loan to fund expert fees, which was recommended by RPC.”
• “The Court held that RPC had a clear conflict of interest in advising the client to borrow money and then advising and acting for the lender in preventing the client from enforcing the settlement. RPC could not properly have advised or acted for borrower and lender without the informed consent of both.”
• “It was found that RPC was in breach of its duty to the client when it declined to act on her instructions to enforce the settlement. Whilst RPC had a greater financial interest in successful enforcement than the client did, as a consequence of the CFA, that did not entitle RPC to decide what to do. As a result of the enormous costs incurred on the client’s claim and the modest settlement in her favour, there was an intractable conflict of interest and duty on RPC once the opponent defaulted.”
• “In Michael Partridge Suzette Partridge v Healys LLP [2023] EWHC 2340 (KB) , a professional negligence action against the Defendant firm of solicitors, one of several allegations raised by the Claimants was that Healys had put themselves in a position of conflict under the terms of the CFA they were engaged under by advising the Claimants to settle at a mediation.”
• “The specifics of the conflict, or why the advice was not in the Claimants’ best interest was not pleaded nor was there a pleading that the advice to accept the offer was negligent. Healys applied to strike out the claim on the basis the pleaded claim had no real prospect of success.”
• “The Court held that in the absence of any pleaded allegation that the advice at mediation was negligent, simply giving non-negligent advice that led to a termination of the retainer was not an actionable conflict. Rather, it was a situation expressly provided for in the CFA agreement.”