Bressler Risk Blog

“Sublime’s Ex-Lawyers Hit Back at Malpractice Lawsuit, Calling It a ‘Pathetic’ Attempt to Avoid Legal Bills” —

• “Top music law firm King Holmes Paterno & Soriano is firing back at a legal malpractice lawsuit filed by the band Sublime, arguing that the group has “falsely and maliciously” sued to get out of paying their hefty legal bills.”
• “‘While Sublime had the right to terminate its lawyers at any time, it has no right to sidestep its responsibility to pay fees it incurred,’ the firm wrote. ‘Yet, in an obvious and pathetic attempt to do exactly that, plaintiffs, presumably at the prodding of reputationally challenged new advisors, have cynically elected to file a trumped-up preemptive malpractice suit falsely and maliciously accusing the law firm of conflicts of interest they claim caused them unspecified damages.'”
• “The filing from King Holmes aimed to rebut many of Sublime’s specific allegations, including the band’s accusation that the firm steered it into a merchandise deal without disclosing that the company was another one of the firm’s clients — a move Sublime claimed cost the band millions.”
• “In Monday’s filing, the firm said it had disclosed that potential conflict of interest to the band members and that they had consented to the arrangement. King Holmes said it even invited the band members’ personal attorneys to be involved in the negotiations to avoid any doubt.”
• “‘At the request of Sublime and its partners, KHPS helped secure a state-of-the-art merchandising agreement with one of the world’s few most preeminent music merchandisers, which also was Sublime’s merchandiser of choice,’the firm wrote. ‘That merchandiser paid and continues to pay Sublime higher royalties on a much broader range of products and with other more favorable terms than its main competitor offered.'”
• “The firm went even further, suggesting that Sublime had perhaps been motivated by ‘predatory new advisors’ to file baseless allegations in court.”
• “‘A cursory investigation done in good faith, had plaintiffs or their advisors cared to make the minimal effort needed to conduct one before pulling the litigation trigger, would have demonstrated what plaintiffs and their advisors already knew or should have known — that nothing could be further from the truth,’ the firm wrote.”
• “In technical terms, Monday’s filing accused Sublime and its surviving members of breach of contract and other related violations, saying they had violated their agreement by failing to pay the firm $108,852 in past-due legal bills. The case will be litigated alongside the original allegations filed in January.”

For those following the Corporate Transparency Act: “Court Challenge to Corporate Transparency Act Prevails – For Now” —

• “On March 1, 2024, U.S. District Judge Liles C. Burke for the Northern District of Alabama, Northeastern Division, issued a Final Judgment ruling in favor of the Plaintiffs’ (National Small Business United, et al. ‘NSBU’) motion for summary judgment, and against the U.S. Treasury (Defendants).”
• “This judgment held that the Corporate Transparency Act (CTA) is unconstitutional because it exceeds the Constitution’s limits on Congress’ power.”
• “Further, FinCEN is permanently enjoined from enforcing the CTA against the Plaintiffs in that case (but only the Plaintiffs in that case).”
• “It is currently unclear as to the implications of this ruling for the business community at large. This ruling may be persuasive in similar cases brought against Treasury outside of the Northern District of Alabama, but is not precedential, meaning that other judicial forums may rule differently on the issues presented in this case.”
• “In reaching its conclusions, the court reviewed all of the arguments made by Treasury and the Plaintiffs. First, the court dispensed with Treasury’s standing argument finding that the Plaintiffs had a redressable injury and the NSBU had associational standing in order to bring the suit in federal court. Next, the court discussed the various constitutional arguments the Plaintiffs made, determining the CTA did not pass muster under the Necessary and Proper Clause (referring to foreign affairs and national security), the Commerce Clause, nor Congress’s taxing power under the Necessary and Proper Clause. The court extensively discussed Supreme Court precedent to reach the result that the CTA cannot be justified as a constitutional exercise of Congress’s powers. The Court indicated that its conclusion made it unnecessary to decide whether the CTA violates the First, Fourth, or Fifth Amendments of the Constitution, as also asserted by the Plaintiffs.”
• “Because this case only included questions of law, and was decided on summary judgment based solely on dispositive motions by the parties, the appeals court will have de novo review of this case. That is, the appeals court will decide all issues in the case, as if the case was being heard for the first time.”

State Bar of Michigan: “Ethics opinion details the judicial ethical obligations when invited to attend firm-sponsored events” —

• “Judicial officers should decline to attend law firm-sponsored events with limited exceptions, according to a new ethics opinion from the State Bar of Michigan’s Standing Committee on Judicial Ethics.”
• “‘It may be permissible for a judicial officer to attend an event if the judicial officer has a personal connection to the firm and has weighed the ethical limitations to ensure that there is no appearance of impropriety, it does not detract from the dignity of the office, and it does not interfere with the performance of judicial duties,’ the opinion states.”
• “The opinion analyzes Canon 2, which deals with the appearance of impropriety, and Canon 4, which outlines allowable extrajudicial activities, as to why judges should not attend events at law firms.”
• “The opinion concludes by saying that judicial officers play a crucial role in maintaining public trust in the judiciary, necessitating careful consideration of their participation in law firm-sponsored events. The opinion advises that judicial officers should therefore decline invitations unless they have personal connections to the firm and that, when considering attendance, they should conduct thorough analyses to ensure they are in compliance with the Code of Judicial Conduct.”
• “Factors to consider include being aware of the event’s public visibility, avoiding ex parte communications, and refraining from discussions regarding pending cases. These factors should be considered for the judicial officer to ensure that they continue to uphold the dignity of their office and to ensure activities align with ‘ordinary social hospitality.'”
• Text of full opinion here.

“Virginia senator who does legal work for skill game industry will help write skill game bill” —

• “A state senator whose law firm has helped the skill game industry fight Virginia’s ban on the slots-like gambling machines is among the handful of senators picked to write legislation behind closed doors that could determine whether the industry remains profitable or ceases to exist in the state.”
• “Many members of the Virginia General Assembly are lawyers, and it’s not uncommon for them to vote on legislation that could conceivably impact a client.”
• “Glancing associations aren’t usually enough to trigger Virginia’s conflict of interest laws, which are meant to prevent elected officials from taking public actions that benefit their private interests.”
• “But the professional connection Sen. Bill Stanley, R-Franklin, has to Georgia-based skill game company Pace-O-Matic is unusually direct, touching on his work as a private attorney, his interest in car racing and the political punditry he offers in podcast form. Pace-O-Matic has lobbied heavily for the bill Stanley will now help finalize in the last week of the session.”
• “In an interview Thursday, Stanley said the Virginia Conflict of Interest and Ethics Advisory Council determined his ties to Pace-O-Matic don’t amount to a legal conflict.”
• “‘They found that there was no conflict because I don’t own Pace-O-Matic,’ Stanley said. ‘I don’t own one of these skill games. And I don’t own a convenience store that has a skill game in it.'”
• “Stanley and his firm worked with Pace-O-Matic on a lawsuit seeking to overturn the previous ban passed by his General Assembly colleagues, a legal challenge that bought skill game companies nearly two years of revenue with no taxation and regulation before the ban was reinstated last year.”
• “Pace-O-Matic also sponsors a racing team partnership between Stanley and former NASCAR driver Hermie Sadler, who has hosted skill games at his Southside Virginia truck stop and served as a plaintiff in the lawsuit trying to keep them legal. The company also sponsors the ‘Leaning Right and Turning Left’ podcast Stanley hosts with Sadler. Fliers promoting that podcast are laid out on the reception desk outside Stanley’s General Assembly Building office and include the phrase ‘Powered by Pace-O-Matic.'”
• “Asked if he remains retained by Pace-O-Matic and Sadler today, Stanley said, ‘Of course.'”
• “Getting the bill passed is critical to Pace-O-Matic’s continued business in Virginia. Its failure would mean the company would have to pack up thousands of skill machines that are currently deactivated due to their illegal status. Its passage would allow the machines to be turned back on and start making money again, but the bill’s specifics could determine exactly how profitable they could be.”
• “The law also says a conflict doesn’t exist if a legislator’s interest in a matter considered by the General Assembly isn’t ‘substantially different’ from that of “the general public” or a broader ‘class or group’ of businesses that could potentially be impacted. In other words, if Stanley only works with one of several skill game companies operating in Virginia, that could be enough to clear him under the “substantially different” rule.”
• “Though the skill game legalization bill affects multiple companies and the public, roughly half the skill machines in Virginia are believed to be Pace-O-Matic machines, according to the limited state data available.”
• “Stanley said he had previously abstained from gambling votes and opposes gambling generally, but was ‘surprised’ to learn that the Ethics Council found he could act freely on skill game legislation because there was no conflict.”

“Sundholm v. Hollywood Foreign Press Assn.” —

• “The case involves Magnus Sundholm, a former member of the Hollywood Foreign Press Association (HFPA), who sued the HFPA for breach of contract and other claims after his expulsion from the organization. The HFPA moved to disqualify Sundholm’s attorneys from the case, asserting that they had reviewed privileged documents that belonged to the HFPA. The trial court granted the motion, leading to Sundholm’s appeal.”
• “The Court of Appeal of the State of California, Second Appellate District, Division Seven, found that while Sundholm’s attorney had improperly refused to produce documents in response to a subpoena from the HFPA, disqualification of the attorney was not the appropriate remedy. This is because disqualification affects a party’s right to counsel of choice and should not be used to punish an attorney for improper conduct. The court further found that there was no evidence that the possession of the HFPA’s documents by Sundholm’s attorney would prejudice the HFPA in the proceeding.”
• “Thus, the court reversed the trial court’s order disqualifying Sundholm’s attorneys.”

“New opinions from the Ohio Board of Professional Conduct” —

• “The Ohio Board of Professional Conduct has released two advisory opinions concerning in-house counsel and lawyers serving in the dual role of guardian ad litem/lawyer. Each opinion replaces an earlier opinion that analyzed the issue presented under the former Code of Professional Responsibility.”
• “Advisory Opinion 2024-01 addresses the ethical issues that can arise when an in-house lawyer for a corporation privately represents a customer of the corporation. The board advises that the representation should be avoided due to potential issues with conflicts of interest, the impairment of the lawyer’s independent professional judgment, the unauthorized practice of law, and the impermissible sharing of fees with a nonlawyer. This opinion replaces Adv. Op.1992-17.”
• “Advisory Opinion 2024-02 concerns a lawyer’s communication with a represented party when the lawyer serves in the dual role as guardian ad litem and lawyer for a child in juvenile or domestic court matters. The Rules of Professional Conduct generally prohibit communication with represented parties unless the opposing lawyer gives permission, or the conduct is permitted, by law or court order. The board concludes that communication with a represented person, usually the child’s parent, is permitted when the sole purpose of the communication is to obtain information about how to initially contact the child. This opinion replaces Adv. Op. 2006-05.”

“Blackstone Racked Up $165M in Kirkland Fees in Just 3 Years” —

• “Blackstone paid Kirkland & Ellis $164.6 million in legal fees over the past three years, the New York-based private equity giant disclosed in a new regulatory filing.”
• “Blackstone makes the unusual legal fee disclosures to comply with U.S. Securities and Exchange Commission rules on potential conflicts of interest stemming from having an attorney on the board who’s employed by a law firm that receives work from the company.”
• “Those rules came into play for the private equity firm when Reginald ‘Reg’ Brown, a partner in Kirkland’s Washington, D.C., office, joined its board in 2020.”
• “Brown, who earlier in his career was an associate White House counsel under President George W. Bush, came to Kirkland after 15 years as a partner at Wilmer Cutler Pickering Hale and Dorr, where he was chair of its Financial Institutions Group and vice chair of its Crisis Management and Strategic Response Group.”
• “That rule also has come into play at Meta, where Robert Kimmitt, senior internal counsel at Wilmer, joined the board in 2020. Meta paid Wilmer $67 million in 2022. The tech giant has not yet disclosed how much business it did with the law firm in 2023.”

“Opioid Judge Has Concerns About Motley Rice: ‘I Can’t Understand Why You Don’t See That’” —

• “A federal judge is weighing whether to disqualify Motley Rice from dozens of opioid lawsuits because the firm obtained confidential information when representing the state of Hawaii, the District of Columbia and the City of Chicago in separate actions.”
• “At a Feb. 12 hearing, U.S. District Judge Dan Polster, who is overseeing the opioid multidistrict litigation in the Northern District of Ohio, raised several questions to Motley Rice’s Linda Singer about her responsibilities as outside counsel in government lawsuits against the same defendants her firm has sued in the opioid cases—specifically, pharmacy benefit manager OptumRx Inc., owned by United HealthCare.”
• “Brian Boone, of Alston & Bird in Charlotte, North Carolina, has alleged in a disqualification motion that Motley Rice, in the government cases, used its subpoena powers to obtain confidential documents from his client, OptumRx, and some of them pertain to opioids.”
• “At the hearing, Singer insisted Motley Rice never shared the confidential documents with other clients and, in any event, Hawaii’s lawsuit, filed last year, did not even reference opioids. ‘I want to be clear,’ she said. ‘It’s our legal position that, again, none of that matters.'”
• “‘Well, I disagree with that,’ Polster said. ‘I can’t understand why you don’t see that there is a difference between your work for these—your firm’s work for these three entities and your work for all of your other clients, and particularly the four—you know, the four bellwether clients that you’re representing.'”
• “Though the bellwether clients, as cities and counties, also are public entities, Polster drew a distinction because Motley Rice had subpoena powers in the state cases.”
• “The debate addresses a thorny but longstanding issue when private plaintiffs’ firms serve as outside counsel to government entities, particularly state attorneys general. At the hearing, liaison counsel Peter Weinberger, of Cleveland’s Spangenberg, Shibley & Liber, referenced ‘a move afoot’ to ‘curtail the rights of state and cities and counties to retain outside counsel who are prepared to represent them on a contingent fee.'”
• “But OptumRx’s motion says Motley Rice has violated both the American Bar Association’s Rules of Professional Conduct and the Ohio Rule of Professional Conduct 1.11(c), which prohibits a lawyer with confidential government information about a person from representing a private client ‘whose interests are adverse to that person.'”
• “In opposition, the plaintiffs’ executive committee, which includes Motley Rice’s Joe Rice, insisted the firm had no conflict because the government investigations involved allegations of overbilling for insulin and other prescription drugs, not causing the opioid epidemic. As such, the information wasn’t even material, they wrote.”

“ABA Clarifies Rule on Information Obtained During Public Service” —

• “Attorneys with government jobs can’t represent private clients in cases where confidential information learned about an individual through the attorney’s public work could disadvantage the individual, the American Bar Association said on Wednesday.”
• “The opinion clarified the scope of ABA Model Rule of Professional Conduct 1.11(c). The prohibition extends to both current and former government workers, including attorneys who hold part-time public jobs, the ABA said.”
• “This is the case even though 1.11(c) was once aimed at regulating the ‘revolving door’ of lawyers moving from government to private practice, the ABA explained.”
• “‘We do not perceive any countervailing considerations that would justify exempting current public officers and employees from a disqualification provision designed to prevent that lawyer from misusing confidential government information for a private client,’ the ABA said.”
• “The rule ‘applies irrespective of whether lawyers served in a representational capacity when they acquired’ the information, the ABA said. It’s scope therefore includes legislators and public executives. The ABA cited a 2019 New York State Bar Association ethics committee ruling that applied the rule to a part-time town supervisor who also worked as a private attorney.”
• “The ABA also said it interpreted ‘private client’ to include even public ‘entities and officials whom the lawyer represents in private practices, if those clients are not legally entitled to employ the confidential information.'”

See complete text: “Formal Opinion 509 (February 28, 2024).”