Bressler Risk Blog

“Boies Backs Ex-Bankruptcy Judge ‘Immunity’ in Relationship Suit” —

• “Litigation surrounding a former Texas bankruptcy judge’s once-secret relationship with a local attorney should be dismissed, despite ‘appearance issues,’ top litigator David Boies said.”
• “Boies on Thursday filed papers asking a federal court to toss the case against his client, former judge David R. Jones, which was brought by the onetime CEO of a petroleum barge company that filed for bankruptcy before Jones four years ago.”
• “The motion to dismiss is the latest development in the scandal related to Jones and his longstanding romantic relationship with Elizabeth Freeman. She was Jones’ former clerk and a onetime bankruptcy partner at Jackson Walker, a law firm that regularly represented clients before him in court.”
• “Boies, 83, said in an interview with Bloomberg Law that judges are entitled to ‘absolute immunity’ for their decisions.”
  “‘It is designed to ensure judges know when they make a decision that that decision is not going to subject them to civil liability from an unhappy litigant,’ Boies said. ‘Or even the burden of having to defend themselves against an unhappy litigant.'”
• “Allegations of malice or corruption don’t render a judge’s actions an exception to judicial immunity, and Jones’ failure to disclose the relationship doesn’t make his actions in the Bouchard Transportation Co. Inc. bankruptcy non-judicial, Thursday’s motion said.”
• “‘are entitled immunity even when their violation of a recusal obligation was allegedly intentional or malicious,’ the motion said.”
• “The revelations involving Jones, once the busiest judge overseeing large corporate Chapter 11s in the country, have cast a shadow on the Houston bankruptcy court Jones built to prominence, and have prompted a Justice Department unit to try to recover millions of dollars from Jackson Walker, Freeman’s former firm.”

“Former Dolton lawyers sue competing attorney for defamation” —

• “After bowing out of representing the village of Dolton due to village trustees’ refusal to pay them, the Del Galdo law group is suing a lawyer representing those trustees for defamation.”
• “The Berwyn-based law firm claims Burt Odelson, of the Odelson, Murphey, Frazier and McGrath law group, made knowingly false statements about the Del Galdo group that led to the trustees turning against them as village attorneys.”
• “The opposing law firms both have extensive experience representing municipalities and government officials in the Chicago area. Michael Del Galdo, founding attorney of the Del Galdo firm, has long ties to the political operation Michael Madigan, the indicted former Illinois House speaker and Democratic Party chairman.”
• “According to the lawsuit, Odelson told attendees at a Feb. 22 Dolton Village Board meeting that Del Galdo had a conflict of interest in representing the village and had billed the village tens of thousands of dollars ‘in violation of Dolton’s corporate authorities.'”
• “Del Galdo said other statements he claims were defamatory include that they solely served as the village’s prosecutor, not village attorney, and that cases under Del Galdo’s representation had gone under default judgment.”

“Atty Agrees To Withdraw Mid-DQ Hearing In NC Biz Court” —

• “A real estate attorney on Wednesday [6/24] beat opposing counsel to the punch on a motion for disqualification in a dispute over a soured business partnership, opting instead to voluntarily withdraw his representation of one party but remain as counsel for another after a state Business Court judge pointed out conflicts with him providing services to both.”
• “The verbal agreement to withdraw by Jason Norman of Norman Legal PLLC came during a hearing in Mecklenburg County after North Carolina Business Court Judge Adam Conrad questioned whose approval Norman had sought in filing an answer on behalf of Golden Rooster LLC, a real estate investment company at the heart of the suit.”
• “Norman — who represents defendants Golden Rooster and member Khanh Ngoc ‘Katie’ Phan — conceded that he only consulted with Phan in seeking to file documents on behalf of the company, leaving the other member-owner, plaintiff Thao Phuong ‘Tiffani’ Bui, in the dark.”
• “Judge Conrad said one manager’s approval without the other is insufficient given that both Bui and Phan have equal voting rights when it comes to Golden Rooster — even if Bui and Phan are opposing parties in the suit.”
• “‘That seems like a problem to me — and that seems like a problem that would last throughout the course of this case,’ the judge said of Norman’s representation of both Golden Rooster and Phan.”
• “Norman subsequently agreed to pull his representation of Golden Rooster and remain as counsel for Phan, noting that Golden Rooster didn’t appear to be a necessary party.”
• “During Wednesday’s hearing, Bo Caudill of Villmer Caudill PLLC, who represents Bui, said his client never agreed to Norman representing Golden Rooster. If that weren’t enough, Norman’s representation of both the company and Phan was in clear violation of the rules of professional conduct, Caudill said.”
• “He argued that Bui, as a 50% owner, has a right to be informed about the status of the company’s representation, including directing strategy and making decisions about settlement offers. That inherently creates ‘difficult circumstances’ for Norman given that he is also representing Phan, Caudill told the court.”
• “In response, Norman claimed Bui did agree to his representation of Golden Rooster and only changed her mind when he advised that she wasn’t owed $68,000 as part of the buyout offer, at which point he said she “soured” on his services.”
• “‘The idea that she did not consent to hiring me as counsel for Golden Rooster belies the evidence,’ Norman said. ‘She directed it.'”
• “Judge Conrad then questioned whether Norman had circulated the answer he filed on Golden Rooster’s behalf to both Bui and Phan as equal partners in the business. Norman, however, said he did not send it to Bui because she was an ‘adversarial litigant.'”
• “According to Judge Conrad, therein lies the problem. ‘In the course of this dialogue, I think you can see there is a pretty substantial problem here with your continued representation of the company,’ he said.”
• “While Norman argued that his initial hiring was lawful, he conceded the judge’s point and said he didn’t ‘have a problem being removed from Golden Rooster’s representation.'”

“VEEVA SYSTEMS INC. v. TACT.AI TECHNOLOGIES, INC., AKTANA, INC.” —

• “Fairly universal principles of legal ethics tell us that a lawyer cannot defend her client in a lawsuit and then turn against that client in the same or a substantially related matter. But this rule is not a black hole inhaling anyone nearing the event horizon. A new client’s choice of counsel is entitled to respect. Former clients may give informed consent. And there’s nothing strange about lawyers working on many matters of a similar kind — that is the nature of specialization, which is a boon for clients.”
• “Many matters that seem somewhat similar do not really have the kind of relations that run counter to the recognized purposes of the ethical rules. Nor are the ethical rules weapons for deployment at a whim.”
• “Here, lead counsel for the defendants, Ms. Christa M. Anderson, Esq., used to represent Veeva at her old firm. Veeva — the former client — objects and moves to disqualify Ms. Anderson and her new firm. The focus is on a patent and trade secret case from about ten years ago where Ms. Anderson represented Veeva. Defendants argue that plaintiff failed to show the two matters are substantially related, and that plaintiff waived its objection.”
• “For the reasons set out below, we agree with Veeva and grant the motion. Ms. Anderson and her firm, Cooley LLP, are disqualified from their representation of defendants in this case.”
• “Ms. Anderson practiced at Keker from 1996 to 2022 and moved to Cooley in 2022. In 2013, she was lead counsel for Veeva in a patent infringement and trade secret misappropriation case brought by Prolifiq Software, Inc. against Veeva.”
• “The record offers a few details on Ms. Anderson’s role in Prolifiq. In support of its motion, Veeva filed several insightful documents as well as some partially unredacted billing records.”
• “In response — rather than seek an order compelling production of the complete records or otherwise digging in — Ms. Anderson filed a declaration averring that she possesses no relevant records and does not remember anything of substance about Prolifiq.”
• “Ms. Anderson’s billing entries — and entries of others on the team referring to Ms. Anderson — reflect her supervision of the Keker litigation team. (“case planning,” “case strategy,” with attendant meetings and correspondence with Veeva).”
• “The story picks up again in 2023 — after Ms. Anderson moved to Cooley — when she became lead counsel for Aktana in this dispute with Veeva.”
• “Ms. Anderson’s representation of Aktana was well known to Veeva. Between November 2, 2023 through the end of January 2024, she communicated more than 50 times with Veeva representatives including Mr. Faddis (recall: he was her point of contact when she represented Veeva).”
• “Although the parties were understandably guarded about the nature of these communications, it was made sufficiently clear during oral argument that they were exploring the possibility of settlement. For those first three months, Veeva never complained about Ms. Anderson’s involvement, and Ms. Anderson never sought Veeva’s informed consent to represent Aktana against it. Veeva’s reason is that Mr. Faddis did not remember what Prolifiq was about and their team did not investigate until Aktana moved to dismiss in mid-January 2024; Aktana’s reason is that it was not Ms. Anderson’s responsibility to say something”
• “The motion to disqualify. Veeva’s motion is simple enough: Ms. Anderson must be disqualified because she is violating the rule against being adverse to a former client in a substantially related matter without informed consent. DI 57 (relying on Model Rule of Professional Conduct 1.9). And because Cooley declined to screen Ms. Anderson from this case, Cooley must also be disqualified.”
• “There is no room for another result here. Because Ms. Anderson’s representation of Aktana against Veeva in this case violates Model Rule 1.9, we must grant the motion to disqualify her. And because her law firm, Cooley, has not accepted Aktana’s request to screen her or argued that screening would be an appropriate resolution, we must disqualify Cooley from representing Aktana in this matter as well. Veeva’s five-month delay in bringing this motion is not a good thing on the whole. But there was some brinksmanship on both sides here, and the facts do not amount to waiver. In the end, this ruling is not about who wore the white hat. It is required by the ethical rules.”

“Fourth Department – Motion to disqualify: Consumer Beverages Inc. v. Kavcon Development LLC” —

• “Background: The defendant appealed from an order that denied its motion to disqualify the plaintiff’s attorneys from representing the plaintiff in the underlying action to recover on a demand note. It is undisputed that, at the time the demand note was issued, the plaintiff’s attorneys represented both parties.”
• “Ruling: The Appellate Division affirmed. The court held that the defendant failed to demonstrate that the prior representation is substantially related to the present litigation. The court noted vague references to confidential information, but it does not explicitly contend that the plaintiff’s attorneys received specific confidential information substantially related to the litigation.”
• WATCH: Oral argument video

Naylor v. BAE Systems, Inc., Docket No. 1:24-cv-00536 (E.D. Va. Apr 04, 2024): “PLAINTIFF’S MEMORANDUM OF LAW IN SUPPORT OF HER MOTION TODISQUALIFY DEFENDANT’S COUNSEL” —

• “Groom currently represents the [BAE Systems Employees’ Savings and Investment] Plan. Groom has represented the Plan for several years. Groom receives from the Plan roughly $700,000 per year for legal services. The Plan has paid Groom more than $2 million for legal services over the past three years.”
• “Plaintiff alleges in her Complaint that Defendant breached ERISA’s duty of prudence by causing the Plan to pay excessive and unreasonable fees to the Plan’s third-party service providers, including Groom.”
• “Groom has appeared in this lawsuit as counsel for Defendant. Accordingly, Groom is simultaneously representing both the Plan and the Defendant in this case – defending against the Plan’s claims in this matter. Should Groom be disqualified from representing both the Plaintiff and Defendant in this lawsuit?”
• “Plaintiff alleges Defendant is violating a myriad of ERISA provisions and causing the Plan to suffer millions of losses. Among Plaintiff’s allegations is that Defendant is causing the Plan to pay Groom excessive and unreasonable fees both in relation to the services provided to the Planand in relation to the fees paid by retirement plans in general for ERISA compliance and legalconsulting services.”
• “Plaintiff identifies several retirement plans that paid Groom between $10,000 and $34,000 annually for the same or similar services that Groom provided to the Plan here for roughly $700,000 annually.”
• “Groom has represented the Plan for the entirety of the class period. Groom’s concurrent representation of the Plan and Defendant (who is seeking to defeat the claims of the Plan), creates an obvious irreconcilable concurrent conflict, specifically prohibited pursuant to Rule 1.7(a)(1)and (2).”
• “The conflict is even more glaring considering Plaintiff’s allegations that Defendant breached its duty of prudence to the Plan, among other ways, by causing the Plan to pay Groom millions of dollars in excessive and unreasonable compensation during the class period.”
• “The allegations pertaining to Groom’s excessive compensation make the conflict even more egregious and troubling. Groom is defiantly shirking the duties it owes to the Plan and instead seeking to help Defendant defeat the Plan’s claims and thereby protect the excessive fees that Defendant is causing the Plan to pay Groom. Groom’s ‘switching sides’ and seeking to protect the Defendant to the detriment of the Plan further bolsters the core claims in the operative Complaint that the Defendant breached ERISA’s duty of loyalty and prudence in connection with the administration of the Plan.”
• “Under ERISA, Defendant has the highest duties of loyalty known to law. Instead of respecting its duties of loyalty to the Plan, Defendant is insisting on using the Plan’s lawyers to defend against claims that Defendant breached its duty of loyalty to the Plan.”
• “Defendant’s disregard for its duty of loyalty to the Plan is on full display by insisting on having the Plan’s lawyers represent Defendant (who have gained confidential information about the administration of the Plan, while representing the Plan, and being paid millions of dollars by the Plan) in this action to the detriment of the Plan.”

“US judge’s financial conflict leads to revived lawsuit against big banks” —

• “A US appeals court threw out the dismissal of an antitrust lawsuit accusing 10 large banks of overcharging investors on corporate bonds, saying the trial judge should have been recused because his wife owned stock in one of the banks.”
• “The 2nd US Circuit Court of Appeals in Manhattan said that while US District Judge Lewis Liman ‘almost certainly unknowingly’ had a conflict of interest, his partiality could reasonably be questioned because his wife’s ownership of Bank of America stock created an ‘appearance of impropriety.'”
• “Tuesday’s unsigned decision came nearly three years after a Wall Street Journal investigation found that more than 130 federal judges had since 2010 violated federal law and judicial ethics by overseeing cases involving companies in which they or family members owned stock.”
• “Liman, an appointee of former President Donald Trump, was assigned the lawsuit in April 2020 and dismissed it with prejudice in October 2021, three months after his wife sold $15,000 of Bank of America stock.”
• “In February 2022, a court clerk alerted parties to the conflict, writing of the judge that the ‘ownership of stock neither affected nor impacted his decisions.'”
• “The banks said Liman’s failure to uncover his conflict didn’t require recusal or reviving the case. But the appeals court found a ‘legitimate risk’ that similar violations could undermine public confidence in the judicial process.”
• “US Supreme Court Chief Justice John Roberts highlighted in his 2021 annual report on the judiciary a need for judges to be vigilant about financial conflicts”

“Recusal Of Judge Who Reported Attorney Misconduct” —

• “The South Carolina Advisory Committee on Standards of Judicial Conduct opines on the recusal of a judge who reported an attorney to discipline authorities:
  • “A family court judge should recuse himself/herself from presiding over cases in which one of the attorneys is a person the judge reported for misconduct.”
  • “Rule 3E(1)(a) states that ‘[a] judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned, including but not limited to instances where the judge has a personal bias or prejudice concerning a party or a party’s lawyer….’ While the judge may not have a personal bias, the rule is not solely limited to such bias, and certainly, reporting an attorney as required by Canon 3D(2) could be construed (even if it is entirely warranted) as bias if known to the parties and their counsel.”
  • “However, in the case of disciplinary proceedings, certain proceedings are confidential. For example, if it is determined that the complaint does not allege conduct that, if true, would violate the Rules of Professional Conduct, it will be dismissed without notice to the attorney. Rule 19(a), RLDE, Rule 413, SCACR.”
  • “Should the matter progress, the lawyer will receive a notice of investigation, including the initial complaint, and a request for a response. Id. However, the notice of investigation and initial complaint (and the attorney’s response) are not available to the public. Thus, the only person that could question the judge’s impartiality would be the attorney, and the attorney would have to reveal the investigation into his/her conduct, an act that the lawyer is not likely to want to do. Yet, if the matter was public, the judge’s impartiality would or could be called into question. Therefore, it would seem that the best course of action is for the judge to recuse himself/herself from presiding over matters in which the attorney appears.”

“New judge assigned to lawsuit over judicial retention ballot referral” —

• “A new judge has been assigned to a lawsuit challenging a legislative ballot referral that would end most judicial retention elections in Arizona.”
• “Progress Arizona is suing to prevent Senate Concurrent Resolution 1044 from appearing on the ballot. The group alleges SCR 1044 is unconstitutional because it bears a deceptive title and contains more than a single amendment to the state constitution.”
• “The measure states that only judges who have been convicted of a felony, declared bankruptcy or been found not to have followed judicial standards should stand for retention.”
• “‘It basically eliminates retention, but then it also really changes the makeup of the judicial performance review committee, and those are separate amendments that have to be voted on separately,’ said Jim Barton, an attorney for Progress Arizona.”
• “Kory Langhofer, an attorney for the legislative leaders intervening in the case, disputes the lawsuit’s claims. ‘The title of the act — Judicial Accountability Act of 2024 — is exactly what it is. It’s about judicial accountability,’ Langhofer said. ‘Regarding the separate amendment issue, I think when the court looks at it, it will find that everything is sufficiently interrelated and that it will qualify for the ballot.'”
• “Currently, trial judges in Maricopa, Pima, Pinal and Coconino counties, appeals court judges and Supreme Court justices are subject to Arizona’s retention election system.”
• “Citing this set of circumstances, Judge Joseph Welty, the presiding judge of the Maricopa County Superior Court, assigned the case to Judge John Napper, a Yavapai County judge.”
• “In Arizona’s rural counties, like Yavapai, judges are elected. Therefore, Napper is not subject to the retention election process the ballot referral seeks to change.”

New York Advisory Committee on Judicial Ethics: “Judicial Ethics Opinion 23-144” —

• “Question: May a full-time support magistrate in one county serve as a volunteer arbitrator in the small claims part of a different court in another county?”
• “Discussion: We have advised that service as a volunteer arbitrator in small claims court is not performed in a “private capacity” within the meaning of Section 100.4(F). Thus, the Rules Governing Judicial Conduct do not prohibit a full-time judge or quasi-judicial official from serving in that capacity, as long as such service does not conflict with official duties. We note that a support magistrate does not hear appeals, whether from the small claims part or otherwise, and the risk of any conflict is further reduced by the fact that the small claims part is in another county.”
• “Accordingly, we conclude this support magistrate may volunteer as an arbitrator in the small claims part of a different court in another county. However, the support magistrate should consult the Office of Court Administration’s Nonjudicial Ethics Helpline (888-283-8442; inside-ucs.org/oca/ethics/) for guidance on any issues that may arise under Part 50, including any administrative approvals that may be required.”

“Ex-Bankruptcy Judge Agrees to Jackson Walker Romance Questioning” —

• “A former judge tied up in litigation related to his relationship with a onetime Jackson Walker LLP partner agreed to let the Texas law firm depose him over key questions about the romance.”
• “Jackson Walker and David R. Jones, the former Houston bankruptcy judge, agreed to a seven-hour deposition on July 18 on topics related to his previously-secret relationship with attorney Elizabeth Freeman. The questioning will come as Jackson Walker battles a government effort to claw back more than $13 million in fees the firm collected in cases that were handled by Jones, while it employed Freeman.”
• “Chief Judge Eduardo V. Rodriguez of the US Bankruptcy Court for the Southern District of Texas signed off on the stipulation Tuesday.”
• “Jackson Walker has said Jones’ testimony is crucial in determining whether anyone at the firm was aware of the relationship. Jones previously criticized the request, saying its true purpose is to harass and embarrass him.”
• “The deposition agreement came a day after the Justice Department’s bankruptcy unit, the US Trustee’s office, forcefully pushed back against Jackson Walker’s argument that it didn’t violate any ethical rules in not disclosing the relationship because it didn’t know about the romance.”
• “The firm has also said it took internal steps to address the matter once it learned of the relationship. But its failure to to disclose the connection publicly shows that it knew it had an ethical problem but consciously decided to keep the romance a secret, the US Trustee said.”