Bressler Risk Blog

“Ex-Holland & Knight Attorney Improperly Accessed Client File to Gain Upper Hand in Divorce Proceedings, Suit Alleges” —

• “Holland & Knight is being sued in Pennsylvania state court by a client for failing to flag a conflict of interest and safeguard confidential client information after one of the firm’s attorneys improperly accessed a client file to gain an advantage during his personal divorce proceedings.”
• “The suit, filed in Philadelphia’s Court of Common Pleas on Aug. 20, claims that as a result of Holland & Knight’s failure to detect a potential conflict of interest between then-partner Patrick McCabe and a new firm client, McCabe’s soon-to-be-ex-wife’s employer Philadelphia-based personal injury firm Fritz and Bianculli, McCabe and two other firm employees accessed Fritz and Bianculli’s confidential information multiple times from July 2022 to early 2024, violating client confidentiality protections.”
• “Fritz and Bianculli, the plaintiff in the action, alleges that Holland & Knight brought on the firm as a client around the same time as McCabe began his divorce proceedings in March 2022. The suit claims that during the divorce proceedings, McCabe accessed Fritz and Bianculli’s client file despite not being assigned to work on its matters and deduced his wife’s password and login information for her work computer, subsequently beginning to monitor and record communications between his wife and her employer.”
• “‘McCabe admitted such unlawful and unethical access by providing screenshots he took of the laptop during discovery in the divorce proceedings and certifying under oath that he had obtained this information by illegally accessing the Fritz and Bianculli email server,’ the suit alleges, suggesting that McCabe did so in an effort to substantiate his belief that his wife was having an affair with Brian Fritz, a leader at Fritz & Bianculli.”
• “In addition to monitoring Fritz and Bianculli’s confidential communications during his divorce, the suit claims that McCabe began to use information within those communications to harass his wife.”
• “‘on July 19, 2022, over four months after the filing of the divorce action, approached Kristy McCabe after an extended email monitoring session … and there informed Kristy McCabe that he … was going to kill her as a result of his unlawful access to these emails,’ the suit reads.”
• “After McCabe’s wife filed a second temporary restraining order in July 2023, the suit says Holland & Knight flagged the conflict between its representation of Fritz and Bianculli and McCabe, terminating the contract between the two firms and neglecting to inform Fritz and Bianculli of McCabe’s unauthorized file access. “
• “‘There was no explanation why the second restraining order triggered a conflict while the first restraining order did not,’ the suit alleges. ‘Holland and Knight intentionally omitted and failed to disclose that Defendant McCabe had routinely been accessing the confidential files at will[,] … failed to take any precautions to protect the confidential files from Defendant McCabe[,] … [and] failed to take any steps or employ any measures to limit which attorneys and/or staff could gain access to the confidential files.'”
• “After Holland & Knight disclosed the conflict and terminated its relationship with Fritz and Bianculli, the suit claims, McCabe continued to access the file and asked two of his colleagues, Donohue and Berg, to access the file on his behalf as well at the end of 2023 and beginning of 2024.”

“Worried your legal work could contribute to clients’ criminal conduct? New ABA ethics opinion shares guidelines” —

• “What are lawyers’ duties to assess the facts and the circumstances of every client’s or potential client’s situation—to ensure that the representation does not contribute or further the client’s criminal or fraudulent activity? This question is addressed in a new ethics opinion from the ABA’s Standing Committee on Ethics and Professional Responsibility.”
• “Formal Opinion 513, released Friday, centers on Model Rule 1.16(a) of the ABA Model Rules of Professional Conduct. The rule was amended in 2023 because some lawyers were unwittingly involved in clients’ criminal or fraudulent activity or failed to pay appropriate attention to helping clients in activities, such as money laundering and financing terrorist activities.”
• “If a lawyer has ‘actual knowledge’ that their services will further a client’s criminal or fraudulent activity, the lawyer must decline the representation, according to the opinion. Likewise, if the lawyer has knowledge that there is a high probability that their services will further client criminal or fraudulent activity, the lawyer’s conscious and deliberate choice not to inquire and assess further represents the ‘knowing assistance of criminal or fraudulent activity.'”
• “Also, the opinion explains that the lawyer’s investigation must be ‘reasonable,’ rather than ‘perfunctory.’ The lawyer does not have to undertake a ‘dragnet-style operation’ to uncover every single fact about a client, according to the opinion.”
• “In a series of comments, the opinion notes that lawyers’ duties to assess the situation will vary, depending on the situation. Also, it explains that lawyers should follow ‘a risk-based approach,’ which classifies potential risk as either high, medium-high, medium, medium-low or low.”

“Freshfields Scrutinised for Perceived Conflict Over Germany’s ‘Elbtower’ Skyscraper” —

• “A German politician has criticized Freshfields Bruckhaus Deringer over a perceived conflict of interest regarding the problematic construction of Hamburg’s 64-storey Elbtower.”
• “It is the firm’s role in acting at times for more than one party involved in the tower’s development that has drawn the attention of certain individuals, leading to suspicions of a conflict of interest.”
• “Freshfields had been advising the Elbtower’s planned main tenant, Hamburg Commercial Bank (HCOB) and has previously advised the property’s main developer, Signa. It has also acted for HafenCity Hamburg GmbH, the municipal company responsible for marketing the up-and-coming Hafencity district. Freshfields has previously announced these relationships.”
• “The city of Hamburg had initially stated that at least 30% of the building had to be rented out for the construction project to be approved, according to the regional government. Signa had to present rental agreements in order to be awarded the contract for the project by the city.”
• “The controversy turns on the fact that Freshfields has ties to both the developer Signa and a party that enabled the construction to go ahead, HCOB, and other parties.”
• “Heike Sudmann, deputy parliamentary group leader of the Left Party in the regional Hamburg parliament, told Law.com: ‘When I mentioned to the regional government in 2022 that Freshfields had represented HCOB and previously the project developer Signa as well as the city, most people’s faces fell apart. If the same lawyer from a law firm advises several parties involved in the project, this cannot be done neutrally.'”

“Attorney Who Tipped SEC About Client Loses Appeal Over Award” —

• “An attorney who blew the whistle on his client can’t collect an award from the Securities and Exchange Commission because the disclosure wasn’t permitted by state bar rules, a federal appeals court decided.”
• “Under rules for the SEC’s whistleblower program, an attorney can’t recover an award for disclosing information learned during the representation of a client unless the disclosure was allowed by state bar rules or SEC attorney conduct regulations.”
• “While Florida bar rules permit an attorney to disclose confidential information if they reasonably believe it’s necessary to ‘serve the client’s interest,’ the attorney in the case at hand blew the whistle intending to subject his own client to an investigation, the US Court of Appeals for the District of Columbia said.”
• “‘In reporting on the suspected wrongdoing, then, Doe was reporting on his own client,’ the court wrote in an opinion unsealed on Friday. ‘Common sense therefore dictates that Doe could not have reasonably believed that he was acting in his client’s best interest.'”
• “The appeal is connected to an enforcement action the SEC brought in 2018 against two individuals, alleging securities fraud. The SEC accused the individuals of misappropriating a large chunk of investor funds for their personal use.”
• “In a sworn declaration he made after tipping off the SEC to the suspected misconduct, the attorney acknowledged his goal was to prevent his client from committing a crime.”
• “On appeal, however, he argued such statements were made with the benefit of hindsight and should be ignored. His tip to the SEC, when read in isolation, supports the idea that he thought his client was a victim, not a perpetrator, when he blew the whistle, he said.”
• “Unconvinced, the D.C. Circuit said there was substantial evidence to suggest the attorney suspected that his employer was engaged in wrongdoing when he submitted the tip.”

Trusting that the fact that there’s a parallel IG staff survey closing this week won’t confuse people, I’m pleased to invite our law firm risk readers to participate in the 2024 Risk Staffing Compensation Survey!

Last year’s exercise, our second go, was a tremendous success. We saw participation from 125+ individuals, who contributed data on 515+ individual risk staff positions. (Let’s see if we can’t top that figure this year, shall we? Given the large number of report requests over the past year from folks who missed or skipped the 2023 exercise, I’m quite optimistic about 2024 numbers!)

Once again, after publishing the 2023 exercise I received many encouraging notes of feedback and input from risk staff, risk managers, and firm leaders. It’s gratifying to see mangers using this data to pursue adjustments for their team and to support recruiting processes. I’m also always happy to hear from individuals using this industry data to self advocate.

Based on input from several of you, I’ve made some changes and enhancements to the 2024 exercise. The two key being:

1. For the “risk lawyer” role several folks are curious to see what the data might say about lawyer “specialization.” So the survey form will now collect optional detail on this front. If you’re a risk lawyer self-reporting, or a manager sharing staff detail, there’s an optional field to note if the individual focuses solely (or primarily) on an area like conflicts or OCG management specifically.
2. For managers & directors, the survey now includes an optional section collecting qualitative feedback from managers on risk staff hiring, budget, challenges, goals, investment plans and wishes, and other related matters. (While participation in this section is not required, if you’d like visibility into the feedback your peers provide, please share your perspectives here as well!)

So if you’re an individual contribution looking to understand how your comp compares to your peers, or you’re a risk manager looking to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

SURVEY DETAILS:

• Participation open to law firm risk professionals only
• All responses will be treated confidentially
• Manager participants sharing data on themselves and their team’s roles and compensation will receive a report summarizing key findings and analysis relevant to their firm demographics
  • (The report may be shared internally within your firm, but not redistributed externally. So if you want the results, your best path is to participate!)
• Individual contributor participants sharing personal compensation data will be receive a personal benchmark compensation summary relevant to their specific role and firm demographics.

The survey will be open through September 30, and can be accessed here: 2024 Risk Staffing Compensation Survey.

Feel free to share the link with law firm peers and colleagues.

And if anyone has questions (or really needs more time), please do reach out to me directly. (Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

Let’s see what we learn this round!

“He Regulated Medical Devices. His Wife Represented Their Makers” —

• “For 15 years, Dr. Jeffrey E. Shuren was the federal official charged with ensuring the safety of a vast array of medical devices including artificial knees, breast implants and Covid tests.”
• “One connection stood out: While Dr. Shuren regulated the booming medical device industry, his wife, Allison W. Shuren, represented the interests of device makers as the co-leader of a team of lawyers at Arnold & Porter, one of Washington’s most powerful law firms.”
• “Dr. Shuren signed ethics agreements obtained by The Times that were meant to wall him off from matters involving Arnold & Porter’s business. But it’s not clear how rigorously the ethics agreements were actually enforced.”
• “His wife’s law firm refused to provide a list of clients — and the agency had no legal authority to require it, said Michael Felberbaum, a spokesman for the F.D.A.”
• “In a review of thousands of pages of court documents and F.D.A. records and dozens of interviews with current and former agency staff members and advocates, The Times identified some clients and several instances in which the Shurens’ roles intersected.”
• “Her partner at the helm of the firm’s life sciences team began representing Theranos, the discredited blood testing company, in 2015, demanding that the F.D.A. halt an inspection at its sites in California. While Dr. Shuren said he was recused from the matter, court records suggested he remained involved.”
• “In another case, Ms. Shuren’s firm was working on a $63 billion acquisition of the company Allergan in 2019 when Dr. Shuren initially declined to urge a recall of the company’s breast implants tied to a rare cancer.”
• “The couple’s work overlapped again in 2022 when Dr. Shuren announced a proposal to strengthen warnings given to patients preparing for LASIK vision correction surgery. Two of Ms. Shuren’s clients opposed the plan; the recommendations have yet to be put in place.”
• “In a statement Friday, Shannon P. Hatch, an F.D.A. spokeswoman, said the agency had found that ‘it appears there were certain instances from about 10 years ago for which Dr. Shuren should have either recused himself or sought ethics authorization to participate to avoid any potential appearance of bias.'”
• “Ms. Hatch confirmed that the lapses occurred in the Theranos case as well as another one identified by The Times involving Alcon, an eye care drug and device company that was a client of Ms. Shuren’s.”
• “Ms. Hatch said the agency ‘has no indication that any F.D.A. regulatory decisions were impacted by Dr. Shuren’s wife’s employment nor that Dr. Shuren made any decisions in the interest of parties other than the public served by the F.D.A.'”
• “During the decade and a half of overlapping career trajectories, ‘Dr. Shuren has not requested, nor has he received any waiver or agency authorization to participate in any particular matter relating to his wife’s employment or any of her clients,’ Mr. Felberbaum said.”
• “Dr. Peter Lurie, a former F.D.A. associate commissioner, said he hoped the next division chief would shape a legacy that is more impartial toward device companies.”

“Egregious conflict of interest surfaces in Jannik Sinner escaping drugs ban despite failed tests as Italian’s lawyer has ITIA on client list” —

• “Jannik Sinner has landed in the eye of a major storm in the tennis world, as the World No. 1 escaped facing a suspension from the sport despite two failed drug tests in March during the Indian Wells Masters. The ITIA (International Tennis Integrity Agency) ruled that the Italian bore no fault for the positive tests and that he was simply the victim of an unintentional use of healing spray by his physio.”
• “As proved by Sinner’s lawyers, the spray used by the physio contained trace amounts of Clostebol, an anabolic steroid that has been banned by the WADA (World Anti-Doping Agency) for stimulating muscle growth. The findings were accepted by the expert team assembled by the ITIA, who let the 23-year-old off with a £250,000 prize money penalty.”
• “After the decision, the reigning Australian Open champion’s lawyer Jamie Singer addressed the press, stating his happiness at winning the verdict.”
• “Singer, it turns out, is the founding member of Onside Law, a UK-based law firm that specializes in sports law. The clients for the firm include, in addition to Sinner, the ECB (England Cricket Board), Real Madrid football star Jude Bellingham, Serie A side AC Milan, PL side West Ham, Football Australia, and Formula 1’s governing body FIA. Interestingly, the law firm also has the ATP (Association of Tennis Professionals) as one of its major clients.”
• “More concerning, Singer himself has the ITIA on his client list… leading to a rather questionable conflict of interest in the situation, wherein he is representing both the investigative agency and the very athlete the agency is investigating in the first place.”

“Bankruptcy Racketeering Lawsuit Against Law Firms, Ex-Judge Dismissed” —

• “A federal judge dismissed a civil racketeering complaint accusing law firms Kirkland & Ellis and Jackson Walker of conspiring with the nation’s former top bankruptcy judge to rig his Houston court.”
• “U.S. District Judge Alia Moses on Friday ruled that an unhappy litigant, Michael Van Deelen, had failed to show he was harmed by the alleged scheme. Moses said she dismissed the case ‘ with some consternation’ after finding that Van Deelen lacked standing to sue the two law firms, then-judge Jones and his longtime romantic partner, who worked as a bankruptcy lawyer on major chapter 11 cases they brought to his court.”
• “Jones became the nation’s busiest bankruptcy judge in recent years after Kirkland, the top U.S. firm for advising financially-troubled companies, began filing many of its largest chapter 11 cases to Houston, usually with Texas-based Jackson Walker as its co-counsel. Jones resigned in October after he confirmed to The Wall Street Journal that he had shared a home for years with Elizabeth Freeman, a Jackson Walker partner from 2018 to 2022.”
• “Van Deelen, who filed the lawsuit, is a former high school math teacher who had owned shares in McDermott International, an oil-and-gas drilling company that filed bankruptcy in Jones’s court with Kirkland and Jackson Walker as its lawyers.”
• “Moses, who sits in Del Rio, Texas, ruled that Van Deelen didn’t adequately show in his complaint that the alleged scheme to conceal Jones’s conflict of interest caused Van Deelen to take a greater loss on his investment in McDermott than he would have otherwise.”
• “Van Deelen’s shares in the company were wiped out when Jones in 2020 confirmed a chapter 11 plan drawn up by McDermott’s lawyers. As a result, he had no financial interest in the company by the time its lawyers received court approval to collect their fees, Moses said.”

“McKinsey Foe Alix Ends Bankruptcy Conflict-of-Interest Battle” —

• “Jay Alix, the founder of turnaround consulting firm AlixPartners, isn’t appealing a recent ruling dismissing his long-running racketeering lawsuit against McKinsey & Co., ending his six-year battle against the major consulting firm.”
• “In early July, a federal judge dismissed for a second time Alix’s lawsuit against McKinsey, which alleged the consulting firm concealed conflicts of interest from bankruptcy courts to help land lucrative contracts advising on corporate restructurings and causing AlixPartners to lose out on work and revenue. “
• “At the time of the ruling, Alix’s spokesperson said he intended to appeal the decision. But the deadline to appeal has now passed, and the case has been closed. “
• “A McKinsey spokesperson said Thursday that the consulting firm has maintained from the beginning that Alix’s accusations were legally meritless and his motives anticompetitive.”
• “Without admitting any wrongdoing, McKinsey in 2021 paid $18 million to resolve a government probe into its policies meant to prevent insider trading, and in 2019 $15 million to settle a separate investigation into the firm’s conflict-of-interest disclosures in bankruptcy court. “
• “Last year, The Wall Street Journal, citing people familiar with the matter, reported that the consulting firm was winding down its bankruptcy practice after numerous lawsuits and government probes into its recovery and transformation services division’s work.”
• “A McKinsey representative told the Journal the division wasn’t shutting down, while confirming the company didn’t have any chapter 11 engagements at that time. The firm’s spokesman said Thursday it will ‘continue to support our clients’ transformations with integrity, professionalism, and excellence.'”

Brian Faughnan asks: “Can you name all the ABA Model Rules that can never be violated?” —

• “No one can actually violate an ABA Model Rule as they don’t govern anyone on their own. They can only have sway if they are adopted into a specific jurisdiction as a relevant ethics rule. However, since I do not possess encyclopedic awareness of every single variation of the rules that have been adopted in all 51 U.S. jurisdictions, I’m keeping this post focused on the substantive concepts enshrined in the ABA Model Rule version of the ethics rules.”
• “The first is the one that likely springs to mind first for everyone: Model Rule 6.5 regarding pro bono public service. It is an entirely aspirational rule and so no one could ever get disciplined for a ‘violation” of it.'”
• “The second is another easy one. Model Rule 8.5 which simply addresses conflict of law issues and determines which jurisdiction’s ethics rules would apply in a particular circumstance. Thus, since it imposes no requirement on a lawyer, it cannot itself be violated.”
• “The third is also easy (I think). Model Rule 5.2. That rule only does two things: (1) it gives a limited defense to lawyers for what might otherwise be disciplinable conduct; and (2) makes clear that, absent that defense, a lawyer is responsible for their own conduct even if ordered by their boss to do it. You cannot violate Rule 5.2.”
• “The fourth is not as easy to remember as the first three but only because it simply isn’t an easy rule to remember even exists. If you remember it exists, then recognizing its lack of teeth is pretty well understood. Model Rule 6.5 on working with nonprofit and court annexed limited legal services programs. All it does is identify the limitations on the application of other rules when the circumstances are met. A lawyer participating with such a group could still violate those other rules within their limited application but cannot actually violate Rule 6.5.”
• “And that brings us to the fifth which essentially has the same structural set up as the fourth even though it isn’t quite written in the same straightforward fashion. That’s right, it’s Model Rule 5.7: Responsibilities Regarding Law Related Services.”
• “That rule only serves to provide a structure for when a lawyer can avoid the application of nearly all of the ethics rules to the provision of law-related services. Now it is written in a somewhat backwards sort of fashion — describing when all of the rules will apply to the provision of law-related services but, in the end, it still serves to just provide guidance (even if only indirectly) for how a lawyer can avoid that result.”
• “An attorney whose conduct doesn’t meet the standards set out by RPC 5.7, doesn’t violate the rule and no one can ever be non-frivolously charged with a violation of RPC 5.7.

Interesting spot and review from Amy McClurg at Thompson Hine: “Utah Supreme Court: Lawyers represented former trustees, not the trust—no conflict” —

• “Conflicts of interest aren’t always straightforward, especially with trust and estate planning matters. The Supreme Court of Utah recently determined that there was no former client conflict under Utah’s Rule 1.9 where lawyers were found to have only represented the former trustees and not the trust itself in litigation.”
• “Trustees (“Trustees”) hired lawyers to represent them in their duties as Trustees of the trusts at issue. After a significant period, Trustees hired the same lawyers to hire them to defend a lawsuit brought by the trusts’ beneficiaries.”
• “A jury eventually found that Trustees breached their fiduciary duties to the trust. The court entered a $1.8 million judgment against the Trustees, which was mainly payable to the trusts. The court removed the Trustees and appointed Successor Trustees (“Successor Trustees”). Using the same attorneys, the now former trustees (“Former Trustees”) requested that the court reduce the judgment.”
• “The Successor Trustees moved to disqualify the Former Trustees’ attorneys… The argument was based on the view that the lawyers had represented the trusts in the litigation initiated by the beneficiaries and therefore were prohibited from assisting the Former Trustees in trying to reduce the judgment. They argued that to do so would be adverse to the interests of the trusts and the trusts were their former clients. The lawyers were disqualified by the district court.”
• “The Utah Supreme Court found that while an attorney can represent a trust, an attorney-client relationship does not arise with the trust solely due to the lawyer’s representation of a trustee. While a trust is capable of forming an attorney-client relationship with a lawyer, context determines whether such relationship was actually formed. The trust holds the attorney-client privilege and the trustee, as fiduciary, claims the privilege on the trust’s behalf.”
• “While substantive law regarding trusts will vary from state to state, former client conflicts are fairly common. Different states with the nearly identical former client conflict rules, may very well issue opinions with a vastly different result. For those states without clear cut answers to the questions raised in this opinion, engagement letters become even more crucial. This case was not ultimately decided on the content of the engagement letter, but it is a wonder how far the case would have made it in court had the Former Trustee’s engagement letter explicitly mentioned who the client was not—rather than just mentioning who the client was. This case surely raises the question of when it would be advantageous for trusts and estates lawyers (and those in other fields of practice as well) to follow suit.”

And for those missing the Olympics: “Head of Panel That Ruled Against Jordan Chiles Represents Romania in Other Cases” —

• “The head of a panel that ruled that the American gymnast Jordan Chiles had to give up her Olympic bronze medal in favor of a Romanian athlete has represented Romania for almost a decade in arbitration cases, documents show.”
• “The three members of a special tribunal convened for the Olympics by the Court of Arbitration for Sport after Romania lodged a complaint ruled that a successful appeal made by Chiles’s coach over the points awarded to her in the floor exercise competition was initiated four seconds late. The Romanian athlete, Ana Barbosu, was awarded the bronze medal as a result of the panel’s decision, and Chiles was dropped to fifth place.”
• “The decision to reallocate the medals in the floor exercise outraged U.S. Olympic and gymnastics officials, who have threatened to take their fight to the Swiss courts. The revelation that Hamid G. Gharavi chaired the panel that resolved the dispute in favor of a Romanian athlete despite having a long relationship with Romania’s government is sure to inflame the case further.”
• “Very little is known about the deliberation and how the panel reached its verdict, with the court publishing just a one-page statement confirming the decisions it made. A detailed document outlining the full reasoning behind the outcome will eventually be sent to all the parties involved.”
• “U.S.A. Gymnastics said on Monday it had been notified by the court that under its rules, the decision cannot be reconsidered ‘even when conclusive new evidence is presented.'”
• “The gymnastics federation said it would continue to pursue “every possible avenue” for an appeal, including before the Swiss Federal Tribunal. That body, the only one that can hear an appeal against a decision by CAS, the sports court, only considers breaches of process and not new evidence related to the case itself.”
• “Under the court’s rules, panel members, including the chair, must complete a conflict of interest form before reviewing each case that lists three possible outcomes.”
• “The first and third are explicit, revealing no conflict or a conflict so significant that they would require their recusing themselves from a case. The second is more nuanced, allowing arbitrators to reveal potential conflicts but giving them a chance to explain why the potential conflict should not prevent them from hearing a case.”
• “‘The issue is whether an Olympic arbitrator who currently represents a country on the global stage can decide a case involving a gymnast of that country, in an unbiased manner,’ three arbitration experts wrote in an opinion published on the institute for conflict resolution’s website. ‘Is it realistic to expect such arbitrator can decide against the interests of that country or of that country’s gymnast, who in this case is represented by the Federation of Romanian Gymnasts?'”
• “Katherine Simpson, an international arbitrator and one of the authors of the opinion piece that first disclosed Mr. Gharavi’s work for Romania, said that even if none of the parties objected, his work on behalf of Romania was significant and meant he would automatically have had to recuse himself under the IBA’s so-called red list of non-waivable activities.”

Whistleblower DQ of Assistant US Attorney Denied: “United States v. Standard Chartered Bank, 18 Civ. 11117 (PAE), 6-11 (S.D.N.Y. Aug. 12, 2024)” —

• “Brutus Trading’s motion is premised primarily on the witness-advocate rule, as set forth in Rule 3.7 of the New York Rules of Professional Conduct. It provides that, subject to certain exceptions, ‘[a] lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact.'”
• “In moving to disqualify AUSA Barnea, Brutus Trading contends that his continued representation of the Government in connection with the pending motion to set aside the judgment pursuant to Rule 60(d)(3) would violate New York Rules of Professional Conduct 3.7 and 1.7.”
• “In that pending motion, Brutus Trading alleges that the Government committed fraud on this Court by falsely denying that Standard Chartered Bank transacted with Iranian entities and foreign terrorist organizations after 2007.”
• “Brutus Trading contends that because AUSA Barnea represented the Government throughout the underlying litigation, he participated in the alleged fraud. It argues that AUSA Barnea would be an indispensable fact witness were the Court to conduct an evidentiary hearing in connection with the Rule 60(d)(3) motion.”
• “For several reasons, Brutus Trading’s contentions are meritless, to the point where they verge on vexatious and fii volous. They fall far short of the ‘high standard of proof’ necessary to justify disqualification.”
• “AUSA Barnea’s continued representation does not violate the witness-advocate rule embodied in New York Rule of Professional Conduct 3.7 because the Court has not scheduled- and does not have plans to schedule-a trial or evidentiary hearing in the case at which AUSA Barnea would have to testify.”
• “In relevant part, New York Rule of Professional Conduct 3.7(a) provides that a ‘lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact.'”
• “As the Government rightly notes, there is no trial or evidentiary hearing scheduled in this case. Nor is there any prospect of an upcoming trial or evidentiary hearing.”
• “Quite the contrary, the case is currently closed. The Court dismissed it in July 2020 and the Second Circuit affirmed the dismissal. Brutus Trading’s current bid to reopen the case almost four years later by filing the pending Rule 60(d)(3) motion is exceptionally unlikely ever to necessitate a trial or even an evidentiary hearing.”
• “The Court expects the Rule 60(d)(3) motion to be readily resolved on the papers, without a need for an evidentiary hearing. The Court, notably, did not need to conduct an evidentiary hearing when it resolved (and denied) Brutus Trading’s October 2020 motion for an indicative ruling that, had the Court retained jurisdiction, it would have vacated the dismissal based on newly discovered evidence.”
• “Even if there were a colorable basis to project that an evidentiary hearing might be held in the future, with the Court not having scheduled one, under settled case law, it would be premature to disqualify AUS A Barnea based on Brutus Trading’s conjecture that his representation of the Government at such a hearing would breach the witness-advocate rule.”
• “That is because, at such a preliminary stage, ‘it is impossible to determine how significant [counsel] might be as a witness or whether he is likely even to be called as a witness; whether his testimony would likely hurt or help his client; or whether his testimony would or would not be cumulative of other witnesses.’ Prout v. Viadeck, 316 F.Supp.3d 784, 810 (S.D.N.Y. 2018).”
• “The Court therefore denies the motion to disqualify on the basis of the witness-advocate rule. There is no risk that AUSA Barnea’s continued participation will taint this case. In the improbable event that an evidentiary hearing is one day scheduled, Brutus Trading will be at liberty to renew such a motion, provided one can then be filed consistent with Federal Rule of Civil Procedure 11.”
• “Brutus Trading also briefly argues that disqualification is necessary under Rule 1.7(a)(2)… Brutus Trading declares that ‘[a]s an alleged participant in the fraud, Barnea should also be disqualified from representing the Government because:a reasonable lawyer would conclude that there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own … personal interests.” Relator Mem. at 8 n.2 (citing Rule 1.7(a)(2)).”
• “This argument is undeveloped and specious. For one, Brutus Trading’s allegation of fraud is wholly threadbare.”
• “But, even assuming the truth of Brutus Trading’s claim that the Government wrongly denied that Standard Chartered Bank conducted unlawful transactions post-2007, that is a far cry from meaning that AUSA Barnea or any other government attorney intentionally deceived the Court. Indeed, in its Rule 60(d)(3) motion briefing, Brutus Trading claims that ‘[w]ith the assistance of forensic data analysis, Brutus [Trading] was only recently able to reveal or ‘decloak’ countless illegal transactions that were hidden deep in the Bank’s electronic spreadsheets, which Brutus [Trading] gave to the Government.’ Dkt 102 at 1.”
• “Given the difficulty that Brutus Trading itself purports to have had in ‘decloak [ing]’ these alleged illegal transactions, there would be no reason to assume that Government counsel were aware of such misconduct by the bank, as opposed to not having investigated to a degree necessary to uncover such machinations.”
• “Brutus Trading’s allegations do not come to close to supporting the serious allegation that the Government or AUSA Barnea committed fraud on the Court by denying that Standard Chartered Bank engaged in illegal transactions. There is no basis to infer a conflict of interest between the AUSA Barnea and the Government-and Brutus Trading has done nothing to substantiate that claim.”
• “The Court denies Brutus Trading’s motion to disqualify.”

“Indicted pro-Trump lawyer is ousted as counsel for ex-Overstock CEO in Dominion case” —

• “It is exceedingly difficult to persuade a federal judge to disqualify your opponent’s chosen counsel. And for good reason: Courts are loath to interfere with the right to select one’s own lawyer and generally don’t like the disruption that ensues when a client is forced to pick a new lawyer.”
• “The disqualification test in Washington, D.C. — where Dominion Voting Systems is litigating a defamation lawsuit accusing former Overstock CEO Patrick Byrne of falsely claiming that the voting tech company tainted the 2020 presidential election — is particularly stringent. Unless one side can show that the other side’s lawyer is conflicted, Washington judges may only resort to disqualification if the targeted lawyer has engaged in ‘truly egregious misconduct likely to infect future proceedings.'”
• “U.S. Magistrate Judge Moxila Upadhyaya found all that and more in a decision on Tuesday to disqualify Michigan attorney Stefanie Lambert from serving as Byrne’s counsel in the Dominion case.”
• “Upadhyaya concluded in Tuesday’s ruling that Lambert repeatedly violated both a protective order shielding Dominion documents and subsequent court orders directing Lambert to abide by the protective order. The judge also found that Lambert engaged in a pattern of misrepresentations about her conduct.”
• “The alleged misconduct began, according to the opinion, even before Lambert first entered an appearance in the case last March. Unbeknownst to Dominion, Lambert had joined Byrne’s team a couple of months before entering that appearance, signing onto the protective order Dominion had previously negotiated with Byrne’s lawyers from McGlinchey Stafford.”
• “But at the beginning of March, Lambert disclosed protected Dominion documents. She attached some documents to a filing in a separate Michigan criminal case accusing her of election interference. She also, according to the judge, gave a right-wing Michigan sheriff confidential log-in information to allow him access to the full repository of documents Dominion produced in discovery in the Byrne case.”
• “The sheriff, Dar Leaf, subsequently posted links to more than 2,000 Dominion documents on social media sites. Leaf’s posts attracted hundreds of thousands of views, according to Upadhyaya’s opinion.”
• “Upadhyaya asked Lambert why she had not consulted the court before disclosing protected documents. Lambert said she was obligated as an officer of the court to inform law enforcement officials when she found evidence of Dominion’s crimes.”
• “‘Lambert’s misrepresentations reflect a deeply concerning pattern that does not appear to have any sign of stopping,’ the judge wrote. ‘Dominion has raised a plausible narrative that Lambert became involved in this litigation so that she could gain access to Dominion’s documents and use them for improper purposes.'”
• “Upadhyaya noted that the stringent test for disqualification is meant to insulate clients from the consequences of their lawyers’ misconduct. But that principle doesn’t apply in this case, the judge said, because Lambert’s client, Byrne, has engaged in similarly ‘egregious’ violations of the protective order. (Dominion has not yet sought sanctions against Byrne but has reserved that right.)”

“Opposing Counsel Want Judge’s Son Off the Case” —

• “An oil and gas exploration company wants the Texas Supreme Court to assist in the disqualification of Justice Debra Lehrmann’s son from a case pending in a state district court.”
• “Jonathan Lehrmann, currently an appellate attorney and associate at Houston-based Buck Keenan, became the subject of a disqualification motion after he was hired by opposing counsel in a dispute with RSM Production Corp., which is based in Denver, Colorado.”
• “As explained in the petition, Jonathan Lehrmann once worked as an attorney with Wright Close & Barger, a firm that at the relevant time represented RSM in a breach-of-fiduciary duty and fraud-by-non-disclosure lawsuit filed against Jim Ford and companies formed by him, such as Rodeo Resources, collectively referred to as the Rodeo defendants.”
• “‘Days before Rodeo filed its notice of appeal, Buck Keenan hired Lehrmann,’ the RSM petition states, adding Buck Keenan attorney E.F. Mano DeAyala asked Lehrmann if he had previously represented RSM and Lehrmann responded that he ‘did not remember.'”
• “DeAyala allegedly tasked Lehrmann with drafting Rodeo’s opening brief for the appeal. RSM’s counsel, noticing the conflict, asked Buck Keenan to voluntarily withdraw but DeAyala refused to respond, the RSM petition claims.”
• “The issue before the Supreme Court is a complaint against the First District, alleging Justice Gordon Goodman, ‘acting individually,’ denied RSM’s notice of motion to disqualify Rodeo’s counsel, and Goodman’s granting of Rodeo’s emergency motion for a temporary stay of all further trial court proceedings.”
• “RSM asked the Supreme Court if the First District clearly abused its discretion by staying the trial court’s consideration of RSM’s motion on the basis the issue may be arbitrable, ‘when courts have the sole power and duty to regulate attorney conduct.'”

“Ethics panel clarifies recusal standards for judges with previous prosecutorial roles” —

• “A judge must recuse from all cases involving defendants whom the judge previously prosecuted, according to the [Florida] Judicial Ethics Advisory Committee.”
• “‘The test for the appearance of impropriety is whether the conduct would create in reasonable minds, with knowledge of all the relevant circumstances that a reasonable inquiry would disclose, a perception that the judge’s ability to carry out judicial responsibilities with integrity, impartiality, and competence is impaired,” the ethics panel said in Opinion Number 2024-12, citing commentary to Canon 2A. “This Committee finds that a reasonable mind would perceive that a judge who previously prosecuted the same defendant would not be impartial.'”

“Alaska Prosecutor Accused of Exploiting Judge Ties for Recusal” —

• “A federal public defender has accused the US attorney’s office in Alaska of trying to force a judge’s recusal in a controversial murder case last year by adding a prosecutor to the trial team who had sent nude photos to the judge.”
• “In early 2023, Karen Vandergaw, a senior prosecutor, suddenly joined a case overseen by Joshua Kindred, then one of two active judges on the Alaska federal bench. At the time, Kindred’s cases involving Vandergaw had for months been reassigned away from him, though the federal defenders office didn’t know why.”
• “Gary Colbath, the Alaska federal defender’s office No. 2, said he confronted the lead prosecutor on the case about his suspicions of improper maneuvering and warned he planned to accuse the office of misconduct in a motion to dismiss. Kindred had a reputation for being more lenient toward criminal defendants.”
• “‘There was no reason that she noticed an appearance, in our eyes, other than as a strategic attempt to cause Kindred’s recusal,’ Colbath said in an interview.”
• “The following business day after Colbath said he raised concerns, Vandergaw was withdrawn from the prosecution team without explanation, court records show.”
• “The case is one of dozens now under scrutiny since Kindred resigned last month amid findings that he sexually harassed a law clerk and created a hostile environment for other employees.”
• “Now, both the US attorney’s and federal defenders offices are conducting their own reviews into Kindred’s past cases for potential conflicts of interest. The Justice Department is deploying a veteran lawyer who has previously helped other troubled offices to support the case review.”
• “Legal ethics experts outside of Alaska said it would be inappropriate for a US attorney’s office to add an attorney to a case to disqualify the judge.”
• “It’s possible that Vandergaw’s addition to the case may have been negligence or a failure by the office to conduct proper ethical reviews, said Jeremy Fogel, executive director of the Berkeley Judicial Institute and a former California federal judge.”
• “Private attorneys are also eyeing current and past cases for potential relief due to the conflicts. Defense lawyers and academics outside of Alaska have said there may be grounds to reopen any cases Kindred heard involving the US attorney’s office.”

Previous and additional detail on this situation: “Prosecutors Flag More Possible Case Conflicts From Alaska Judge.“

Reminder, The 2024 IG Staffing Compensation Survey will close at the end of the month.

If you missed the original announcement, you can read more about this survey here.

This survey looks to capture data on the broad range of law firm IG roles. So if you’re an individual contributor looking to understand how your comp compares to your peers, or you’re an IG manager looking to benchmark yourself + to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

(If you’re not on the IG side of your firm’s house, I encourage you to pass along details to those who are, as I suspect they’ll regret missing the chance to participate and see the results when they become available!)

For those who are wondering, yes we’ll be running the risk (e.g. intake/conflicts/terms) staffing compensation survey again this year. (In fact, I hope to have that exercise kicked off quite soon…)

And if anyone has questions, or would like a reasonable deadline extension, please feel free to reach out to me directly. (Email readers can do that by just replying to this message in their inbox — it’ll reach me. Others can use the contact form.)

“Sidestepping Conflicts and Other Ethical Pitfalls in Employee Depositions” —

• “Quite often corporate employers want outside counsel to represent both the corporation and potential employee-witnesses during pretrial discovery depositions. Conflicts of interest are obviously lurking in these scenarios, although, in the case of current employees — particularly current management employees — the likelihood of an ethical misstep is small. In fact, a lawyer’s representation of current, highly placed corporate employees will have the effect of protecting with attorney-client privilege information they provide to the corporation’s attorney.”
• “The real problems arise when a corporation’s attorney seeks to represent both the corporation and former employees who may possess information adverse to the corporation and may even be facing personal liability themselves.”
• “The recipe for ethically representing a nonparty witness at a deposition in a case in which the lawyer also represents a party (usually a corporate employer) has four ingredients:
  • Limited Scope Representation. Representing the witness during a deposition could be a “limited scope representation,” meaning that the lawyer would provide some, but not all, of the legal services that attend a traditional lawyer-client relationship. “Limited representation” could include no more than a pre-deposition preparation session and legal advice on whether the witness’s testimony could subject him or her to criminal or civil liability. Any limitations on the usual attorney-client relationship would have to be reasonable under the circumstances.
  • Is There a Conflict? Can It Be Waived? The lawyer should next consider if representing the witness creates a conflict of interest with the corporate client. If so, and if the conflict can be waived, the lawyer must obtain signed, written conflict waivers from both the witness and the corporate client. The lawyer’s ethical obligation to inform both clients about the possibility that conflicts of interest may arise, to independently monitor the case for conflicts of interest, and to address these conflicts continues throughout the litigation.”
• “Even though it is not necessarily an ethical violation for a corporation’s lawyer to also represent an employee witness at a deposition, in reality, most witnesses likely possess information that is unfavorable to the corporation’s case, thus creating a strong potential for a conflict of interest. It can be very difficult for the lawyer to determine the witness’s full knowledge before the deposition.”
• “Finally, if a conflict arises, it can be waived only if the witness gives informed consent to representation despite the conflict. Informed consent means that the witness must be advised of all of the negative consequences that could occur as a result of his or her testimony.”

“CapRadio audit details ‘possible conflicts of interest’ for 5 ex-board members. Here’s who they are.” —

• “An audit released this week into financial practices at Capital Public Radio flagged five contracts involving possible conflicts of interest on the part of five different former board members — three more than previously known to the public.”
• “The forensic analysis released Monday of finances at CapRadio, an auxiliary of Sacramento State, found that those three board members were “either a founder or a partner” at businesses that entered into contracts with the station totaling tens of thousands of dollars.”
• “‘As such, the contracts with CPR may have provided a financial benefit to the Board members associated with each vendor,’ part of the audit reads.”
• “Two of the three board members are partners at two different law firms with offices in Sacramento, according to the audit. The third is the founder of a management consulting firm. All three were among the 14 board members who resigned last October, days after a separate audit revealing vast financial mismanagement was released by the California State University system.”
• “The [Sacramento] Bee determined the identities of two other board members, both attorneys, based on the descriptions of their law firms and their roles described in the audit. “
• “A person knowledgeable of CapRadio’s finances, who wished to remain anonymous because the person was not authorized to speak about the matter, confirmed the identities of those two, as well as the board member who runs a consulting firm.”
• “From January 2019 until May 2023, Downey Brand was paid more than $42,000 for legal services related to ‘lease negotiations,’ the audit said.”
• “However, CLA did not determine whether Clark recused herself from the discussion and votes pertaining to the contract, the audit said.”
• “The audit noted the payments ‘appear reasonable based on the stated services rendered’ for this contract.”
• “‘There may be another contract with (Downey Brand) in addition to the contract CLA reviewed,’ the audit states. ‘However, Sacramento State has been unable to locate any other contracts and no further outreach was made to (Downey Brand).'”
• “Another law firm, Stoel Rives, was paid more than $11,000 for two years while a CapRadio board member was employed at the firm.”
• “Stoel Rives, through a Portland-based attorney, helped CapRadio file a trademark application in 2021, according to the U.S. Patent and Trademark Office.”
• “The station entered into a contract with Stoel Rives in October 2020 for “legal services” related to trademark matters, the audit said.”
• “The audit noted that the ‘payments and contract appear reasonable for the stated services.'”
• “The discussions surrounding the contract were not noted in the minutes from the Board of Directors meeting, executive or the finance committees, the audit said.”
• “Though [General Manager] Eytcheson said the contracts were properly vetted, the 2023 financial audit by the CSU said annual documents that were supposed to track board members’ conflicts of interest could not be located.”
• “‘Conflict‐of‐interest (COI) statements for board members were not retained,’ a portion of last year’s audit reads, in part.”
• “‘The COI policy states that members of the board should complete an annual COI statement. However, CPR could not locate signed statements during the audit period because the staff member responsible for maintaining the statements was on sabbatical leave.'”

For more, see: “‘Absolutely unacceptable’: Forensic examination finds misuse of funds, possible conflicts of interest and $700,000 in mysterious reimbursements at CapRadio”