Bressler Risk Blog

“Breaking News: Conflict of Interest Bombshell: Judge Invested in Ozy’s Victim Companies” —

• “Ozy Media founder Carlos Watson may not be going to prison after all. The federal judge who presided over his trial for securities and wire fraud conspiracy and identity theft and who scheduled Watson’s sentencing in December, may have to remove himself from the case for an unprecedented appearance of a conflict of interest.”
• “Watson, 55, who was convicted on all three financial fraud counts, faces a maximum sentence of 37 years, with federal sentencing guidelines ranging from 24 to 29 years, according to prosecutors.”
• “Watson’s attorney, Andrew J. Frisch, a former federal prosecutor, in a motion filed in federal court on Friday, made the shocking allegation that Judge Eric R. Komitee had significant investments through hedge funds in all three of Watson’s primary alleged corporate victims – Goldman Sachs, J P Morgan Chase, and Google.”
• “Watson’s motion demands Judge Komitee disqualify himself, vacate the conviction, and dismiss the original indictment against Watson.”
  Jury Conviction and Unreported Financial Conflicts”
• “In July, a Brooklyn jury convicted Watson for conspiring to defraud Goldman Sachs and JP Morgan Chase by falsely claiming Google and Live Nation were his Ozy Media company sponsors.”
• “Through four hedge funds managed by three asset management companies, Judge Komitee had active investments in all four of these Watson’s alleged victim companies, something the judge did not disclose during the trial.”
• “Komitee, one of, if not the wealthiest federal judges in America, has millions invested in hedge funds, which invest in Watson-victims Google, JP Morgan, and Goldman Sachs and other companies.Komitee began investing in the Watson victims’ stock through hedge funds before becoming a judge in 2018, during the time he worked as general counsel for Viking, one of the largest hedge funds in the world.”
• “It was not until after the trial – on October 2, 2024 – when Judge Komitee’s required annual financial disclosure for 2023 became available to the public. This prompted scrutiny into motives for what Watson’s trial attorney, Ronald Sullivan, called the most biased judge and unfair trial he had ever witnessed in more than 30 years of trial practice and decades as a Harvard law professor.”
• “The 2023 financial disclosure reveals that Judge Komitee, through hedge fund accounts worth more than $16 million, had money invested in the companies singled out by the US Attorney for the EDNY as Watson’s primary victims.”

“Conflict or Earned? Judge in Trump Cases Floated as Potential AG Pick” —

• “Donald Trump is considering U.S. District Judge for the Southern District of Florida Aileen Cannon as a nominee for the nation’s top prosecutor, according to numerous reports.”
• “ABC News first reported the former president, currently running for re-election, had named Cannon to a list of potential nominees for Attorney General, if he wins the election on Nov. 5.”
• “The news has sparked debate in the legal community for a number of reasons.On one hand, some say Trump recognized Cannon’s skillset when he appointed her to the bench long before she ever presided over any cases directly involving him. But on the other hand, some court watchers say awarding Cannon the top job would seem like a reward for her adjudication in Trump’s favor.”
• “In July, Cannon ruled that Trump’s federal classified documents trial be dismissed. She found Special Counsel Jack Smith’s ‘appointment violates the Appointments Clause of the United States Constitution.’ Smith is appealing that ruling.Cannon is also presiding over the case against Ryan Wesley Routh, the man accused of trying to assassinate Trump at a golf course in Florida. Court records suggest the judge was randomly selected for that case.”
• “But the question for some lawyers is whether the judge has a conflict—and if the reports of her consideration for a top job under a potential Trump presidency are true.”
• “Miami attorney Etan Mark of Mark Migdal & Hayden has a different take. ‘There’s something icky about a presidential candidate floating a promotion to a federal judge— in front of whom he was being prosecuted—if he succeeds in his reelection campaign,’ Mark said. ‘Presumably, Judge Cannon has the integrity to ignore these flirtations. Otherwise, if the rumors are true, she should recuse herself from any pending cases involving the former President.'”
• “Trump’s team has not publicly commented on the ABC News reports.”

“Interpath chair to step down over Deloitte ‘audit conflict’” —

• “A former chair of one of Britain’s biggest auditors is to step down as chairman of Interpath, the independent advisory firm, because of a potential conflict of interest involving its private equity backer’s choice of auditor.”
• “Sky News has learnt that Interpath, which has been engaged by billionaire Sir Jim Ratcliffe on his cost-cutting campaign since taking a stake in Manchester United Football Club, will announce this week that John Connolly is to leave.”
• “Mr Connolly, who has chaired the company since it was formed in 2021, is to hand the reins to Tamara Box, a former managing partner at the City law firm Reed Smith.”
• “Insiders said this weekend that Mr Connolly was stepping down because of the impending appointment of Deloitte as the global auditor of HIG Europe, Interpath’s private equity backer.”
• “Mr Connolly retired as senior partner and UK chief executive of Deloitte in 2011, but continues to receive a pension from the firm.”
• “One source said that he, Interpath and HIG had agreed that his departure would avoid any potential conflict of interest arising, and that HIG needed Deloitte to be conflict-free.”
• “The move is not without irony, given that Interpath’s formation was triggered by KPMG UK’s disposal of its restructuring arm amid growing obstacles posed by conflicts between large accountants’ audit and consulting operations.”

“Judge Recuses Herself From Antitrust Case Against Top Colleges” —

• “A federal judge has recused herself from a financial aid conspiracy case against 40 private colleges, saying she and her family members are ‘involved with one or more of the university defendants.'”
• “Judge Sharon Johnson Coleman of the US District Court for the Northern District of Illinois on Oct. 18 filed a request for reassignment in the case, which accuses the College Board and 40 private universities of engaging in a scheme tied to financial aid that violates US antitrust law. The case has been reassigned to Judge Sara L. Ellis.”
• “Judge Andrea R. Wood of the US District Court for the Northern District of Illinois recused herself last month from a settled antitrust class action brought by homeowners over realtor commission payments, citing the spouse of a distant relative who is a partner in a law firm representing one of the defendants.”
• “In April, Judge Michael Farbiarz recused himself from the Justice Department’s antitrust suit against Apple Inc. citing a rule barring federal judges from overseeing cases in which their impartiality ‘might reasonably be questioned.'”
• “Federal law requires judges to disqualify themselves from cases when they have a conflict of interest, such as appearance of impartiality, actual bias, or personal knowledge of disputed evidentiary facts.”

“DOJ Seeks Jackson Walker’s Partnership Agreement in Ethics Probe” —

• “Jackson Walker LLP should be forced to hand over its partnership agreement as part of a probe into whether the firm should’ve disclosed a relationship between a bankruptcy judge and one of its attorneys, a Justice Department unit said.”
• “The agreement would reveal whether the Texas firm’s partners could have removed former firm partner Elizabeth Freeman after they learned of her relationship with ex-judge David R. Jones, the Justice Department’s bankruptcy monitor, the US Trustee, told the US Bankruptcy Court for the Southern District of Texas on Monday.”
• “‘Jackson Walker’s Partnership Agreement represents potentially the only contractual basis for what its partners, including Freeman and management, legally bound themselves to do,’ the US Trustee said in a motion to compel.”
• “The request was made as part of the US Trustee’s challenge to as much as $23 million in fees Jackson Walker collected in cases involving Jones while it employed Freeman. The US Trustee has said Jackson Walker should have disclosed the relationship.”
• “The firm said it retroactively reduced Freeman’s compensation by almost $79,000 for 2021 through November 2022—the share of partnership profits from cases she worked on in front of Jones, according to court documents filed Monday.”
• “The partnership agreement could reveal whether Jackson Walker took inadequate steps to remove Freeman from the firm or cases Jones worked on, or if Jackson Walker ‘waited months for Freeman to voluntarily act,’ the US Trustee said.”
• “The agreement would disclose what duties Freeman and firm management had, whether they failed to follow those rules, and whether and how Freeman could have been let go for cause, the motion said.”
• “If Freeman had authority to act on behalf of the whole firm, that could show that her actions should be imputed to all of Jackson Walker, the US Trustee said. The agreement would also allow the US Trustee to determine whether Jackson Walker ‘knowingly continued to accept the financial benefit of cases heard or mediated by Jones,’ the US Trustee said.”
  “Jackson Walker has said the US Trustee should be able to find the answers it seeks in depositions it’s taken.”
• “Attorneys for Jackson Walker didn’t immediately respond to a request for comment Tuesday. The firm has previously said Freeman lied to it about the full extent of her relationship with Jones, and has maintained that it didn’t violate any ethical rules or disclosure obligations.”
• “The US Trustee has said some Jackson Walker employees made efforts to seal documents alleging a relationship and that at least three employees knew about the relationship.”

“Pre-Bankruptcy Texts Deepen Ethical Concerns About Ex-Judge” —

• “Recently revealed texts highlighting a Houston attorney’s apparent interactions with a former bankruptcy judge whom she was dating have added more fuel to the fire amid allegations that their relationship led to improper communications about cases he oversaw.”
• “The texts offer a peek at how Elizabeth Freeman, a partner at Jackson Walker LLP at the time, characterized to her firm colleague her discussions of Chapter 11 cases with David R. Jones, her boyfriend and then-judge for the US Bankruptcy Court for the Southern District of Texas.”
• “And while they don’t necessarily confirm improper, ‘ex parte’ communications, the texts do raise fresh concerns over whether he should’ve recused himself from cases involving Jackson Walker, as well as the ability of distressed corporations and their advisers to hand-pick their bankruptcy judge to secure the outcomes they want.”
• “Freeman’s texts reveal planning over filing JCPenney’s sprawling Chapter 11 case in Jones’ court. On May 12, 2020, three days before the bankruptcy filing of the storied American retailer, Freeman told her Jackson Walker colleague that she had ‘talked to Jones’ and ‘he’s got us,’ according to texts displayed in records viewed by Bloomberg Law.”
• “Freeman told her colleague that there were ‘too many fights’ in the JCPenney case, where Jackson Walker served as local counsel to the company’s lead bankruptcy lawyers at Kirkland & Ellis LLP, and that it couldn’t afford a ‘process hawk,’ referring to Jones’ judicial colleague and friend, Judge Marvin Isgur.”
  Impartial”
• “The texts highlight ongoing questions over how Jones could have been ‘impartial,’ said Judith Fitzgerald, an attorney with Tucker Arensberg PC and a former bankruptcy judge.”
• “‘This type of behind-the-scenes conduct is an embarrassment to, if not an indictment of, a judicial system which promises litigants access to justice and adjudication by fair and impartial judges,’ Fitzgerald said. ‘A courtroom should present a level playing field for the issues raised, not one that pre-handicaps the outcome.'”
• “Bankruptcy rules require attorneys to refrain from communications with the court concerning matters affecting a particular case, said bankruptcy expert Lynn LoPucki, a professor at the University of Florida Levin College of Law and longtime critic of forum shopping. If Freeman talked to Jones about the JCPenney case, she violated the rule, he said.”
• “The texts don’t seem to pass ‘the smell test,’ said Brya Keilson, a Morris James LLP partner and former trial attorney for the Office of the US Trustee. But she cautioned that it’s not clear from the texts whether others also talked to Jones before the case.”
• “‘It’s not obviously: ‘Yes, this is ex parte, this is a conversation between the judge and only one party,’’ Keilson said. ‘But it certainly could be, and that’s never a good position in to be in to be discussing something that could be taken as that.'”
• “Georgetown University law professor Adam J. Levitin said the pre-bankruptcy communications between Freeman and Jones aren’t ex parte communications. There was no bankruptcy filed, so there was no case with parties, he said.”
• “And while the texts seem to counter Jones’ claims that they didn’t discuss their mutual cases, the level of harm isn’t fully clear.”
• “In a court hearing over the US Trustee’s motions to disgorge Jackson Walker’s fees in August, Jones’ attorney, Benjamin I. Finestone of Quinn Emanuel Urquhart & Sullivan LLP, said there were no ex parte communications about the substance of any case Jones was involved in.”
• “But formal labels don’t matter as much as the ethics do, Levitin said. The communications violate the Code of Conduct for United States Judges, which says judges can’t consider communications concerning an ‘impending matter that are made outside the presence of the parties or their lawyers,’ Levitin said.”
• “‘The Freeman texts illustrate that debtors don’t pick judges because of their skill or experience,’ Levitin said. ‘They pick them because they anticipate favorable treatment.'”

For even more, see: “Jackson Walker Lawyer Texts Reveal Anger Over Judge Romance“

“Miami State Court Disqualified Attorney, Co-Counsel Over Conflict of Interest” —

• “A state court in Miami has entered an order disqualifying an attorney and his co-counsel from a litigation matter. The judge found that the attorney’s testimony would ‘inevitably require him to challenge the very contract he drafted’ for the defendant, a former client.”
• In 2019, four years before this litigation, Fetes, which is represented by Jonathan Osborne and Frank A. Florio from Gunster, asked Zarraluqui to assist with revising and finalizing its event contract, working alongside Fetes’ president, JC Miranda, to mark up the document.”
• In April 2023, Zarraluqui began assisting the Knights of Columbus in litigation against Fetes without disclosing his prior work for the defendant. He was actively involved in the Knights of Columbus’ strategy, playing a key role in shaping its claims against Fetes and participating in all aspects of the litigation.”
• The judge, in disqualifying Zarraluqui, wrote that ‘while the plaintiff refused to stipulate that the event contract and related issues are central to both Zarraluqui’s work for Fetes and his current work for the plaintiff, the plaintiff did stipulate that they are an aspect of this litigation.'”
  “But the disqualification’s ruling was not just for Zarraluqui. Since ‘Zarraluqui and the Martinez-Cid Firm could not have worked more closely together’ and ‘Zarraluqui admitted that every decision made by the Martinez-Cid Firm concerning this litigation is made in consultation with him,’ Judge Thomas also disqualified the Martinez-Cid Firm under Florida Bar Rules 4-1.9 and 4-1.10.”
• Jarvis highlighted that Judge Thomas ruled that ‘the fact that attorney Zarraluqui did not have an engagement letter with Fetes does not limit the scope of his representation,’ and ‘the fact that Zarraluqui was not paid by Fetes does not affect their attorney-client relationship.'”

“Not parties in interest: Law firm dodges co-trustees’ malpractice lawsuit” —

• “A malpractice lawsuit brought by co-trustees and personal representatives of a trust and estate against a law firm was properly dismissed where the trust and estate were not real parties in interest, a Michigan Court of Appeals panel has ruled.”
• “‘Because [the law firm] represented only [the co-trustees and personal representatives] in their fiduciary capacities, the trust and the estate cannot assert malpractice against [the law firm],’ the appellate judges wrote.”
• “Richard and Eddie signed an engagement letter with McDonald Hopkins. The agreement, directed to Richard and Eddie in their capacity as trustees, stated the firm would be acting ‘as your legal counsel regarding the estate and trust matters of Robert E. Whitton.'”
• “In the first three years of operating TMX, Richard and Eddie each took more than $1 million in compensation. They did not seek advice from the law firm, instead consulting with TMX’s accountant. They also took 1 percent of the value of the trust as an annual fiduciary fee.”
• “The probate court removed Richard and Eddie as fiduciaries, concluding a breach of fiduciary duty occurred. Richard and Eddie fired McDonald Hopkins and eventually settled with Pfankuch. Richard and Eddie then sued the law firm on behalf of the trust and estate, alleging legal malpractice and breach of fiduciary duty. The law firm moved for summary judgment, arguing that certain claims were time-barred and that the trust and estate did not have standing because it lacked an attorney-client relationship with the firm.”
• “Siding with the law firm, the Oakland Circuit Court granted the motion. Richard and Eddie appealed. The brothers argued that the trial court erred by granting summary disposition based on its conclusion that the estate and trust were not the real parties in interest and lacked standing to bring a legal malpractice claim against the law firm. The appellate judges disagreed.”
• “‘The plain language of MCL 700.3715(1)(w) and MCL 700.7817(1)(w) establishes an attorney hired by a personal representative or trustee represents the personal representative or trustee, and the attorney does not have an attorney-client relationship with the estate or the trust,’ they wrote. “

“McKinsey faces Republican calls for probe into China ‘conflicts’” —

• “Leading Republican lawmakers have called for a US justice department investigation into whether McKinsey violated federal law by failing to disclose potential conflicts of interest between its work in China and for the Pentagon.”
• “In a letter to US attorney-general Merrick Garland, seen by the Financial Times, the head of the House select committee on the Chinese Communist party and two US senators said McKinsey appeared to have breached government contracting rules and misled Congress.”
• “The demand for an investigation raises political pressure on the consulting firm, whose extensive work for the US military has been in the crosshairs of Republican lawmakers who argue that McKinsey’s simultaneous work in China represents a risk to US national security, something the firm denies.”
• “It also adds to challenges facing the consulting group that range from the fallout from its work for opioid producer Purdue Pharma, which has led to a criminal investigation by the Department of Justice and hundreds of millions of dollars of legal settlements, to a slowdown in the consulting sector that has left it looking to ease out its least productive staff.”
• “McKinsey has won almost half a billion dollars of business from the US Department of Defense since 2008, according to public disclosures. Procurement laws and the details of specific contracts require it to disclose potential conflicts of interest.”
• “The lawmakers said McKinsey’s work for Chinese state-owned enterprises including China Communications Construction Company — which has been blacklisted by the US Department of Commerce for helping Beijing build military bases in the South China Sea — represented at least a potential conflict of interest that should have been disclosed, along with details of how McKinsey mitigated any conflict. They said this was also the case with work for the Chinese central government that McKinsey had revealed in unrelated US legal filings.”
• “McKinsey declined to comment. It has previously said that its policies on disclosing organisational conflicts of interest adhere to federal laws.”

Excellent piece from Matthew Henderson at Hinshaw: “Law Firm Best Practices to Mitigate the Increasing Risk of Attorney Disqualification Motions” —

• “It seems as though every day, there is a story in the legal news about a well-known law firm facing a disqualification motion. While disqualification motions are being filed more frequently, that is only half the story.”
• “Such motions are often filed under seal, either by counsel seeking to avoid publicity or clients who do not want to air their dirty laundry (such as employment discrimination claims, white-collar criminal matters, etc.) in a public forum. Additionally, law firms may quietly withdraw when initially faced with a well-grounded disqualification motion.”
• “When a lateral partner moves to a competitor, there is a risk that the partner’s former clients, who may become adverse to the new firm, may file disqualification motions. However, the risk may not be realized unless the new client engages in litigation with the lateral partner’s prior client, possibly months or years later.”
• “The risk of disqualification motions can be considerable for clients engaged in high-stakes litigation. This includes losing their counsel of choice, who are familiar with the case, and having to retain successor attorneys to get up to speed in a complex matter.”
• “Disqualification can likewise lead to a claim for legal malpractice or breach of fiduciary duty, as illustrated in the April 2022 decision of RevoLaze LLC v. Dentons in the Eighth Appellate District of the Ohio Court of Appeals[2]. In the Dentons case, the law firm’s primary sin was allegedly not telling the client about the risk of disqualification early in the attorney-client relationship.”
• “From a risk management perspective, even when a law firm concludes that a conflict does not exist, it should consider disclosing any issue to the client, which could potentially trigger a disqualification motion. It should also explain that while the firm does not believe a conflict exists, the firm wants the client to be aware of the issue and offer to discuss any questions or concerns the client may have. That step prevents the client from later claiming that had it known of a conflict, it would have made a different decision.”
• “To reduce the risk of disqualification motions, some law firms proactively include advance conflict waivers in their engagement letters. Such waivers are more likely to be effective when working with a sophisticated client.”
• “Another risk management best practice is to identify and analyze potential conflicts of interest at the onset of the attorney-client relationship. This is often a labor-intensive process but a valuable risk mitigation measure. It involves reviewing attorney time records and interviewing lawyers to determine the scope of the prior representation and what confidential information the attorneys and law firm may possess.”
• “Given that concurrent and former conflicts of interest are imputed to entire law firms, it is also prudent to have robust screening protocols to ensure that lawyers with potential conflicts cannot access confidential client information on a law firm’s server. Disqualification may be avoided where a law firm can demonstrate that it promptly and carefully screened allegedly conflicted counsel.”
• “However, states take different approaches to lateral attorney conflicts, so law firms must be familiar with the imputation rule in the particular jurisdiction in which the lateral practices.”

“From Roadblock to Opportunity: Rethinking Client Conflict Processes in Lateral Partner Recruiting” —

• “After a robust search, the Am Law 200 firm zeroed in on a perfect lateral partner candidate—a respected litigator with a substantial client base. Over the next several weeks, interviews commenced, questionnaires were completed, and both the firm and the partner were confident that they had found the right fit. But as they approached the finish line, a problem emerged: a conflict with one of the incoming partner’s key clients. What had seemed like a done deal suddenly became complicated.”
• “This sort of scenario is common in law firms today. In my experience as a legal recruiter, client conflict issues, often discovered at the ‘eleventh hour’ of a search, too often complicate, if not completely derail, the hiring process of a lateral partner. There is obviously no way to avoid these issues altogether, but law firms can and should take proactive steps, such as tackling conflicts earlier and more thoroughly during the recruiting process, to address these challenges and realize the potential of their promising new hire.”
• “No matter how diligently a firm and a candidate approach the issue, conflicts can present a significant hurdle in lateral partner recruitment. However, when potential conflicts are left largely unaddressed until the end stages of a search, it compounds the problem.”
• “Indeed, the late identification of conflicts adds considerable stress and work to an already demanding hiring process for both lateral candidates and law firms. Moreover, in some cases, despite early identification of a potentially problematic conflict, the parties move forward with the vetting process on the assumption that they’ll be able to resolve the issue later. This often results in (i) a last minute implosion of the hiring process because the conflict cannot be resolved to the satisfaction of the potential new partner or (ii) a conflict within the firm when the time arrives to actually resolve the issue, hampering the new partner’s ability to bring work in from a key client, thereby undermining the lateral partner’s bottom line and the firm’s business case for the lateral hire.”
• “Another complication with conflicts in recruiting is the wide variation in how law firms approach conflict policies. Some firms take a broad view of conflicts, erring on the side of caution and potentially limiting opportunities for new lateral hires. These firms may prioritize existing client relationships and partner preferences, even when creative solutions could resolve perceived conflicts. On the other hand, some firms adopt a narrower interpretation, actively seeking ways to navigate conflicts through client waivers, ethical walls, or other mechanisms. This disparity in approach can significantly impact a lateral partner’s ability to transition their practice successfully and highlights the need for clear communication about conflict policies early in the recruitment process.”
• “The handling of client conflicts in lateral partner recruitment often reveals deeper cultural and strategic issues within law firms. Two key challenges stand out: the collaboration disconnect and the misalignment between recruitment messaging and business operations.”
• “In an ideal scenario, the relationship partner for the existing client would work cooperatively with the new partner to find a solution, such as obtaining a conflict waiver. Unfortunately, this is not always the way it works out. Some partners may be reluctant to approach their long-standing clients about waivers, fearing it might jeopardize the relationship or impact their ‘credit,’ which could impact compensation.”
• “Another client conflict challenge arises when there is a disconnect between a firm’s recruiting efforts and its business operations. This misalignment, stemming from a lack of early coordination between the recruitment team and key operational stakeholders, leads to conflicts being addressed too late or with insufficient urgency. This, in turn, often results in unfulfilled expectations about conflict resolution that can derail the hiring process at the offer stage or cause problems at the early new hire phase.”
• “To effectively navigate the complexities of client conflicts in lateral partner recruitment, law firms should consider implementing the following strategies: Early Conflict Identification… Initiating preliminary conflict checks early in the recruitment process with a lateral candidate… standardizing the conflict check procedure across law firms. The legal industry could benefit greatly from developing and implementing a universally accepted form specifically for conflict disclosure.”

“The Ethics of Freelance Lawyering, Part 2: Conflicts of Interest and Duty to Preserve Client Confidences” —

• “If a freelance attorney temporarily works on a matter, that firm’s client is the temporary attorney’s client for purposes of conflicts of interest. Because temporary attorneys often work for multiple firms simultaneously, it is crucial that both the temporary attorney and the firm routinely monitor conflicts.”
• “Every freelance attorney is required to maintain accurate records of their actual conflicts so they can properly clear conflicts for every new matter. COPRAC 1992-126 states, ‘To facilitate identification of conflicts, the contract attorney should maintain a personal record of clients and firms for whom he/she has worked, in addition to a general description of the work performed for the clients. The firm engaging a contract attorney has the most direct obligation to maintain an accurate record of the contract attorney’s work for each of its clients and to monitor for conflicts on a routine basis.'”
• “COPRAC Opinion 1992-126 indicates potential for a conflict if the attorney had a ‘substantial relationship’ and obtained ‘confidential’ information during the course of his or her representation of that client. While temporary attorneys typically do not obtain confidential client information to amount to a “substantial relationship,” all attorneys must take care to avoid engagements adverse to a current or former client’s interests, especially if a prior relationship presumes knowledge of that client’s confidential information.”
• “A better rule is simply for freelance attorneys to maintain accurate records of matters and clients, and to take care to avoid working on any other matter adverse to current and former clients.”
• “Firms and freelance attorneys must take special care to avoid imputed conflicts of interest, which create an obligation to clear all conflicts, including those beyond the freelance attorney’s assignments with the firm. The key question is whether the law firm’s conflicts are imputed to the temporary attorney, and vice versa.”
• “The answer generally depends on the closeness of the relationship, and under ABA Formal Opinion No. 88-356, whether the temporary attorney is “deemed associated” with the firm such that knowledge of and access to the firm’s clients’ confidential information is presumed. If the attorney is ‘deemed associated” with the firm, then the firm’s conflicts are imputed to the temporary attorney and vice versa.'”
• “A lawyer who is ‘of counsel’ at a law firm must pay special attention to the ethical implications that the ‘of counsel’ designation creates—specifically with respect to imputed conflicts. Unlike the case-specific conflict analysis for an independent contractor, an ‘of counsel’ lawyer in California is deemed part of the law firm for conflict purposes.”
• “Under this single de facto firm analysis, current and former clients of every firm lawyer and the ‘of counsel’ attorney become relevant to all the lawyers’ respective ethical obligations and potential disqualifications. Therefore, when accepting new projects from other law firms, a lawyer who has an ‘counsel’ relationship with Firm A must run each new matter for Firm B through Firm A’s conflict system. Many freelance lawyers avoid the ‘of counsel’ designation in order to avoid imputed conflicts.”
• “When a law firm hires a freelance attorney, it may need to disclose a client’s confidential information for the freelance attorney to adequately assist with the matter. The freelance attorney bears the burden of non-disclosure regarding secrets learned during her involvement with the representation, while the law firm has the obligation to screen the freelance attorney from client secrets unrelated or unnecessary to a particular project.”

“Nixon Peabody sues law firm for allegedly luring away its clients without cut of contingency fee” —

• “Nixon Peabody has filed a lawsuit alleging that its clients were improperly lured away by personal injury law firm Shaheen & Gordon through use of ‘scare tactics’ and false promises.”
• “The two firms allege that Shaheen & Gordon ‘improperly enticed’ their clients to switch firms before submitting their claims to a settlement fund, according to Law.com. The clients were survivors of abuse at the Sununu Youth Services Center.”
• “Thirty-five clients jumped to Shaheen & Gordon between February 2023 and June, the suit says.”
• “Nixon Peabody and Rilee & Associates say they spent thousands of hours representing victims and setting up a settlement fund with state legislators. Their original fee agreement called for attorney fees amounting to 40% of gross recoveries along with costs. The two firms say they have been cut out of Shaheen & Gordon’s client recoveries.”
• “Shaheen & Gordon allegedly told survivors that the firm could obtain the highest damages award to which they are entitled by submitting their claims to the settlement fund, according to Law.com’s description of the suit allegations. That is not necessarily the case, the suit says.”
• “Shaheen & Gordon gave this statement to the ABA Journal: ‘Shaheen & Gordon has reviewed the complaint and denies the allegations. Clients are not the property of their lawyers, and they are free to hire counsel of their own choosing. Shaheen & Gordon has attempted to cooperate with Nixon Peabody but has not received any specific demands or proposals. We are truly surprised by this lawsuit and do not intend to litigate it in the press.'”

“Edgio counsel faces UST objection to retention” —

• “The US Trustee in Edgio’s bankruptcy filed an objection to the debtors’ application to employ Milbank as counsel, marking the third big retention battle this year — the other two taking place in Enviva and Invitae.”
• “Edgio, a technology services company filed for bankruptcy on 9 September in the US Bankruptcy Court for the District of Delaware before Judge Karen Owens, with an application to employ Milbank as debtors’ counsel.”
• “The US Trustee’s objection arose from Milbank’s representation of the debtors’ current and former officers as defendants in litigation actions. The US Trustee views this representation of directors and officers as ‘interests adverse to the estate’ which would disqualify the firm under Section 327(a) of the Bankruptcy Code. The debtors disclosed this relationship in their declaration and stated ‘Milbank’s joint representation of Edgio, Inc. with certain of its current and former directors and officers is not adverse to the Debtors or their estates.'”
• “Section 327(a) of the Bankruptcy Code provides: Except as otherwise provided in this section, the trustee, with the court’s approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee’s duties under this title.”
• “The Bankruptcy Code does not define ‘adverse interest.’ The US Trustee cites a number of cases which have set precedent for what ‘adverse interest’ means and suggests the phrase can be defined as ‘when counsel has a competing economic interest tending to diminish estate values or to create a potential or actual dispute in which the estate is a rival claimant,’ or where ‘the representation of another interest may cause the debtor’s attorneys to act any differently than they would without that other representation.’ According to the US Trustee, these circumstances create a conflict of interest such that the firm must be disqualified under section 327(a).”
• “The US Trustee argues that Milbank’s clients in the securities and derivative actions have opposite interests to the estate, since the officers and directors ‘want to minimize their liability on the same claims that the Debtors have a fiduciary duty to maximize.'”
• “Addressing certain arguments the US Trustee expects Milbank to offer in reply, the US Trustee says even if the debtors argue that this is only potentially a conflict and not an actual conflict, it should still result in disqualification, since potential conflicts are only a defense if every competent professional in the field is already employed in the case, which is not the case here. Also, even if Milbank asserts that it has a conflict waiver from the debtors and its directors and officers, the US Trustee argues that the code does not allow for an adverse interest to be overcome by a conflict waiver.”
• “Notably, this issue arose in Enviva’s retention battle as well, where Vinson & Elkins was representing officers and directors in shareholder and derivative actions, but the judge ultimately ruled that this issue did not present an impermissible conflict. In Enviva, the directors and officers were also entitled to indemnification, including defense costs, and under the RSA debtors’ management was entitled to 3.5% of the equity in the reorganized entities. After weighing the risk of any potential conflicts and the potential advantages to the bankruptcy estate such as savings of time and money, the court found that at least at the time of the opinion, this did not disqualify counsel.”

“Shipman & Goodwin Atty Needed As Witness, DQ Bid Claims” —

• “A Connecticut company wants a Shipman & Goodwin LLP partner disqualified from representing a rival in a bond dispute surrounding a garbage sorting facility permit, saying the attorney was personally involved in some of the conduct in question.”
• “In a motion filed Monday [9/23] in Connecticut Superior Court, Country Holding Company LLC asked the court to remove attorney Joseph P. Williams of Shipman & Goodman from serving as trial counsel representing defendants Covanta Projects of Wallingford LLC and Covanta Energy LLC. Country Holding argued that Williams previously served as counsel for the defendants amid the two sides’ negotiations regarding a contentious permit transfer, and is needed as a witness at trial.”
• “In its motion to disqualify Williams, Country Holding said the Shipman & Goodwin partner ‘was personally involved’ in conduct that led to one of the tortious interference claims.”
• “Because Williams was involved in the ‘scheme’ to use the DEEP permit needed to operate the Wallingford facility as ‘leverage’ in the ongoing legal tussle, Country Holding said, his testimony would be needed at trial, and therefore, he could not appear on behalf of the Covanta parties.”

“An Australian company now owns one-third of Canada’s patent law market, drawing concern over conflicts of interest” —

• “Australian intellectual property services company IPH Ltd. now controls about a third of the Canadian patent and trademark law market following its recent acquisition of Bereskin & Parr.”
• “That deal, which was announced in late August, is IPH’s fourth Canadian acquisition in the past two years. The company’s aggressive push into Canada has raised concerns in some quarters about the impact on the country’s intellectual property market. Some in the sector have warned that this level of consolidation will drive up costs and create conflict of interest headaches, while others warn that the IPH business model is going to harm small domestic innovators.”
• “In 2013, a law changed in Australia allowing patent attorney firms to incorporate. This was the genesis of IPH, which grew out of Australian intellectual property firm Spruson & Ferguson. The partners sold the business into IPH and then listed the company on the Australian Stock Exchange.”
• “The way the ownership is structured in Canada is as follows: IPH purchases the firm’s intellectual property agency practice – the component that handles patent prosecution and trademark work – and then assumes an ownership stake in the legal practice through the agency.”
• “IPH’s entrance into the Canadian market has some lawyers worried. Among them is Louis-Pierre Gravelle, who left Bereskin & Parr recently after the buyout was announced. He is now with Dipchand LLP. ‘The incursion of IPH on the Canadian market will have long lasting ripple effect, some of which is predictable, some of which isn’t,’ Mr. Gravelle said.”
• “Gunars Gaikis, a senior counsel at Norton Rose Fulbright Canada, who left Smart & Biggar after nearly four decades shortly after the sale to IPH, raised a similar concern. ‘Their focus is profit,’ he said. ‘Not everything is always about money … I know in my own career, somebody calls, they have an idea, you help them out, you quickly realize they really can’t afford very much, but you help them to the extent you can. I think a lot of that is likely to go by the wayside.'”

“What France’s ‘McKinsey Gate’ scandal revealed about the four major types of consulting’s conflicts of interests“–

• “McKinsey & Company and other consulting firms have long faced criticisms for their involvement with governments. Investigative journalists and academics alike have flagged their growing influence, citing cases like the staggering expenses of up to £1 million per day on private consultants for the UK’s Covid-19 Test-and-Trace service, or the €10.7 million in contracts paid to McKinsey by the French government during the same crisis.”
• “Yet there is broader criticism that consulting firms have lost their professional ethos. Investigative journalist Duff McDonald, in his 2014 book The Firm, argued that McKinsey veered far from the ethical standards set by its founder, Marvin Bower, in the 1950s, who invented management consulting by taking inspiration from the law profession.”
• “This shift has led to a long series of scandals involving corruption, unethical work, and conflicts of interest. Other consulting firms, including Bain & Company and BCG, have also faced their fair share of scandals. In 2022, they were banned from bidding on South African government contracts for their role in a state capture scandal, and BCG recently agreed to forfeit $14 million in profits in Angola after admitting to bribery scandal.”
• “A closer look at recent scandals that strategy consulting firms have faced in advising governments reveals four types of conflicts of interest:
  • Personal interests and relationships: As the Cash Investigation episode revealed, Karim Tadjeddine’s connections with Macron’s party allowed McKinsey to establish a strong foothold within government decision-making. This not only advanced Tadjeddine’s career but also underscored a deeper conflict – where consultants build relationships or align themselves with key networks to secure future contracts, bonuses, or other rewards. One common avenue for such conflicts is their pro bono work, which Cash Investigation exposed as a tool that Tadjeddine used to forge connections that later led to profitable contracts.
  • Working with conflicting clients and assignments: McKinsey & Company’s involvement in the opioid crisis is a striking example. The firm provided strategic advice both to opioid manufacturers like Purdue Pharma and to the US Food and Drug Administration (FDA), which regulates the opioid market. An investigation by the US House of Representatives revealed that McKinsey failed to disclose these conflicts over a 10-year period, impacting 37 FDA contracts at a cost of over $65 million. Although Cash Investigation did not address such overlapping contracts, similar conflicts likely exist in France, where McKinsey’s work with both public and private clients raises red flags. According to the French Senate, those advising the government are legally required to declare potential conflicts of interest, yet in most cases McKinsey failed to submit these declarations.
  • Profit-centered advice: In a highly publicised case, the South African Government Commission found that Bain & Company acted unlawfully colluding with private companies to manipulate government procedures and shape policies in their favour. This highlights a crucial issue overlooked by Cash Investigation: private consultants often pursue financial interests that conflict with the government’s responsibility to serve the public good. When such firms work for governments, these their profit motive can undermine social welfare goals.
  • Revolving doors: Another conflict of interest involves leveraging personal connections within government to influence decisions. Largely overlooked by the documentary, this issue is significant: around 1% of McKinsey’s employees in France previously held high-ranking positions in the government, and several have transitioned into government roles. In an industry where networks create opportunities, this revolving door between consulting firms and government raises serious concerns about impartiality. A notable example outside France is Deloitte’s role in the UK’s Covid-19 Test and Trace program, as detailed in ‘The Big Con’. Deloitte’s close ties to government officials, including Cabinet Office minister Chloe Smith – who previously worked for Deloitte – likely fast-tracked the firm’s £279.5 million contract during the pandemic.”

“Honigman Not Conflicted Out Of $40M Detroit Embezzling Suit” —

• “A Michigan state judge said Friday [9/27] that the law firm that investigated suspected fraud at the Detroit Riverfront Conservancy can also represent the organization in its civil suit against its former chief financial officer, who is accused of embezzling $40 million.”
• “Wayne County Circuit Judge Muriel D. Hughes denied accused co-conspirator Darrell Greer’s motion to disqualify Honigman LLP from representing the Detroit Riverfront Conservancy. The judge found the firm’s involvement in the investigation that supported criminal charges against former CFO William A. Smith is not in conflict with its ability to pursue civil claims against Smith, his family and Greer.”
• “Greer and his construction business, You Services LLC — which is accused of accepting transfers from Smith to shield assets from the conservancy after the theft was discovered — had asked the court to disqualify Honigman from representing the conservancy, alleging the firm will have a conflict because it was involved in the fraud investigation.”
• “Todd Russell Perkins of the Perkins Law Group, one of Greer’s attorneys, told the court Friday that the attorneys involved in the investigation also turned over information to law enforcement, and that they could potentially need to be deposed or called as witnesses at trial.”
• “Perkins said the information Honigman learned has been used to prosecute others and that because his client is accused of being connected to the scheme, the firm’s involvement could prejudice Greer.”
• “Jeremy Lockhart of Honigman said disqualification would be of ‘severe consequence’ to the conservancy. If Honigman were to be disqualified, the nonprofit would have to spend money on catching another firm up to speed and the case would be unnecessarily delayed, he said.”
• “Disqualification would also be unwarranted, Lockhart said. Law firms often conduct pre-lawsuit investigations, and if that were enough of a basis to disqualify a lawyer, courts would see these motions all the time, he said. He referenced Michigan professional conduct rules that allow other lawyers to act as advocates in a trial if another lawyer from the same firm could be called as a witness if no other conflict exists.”

“Jackson Walker Lawyers Spoke of Secret Judge Romance, Texts Show” —

• “Two Jackson Walker LLP attorneys exchanged text messages in 2021 showing they knew about, and discussed the potential fallout of, an undisclosed romantic relationship between a firm lawyer and a former Houston bankruptcy judge.”
• “The texts, which were displayed in records viewed by Bloomberg Law, appeared to be the subject of debate during a bankruptcy court hearing Tuesday over discovery related to the Justice Department bankruptcy unit’s claims that the Texas law firm breached its ethical duties. The bankruptcy monitor, the US Trustee, says Jackson Walker should disgorge at least $18 million because the firm failed to disclose what it says is a clear conflict of interest.”
• “The texts viewed by Bloomberg Law, which indicate the Jackson Walker attorneys who sent them were trying to ‘protect’ Freeman, are notable in light of the firm’s statements that it took appropriate actions when it learned of the relationship. Jones regularly presided over Jackson Walker’s cases in bankruptcy court before he resigned.”
• “‘What the employees did is they came up with a plan, and the plan was to get documents sealed so that it wouldn’t be public,’ [US Trustee attorney] Charboneau said. ‘The evidence is going to show that the employees spoke about this—Freeman and former Judge Jones—in a way that shows that no less than three of the employees of Jackson Walker had knowledge that they were in a relationship.'”
• “Rusty Hardin of Rusty Hardin & Associates LLP, representing Jackson Walker, told Chief Judge Eduardo V. Rodriguez on Tuesday that there’s been no evidence that ‘anyone in management’ at the firm knew about the relationship. He said there’s a “strong disagreement” about the meaning of the texts.”

“AI assistants are blabbing our embarrassing work secrets” —

• “Corporate assistants have long been the keepers of company gossip and secrets. Now artificial intelligence is taking over some of their tasks, but it doesn’t share their sense of discretion.”
• “Researcher and engineer Alex Bilzerian said on X last week that, after a Zoom meeting with some venture capital investors, he got an automated email from Otter.ai, a transcription service with an ‘AI meeting assistant.’ The email contained a transcript of the meeting — including the part that happened after Bilzerian logged off, when the investors discussed their firm’s strategic failures and cooked metrics, he told The Washington Post via direct message on X.”
• “Companies are pumping AI features into work products across the board. Most recently, Salesforce announced an AI offering called Agentforce, which allows customers to build AI-powered virtual agents that help with sales and customer service. Microsoft has been ramping up the capabilities of its AI Copilot across its suite of work products, while Google has been doing the same with Gemini.”
• “Sometimes AI note takers catch moments that weren’t meant for outside ears. Isaac Naor, a software designer in Los Angeles, said he once received an Otter transcript after a Zoom meeting that contained moments where the other participant muted herself to talk about him. She had no idea, and Naor was too uncomfortable to tell her, he said.”
• “Other times, the very presence of an AI tool makes meetings uncomfortable. Rob Bezdjian, who owns a small events business in Salt Lake City, said he had an awkward call with potential investors after they insisted on recording a meeting through Otter. Bezdjian didn’t want his proprietary ideas recorded, so he declined to share some details about his business. The deal didn’t go through.”
• “Too often, the executives who decide to implement companywide AI tools aren’t well versed in the risks, said cybersecurity consultant Will Andre. In his previous career as a marketer, he once stumbled across a video of his bosses deciding who would get cut in an upcoming round of layoffs. The software recording the video meeting had been configured to automatically save a copy to the company’s public server. (He decided to pretend that he never saw it.)”