Bressler Risk Blog

“Judge Rejects Company’s Attempt to Boot Former Lewis Rice Counsel From Representing Competitor” —

• “A federal judge in Missouri this week declined to boot an NLJ 500 firm from defending an orthodontic appliance manufacturer in a trademark dispute, finding that the defense counsel’s former client, who is now the plaintiff, likely knew of the firm’s involvement well before the lawsuit was filed.”
• “The plaintiff had claimed that Lewis Rice served as its ‘general counsel and only attorney for two decades.’ Its president also claimed he discussed issues regarding the present lawsuit with Lewis Rice partner Brian Pezza.”
• “However, Pitlyk agreed that evidence showed the plaintiff likely had knowledge of the firm’s involvement with the competitor, leaving the plaintiff little room to attempt to explain a justified delay for its motion to disqualify.”
• “‘Defendant had Lewis Rice as counsel for at least 11 months of back-and-forth between the parties to this litigation. At no point during those 11 months did plaintiff seek to disqualify Lewis Rice. Compelling defendant to find new counsel that far along in the litigation would be prejudicial,’ Pitlyk said in Monday’s order.”
• “According to Pitlyk, Ordont did not raise the conflict of interest issue until after Lewis Rice filed a motion to dismiss the lawsuit in July 2023.”
• “Lewis Rice further argued that its present representation of DynaFlex was well beyond any professional conduct violations. The firm claimed it never represented Ordont in trademark matters, and that Ordont used other law firms for such matters, as shown by public filings of the U.S. Patent and Trademark Office.”
• “‘Under these circumstances, characterizing Lewis Rice as Ordont’s ‘general counsel’ is hyperbole and misleading,’ the defendant’s counsel said. ‘Lewis Rice properly declined to take on a new representation of its former client, Ordont, in December of 2021 when Ordont reached out asking that Lewis Rice represent it, for the first time, in a trademark matter.'”
• “Ultimately Pitly rejected the plaintiff’s reasoning for the delayed disqualification request.”
• “‘Plaintiff concedes in its reply that it ‘could have raised this motion before the TTAB, a tribunal,’ but contends that it was ‘required to raise the motion within a reasonable time of the commencement of this litigation,'” Pitlyk wrote. “Plaintiff’s suggestion that the delay should be measured from when this particular action commenced rather than when plaintiff learned of the potential conflict is in tension with the rationale for prohibiting untimely motions to disqualify—i.e., to prevent litigants from using such motions ‘later as a tool to deprive his opponent of counsel of his choice after substantial preparation of a case has been completed.””

“Arnold & Itkin DQ Bid Says Zeta Defense Atty Is Ex-Employee” —

• “Arnold & Itkin has asked a Harris County judge to disqualify the law firm representing a drilling rig owner in litigation spurring from Hurricane Zeta, alleging a defense lawyer previously worked for Arnold & Itkin and improperly sent herself confidential information about the litigation before leaving the firm.”
• “In a 25-page motion filed Tuesday, Arnold & Itkin LLP says that Karina Sanchez-Peralta of Ahmad Zavitsanos & Mensing PLLC, who represents Transocean Ltd., worked as a law clerk at Arnold & Itkin from Aug. 29, 2022, to Oct. 4, 2022. By that point, Arnold & Itkin had for two years been representing plaintiffs in the multidistrict litigation created to handle seamen’s claims surrounding Hurricane Zeta, the firm states. The crew members claim they were injured after Transocean forced their ship to remain in the path of the hurricane when it hit the Gulf of Mexico in October 2020.”
• “Ahmad Zavitsanos ‘recruited’ Sanchez-Peralta before the end of her employment with Arnold & Itkin, the firm says, adding that she became an associate with Ahmad Zavitsanos in September 2023 and became attorney of record for Transocean in the Hurricane Zeta MDL in March 2024.”
• “Sanchez-Peralta, has been chosen by her employer to serve as ‘lead attorney on all issues related to medical damages, witnesses, and records,’ took work product from Arnold & Itkin related to the Hurricane Zeta MDL “in the final minutes” of her employment, according to Arnold & Itkin.”
• “‘Namely, Ms. Sanchez attached multiple confidential work-product documents to an email she sent to her own personal email literally in the last few moments before she walked out of the door,’ Arnold & Itkin asserts.’ Then, according to her own LinkedIn profile, she took a job at AZA. Plaintiffs just discovered these violations and the conflict of interest after feeling compelled to investigate other potential ethical and professional violations based on Transocean and its counsel’s recent conduct in the media.”
• “In its motion Tuesday, Arnold & Itkin also accuses Sanchez-Peralta of saving trial strategy and a list of ‘hot docs,’ or documents considered to be the plaintiffs’ best evidence, for the Hurricane Zeta MDL litigation before leaving the firm.”
• “‘Perhaps most damning is the fact that Ms. Sanchez also directly assisted in trial preparation and strategy related to Dr. Henry Small (‘Dr. Small’), an orthopedic surgeon who provided treatment for some of the plaintiffs in this case and a witness AZA intends to crossexamine at trial,’ Arnold & Itkin states. ‘Ms. Sanchez was intimately involved with [Arnold & Itkin attorney Roland Christensen] in researching and discussing information contained in a Texas Medical Board report — which is by Transocean’s own admission a critical component to Transocean’s defense in this case as evidenced during the days of pretrial hearings.'”

“Clifford Chance Acted for Three Clients on a Single Deal Process—Is it a Problem?” —

• “On the face of it, the €14 billion transaction was a sizable if unexceptional European mega-deal. Last week, Deutsche Bahn sold off its logistical arm DB Schenker to another well-established European transport group, Danish company DSV, in an effort to reduce debts, which have reportedly climbed to as high as €34 billion.”
• “The matter reignites the long-running conversation around the risks of conflict of interest when multiple teams are deployed on the same deal, as well as questions around the information barriers law firms have in place to prevent conflicts from arising.”
• “Earlier in September, it emerged, unannounced, that Clifford Chance was advising bidding parties Saudi logistics firm Bahri—with a team including corporate partners Christian Vogel in Düsseldorf and Guy Norman in Riyadh—as well as another bidder, Abu Dhabi sovereign wealth fund ADQ.”
• “Then, a few days later, Clifford Chance announced that it had successfully advised the lenders backing the company that became the final buyer, DSV, led by partner Jim MacHale in London.”
• “It meant that, throughout the deal, including the bidding process, the firm deployed three separate teams in the bidding process. One person with knowledge of the situation pointed out that the firm had client consent and that it acted in accordance with regulations. They added such things were not uncommon.”
• “Yet while not unheard of in high stakes M&A with multiple bidding parties, several people that commented for this article said it was ‘unusual’ to have three separate teams, with some even positing that it teetered on the edge of what is ethical and what is not.”
• “Although this has become commonplace in private equity transactions in recent years, one London partner explained the nature of public M&A makes it far more complicated.’
• “‘It is becoming quite a problem in PE because [clients] all seem to want to use the one or two sponsor shops, and have persuaded themselves its all fine, and to an extent because of the private nature of the sector, it can work.”
• “‘But ‘Chinese walls’ and ethical screens can’t really work in the context of a public deal. They would have to be really creative and have gone through a number of loops to get comfortable doing this.'”
• “But, in the same way that PE houses have consolidated relationships with various ‘favourited’ firms, if you build up a strong enough relationship with banks and bluechip companies, then your clients can also essentially become open to this approach.”
• “‘If your client knows you can do the job, and that you will succeed, they will likely be willing to accept that your firm might be acting for another party on the same matter,’ another London partner said.”
• “But others argue that, so long as potential conflict is well managed, then there are ways of circumventing risk, ‘as I’m sure will have been the case at Clifford Chance,’ as one partner at a rival put it.”
• “One partner also noted that, within one firm, allocating a major transaction to a specific partner or team can also lead to competition within the partnership. ‘If you tell one partner they can’t take on the deal because someone else is already on it, then obviously you open the door to potential arguments between partners at the firm. You need a firm with a good culture to be able to navigate these issues.'”

“Lawyer Wields Blank Rome Atty Voicemail To Bolster DQ Bid” —

• “An attorney who is suing three lawyers from Blank Rome LLP and has asked a federal court to disqualify the firm’s other attorneys from representing their colleagues — alleging they contacted one of her witnesses — told the court Friday she accessed a phone message that strengthens her arguments.”
• “In a brief filed in Pennsylvania federal court, attorney Veronica Turner said she secured an audio recording and a transcript of a voicemail left by Jeffrey Rosenthal of Blank Rome, who is representing his three colleagues at the firm. Turner accused Rosenthal of improperly contacting Dr. Richard S. Goldberg, an expert witness for Turner and her husband.”
• “‘The voice mail was left on September 23, 2024, acknowledged that attorney Rosenthal was aware Dr. Goldberg was serving as an expert witness for plaintiffs, asked if there was an intention to supply Mr. Rosenthal with documents and if so when that would occur, provided Dr. Goldberg with attorney Rosenthal’s direct dial telephone number, and stated ‘feel free to call me back,” according to the filing.”
• “Earlier this week, Turner filed a motion for disqualification and sanctions that sought to have Rosenthal, Blank Rome attorney Brian Paszamant and the firm tossed from her lawsuit. Rosenthal and Paszamant are representing Blank Rome attorneys James T. Smith, Rebecca Ward and Heidi G. Crikelair.”
• “Turner, along with her husband, Kevin Turner, sued the three lawyers, as well as aircraft motor manufacturer Avco Corp. and its parent company, Textron Inc., for retaliation after she switched from corporate defense to the plaintiffs bar. She previously represented Avco’s Lycoming Engines division in “major aircraft crash litigation” from 2005 through November 2017.”

“DoorDash Seeks More Information About NLJ 500 Firm’s Connections With Chicago” —

• “In a service fees dispute between DoorDash and Chicago, the online delivery service’s counsel with Gibson, Dunn & Crutcher have asked for more evidence that may shed light on the working relationship between the city and its NLJ Top 500 firm.”
• “DoorDash claims it is seeking more evidence from the city that could be relevant in its due process defense in the pending suit, Chicago v. DoorDash, in the U.S. District Court for the Northern District of Illinois. DoorDash asked for documents that may be related to the city’s oversight of its counsel with Cohen Milstein Sellers & Toll, claiming the firm ‘is improperly acting as a city official or employee exercising the city’s prosecutorial powers,’ according to an opinion filed in the case last week.”
• “On behalf of DoorDash, Gibson Dunn relied on a March 2015 decision in Chicago v. Purdue Pharma from the Illinois federal court to argue that it has the right to a ‘financially disinterested prosecutor.’ The court previously denied Cohen Milstein’s motion to strike DoorDash’s defense, and in the city’s renewed attempt, DoorDash asked the court to deny the city’s motion or defer a ruling on it until after the close of fact discovery.”
• “On Friday, U.S. District Judge Jeremy C. Daniel agreed with DoorDash, finding that the additional discovery Gibson Dunn is pursuing through a pending motion to compel could be relevant to its defense, even if the information is privileged. Gibson Dunn is seeking documents related to the city’s oversight and control of Cohen Milstein, its compliance with the city’s outside counsel guidelines, and admissions regarding Cohen Milstein’s contributions to Chicago political campaigns and candidates.”
• “‘The question of whether retained counsel is financially interested in the outcome of the litigation may involve a wider range of materials than the retention agreement alone,’ Daniel said. ‘For example, even if the agreement contains adequate safeguards, the arrangement may still violate DoorDash’s due process rights if DoorDash presents evidence the city failed to exercise ‘absolute and total control over all critical decision-making.'”

“PwC Lead Advisory team advises Stowe Family Law on its sale to Investcorp” —

• “The PwC Lead Advisory team is pleased to announce the sale of Stowe Family Law, the largest specialist family law firm in the United Kingdom, to Investcorp, a leading global alternative investment firm. The transaction represents a successful exit for Livingbridge, which has backed Stowe Family Law in its growth journey since 2017.”
• “[The firm] operates from 90 locations across the United Kingdom, with nearly 400 staff supporting 5,000 clients a year.”
• “PwC acted as lead financial adviser to the shareholders of Stowe Family Law, providing Corporate Finance, Debt & Capital Advisory, Vendor Commercial Due Diligence, and Data Insights & Analytics advice. This landmark transaction highlights PwC’s position as one of the leading financial advisors in the professional and legal advisory sector.”

Herbert Smith Freehills published: “Modernising Australia’s AML/CTF regime” —

• “On 11 September 2024, amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) were introduced into Parliament through the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth). The Bill includes significant proposals to expand the application of the AML/CTF Act to additional sectors of the Australian economy, including lawyers, real estate agents, accountants and others.”
• “In this paper we look at the amendments to the AML/CTF Act that we expect to be of most importance to existing reporting entities. These include:
  • updates to requirements around AML/CTF Programs including a new definition capturing risk assessments, policies, procedures and controls;
  • reform to governance requirements including a new “lead entity” concept;
  • a new approach to regulating offshore operations;
  • modified customer due diligence obligations including legislating customer risk assessment requirements;
  • reformed virtual asset service provider requirements;
  • significant changes through the introduction of obligations connected to the “transfer of value”;
  • updates to the regime when assisting an investigation of serious offences; and
  • new AUSTRAC investigation and enforcement powers.”

“Sullivan & Cromwell Didn’t Ignore FTX Red Flags, Second Examiner Report Concludes” —

• “After an initial inquiry cleared Sullivan & Cromwell of allegations that the firm knew—or should have known—of the fraud at FTX prior to representing the company as debtors counsel, a second report from a bankruptcy court-appointed examiner cleared the law firm of a disqualifying conflict of interest in the case.”
• “Wednesday’s report from independent examiner Robert J. Cleary of Patterson Belknap Webb & Tyler found no disqualifying conflict of interest in Sullivan & Cromwell’s pre-petition work helping FTX founder Sam Bankman-Fried acquire the shares of the Robinhood trading platform, which Cleary described as regulatory in nature.”
• “Cleary also found that the April 2022 matter did not make Sullivan & Cromwell aware of the fraud and that the firm didn’t ignore any ‘red flags.'”
• “After creditors, academics and U.S. senators criticized Sullivan & Cromwell’s representation of FTX as debtors counsel, alleging a potential conflict of interest due to the law firm’s 20 pre-petition matters for FTX, Judge Luis Felipe Restrepo of the Third Circuit said the prepetition work was among several reasons why an independent examiner was warranted.”
• “An initial report from Cleary in May found that Sullivan & Cromwell was unaware of the fraud during its pre-petition work for FTX, but Cleary called for an additional investigation into whether Sullivan & Cromwell had a conflict of interest (or knew of the fraud, or should have known of it) during its work for Bankman-Fried personally as he sought to acquire shares of Robinhood.”
• “The second report came after a review of more than 700 documents, mostly email exchanges between FTX Group in-house counsel and Sullivan & Cromwell partners, as well as interviews with partners Andrew Dietderich, Mitch Eitel, Joseph Hearn and Eric Queen.”

“Attorney Can Take Business Without Compensating Former Firm” —

• “A [Colorado] state supreme court recently rejected an attempt by a law firm to charge a departing associate attorney for lost “marketing expenses” when the associate took clients to a new firm.”
• “In Johnson Family Law, P.C. v. Bursek, the court refused to enforce a ‘reimbursement agreement’ when a resigning associate took clients with him, concluding the agreement unreasonably restricted the attorney’s ability to practice law.”
• “The court reasoned that charging undifferentiated fees to departing attorneys substantially disincentivized lawyers from continuing their representation of clients. ABA Litigation Section leaders agree with the decision but note law firms may still be permitted to recover fees in limited circumstances. Litigation Section leaders further note that law firms can seek to retain associates—and thus clients—in other ways that do not run afoul of ethics rules.”
• “When an associate left his former family law firm in Denver, 18 clients followed. But the firm claimed the attorney owed $18,936 for the privilege of taking clients. The firm argued it should be repaid $1,052 per client for ‘marketing expenses’ under the reimbursement agreement. These expenses, the firm asserted, represented ‘historic costs’ for promotion.”
• “The associate challenged the agreement, claiming it violated Colorado Rule of Professional Conduct 5.6, which prohibits a lawyer from entering into an agreement ‘that restricts the right of a lawyer to practice after termination of the [employment] relationship.'”