Bressler Risk Blog

For those following this saga, Update 1 [Dec 25]: “Corporate Transparency Act Filing Requirements Reinstated: Act Now” —

• “The Corporate Transparency Act (CTA) filing requirements have been reinstated and most filings will now be due January 13, 2025 instead of the December 31, 2024 prior deadline. The bottom line is that any entity classified as a ‘reporting company’ under the CTA has to file with the Financial Crimes Enforcement Network of the Treasury (FinCEN). Each reporting company will have to file Beneficial Owner Information (BOI) for each person deemed a beneficiary owner (BOs). While a detailed discussion of the legal arguments in the cases challenging the CTAs constitutionality, and the counter arguments by the government would be interesting, that will not help those required to report to address that requirement.”
• “Reporting companies include closely held business entities whether they be limited partnerships (LPs), limited liability companies (LLCs), S corporations, other corporations unless they are specifically exempt. FinCEN has made the requirements broad and complex and even includes entities that might be inactive or terminated.”
• “Beneficial Owners include anyone who owns 25% or more of a reporting company or who has ‘substantial control’ over an entity. The definition of ‘substantial control’ is both broad and vague so that many people who are officers, directors, managers, key employees, etc. of a reporting company may have to provide information to the reporting company to report them as a BO. If a trust owns or controls interests in a reporting company, the filing requirements become exponentially more complicated and many or all people named in fiduciary and other capacities in the trust may have to provide BOI information to the reporting company.”
• “‘In light of a December 23, 2024, federal Court of Appeals decision, reporting companies, except as indicated below, are once again required to file beneficial ownership information with FinCEN. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline…'”

Followed by Update 2 [Dec 26]: “FinCEN beneficial ownership registry deadline paused again” —

• “The January deadline for covered businesses to register their beneficial ownership information is once again on hold following a Dec. 26 order from the Fifth Circuit Court of Appeals.”
• “On Dec. 23, the Fifth Circuit lifted a nationwide injunction issued by the district court judge earlier this month in a Texas lawsuit challenging the Corporate Transparency Act, which requires covered businesses to report their beneficial ownership information to the Financial Crimes Enforcement Network. Three days later, ‘in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments,’ the panel of Fifth Circuit judges that will consider the merits of the government’s appeal of the preliminary injunction vacated that decision and once again enjoined enforcement of the reporting rule and CTA.”
• “The lawsuit in Texas was filed by the National Federation of Independent Business and several of its members. The plaintiffs argued that the CTA exceeded Congress’ authority to regulate interstate commerce, that it violates the First Amendment by compelling speech and infringing freedom of association and that it violates the Fourth Amendment by forcing the disclosure of private information.”
• “[See] FinCEN’s BOI page for updates and revised instructions.”

“Jenner & Block Hits Back at Keller Postman in Dispute” —

• “Jenner & Block is defending itself against allegations it hired a former FBI investigator to ‘harass’ people who filed claims against its client, video streamer Tubi.”
• “Tubi in a May 31 complaint accused Keller of bringing thousands of frivolous arbitration claims against it for running ads that allegedly targeted users based on age and gender. Jenner responded on Monday to allegations it acted unethically in its investigation into the validity of certain claims.”
• “Keller ‘seeks to divert the court’s attention from the troubling findings of Tubi’s investigation’ by calling Tubi’s investigation unethical, the company said in the new filing. Tubi is seeking to file an amended complaint which includes new evidence that would bolster its case against Keller, the lawyers said.”
• “Tubi says Keller’s business model is to flood target companies with a tidal wave of arbitration claims to pressure them into settling rather than paying the legal costs of fighting the claims. Many companies’ terms of service state that customers must arbitrate any dispute and typically companies pay for customers’ initial filings, which can cost anywhere from $100 to $325 per case, in addition to case management fees and arbitrator compensation.”
• “An estimated 4,500 claimants didn’t register with Tubi under the email addresses listed in the claimant’s arbitration demands, according to Tubi. An estimated 600 claimants started the registration process but didn’t complete it, or didn’t watch Tubi content using the account linked to the email address during the relevant time period. Another estimated 2,500 claimants completed the account verification process but didn’t watch Tubi content using the associated account during the relevant time period.”
• “Keller fired back in a motion to disqualify Jenner and a separate lawsuit against the firm last week, stating Jenner violated lawyer ethics rules by directing a former FBI investigator to coerce Tubi claimants into signing false declarations to support its case. Keller also claimed Jenner misled the court about the volume of claimants without registered Tubi accounts.”
• “Jenner first revealed it hired a former FBI agent to interview 22 of the 29 claimants who had withdrawn arbitration demands against Tubi in a Nov. 25 proposed amended complaint. Some former claimants said they weren’t aware of being represented by Keller Postman or having claims against Tubi, according to Jenner.”
• “Keller seized on the interviews in a Dec. 9 motion to disqualify Jenner and oppose its motion to file an amended complaint. Keller said the investigator interviewed the claimants without the knowledge of their counsel at Keller and coerced them into making false statements. Keller included exhibits by claimants asking to withdraw their previous statements.”
• “Although Jenner claimed the investigator only interviewed withdrawn claimants, Keller said its client relationship with the withdrawn claimants didn’t end once their claims were withdrawn. ‘Jenner’s response ignores what every lawyer knows: counsel can represent clients in a ‘matter’ regardless of whether a pleading has been filed or withdrawn,’ Keller said in a Dec. 9 court filing.”
• “The former FBI investigator hired by Jenner to interview the withdrawn claimants, Stephanie Talamantez, declared in the Monday filing that she ended every interview with a claimant who claimed to still be represented by Keller Postman. Talamantez also denied asking the withdrawn claimants to sign declarations at their initial meetings.”
• “‘I never pressured anyone into signing a declaration, and I told them all that doing so was voluntary,’ Talamantez stated. ‘I also asked them to review the declaration and advised that they should only sign it if what was stated in the declaration was accurate.'”
  ‘Fundamentally Flawed’”
• “Tubi also stated its response to Keller’s call for disqualifying Jenner & Block would be filed ‘in due course.'”

“Fani Willis is disqualified from prosecuting Trump election case in Georgia, appeals court rules” —

• “A Georgia appeals court has ruled that Fulton County District Attorney Fani Willis and her office must be disqualified from the criminal racketeering case she brought against President-elect Donald Trump and his allies over their efforts to alter the results of the 2020 election.”
• “In a 2-1 decision Thursday, the court found that Willis had created the appearance of a conflict of interest stemming from her romantic relationship with an outside prosecutor whom she hired to help run the case.”
• “‘This is the rare case in which disqualification is mandated and no other remedy will suffice to restore public confidence in the integrity of these proceedings,’ Judge Trenton Brown wrote, addressing the legal implications of Willis’ relationship with prosecutor Nathan Wade.”
• “The ruling appears likely to require the case to be assigned to another prosecutor. But Trump’s imminent inauguration as president means the charges against him are almost certain to either be paused while he is in office or dismissed entirely. The proceedings against Trump’s co-defendants — including close allies like former chief of staff Mark Meadows and lawyer Rudy Giuliani — could continue to grind forward during Trump’s presidency.”
• “The prosecution has been stalled for months while Trump and other defendants pressed their claims that Willis and Wade had a financial conflict because they were taking lavish vacations together while Wade was under contract with her office as a special prosecutor on the case.”
• “In March, following high-profile televised hearings featuring testimony from Willis and Wade, Fulton County Superior Court Judge Scott McAfee concluded the prosecutors’ relationship had caused an appearance of impropriety. However, he ruled that Willis could remain on the case if Wade resigned from the team. Wade stepped down within hours of that ruling.”
• “But the divided state appeals court panel found that Wade’s resignation did not go far enough. Willis, the elected Democratic district attorney for the Atlanta area, could appeal Thursday’s decision to the Georgia Supreme Court. But if it stands, it will further derail a case that has been mired in delays and controversies.”
• “Reassigning the case to another prosecutor’s office could take months or even years. And it’s far from clear whether a new prosecutor would agree with Willis’ overarching legal theory, which centered on deploying Georgia’s racketeering law to charge various Trump allies with a conspiracy to try to overturn President Joe Biden’s victory in the state. The newly assigned prosecutor could even choose to drop the case altogether.”
  “The criminal charges are currently pending against 15 defendants after several other defendants reached early plea deals.”

New York: “Judicial Ethics Opinion 24-82” —

• “A town justice may accept a position with the town’s highway department and “ghostwrite” a town’s state and federal grant applications for street, sidewalk, sewer, and infrastructure repairs, provided the judge does not personally solicit funds, permit the use of the prestige of judicial office for fund-raising, or permit the judge’s name to appear as the author or signatory on any grant applications.”
• “We have advised that a town justice may be employed as a laborer in the town highway department, subject to disqualification in matters involving the highway department (see Opinions 08-57; 00-62; see also Opinion 19-07 [discussing three categories of outside employment with the same municipality]).”
• “We have also advised that judges may ‘ghostwrite’ a not-for-profit charitable organization’s fund-raising letters and grant applications that will be signed, submitted and circulated by others without crediting the judge, provided the judge’s name and office do not appear on the applications and are not otherwise used for fund-raising or solicitation (see Opinion 23-145; see also Opinions 23-118 [full-time judge may prepare and submit grant applications in role as food pantry administrator, provided judge does not sign them]; 23-11 [part-time judge may write grant applications in role as volunteer treasurer for local fire company, but must not lend their name to any fund-raising activity]). [1]”
• “Accordingly, we conclude the inquiring judge may accept outside employment with the town highway department and, in that capacity, ghostwrite state and federal grant applications for the town highway department so long as the judge does not sign the applications or otherwise personally solicit funds or permit the use of the judge’s name or the prestige of judicial office for fund-raising.”
• “Assuming the position ‘will not involve the judge in the exercise of high-level executive or management authority on behalf of the town,’ we note that the judge must still disqualify ‘if his/her direct supervisor or municipal department appears as a party in a case before the judge’ (Opinion 19-07).”

“FaceTec accuses law firm of ‘betrayal’ in patent dispute with Jumio, iProov” —

• “Nevada’s FaceTec has accused its former legal representation of a conflict of interest in its patent dispute with California’s Jumio, and filed a motion to have the firm disqualified from the case.”
• “The case concerns a complaint of Willful Patent Infringement by Jumio Corporation, filed on June 14, 2024. Per the text, ‘FaceTec alleges herein that Defendant Jumio makes, uses, offers for sale and sells in the United States products, systems, and/or services that infringe one or more claims of each of the FaceTec Patents-in-Suit.'”
• “In another twist, the actual tech that FaceTec says infringes on their patent belongs to the UK’s iProov. Having explored a partnership in 2019, Jumio and FaceTec parted ways. Jumio pursued a partnership with iProov, which, per the complaint, ‘thereafter deployed for Jumio a liveness detection technology that infringes on FaceTec’s patent rights.'”
• “Now FaceTec claims that Jumio, having failed at prior efforts to develop its own liveness tools, is using FaceTec’s proprietary liveness detection as a model.”
• “Having crawled through the Northern District of California court system, the case has now reached a boil, with FaceTec calling out its former legal representative, Perkins Coie LLP, for representing Jumio in the dispute.”
• “FaceTec says that since the firm has previously represented it in matters concerning the same patent, its working for Jumio constitutes a conflict of interest – and a ‘betrayal.'”
• “‘Defendant Jumio is well aware of both FaceTec and its patented technology,’ it says. ‘Jumio is a direct competitor of FaceTec and provides competing biometric liveness detection software products.'”

Hat tip to Simon Chester for flagging: “The Law Society Takes Conflicts of Interest Seriously: Knocking on Wood” —

• “In ‘The Lawyer as Friend,’ a famous 1976 law review article, Charles Fried proposed that a lawyer should act as a ‘special-purpose friend’ to each of his or her clients. Within the bounds of the retainer, Fried argued, the lawyer must adopt the interests of the client as their own — just as a friend would.”
• “This analogy helps clarify why conflicts of interest are so toxic to lawyer-client relationships. A conflict of interest usually arises because a lawyer’s loyalty to a client is undermined by the their work for other clients, or by the lawyer’s own personal interests.”
• “A client feels betrayed if they learn (for example) that their lawyer is taking legal fees from the client’s adversary, or learns that the lawyer has some other good reason to want the client’s cause to fail. The stab — like the wound from his friend Brutus that killed Julius Caesar — is especially painful because it’s a stab in the back.”
• “When other people witness such betrayals, the reputation of the enitre legal profession suffers. After all, if people can’t trust us to loyally serve our clients and advance their legitimate interests within the bounds of the law, then what good are we to society?”
• “A large Bay Street law firm has been credibly alleged to have acted in a conflict of interest, thanks to some outstanding investigative reporting by Zach Dubinsky of CBC News.”
• “For several years, McMillan LLP has been a go-to law firm for the Paper Excellence corporation. This large Canadian forestry company has been represented by McMillan on transactions worth over $6 billion, including its acquisitions of Domtar and Catalyst Paper. Those deals would have generated very substantial legal fees for McMillan.”
• “The ethical problem arose when McMillan took on a new retainer, for the Forest Stewardship Council (FSC). That client’s main work is administering the ‘FSC’ certification, which you may have seen stamped on some wood products:”
  The Certification Business, and its Temptations”
• “The problem is that it’s manufacturers who pay FSC for the right to use the stamp. Using the stamp helps sell more product. And so there is a pecuniary temptation for certifiers like FSC to adopt lax rules, and to look the other way if a fee-paying manufacturer breaks them.”
• “One of FSC’s rules is that, in order to remain certified, a company must not only avoid destructive forest practices, but must also not be ‘indirectly involved’ with companies that do so. In November 2023, Greenpeace Canada complained to FSC that Paper Excellence was indirectly involved with Asia Pulp and Paper. That company had been decertified by the FSC in 2007 for destructive forestry practices. Drawing on the CBC’s reporting, Greenpeace alleged that Paper Excellence was effectively a corporate sibling of Asia Pulp & Paper, insofar as both were controlled by Indonesian forestry company Sinar Mas. This type of corporate relationship, if substantiated, would constitute ‘indirect involvement’ according to FSC rules and disqualify Paper Excellence from using the stamp.”
• “That allegation was contested by Paper Excellence, and so the FSC sought corporate law expertise to conduct a review.”
• “The firm that FSC hired was none other than McMillan LLP. As readers will recall, McMillan had cashed a number of cheques from its client Paper Excellence in the past, and probably hoped to do so again in the future. And yet, in this new retainer for FSC, McMillan was to neutrally and dispassionately form an opinion about whether Paper Excellence should lose its lucrative access to the FSC certification.”
• “McMillan LLP concluded that Paper Excellence should keep that certification. Whatever the merits of that conclusion, it is hard to understand how it could have been ethical for McMillan to accept the FSC brief. Large sums in future legal fees from Paper Excellence could have been sucked out of McMillan’s posh Bay Street headquarters, had the firm ruled the other way.”
• “By taking this retainer, the firm effectively became adjudicator of Greenpeace’s case against Paper Excellence. A judge who was very recently employed by a certain corporation should clearly not be assigned to hear a lawsuit involving that corporation (especially if they might be paid by them again in the near future). Likewise, McMillan seems a very problematic choice of adjudicator for this case impugning its former (and potentially future) fee-paying client.”
• “As noted above, the garden variety conflict of interest is problematic because it damages client interests. But in this case, the clients had no problem with it.”
• “FSC told the CBC that it had ‘conducted a conflict of interest check and found none,’ prior to retaining McMillan. It presumably learned of the firm’s prior work for Paper Excellence in conducting this check”
• “But that doesn’t make the conflict of interest go away or render it unproblematic. Consent of the client does not automatically resolve a conflict-of-interest problem, under Canada’s Model Code of Professional Conduct. After all, the question of whether McMillan is a suitable law firm to invetigate Paper Excellence on behalf of FSC doesn’t only affect Paper Excellence and FSC. It affects all consumers who want to be able to rely on the FSC certification as a true sign of ethical forestry practices. It affects every Canadian — whether or not they buy wood — because we all have an interest in upholding a legal profession able to act loyally and professionally.”

“Lateral Attorney Transitions Under the Ethics Rules” —

• “Law firms hiring lateral lawyers should be careful that they are not conflicting themselves out in the process. This is because a lateral lawyer’s conflicts are imputed to the new firm under the Rules of Professional Conduct (RPC). This principle applies to lateral partners as well as associates.”
• “Absent informed consent, confirmed in writing, a lawyer may not switch sides and sue a former client in the same or a substantially related matter. New York Rule of Professional Conduct 1.9 prohibits a lawyer from acting adversely to a former client about whom the lawyer acquired material confidential information:”
• “Unless the former client gives informed consent, confirmed in writing, a lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client:”
  • “1. Whose interests are materially adverse to that person.”
  • “2. About whom the lawyer had acquired information protected by Rules 1.6 [the confidentiality rule] or paragraph (c) of this Rule that is material to the matter. (NY RPC 1.9(b))”
• “The U.S. Court of Appeals for the Second Circuit has ruled that disqualification may be ordered where:”
  • “(1) The moving party is a former client of the adverse party’s counsel.”
  • “(2) There is a substantial relationship between the subject matter of the counsel’s prior representation of the moving party and the issues in the present lawsuit.”
  • “(3) The attorney whose disqualification is sought had access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of the client. (Hempstead Video v. Incorporated Village of Valley Stream, 409 F. 3rd 127, 133 (2nd Cir. 2005) (holding that counsel’s connection to law firm was too attenuated to impute disqualification to entire firm)).”
• “When hiring a lateral lawyer, the new firm must screen for potential conflicts with former clients. This is because RPC 1.10 imputes such conflicts to the entire firm:”
• “But not every lawyer who assisted on a case is deemed to have represented a client within the meaning of the Rules of Professional Conduct. Junior lawyers who played minor roles in a matter will not be subject to disqualification. For example, a lawyer who merely does research, or drafts routine documents, is not necessarily subject to disqualification. See Silver Chrysler Plymouth v. Chrysler Motors, 518 F. 2nd 751 (2nd Cir. 1975). Professor Roy Simon writes that the ethics rules do not require disqualification of junior lawyers with fleeting, de minimus roles:”
• “In one leading case, a lawyer from a large firm had done some research and drafting work for an auto company. (Silver Chrysler Plymouth v. Chrysler Motors, 518 F. 2nd 751 (2nd Cir. 1975)). When the lawyer started his own firm, he became adverse to the former client. A motion to disqualify the lawyer was denied due to the de minimus nature of the associate’s work. As the Second Circuit reasoned:”
• “‘[The associate’s] involvement was, at most, limited to brief, informal discussions on a procedural matter or research on a specific point of law. … But there is reason to differentiate for disqualification purposes between lawyers who become heavily involved in the facts of a particular matter and those who enter briefly on the periphery of a limited and specific purpose related solely to legal questions.’ (Silver Chrysler Plymouth, 518 F. 2nd at 756).”
• “As currently constituted, the New York Rules do not expressly provide for an ethical screen except in limited circumstances. However, a proposal by the New York State Bar Association Committee on Standards of Attorney Conduct (COSAC) would incorporate an ethical screen into the New York rules. That proposed rule change contemplates screening to avoid imputation of conflicts to the firm under RPC 1.10 in most cases. The COSAC proposal has not been adopted by the Appellate Division.”
• “But the courts have designed solutions not contemplated by the Rules of Professional Conduct. Case law permits ethical screens depending on the facts of each case. These facts include the size of the outgoing and incoming law firms, the likelihood that the lateral lawyer has been exposed to confidential information, and the precautions taken by the new firm to prevent the spread of confidential information.”
• “As mentioned, screening is not addressed for most conflicts in the New York Rules of Professional Conduct. However, the courts have held that screening is permissible in some instances, depending upon the facts. The best practices for firms seeking to implement screening are as follows:”
  • “1. Written acknowledgement. The disqualified lawyer should acknowledge in writing the fact of the screening, and the obligation not to discuss any aspect of the tainted matter with other colleagues at the firm. Firm management should instruct the legal and non-legal staffs not to discuss the matter with the screened lawyer.”
  • “2. File separation. Have the files in the tainted matter placed in an area separate from the firm’s other client files and made accessible with codes known only to the team members working on the matter. The paper and digital files for the tainted matter should remain inaccessible to the incoming lateral lawyer. In addition, the disqualified lawyer’s office should be, insofar as practicable, physically remote from the offices of other lawyers working on the tainted file.”
  • “3. Non-participation in fees. The tainted lawyer should not share in any fees from the conflicted matter. If the lateral lawyer is not paid on straight salary, then the firm should send a memorandum to its comptroller regarding the disqualified lawyer’s nonparticipation in the fees generated in the matter.”
    Conclusion”
    “Disqualification of a tainted lawyer may be imputed to the incoming law firm. The incoming lawyer may be disqualified if they had access to confidential information at the prior firm. There is a rebuttable presumption that the incoming lawyer had access to such information. This presumption may be rebutted upon a proper showing that the lawyer in fact did not have access to material confidential information. In addition, the transitioning lateral lawyer should be denied access to paper and electronic files regarding the tainted manner.”

“Big Law Firms, Clients Battle Over Advance Conflict Waivers” —

• “The tug-of-war between Big Law firms and their most profitable corporate clients has shifted in favor of firms as they increasingly use advance conflict-of-interest waivers seeking to govern whether, and when, they can represent competing corporations at the same time.”
• “Courts increasingly are finding that firms devising advance waivers are taking care to be more specific so they can avoid being targeted by their own clients over conflicts—or at least can beat them in court when they get sued.”
• “Federal judges over the last 18 months have refused to disqualify leading law firms like Kirkland & Ellis, Sullivan & Cromwell, and Paul Hastings in lawsuits involving companies like Coca-Cola Co. and IBM Corp. This wasn’t the case as little as six years ago, when judges regularly took a harsh view of such waivers.”
• “‘Over time, firms have started drafting better waivers, so that clients feel like their interests are being better protected,’ said Doug Richmond, who advises law firms as a senior vice president with Lockton Companies LLC. As a result, ‘courts are tending to view these waivers with much less hostility than they used to.'”
• “Courts historically have been suspect of ‘very broad blanket’ advance waivers, said Cornell Law School Professor W. Bradley Wendel. But ‘I do think courts are willing to enforce the well drafted ones, and I suspect that law firm in-house counsel have gotten better at drafting them,’ he said.”
• “Legal ethics rules generally prohibit law firms from representing parties adverse to existing clients unless they receive a waiver that allows them to do so. Advance conflict waivers in retainer agreements say clients will waive those conflicts if the situation arises. They provide firms with a ready-made way to ask clients to agree—ahead of time—to allow the firm to represent others in ethically sticky situations.”
• “Determining the boundaries of advance conflict waivers have been key parts of SuperCooler Technologies Inc. v. The Coca Cola Co., IBM Corp. v. Micro Focus Inc., and US v. Tournant. In each, a federal judge granted a firm the right to continue despite alleged conflicts of interest.”
• “A federal court rejected Micro Focus’s motion to disqualify Kirkland from representing IBM in a copyright and breach of contract case, concluding that the law firm’s concurrent representations of IBM and Micro Focus were a ‘consentable conflict to which Micro Focus, a sophisticated user of legal services,’ had provided advance and informed consent.”
• “Micro Focus agreed in writing via the prospective waiver that Kirkland ‘may represent, or may already represent,’ parties in litigation directly adverse to Micro Focus, so long as the matters aren’t ‘substantially related’ to Kirkland’s representation of the company, said Judge Vincent L. Briccetti, of the US District Court for the Southern District of New York.”
• “Another federal judge denied Coca-Cola’s bid to bar Paul Hastings from suing Coke for more than $100 million on behalf of SuperCooler. When the soda giant agreed to the waiver, ‘Coca-Cola knew what Paul Hastings is, what Paul Hastings does, and the types of clients Paul Hastings represents,’ Magistrate Judge Robert M. Norway wrote. Paul Hastings’ engagement letter is ‘unambiguous,’ Norway said. Coke ‘understood and consented’ to the firm serving as counsel to an opposing party in future litigation.”
• “In another case, Sullivan & Cromwell’s failure to advise hedge fund manager Gregoire Tournant of a potential conflict of interest didn’t negate the confidentiality waiver that was part of the engagement letter, said Judge Laura Taylor Swain.”
• “The agreement ‘made a thorough disclosure of the risks and benefits that were posed by the joint representation,’ Swain wrote, and Tournant was represented by independent counsel when he signed it.”
• “‘IBM and SuperCooler are bellwether cases,’ said Matthew Henderson, a legal ethics and professional responsibility partner with Hinshaw & Culbertson. ‘I think this does reflect a trend.'”
• “Waivers feed the confirmation bias myth of the large-firm lawyer as the only advocate ‘who can grasp complex, large corporate transactional matters,’ she wrote in an Oct. 24 paper. ‘That is, until a client reaches a breaking point and files for disqualification.'”
• “Advance waivers have helped Big Law attorneys simply shelve fundamental legal ethics precepts, London said in an interview, like loyalty and fiduciary duty. ‘It may be old-fashioned to say, but clients hire lawyers to be on their side.'”

“We Don’t Need More Disclosure Rules for Litigation Funding” —

• “More litigants are obtaining financing from third-party litigation funders due to rising legal costs, the complexity of litigation, and the need to balance financial disparities between parties. Proponents argue that third-party litigation funding empowers plaintiffs to pursue cases against wealthier defendants.”
  “The necessity of disclosing litigation funding remains contentious. Several US courts—in states such as New Jersey, Texas, and California—have begun requiring parties to disclose funding arrangements. But the rules vary. The US Supreme Court’s Advisory Committee on Civil Rules created a subcommittee to consider the issue of funding disclosure, but the committee’s work will likely be a years-long process.”
  “There are concerns that third-party litigation funding may encourage plaintiffs to seek higher settlements and could improperly sway case strategies, potentially compromising legal integrity. Critics worry lawyers might prioritize funders’ interests over their clients’.”
  “Defense counsel say funding agreement disclosure is essential to clarify the funder’s influence on the case, and courts are cautious about external parties with financial interests but without the ethical obligations attorneys have. The interests of the plaintiffs’ counsel may diverge from their client, especially if a settlement doesn’t adequately cover or exceed the client’s recovery and the third-party litigation funder’s claim.”
  “The ethical rules governing an attorney’s duty to consult with and keep their clients informed are primarily outlined in Rule 1.4 of the American Bar Association’s Model Rules of Professional Conduct. These rules are intended to ensure that clients are well-informed and can make educated decisions about their legal representation.”
  “The justification for third-party litigation funding disclosure hinges on the assumption that attorneys may prioritize their personal interests or the funder’s interests over their clients.’ But existing attorney ethics rules, such as Rule 1.7 and New York Rule of Professional Conduct 1.8(i), already address potential conflicts. These rules aim to ensure attorneys remain loyal to their clients, making additional disclosure requirements redundant.”
  “The question is whether special rules are needed to ensure compliance with existing ethical rules.”
  “Judges are vigilant about ethical violations, including conduct they suspect may result from third-party litigation funding. They recognize unreasonable behavior through various courtroom interactions, including motions and mediations. Inevitably, irrational and unreasonable behavior becomes apparent and judges know how to deal with it.”
  “Attorneys are the face of a case to the court. They—not the third-party litigation funder—risk sanctions when they cede control over litigation. Attorneys had better know that risk when they sign up for the litigation funding that includes giving control to the third-party litigation funder.”
  “Law firms may use other forms of financing to fund litigation such as a firm line of credit, which may be used for day-to-day operating expenses as well as to fund litigation. And the firm’s overall financial health can affect litigation strategies. Disclosure of third-party litigation funding may lead to revealing other potential direct and indirect financial influences on case strategy to the defendant’s advantage.”
  “Disclosure of litigation funding gives an advantage to the defense counsel in knowing how long it can run the meter of its adversary before bringing the adversary to its knees.”
  “Courts should decide cases with third-party litigation funding the same way as those without: on the law and the facts. The existing ethics rules and careful judicial oversight are sufficient safeguards against misconduct.”

“Panel finds no conflict of interest in divorce, probate matters” —

• “An attorney need not withdraw from representing a client in a divorce proceeding despite opposing counsel serving as the probate judge overseeing an unrelated matter in which the attorney represents a different client, the Rhode Island Supreme Court Ethics Advisory Panel has ruled.”
• “The attorney inquired into whether withdrawal from representing the client in the divorce proceeding was required under the Rules of Professional Conduct.”
• “‘The inquiring attorney represents a client (‘Client 1’) in a divorce proceeding. The lawyer for the opposing party in the divorce proceeding is also a probate judge before whom the inquiring attorney represents a different client (‘Client 2’) as an heir against a surviving spouse in an unrelated contested matter,’ the panel noted.”
• “‘The Panel finds that under the facts as described by the inquiring attorney, no conflict of interest exists here. The interests of Client 1 and Client 2 are not directly adverse because they are unrelated parties involved in unrelated matters — one a divorce proceeding, the other a contested probate matter,’ the panel wrote.”
• “‘Additionally, neither representation is materially limited by the inquiring attorney’s responsibilities to either Client 1 and Client 2 or any other party. … Therefore, the inquiring attorney is under no obligation to withdraw from representing either Client 1 or Client 2,’ the panel added.”
• “The two-page decision, Rhode Island Supreme Court Ethics Advisory Panel Op. 2024-11, can be found by clicking here.”

“As Global Law Firm Mergers Keep Coming, Could There Ever Be a New Swiss Verein?” —

• “The Swiss verein model for law firm combinations has benefited a handful of global firms looking to sustain growth and increase size and scale, but the fact that only a small number of firms have combined using the verein structure has experts wondering whether it is still a viable business strategy.”
• “Large firms such as Dentons, DLA Piper and Baker McKenzie embraced the verein approach in the early part of the 21st century, using the model to place them in the upper echelons of the Am Law 100. Other recent trans-Atlantic mergers, however, including the combination between Allen & Overy and Shearman & Sterling that created A&O Shearman, and the merger between Herbert Smith Freehills and Kramer Levin Naftalis & Frankel to become HSF Kramer, have avoided the Swiss verein route, leading to questions over whether the model is losing luster.”
• “‘The verein model for law firm combinations is still a prominent business model for many international law firms, but its popularity and effectiveness have come under scrutiny in recent years,’ said Zain Atassi, a principal with recruiting firm Lateral Link. ‘Whether it remains a favored model depends on the perspective of the firm, its clients, and the specific markets in which it operates.'”
• “One of the draws to operating as a verein is the ability for large firms to expand internationally while still respecting local regulations. Another is liability protection, since firms under the verein model are considered to be separate legal entities. And yet another benefit is M&A flexibility, since the structure makes it easier to bring in new firms or dissolve relationships without having to restructure the entire organization, Atassi said.”
• “But some experts say it’s not all upside when it comes to vereins, which is reflected by the fact that only a small number of global firms today are actually structured as Swiss vereins.”
• “‘One of the biggest criticisms of the verein model is that it can create a fragmented culture, coupled with leadership and governnance issues,’ said Atassi, of Lateral Link. ‘Because member firms operate independently, there can be challenges when it comes to aligning strategies, managing conflicts, or implementing firm-wide initiatives.'”
• “Clients can also develop the perception that firms under the verein model are ‘fragmented rather than fully integrated,’ which can pose an issue for firms, Atassi said.”
• “Critics of vereins note that the impression that firms who merge this way are looked at as one, single global law firm is illusionary, and also that vereins open up the door to greater risks of conflict of interest for attorneys associated with verein firms.”
• “One example of verein conflicting interests involved global firm Dentons, which had been representing a company in an international investigation for patent infringement brought by a U.S. clothing retailer, which sought to have Dentons disqualified from the case because the retailer was also a client of Dentons, according to a 2017 paper written by then-law student Gabriela Chambi of American University, Washington College of Law, who now works as a senior associate with Hudson Cook.”
• “The verein structure serves the purpose of globalization and limited risk, but ‘you’re not going to be a proper, true firm in the sense that a partnership typically is,’ Mclaren said. ‘The question for the verein is, is there clear direction globally and what (are they) trying to achieve? Are all the partners in their organizations aligned and are they committed in the same way?'”
• “Also, ‘bigger from a global perspective isn’t always better,’ said one recruiter who has experience working with Big Law firms who spoke anonymously because of potential client conflict.”
• “Furthermore, partners looking to move to another firm will not necessarily consider whether a firm is structured as a verein as a determining factor when deciding to make a lateral leap, one industry expert said.”
• “‘All they really want to know is, ‘How is this going to affect me personally, and will it affect the amount of money that I make,” said Jeffrey Lowe, a legal recruiter with CenterPeak. ‘They’re really looking more at the quality of the firm, so they’re much more focused on the perception of the firm’s profitability and prestige rather than the structure that they have.'”

“Law firm Keller Postman moves to oust Tubi lawyers in epic mass arbitration showdown” —

• “Keller Postman filed a motion to disqualify and sanction Tubi’s lawyers at Jenner & Block, asserting that Jenner breached California ethics rules by engaging an ex-FBI agent to interview nearly two dozen Keller clients who had dropped their demands for arbitration against Tubi.”
• “Jenner knew the former claimants had been represented by Keller Postman, Keller argued, but nonetheless sent an investigator to interview them outside of the presence (or even awareness) of Keller Postman lawyers.”
• “Moreover, according to Keller Postman, Jenner’s investigator used harassing, deceptive and intimidating tactics — such as implying that she worked for Keller Postman and refusing to leave someone’s home without a signed declaration — to squeeze privileged and confidential information out of the former claimants.”
• “‘This misleading and oppressive conduct would have violated ethical rules even if the clients were no longer represented by Keller Postman,’ the firm wrote in its motion to disqualify Jenner. ‘It is doubly improper because the clients are still represented.'”
• “In an email statement on Wednesday, Jenner & Block denied any impropriety, describing its investigation as ‘ethical, necessary and warranted.’ The firm previously said in a court filing that it took care to respect ethics rules prohibiting communications with represented parties when it tracked down people who had withdrawn arbitration demands against Tubi. Its investigator, Jenner said in the filing, first asked the erstwhile arbitration claimants whether they were still represented by Keller Postman and only proceeded if they said they were not.”
• “The context for this latest fusillade of accusations is Tubi’s request to file an amended complaint against Keller Postman in its lawsuit before U.S. District Judge Ana Reyes in Washington, D.C.”
• “Tubi’s original complaint alleged that Keller Postman put its own interests ahead of its clients’ when it advised clients to file arbitration demands without engaging in a contractually mandated informal dispute resolution process.”
• “The company also claimed that Keller Postman did a woefully inadequate job of vetting its clients, asserting that about 40% of the alleged subscribers demanding arbitration did not have an email in Tubi’s database or had not watched content from the streamer in the relevant time frame.”
• “That particular statistic came into question after some of Keller Postman’s clients sought to intervene in an Illinois state-court class action over Tubi’s alleged violations of video privacy laws. I’ll spare you the details of that dispute, but what you need to know is that Tubi acknowledged an additional database of customer emails that turned out to include purportedly missing information about some of Keller’s clients.”
• “Tubi and Keller Postman have dramatically different views of the significance of the second database. Tubi insists that it doesn’t much matter because thousands of Keller Postman clients still cannot show that they signed up for Tubi accounts or watched Tubi content. Keller, meanwhile, contends that the revelation shows Tubi’s accusations against the mass arbitration firm were baseless, making the Fox subsidiary desperate to distract attention away from its overblown assertions.”
• “Tubi also disclosed, for the first time, that it had engaged an investigator to interview claimants who had dropped arbitration demands. The company said its investigator’s findings were alarming.”
• “Of the 21 former claimants located by its investigator, Tubi said, only three indicated that they were still represented by Keller Postman. Nine of the remaining 19 said they were not familiar with the firm. Three others said they knew of the firm but did not think Keller had represented them in claims against Tubi. Three others said they hadn’t filed arbitration demands or didn’t know demands had been filed in their names.”
• “Not one of the former claimants, according to Tubi, was aware of the streamer’s informal dispute resolution requirement. That fact, Tubi said in its proposed amended complaint, is strong support for its contention that Keller Postman failed to obtain informed consent from its clients when it skipped that process and filed arbitration demands.”

“Attorneys – Letterhead – Client’s delinquent customers” —

• “Where a lawyer has asked whether a client can use the lawyer’s letterhead to send form letters to the client’s customers who have delinquent invoices, that would be a false and misleading communication in violation of Rule 7.1 of the Massachusetts Rules of Professional Conduct.”
• “‘It is not permissible for a lawyer to allow a client to send form letters on the lawyer’s letterhead to customers who have delinquent invoices. Similarly, it is not permissible for a lawyer to send letters to the client’s delinquent customers without performing a conflicts check and other due diligence customary when opening a new matter…”
• “‘It would of course be permissible for a lawyer to send out letters to a client’s delinquent customers, provided that before sending those letters the lawyer follows the procedures typically used when opening new client matters. First, for each of the client’s customers who is to receive a letter, a conflicts check must be done to confirm that the client’s customer is not a current client of the firm, … and is not a former client of the firm in the same or a substantially related matter…”
• “‘Second, the lawyer’s duty of competence requires the lawyer to make at least a preliminary inquiry into the legal and factual basis of the claims asserted by the client against the customer…”
• “‘Third, if the customer is not represented by counsel, the lawyer’s letter must make the lawyer’s role in the matter clear and avoid giving the customer legal advice… In addition, depending on whether the client’s customers are ‘consumers’ as defined under the Fair Debt Collection Practices Act, 15 U.S.C. §§1692-1692o (‘Act’), compliance with the Act may be required. …”
• “‘Finally, to avoid a possible violation of Mass. R. Prof. C. 4.2, it would be prudent for the lawyer to ask the client whether the customer receiving the letter is represented by counsel… Knowledge of the fact of the representation may be inferred from the circumstances.”
  Full text of the opinion here.

“C.A. Affirms Denial of Disqualification of Century City Firm” —

• “Opinion Says No Conflict in Representing Both Supervisory, Non-Supervisory Employees in Wage Class Action Despite Tension With Supervisors Over Challenged Policies, Reporting of Attorney to State Bar”
• “Div. Three of the First District Court of Appeal has held yesterday that there is no conflict of interest for a law firm to concurrently represent both supervisory and non-supervisory class members in a wage-and-hour class action despite tension between some attorneys and supervisors.”
• “That tension was spawned by intense deposition questioning of supervisors over the challenged practices and the reporting by a supervisor of one of the firm’s lawyers to the State Bar.”
• “For disqualification, the court said, the ‘salient question’ is whether the concurrently represented clients have directly adverse interests and not whether some have differing opinions about counsel’s legal strategies, theories, and competence. Surviving the disqualification motion was the Century City firm of Capstone Law APC.”
• “In November 2022, Alameda Superior Court Judge Michael M. Markman granted Mendoza’s motion to certify a class of all nonexempt, hourly employees of the silicon parts manufacturer for the four years leading up to the filing of the complaint. Markman also certified six subclasses, including one relating to meal periods.”
• “At issue for the meal-period subclass was a written policy requiring that employees take their first break within six hours of their start time, which was inconsistent with well-established law mandating meal breaks within the first five hours.”
• “Markman rejected WCQ’s contention during the class certification hearings that there was a conflict in having the same lawyers represent the nonexempt supervisors as they ‘created and enforced break schedules,’ finding that there was no evidence that they played any role in setting policy.”
• “In April 2024, WCQ moved to disqualify Capstone, providing evidence that certain supervisory class members were opposed to the lawsuit and that Capstone attorney Daniel Jonathan had ‘viciously’ cross-examined them. The supporting evidence included a handwritten letter by supervisory employee Virgilio Presa opining that ‘[t]he case is a lie’ and expressing concerns about how the deposition had been handled.”
• “Markman denied the motion, saying that even if certain class members contradicted Mendoza’s allegations, ‘this conflict in evidence does not give rise to a disqualifying conflict between class members and class counsel,’ as certification was based upon written policies and statistical evidence. The judge also ruled that WCG lacked standing and expressed concern that the motion was being ‘used to gain tactical advantage.'”
  “Acting Presiding Justice Carin T. Fujisaki wrote the unpublished opinion, filed Tuesday, affirming the denial. Justice Victor Rodríguez and Justice Gordon B. Burns of Div. Five, sitting by assignment, joined in the opinion. Fujisaki noted that ‘[t]he challenge here is to representation by counsel that is concurrent, as opposed to successive’ and said that the primary duty implicated is one of loyalty. She further pointed out that courts must be skeptical of disqualification motions brought by opposing parties.”
• “‘That the class consists of nonexempt employees at different levels of authority does not, by itself, signal that Capstone’s loyalty is divided. In this regard, we observe federal courts have held that class counsel is not impermissibly conflicted due to the mere fact that ‘the class cuts across levels of authority in a company, with some class members supervising other class members.’….Like the federal courts, we decline to recognize a per se rule against including employees at different levels of an employment hierarchy in the same class.'”
• Read the decision: Mendoza v. West Coast Quartz Corporation, A170409

“Decision of the Day: Firm, Founding Partner Disqualified From Probate Case Amid Investigation on Undue Influence Claim” —

• “In a probate proceeding, Richard Feigen’s children allege that his will offered for probate, which was prepared by Zabel and Schulte Roth & Zabel, was the product of undue influence and fraud by Mr. Feigen’s third wife.”
• “Discovery produced by Feigen’s surviving spouse showed that while Feigen was alive, the firm was in direct communication with his third wife, who the firm did not represent at the time, about decedent’s estate plan. It was also revealed that, before decedent died, firm name partner William Zabel made additions and deletions to a physician’s letter concerning decedent’s mental capacity, anticipating that such a letter would be used by decedent’s spouse in a future probate contest.”
• “Westchester County Surrogate Brandon Sall disqualified Zabel as counsel for the executors, finding his testimony will be necessary on the issue of undue influence and likely prejudicial to his own clients. Sall also found that the entire law firm of Schulte Roth should be disqualified by imputation, effective at the time of trial.”

“Challenger in VLSI-Intel Patent Dispute Ordered to ID its Owners” —

• “VLSI Technology LLC is closer to identifying who filed an administrative challenge to a patent that Intel Corp. was found to have infringed by a Texas jury almost four years ago.”
• “A federal judge on Thursday ordered Patent Quality Assurance LLC to comply with heightened disclosure rules in the US District Court for the Eastern District of Virginia where it’s defending a VLSI abuse-of-process lawsuit. Judge M. Hannah Lauck stated PQA violated the rule, rejecting the company’s argument that it was only required to identify “entities which pose potentially disqualifying financial conflicts.”

The order notes:

• “This matter comes before the Court on Plaintiff VLSI Technology LLC’s (‘VLSI’) Motion to Compel Defendant Patent Quality Assurance, LLC to Comply with Local Civil Rule 7.1 (the ‘Motion’).”
• “PQA filed a Financial Interest Disclosure Statement. (ECF No. 2.) PQA left the first two sections of the Disclosure Statement blank and filled out the third portion as follows:
  • “Pursuant to Local Rule 7.1 of the Eastern District of Virginia and to enable Judges and Magistrate Judges to evaluate possible disqualifications or recusal, the undersigned counsel for Patent Quality Assurance, LLC in the above-captioned action, certifies that there are no parents, trusts, subsidiaries, and/or affiliates of said party that have issued shares or debt securities to the public.”
• “On April 9, 2024, VLSI filed a Motion to Compel Defendant PQA to Comply with Local Civil Rule 7.1.”
• “Local Rule 7.1 (A) concerns disclosure statements and provides:
  • ‘(A) Nongovernmental Corporations: A nongovernmental corporation, partnership, trust, or other similar entity that is a party to, or that appears in, an action or proceeding in this Court shall: (1) file a statement that (a)identifies all its parent, subsidiary, or affiliate entities (corporate otherwise) that have issued stock or debt securities to the public and also identifies any publicly held entity… b. Identifies all parties in the partnerships, general or limited, or owners or members of non-publicly traded entities such as LLCs or other closely held entities.'”
• “In short, an LLC “that is a party to, or that appears in, an action or proceeding in this Court” and fails to identify its ‘owners or members’ has violated the Court’s Local Rules. E.D. Va. Local Civil R. 7.1(A).”
• “PQA is a South Dakota limited liability company (‘LLC’). (ECF No. 14-1, at 2.) PQA acknowledges that it did not disclose its individual members in its Local Rule 7.1 Disclosure Statement. (ECF No. 22, at 13.) However, PQA argues that its Local Rule 7.1 Disclosure Statement is complete because Local Rule 7.1 only requires the disclosure of parties that pose potentially disqualifying financial conflicts. (ECF No. 22, at 15) (emphasis in original).”
• “This is incorrect. The plain language of the rule requires parties to ‘file a statement that… identifies all parties in the partnesrships, general or limited, or owners or members of non-publicly traded entities such as LLCs or other closely held entities.’ E.D. Va. Local Civil R. 7.1(A)”
• “Local Rule 7.1 does not distinguish between ‘individual’ and ‘entity’ members of an LLC. The purpose of Federal Rule of Civil Procedure 7.1 is to require parties to provide information to courts that will enable judges to make disqualification decisions in accordance with Canon 3C(1)(c) of the Code of Conduct for United States Judges. Fed. R. Civ. P. 7.1, 2002 Advisory Committee Notes. Federal Rule of Civil Procedure 7.1 specifically ‘does not prohibit local rules that require disclosures in addition to those required by Rule 7.1.’ Id. The Eastern District of Virginia’s corresponding Local Rule does just that, requiring additional disclosures to those contained in Federal Rule of Civil Procedure 7.1. Specifically, parties must identify ‘all parties in the partnerships, general or limited, or owners or members of non-publicly traded entities such as LLCs or other closely held entities.’ E.D. Va. Local R. 7.1 (emphasis added).”
• “Local Rule 7.1’s requirement that parties disclose individual members of an LLC advances the Rule’s purpose of ferreting out conflicts of interest because individuals may enter into financial arrangements with judges. Further, judges may have personal relationships with individuals necessitating disqualification. PQA’s assertion that the possibility of such a relationship is ‘vanishingly slim’ (ECF No. 22, at 18) insufficiently satisfies the Court’s burden to ensure that no grounds for recusal exist, financial or otherwise. See Uieky v. United States, 510 U.S. 540, 548 (1994).”
• “Thus, the Court will grant VLSI’s Motion and require PQA to file a Disclosure Statement identifying its members as required by Local Rule 7.1.”

“Lab Owner’s Atty DQ’d After Repping Doctor In Fraud Inquiry” —

• “New Jersey prosecutors succeeded in disqualifying the lawyer for a lab owner accused of paying kickbacks to a New York City doctor in a $20.7 million fraud scheme because the attorney previously represented the doctor.”
• “On Friday [11/6], U.S. District Judge Susan D. Wigenton in New Jersey ordered that Abe George of the Law Offices of Abe George PC must step away from his defense of laboratory owner Richard Abrazi against a criminal charge that he took part in an illegal Medicare billing scheme with Queens, New York-based physician Dr. Alexander Baldonado.”
• “George previously represented Baldonado amid the government’s investigation into the alleged healthcare fraud scheme.”
• “Abrazi and Baldonado are facing separate but related charges over their respective roles in an alleged plot to defraud the government by conducting about $20.7 million worth of unnecessary medical tests. The Justice Department says the tests were ordered by Baldonado and conducted by Abrazi, with the doctor accused of accepting kickbacks for his patient referrals.”
• “Court records show Baldonado was first indicted in May 2021 and charged with eight counts in a superseding indictment in February 2024. Abrazi was indicted separately in June 2024 and charged with one count.”
• “In July, prosecutors filed a letter to Judge Wigenton alerting her to the potential conflict and requesting she remove George from the suit.”
• “In their letter, the government warned the court of the danger of an ‘actual or potential conflict of interest’ arising under the New Jersey Rules of Professional Conduct.”
• “At the time, prosecutors noted that both Baldonado and Abrazi signed waivers to permit George to represent Abrazi in the criminal proceeding, and entered each of the waivers into the record as exhibits.”
• “In Baldonado’s waiver, George informed him that his case and Abrazi’s were ‘substantially related’ and therefore it was ‘possible that Mr. Abrazi’s interest might be adverse to yours, which could create an actual conflict of interest.’ For instance, the waiver stated, either of the defendants could choose to cooperate with the government and testify against the other.”
• “George also said in Baldonado’s waiver that he did not believe he had ‘any privileged confidential information from you that could impact your case or help Mr. Abrazi gain any advantage.'”
• “In Abrazi’s waiver, George likewise recognized the substantial overlap between the laboratory owner’s case and Baldonado’s, and acknowledged that the two defendants could find themselves at odds, including the potential that questions could arise about the thoroughness of George’s advocacy in light of his prior relationship with the doctor.”
• “Despite these waivers, prosecutors told Judge Wigenton at the time, Third Circuit precedent has established that district courts may still disqualify counsel at their discretion.”
• “On Friday, Judge Wigenton found the government was right to raise the issue of actual or potential conflicts arising from George’s appearance on behalf of Abrazi, determining that such conflicts cannot be waived and therefore the attorney must be disqualified.”

Last noted here in 2021, here’s an update: “Graham Weston can go forward with lawsuit against ex-lawyer over him representing wife in divorce” —

• “Graham Weston’s lawsuit against San Antonio attorney Jason Davis and his law firm over their representation of the prominent downtown developer’s ex-wife in the couple’s divorce can go forward. Davis had moved to dismiss the complaint, but a state appeals court denied his motion.”
• “Weston, who’s also a co-founder of Rackspace Technology Inc., said the attorney and his firm Davis & Santos breached their fiduciary duties and committed fraud by agreeing to ‘secretly represent’ Elizabeth Weston in the divorce while serving as counsel for Graham Weston and entities he manages. “
• “On Friday, a three-judge panel of the 3rd Court of Appeals in Austin affirmed a Comal County District Court judge’s order denying Davis’ request to toss the case.”
• “‘The firm intends to continue vigorously defending themselves for the work they did in loyally representing a long-standing client who came to them in a time of great need,’ said Austin lawyer Amanda G. Taylor, who represents Davis and Davis & Santos.”
• “He originally sued Davis and the law firm in the summer of 2021 after the divorce proceedings were underway. Davis appeared as Elizabeth Weston’s attorney of record in the divorce case after accepting more than $2.9 million in legal fees for representing Graham Weston and businesses he manages in at least nine matters between 2009 and 2021, according to the lawsuit.”
• “‘This is a case about an attorney who violated the solemn tenets of his professional creed in the name of personal financial gain,’ Graham Weston says. “
• “Elizabeth Weston filed for divorce on Oct. 26, 2020, with Davis as her lawyer. She accused her husband of sexually assaulting her and carrying on several extramarital affairs with women in London. Graham Weston accused his wife of recording him and hiring a private investigator to track him for a year and a half.”
• “Davis and his firm were disqualified from the case case after Graham Weston’s counsel accused them of conflicts of interest. She petitioned the 3rd Court of Appeals to set aside the disqualification order but it denied the petition.”
• “Elizabeth Weston ultimately represented herself in the divorce trial after hiring and terminating numerous other lawyers but she presented no evidence to support her allegations of abuse. The trial proceeded on claims Graham Weston made in his counterpetition for divorce.”
• “A judge granted a divorce in October 2022, ending the Westons’ marriage of more than 27 years.”

“Gorsuch steps down from major environmental case amid ethical conflict” —

• “Justice Neil Gorsuch won’t sit for next week’s environmental showdown because of ethical conflicts in the review of a proposed Utah oil and gas rail line.”
• “According to a letter from the high court’s clerk Scott Harris, the Donald Trump appointee determined he would not continue to participate in the case consistent with the justices’ code of conduct. “
• “Gorsuch did not detail his ethical conflict, but he has been pressured to recuse from the case because of his ties to an oil billionaire who stands to profit from the ruling. “
• “The U.S. Surface Transportation Board approved a permit to build a Utah railway that would quadruple oil production in the Uinta Basin. Philip Anschutz, the owner of Anschutz Exploration Corporation, operates oil wells in the area and could benefit from the 88-mile line. “
• “Gorsuch served as counsel to Anschutz and his companies in the early 2000s and maintained a cozy relationship with the oil billionaire in the ensuing years. Gorsuch said he went on annual hunting retreats on Anschutz’s estates and has property with business associates with the company. “
• “Anschutz’s company filed a friend of the court brief, asking the justices to narrow the scope of NEPA. A government watchdog said the Uinta Basin Railway would cut Anschutz’s freighting costs and increase the company’s profits. However, Anschutz also has oil and gas operations in other regions in Utah as well as Colorado and Wyoming that are all subject to environmental reviews. “
• “Ethics experts were initially skeptical of the validity of the calls for Gorsuch’s recusal since it has been almost two decades since he worked as outside counsel for the company and there is no public information about their relationship after 2017. “
• “It’s not clear if Gorsuch’s relationship with Anschutz led to his recusal or if another conflict arose. “
• “Gorsuch’s recusal is rare despite the increased focus on the justices’ ethical standards over the last few years. “

“Cooley Hid Tech CEO Fraud From Company, Bankruptcy Trustee Says” —

• “Cooley LLP is facing a new round of malpractice accusations related to a messy bankruptcy fight, this time from the court-appointed trustee in the case.”
• “The firm’s lawyers concealed fraud by a Carbon IQ executive from the tech company and its shareholders, according to a complaint filed Friday in an Ohio federal court. James Coutinho, the trustee in Carbon IQ’s bankruptcy proceedings, said the lawyers violated their ethical duties while representing Carbon IQ and CEO Ben Cantey.”
• “‘This case shows what happens when lawyers try to serve conflicting interests,’ Coutinho said in the complaint.”
• “Cooley partner Michael Tu learned of fraud allegations against Cantey as early as June 2022, while the firm was defending Carbon IQ and Cantey in a suit by a co-founder, according to Coutinho.”
• “The co-founder claimed Cantey forged business documents and had been investigated by the Texas State Securities Board for fraud in a previous business venture. Cantey later admitted to falsifying business records to shareholders, paying himself large commissions, and failing to pay taxes in an Oct. 7 email to Cooley partner Matt Hallinan, according to an exhibit attached to the complaint.”
• “Cooley lawyers allegedly withheld that information from shareholders and continued to assist Cantey as he tried to obtain additional investor financing. Coutinho cited a September 2022 email in which the lawyers said they were ‘trying to avoid’ calls from board members regarding potential fraud and requests for documents. Those calls turned into multiple shareholder lawsuits against the company, according to the complaint.”
• “‘This created a clear conflict of interest that caused substantial harm to Carbon IQ and its shareholders,’ Coutinho said.”
• “Discovery is necessary ‘to reveal the full extent of defendants’ knowledge regarding Cantey’s misconduct and the full extent of Defendants’ actions to conceal or aid Cantey’s misconduct,’ Coutinho told the court.”
• “‘If lawyers represent a corporation and learn that the CEO may be committing fraud, the lawyers can’t ignore the issue,’ Cooper Elliott partner Bart Keyes said in an email. ‘They have to protect the corporation, and this case shows just how devastating the consequences can be if they don’t.’ “

“Coinbase CEO Threatens Law Firms Over Government Hires” —

• “Coinbase Global Inc. is warning its law firms not to hire any anti-crypto government lawyers or risk losing the company’s work in what could be a sign of things to come for Biden administration attorneys.”
• “Coinbase CEO Brian Armstrong wrote in a post on X on Dec. 2 that ‘we’ve let all the law firms we work with know, that if they hire anyone who committed these bad deeds in the (soon to be) prior administration, we will no longer be a client of theirs.'”
• “Armstrong then singled out Milbank LLP’s hire of Gurbir Grewal in October, who was the former enforcement director of the US Securities and Exchange Commission, saying the firm ‘messed up’ while noting that ‘we don’t work with them now (and never will while he works there).'”
• “Grewal, the former New Jersey attorney general, joined the SEC in 2021 and led the agency’s stepped-up enforcement against the cryptocurrency industry. The agency filed more than 100 actions, including ones against Coinbase, Binance, Kraken and Gemini.”
• “The value of Armstrong’s message is to communicate directly to those firms that are not yet on Coinbase’s roster that this is a consideration that they should bear in mind when they’re when they’re recruiting people to their firm, Paul Grewal, the company’s general counsel, said in an interview.”
• “Coinbase’s Grewal said he hoped Armstrong’s tweet ‘does provoke a wider conversation among industry leaders about the revolving door in Washington and the historic assumption that lawyers in government can essentially do what they want without any consequence.'”
• “Coinbase was charged in June 2023 for operating a trading platform without registering with the SEC as a broker. Coinbase sued the SEC last year demanding new rulemaking for digital assets following a denied petition filed by Coinbase in 2022. Gibson Dunn & Crutcher’s Eugene Scalia represented Coinbase in its appeal.”
• “‘Let your law firms know that hiring these folks means losing you as a client,’ Armstrong said.”
• “Threats like Coinbase’s aren’t anything new, but making a public statement about it is unusual, said Washington-based legal recruiter Jeffrey Lowe at CenterPeak.”
• “‘It might be something that a client will be telling its law firms privately, but to just put it out there just really draws a line in the sand,’ he said.”
• “Firms know when they hire certain people, whether they’re from an administration, a different firm, or a competing company know that they run a risk of there being a perceived business conflict with other potential clients out there, Lowe said.”
• “‘Which position do we want to take? Do we want to be pro Google, or do we want to be pro Amazon or pro Apple or Samsung?’ Lowe said.”
• “‘These are all things that law firms are considering every single day and with the size of the companies and the kinds of engagements at stake, you can be talking easily tens if not hundreds of millions of dollars in lost revenue if you bet on the wrong horse,’ he said.”

Hat tip to Simon Chester at Gowlings for sending word of this recent decision from the Supreme Court of British Columbia: “R. v Gagne, 2024 BCSC 2183 (CanLII)” —

• “On March 26, 2024, the date that had been set for the Gardiner hearing, Mr. Chesterley and Crown counsel John Boccabella, not Mr. Grabe, appeared before me. Mr. Chesterley advised the Court as follows:
  • ‘… An issue has come up, Justice, and I think I am placed in the position on behalf of Mr. Gagne to seek to adjourn this. And I won’t go into too much detail, but the court will recall that during the course of this trial my paralegal, Ms. Eddy had been accompanying me and taking notes and so forth.’
  • ‘It turns out – and it wasn’t entirely unknown to me, but she was also dating the prosecutor at the time and this has led to a confidence issue from the standpoint of Mr. Gagne, perhaps understandably. I don’t think she did anything inappropriate, but nonetheless certainly that raises an issue and he wants to seek independent legal advice about that.’
• “On June 14, 2024, the defendant swore and filed an affidavit in support of his Mistrial Application, which includes the following:
  • …The day after the above noted conversation, I again spoke with Mr. Chesterley at which time he advised me that his paralegal and Mr. Grabe were in a romantic relationship and that the relationship was ongoing during my trial. I was in a state of shock and disbelief upon learning of this relationship. Mr. Chesterley’s paralegal was assisting him both before and throughout the trial. She was sitting next to him at counsel’s table and was taking and passing him notes. She was also present during our meetings to discuss trial strategy. As far as I was aware, she was part of my legal representation.’
  • ‘After the complainant testified in my trial, I relied on their collective advice in reaching my decision to not testify in my own defence. Had I known in advance that my lawyer’s paralegal was involved in a romantic relationship with the Crown counsel who was prosecuting my case, I would have immediately asked for a new lawyer.'”
• “On July 22, 2024, Crown counsel filed the affidavit of Nicolas Grabe, which includes the following:
  • ‘In approximately August 2022 I began dating a woman named Mary-Anna Eddy. We are still together today. We maintain separate residences and have never lived together… Ms. Eddy is employed at Eric Chesterley’s law office as a legal assistant. She does not have any legal training, but I understand Mr. Chesterley has made her a designated paralegal. I do not know the extent of her role as a designated paralegal, but understand she has from time to time attended court with Mr. Chesterley to assist with note-taking. I do not know exactly when she started working for Mr. Chesterley, but believe she was so employed throughout the relevant time of the Gagne prosecution.’
  • ‘As a government employee, I am aware of my duty to keep information received in the course of my employment strictly confidential. I am also aware of my confidentiality obligations as a lawyer pursuant to the Code of Professional Conduct. At no time during my relationship with Ms. Eddy have I disclosed to or discussed with Ms. Eddy any information about the Gagne prosecution or any other prosecution file.'”
  • ‘As a general rule I do not work from home and do not bring file materials to my residence. I am confident that Ms. Eddy would not have had access to any confidential information while in my residence. Ms. Eddy has never discussed with me any confidential information about Mr. Gagne, his defence, or matters involving the prosecution. I have never seen, been provided, or reviewed any information relating to Mr. Gagne’s matter while at Ms. Eddy’s residence or in her presence. I understand, based on my discussions with Ms. Eddy, that Mr. Chesterley was aware of my relationship with Ms. Eddy prior to the Gagne prosecution.'”
• “The Crown argues the defendant has failed to establish a basis for a mistrial. Crown argues that post-conviction, a defendant seeking a mistrial must establish an actual conflict of interest, and not just an appearance of one, and that the facts in this case do not give rise to an actual conflict of interest. The Crown argues that even if an actual conflict of interest existed, the defendant has not established an adverse effect on Mr. Chesterley’s representation at trial, which it argues is required where conflict of interest is raised after the trial.”
• “However, the case before me does not involve a relationship between two lawyers. It involves a relationship between one lawyer and a person who Mr. Grabe acknowledges ‘does not have any legal training’. There is no evidence before me that ‘paralegals’ (however that may be defined) are a profession regulated in the public interest, guided by a code of ethics by which the conduct of members is gauged.”
• “In my view, the dating relationship between prosecuting Crown counsel and a member of defence counsel’s firm, who was part of the defence team, constituted a conflict of interests for Mr. Chesterley. Ms. Eddy, and by extension Mr. Chesterley and his firm, were personally aligned with the prosecutor. There was a substantial risk both that Mr. Chesterley’s representation of the defendant would be materially and adversely affected by that relationship. There was a risk that Ms. Eddy, a key member of the defence team, would favour Crown counsel because of that relationship. In addition, there was a substantial risk that confidential information to which Ms. Eddy was privy would be disclosed to Crown in the course of that personal relationship. The risk that such confidential information could have been disclosed to Crown by Ms. Eddy is implicitly acknowledged by the fact that Crown counsel prepared an affidavit in which he deposed that no such evidence was received by him. If there was no risk of disclosure, such an affidavit would have been unnecessary.”
• “The relationship was concealed from the defendant. For counsel, for both sides, to have failed to disclose that information to the Court, is conduct so egregious that it creates an appearance of unfairness to such a degree that it would taint the administration of justice in the eyes of a reasonable and objective observer: Ball at paras. 119, 120. A reasonable and objective observer would consider it a betrayal and a fundamental breach of trial fairness for an accused to learn only after he has been convicted at trial that a member of his defence team had been, at least metaphorically, sleeping with the enemy, by being involved in a personal relationship with the Crown, a relationship known to both counsel, but concealed from him.”
• “The defendant’s application is granted. I order a mistrial.”