Bressler Risk Blog

David Kluft always spots great stuff: “If the state indicts my law partner, can I represent the state in another matter?” —

• “A NJ plaintiff brought employment-related civil claims against NJ state agencies, and the state hired a law firm to represent it.”
• “While the case was still ongoing, a firm partner who had an appearance in the case was indicted for alleged fraud in connection with the Camden waterfront development.”
• “The indicted partner withdrew from the employment case, but the plaintiff claimed the whole firm should be disqualified because it could not be adverse to the government while representing it.”
• “The NJ Appellate Division held that, even assuming the indicted partner had a personal conflict of interest with the state, personal interest conflicts are not imputed to the other firm lawyers. Denial of Disqualification affirmed.”
• Decision: here.

“Is top lawyer in Sandie Peggie tribunal facing a conflict of interest?” —

• “In March Jane Russell trotted two and a half miles on horseback through the busy streets of central London. Her journey, from a Westminster Hall ceremony to her chambers in Lincoln’s Inn Fields on a steed named Jupiter, was a celebration of her elevation to King’s Counsel, the culmination of a stellar legal career.”
• “Last week, the barrister, more accustomed to the grand surroundings of London’s High Court, found herself in a small, stiflingly stuffy tribunal hearing room in Endeavour House, Dundee. Representing both NHS Fife and the transgender doctor Beth Upton, who are opposing the nurse Sandie Peggie’s employment tribunal claim, the nondescript 19-year-old office building has quickly become the setting for the most high-profile case of Russell’s career.”
• “Questions have been raised over whether the lawyer, who is married to a hereditary peer who is a direct descendant of the Victorian era prime minister Lord John Russell, might be faced with a conflict of interests if she is representing two clients whose positions no longer align. “
• “Peggie, an experienced nurse, has claimed to have been a victim of harassment and discrimination as a result of having to share a female changing room at Victoria Hospital, Kirkcaldy, with Upton, a biologically male doctor who identifies as female. ‘NHS Fife had separately investigated Peggie for a ‘hate incident’, after she confronted Upton for using the women’s facilities on Christmas Eve, 2023. The nurse was suspended for several months.”
• “In February, when the first public tribunal hearings took place, NHS Fife and Upton, its employee, both separately named as respondents to Peggie’s litigation, appeared to be in lockstep. Russell, representing both NHS Fife and Upton jointly in the case, set about cross examining Peggie in a line of questioning which wholly endorsed the doctor’s account.”
• “Last week, however, the positions of NHS Fife and Upton appeared to dramatically diverge.”
• “Peggie was told on Tuesday evening, hours before hearings were due to resume, that the internal NHS Fife disciplinary investigation, separate to the tribunal, had found there was ‘insufficient evidence’ to support findings of misconduct against her.”
• “As one observer noted, the situation had left Russell on Thursday leading Gillian Malone, the health board’s head of nursing, painstakingly ‘through the details’ of an allegation NHS Fife said there was not enough evidence to conclude happened, referring to the fallout of the supposed ‘hate incident’ in the changing rooms for which Peggie is now in the clear.”
• “In Scotland, the Faculty of Advocates’s rulebook states that an advocate ‘may not advise, represent or act on behalf of two or more clients in the same matter if there is a conflict, or a significant risk of conflict, between or among the interests of those clients’.”
• “The Law Society of Scotland has similar rules, while the Bar Standards Board handbook, for English barristers, states that if there is a conflict of interests between clients, they should not accept instructions unless all parties have given their informed consent to doing so. There is also a broad duty in the English rules, the ones Russell is bound by, stipulating that barristers ‘must act in the best interests of each client’.”
• “One practising lawyer, who did not want to be named, said Upton has a reputational interest to keep fighting the tribunal, and dispute Peggie’s version of events. NHS Fife, meanwhile, ‘has an interest in retaining some freedom of manoeuvre’. The lawyer added: ‘It would be extraordinary for an employer to seek to relitigate an issue on which its own internal process had cleared the employee.'”
• “‘The board’s interest in settling now looks clearer than ever, not least because maintaining public and ministerial confidence is an important consideration for the board’ they added.”
• “Jonathan Brown, an advocate at Axiom Chambers, said he was ‘bemused’ at the ‘apparent view that there is no conflict of interest between Fife Health Board and Dr Upton’.”
• “Addressing the case on X in advance of Peggie’s acquittal in the disciplinary case, he said that in his view, Russell should have refused to take on both clients. ‘One of the standard tests for conflict is whether you’d give different advice to each of two clients,’ Brown said. ‘That’s clearly the case here.'”
• “Michael Foran, who will in September become associate professor of law at the University of Oxford, said the fact that Russell was representing both clients could potentially make it harder for NHS Fife to seek to settle. ‘I can’t see how Upton could have settled this and admitted liability, but I could see NHS Fife doing that,’ he said. ‘But if they come as a joint package, then that makes it difficult.'”
• “He added: ‘The internal investigation clearing Sandie Peggie of all allegations raises serious questions about the legal approach of NHS Fife and Dr Upton, not least because it highlights a potential conflict of interest between each respondent.”
• “‘Jane Russell, counsel for both respondents, may need to consider whether it is in the best interests of both clients to share representation or for Dr Upton to obtain separate counsel, given NHS Fife has not upheld Upton’s version of events.'”
• “A spokeswoman for NHS Fife said: ‘NHS Fife is jointly represented with Dr Beth Upton in the ongoing employment tribunal proceedings, in line with standard legal practice where an employer may be vicariously liable for the actions of an employee.”
• “‘This approach has been taken following detailed legal advice and reflects the nature of the claims raised. We are satisfied there is no impermissible conflict of interest.”
• “‘The appointment of legal representation was made by the CLO, on behalf of NHS Fife, based on professional expertise and experience relevant to the case. It would be inappropriate to comment further.'”
• “In a brief statement, Russell said that she did ‘not comment on, or in connection with, cases in which I am instructed.’ She added: ‘I follow the cab rank rule.'”

“Judge Scraps Opinion After Lawyer Flags Made-Up Quotes” —

• “A New Jersey US district court judge withdrew his decision in a biopharma securities case Wednesday after lawyers complained that his opinion contained numerous errors, including made-up quotes and misstated case outcomes.”
• “Judge Julien Xavier Neals of the US District Court for the District of New Jersey on June 30 denied CorMedix Inc.’s request to dismiss a lawsuit by shareholders. ‘That opinion and order were entered in error,’ according to a notice the court posted in the case docket on Wednesday. ‘A subsequent opinion and order will follow.'”
• “Willkie Farr & Gallagher partner Andrew Lichtman, who represents CorMedix, wrote Neals on Tuesday, telling the judge he may want to ‘consider whether amendment or any other action should be taken’ in regard to errors he made in his June 30 decision.
• “Lawyers in a separate case earlier this month also pointed out flaws in Neals’ CorMedix opinion, saying it ‘contains pervasive and material inaccuracies.'”
• “The case shows a rare example of a judge being called out for the sort of elementary mistakes in legal drafting that courts have more frequently pointed out in the work of lawyers. Such flaws have come to the fore as lawyers increasingly rely on artificial intelligence to assist in case preparation, though there is no mention of AI in the complaints the attorneys have directed at Judge Neals.”
• “Neals in his June 30 denial of CorMedix’s motion to dismiss referred to the court in Dang v. Amarin Corp. as describing defendants’ conduct as ‘classic evidence of scienter,’ though that case didn’t contain the quote. He also quoted a court in a case involving tech consulting firm Intelligroup as saying that certifications by company executives became ‘false statements in their own right,’ though that quotation doesn’t exist in the case.”
• “Neals’ opinion referenced a case captioned Stichting Pensioenfonds Metaal en Techniek v. Verizon Commc’ns Inc. in the Southern District of New York, though Lichtman said no such case exists in that venue. ‘We believe the court was referring to a case with the same caption from the District of New Jersey,’ the lawyer wrote.”
• “Several lawyers have made news for AI-generated case citations that turned out to be false. Two Manhattan lawyers in 2023 were fined $5,000 for filing a ChatGPT-generated court brief. Last month, the Court of Appeals for the Fifth District of Texas imposed a $2,500 sanction against a lawyer for submitting a brief that cited non-existent cases.”
• “‘The use of AI or other technology does not excuse carelessness or failure to follow professional standards,’ the panel of judges wrote.”
• “Bruce Green, a legal ethics professor at Fordham Law School, noted that judges, too, can face sanctions for the kind of errors they find in lawyers’ work. Discipline rules state that a judge shall perform judicial and administrative duties competently and diligently, according to Green.”
• “Neals’ June 30 opinion has already influenced a parallel case also playing out in the US District Court for the District of New Jersey. That case also centers on allegations by shareholders that a biopharma company—in this instance, Outlook Therapeutics Inc.—lied to them about a product.”
• “Citing Neals’ decision as a ‘supplemental authority,’ lawyers for Outlook shareholders argued against the company’s motion for dismissing the class action. A team of lawyers at Cooley who are defending Outlook raised the false citations in a July 15 response.”

“Slim Chickens bid to disqualify attorneys lacks merit, plaintiff says” —

• “R Solution, a franchisee suing Slim Chickens, says the chicken chain’s attempt to disqualify R Solution’s attorney and Friday, Eldredge & Clark, LLP for conflict of interest lacks merit and should be denied.”
  “St. Louis-based R Solution includes three entities that share common ownership and management of a total of 10 Slim Chickens franchises operating in Illinois, Missouri and Kentucky. R Solution filed suit in Washington County Circuit Court in June claiming Slim Chickens painted a picture of a lucrative and scalable franchise opportunity while the reality was ‘starkly different.'”
  “Slim Chickens responded to the suit earlier this month, arguing the action should be dismissed, saying it is an attempt to shift blame for the franchisee’s poor performance and that agreements between the two entities invalidate the suit.”
  “In a separate filing, Slim Chickens asked the court to disqualify R Solution’s legal counsel because of a ‘clear’ conflict of interest. Slim Chickens noted it has been a long-time client of the Friday law firm, with the firm serving as counsel for Slim Chickens in transactions and litigation for more than 20 years.”
  “In its response filed recently, R Solution’s counsel contends the disqualifying attempt is invalid since Slim Chickens is not a current client of the Friday firm and that the cases where the firm did represent Slim Chickens are not substantially related to the current suit. R Solution argued Slim Chicken’s relationship with the Friday firm occurred in 2012 and revolved around matters of internal governance and fiduciary duty, while this case involves allegations of fraud and contract breeches.”
  “‘Yet Defendant now claims that information obtained over a decade ago — before it had even begun franchising — is so sensitive that it could unfairly prejudice them in this litigation,’ the response reads in part. ‘This inconsistency reveals the Motion for what it is: a litigation tactic intended to burden Plaintiffs and deprive them of their chosen counsel and not a genuine attempt to protect confidential information.'”
  “In its initial suit, R Solution said it invested more than $15 million developing the stores and $450,000 for development rights in Missouri and Illinois. It claims Slim Chickens also breached its franchise agreement in several aspects, including how Slim Chickens calculates royalties and its rejection of poultry product suppliers who were more cost-effective.”
  “In documents filed earlier this month, Slim Chickens said the suit by R Solution should be dismissed with prejudice since the plaintiff’s claims of fraud are actually disguised breach of contract arguments. It also notes the parties signed agreements that contained both general and specific releases of liability and a covenant not to sue.”
  “When a suit is dismissed with prejudice the plaintiff cannot refile the same claim against the same defendant going forward.”
  “Slim Chickens competes in the fast-casual segment, where restaurants provide a slightly more formal dining experience compared with fast-food operations. While fast-casual restaurants don’t have a wait staff, servers generally carry food to tables. The company has more than 300 locations, including overseas locations in the United Kingdom, Turkey and Germany.”
  “According to court documents, R Solution is involved in commercial development including retail, warehouses, offices and restaurants, and its leadership team had experience in franchise operations across multiple brands prior to its deal with Slim Chickens.”
  “R Solution acquired its first Chickens locations in Illinois in July 2019, between 2020 and 2022 it added six more, and in 2024 it acquired controlling interest in two locations in Kentucky.”

David Kluft notes: “Tidbit: If the judge says he doesn’t like me, can I move for his recusal?” —

• “In a dispute between a restaurant and a commercial landlord, an OH judge granted summary judgment for the landlord on the morning of trial. The restaurant won on appeal and the matter was remanded back to the judge.”
• “On the day of the new trial, the judge made off the record comments about the merits of the case and the restaurant asked him to recuse. The judge sanctioned the restaurant $40k in attorneys’ fees for a frivolous recusal motion. The attorneys’ fee order was reversed on appeal. On the day of the third attempt to conduct the trial, the judge turned to the restaurant’s counsel and said ‘I don’t like you… and you don’t like me.'”
• “The restaurant moved to recuse again and the court denied it. The judge then encouraged the landlord to move for a directed verdict, which he granted. The OH Supreme Court noted that adverse rulings are not normally sufficient grounds for recusal, except when the ruling ‘is accompanied by words or conduct that call into question the manner in which the proceedings are being conducted.’ The judge was disqualified.”
• Decision: here.

“Judge disqualifies three Butler Snow attorneys from case over AI citations” —

• “A federal judge in Alabama disqualified three lawyers from U.S. law firm Butler Snow from a case after they inadvertently included made-up citations generated by artificial intelligence in court filings.”
• “U.S. District Judge Anna Manasco in a Wednesday order reprimanded the lawyers at the Mississippi-founded firm for making false statements in court and referred the issue to the Alabama State Bar, which handles attorney disciplinary matters. Manasco did not impose monetary sanctions, as some judges have done in other cases across the country involving AI use.”
• “Fabricating legal authority ‘demands substantially greater accountability than the reprimands and modest fines that have become common as courts confront this form of AI misuse,’ Manasco said. ‘As a practical matter, time is telling us – quickly and loudly – that those sanctions are insufficient deterrents.'”
• “The case is the latest example of a judge sanctioning or admonishing lawyers as AI-generated ‘hallucinations’ have continued to crop up in court filings ever since ChatGPT and other generative AI programs became widely available. Professional rules require lawyers to vet their work however it is produced.”
• “The three Butler Snow lawyers were part of a team defending former Alabama Department of Corrections Commissioner Jeff Dunn in an inmate’s lawsuit alleging he was repeatedly attacked in prison. Dunn has denied wrongdoing.”
• “The judge said the three lawyers’ conduct was ‘tantamount to bad faith.’ She sanctioned partner Matthew Reeves, who admitted to using AI to generate the citations and including them in the filings without verification. Reeves in a May filing apologized to the court and said he regretted his ‘lapse in diligence and judgment.'”
• “She also disqualified partners William Cranford and William Lunsford, who each signed their names onto the filings. The lawyers said in May filings that they did not independently review the legal citations that were added.”

“Another LLC Attorney Disqualified Due to ‘Conflict of Authority’” —

• “A prior LLC Jungle post covered the Court of Appeal’s seminal opinion in the Jarvis v. Jarvis case here: Why Having ‘Co-Managers’ for Your LLC is a Terrible Idea. In the Jarvis case, the Court of Appeal affirmed the disqualification of an attorney not on the typical grounds of an ethical ‘conflict of interest,’ but rather, based on a ‘conflict of authority’ — i.e., the attorney was hired by one of the two 50/50 general partners of a partnership, over the other partner’s objection.”
• “In a case recently filed by California’s Sixth Appellate District — Altva Capital Management Limited v. Chung — the Court of Appeal followed the framework from Jarvis and affirmed the trial court’s disqualification of an attorney representing an LLC. While the Altva case is unpublished and therefore not binding precedent, it still provides a useful guidepost and confirms the impact of Jarvis on this area of the law.”
• Facts: LLC co-managed by divorcing spouses; wife hires attorney to represent the LLC in her own derivative action”
• “Elizabeth Chung and David Chung were a married couple. Title to their home was held by their LLC – Bend Capital, LLC. Elizabeth and David were the only two members of the LLC. Each held a 50% interest, and each was a managing member.”
• “During their divorce proceedings, Elizabeth and David disputed whether the LLC owed money on a loan then held by Altva Capital Management Limited (‘Altva’). David contended that the loan was legitimate; Elizabeth contended the loan was a fraud perpetrated by David.”
• “Elizabeth filed a lawsuit against David, Altva, and other parties, and included a derivative claim on behalf of the LLC seeking to invalidate the loan. Her lawsuit alleged that David, in violation of his fiduciary duties to the LLC, fabricated the loan to extract money from the LLC. Altva filed cross-claims against the LLC, Elizabeth, and David.”
• “Without David’s consent, Elizabeth retained attorney Mikael Abye to represent the LLC in the action. Abye filed a demurrer on the LLC’s behalf against Altva’s cross-complaint. The next day, David filed a motion to disqualify Abye.”
• “The trial court granted the motion to disqualify Abye from representing the LLC.”
• “The court observed that while the LLC’s operating agreement allowed either member to bind the LLC ‘in all matters in the ordinary course of business,’ the representation of the LLC in a case featuring a dispute between the LLC’s two members was ‘outside the ordinary course’ of the LLC’s business.”
• “The Court of Appeal affirmed, following the framework of the Jarvis case.”
• “The court started by reviewing the LLC’s operating agreement. Section 4.1 of the agreement stated that the LLC would be managed by its members, and that any member could bind the LLC in all matters ‘in the ordinary course’ of business. Matters outside the ordinary course were to be resolved by a ‘majority’ vote — which here would be a unanimous vote since there were only two members who each held a 50% interest. The agreement contained no tie-breaking mechanism, and the court refused to infer one, holding that ‘devising a tie-breaking procedure would rewrite the operating agreement.'”
• “The LLC, the court noted, ‘is embroiled in litigation because its two equal members disagree about the subject matter of the lawsuit.’ The court agreed with the trial court’s conclusion that ‘the defense of this lawsuit, pitting equal member against equal member, is not a matter in the ordinary course’ of the LLC’s business. As such, the operating agreement did not permit Elizabeth to ‘unilaterally retain counsel’ and direct the LLC’s defense.”

“Verizon Faces Legal Setback as WilmerHale Disqualified in High-Stakes Patent Case” —

• “In a significant development in the ongoing litigation between Verizon and Headwater Research, a federal magistrate judge in Texas has disqualified the law firm WilmerHale from representing the telecommunications giant. This decision was made just before what promised to be a contentious trial over allegations that Verizon had infringed on patents related to wireless communications technology held by Headwater Research.”
• “The disqualification reportedly stemmed from WilmerHale’s prior representation of a party with interests adverse to Verizon, raising questions about the firm’s ability to impartially and effectively advocate for its client. The implications of this development extend beyond the immediate case, highlighting the potential for conflicts of interest to disrupt legal strategies and client relations in complex, multi-party litigations.”

“NFLPA exec in conflict-of-interest controversy with private equity firm approved for NFL ownership stakes” —

• “NFL Players Association executive director Lloyd Howell Jr. is facing a new round of scrutiny after ESPN reported on Thursday that he is working as a paid, part-time consultant for one of the league-approved equity firms looking to take a minority stake in an NFL team. Howell has been working with The Carlyle Group since March 2023, three months before he was hired as the NFLPA executive director, the report said.”
• “A senior lawyer for the players union reportedly had asked Howell to consider resigning from the private equity firm to avoid any conflict of interest, though part of that is being disputed in a separate report from The Athletic. The alleged conversation between Howell and the union lawyer occurred a month after the NFL had given The Carlyle Group approval to pursue minority ownership of an NFL team last August. “
• “Howell declined to step down from his role, according to the report; however, The Athletic cited five sources that disputed that he was ever advised to step down by an NFLPA attorney. “
• “One NFLPA source told the outlet that they challenged the characterization that Howell refused to follow the union attorney’s request, and three other sources told The Athletic that they weren’t aware of any NFLPA lawyer approaching Howell about the issue.”
• “The Athletic report also indicated that Howell had met with lawyers from the NFLPA and The Carlyle Group, with both agreeing that his role in the aerospace and defense division was enough separation from the sector that would work with the NFL.”
• “‘He had no access to information about the NFL and Carlyle process beyond public news reports due to strict Carlyle information barriers in place,’ a spokesperson for the firm said in a statement to ESPN. ‘Carlyle was not aware of the request from union lawyers for Lloyd to resign from Carlyle.'”
• “A separate source told ESPN that Howell had only remembered that any concerns were brought up by a ‘union employee,’ and he responded that he would ‘do his due diligence’ before making any decision regarding his involvement with The Carlyle Group. “
• “The NFLPA executive already had been under the microscope after it was reported that the union had struck a confidential agreement with the NFL to keep details of a January arbitration ruling from the players. “
• “But it noted in the 61-page ruling that the NFLPA had shown ‘by a clear preponderance of the evidence’ that NFL commissioner Roger Goodell and league general counsel Jeff Pash impressed upon owners to restrict guaranteed money in player contracts. “
• “Beyond that, the NFLPA hired lawyer Ronald Machen of the law firm WilmerHale last month to work with a group of players to look over Howell’s activities as executive director following reports in May that the federal investigators were probing the union’s financial dealings.”

“Mandelson in ‘conflict of interest’ row as he retains £6m stake in lobbying firm” —

• “Peter Mandelson [UK Ambassador to the United States] still owns shares worth millions of pounds in a corporate lobbying firm – despite the company saying he would be selling them to avoid a conflict of interest, The i Paper can reveal. When the former Labour cabinet minister was appointed US ambassador in February, it was reported he would sell his stake in Global Counsel, although no deadline was set.”
• “New documents registered at Companies House disclose that Lord Mandelson retains a 21 per cent stake in Global Counsel, a worldwide lobbying company which currently represents corporations including US data giant Palantir and BMW. It has previously worked for Tik Tok, Shein, Open AI and Shell. Mandelson’s shareholding is estimated to be worth more than £6m.”
• “It was understood the former minister in Tony Blair’s Cabinet agreed to sell his shareholding when he was appointed ambassador to the US by Sir Keir Starmer.”
• “It has led to calls from anti-corruption campaigners for the Foreign Office to review how it handles his business interests.”
• “Rose Whiffen, senior research officer at Transparency International said: ‘When our country’s top diplomats have a stake in the promotion of private companies, it raises the question as to whether they use their privileged position to further corporate interests.”
• “‘We urge the Foreign Office to review how it is managing potential conflicts of interest, including how it ensures the UK’s ambassador to the US does not present an inappropriate channel for influence.'”
• “A Government spokesperson said Mandelson has no ‘operational involvement’ with Global Counsel and the firm’s website says ‘in early 2025, Peter Mandelson stepped down from Global Counsel to assume the role of UK ambassador to the USA’.”
• “When Starmer went to Washington this February to meet Donald Trump, the Prime Minister also visited Palantir’s offices, a trip arranged by the UK embassy in Washington. Mandelson accompanied Starmer on the visit. There is no evidence to say Mandelson was directly involved in the trip’s arrangement of the trip.”
• “An FCDO spokesperson said: ‘There is an established regime in place for the management of interests held by ambassadors or high commissioners. This ensures that steps are taken to avoid or mitigate any actual, potential, or perceived conflicts of interest.'”
• “They added that Mandelson has no ‘operational involvement’ with Global Counsel. The lobbying company was also approached for a comment but referred The i Paper back to the Foreign Office.”

Also touching Palantir & PR: “Davis Polk Axes Associate Over Writings Criticizing Trump” —

• “Wall Street’s Davis Polk & Wardwell fired a junior attorney following warnings over his op-eds knocking the Trump administration, according to the lawyer.”
  “Ryan Powers, a former Davis Polk associate, says the firm fired him June 12. His profile was removed from the site immediately, Powers said in an interview.
• “The Harvard Law graduate joined the firm’s tax group October 2023 and worked on deals for Cintas Corp. and Penske Truck Leasing.”
• “Powers’ op-eds included critical takes on the federal government’s surveillance of the public, which highlighted Palantir Technologies. Davis Polk lawyers advised banks involved in Palantir’s 2020 stock listing. A firm human resources representative notified Powers that his content violated the firm’s internal policy because he was not granted prior permission, he said.”
• “‘The firm needs to do what it needs to do to protect whatever interests that they choose to support,’ Powers said in an interview. ‘I understand why they are doing what they’re doing. At the same time, it’s very sad on a personal level because it ends my Big Law career sooner than I had anticipated and in a very different way than I had anticipated.'”
• “Davis Polk declined to comment.”
• “Davis Polk has so far avoided the vitriol the president has directed at rival operations. Trump issued directives that threaten five firms’ ability to interact with the federal government, reached agreements with nine others and targeted 20 with investigations through the US Equal Employment Opportunity Commission.”
• “The firm is helping Trump Media & Technology Group Corp. and Crypto.com launch a series of exchange-traded funds later this year. Davis Polk hired former Trump White House lawyer Stefan Passantino as an outside lobbyist in March and removed website references to its lawyers’ work on special counsel Robert Mueller’s investigation into Russian meddling in the 2016 election.”
• “‘The firm should be embarrassed about it,’ Powers said of the work for Trump Media. ‘We tout our commitment to social responsibility through our pro bono partners and the kind of causes that we take up as part of official firm practice and then we are partnering with a namesake organization to a sitting president who has not supported those values.'”

Hat tip to Jim Burns at Latham for sending word of an update on this one: “‘Little Is Gained by Disqualification,’ Law Firm Concedes in Related Efforts Against GM’s Counsel” —

• “Following a magistrate judge’s ruling this week that denied a boutique Chicago law firm’s efforts to disqualify Fish & Richardson from representing General Motors Co. in a patent dispute, attorneys with Irwin IP withdrew similar attempts in a related but separate case.”
• “Attorneys from Irwin IP, a Chicago litigation firm, represent LKQ Corp. and its subsidiary, Keystone Automotive Industries, in patent disputes against GM. In one matter pending before U.S. District Judge Jorge Alonso of the Northern District of Illinois, the plaintiffs’ attorneys accused Fish & Richardson of poaching one of its former paralegals, Gloria Rios. Rios oversaw all LKQ matters, including the present adverse suit against GM, and is now working for the automaker’s counsel of record. Irwin IP moved to kick opposing counsel off the case, questioning whether Fish & Richardson’s screening and safeguards were enough to protect LKQ’s confidential information, among other things.”
• “U.S. Magistrate Judge M. David Weisman agreed that Rios’s permanent deletion of nearly 17,000 emails from her Irwin IP email was ‘troubling,’ but concluded this week that Irwin IP failed to allege that confidential information had been turned over to Fish & Richardson, or why an ethical wall should have been established sooner than three days before the paralegal’s start date.”
• “‘What is clear from this evidence is that F&R did not ‘target’ Ms. Rios for employment. Rather, she was one of twenty-five people [recruiter Dené] Maloney messaged about the paralegal vacancy at F&R. Further, though plaintiffs contend that F&R should have implemented the ethical wall sooner than the Friday before Rios’s Monday start date, they do not explain why doing so was necessary,’ Weisman wrote in an order filed Tuesday.”
• “‘In short, F&R has rebutted the presumption that Rios and F&R are sharing confidences with respect to LKQ/Keystone cases. Accordingly, the court denies plaintiffs’ motion to disqualify,’ Weisman added.”
• “In response to Weisman’s decision, Irwin IP attorneys withdrew a similar disqualification motion against Fish & Richardson in a related patent case pending before U.S. District Judge Jeremy C. Daniel.”
• “‘Accordingly, LKQ does not plan on objecting to Magistrate Judge Weisman’s order,’ Michael P. Bregenzer wrote in Wednesday’s filing. ‘As such, while it would be inappropriate to take advantage of this knowledge, GM’s counsel herein will be employing and working daily with an individual with intimate knowledge of LKQ’s litigation strategies and thought processes whether they are disqualified in this matter or not. Therefore, LKQ believes little is gained by disqualification in this matter at this point.'”
• “According to Irwin IP, Rios, who joined the boutique Chicago firm in January 2022, did not disclose that she was leaving for a role working with opposing counsel. It was no secret that Rios worked on the matter, as she sent ‘virtually every single one’ of the documents and pleadings, among other things, on behalf of LKQ to Fish & Richardson, Irwin IP said in a motion to disqualify opposing counsel in March.”
• “After Rio’s departure, Irwin IP said it discovered that Rios allegedly ‘spent hours’ permanently deleting at least 17,000 emails from her work email account, among other things. Irwin IP accused Fish & Richardson of violating professional obligations and questioned whether the firm’s screening methods and safeguards were sufficient, particularly because Rios was privy to LKQ’s confidential information across multiple matters.”
• “Fish & Richardson denied targeting Rios, as a recruiter reached out to the paralegal on LinkedIn during a ‘routine search for candidates’ with relevant experience, and Rios was one of nearly 25 potential candidates to respond to an initial inquiry. Rios went through the interview process and was hired to work for Louis Fogel, GM’s counsel of record in the patent suit, LKQ Corp. v. General Motors Co. Rios said that she informed Fish & Richardson about her participation in adverse litigation, and she executed a declaration acknowledging her ethical obligations on Jan. 28, the day before she put in her two-week notice with Irwin IP.”
• “On Feb. 21, Fish & Richardson sent a firm-wide email with a screening memorandum and notification to all personnel about the ethical wall and their obligation not to share any covered information with Rios. Fish & Richardson’s ethical wall software blocks an employee from accessing the litigation document management system, according to the opinion.”

And to industry consultant and former biglaw risk director David Skweres for noting: “Lateral Partner Vetting Intensifies as Compensation Creeps Upward” —

• “As Big Law partner hiring—and compensation packages—grow increasingly expensive, lateral vetting has generally grown more complex over the last several years, recruiters and lawyers say.”
• “Law firms are becoming more inquisitive about laterals, asking them to go beyond basic background checks and routine lateral partner questionnaires (LPQs). They are asking lateral candidates much more probing questions about their client lists, originations, and profitability of practice, as well as explicit questions about the percentage chance specific clients will move with them, industry observers say. Some laterals, in turn, have hired lawyers to represent them in moves.”
• “Amid an exponential increase in partner compensation, especially that offered to ‘superstar’ lateral partners, making the wrong lateral investment can be costly to a firm’s bottom line these days. Depending on overall revenue and profitability levels, some firms have even less room to hire unsuccessful laterals than others.”
• “‘Compensation has skyrocketed, and [firms are] just trying to do as much due diligence as possible,’ said Brian Davis, a recruiter who is a Major Lindsey & Africa partner and global liaison for New York and London partners. ‘Laterals can be a big investment for firms. They want to make sure they get it right.'”
• “Jon Lindsey, New York founding partner at MLA, also said some firms do a ‘mini’ questionnaire, earlier in the process than ever before. Even something as simple as ‘‘Tell us your top 10 clients and what you do for them.’ That sort of a thing, as a conversation-starter,’ Lindsey said.”
• “Questions pertaining to profitability and portability—for instance, if anyone else gets origination credit for clients that a lateral lists as their own, and how likely a client is to follow along if a lateral makes a move—are part of firms’ move toward making savvier evaluations. Already, some in the industry have sought to create universal or common lateral questionnaires, Law.com has reported. But those efforts for a standard questionnaire come as firms are increasingly inquisitive as part of their own hiring process.”
• “‘As the lateral market has become very robust in the last 10 years, the firms have each become far more sophisticated than they used to be in terms of which metrics and other mechanisms they use to assist them in their lateral partner process,’ said Tina Solis, a litigation partner at Nixon Peabody who routinely counsels lawyers and law firms on their ethical and fiduciary obligations in connection with lateral partner moves. ‘Because the firms have become more sophisticated in how they recruit laterals, they’ve become far more inquisitive in the types of questions they ask the lateral partner candidates.'”
• “Jennifer Gillman, a lateral partner recruiter and president of Gillman Strategic Group in Westfield, New Jersey, said some firms will ask laterals to estimate the percentage chance specific clients will move with them. Others will tell them to describe what they think their business will look like on the new platform and what the range of outcomes might be. What does a great year look like? How about an average year and a terrible year?”
• “‘We usually counsel our candidates to think long and hard about those numbers,’Gillman said. ‘We don’t want them just to guess, because those are kind of the levels they’re going to be held to.'”
• “She added, though, that it’s a ‘delicate dance’ for firms. Make the process too onerous, and you risk alienating the candidate, particularly if they’re already deciding between multiple firms.”
• “Dan Binstock, a recruiter and partner at Washington, D.C.-based Garrison, agreed, although he described firms walking a fine line between gathering enough data to make an informed decision on a lateral hire with the ethical and fiduciary duty obligations of that candidate.”
• “‘Overall, I do see firms asking more explicit questions, or at least better defining their questions,’ Binstock said. ‘Firms have to balance their LPQs so they ask the right questions to help them evaluate a partner’s practice and find the sweet spot on compensation, while not digging too deep such that it goes beyond what’s ideal from an ethics and disclosure standpoint. It’s a delicate balance.'”
• “As such, candidates have taken to bringing ethics counsel into the mix during this stage of the lateral hiring process to avoid crossing any disciplinary boundaries.”

“FaceTec Fails to Disqualify Morrison & Foerster in Patent Dispute Amid Conflict of Interest Concerns” —

• “In a recent ruling, FaceTec Inc., a company focused on 3D face authentication, encountered a setback in its legal battle against legal giant Morrison & Foerster LLP, as the U.S. District Court refused to disqualify the firm from continuing its representation in a patent infringement case. FaceTec had previously sought to disqualify Morrison & Foerster, arguing potential conflicts of interest due to the firm’s prior engagement with FaceTec on unrelated matters. However, the court determined that the connections were not substantial enough to warrant disqualification.”
  “The ruling from Judge Cathy Ann Bencivengo in the Southern District of California emphasized that the prior interactions of the firm did not pose any serious risk of revealing confidential information that might disadvantage FaceTec in the current proceedings. This decision provides a noteworthy instance of how courts evaluate the intricacies of attorney-client relationships and conflicts of interest, maintaining a delicate balance between past engagements and current representation. Details of the case can be found through Bloomberg Law.”
  “Patent disputes like those faced by FaceTec underscore the complexities surrounding representation in intellectual property law, especially when previous client interactions come into play. The decision showcases the rigorous standards applied by the judiciary to ensure fair representation without granting the potential for misuse of sensitive information.”
  “This case adds to a series of recent rulings that highlight similar issues of conflict in legal representation. For example, a recent decision involving Qualcomm Inc. illustrated how courts approach potential conflicts with a view to preserving the integrity of legal counsel, a critical aspect given the increasing intricacies of modern legal practices. More information about how courts handle such disqualification attempts can be found on Law.com.”
  “Overall, FaceTec’s attempt to disqualify Morrison & Foerster from the case encapsulates ongoing challenges in patent litigation and the broader legal landscape’s efforts to navigate the complexities of attorney-client relationships. As the case progresses, it will be closely watched by legal professionals who seek to understand the evolving standards for conflict management in high-stakes litigation.”

David Kluft notes: “If I consult briefly with a fellow attorney representing a pizza shop, can I later be adverse to the pizza shop?” —

• “A CT lawyer knowledgeable in eviction law gave some general information to a fellow attorney who was defending a pizza place against a commercial eviction, including listing some possible defenses and providing a sample motion to dismiss.
• “When the fellow attorney asked her to work on the case, she declined. The fellow attorney sent her some more information unsolicited to tempt her to take the case, but she remained firm. A few years later, she appeared in a commercial eviction matter for a different landlord but against the same pizza place.”
• “The pizza place moved to disqualify. The Court found that because the lawyer never spoke with or formed an attorney client relationship with the pizza place, there was no reason to ask if the matters were substantially related. She also had no duties to the pizza place as a prospective client, because she received no significantly harmful information, and any unsolicited information after she clearly declined representation doesn’t count.”

ALAS notes this twist in Winter v. Menlo —

• “When does disclosure of confidential information by a prospective client require disqualification under California Rule of Professional Conduct 1.18?”
• “In a case of first impression, the California Court of Appeal decided that materiality should be evaluated at the time a party moves to disqualify. It also held the information must be materially harmful to the prospective client, declining to define ‘material’ to mean the information is directly at issue in the case or of critical importance.”
• “In this case, the potential client disclosed not only his intention to sue the law firm’s client, but also his theory of the case and documents supporting it. Accordingly, the appellate court affirmed disqualification.”
• Decision: here.

“It’s illegal in most states for private equity to buy a law firm. Lawyers have figured out a workaround” —

• “Nearly every state has adopted a professional ethics rule from the American Bar Association forbidding lawyers from working for nonlawyer-owned firms.”
  “Lawyers, of course, have figured out a way around it.”
• “The loophole, known as a ‘managed services organization’ — or MSO — allows non-lawyers to effectively own part of law firms through a second corporate entity.”
• “Business Insider spoke to two attorneys who advise law firms on the arrangement, which they said is becoming increasingly common.”
• “In June, Puerto Rico’s high court allowed non-lawyer investment in law firms in order to spur economic development in the territory. Arizona, the only state that has done away with the ABA rule, in 2020, now has over 100 law firms that are open to outside investors, according to a recent Stanford Law School study. Large companies like KPMG and Rocket Lawyer now own law firms in the state outright.”
• “The MSO model, which isn’t limited to only Arizona, could appeal to law firm owners who want to retire or who don’t want to hand their firms over to a law partner.”
  “‘We’re in the midst of the largest rolling retirement of lawyers in history,’ said Lucian Pera, a legal ethics attorney at Adams & Reese who advises lawyers and businesses about setting up MSOs.
• “Using an MSO can give private equity firms — or other kinds of companies — a chance to effectively buy a slice of legal practices. And it gives lawyers the chance to sell stakes of their companies for cold, hard cash.
• “Traditionally, law firms have operated as partnerships among attorneys, where equity partners own shares in the firm and help manage it. That’s partly because of ethics rules designed to maintain attorney independence, such as ABA Model Rule 5.4(d), which largely prevents nonlawyers from owning law firms or from having the right to control the professional judgment of a lawyer.”
• “The ABA’s rules have made law practices distinct from many other white-collar professions, like finance or consulting, which may have robust ethical rules and norms but don’t impose such stringent limits on ownership. There are plenty of publicly traded banks and consulting firms, but no publicly traded law firms.”
• “As a workaround, the law firms can set themselves up as two corporate entities, Pera said. One is the law firm itself, composed exclusively of lawyers and owned only by lawyers. The second is the service organization, which can be owned by anyone and acts as a vendor for the law firm. It is essentially the back office, taking care of all non-lawyer tasks, including marketing, accounting, human resources, real estate leases, and employing paralegals. The two corporate entities enter into a long-term contract.”
• “Under this MSO arrangement, non-lawyers can invest in the service corporation, though not the law firm itself. Presto! You have an ethically independent group of lawyers who are exclusively working with a company that can sell shares, Pera says.”
• “According to Pera, no state bars have issued ethics opinions that expressly bless the MSO model, but no court or regulator has found a problem with it, either.”
• “‘The pieces fit well, and there’s no regulatory approval required for a law firm to do it, just like there’s no regulatory approval required for a law firm to take out a bank loan,’ Pera said.”
• “A spokesperson for the American Bar Association said its Center for Professional Responsibility doesn’t have any ethics opinions on non-lawyers investing in MSOs.”
• “Because law firms aren’t required to disclose their use of service organizations, it’s difficult to know how widespread the practice is.”
• “Pera said he knows of one firm that used the structure as far back as 2006. In more recent years, more law firms and investors have become interested in using MSOs, Pera and Lenfestey said.”
• “‘There are many more that are in process right now, and some of them are quite large,’ Pera said. ‘There’s a fairly large insurance defense firm in this country that’s looking at doing this. There’s a fairly large AmLaw-ranked law firm that’s looking at this. So there’s a non-trivial number of these that are going on.'”

“23andMe Privacy Reviewer Defends WilmerHale as Choice of Counsel” —

• “The consumer privacy ombudsman in 23andMe’s sale of customers’ genetic data is defending his choice of counsel against objections from the Justice Department’s bankruptcy watchdog. Neil Richards, a Washington University School of Law professor appointed by the court to make privacy recommendations in 23andMe’s asset sale, denies that WilmerHale has disqualifying conflicts of interest in the case.”
• “The US Trustee in June objected to Richards’ choice of counsel, citing a possible conflict of interest due to the firm’s work for Regeneron Pharmaceuticals Inc. on unrelated matters. Regeneron was named a backup bidder in the asset sale.”
• “‘To disqualify WilmerHale now, based on a remote and hypothetical possibility of a conflict that never presented itself, would be to create an unworkable rule,’ the filing said.”
• “The filing argues that WilmerHale’s work for Regeneron in matters unrelated to the Chapter 11 case doesn’t create an actual conflict and that the US Trustee is holding WilmerHale to a higher standard than prescribed by bankruptcy law. “Because Regeneron was not one of the original parties in the interest list, WilmerHale had no prior knowledge of the company’s involvement before it submitted a bid, over which the law firm ‘had no control,’ the filing says.”
• “This scenario doesn’t even require disqualification and would ‘upend the orderly operation of large chapter 11 cases,’ it said.”
• “The fees WilmerHale collected from Regeneron in 2024 accounted for less than 0.04% of the firm’s revenue, no other party objected to the firm’s retention, and Richards’ work has concluded, the response said.”
• “‘The CPO’s role, and WilmerHale’s representation of the CPO, has concluded,’ the response says. ‘Denying the CPO’s retention of WilmerHale would not change the Report, the selection of TTAM as the successful bidder, the CPO’s testimony at the sale hearing, or the Court’s approval of the sale to TTAM.'”

“Conflict Forces Transfer Of Seton Hall Whistleblower Case” —

• “Seton Hall University’s former president’s whistleblower suit against the school will be heard in a New Jersey state court in Hudson County after an Essex County judge confirmed her decision to move the case due to a potential conflict of interest involving the daughter of one of the defendants.”
• “Judge Venable moved the case originally when a law clerk in the Essex County civil division reported a potential conflict because her father, Michael Lucciola, is a member of Seton Hall’s Board of Regents and a defendant in the case.”
• “Seton Hall fought that move on the grounds that Lucciola’s daughter was not clerking for the judge handling the litigation brought by the university’s former president, Joseph Nyre, and that nothing in the Code of Judicial Conduct or the Code of Conduct for Judicial Employees requires transferring a case in such a situation.”
• “The school also pointed out that it filed its motion to dismiss in March 2024 and that the parties had already had a hearing on it in September 2024. Moving the case would require duplicating a significant amount of effort, Seton Hall argued.”
• “In Wednesday’s opinion Judge Venable wrote that the court properly considered all evidence presented in various lengthy filings in deciding to move the case.”
• “She wrote that Canon 2.1 of the Code of Judicial Conduct, which directs judges to avoid the appearance of impropriety, is the best guide for handling the situation. She clarified that the court relied on that canon not because it fits the exact facts of the situation, but for guidance about appearances of impropriety.”
• “‘It was not a misunderstanding of the court that Canon 2.1 applied to law clerks, but rather the misunderstanding of the court’s reasoning by moving defendants,’ Judge Venable wrote.”
• “‘Moreover, the absence of a specific canon addressing law clerk conduct does not preclude the possibility that a law clerk’s actions or relationships could create an appearance of impropriety; however, citing the lack of a rule as justification essentially invites the court to conclude that such situations can never arise, which is not the case,’ she went on.”

“Boston firm hit with pair of data breach class actions” —

• “A Boston law firm is facing two class actions alleging that a failure to take appropriate cybersecurity measures resulted in a March 2024 data breach that exposed nearly 13,000 clients, former clients and others to the risk of identity theft.”
• “‘Defendant disregarded the rights of Plaintiff and Class Members by … intentionally, willfully, recklessly, or negligently failing to take adequate and reasonable measures to ensure that its network servers were protected against unauthorized intrusions,’ states the complaint in Frawley v. Casner & Edwards, filed in U.S. District Court in Boston.”
• “A second putative class action filed days later on June 2 alleges the law firm exacerbated the potential risks from the 2024 breach by waiting until last month to begin informing those whose personally identifiable information had been compromised.”
• “‘Casner took over a year before informing Class Members even though Plaintiff and thousands of Class Members had their most sensitive personal information accessed, exfiltrated, and stolen,’ the complaint in Glavin v. Casner & Edwards states.”
• “Casner managing partner Michael F. Zullas said his firm had yet to be served with the complaint in Glavin. He said the breach involved only a ‘small, separate’ segment of his firm’s computer database.”
• “‘It didn’t affect the majority of our data,’ Zullas said. ‘As soon as we became aware [of the breach], we engaged in a lengthy investigation to determine exactly what happened, we notified federal law enforcement, [and] we implemented additional technical safeguard to help ensure this wouldn’t happen. And out of an abundance of caution, we identified anyone whose data may have been tangentially affected, notifying each of those individuals.'”
  “The Casner breach is an example of a shift in the nature of threats from the ransomware attacks that were the bane of law firms several years ago, said Brian J. Lamoureux, a Providence litigator who handles cyber cases. That shift occurred once law firms and other businesses figured out they could defeat ransomware attacks by continuously backing up their data, he said.”
• “‘Once cyber hygiene and cyber backups became [the norm], bad actors shifted over to what is called the ‘double extortion’ scheme where they not only get access to your system but then threaten the release of customer, client and patient data,’ Lamoureaux explained.”
• “Lawsuits like the ones facing Casner & Edwards are not surprising, according to Boston attorney Seth P. Berman. ‘As we have seen over the past several years, we can expect to see that many law firms and other companies will get hacked and will get data stolen,’ Berman said. ‘There really isn’t a perfect way to protect yourself from this problem.'”
• “The negligence per se claim is premised on an alleged breach of duties imposed under the Federal Trade Commission Act, 15 U.S.C. §45. According to the complaint, Casner failed to use reasonable measures to protect Personally Identifiable Information entrusted to it in violation of §5 of the FTC Act, which prohibits ‘unfair … practices in or affecting commerce.'”
  “The Frawley complaint similarly alleges that Casner breached duties established under 15 U.S.C. §45, FTC guidelines, and other industry standards.”
• “In terms of liability for a data breach, the standard of care for law firms is one of ‘reasonableness,’ Lamoureux said. ‘Did the law firm take commercially reasonable steps to avoid the incident?’ he said. ‘That’s a moving target. Two-factor authentication was not a thing 10 years ago. Now, if you don’t have two-factor authentication or other backup security measures, someone can get on the witness stand and testify that that fell below the standard of care depending on the type of business.'”
• “‘Just the idea of having to let your clients know that you were victimized creates enormous trust and relationship issues, because lawyers, like doctors, are in the ‘secrets’ business,’ he said. ‘We get paid and are obligated to hold secrets.’ “

“Goodwin, Eckert Seamans Faced Data Breaches in April” —

• “Two Am Law 200 firms suffered data breaches in April, according to data security notices submitted to the Maine Attorney General’s Office.”
• “Goodwin Procter experienced a data breach on April 29 that impacted the personal information of approximately 363 individuals. The second firm, Eckert Seamans Cherin & Mellott, was sued Tuesday over its own data breach dating to April 17 that impacted the information of over 9,000 individuals associated with a singular client, the Wheeling Jesuit University.”
• “According to Goodwin’s notice, which was filed on the firm’s behalf by Erez Liebermann of Debevoise & Plimpton on July 2, the firm discovered the breach on May 2. The letter indicates that the breach was caused by an incident related to a firm vendor, Commvault, and that the breach impacted a small number of firm email accounts; the firm is offering two years worth of credit monitoring through Experian.”
• “Pittsburgh-based Eckert Seamans, meanwhile, faces a negligence suit in the U.S. District Court for the Western District of Pennsylvania. The suit claims that the names and Social Security numbers of approximately 9,400 alumni of Wheeling Jesuit University alumni were exposed in the data breach as a result of the firm failing to update its technology security practices.”
• “A data breach notification letter submitted to the attorney general of Maine confirms that the Eckert incident occurred on April 17 and additionally indicates that the firm did not discover the data breach until May 20. The data breach notification further indicates that the firm did not notify those impacted in the breach until June 18, which is also noted in the suit.”
• “‘Plaintiff’s notice letters were dated nearly one month after Defendant discovered the Data Breach and nearly two months from the actual breach,’ the suit, filed by attorneys from Kimmel & Silverman and EKSM LLP on behalf of Wheeling Jesuit University alumna Lara Williams, reads, alleging that the delayed notification impacted the plaintiffs’ ability to mitigate the breach’s harm.”
• “The suit further alleges that Eckert Seamans did not adequately protect its clients’ confidential information, thereby contributing to the breach.”
• “The firm ‘negligently maintained its computer network system in a condition that failed to meet the industry standards recommended by the ABA, the FTC, industry guides, and information technology security recommendations and manufacturers,’ the suit alleges.”
• “‘These foregoing frameworks are existing and applicable industry standards in the legal industry, and Defendant failed to comply with these accepted standards, thereby opening the door to and causing the Data Breach,’ the suit claims. ‘As the result of computer systems needing security upgrading, inadequate procedures for handling emails containing ransomware or other malignant computer code, and inadequately trained employees who opened files containing the ransomware virus, Defendant negligently and unlawfully failed to safeguard Plaintiff’s and Class Members’ Private Information.'”

“Judge Won’t Disqualify Attys In AmeriMark Control Dispute” —

• “A Utah magistrate judge declined to disqualify attorneys from Venable LLP and Parsons Behle & Latimer PC from representing Swiss plaintiffs Capana Swiss Advisors and AmeriMark Automotive in a lawsuit over who controls AmeriMark Group, finding there is no clear conflict of interest and that disqualification would unfairly disrupt the case.”
• “Defendants Rymark Inc. and Nicholas Thayne Markosian asked the court in January to remove the attorneys from the case, claiming there was a conflict of interest because the attorneys were representing both Capana and AmeriMark.”
• “The lawsuit boils down to a dispute over who controls AmeriMark Group and AmeriMark Automotive. Capana claims it has about 13 million shares in AmeriMark Group or a 65% stake, but Markosian alleges in a countersuit that those 13 million shares were stolen from him and that he is, in fact, the largest shareholder in the company.”
• “‘In the ordinary course, AmeriMark would be agnostic as to the dispute between Capana and Mr. Markosian … but in this litigation, AmeriMark is represented by the same attorneys representing Capana,’ the January motion said. ‘Those attorneys are being paid by Capana, not AmeriMark. The upshot is that AmeriMark is essentially at the mercy of Capana and Capana’s attorneys. It is not receiving independent or unbiased legal advice.'”
• “However, in an order issued June 6, U.S. Magistrate Judge Cecilia M. Romero said the defendants have not met their burden of demonstrating a conflict of interest or that there has been an ‘interference’ in the suit from Capana paying the legal fees.”
• “Additionally, the judge said that even if the defendants had demonstrated a sufficient conflict, their motion would still fail because they did not ‘diligently pursue disqualification,’ and did not file their disqualification in a timely manner.”
  “John Worden of Venable LLP said: ‘The motion was untenable from day one. It was strategic and it was filed by lawyers who when they filed, they were also representing multiple parties and entities. And so by the terms of their own motion they should have been disqualified, too… We never feared much that the judge would grant it, but it was an inconvenience … we are hopeful that the new motions moving forward will be of a more substantive nature,’ Worden added.”
• “The attorneys who filed the disqualification motion in January on behalf of Rymark and Markosian are no longer serving as their counsel. According to the court docket, the defendants alerted the court in May to a substitution in their legal representation.”