Bressler Risk Blog

“An Attorney’s Ethical Obligations to the Client in Third-Party Funded Litigation” —

• “The landscape of legal practice has significantly changed due to the proliferation of third-party litigation funding, a financial mechanism that provides capital to plaintiffs, including patent owners, in exchange for an interest related to any recovery. This funding source can be a vital tool for expanding access to justice, particularly for patent owners who would otherwise be unable to afford the high costs of patent litigation, but it introduces several dynamics that require careful ethical consideration from attorneys. After assessing an attorney’s ethical duties of loyalty to the client and client control, attorneys can examine how they are applied and safeguarded in the context of litigation funding, and analyze how state bar ethics opinions and judicial interpretations are guiding attorneys in this evolving field.”
• “At its heart, litigation funding creates a triangular relationship between the attorney, the client, and the funder, which potentially complicates two fundamental ethical principles governing the attorney-client relationship: an attorney’s duty of loyalty to the client and the client’s right to control the litigation.”
• “First, a lawyer’s duty of loyalty compels acting in the best interests of their client without being compromised by conflicting interests. Model Rule of Professional Conduct 1.7 addresses conflicts of interest, stating that a conflict of interest exists if ‘there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to . . . a third person or by a personal interest of the lawyer.'[1] This rule is particularly relevant when a lawyer advises a client on a funding proposal.”
• “An attorney who affirmatively advises a client to accept a third-party funding arrangement must consider the risk of a future claim that their representation will be ‘materially limited by . . . a personal interest.'[2] This personal interest could stem from the attorney’s or their law firm’s own financial position, including the need to ensure payment of their fees. However, issues associated with Model Rule 1.7(a) can be dealt with by the exceptions to the rule listed under Model Rule 1.7(b). Under Model Rule 1.7(b), a client may waive a conflict by providing the lawyer with informed written consent after full disclosure of the existence and nature of the possible conflict, as long as ‘the lawyer reasonably believes that they will be able to provide competent and diligent representation to each affected client.'[3]”
• “Further emphasizing the importance of professional independence, Model Rule 5.4(a) generally bars lawyers from sharing legal fees with non-lawyers.[4] As the comment to this rule flags, the prohibition on fee-splitting is ‘to protect the lawyer’s professional independence of judgment’ that the lawyer owes to the client.[5]”
• “Second, the principle of client autonomy is a cornerstone of Model Rule 1.2(a), which grants the client the exclusive right to make fundamental decisions regarding the objectives of their representation. This right includes the non-delegable authority to decide whether to settle a matter. The introduction of a third-party funder can, however, introduce complexities in safeguarding this right. For example, while some funders do not receive any control, certain funding agreements may grant funders express or implied control over a lawsuit, thereby interfering with the client’s autonomy. Examples of such control mechanisms may include a funder’s veto power over settlement, conditions for continued funding, or requirements for specific strategic moves.[6]”
• “The ethical challenges presented by litigation funding have prompted various state bar associations to issue opinions that guide attorneys on navigating these arrangements while upholding core professional duties. While the common-law doctrines of champerty and maintenance—which historically prohibited third-party involvement in litigation—have largely been relaxed, their underlying concerns about outside interference and control persist in modern ethical frameworks.[7]”
• “Many of these opinions permit litigation funding but impose conditions, some stringent, to safeguard loyalty and client control. For example, the Illinois State Bar Association has issued an advisory opinion concluding that, although an attorney may assist a client in obtaining third-party litigation funding, the attorney must ensure that the funding agreement does not grant the funder any rights to control settlement, strategy, or other aspects of the litigation.[8] Moreover, the attorney must ‘render independent professional judgment and candid advice to the client’ to comply with Illinois’ ethical rule requiring the attorney to ‘exercise independent professional judgment and render candid advice,’ similar to Model Rule 5.4.[9]”
• “Judicial decisions also offer crucial insights into the ethical boundaries of litigation funding, particularly when arrangements appear to compromise attorney loyalty or client control. The Nimitz opinion from the District of Delaware offers a striking example.[12] In Nimitz, the court examined patent-infringement cases where plaintiff LLCs were allegedly controlled by litigation funder IP Edge and its affiliate Mavexar. The court found that attorneys representing the plaintiff LLCs filed, settled, and dismissed cases without any direct communication with their named clients, and, in doing so, concluded that the attorneys violated the ethical rules on client control and communication.[13]”
• “The court also addressed concerns about loyalty and conflicts of interest, concluding that ‘counsel violated Rule 1.7 and, to the extent their fees were paid or advanced by Mavexar or IP Edge, Rule 1.8(f).'[14] Mavexar’s agreements created ‘potential conflicts of interest between Mavexar and the clients,’ and the attorneys’ ‘blind adherence to Mavexar’s directions to file and settle cases in the clients’ name created a significant risk that counsel’s actions materially limited their representation of their clients.'[15]”
• “Central to Nimitz was the absence of informed client consent to the funder’s directions. This lack of informed consent, especially regarding conflicts and funder influence, constituted a critical ethical lapse in which the attorneys ‘failed to satisfy their ‘ethical obligations of giving [their] clients full and meaningful disclosure of conflicts of interest.’'[16] In other words, the attorneys’ ‘de facto clients were IP Edge and Mavexar’ and their ‘loyalty was not to their clients, but rather to IP Edge.'[17] These findings led the court to refer the attorneys to disciplinary counsel for their state bars.”
• “The Nimitz opinion spotlights a judicial perspective on the importance of maintaining attorney loyalty and genuine client control in the context of funded litigation, emphasizing that an attorney’s obligations to their client remain paramount, regardless of external financial arrangements.”

“Obviously Not! Navigating Subject Matter Conflicts of Interest in Patent Law” —

• “For any attorney, navigating conflicts of interest is a cornerstone of a solid legal practice. The fundamental rules are simple: you cannot represent one client if their interests are directly adverse to another client, or if your duties to a client would be materially limited by your duties to another current or former client, third party, or yourself. However, for patent practitioners registered to practice before the United States Patent and Trademark Office (USPTO), the ethical duties are significantly more complex and nuanced.”
• “The USPTO Rules of Professional Conduct, which are based upon the ABA Model Rules and similar to state rules, impose similar standards. However, patent law as a whole, including the special duty of disclosure provisions at the USPTO, create unique requirements that go beyond the typical ‘direct adversity’ and ‘material limitation’ tests. This special duty centers on the concept of subject matter conflicts, a critical distinction that all patent practitioners must understand.”
• “…For patent prosecutors, the ‘materially limited’ clause is interpreted broadly to prevent a practitioner from representing two clients with competing interests in the same or ‘substantially related’ subject matter.”
• “What is a ‘Subject Matter Conflict’? Unlike litigation, where conflicts often involve two parties in a dispute, patent prosecution conflicts can arise even when two clients are not competitors and may not even be aware of each other.”
• “The key question is whether the two clients’ inventions are substantially related. This means a practitioner may encounter a conflict if they attempt represent Client A to file a patent application in a specific technology are while simultaneously representing Client B for a patent on a substantially related technology area.”
• “Consider this example:”
  • “A patent attorney represents InnovateCorp on a new chemical composition for a smartphone battery that improves charging speed. A few months later, a new startup, PowerUp Inc., approaches the same attorney to file a patent for their slightly different battery chemistry that improves battery longevity.”
  • “Even though these inventions may be considered novel by the patent attorney, they are in the same narrow technological field, which creates the potential for a subject matter conflict. The attorney’s duty to get the broadest possible claims for InnovateCorp could be ‘materially limited’ by their knowledge of PowerUp’s confidential technology, and vice versa. Moreover, the duty of disclosure, or even an Office Action citing one application over another, may require the practitioner to respond to the USPTO—pinning on client against the other. The answer than many practitioners incorrectly believe is appropriate is to engage in claim shaving—narrowing the claims to allow both clients to obtain patent protection. However, the practitioner cannot ethically engage in such conduct, absent informed consent.”
• “To be clear, simply representing two clients in the same field is not an automatic conflict. However, the stringent subject matter conflict analysis is designed to protect the integrity of the patent system and the practitioner’s core duties of confidentiality and zealous representation.”
  • “Duty of Confidentiality (37 C.F.R. § 11.106): A practitioner representing two clients in a similar technology space will possess confidential information from both companies. It becomes nearly impossible to ensure that knowledge of one client’s unpublished invention and patenting strategy doesn’t subconsciously influence the advice and claim drafting strategy for the other.”
  • “Duty of Competent and Diligent Representation (37 C.F.R. §§ 11.101 and 11.103): To zealously represent a client, a practitioner must strive to obtain the broadest patent protection possible. This might involve drafting claims that could foreseeably limit the patentable territory available to another client working in a related area.”
• “Can These Conflicts Be Waived? Yes, but with significant caveats. A practitioner can proceed despite a conflict if they reasonably believe they can provide competent and diligent representation to both clients, and if each affected client gives informed consent, confirmed in writing.”
• “The practitioner must clearly explain the existence, nature, implications, and potential risks of the conflict. The client must fully understand how their attorney’s representation of another party could potentially impact their own patent strategy and the scope of their intellectual property rights before they can validly consent.”
• “One point of concern is whether a solo practitioner can appropriately ensure that the best interests of each of the clients is protected. Conversely, practitioners in larger firms can explain to their clients that the other matter may be handled by a separate team, and include an ethical screen. Moreover, the division of labor between teams also prevents the imputation of the duty of disclosure. That is, while conflicts are imputed to others within the firm under 37 C.F.R. § 11.110, the duty of disclosure is personal to those substantively involved in the preparation or prosecution of that application.”

Above the Law notes: “Skadden Advises Intel On Trump Deal, Because What Are A Few Obvious Conflicts Among Friends?” —

• “Intel just agreed to give the federal government a roughly 10 percent ownership stake. It’s reportedly a common stock deal that binds the federal government to vote with the board unless the board is voting to undermine the deal itself. The deal is a payoff for the CHIPS Act, a $280 billion funding authorization to boost the domestic semiconductor industry. The Biden administration pushed for the funding, Trump pushed for the vig. Theoretically, the equity stake belongs to the government and not Trump personally, but we thought that about Air Qatari One too.”
• “The company needed lawyers to protect its interests in making such a consequential deal, so it turned to… a law firm that agreed to give Trump $100 million in free gifts in exchange for settling an attack on their ability to stay in business. It’s the sort of fact pattern a professional responsibility professor couldn’t put on an exam or they’d be laughed out of the academy: a sophisticated client, a well-heeled firm, and a high-stakes extortion effort.”
• “To be honest, I’ve always thought deals like this made a lot of sense. The federal government took an ownership stake in GM in exchange for its bailout during the Obama administration. As a consequence, when the manufacturer came back, taxpayers were much better off than when they went in. For all the scare-mongering over socialism, the American economic system already rests on capitalistic gains and socialized losses. Taking an equity stake lets the taxpayers in on the gains too. It also helps avoid ‘picking winners and losers’ if the beneficiaries of government cash have to share a slice of their gains with the public that their better managed competitors don’t.”
• “Intel is not a mom-and-pop cobbler blissfully unaware of its lawyers’ dealings. It’s a sophisticated party that knew Skadden is $100 million in hock to the Trump administration. Indeed, it likely counted on it.”
• “The Trump administration walked up to Intel and said, ‘nice little funding authorization you got there… shame if something happened to it,’ and Intel immediately turned to lawyers who already surrendered to a similar threat for advice. It’s not because they were thoroughly impressed with Skadden’s brilliant negotiation there (if they were impressed by that… then maybe it explains why they needed a bailout).”
• “And Intel is exactly the sort of client the rules trust to make an informed waiver.”
• “While professional responsibility focuses primarily on the client, it’s also — at least somewhat — a matter of protecting public trust in the profession. Just because the client can waive a conflict doesn’t mean it’s good for the legal industry to have firms owing the government still unfulfilled nine-digit settlements while ostensibly negotiating against it. That’s how the public loses its already rock bottom faith in lawyers.”
• “Ideally, ethics rules shouldn’t just exist to keep dumb clients from getting tricked. They should also keep smart clients from normalizing corruption.”

With our thanks, as always, here are some of the latest findings of Bill Freivogel:

Changing Firms; Law Clerk (posted August 19, 2025) Moreno v. Bosholm, 2025 WL 2371118 (4th Cir. Aug. 15, 2025).

• This is the appeal of a North Carolina district court medical malpractice case. 95+ percent of the opinion deals with liability and evidentiary issues. The defendant-doctor moved, in the appellate court, to disqualify the plaintiff’s lead appellate lawyer because she belatedly learned the appellate lawyer clerked for the trial court judge while this case was being litigated below.
• In opposition, the appellate lawyer averred she had no role whatever in, and learned nothing about, this case when it was before the trial judge. In this opinion the appellate court denied the motion to disqualify, noting the “personally and substantially” language in North Carolina’s Rule 1.12(a). The court noted several other jurisdictions had broader rules flatly preventing the subsequent representation regardless of what the clerk learned.

Derivative Action (posted August 15, 2025) Boyd v. Lopez-Vidal, 2025 WL 2322439 (D.P.R. Aug. 12, 2025).

• Plaintiffs Boyd and Lassers (“Plaintiffs”) filed this case against various individuals and entities seeking relief for themselves as well as derivatively for companies Biomass and GFC (“Companies”). The Becker firm (“Becker”) represents Plaintiffs. Lawyer Abesada (“Abesada”) represents Companies. Becker seeks an order allowing it to represent Companies as well as Plaintiffs and removing Abesada as lawyer for Companies. Other parties, including Companies, objected.
• In this order the court denied Becker’s requests. First, the court noted Becker would have a conflict of interest because Companies had been taking positions adverse to Plaintiffs. Second, Becker could not get adequate conflict waivers from Companies because of the terms of a controlling Operating Agreement and the alignment of the corporate officials needed to consent.
• [Our [Bill’s] note: We are not certain we completely grasp what is happening here. The most frequently recurring conflict issue in derivative actions is whether the lawyer for the accused wrong-doers can also represent the corporate entity involved. If you have a derivative case where the companies involved are speaking for themselves, apart for the other defendants and plaintiff(s), you might want to check it out.]

Joint Representation; Standing (posted August 15, 2025) Alomran v. Marriott Corp., 2025 WL 2337082 (S.D. Fla. Aug. 13, 2025).

• Plaintiff moved to disqualify Lawyer because Lawyer was representing both Mariott and its current and former employees. In this opinion the magistrate judge denied the motion to disqualify. Other than conjecture, Plaintiff could not show how any of the defendants were adverse to each other. Moreover, Plaintiff lacked standing to bring the motion, because “the fair administration of justice” was not in question.

Current Client; Lawyer’s Personal Involvement (posted August 14, 2025) Hipes v. Lozano, 2025 IL App (1st) 240601 (Ill. App. Aug. 5, 2025).

• Divorce case. This opinion has to do with the terms of a daughter’s custody. It also deals with disqualification of one of H’s lawyers, H’s mother (“Mother”). The trial court disqualified Mother. In this opinion the appellate court affirmed the disqualification. One basis of disqualification was Rule 3.7 (lawyer as witness). We rarely write about Rule 3.7, but note Mother was involved in the lot of H’s conduct. Another basis of disqualification was Rule 1.7 (material limitation). H’s success, or lack of success, in the case would affect Mother financially. Mother’s ability to interact with her granddaughter was also at play.

Joint Representation; Third-Party Action (“Cross Claim”) (posted August 14, 2025) Gilliland v. Venepally, 2025 WL 2306883 (D.N.M. Aug. 11, 2025)

• Plaintiff is suing on a note executed by Borrowers 1, 2, and 3. Plaintiff is suing only Nos. 1 and 2. Nos. 1 and 2 have filed a cross-claim against No. 3. Lawyer is representing Plaintiff and No. 3. Nos. 1 and 2 have moved to disqualify Lawyer. In this opinion the court denied the motion to disqualify. First, the court held Nos. 1 and 2 lack standing because they were never clients of Lawyer. Second, Plaintiff and No. 3 have executed waivers of any conflict Lawyer may have. Last, the court noted Lawyer and No. 3 were friends and Lawyer is not necessarily adverse to No. 3, given the circumstances of the parties here.

“Client’s Ex-Employee Sues Kelley Drye Over Data Breach Notice” —

• “Kelley Drye & Warren has been hit with a proposed class action in New York state court by one of its clients’ ex-employees, after the firm allegedly suffered a data breach in March. The complaint alleges the firm sent an ‘intentionally confusing’ notice to those whose information was exposed to hackers to downplay the severity of the incident.”
• “Ratna Kanhai said in her Tuesday complaint in Manhattan Supreme Court that she has received ‘a dramatic increase in scam and phishing texts and calls’ since the firm discovered an unauthorized and unknown party was accessing its network. But she did not receive notice of the breach until May 27. That notice was insufficient, Kanhai said in her complaint, adding the proposed class is ‘several thousand’ members.”
• “‘Defendant’s breach notice obfuscated the nature of the breach and the threat it posted—refusing to tell its current and former clients, employees and others how many people were impacted, how the breach happened, when it was discovered, or why defendant delayed notifying victims that cybercriminals had gained access to their highly private information,’ the complaint states.”
  Representatives for Kelley Drye did not immediately return requests for comment about the suit.”
• “Kanhai’s complaint doesn’t identify the Kelley Drye client where she worked or her role there.”
  An attorney for Kanhai, Linda Joseph of Schroder, Joseph & Associates, declined to comment and referred Law.com to her co-counsel on the case, Raina Borrelli of Strauss Borrelli, who did not immediately return requests for comment.”
• “On March 21, new amendments to New York’s Shield Act, also known as N.Y. General Business Law Section 899-aa, took effect and modified the Empire State’s disclosure requirements for data breaches. Those new amendments in part set the requirement that persons or business owners who suffer breaches must notify New York residents like Kanhai within 30 days of when the breach was discovered.”
• “According to Kanhai’s suit, Kelley Drye discovered its breach in March but did not send notices until May 27. The suit does not specify what day in March the breach was purportedly discovered. The suit does not make claims under the shield law.”
• “The complaint asserts six claims against Kelley Drye on behalf of a proposed class comprised of all United States residents whose information was exposed in the March breach. Those claims are for negligence, negligence per se, breach of implied contract, unjust enrichment, invasion of privacy and breach of fiduciary duty.”
• “All of the claims arise from Kelley Drye’s use, storage and allegedly improper protection of the personal information it collects as part of its course of business, according to the complaint. Kanhai seeks damages in an unspecified amount along with pre- and post-judgment interest, attorney fees, and injunctive relief against the firm.”

Taking a moment out of our regular updates to let the many of you who have asked (and those that haven’t but want to nudge me) that yes, the 2025 risk compensation survey is kicking off soon! Read below for a bit of a preview, and for your chance to influence and support this year’s exercise.

This will be our fourth year conducting a salary survey. In 2022, we saw 80+ participants, providing data on 375+ individual risk staff and leadership positions. Last year, we saw 138 participants sharing data on 730 positions. That’s great growth, no matter how you slice it. This year, I hope we’ll continue the trend and surpass last year’s metrics.

In that spirit, here are some modifications and experiments I have in mind for 2025:

1. Participation: This survey works because firms and individuals participate. So please do!

I’m going to be more of a stickler this year on responsiveness. This is really just applicable to managers who oversee staff reports. If that’s you, please do include data on all of your reports.

This year there will be a question about team size. (So, if the size of your data set seems a bit small for your firm size, I may circle to check that we got complete data.)

(I’d love to do more about correlating team and firm sizes, but there are some many related factors in play it’s hard to do an apples-to-apples comparison… Still, maybe we’ll see some interesting trends? Or maybe we need a future survey?)

2. Data Collection / Presentation: I sincerely appreciate everyone who has written in with thoughts, ideas, and encouragement about the survey (and the blog in general)! Here are a few likely changes coming, based on some of those reader notes:

• We’re going to continue to include our Canadian readers, but will likely break out that data completely, as that market trends a bit differently from the US.
• (UK would be great, and I know we have a contingent of overseas readers, but I don’t think it’s quite large enough across all roles and segments to get us a complete picture. Maybe a few risk leaders out there want to help rally their peers after this round concludes?)
• Data and response levels permitting, we’ll do some percentile analysis, supplementing our standard average + standard deviation.
• We may include an optional input to flag “senior” roles in key categories like “conflicts analyst.” While the survey collects titles, it doesn’t break out data to this degree, or attempt to normalize after the fact.

3. “New York, New York”: Speaking of requests, Hello New York readers! You folks really, really do want to get data on just New York (city). >smile<

• There will be a new, optional field for “city/state” in the survey and if enough people do their part, we’ll have some fresh and new data for you.)
• We will still have and use the five general US regions (+Canada) as geographical regions to present data. Those of you who have taken the survey know that it lets managers/participants self-select on geography. (I leave it to you all to decide issues like where the Midwest starts and ends, because that and other hair-splitting geographical questions are too risky for me to wade into…)

4. Q&A section: Last year’s big new experiment was an optional Q&A section for risk leaders. Dozens of you participated in that and I hope you were were as fascinated by the responses as I was. That contingent submitted over 180 comments, generating 22 pages of reading.

Those questions came from me and several risk leaders who weighed in. I’m sharing them below, as I’m definitely open to input on what questions folks might want to see this round. So, if you have thoughts, let me know!

1. What are your top challenges tied to risk staff recruiting, training, and career development?
2. What are your goals for risk staff recruiting, training, and career development in 2025?
3. To what extent are you adding new/emerging roles to your risk organization (e.g. OCG, AI related)? If new roles aren’t yet defined or funded, which would you like to add if possible?
4. Are there staffing model changes you’re pursuing or would like to pursue moving forward?
5. What is your firm’s remote work strategy for risk? What challenges/opportunities, if any, does remote work present for your firm and its staffing strategy?
6. What risk initiatives, if any, is your firm focusing fresh investment in new staff, new resources for 2025?

Other survey questions, ideas, and feedback also welcome at this point. If you’re reading this in your inbox, just responding to that email should reach me. Otherwise, feel free to use the form on the blog website.

And if you took the survey last year, in addition to announcing the 2025 exercise here on the blog, I’ll be sending a direct email note when things kick off.

Thank you. And stay tuned!

David Kluft asks: “Can I be adverse to a prospective client if all the information I received from her was publicly available?” —

• “A Tulsa public bus driver wanted to file a discrimination complaint against the transit authority. She visited an OK law firm and showed them her EEOC right-to-sue letter and the same paperwork she had showed to her employer and filed with the EEOC. The firm declined the case and she sued pro se, also naming her union as a defendant.”
• “When the same firm appeared on behalf of the union defendant, she moved to disqualify the firm pursuant to Rule 1.18 (prospective client conflicts).”
• “The Court denied the motion, finding no conflict. Because the information the firm received from the prospective client was “generally known” already to all parties, the court found it could not possibly be ‘significantly harmful’ under the rule.”
• Decision: here.

“Ethics Opinion 1283: Attorney’s Referrals to Title Abstract Company Owned by Referring Attorney” —

• “An attorney who owns an interest in a title abstract agency that brokers title insurance may not simultaneously (i) represent a client in a real estate transaction and (ii) act as agent for a title insurance underwriter in the same transaction, unless the attorney performs purely ministerial functions for the title agency and does not negotiate on behalf of the underwriter.”
• “Under Rule 1.10(a) (as amended effective January 1, 2025), whether the attorney’s conflict (which is based on a financial interest in the title abstract agency) will be imputed to the whole firm depends on whether there is a ‘significant risk that the representation will be materially limited or that the independent professional judgment of the participating lawyers in the firm will be adversely affected.'”

“EEOC data requests to law firms were not mandatory, agency says in court filing” —

• “A letter to 20 BigLaw firms seeking detailed information about diversity-program applicants and other attorney job seekers constituted ‘informal information gathering’ rather than a mandatory demand, according to a court filing by the Equal Employment Opportunity Commission.”
• “Most of the 20 law firms did not provide any information requested by the EEOC, and those that did reply did not include identifying information about any specific individual, according to the July 31 EEOC filing seeking to dismiss a lawsuit challenging the information gathering. Three anonymous law students are the plaintiffs.”
• “The March 17 letters by EEOC acting chair Andrea Lucas expressed concerns about the firms’ diversity hiring practices, saying they may amount to discrimination that violates Title VII of the Civil Rights Act of 1964.”
• “The student plaintiffs had alleged the EEOC acted beyond its authority when it demanded sensitive personal information about the law firms’ applicants and employees dating back six to 10 years. The students applied to or worked at one or more of the law firms.”
• “In their Aug. 14 reply to the EEOC’s motion, the student plaintiffs say the EEOC defendants ‘attempt to minimize their conduct—an implicit acknowledgment that they have overstepped.'”
• “According to Law.com, Goodwin Procter ‘is the only law firm known to have submitted voluminous hiring data to the EEOC.’ The firm did not provide applicant names, however.”

“Burford Aims to Buy Stakes in US Law Firms, Rival Private Equity” —

• “Burford Capital is eyeing new territory after investing in lawsuits for nearly two decades: The litigation funder wants to buy stakes in US law firms. Burford is pitching the idea of purchasing a minority stake to several US law firms, according to Travis Lenkner, its chief development officer. The funder is angling itself as an alternative to private equity companies already backing some firms through deals to provide back office services. “
• ‘Burford is probably the most natural investor in this space,’ Lenkner said. ‘We’re not structured predominantly as a private equity fund, so we can be a very patient, permanent investor in a structure like this.'”
• “With $3 billion in market capitalization, publicly traded Burford is big enough to pull its weight in a space mostly inhabited by private equity giants, said Lenkner.”
• “‘Our size and capital structure I think gives us a relative advantage when you’re talking about other investors from within the legal finance space as compared to broader private equity,’ he said.”
• “Lenkner would not specify the number of law firms Burford is in talks with but said it’s a ‘significant pipeline’ for the company. The firms include leading larger firms as well as boutiques, he said. The plan was first reported by Financial Times.”
• “Lenkner said potential conflicts—such as a firm with Burford investment also representing defendants in a Burford-funded case—would be addressed at the beginning of any arrangement. Burford would be a passive minority investor in a service company, meaning it wouldn’t have access to confidential information in any cases, he said.”
• “A few states in recent years have loosened strict restrictions on outside investment in law firms, opening a path for litigation funders, private equity firms, and others to pour money directly into firms. Big Four consultancy KPMG in February won approval to open a US law firm under Arizona’s alternative business structure program. Utah, Puerto Rico and Washington, DC also have relaxed restrictions on non-lawyer ownership of law firms to varying degrees.”
• “In states that don’t allow nonlawyer ownership, some capital providers have used ‘managed service organizations’ as workarounds. Law firms are split in these arrangements, with the legal work flowing through a traditional lawyer-owner operation and the MSO controlling firm assets and selling back-office services to the law firm for a fee. The model has traditionally been used to allow outside investors into accounting firms and medical practices.”
• “Lenkner says Burford is exploring both options, but the MSO structure might be more accessible for national law firms.”
• “‘This is for us an incremental step, but an exciting one,’ said Lenkner. ‘It’s where the profession is going and the question is not whether these transactions will happen, it is how quickly and with whom.'”

“Law Firm MSOs and Legal Ethics Regulations: Lessons from Texas Opinion 706” —

• “The Professional Ethics Committee for the State Bar of Texas (Committee) in February 2025 issued Opinion No. 706, the first ethics opinion that squarely addressed the use of law firm management service organizations (MSOs).1 The Opinion is unique for two reasons. First, it provides guidance for the use and operation of law firm MSOs. Second, in doing so, it implicitly acknowledges the permissibility of such a structure. In the authors’ work in the law firm MSO space, we are asked nearly daily about the ethical permissibility of the relationship between law firms and MSOs. We, like the State Bar of Texas, believe that these relationships can (and currently do) exist entirely within the bounds of the legal regulatory structure – but only when properly planned, controlled and maintained.”
• “By way of background, law firm MSOs function much like the MSOs that have appeared in other professional service industries. As discussed in a previous Holland & Knight article, MSOs exist to assist professional service organizations – such as healthcare companies, accounting companies and law firms – with the administrative challenges that are associated with running those organizations. ‘In a typical MSO arrangement, the professional retains and exercises control over all professional aspects of the relevant practice [while] … the MSO, which is often owned by investors, provides all of the administrative services and nonprofessional personnel needed to support the practice, pursuant to a long-term management services agreement.’2 The aim of the model is to allow the professional to focus primarily on the professional relationship with their client, while the MSO handles the administrative burdens of the business.3 This structure allows an MSO to take advantage of innovating and professionalizing the business needs of the professional organization.4 This dual structure is becoming increasingly popular in the legal profession. Lawyers recognize the benefits of being able to hand off the ‘business of law’ while keeping control over the ‘profession of law’ – the actual serving of clients in an attorney/client relationship.”
• “While the law firm MSO structure goes to at least 2006,5 there are few people openly discussing these models in the legal profession and even fewer people or organizations writing about them. That is one of the reasons that Opinion No. 706 is so interesting to those of us practicing in the law firm MSO space: It is the first ethics opinion to provide guidelines around properly structuring law firm MSOs. More interestingly, the Committee implicitly approves the use of those very structures.”
• “Perhaps the most nuanced portion of Opinion 706 involves the situation where a lawyer refers his or her clients to a company in which the lawyer has an ownership interest.10 In this case, the company is not merely an independent service provider – it becomes part of the lawyer’s financial landscape. This dual role raises conflict concerns under Rule 1.06 and triggers the business-transaction requirements of Rule 1.08.”
• “Here, Opinion 706 draws a careful but firm line: Where a lawyer refers a client to a law-related business in which the lawyer has a personal financial interest,11 the referral constitutes a business transaction with the client.12 As a result, the lawyer must comply with the full set of requirements in Rule 1.08, including:
  • ‘full disclosure of the terms and nature of the transaction
  • a recommendation that the client seek independent counsel
  • informed, written consent from the client”
• “These safeguards ensure that the client understands the lawyer’s dual role and the potential for divided loyalties. The mere fact that the referred services are not strictly ‘legal’ in nature does not eliminate the duty of disclosure. Indeed, the Committee notes that, under the facts presented, it is unclear whether 1) the lawyer’s law firm will be using the Company’s services in the representation of the law firm’s clients or 2) the Company’s services will be engaged in general law firm operations or management. Ultimately, it concluded that in situations that implicate the former, ‘Lawyer A’s investment in the Company may create a conflict of interest and may require written disclosure and informed consent under Rules 1.06 and 1.08.'”
• “Importantly, the opinion does not prohibit such referrals outright (which is consistent with the view other jurisdictions have taken on the increasingly common practice). Rather, it insists that lawyers treat them with the seriousness and transparency required when engaging in any financial transaction with a client.”
• “As the legal marketplace continues to evolve, lawyers must remain vigilant about the ethical implications of innovation. Structuring law firm MSOs can be complicated, and an attorney must be careful to ensure that the needs of attorneys, investors and, most important, clients are met. While acting only as persuasive authority, Opinion No. 706 confirms that, when structured correctly, law firm MSOs are a viable option for lawyers, investors and service providers.”

“Firm’s Failed Tech Venture Foretells Big Law’s AI Sales Struggle” —

• “Norton Rose launched a Chicago office in 2022 with a lofty target: the firm and a tech company owned by a newly recruited partner would introduce 150 clients to a new legal workflow management tool called Proxy.”
• “Three years later, the relationship didn’t record a single sale to a firm customer. The reasons for the failure are laid out in dueling lawsuits filed by Norton Rose and the company, NMBL Technologies, led by now ex-partner Daniel Farris.”
• “The fight comes as firms are making more tech investments than ever, diving headfirst into buzzy artificial intelligence tools. Many of those investments are bound to fizzle out, but consultants expect successful ventures will mimic Norton Rose’s plan: sell tech-enabled legal products rather than traditional billable hours—a new challenge for law firms.”
• “‘Partners are good at selling legal services; selling products is not in their DNA, and that makes it hard,’ said Jeroen Plink, chief operating officer of consultancy LegalTech Hub. ‘Products are typically sold by product salespeople. Most law firms don’t have product salespeople.'”
• “There’s a long history of Big Law ‘innovation’ efforts promising far more than they deliver, but the Norton Rose-Proxy episode offers a rare peak behind the scenes of the concomitant internal fallout.”
• “NMBL argues that Norton Rose’s top leadership never invested in the company the way it promised and threw up bureaucratic roadblocks that made sales of the service impossible. It wants $15 million to make up for the botched rollout.”
• “Norton Rose, meanwhile, says clients weren’t interested in the tool, noting that an e-mail campaign marketing free trials to clients didn’t receive a single response. The law firm wants as much as $250,000, saying it never would have invested in the tool had it known how poorly it was going to perform in the market.”
  Innovative Focus”
• “Cody was heavily involved in the negotiations to recruit Farris and to partner with NMBL, according to the company’s lawsuit, which catalogues a nearly year-long recruiting effort that involved back-and-forth negotiations over Proxy.”
• “One of the hold-ups was over language for getting 150 Norton Rose clients to sign up for the new technology. The law firm didn’t want to sign up 149 clients and be on the hook for not performing, the NMBL complaint says. So the two sides settled on language that made the number a soft target based on Norton Rose providing ‘commercially reasonable good faith efforts to introduce’ that many clients to the product, according to a copy of the agreement.”
• “NMBL says Norton Rose didn’t meet even that less-burdensome requirement—or other aspects of the agreement.”
• “The firm ‘never had any actual interest in investing in and championing Proxy,’ said Andrew Patton, an attorney representing NMBL. Norton Rose used the Proxy agreement to recruit its cofounders to the firm ‘so that NRF could pursue traditional practices,’ he said.”
• “After original discussions that envisioned Norton Rose introducing all new clients to the products, the firm’s leader later insisted that relationship partners would decide whether to do so, according to NMBL’s complaint.”
• “Even after Farris developed training videos and white papers demonstrating the product, as few as 5% of the firm’s lawyers accessed the materials, NMBL’s complaint says. The firm never hired a ‘client success manager’ as the agreement envisioned.”
• “‘The allegations made by NMBL are without merit. We will vigorously pursue this matter, which should be resolved in Texas’ (where the firm’s suit was filed), a Norton Rose spokesperson said.”

Another from David Kluft: “Should the judge’s first cousin be once removed?” —

• “An SC Circuit Judge was assigned to a court where the judge’s first cousin’s firm frequently practices. The judge is recusing from the cases litigated by the cousin, but asked the Advisory Committee on Standards of Judicial Conduct if recusal was required for all cases involving the cousin’s firm?”
• “The Committee opined that under the SC rules, judges have to recuse when a litigant is within the ‘third degree of relationship’ to the judge, which includes parents, kids, grands, nieces, nephews, uncles and aunts. Cousins are not within this category, and neither are other lawyers at a cousin’s firm, so recusal is not required, but recusal may still be appropriate if the relationship is such that the judge’s impartiality could be questioned.”
• Decision: here.

“Former Highland Capital CEO Seeks Judge’s Recusal, Citing Her Novels as Evidence of Bias” —

• “In a unique twist to an ongoing legal battle, the former CEO of Highland Capital Management, James Dondero, has leveraged the novels authored by a federal judge as part of his latest effort to seek the judge’s recusal from a case central to the company’s contentious bankruptcy proceedings. Dondero argues that the novels reflect potential biases that could adversely affect the fairness of the judicial process.”
• “The issue at stake is the involvement of U.S. Bankruptcy Judge Stacey G. C. Jernigan, who has written several novels under the pseudonym L. A. Starks. Dondero claims that the characters and themes in Jernigan’s work suggest a predisposition that could taint her rulings in the complex financial disputes surrounding Highland Capital. He posits that specific character portrayals and plot lines might not be coincidental and raise reasonable doubts about impartiality.”
• “This unusual argument brings to the fore questions about the intersection of personal expression and judicial responsibility. While judicial recusal requests are typically grounded in concrete financial or personal interests that could lead to a conflict of interest, Dondero’s appeal introduces the interpretation of fictional literature as potential evidence in evaluating a judge’s ability to remain unbiased.”
• “The effectiveness of such an argument remains to be seen, as legal experts are divided on whether references in fiction should impact a judge’s standing to preside over a case. Some view this approach as a strategic maneuver designed to prolong proceedings, while others consider it a legitimate concern. The scrutiny of private writings of public officials is not entirely unprecedented, but it is rare in the context of judicial recusal controversies.”

“Judge sets hearing in bid to remove Mavis lawyers from limo cases” —

• “The judge overseeing civil litigation in the deadly 2018 limousine crash in Schoharie will conduct a hearing next month to determine whether the firm that represents Mavis Discount Tire, Yankwitt LLP, should be removed from the case.”
• “Brian Premo, who represents one of the two plaintiffs still suing the repair chain for work done on the limousine before the crash, wants the lawyers for the firm disqualified.”
• “The White Plains law firm has been leading the legal defense of Mavis in the civil courts. The families of the 20 people killed in the Oct. 6, 2018, crash filed wrongful death lawsuits within a few months of the tragedy. The civil cases were filed in several different counties, but acting state Supreme Court Justice Denise Hartman was assigned to coordinate the collection of evidence and the taking of depositions from witnesses.”
• “Mavis struck legal settlements in all of the civil lawsuits that Hartman has been overseeing, except for two. In each case, it is believed that Mavis agreed to pay roughly $2.25 million per victim.”
• “Lawyers for the Ukaj and Lisinicchia estates, led by Albany attorney Premo, have not settled with Mavis and are seeking to amend their lawsuits to include evidence the State Police collected as part of its investigation into the crash.”
• “They argue that internal Mavis security video recordings show that Mavis mechanics knew that the brakes in the Excursion were dangerous and would stop working at times, contrary to how the firm’s actions were portrayed at the May 2023 criminal trial of Nauman Hussain, who oversaw the limousine company founded by his father. Hussain, 35, was the only person ever charged with a crime in the case. He’s serving a prison term of 5 to 15 years after a Schoharie County jury last year convicted him of 20 counts of second-degree manslaughter. “
• “Mavis, through a spokesperson, declined to comment. Benjamin Allee, the Yankwitt partner who is leading the case, is a former criminal prosecutor in the U.S. attorney’s office for the Southern District of New York. He did not respond to a detailed request for comment. In the past, the law firm has said it did nothing to merit disqualification.”
• “Premo and Francis Young, a downstate attorney who represents the Lisinicchia estate, filed a motion with Hartman seeking the disqualification of Yankwitt from the case.”
• “Hartman has granted a request to hear oral arguments from the lawyers on Sept. 11. Premo and Young allege that Yankwitt attorneys had assisted prosecutors and police so much in the criminal investigation, including with arranging interviews with former Mavis employees, that they could not continue to represent Mavis in the civil cases.”
• “The limo departed from Amsterdam and was making its way to a brewery outside of Cooperstown when its brakes failed on a steep hill. “
• “In his motion to disqualify Yankwitt, Premo alleges that Allee and Yankwitt were given a leg up in negotiating the Mavis financial settlements with the families from their work on the criminal case. He also alleges that former Mavis mechanics who worked on the limo before the crash lied on the stand. Premo says after reviewing the internal videos from the Mavis store in Saratoga Springs, he believes that Mavis mechanics were aware the stretch limo’s brakes had serious mechanical issues and the pedal would drop to the floor at unexplained times, making the limo’s brakes useless.”
• “Hussain never had the limo properly inspected by the state Department of Transportation and lied on state Department of Motor Vehicles registration forms in order to conceal his use of the vehicle for weddings, proms and parties. “
• “In his most recent filing in the motion to disqualify Yankwitt, Premo points out that during Hussain’s trial, former Mavis mechanic Chikezie Okoro told Schoharie Country District Attorney Susan Mallery on direct examination that he never got under the Excursion when it was brought into the shop for work because the shop didn’t have the correct lift for a limo that size. The Excursion weighed about 6 tons.”

“Jackson Walker Settles Judge Romance Claims For $485K” —

• “Jackson Walker LLP has reached a $485,000 settlement with two former bankruptcy clients to resolve a dispute related to the concealed romance of a former partner and former Texas bankruptcy judge David R. Jones, according to a motion filed Friday.”
• “The settlement would resolve claims between Jackson Walker and two related offshore drilling companies, Seadrill Partners LLC and Seadrill Ltd., which hired Jackson Walker to handle their bankruptcy that concluded in 2021 and was overseen by then-judge Jones. The $485,000 settlement would recover more than half of the fees awarded to Jackson Walker in the underlying matter.”
• “‘The settlement amount provides a significant recovery for Seadrill, eliminates the litigation risk associated with continuing to litigate the claims, and eliminates the need for continued attorney fees and costs (including U.S. Trustee quarterly fees) associated with the litigation,’ the companies wrote in their motion for approval of the settlement.”
• “The settlement comes just 10 days after the U.S. Trustee and Jackson Walker told the judge overseeing the instant dispute, U.S. District Judge Alia Moses, that the parties had not been able to reach a deal by her deadline of July 15 and a few months after Seadrill participated in another mediation that failed in the spring.”
• “The Seadrill companies are two of many former Jackson Walker clients whose fee awards to Jackson Walker could be vacated in an action brought by the U.S. Trustee’s Office following revelations of a secret romantic relationship between Jones and former Jackson Walker partner Elizabeth Freeman.”
• “Although Freeman no longer worked at the firm when news of the relationship became public, she was involved in over 30 cases before him while during the relationship. Jones resigned in October 2023 amid an ethics investigation. The controversy has spawned accusations that Jones unjustly favored parties represented by Jackson Walker when they appeared in his courtroom.”
• “The trustee’s office has argued that judgments or orders approving the law firm’s fees in a slew of bankruptcy cases should be rescinded in light of the undisclosed relationship.”

“Trump Got His Judge, But Bove Must Sit Out the President’s Cases” —

• “Emil Bove, who recently was confirmed in a 50-49 Senate vote to be a judge on the US Court of Appeals for the Third Circuit, can and legally must be disqualified from hearing cases involving challenges to President Donald Trump’s actions and policies.”
• “Trump is clearly counting on Bove’s personal loyalty to rule in his favor in any cases that come before Bove. His expectation was confirmed when he posted on Truth Social: ‘He will end the Weaponization of Justice, restore the Rule of Law, and do anything else that is necessary to MAKE AMERICA GREAT AGAIN. Emil Bove will never let you down.'”
• “But Trump may have been too clever by half. Federal law requires judges who have a personal relationship with a party to recuse themselves from cases. The president may have used a judicial appointment slot to appoint an appeals court judge who will be barred from hearing Trump-related cases, just the opposite of what he wanted.”
• “Justices and judges whose impartiality might ‘reasonably be questioned’ must disqualify themselves from proceedings, under 28 U.S. Code Sec. 455. The code includes a litany of reasons a judge must be disqualified, including conflicts as vague as having ‘personal bias’ to specific instances of serving as an attorney for one of the parties or expressing a public opinion about the merits of the case they are hearing.”
• “Additionally, the US Supreme Court has been emphatic that due process of law, guaranteed by the Constitution, requires an impartial decision-maker.”
• “Bove was previously Trump’s private personal defense attorney in multiple criminal cases. In People v. Trump, Bove unsuccessfully defended Trump against 34 felony counts of falsifying business records as hush money to porn star Stormy Daniels.”
• “Trump then hand-picked Bove as principal deputy attorney general, a role in which he did Trump’s bidding at the Department of Justice. According to a high-level whistleblower, Bove told subordinate DOJ lawyers they may need to tell courts ‘fuck you’ if they don’t like courts’ decisions and instructed them to ignore court orders during a contentious legal battle in an immigration case. Bove has denied the accusations.”
• “At the DOJ, Bove sent memos to the acting FBI director instructing the FBI to ‘effectuate the termination’ of FBI employees involved in investigating and prosecuting Jan. 6 insurrectionists and directed the firing of numerous line prosecutors working on the cases.”
• “It is all but self-evident that Bove’s personal and professional loyalty to Trump demonstrates that his ‘impartiality might reasonably be questioned’ when it comes to matters involving Trump.”
• “Recusal isn’t optional. Both state and federal laws provide that judges are required to recuse themselves if grounds exist to do so.”
• “A judge may be subject to punishment for not recusing themselves, depending on the circumstances. If proper grounds for recusal did exist, and the judge was aware, there may be penalties levied against the judge for not doing so. Wrongful failure to recuse may also be grounds for appeal which could result in the case being dismissed or remanded for a new trial. If a judge refuses a recusal request, a party may move to have him recused.”
• “Because it’s unlikely Bove will agree to recusal, parties challenging Trump may need to regularly move for Bove’s recusal from cases involving Trump, citing reasonable questions as to Bove’s impartiality.”

David Kluft with another find: “If a judge is given an advisory opinion telling him to recuse, can he pretend there was no opinion and stay on the case?” —

• “A NY judge running for reelection was assigned a case being litigated by a member of his campaign committee, whose firm was holding fundraisers for the judge.”
• “Opposing counsel asked that the judge recuse. The judge contacted the Advisory Committee on Judicial Ethics, and the Committee issued an opinion telling him he was disqualified.”
• “The judge concealed the opinion and stayed on the case through the election. After he was re-elected, he revealed the opinion to the parties and declined to recuse anyway.”
• “Opposing counsel appealed and, of course, the Appellate Division reversed and remanded the case to a new judge. Public censure from the Commission on Judicial Conduct.”
• Ruling: here.

Actually, it’s a Double Kluft day, as he’s spotting all the interesting needles out there: “Can a lawyer testify as an expert witness in matters adverse to former clients?” —

• “A proposed CA ethics opinion would allow a lawyer ethically to testify as an expert adverse to a former client if it does not harm the client with regard to the matter in which the lawyer represented them; and if the lawyer does not disclose or use confidential information.”
• “Similarly, no ethical principal prevents a lawyer from representing a party after testifying against them as an expert (provided there is otherwise no conflict). Public comments to the proposed opinion are due August 18, 2025.”
• Read more and submit comments to the State Bar: here.

“Judge Won’t Recuse Over Past Work With DraftKings Counsel” —

• “A California federal judge presiding over a proposed class action against DraftKings regarding its fantasy sports games offerings rejected a request from the plaintiffs to recuse himself over concerns that an attorney for the defense has ties to the court.”
• “U.S. District Judge Charles R. Breyer acknowledged in his single-page Thursday order that Richard Patch of Coblentz Patch Duffy & Bass LLP was formerly a law partner of the court more than 25 years ago. The court has also hired the Coblentz Patch law firm in the past to do estate work.”
• “‘That said, the court does not automatically recuse in matters where Coblentz appears before the court, and there being nothing particular about this case that would warrant recusal, the court declines to recuse,’ Judge Breyer said.”
• “A trio of DraftKings customers filed a proposed class action accusing the sports betting operator of fraudulent behavior, saying its daily fantasy sports games and other contests circumvent California’s ban on sports betting.”
• “Fantasy wagers are no different from traditional proposition betting because they cannot control the outcome, the June 1 complaint filed by California residents Brandon Moore, ZhiCheng Zhen and Jonathan Smith said. Combined, the men have lost thousands of dollars on the betting app since May 2019, they claimed, saying they believed they were placing legal wagers.”
• “The plaintiffs recently filed with the court the July 3 official opinion of California Attorney General Rob Bonta saying that daily fantasy sports games violate the state’s penal code because they involve betting on sports, which is prohibited in the Golden State.”
• “In November 2022, California voters rejected two measures that would have legalized sports betting in the state. Proposition 27 would have legalized online sports betting for companies that could pay a hefty licensing fee and partner with a tribe. Proposition 26 would have opened the door for in-person sports betting at tribal casinos and a handful of racetracks across California.”