Amy McClurg at Thomson Hine unpacks and analyzes this one: “Playing with Fire: Avoid Getting Burnt by the Unworthy Client” —

• “While perceptions and descriptions may vary, the term ‘unworthy client’ generally includes dishonest clients whose lawyers get entangled in their client’s web of deceit. Even reputable law firms can easily become entangled with dubious clients if they aren’t paying close enough attention. Not surprisingly, lawyers and firms caught up in these situations are at risk of getting brought down—and hard. A recent example comes from reports of a case settled in the Southern District of Florida which gives attorneys 38 million reasons to be more careful about taking on questionable clients.”
• “The [250+ attorney] firm’s client was an individual financial advisor associated with an investment company. The individual client had initially asked the firm to conduct due diligence on the investment company. After spending 20k in legal fees, the client told the attorney he did not wish to pay for any additional investigation—and so the attorney stopped its due diligence investigation. Had the lawyer continued to investigate—he might not be entangled in the mess that still remains today.”
• “The client later became heavily involved with the investment company, including raising $100,000,000 from investors. The client advertised to investors pointing to how reputable the attorney and law firm were—effectively using the firm to vouch for the integrity of their investment. More details emerged as the representation continued, and they weren’t good. The Company’s founder had been released from prison right before he started the company. He had served time for money-laundering. He apparently had created several fake names for himself, and hired a ‘reputation manager’ to obfuscate his criminal convictions online.”
• “But information about the founder’s past criminal history, his role in the company, and the company’s default rate, profitability and underwriting process wasn’t disclosed to the investors. Investments continued to be solicited until the company was placed in receivership. The resulting fraud loss was over $400,000,000. The founder eventually pleaded guilty to a RICO charge, securities fraud, tax crimes, and perjury and was sentenced to serve many years in prison.”
• “Unsurprisingly, a class action was filed against the Firm for its alleged role in the underlying scheme. The Plaintiffs claim the Firm aided and abetted the Company’s fraud by advising agent funds used to solicit investors in the company’s merchant cash advance loans, creating false and misleading offering documents that were disseminated to investors, and effectively performing as investment underwriters. The law firm denied liability but agreed to pay 38 million dollars in potential damages to settle—avoiding additional and very complex litigation.”
• “The lawyer against whom the allegations were targeted not only faced issues with the SEC but is also currently fighting disciplinary charges related to his entanglement with this client. The disciplinary petition included violations of Rules 1.1 (competence), 1.3 (diligence), 1.7 (conflicts), 4.3 (dealing with unrepresented persons), and 8.4 (misconduct) of the Pennsylvania Rules of Professional Conduct. It did not mention but could have also included violation of Rule 1.16 (failing to withdraw from a representation that results in a violation of law).”
• “Unworthy clients often use others, including their law firms, as pawns in their schemes. And just like the others, the clients often need to deceive their lawyers as well as their victims to accomplish their fraudulent goals. And they’re good at what they do. That is why lawyers need an objective list of signs or ‘red flags’ that will help them spot when a client is unworthy. Lawyers who ignore these signs in favor of the urge to take on another lucrative client are bound to get burnt. Law firms must implement ‘red flag’ policies and put the processes in place to enforce them otherwise they will be on the hook too. “
• “The bottom line is that lawyers need to learn and pay attention to who they are working with. Do your own research on the client until you are satisfied one way or the other. If the representation feels wrong, it probably is. If there is any uncertainty, discuss the potential representation with those in charge at the firm. There will always be more clients, but you’re never guaranteed another law license (or job).”
• “Not only should the red flag list be considered during the business intake process, but it should also be considered throughout the course of any representation as new facts or circumstances reveal themselves. But you must know what you’re looking for—which signs to spot.”

And, applicable to both starships and law firms, Brian Faughnan highlights: “The importance of knowing how things work” —

• “…the existence of a particular local rule that made a lot of difference in the outcome. But this particular story does provide sufficient underpinning for discussion of a larger topic of overall significance to the ethics rules when it comes to technology usage.”
• “The story involves the imposition of sanctions against a law firm for doing research about potential jurors using LinkedIn. It arises from federal court in the Northern District of California, it involves the imposition of sanctions against a fairly well-known [Am Law 50] law firm, and you can read the full opinion below:”
• “Now, it is worth stressing again that the court issuing the sanctions order had a standing order that specifically prohibited any use of LinkedIn for the purpose of research about prospective jurors. Thus, for this particular case, knowing how LinkedIn works wouldn’t matter.”
• “In any other context though, knowing the way that LinkedIn works is a helpful educational point about a practical application of what it means to need to have technological competence sufficient to comply with the language in the comment to ABA Model Rule 1.1 which says: ‘To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology . . . .'”
• “More than five, and fewer than ten, years ago I did a presentation on ethics issues and the use of social media that included a specific hypothetical about a lawyer who used LinkedIn to research the backgrounds of prospective jurors. I did that for two reasons at the time: (1) Tennessee’s RPC 3.5(b) prohibits a lawyer from ‘communica[ting] ex parte’ with a potential juror during a proceeding ‘unless authorized to do so by law or court order;’ and (2) many lawyers did not understand that unless they make changes to their settings in LinkedIn, other LinkedIn users are sent a communication through LinkedIn that you have viewed their profile.”
• “Thus, even absent the California judges standing order, using that platform to investigate information about a prospective juror, much less a seated juror, would present an ethical problem if you haven’t changed your settings so that the platform does not automatically send a communication to the person on your behalf.”
• “All of that being said, the standing order appears to be so strict as to be unreasonable. That judge appears to quite strongly believe that even a notification from LinkedIn that someone anonymously viewed your profile is problematic.”
• “If people post things on social media that are accessible to the public at large (rather than say restricted to ‘friends’ or ‘connections’ or whatever noun a platform uses as an equivalent limitation) then lawyers ought to be free to digest that information if they are trying to determine if someone should sit as a juror over their client’s case. If when that happens, the prospective juror gets a message that says: [person’s name] viewed your profile. That is one thing, and I agree that is sufficiently communicative to be a problem under Model Rule 3.5(b). If it just says that you got a profile view, or your profile was viewed by an anonymous user, or something else that doesn’t reveal who was looking, then that simply cannot be the kind of ‘communication’ the law or the ethics rules should prohibit.”
• “Nevertheless, the overall point remains relevant. Almost every technological tool has a variety of settings about things that happen when you use it if you don’t establish other defaults or invoke other settings. If you are a human being, you should probably familiarize yourself with how those work when using social media. If you are a human being who also is a lawyer, then if you are going to use such things as part of your representation of your clients, you have an ethical obligation to familiarize yourself with how those work.”