David Kluft asks: “Can I mediate a dispute about ownership of a company and then appear as counsel in a related dispute about the same company?” —

• “A TX lawyer mediated a dispute between a sister and brother over part ownership of an investment company. Later, an Investor sued the sister in a separate litigation, claiming that the terms of the settlement with the brother in the first litigation constituted a misuse of company assets.”
• “The mediator’s law firm appeared in the second case for the Investor, and the sister moved to disqualify the mediator under Rule 1.12 (neutral can’t represent party in same matter).”
• “Apparently, the mediator’s firm ran a conflict check before taking the case, but the sister had gotten married and changed her name in the interim, so they didn’t notice the conflict.”
• “The mediator’s firm argued they should not be disqualified anyway because it was not the same ‘matter’ (i.e., it was a different litigation), but the TX Court of Appeals disagreed, holding that what qualifies as a ‘matter’ under the rule depends on the facts and circumstances, and here it was the same matter because it involves the same company and even some of the same payments.”
• “The Court also found that the firm’s screening was inadequate, so the whole firm was disqualified. However, another firm that that had already appeared as co-counsel for the Investor alongside the mediator’s firm was not disqualified by imputation absent specific evidence it received information from the mediator.”
• Decision: here.

“Bradley Arant Facing Convicted CEO’s Malpractice Claims, Bid for Removal From Case” —

• “Bradley Arant Boult Cummings is facing charges of legal malpractice in Alabama from a disgraced former health care CEO who alleges the firm dually represented him and his former company while it worked to oust him and then ‘concealed the conflict for more than two decades.'”
• “Richard Scrushy, founder and former CEO of HealthSouth—a company now called Encompass Health—also wants Bradley removed as his counsel in a separate civil case dating from the early 2000s because of the alleged conflict. The move could lead to overturning a $3.2 billion verdict against him.”
• “Scrushy’s attorney, Johnathan Austin of Austin Law in Birmingham said in an interview Bradley was not involved in mere ‘concurrent representation’ of both parties. ‘This was Bradley Arant representing Richard Scrushy and then going and representing HealthSouth directly adverse to Richard Scrushy,’ Austin said.”
• “The malpractice case followed Scrushy’s filing of new motions in a civil case dating from the early 2000s in which Scrushy was found liable for $3.2 billion in damages related to a high-profile accounting fraud and bribery scheme that led to his ouster from his job and ultimate prison time.”
• “Scrushy wants Bradley removed as his attorney in the civil case, titled Wade Tucker v. Richard M. Scrushy, because he did not know the firm was representing him and HealthSouth until he discovered documents earlier this year that a now-deceased company official had in his possession, Austin said.”
• “Austin said Scrushy believes the firm knew about the conflict even as the firm was representing both him and HealthSouth while the company was accusing him of fraud, filing false corporate reports and making false statements in court.”
• “In 2003, Scrushy was accused of filing false corporate reports and making false statements in Alabama state court related to a multi-billion-dollar accounting fraud scheme at HealthSouth—which included an FBI raid of his office.”
• “He was later acquitted of fraud but then was charged in federal court with money laundering, extortion, racketeering, bribery and obstruction of justice related to charges he bribed then-Gov. Don Siegelman. Scrushy was found guilty of bribery and conspiracy to commit wire fraud in 2007, sentenced to prison, and released in 2012.”
• “However, while in prison, a civil case related to the HealthSouth accounting fraud led to him being found liable for $3.2 billion in damages—a case in which Scrushy now is wanting Bradley disqualified from representing him so the verdict could be overturned and the case reopened.”
• “In the Wade Tucker case, Judge Elisebeth French heard arguments in the disqualification case Nov. 13. Scrushy made motions to disqualify Bradley under Bar rules 1.7, 1.9 and 1.10 dealing with current and former clients and imputation of conflicts of interest, as well as rule 3.7 concerning attorneys not representing Bradley in the Nov. 13 hearing because they were necessary witnesses in the case, Austin said. The judge denied the rule 3.7 motion from the bench and has not ruled on the others, he said.”
• “In the malpractice case, Scrushy names as defendants the Bradley firm and firm partner Chris Glenos, retired partner Meade Whitaker, and ‘John/Jane Doe Partners 1-10’ who were ‘decision-making partners’ and ‘responsible for authorizing of concealing the conflicted representation.'”
• “Bradley was scheduled to file its answer Friday but convinced the judge to delay filing because the firm’s new lawyer in the case, Tabor Novak III of Starnes Davis Florie in Birmingham, needed more time to learn about it, Austin said.”
• “Scrushy alleges that Bradley lawyers in 1998 were hired to represent him and his interests but later began representing HealthSouth in 2002 ‘first on corporate matters, then in positions increasingly adverse to Mr. Scrushy.'”
  ‘Bradley never notified Mr. Scrushy of this dual allegiance,’ the complaint states. ‘Instead, it suppressed and concealed this conflict while benefiting from privileged access to [Scrushy’s] strategy and decision-making.'”
• “But an affidavit by the firm’s former partner, Whitaker, that was filed in the Wade Tucker case in August stated that he represented the firm in Scrushy’s personal real estate and trademark matters but said he was not part of the firm’s representation of HealthSouth as part of the fraud investigation.”

“Rule on Multidistrict Litigation’s First Steps Goes Into Effect” —

• “A new federal rule governing the first steps for multidistrict litigation is set to take effect Monday [12/1], the result of years of debate over the measure and what it should include.”
• “Multidistrict litigation now makes up well over half of all federal civil cases, with lawsuits that address product liability and other topics consolidated before one judge to avoid them being filed in different courts and resulting in potentially different pretrial rulings. The new rule, 16.1 under the Federal Rules of Civil Procedure, is meant to give judges and parties a framework to get those cases off the ground, while still giving them the chance to modify them as needed for each case.”
• “Those opening steps include an initial management conference to figure out pretrial proceedings. The rule also says parties should provide a report ahead of that conference to lay out their views on whether leadership counsel should be appointed in the case, and if so, what their roles should be.”
• “Parties should also tell the court their initial views on discovery in the litigation, how parties will share information about the factual bases behind their arguments, and the main factual and legal issues that are likely to come up, the rule says.”
• “Some lawyers told Bloomberg Law they had concerns about earlier drafts of the rule, saying too much rigidity would hurt the MDL process by forcing courts to follow steps that don’t fit all cases. The Judicial Conference’s Committee on Rules of Practice and Procedure unanimously approved a version that its authors said was meant to be adaptable.”
• “Some plaintiffs’ lawyers also testified that they thought too many topics were included in the list of items that could be addressed at the initial hearing. The advisory committee drafting the rule said it’s not meant to serve as a mandatory agenda that requires a view on each listed issue.”
• “Class action lawyers also told Bloomberg Law the rule seemed focused more on mass tort MDLs rather than their cases, which commonly involve data breaches, privacy, and antitrust issues.”
• “The rule has its supporters. Implementing initial steps in the cases gives a pathway for finding and dismissing claims that don’t belong in the litigation, said Alex Dahl, general counsel for the advocacy group Lawyers for Civil Justice, which has pushed for the new MDL rule.”
• “‘This rule should strongly discourage the filing of meritless claims and give courts and parties an effective mechanism for identifying and dismissing them at the early stages of a new MDL,’ Dahl said in a statement.”