Risk Update

Conflicts and AI Updates — Appealed DQ Denial Denied Again, AI Error and Firm Reputation Risk, Protective Orders and AI Training Limitations

Posted Dan Bressler

“Connell Foley Survives DQ Attempt in Discrimination and Racketeering Case Against NJ” —

  • “For the second time this year, a federal judge has denied an attempt to remove Connell Foley as legal counsel for several state officials, including New Jersey Gov. Phil Murphy and Attorney General Matthew G. Platkin, in a discrimination and racketeering lawsuit.”
  • “On Thursday [12/11], U.S. District Judge Katharine S. Hayden denied the appeal of Blueprint Capital Advisors in its renewed motion to have the Roseland-headquartered law firm disqualified from its five-year-plus discrimination litigation against the state of New Jersey. U.S. Magistrate Judge Michael A. Hammer of the District of New Jersey had initially ruled in April that BCA’s conflict of interest claim against Connell Foley serving as counsel in the case had no merit.”
  • “While BCA argued on appeal that Hammer used an incorrect standard in evaluating whether an implied attorney-client relationship existed between its CEO Jacob Walthour and attorney Elnardo Webster II, Hayden concurred with Connell Foley that those claims were, again, without merit.”
  • “‘Viewing this record with the required practical lens, this court reaches the same conclusion Judge Hammer did, using the same objective, totality-of-the-circumstances test he correctly used. This record does not support plaintiff’s assertion that an implied attorney-client relationship existed between Webster and either plaintiff or its principal, Walthour,’ Hayden said.”
    In June 2020, BCA, a Black-owned asset management firm, filed a lawsuit in New Jersey federal court against top state officials and others, alleging systemic racial discrimination and retaliation. The firm claims that New Jersey and its Division of Investment excluded it from managing state funds, misused its proprietary investment model, and collaborated with private entities to undermine its business prospects.”
  • “BCA’s claim was that Webster, who handles commercial and real estate matters at Connell Foley, previously provided legal advice to a company principal, thus creating a conflict of interest requiring disqualification from the case. However, Connell Foley countered that out of caution, it had proactively screened Webster from involvement in the suit.”
  • “In his April ruling, Hammer contended BCA’s evidence fell short of the standard needed for either establishing an attorney-client relationship or disqualification, instead labeling them ‘vague assertions’ and a ‘spattering of conversations.’ BCA then appealed, taking issue with Hammer’s methodology in determining whether or not an attorney-client relationship existed between BCA and Webster.”
  • “Rather, Hayden explained, BCA’s claim was ‘based entirely on how Walthour saw the relationship and how he now characterizes his occasional conversations with Webster,’ while not offering ‘any evidence that would establish that Webster actually understood, or should have understood, the relationship the same way.'”
  • “‘At bottom, plaintiff has not shown any objective indicia reflecting that Webster understood the relationship the way Walthour did. While there was no one way plaintiff had to make that showing, the law is that plaintiff did have to make it. Plaintiff has not done so, and Judge Hammer made no error of law in reaching that conclusion,’ Hayden wrote.”

David Kluft asks: “Ok, so I misquoted some cases. Can we leave my big law firm out of it?” —

  • A GA lawyer from a” large law firm included a bunch of inaccurate citations and quotations in a motion to dismiss. The lawyer argued, and the Magistrate judge believed, that the inaccuracies resulted from poor manual notes and a failure to check citations, and not from AI use, and the lawyer announced certain remedial measures he would take in his practice going forward.
  • “The Court dismissed the underlying case, and issued some sanctions against the lawyer in the form of a small fine and a reprimand, but had ‘some lingering hesitations before entirely closing this matter,’ because the Court ‘was surprised not to hear from the Firm as to what procedures and training it employs … In particular, the undersigned was surprised that [such] a large law firm … did not already have paralegals, more junior lawyers, or other staff cite-checking submissions, and that an Order to Show Cause from a federal judge was required for such a commonplace step to be implemented in this case.'”
  • “The court ordered the firm to provide a sworn statement explaining these issues ‘and any other matters that the Firm wishes to explain.'”
  • “The firm promptly submitted an affidavit from the managing partner of its Atlanta office, which ultimately satisfied the court.”
  • Order and more detail: here.

He also asks: “Should our stipulated protective order prohibit the use of discovery to train AI?” —

  • “In a litigation in CA involving TikTok privacy policies, the parties stipulated to a protective order with a ‘Generative Artificial Intelligence’ section. The stipulation allows artificial intelligence to be used in the case to manage discovery, but prohibits the use of any confidential discovery materials to train, improve, re-train or develop AI models, and also prohibits such materials from being ‘submitted, uploaded, or otherwise provided to any AI … if such submission would result in use, potential access, or disclosure … to any individual’ not covered by the protective order.”
  • “Additionally, AI outputs based confidential materials are also considered confidential.”
  • Detail from the protective order: