Bressler Risk Blog

David Kluft notes: “If I settle a dispute with successor counsel, is the settlement agreement a “fee sharing” arrangement?” —

• “CO Law Firm A accused Firm B of poaching its employees and its clients, and threatened to sue. The firms settled their dispute by agreeing that Firm B would pay Firm A 35% of the fees recovered from the poached cases.”
• “Firm B later argued that the agreement was unenforceable because it did not comply with Rule 1.5(d), which allows fee sharing only if both firms take responsibility for the case and the client consents.”
• “The CO court held that because the firms were not really fee sharing, but rather were better characterized as predecessor and successor counsel, Rule 1.5(d) did not apply so the settlement agreement was enforceable.”
• Decision: here.

As well as: “If I received information from a prospective client that used to be material, but it’s not material anymore, can I be adverse to them?” —

• “A CA law firm received a bunch of information about a trust dispute from a prospective client, including his intention to sue, his theory of the case, and documents supporting the theory.”
• “The firm later realized it already had a relationship with a probable opposing party and declined the case. When the prospective client sued the opposing party, the firm appeared for the opposing party.”
• “The prospective client moved to disqualify, arguing that he had provided material harmful information to the firm. The firm argued that the information wasn’t material anymore since it had been disclosed in the complaint.”
• “The CA Court of Appeal agreed that materiality should be determined as of the time of the requested disqualification, not as of the time the information was transmitted. Nevertheless, here the information transmitted included stuff that wasn’t already revealed by the complaint, so disqualification was affirmed.”
• Decision: here.

“Big Law’s Trump Deals Pose Ongoing Risks, Keker Leaders Warn” —

• “President Trump’s deals with Big Law firms pose ongoing risks to the profession, said leaders of a law firm that was among the first to criticize the pacts. There’s risk the White House will call on dealmaking firms to justify rolling federal troops into US cities or some other legally suspect tactic, said Steven Ragland, associate general counsel at Keker, Van Nest & Peters. The administration also may again use threats to bend law firms to its will, he said.”
• “‘When the bully says, ‘OK now it’s time to give me your lunch money again,’ what’s going to happen?’ Ragland said in an interview. ‘We will see what will be done and what sort of damage might be done.'”
• “Bloomberg Law’s wide-ranging interview Sept. 4 with Ragland and Laurie Mims, the firm’s managing partner, show that some legal leaders remain as concerned about the Trump deals as when they first spoke out against them more than five months ago.”
  “In addition to the deals, Mims said she is concerned about Trump’s personal attacks against judges who have ruled against him. District court judges she knows have received ‘terrifying’ hate mail and threats, she said, without identifying those judges.”
• “In the weeks after Trump’s attacks, Keker, Van Nest signed an amicus brief backing Perkins Coie’s fight against an order, senior partners penned an essay in the New York Times titled, ‘Our Law Firm Won’t Cave to Trump. Who Will Join Us?,’ and firm co-founder John Keker appeared in a ’60 Minutes’ segment where he called firms’ deals with Trump ‘bribery.'”
• “There’s a risk firms that cut deals with the administration could be perceived as having a conflict of interest fighting for clients against the government, Ragland said. ‘If I’ve basically signed on to not challenge the administration in certain ways, or that’s the implication, I don’t know whether it actually creates a conflict, but I think it is a concern,’ he said. “
• “Mims said the firm’s nearly 50 partners unanimously supported the decision to speak out. Clients ‘pretty universally’ responded well to the firm’s stand, and some new business came to the firm because of its stance, she said.”
• “‘There are still risks of losing clients or the government taking action against our firm or others,’ Mims said. ‘We’re aware the risks are there. But it was the thing we all felt we had to do. It was just such a clear violation of what we understand to be our constitutional system.'”
• “‘Our associates were united in thanking us for doing it and telling their friends, ‘My firm did this, how about yours?’’ Ragland said. ‘It’s only helped with our recruitment.'”
• “Keker in July hired associate JiLon Li from Paul, Weiss, Rifkind, Wharton & Garrison, one of the dealmaking firms, which has seen departures from its litigation group in the aftermath of its agreement, Mims said. ‘These firms have suffered a significant reputational hit with law students,’ she added.”

Taking a moment to update everyone on the 2025 risk compensation survey.

As of about a week into the exercise, we have 55+ participants and 225+ data points.

I’ve had several requests about report publication timing, as compensation season is nigh.

So I’m going to try to hold the line on the “end of September” deadline, as it takes a few weeks to generate and distribute reports.

If you haven’t participated yet and would like to receive a copy of the eventual report / personal benchmark, please do!

• Background details on the survey are here, in case you missed that update (or the big, bold reminder in the daily emails).
• A direct link to the survey is: here.
• And for those of you who want to help, please do pass on details to your internal and external colleagues, and feel free to like/reshare our LinkedIn post (for the few risk professions who aren’t already reading the blog)

Thanks for reading. Regular risk updates will be back tomorrow!

“Prosecutor says fatal arson suspect’s attorney may have conflict” —

• “The U.S. Attorney’s Office is questioning whether attorney Kevin A. Luibrand should be removed as counsel to the man accused of setting a 2013 fire in Schenectady that killed a 32-year-old father and his three young children.”
• “In a motion filed in U.S. District Court, a federal prosecutor asked a judge to schedule a hearing to advise Edward A. Leon that Luibrand has a potential conflict of interest because his law firm also represents an ATF special agent in an unrelated sexual harassment case pending in Kentucky. The agent, Lauren Viup, previously worked in the Albany office of the ATF, and she had been part of the team that reopened the investigation of Leon, leading to his indictment in early August.”
• “‘The government requests that the court determine whether a conflict does or could exist, whether the conflict can be waived, and if so, whether the defendant will knowingly waive his right to conflict-free representation,’ assistant U.S. Attorney Alexander P. Wentworth-Ping wrote in the government’s motion.”
• “Luibrand’s firm represents Viup in a federal lawsuit she filed against former U.S. Attorney General Merrick Garland and the ATF in June 2024 when she was working for the ATF in Albany. The case centers on sexual harassment and physical abuse she alleges she was subjected to by another ATF agent when she was working in Louisville from 2019 to 2022.”

“Cannabis, Conflicts And Self-Dealing At Issue In Illinois Complaint” —

• “The Illinois Administrator has filed a complaint alleging misconduct by an attorney who had been employed by three law firms (designated as Firms A, B and C) beginning in 2019.”
  • ‘From November 18, 2019 until March 3, 2021, Respondent was employed fulltime as a lawyer in the Boston office of a large international law firm (“Firm A”), where he concentrated his practice in the areas of private equity and corporate mergers and acquisitions. At all times related to the events described in this complaint, Respondent, as an attorney employee of Firm A, owed a fiduciary duty to Firm A and its partners to act with the highest degree of good faith and honesty in all matters relating to Firm A’s business and property and to avoid using the Firm A’s goodwill, reputation, and resources for his own personal benefit.’
• “He allegedly owed similar duties to Firms B and C.”
  • ‘Respondent left Firm A on March 3, 2021. From April 5, 2021 until June 1, 2022, Respondent was employed full-time as a lawyer in the Boston office of a large international law firm (“Firm B”), where he continued to concentrate his practice in the areas of private equity and corporate mergers and acquisitions. At all times related to the events described in this complaint, Respondent, as an attorney employee of Firm B, owed a fiduciary duty to the firm and its partners to act with the highest degree of good faith and honesty in all matters relating to Firm B’s business and property and to avoid using the Firm’s goodwill, reputation, and resources for his own personal benefit.’
  • ‘Respondent left Firm B on June 1, 2022. From September 6, 2022 until July 13, 2024, Respondent was employed full-time as a lawyer in the Denver office of a large international law firm (“Firm C”) where he continued to concentrate his practice in the areas of private equity and corporate mergers and acquisitions. At all times related to the events described herein, Respondent, as an attorney-employee of Firm C, owed a fiduciary duty to the Firm and its partners to act with the highest degree of good faith and honesty in all matters relating to Firm C’s business and property and to avoid using Firm C’s goodwill, reputation, and resources for his own personal benefit.’
• “He was connected with T.S. and got involved with Kush Kart”
  • ‘Between September 8, 2020 and November 1, 2020, T.S. asked for and Respondent provided legal assistance and legal advice relating to the drafting of contracts, permitting, and applications to be submitted to the CCC on behalf of Kush Kart. Respondent did not execute an engagement agreement with T.S. or with Kush Kart, or explain to T.S. that he was not acting as her lawyer. Based on the fact that T.S. saw on the CCC’s Equity Services List that Respondent offered pro bono legal services to SEP participants, that T.S. asked Respondent for and received from Respondent legal advice and legal services, and that Respondent was communicating with Respondent from Respondent’s Firm A email account, T.S. reasonably believed that Respondent was her lawyer.’
• “Firm A discovered the Kush Kart connection”
  • ‘On or about March 3, 2021, employees at Firm A discovered that Respondent was communicating with T.S. about Kush Kart from his Firm A email account, and directed Respondent to inform T.S. that Firm A was not representing her. Respondent sent T.S. a text message stating, “Can you reply to the email I’m about to send you from my firm. They think I was providing services under the [Firm A] brand to Kush Kart and not in my personal capacity. A simple ‘Lol I know and thanks.” Respondent then emailed T.S. stating, “As already stated at the outset: I write to clarify that I have been assisting you in my personal capacity and not on behalf of [Firm A]. You do not and have not formed an attorney client relationship with [Firm A]. If you have any questions, please direct them to my personal email address which is as follows: [Respondent’s personal email address].” Less than 20 minutes later, T.S. responded to Respondent’s Firm A email address, as Respondent instructed, “Lol I know and thanks.” Respondent’s email did not make it clear that Respondent was not acting as an attorney for T.S. or for Kush Kart.’
• “Charges involving his law firm employers”
  • ‘Respondent never disclosed to either Firm A, Firm B, nor Firm C that he was acting as the Chief Operating Officer of Kush Kart during the time of his employment with Firms A, B, and C. Respondent further failed to disclose to Firm C that he had received salary from Kush Kart during the period of his employment with Firm C. Respondent’s failure to disclose to Firms A, B, and C that he was simultaneously employed by Kush Kart while employed with each Firm was dishonest, because Respondent knew that Firms A, B, and C required him to devote his full time to each Firm’s practice, and further knew that the Firms were paying him to devote his full time and attention to each Firm’s practice.’

David Kluft asks: “Do I have to tell my client who my other clients are if there is no conflict?” —

• “An IL company found out that that a departing employee, who was in the process of starting a competing entity, had been in touch with the company’s outside counsel law firm. The company asked the law firm what was up, and the firm stated that it did not represent the departing employee in any matter adverse to the firm, but ‘if you are also asking the broader question of whether we represent [her] on other matters, I cannot answer that.'”
• “The company later sued the firm on theories of fraudulent misrepresentation (falsely claiming there was no adversity) and fraudulent concealment (not disclosing whether they represented her at all).”
• “The 7th Cir. Affirmed dismissal of the fraudulent concealment allegation, because there was no duty to disclose the identity of one client to another absent a conflict. The Court also affirmed summary judgment against the fraudulent misrepresentation allegation, because the firm had not been paid any attorneys’ fees after the alleged misrepresentation so there was no harm.”
• Decision: here.

“Ayotte’s choice of Casella lawyer for Supreme Court raises alarm among environmental advocates: ‘Simply rewarding a political loyalist’” —

• “[New Hampshire] Gov. Kelly Ayotte chose Bryan Gould, an attorney and lobbyist for Casella Waste Systems, as her nominee for the New Hampshire Supreme Court last week, drawing concern across party lines about his selection could mean for the future of the state’s environmental protections.”
• “Gould is currently the lead attorney representing Casella in its lawsuit against the New Hampshire Department of Environmental Services, after regulators denied a key permit for the company’s plan to build a landfill in the North Country.”
• “State Rep. Kelley Potenza, R-Rochester, said that while she highly respects Ayotte for bringing waste issues to the forefront, Gould’s confirmation to the state’s highest court could be a ‘huge problem.'”
• “‘His relationship is incestuous with industry, as well as has an active lawsuit against the state right now,’ she said. ‘What is she thinking? She literally put forward one of the worst offenders who has trampled on the rights of citizens in the highest position of judicial power in New Hampshire.'”
• “Gould, a director at the Concord law firm Cleveland Waters and Bass, also served as legal counsel for Ayotte’s gubernatorial campaign. In May, Ayotte appointed him to a six-member judicial selection commission.”
• “Gould has also represented the New Hampshire Republican State Committee.”
• “In 2023, emails revealed that the state’s environmental agency consulted Gould during the legislative session on edits to a bill. In its original form, the legislation would have made it difficult for Casella to site a landfill in Dalton.”
  “John Corbett, a spokesperson for Ayotte, said Gould’s conflicts of interest would not affect the cases he hears should he be confirmed to the state Supreme Court.”
• “‘While Gov. Ayotte strongly opposes a landfill at Forest Lake, she knows Bryan Gould will continue to operate with the strongest professional ethics and recuse himself from cases involving Casella and the proposed project in Dalton,’ he said in a statement. ‘The governor is confident Gould will uphold our Constitution and lead with fairness and sound judgment as he hears cases that come before the Court.'”
• “Gould has worked as a lobbyist for Casella since 2020. This year, he has already received $99,050 in lobbying fees from the company, with $65,857 still outstanding, according to his financial filings with the Secretary of State. In 2024, he was paid $72,804 for his lobbying work.”
• “‘The fact that he has been involved and continues to be involved in these legal actions between his out-of-state client and the state of New Hampshire certainly makes it a lot more disconcerting,’ [State Rep.] Germana said.”
• “He also questioned Ayotte’s decision to nominate someone at 66, calling it ‘odd’ for a new justice. In New Hampshire, the mandatory retirement age for judges is 70.”
• “‘It’s really difficult to believe that the motivation behind this is anything other than simply rewarding a political loyalist,’ Germana said. ‘So, the fact that he has been involved, and continues to be involved in these legal actions between his out-of-state client and the state of New Hampshire, certainly makes it a lot more disconcerting.'”

“Big Law Firms Cool to Idea of Bringing on Burford’s Billions” —

• “Some Big Law leaders are skeptical of Burford Capital’s plan for minority investments in firms, in part because they don’t see a need for the cash. The publicly traded litigation finance pioneer last month floated the idea of buying a stake to several US law firms. Some legal leaders worry taking on these kinds of arrangements could breach state rules against non-lawyer ownership of firms. Others hesitate to relinquish any control, even for investments in back-office services only. And some struggle to know what they’d do with new money from the outside.”
• “‘Our service offerings are designed to complement our lawyers in delivering the best service to our clients,’ Miguel Zaldivar, chief executive officer of Hogan Lovells, said in an interview. ‘Profitability matters, but we also want to protect our unique culture. Even in the provision of ancillary services, I consider it a challenge.'”
• “The skepticism shows why Burford leaders have mounted something of a public relations campaign to persuade law firms of their deep experience investing in professional services. The investor, which has $3 billion in market capitalization, has been scouring for large law firms willing to take the jump as it engages in talks with several firms it hasn’t named.”
• “Burford since its founding in 2009 has pumped $11 billion into single lawsuits or portfolios of cases with the hope of reaping a share of awards—an investment practice known as litigation finance. The company now also wants to pour capital into law firms through managed services organizations, or MSOs, a structure used by private equity firms to invest in accountancies and healthcare providers.”
• “The model creates a separate business that houses service functions of a law firm, such as billing and human resources. The law firm then contracts with the MSO for those services, freeing up resources for managing partners to focus on their core business of serving clients.”
• “One person with knowledge of MSOs, who requested anonymity to discuss details of the industry, roughly estimated that more than $100 million has been invested into legal MSOs in the last 10 to 15 years. Some of the money is from traditional private equity firms, while some has come from litigation finance platforms, the person said.”
  “That’s not much money in the world of Big Law. To put that in perspective, the 58 largest law firms each cleared more than $1 billion in revenue in fiscal 2024, according to the American Lawyer.”
  ‘Hypothetical’ Talk”
• “Burford’s Lenkner said the MSO model doesn’t breach the US fee-splitting provision. Burford would be a ‘passive’ investor in the services organization, he said, and law firms would be well-placed to negotiate their continued control over their operations into contracts tied to any deals.”

“Formal Opinion 2025-3: Permissibility of Financial Disincentives Associated With a Lawyer’s Departure From a Law Firm” —

• “TOPIC: Law firm lawyer retention policies, financial disincentives, conditional loan forgiveness, withholding of deferred payments that have the effect, either expressly or in practice, of discouraging or deterring competition with the firm.”
• “QUESTION:  May a law firm impose financial terms, including but not limited to payments in the form of forgivable loans, bonuses, deferred compensation, withdrawal payments, deductions from capital that are expressly forfeitable or forfeitable at the discretion of the firm, that have the effect, either by their express terms or in practice, of discouraging or deterring competition with the firm?”
•  “DIGEST: The implementation by law firms of partnership or employment financial terms, including but not limited to payments in the form of forgivable loans, bonuses, deferred compensation, withdrawal payments, deductions from capital or otherwise that are automatically forfeitable or forfeitable at the discretion of the firm, that have the effect, either by their express terms or in practice, of discouraging or deterring competition with the law firm by lawyers who leave the law firm, is impermissible under Rule 5.6(a) of the New York Rules of Professional Conduct.”

“Large law firms could face prosecution for overbilling” —

• “Large law firms that overbill their clients or make false environmental and diversity claims could be prosecuted under new [UK] legislation coming into force next Monday.”
• “Simon Airey, partner at McDermott Will & Schulte, described the new ‘failure to prevent fraud’ offence in the Economic Crime and Corporate Transparency Act 2023 (ECCTA) as a ‘complete and utter gift’ to the Serious Fraud Office, and said there was no reason why law firms would not be prosecuted.”
• “The offence, which comes into force on 1 September, makes large organisations criminally liable if an ‘associated person’ commits fraud intended to benefit the organisation, and the organisation lacked ‘reasonable’ fraud prevention procedures.”
• “An ‘associated person’ would include associates and trainees, agents of the firm and subsidiaries.”
• “Large organisations are those which meet two out of three criteria: more than 250 employees, turnover exceeding £36m and a balance sheet total exceeding £18m.”
• “Mr Airey said the new offence also applied to large foreign law firms, such as his own, with offices in London which by themselves would not qualify – McDermott is headquartered in the US.”
• “Thomas Jenkins, of counsel at City firm RPC, said a particular risk area was billing and time recording, and law firms ‘should be alive to risks arising from fee-earners over-recording time’.”
• “For example, ‘if a fee-earner deliberately inflates or rounds up time entries, this conduct could trigger liability for the firm, even if the matter partner is entirely unaware of it’.”
• “It could also include ‘fraud by silence’, for example deliberately not notifying a client about a data breach in order to stay instructed.”
• “To protect themselves, law firms must ‘engage in proper risk assessments’, which ‘honestly and frankly’ assess the risk of acting, particularly in high-risk areas like conveyancing. They must ‘design and tailor’ policies to meet those risks.”
• “Mr Jenkins said assessments should ‘identify specific vulnerabilities, such as weaknesses in billing processes or gaps in oversight’, and based on the findings, firms might need to strengthen internal controls.”
• “Both solicitors pointed out that smaller law firms could be prosecuted under ECCTA through what Mr Airey called the ‘senior manager regime’, a part of the Act which came into force at the end of 2023.”
• “Under this regime criminal liability extends beyond board members to anyone who meets the statutory test of being a ‘senior manager’. Mr Airey said that in a law firm this includes heads of department and heads of functions like HR or finance.”
• “A ‘tiny law firm’ in the UK could be ‘infected’ by the behaviour of one of its senior managers, just as a senior manager of a US law firm in the UK could ‘infect’ the whole firm.”
• “Mr Airey described ECCTA as ‘the biggest change ever in corporate criminal liability’, giving the authorities ‘the ability to do things’ that had previously been denied to them.”

“DOJ Drops Another Fraud Case Against a Client of Bondi’s Brother” —

• “The Justice Department dismissed a criminal wire fraud indictment of two St. Louis real estate developers, the second reversal this month benefiting a white-collar client of Attorney General Pam Bondi’s brother.”
• “Brad Bondi, a Paul Hastings partner who represented one of the construction company owners accused last September of 11 counts of wire fraud to earn millions in unlawful tax incentives, successfully convinced DOJ to seek a court dismissal Wednesday. The judge approved it.”
• “It marked an about face from a motion he signed Aug. 4 defending the merits of the prosecution. Interim US Attorney Thomas Albus’s latest filing—which didn’t include the signature of the case’s sole line prosecutor—focused on a June letter from DOJ Solicitor General John Sauer invalidating aspects of race and sex-based business enterprise programs.”
• “Bondi’s firm had defended co-defendant Sid Chakraverty from the get go but he entered his first court appearance July 15. In a post on LinkedIn, Bondi congratulated the defendants, writing that the government agreed with his contention ‘that the St. Louis program (under which our clients were being prosecuted) was unconstitutional.'”
• “Bondi and his firm didn’t immediately respond to questions about whether he communicated with the attorney general or other members of her leadership team about this case.”
• “‘This decision was made through proper channels, and the Attorney General had no role in it,’ said DOJ spokesman Gates McGavick in a statement.”
• “The dismissal comes less than three weeks after another Bondi client, Carolina Amesty, secured an identical outcome. Amesty, a Republican state legislator in Florida, had been charged in January—three days before Trump took office—with stealing government property related to Covid-19 relief fraud.”

I’m incredibly pleased to invite our law firm risk readers to participate in the 2025 Risk Staffing Compensation Survey!

Last year’s exercise, our third go, was a great success. We saw participation from 138 individuals, who contributed data on 730 individual risk staff and management positions. (Given the large number of report requests over the past year from folks who missed or skipped the 2024 exercise, I think we still have room to grow in 2025 numbers!)

As I noted in my update last week, the 2025 exercise incorporates notes and suggestions from many of you. We’ve edited out a question or two, and added a few.

It’s gratifying to see mangers using this data to pursue adjustments for their team and to support recruiting processes. I’m also always happy to hear from individuals using this industry data to self advocate.

So if you’re an individual contribution looking to understand how your comp compares to your peers, or you’re a risk director/manager looking to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

SURVEY DETAILS:

• Participation open to law firm risk professionals only
• All responses will be treated confidentially
• Risk Director / Manager participants sharing data on themselves and their team’s roles and compensation will receive a report summarizing key findings and analysis relevant to their firm demographics
  • (The report may be shared internally within your firm, but not redistributed externally. So if you want the results, your best path is to participate!)
  • NOTE: You’ll need to provide detail on the number of risk staff at your firm and compensation details on yourself and all reports, or you risk a survey report “DQ.” And if you want the Q&A results section, you’ll need to participate in that optional section as well.
• Individual contributor participants sharing personal compensation data will be receive a personal benchmark compensation summary relevant to their specific role and firm demographics.

The survey will be open through September 30, and can be accessed here: 2025 Risk Staffing Compensation Survey.

Feel free to share the link with law firm peers and colleagues.

And if anyone has questions (or really needs more time), please do reach out to me directly. (Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

Let’s see what we learn this round!

“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.”