Bressler Risk Blog

David Kluft asks: “If a public defender is assigned a conflicting case, but doesn’t know it yet, is his assistance ineffective?”

• “A CO public defender represented a criminal defendant in Matter A. At some point during or before trial in Matter A, the public defender office internally assigned him to Matter B, in which he was to represent another defendant who happened to be a prosecution witness in Matter A.”
• “However, the public defender didn’t yet know about the assignment and didn’t do any work on the matter.”
• “After the defendant in Matter A was convicted, he moved for a new trial based on denial of conflict-free counsel. The CO Ct. of Appeals affirmed – even assuming there was some technical conflict, there was no ‘actual conflict’ for constitutional purposes because the public defender did not ‘actively represent’ the Matter B defendant, and therefore there was no adverse effect on Matter A.”
• “The public defender also represented the Matter A defendant at sentencing, after he did know about Matter B, but the Court found no showing the sentencing was effected by this conflict and it also wasn’t an ‘actual conflict’ because the public defender still hadn’t provided legal services to the Matter B defendant.”
• Decision: here.

“Parties to CT business dispute call for disqualification of former chief justice from case” —

• “One of the parties to a protracted Hartford business dispute wants retired Chief Justice Richard Robinson and his law firm removed from the case for what has been characterized as a violation of a fundamental ethics rule: advising their opponents on Supreme Court strategy in a case over which Robinson presided when it reached the high court on an earlier occasion.”
• “Three partners in the private equity firm CCP Equity Partners have moved to disqualify Robinson and the state’s largest law firm Day Pitney, the latest development in a partnership dispute that has reached the state Supreme and Appellate courts repeatedly over the last 13 years.”
• “Day Pitney represents John Clinton, who sued partners Michael Aspinwall and Steven Piaker and the estate of Lynne P. Young in 2013 over control of the business. Robinson joined Day Pitney after retiring from the Supreme Court in 2024. ‘The facts requiring disqualification are undisputed, extraordinary, and deeply troubling,’ according to the motion by partners Aspinwall, Piaker and the Young estate.”
• “The motion to disqualify Robinson, at this point an allegation, touches upon one of the defining characteristics of the Supreme Court — that discussions among judges when deliberating over decisions are confidential.”
• “In 2022, as chief justice, Robinson led a panel of justices that heard argument and issued a decision the first time the CCP litigation reached the high court. The court ultimately did not rule on the substantive claims in the case. The justices concluded it lacked jurisdiction because the Superior Court had not issued a final decision and returned the matter to the lower court for further proceedings.”
• “The case reached the Supreme Court a second time in 2025, after Robinson had retired and joined Day Pitney. On the second occasion the court ruled on the merits of the case and returned it to the Superior Court for a new trial.”
• “Three justices sat on the panels that heard the case both times. They are Andrew McDonald, Gregory D’Auria and Steven Ecker.”
• “The motion for disqualification raises the possibility that, when the high court heard the case for the first time, Robinson learned, through conferences with fellow justices, their views of the strengths and weaknesses of the arguments. Even if on the first occasion the case was returned the the lower court without a substantive ruling, there likely was preliminary discussion of the merits.”
• “Day Pitney billing records obtained by the partners moving for disqualification show, according to their motion, that within days of beginning work for Day Pitney and ‘before Day Pitney filed its brief in the second appeal, Justice Robinson actively joined the firm’s representation of the Plaintiff in this case and offered advice about appellate tactics and strategy—even helping to draft a motion to transfer the pending appeal to the Connecticut Supreme Court over which he once presided.'”
• “‘If Defendants did not see these billing records, they might have never known that Day Pitney has been coached for seventeen months by a Justice who had first hand knowledge of how a majority of the Supreme Court Justices on the 2025 panel once viewed the core contract interpretation issues in this matter. The cat is now out of the bag, and Defendants cannot be required to tolerate this situation,’ the motion asserts.”
• “The motion for disqualification is based on The Connecticut Rules of Professional Conduct for lawyers, which say ‘a lawyer shall not represent anyone in connection with a matter in which the lawyer participated personally and substantially as a judge . . . unless all parties to the proceeding give informed consent, confirmed in writing.'”
• “Day Pitney has not yet responded to the potential disqualification in court, which has been set down tentatively for a hearing on March 16. The firm and Robinson did not respond to inquiries.”

“SBM issues ethics opinion on reverse contingent fee agreements” —

• “The State Bar of Michigan’s Standing Committee on Professional Ethics recently issued a new ethics opinion regarding reverse contingent fee arrangements, in which the attorney’s compensation is calculated based on the amount by which the client’s liability is reduced. “
• “Under such an agreement, the lawyer and client agree that the lawyer will receive a percentage of the amount saved by the client. For example, if a tax authority asserts that a client owes $1 million, and the lawyer negotiates a settlement for $400,000, the savings to the client is $600,000. If the fee agreement calls for a one-third reverse contingent fee, the lawyer would be entitled to $200,000. “
• “Reverse contingent fee agreements are typically used in civil defense matters, tax controversies, debt resolution or other situations where a client must pay a sum of money rather than recover one. “
• “Opinion RI-394 outlines the conditions that must be met for a reverse contingent fee arrangement to be considered ethically permissible. Based on RI-394, an appropriate reverse contingent fee must include:
  • A written fee agreement, specifying the method of calculation;
  • Full disclosure and informed consent;
  • A reasonably-assessed baseline;
  • A fee that is not clearly excessive when agreed to, charged, or collected; and
    Written disclosure of the method of calculation at the conclusion of the matter.
• “The full opinion, which references MRPC 1.5, ABA Formal Opinion 93-373, and DC Bar Ethics Opinion 347, elaborates on each one of these conditions. Read the full opinion here.”

“‘Red flags’: Randazzo hid $4.3M at heart of FirstEnergy trial, attorney says” —

• “Sam Randazzo kept people in the dark about a $4.3 million payment at the center of the bribery trial of two former FirstEnergy executives, a former colleague testified on Tuesday. Columbus energy attorney Matt Pritchard said he wasn’t aware of it for some six years, even though he and Randazzo worked together for years representing the same client. And when he eventually saw documentation of the agreements and payments, Pritchard said it was riddled with ‘red flags.'”
• “The genesis and meaning of the $4.3 million payment are crucial in the trial of former FirstEnergy CEO Chuck Jones and top lobbyist Michael Dowling, who are accused of bribing Randazzo shortly before he was appointed chairman of the Public Utilities Commission of Ohio. “
• “Prosecutors say Jones and Dowling rushed in late 2018 to pay the $4.3 million as a bribe after learning Randazzo would be appointed to the PUCO, which regulates how much utilities like FirstEnergy can make. Randazzo, who died by suicide in 2024, helped push for the scandal-ridden House Bill 6 — a nuclear energy bailout — and regulatory rulings, together, worth more than $1 billion to FirstEnergy, prosecutors say.”
• “Defense attorneys say the payment was a legal settlement meant for Randazzo and Pritchard’s clients. They also said Jones and Dowling wanted to pay out the contract early to get the expenses off FirstEnergy’s books after a particularly successful 2018.”
• “Pritchard said he worked with Randazzo at law firm McNees, Wallace & Nurick since 2011. He helped Randazzo represent IEU-Ohio, a trade group made up of businesses that use large amounts of energy. The attorneys on behalf of IEU-Ohio fought against high prices and large surcharges levied by utilities, including FirstEnergy.”
• “In 2015, Randazzo and Pritchard negotiated a multi-million dollar settlement with FirstEnergy, agreeing they wouldn’t oppose a FirstEnergy surcharge to customers from 2016 to 2019. Pritchard helped work on that settlement.”
• “He said he was ‘confused’ years later when presented with a document that said Randazzo negotiated a $4.3 million settlement extension later in 2015 that called for more pay outs from 2020 to 2024. Pritchard said he learned of the extension after Randazzo’s attorney, Roger Sugarman, asked Pritchard to sign an affidavit about the settlement. Pritchard refused.”
• “Pritchard also said Randazzo kept him and others at the law firm in the dark about a $2.1 million consulting agreement he inked in 2013 with a FirstEnergy subsidiary. He said that was against the law firm’s policy because it presented a conflict of interest.”
• “‘I would only be able to represent one party in a given matter,’ Pritchard said.”
• “Defense attorneys have argued that Randazzo was a thief who stole from his clients, including the $4.3 million settlement.”
• “On cross-examination by Jones’ attorney Jeremy Dunnaback, Pritchard said he became aware that Randazzo stole from other settlements, including those that had more conventional documentation.”

“Alston & Bird Accused of ‘Essential’ Role in Crypto Ponzi Scheme” —

• “Alston & Bird is being sued by investors in Florida who say they were duped into contributing to an alleged $328 million cryptocurrency Ponzi scheme over business relationship contracts drafted by the international law firm.”
• “The purposed class action complaint, filed in the US District Court for the Southern District of Florida, claims that ‘Alston & Bird architected the legal framework through which investor funds and retirement funds were solicited, pooled, transferred, and deployed’ into Goliath Ventures.”
• “Lawsuits have been pouring into Florida state and federal courts from investors claiming to have been fooled by Goliath’s CEO Christopher Alexander Delgado, who’s been charged with wire fraud and money laundering. This week a state court appointed a receiver to protect the investors’ funds.”
• “According to federal prosecutors, Delgado started a legitimate cryptocurrency liquidity business, which uses investor funds to allow for transfer of different crypto assets in a private pool and earns profits from transaction fees. However, most of the funds were never invested in the pool, and millions were allegedly spent on Delgado’s private purchases and real estate.”
• “Thursday’s complaint alleges that Alston & Bird prepared an opinion letter assuring investors that the liquidity pool wouldn’t constitute a security, which would allow Delgado to raise capital from investors and channel that cash through joint venture agreements without triggering regulatory scrutiny and obligations under securities laws.”
• “But this was incorrect advice, and none of the lawyers working on this matter are licensed in Florida, the complaint said.”
• “This triggered ‘a duty owed by Alston & Bird to the partners or joint venturers in the joint venture it created and represented, and then facilitate securities fraud and other misconduct on behalf of one partner against the rest,’ the complaint said.”
• “The firm didn’t immediately respond to a request for comment.”

“‘Four Days Was Enough’ How Filing the Wrong Answer Cost a Law Firm Its Entire Case” —

• “In workers’ compensation litigation, attorneys often move fast. Claims get filed, coverage is investigated, and answers get submitted before all the facts are in. But a new unpublished decision from the New Jersey Appellate Division delivers a stark reminder: moving fast does not excuse moving incorrectly — especially when an ethical duty to a client is on the line.”
• “The case arose from a professional employer organization (PEO) arrangement. Prop N Spoon, a restaurant employer, contracted with Paychex — a national PEO — to administer its HR functions, including workers’ compensation coverage. When employee Johann Mejia Arboleda filed a workers’ compensation claim petition in October 2024, alleging a work-related injury, Prop N Spoon tendered the claim to Paychex. American Zurich Insurance, Paychex’s insurer, assigned Goldberg Segalla LLP as defense counsel.”
• “Here is where things went sideways. The Four-Day Representation”
• “On October 31, 2024, Goldberg Segalla filed a verified answer on behalf of Prop N Spoon. The answer was substantive: it disputed the nature, extent, and causation of Arboleda’s claimed disability; requested his treatment records; reserved all defenses; and preserved the right to cross-examine witnesses and present expert testimony. Nothing in the filing reserved rights or flagged a future conflict. To the court and all others, Goldberg Segalla was Prop N Spoon’s lawyer.”
• “Four days later, on November 4, 2024, Goldberg Segalla filed an amended answer. This time, it entered a special appearance on behalf of Paychex, stated it did not represent Prop N Spoon, and denied coverage of the claim entirely. Shortly thereafter, it moved to dismiss the claim against Paychex, asserting that Prop N Spoon had concealed Arboleda’s employment and thereby forfeited workers’ compensation coverage.”
• “In a span of four days, the firm had gone from defending Prop N Spoon to attacking it.”
• “Prop N Spoon, now forced to hire its own attorney, moved to disqualify Goldberg Segalla under RPC 1.9(a)—New Jersey’s former-client conflict-of-interest rule. That rule prohibits a lawyer who has represented a client from later representing another party in the same matter whose interests are materially adverse to the former client, absent written informed consent.”
• “Goldberg Segalla opposed the motion with a creative argument: there was no attorney-client relationship with Prop N Spoon because the firm never intended to represent it, never provided legal advice, never exchanged confidential information, and — critically — the electronic court filing system left them no choice but to list Prop N Spoon as the client when submitting the initial answer. The firm characterized the filing as a ‘preliminary’ step in the investigative process and emphasized that no substantive proceedings occurred during the four-day window.”
• “The compensation judge was unpersuaded. On May 1, 2025, he disqualified the firm and ordered Zurich and Paychex to retain new counsel. After reconsideration was denied on July 7, 2025, Paychex appealed.”
• “The Appellate Division affirmed, and its reasoning is worth understanding carefully.”
• “The court applied de novo review to the legal question of disqualification under RPC 1.9(a) — meaning it gave no deference to the compensation judge’s legal conclusions and reviewed the rule fresh. That standard actually cut against Goldberg Segalla; the court found the answer just as obvious as the judge did.”
• “The court’s analysis rested on the plain text of RPC 1.9(a). The rule does not ask whether confidential information was exchanged. It does not ask whether the prior representation caused harm. It does not carve out exceptions for brief or unintentional representations. It asks one question: Did the lawyer represent the client in the matter? If yes, and if the current client’s interests are materially adverse to those of the former client, disqualification follows unless there is written, informed consent.”
• “Filing a verified answer on Prop N Spoon’s behalf — one that actively defended the company against Arboleda’s claims — was, in the court’s view, representation. Full stop. The firm undertook Prop N Spoon’s defense. That it did so for only four days before pivoting did not change the analysis; it only underscored how egregious the conflict was.”
• “The court also rejected the ‘no harm, no foul’ framing directly and pointedly: ‘We decline to engraft a ‘no harm-no foul’ standard onto the Rules of Professional Conduct, particularly where, as here, a duty to a client is implicated.’ The Rules of Professional Conduct exist precisely to protect parties who may not even know they are being harmed — and the court refused to let efficiency or industry custom dilute that protection.”
• “As for the defense of the electronic filing system, the court was dismissive. The judge below had already noted the firm could have filed the answer manually from the outset. The Appellate Division agreed: the technology argument did not excuse the ethical lapse. A systemic workaround was available, and the firm did not use it.”
• “Mejia Arboleda v. Paychex is a cautionary tale about the collision of administrative convenience and professional responsibility. The court’s message is unambiguous: the ethics rules are not suggestions, and representing a party — even briefly, even accidentally, even without exchanging a single word of legal advice — carries binding consequences. In workers’ compensation PEO litigation, where the lines of coverage and representation can blur quickly, getting the client identification right from the very first filing is not a technicality. It is an ethical obligation with real teeth.”
• Decision: “Mejia Arboleda v. Paychex & Prop N Spoon, A-0085-25 (N.J. App. Div. Feb. 25, 2026)“

David Kluft asks: “Can I use an AI chatbot for legal marketing and client intake?” —

• “The OR bar has issued an opinion giving ‘qualified’ approval to attorneys’ use of AI chatbots in connection with marketing and intake.”
• “The qualifications include (1) per Rule 1.1, the lawyer must be technically competent with regard to the technology and vendors; (2) per Rule 1.6 and 1.18, the lawyer must protect the confidentiality of information by arranging for it to be encrypted and stored properly; (3) per Rule 5.3, the lawyer must make reasonable efforts to supervise any third party providers who run the chatbot; and (4) per Rule 7.1, lawyers are responsible if the chatbot misleads clients or prospective clients.”
• “In addition, lawyers should be aware that a chatbot’s interaction with a client could inadvertently create an attorney client relationship, so they need to include the appropriate disclaimers and ALSO monitor the chatbot’s interactions with prospective clients to make sure (a) that the interaction did not give the prospective client a reasonable belief that there was an attorney client relationship when that is not what the attorney intends; (b) that the interaction did not trigger a duty of diligence to meet certain case deadlines; and (c) that the interaction did not trigger a duty notify the prospective client that in fact no attorney-client relationship exists.”
• Opinion: Here.

For those noting last week’s Patent examiner conflict story, we now have a response from Director John Squires:

• “…I am directing any Patents employee who participates in deciding the scope of patent rights to affirmatively recuse themselves from examining any application where they hold stock or bonds (publicly traded or privately held) in any of the listed applicants, regardless of the dollar value-rather than the current $15,000 threshold.”
• “Patents employees who participate in deciding the scope of patent rights include patent examiners (inclusive of patent reexamination specialists) and their supervisors when the supervisor is signing or otherwise reviewing (e.g., a streamlined review) an Office action.”
• “This guidance does not alter or amend the application of existing ethical standards to patent examiners or their supervisors. It does not require patent examiners or their supervisors to divest any financial interests (e.g., stocks or bonds), nor does it prohibit them from holding any financial interests.”
• “Let me be clear: nothing in this memorandum is intended to imply or suggest that patent examiners or their supervisors, in any past or pending cases, have been anything but fair, impartial, and acted in good faith. USPTO’s patent examiners are committed to avoiding even an appearance of impropriety, and have pledged not to othe1wise violate any obligations under existing federal ethics regulations and laws.”
• “To ensure that patent examiners, their supervisors, and Patents management are able to make fully informed decisions in examining patent applications, I am herewith requesting that patent examiners, as part of their existing conflict check procedures, voluntarily inform their supervisors of any companies in which they know that they, their spouse, or their minor children own stocks or bonds, regardless of the dollar value of such stocks or bonds. Supervisors of examiners should likewise inform their Technology Center Directors of such information.”
• “I am further directing that if a patent examiner or supervisor later becomes aware-after a case has been docketed or submitted to them-that the examiner or supervisor, or the examiner’s or supervisor’s spouse or minor children, owns any amount of stock or bonds in the applicant, the examiner or supervisor request that the application be reassigned. Patents management shall provide further guidance about the implementation of this memorandum.
  This guidance goes into effect immediately, and will remain in full force and effect until fmther notice.”

David Kluft asks: “Can my expert be disqualified if she spoke to the opposing party without counsel present?” —

• “A group of CA prisoners brought a class action against their prisons over health conditions. Defense counsel facilitated an environmental health expert to conduct an inspection of the facilities, and during the inspection she interviewed four class members without class counsel present.”
• “The defense argued that there was no misconduct because its counsel wasn’t near the expert when she was conducting these interviews and didn’t know they were taking place.”
• “The Court held that these conversations nevertheless violated Rule 4.2, because they were communications by an expert hired by defense counsel with plaintiffs who the defense knew had counsel. As a sanction, the court struck the parts of the expert report that mentioned or relied on these interviews.”
• Ruling: here.

“Trump DOJ Pushes to Sideline State Bar Ethics Investigations” —

• “The Justice Department is seeking to empower Attorney General Pam Bondi to suspend state bar ethics investigations into current and former DOJ lawyers—a step outside attorneys quickly criticized as an illegal intervention into state-run processes.”
• “The proposed regulation, posted in the Federal Register Wednesday, would aim to halt state-level ethics proceedings against DOJ lawyers while the department conducts its own review, which would diminish local bar associations’ power. It comes as Bondi, members of her leadership team, and prosecutors involved in immigration matters face complaints probing DOJ misconduct in states where they’re licensed to practice law.”
• “If finalized after a public comment period, ‘whenever a third party files a bar complaint alleging that a current or former Department attorney violated an ethics rule while engaging in that attorney’s duties for the Department, or whenever bar disciplinary authorities open an investigation into such allegations,’ the attorney general ‘will have the right to review the complaint and the allegations in the first instance,’ the proposal states.”
• “An attorney general who decides to exercise this right—or a designated official—will then notify the state bar agency and the lawyer facing the complaint and ‘request’ that the disciplinary authorities pause the investigation until the review is completed.”
• “If the DOJ finds no violation, that blocks the state from investigating the alleged infraction. And ‘should the relevant bar disciplinary authorities refuse the Attorney General’s request, the Department shall take appropriate action to prevent the bar disciplinary authorities from interfering with the Attorney General’s review of the allegations,’ the proposed regulation states.”
• “Hilary Gerzhoy, chair of the DC Bar rules of professional conduct review committee, said the proposal ‘is incredibly concerning.'”
• “‘It is inconsistent with all precedents, ‘ Gerzhoy said. ‘The way that the DC bar disciplines lawyers is an independent process that happens in the DC Court of Appeals. It is not a federal process.'”
• “Although some attorneys predicted state disciplinary bodies would simply ignore the department’s attempt to intervene, Gerzhoy said she expects state bars to issue statements that ‘will make clear that DOJ does not have standing to promulgate this new rule.'”
• “By moving to establish a new attorney general-run review process for ethics complaints, DOJ would be setting up a potentially duplicative system for handling allegations of employee violations. The department’s Office of Professional Responsibility is already tasked with reviewing complaints of prosecutors or other lawyers breaching their professional duties and can make recommendations to another DOJ internal disciplinary body.”
• “‘This is about DOJ interfering with the states’ licensing authority of lawyers for the political benefit of this administration’ and ‘DOJ attempting to identify those who complain about DOJ attorneys and potentially target them,’ said Kevin Owen, a partner at Gilbert Employment Law who represents whistleblowers and others raising allegations of department wrongdoing. ‘This is going to have a chilling effect on appropriate complaints about DOJ attorney misconduct.'”

“When Advocacy and Ethics Collide: Two Recent North Carolina Decisions on Attorney Disqualification” —

• “Two recent North Carolina decisions, Sloan‑Oudeh v. State Farm Fire & Casualty Co. (N.C. Ct. App. Feb. 18, 2026) and WP Church, LLC v. Whalen (2026 NCBC Order 10) offer timely and instructive guidance on attorney disqualification, underscoring the judiciary’s increasing willingness to enforce ethical boundaries even when doing so disrupts ongoing litigation. Although arising in different contexts, both cases emphasize that courts will closely scrutinize counsel’s role when representation threatens to blur the line between advocate, witness, or conflicted fiduciary.”
• “Sloan‑Oudeh v. State Farm Fire & Casualty Co. (N.C. Ct. App. Feb. 18, 2026) Rule 3.7 and the Lawyer as Necessary Witness”
• “In Sloan‑Oudeh, the North Carolina Court of Appeals affirmed the disqualification of plaintiff’s counsel under Rule 3.7 of the Rules of Professional Conduct, concluding that counsel was ‘likely to be a necessary witness’ in an insurance bad‑faith case. The court emphasized that the plaintiff herself lacked direct knowledge of many key communications and negotiations, which had been handled almost entirely by her attorney. Because those communications went to contested issues such as bad faith, unfair trade practices, and punitive damages, the attorney’s testimony could not be avoided or characterized as collateral. Importantly, the Court rejected arguments that disqualification would cause substantial hardship, noting advance notice, the availability of other attorneys within the firm, and counsel’s long‑standing awareness that he might be called as a witness.”
• “WP Church, LLC v. Whalen (2026 NCBC Order 10) Dual Representation and Non‑Consentable Conflicts”
• “The North Carolina Business Court’s decision in WP Church v. Whalen addresses a different, however equally significant ethical concern: whether a law firm may simultaneously represent a company and its manager when derivative claims allege serious self‑dealing and misappropriation. The court held that such dual representation was impermissible where the allegations went well beyond mere mismanagement and included detailed claims of fraud, theft, and conflicted transactions exceeding $5 million. Applying Rules 1.7 and 1.13, the court found that informed consent could not cure the conflict, particularly where the allegedly conflicted manager effectively controlled the entity and where disinterested approval was lacking. The court ordered disqualification sua sponte and struck all filings made on behalf of the company by conflicted counsel.”
• “Together, these decisions are noteworthy for what they signal to the legal profession. Courts are not treating disqualification as a purely tactical remedy or a theoretical ethical concern; rather, they are prepared to intervene decisively where counsel’s continued involvement threatens trial integrity, client interests, or public confidence in the process. Both opinions stress that advance planning, internal firm firewalls, and consent letters may not suffice when the substance of the lawyer’s role, or the severity of alleged misconduct, creates an unavoidable conflict.”
• “For practitioners, the implications are clear. Lawyers who become deeply embedded in the factual narrative of a dispute risk becoming indispensable witnesses, even in civil and insurance litigation, where such outcomes are often underestimated. Likewise, firms representing closely held companies or LLCs must carefully evaluate dual representation at the outset of disputes involving fiduciary allegations, particularly in derivative actions. These cases serve as a reminder that ethical compliance is not merely a professional obligation; it is a strategic imperative that can determine who gets to stay in the courtroom and who does not.”

“Patent Examiner Pays $500K for Financial Conflicts — But the Real Story may be Systemic” —

• “A USPTO patent examiner has agreed to pay $500,000 to resolve allegations that she examined patent applications from companies in which she held substantial stock positions. The settlement, announced by the Department of Justice on February 25, 2026, resolves allegations against Daxin Wu, who allegedly worked on at least nine patent applications submitted by companies in which she held financial interests between January 2019 and May 2022. The dollar amounts are striking. Wu allegedly reviewed applications for companies in which she owned more than $300,000 and $140,000 worth of stock, respectively. She also allegedly reviewed applications from commercial competitors of a company in which she held more than $900,000 in stock. These holdings dwarf the regulatory de minimis thresholds that permit patent examiners to hold limited stock positions in companies whose applications they review. Under 5 C.F.R. § 2640.202, an examiner may hold up to $15,000 in stock in a single company whose application they are reviewing, or up to $25,000 in aggregate across companies within the industry sector covered by their art unit. Wu’s alleged holdings exceeded these thresholds by orders of magnitude.”
• “The Wu case did not emerge from a vacuum. Two years ago, the Commerce Department’s Office of Inspector General issued a report concluding that the USPTO and the Department of Commerce ‘did not effectively administer the Department’s ethics program to protect against potential conflicts of interest by patent examiners.’ U.S. Dep’t of Commerce, Office of Inspector General, The Department Needs to Strengthen Its Ethics Oversight for USPTO Patent Examiners, Final Report No. OIG-24-013-I (Feb. 14, 2024). That report, triggered by hotline referrals, found systemic failures at every level of the ethics oversight process. The OIG sampled 73 examiners and found that 26 had potential financial conflicts that ethics officials failed to identify. Projecting those results across the roughly 7,000 examiners required to file confidential financial disclosure reports, the OIG estimated that approximately 2,100 patent examiners (about 30%) had potential financial conflicts that went undetected in calendar year 2022.”
• “The Wu settlement appears to be the first public enforcement action arising from those referrals. The OIG report noted that it ‘referred potential violations of law ‘ to the Office of Investigations. The timeline aligns: Wu’s alleged conduct covers 2019 through May 2022, and the hotline referrals began arriving in March 2022. The investigation then took roughly four years to produce yesterday’s civil settlement.”

“Trump’s first solicitor general turns on him in $5 billion JPMorgan ‘debanking’ case” —

• “He developed a reputation as a battler for difficult causes. Against all odds, he managed to defend the so-called ‘Muslim ban’ at the Supreme Court. No wonder he is in demand since becoming a partner at Jones Day. Court filings obtained by [Washington Examiner] Secrets show that he is one of the lawyers defending JPMorgan Chase and Jamie Dimon, its chief executive, against accusations that it ‘debanked’ a client for his political beliefs. That client is his former boss.”
• “Francisco may once have been the fourth-highest ranking lawyer in the Trump administration but now he is the latest figure to have switched sides. Along with his firm, which earned millions of dollars from the 2016 Trump campaign, he provided dozens of lawyers for the administration, which took his side as the then-president fought to overturn the 2020 election.”
• “‘There is no other legal firm more clearly aligned with Trump personally and the wider MAGA movement in general,’ said a Secrets legal source. ‘They revel in it.'”
• “Trump’s allies are fuming. They accuse Jones Day of a conflict of interest and claim that lawyers such as Francisco have intimate insider knowledge of the Trump legal playbook, which they say should be kept far from the case.”
• “‘Isn’t there a conflict of interest given that the President has been represented by Jones Day??’ posted Laura Loomer, the rightwing influencer, who was the first to ask the question.”
• “Trump is suing the bank and its CEO for $5 billion. But it is the names of the lawyers in the court filings that have particularly rankled in Trumpworld, where loyalty is everything.”
• “Other filings last week spotlighted Francisco as one of the lawyers on the case. The name of another key player will also ring bells with longtime Trump watchers: Eliot Pedrosa was plucked from Jones Day in 2018 for a top role with the Inter-American Development Bank, pushing the administration’s hard-line anti-socialist policy in the region. Now he is back with the firm and working against his former boss.”
• “Jones Day inserted itself deeply into the first Trump administration, providing a string of key staff for the White House and Justice Department, and then representing the Trump campaign in suits around the 2020 election.”
• “Mike Davis, a former legal adviser to Trump, said he was shocked that it had taken a case against Trump. ‘The law firm Jones Day, which represented Trump, is now adverse to him in the JPMorgan debanking lawsuit, he told Steve Bannon’s War Room. ‘They know his mindset, strengths, weaknesses, negotiation limits, and confidential information. Taking an adverse client puts them on very treacherous ethical ground.'”
• “That still allows sufficient room for Jones Day to represent JP Morgan, said Cassandra Robertson, a law professor at Case Western Reserve University, unless the firm had previously worked on a matter closely related to this case.”
• “Nor was it enough to say that the firm or figures such as Francisco had insider understanding of the Trump legal strategy in order to get them thrown off the case.”
• “‘That would be called the playbook strategy in legal ethics terms, that somebody represented a party long enough to know their entire legal playbook, which then would be potentially disadvantageous,’ she said.”
• “‘That was kind of a popular theory of conflicts, maybe 20 or 30 years ago,’ Robertson said. ‘At this point, most courts have said that the idea of a playbook conflict is not enough.'”

“Court slashes lawyers’ $510M contingency fee in $10B Robinson Huron settlement to $40M” —

• “The Ontario Superior Court has slashed legal fees for the lawyers who obtained a $10-billion settlement for certain First Nations under the Robinson Huron treaty, reducing their compensation from $510 million to $40 million.”
• “In Nootchtai v. Nahwegahbow Corbiere Genoodmagejig Barristers and Solicitors, 2025 ONSC 6071, released on Oct. 29, Justice Fred Myers ruled that the $510-million claimed by counsel based on a partial contingency fee agreement would amount to a windfall of huge fees unrelated to the value of services rendered.”
• “‘A lawyer’s professional retainer is not a lottery ticket offering a bonus prize of generational wealth to the lawyers if the clients hit the jackpot and win a mega-award,’ the judge wrote.”
• “In June 2023, the Crown agreed to pay $10 billion to settle claims brought by Robinson Huron Treaty First Nations for breach of the 1850 Robinson Huron treaty. Under the treaty, the Crown agreed to make annual payments to the First Nations and their members in perpetuity, with the amount to increase over time as revenues from the territory grew.”
• “However, the annuities were frozen at $4 per person for almost 150 years in what the Supreme Court described as ‘a mockery of the Crown’s treaty promise to the Anishinaabe of the upper Great Lakes.'”
• “The six-member legal team for the First Nations claimed $510 million as fees under a partial contingency fee agreement.”
• “In April 2024, the chiefs and trustees of the Robinson Huron Treaty Litigation Fund voted to approve the legal team’s proposed $510-million fee after the lawyers offered to gift back half to the fund. The legal team was subsequently paid $255 million.”
• “Two of the 21 First Nations opposed approval of the fees.”
• “The applicants — Gimaa (Chief) Craig Nootchtai on his own behalf, and on behalf of Atikameksheng Anishnawbek First Nation, and Ogimaa Kwe (Chief) Karen Bell and Councillor Chester Langille on their own behalf, and on behalf of Garden River First Nation — sought a review of the legal fees.”
• “They submitted that the fees must be reduced despite approval by the fund trustees and chiefs as they were too high.”
• “Justice Myers noted that the issue before the court was whether the $510-million fee claimed by the legal team under a 2011 partial contingency fee agreement was fair and reasonable or if it amounted to unlawful ‘champerty.'”
• “Champerty is the purchase of a stake in a lawsuit without a legitimate interest in the case, and is illegal in Ontario.”
• “Under the 2011 agreement, the six-lawyer legal team agreed to bill at 50 per cent of their normal hourly rates in exchange for a contingent success fee of 15 per cent on the first $100 million recovered and five per cent on any amount above that. The agreement did not, however, cap the total fee and also required the First Nations to fund all disbursements.”
• “The legal team also engaged roughly 40 other lawyers, all of whom billed the fund at their standard hourly rates.”
• “‘As a result of the leverage employed by the Legal Team, using juniors and others (including at least one Queen’s Counsel) all billing at full fees, the 50 per cent discount on the fees of the members the Legal Team did not amount to a 50 per cent discount on the cost of the litigation,’ Justice Myers noted.”
• “The court observed that the discount on the hourly rates of the legal team amounted to about a 25 per cent discount on the $23 million billed by all the lawyers working for the legal team. ‘With disbursements of another $6.5 million paid by the clients, the Fund was bearing over 80 per cent of the financial load of the litigation,’ the judge wrote.”
• “The court also observed that the chiefs of the First Nations involved and their negotiating committee did not consult independent counsel about the risks and benefits of the contingency fee agreement. Justice Myers also noted that the legal team did not suggest or insist that the fund or the chiefs obtain independent legal advice.”
• “The judge found that the chiefs did not fully appreciate the nature of the agreement and believed that the deal was in return for the lawyers bearing 50 per cent of the projected litigation cost.”
• “Justice Myers calculated that dividing the $510,000,000 by 65,000 hours would yield an average hourly billable rate of more than $7,800 per hour, or about $3,900 per hour if the court considered $255 million as the amount claimed for legal fees.”
• “‘Those rates would be a windfall that bear no relationship at all to the chargeable value of legal services in Ontario whether in 2007 or today,’ the judge wrote.”
• “The judge cited Fresco v. Canadian Imperial Bank of Commerce, 2024 ONCA 628, in which the Ontario Court of Appeal observed that lawyers charging excessive fees beyond what is fair and reasonable undermines the integrity of the legal profession.”
• “Justice Myers noted that the amount of the settlement in the case at bar was so big that the percentage recovery guideline often used in contingency fee review must be discarded to avoid an unseemly, disproportionate, champertous windfall to the lawyers.”

For those interested in financial news, Matt Levin’s newsletter is an unparalleled combination of education, insight, and amazing writing. Here’s a relevant portion from last week:

• “We have talked a few times about Optimum’s lawsuit against its lenders. Optimum Communications Inc. would like to restructure its $26 billion of debt, and it would like to do this in the usual modern way, a ‘liability management exercise’ (LME) pitting its lenders against each other to try to extract concessions out of them. The lenders, though, weren’t having it: The holders of most of Optimum’s debt got together and signed a ‘cooperation agreement,’ promising not to cut any deals with Optimum unless holders of two-thirds of the debt agreed to the deal.”
• “That is, if you think about it, a bit weird: If a bunch of competing firms get together and sign an agreement to coordinate their actions and not cut prices, isn’t that an antitrust problem? One person who thought about it was David Nemecek, a lawyer at Kirkland & Ellis who has led a lot of big liability management exercises, and who said at a Bloomberg conference last year that ‘people who enter into cooperation agreements should be careful’ because of ‘the potential for antitrust claims.’ “
• “That was just some public musing about an untested theory, but in December Optimum actually tried it out, suing its lenders and alleging that ‘the cooperative is a classic illegal cartel.’ Kirkland & Ellis represented Optimum in its liability management, but it did not file the lawsuit. Nonetheless, ‘creditors believed Kirkland had been behind the lawsuit,’ because of Nemecek’s public musings and his general aggressive LME work. Many of the creditors in the alleged cartel were big alternative asset managers and important Kirkland clients, and they apparently complained to Kirkland: It is a bad look to accuse many of your big clients of being antitrust criminals, and the clients ‘raised the issue to Kirkland’s executive committee.'”
• “And then (1) Kirkland stopped representing Optimum in January and (2) Nemecek left Kirkland for Simpson Thacher & Bartlett this month. ”
  “Which is, if you think about it, even weirder. When Kirkland dropped Optimum, I wrote: ‘I don’t want to say ‘they all got together and agreed to boycott everyone involved in the lawsuit,’ but,’ and then quoted the Financial Times story about the client pushback. I added: ‘I feel like Optimum’s (remaining) lawyers might want to add this to the lawsuit.’ I don’t think it proves any sort of antitrust conspiracy, but Optimum’s story here is something like ‘our lenders have joined together in a powerful cartel that prevents anyone from trading except on their terms,’ and the lenders getting Optimum’s lawyers to quit does kind of fit with that story.”
• “Optimum’s lawyers did add it to the lawsuit. Bloomberg’s Chris Dolmetsch, Reshmi Basu and Irene Garcia Perez report today:”
  • “Optimum Communications Inc. said a top law firm’s withdrawal from representing it under pressure from Apollo Global Management, Ares Management, Oaktree Capital Management and others showed that they were participating in a cartel against it.”
  • “Optimum, previously known as Altice USA, sued the credit arms of those private equity giants and other creditors in November, saying they had formed an ‘illegal cartel’ to freeze it out of the US credit market. In a revised complaint filed Wednesday, the telecommunications firm said ‘the antitrust conspiracy has only intensified’ in the last three months.”
  • “‘When Optimum sued, Defendants began searching for a way to retaliate,’ said Optimum, which is controlled by billionaire Patrick Drahi. ‘They soon found a target: Optimum’s transaction counsel, Kirkland & Ellis LLP.’ …”
    “‘Defendants’ success in bullying Kirkland served the Cooperative’s core aim – obstructing Optimum’s access to the credit markets – while showing the lengths to which Defendants will go to protect their scheme,’ Optimum said in the amended complaint.”
• “Here is the revised complaint, which includes this passage:”
  • “As one leading commentator put it, Defendants were angry that Optimum sued them for their illegal group boycott, so they ‘all got together and agreed to boycott everyone involved in the lawsuit.'”
• “Sort of? That’s me, I’m the leading commentator, but what I actually said was ‘I don’t want to say ‘they all got together and agreed to boycott everyone involved in the lawsuit,’’ which is not quite the same thing as saying ‘they all got together and agreed to boycott everyone involved in the lawsuit.’ In some technical sense it’s the opposite, though in a more colloquial sense I take their point. In any case I did say they should add it to the lawsuit so this serves me right.”
• “Incidentally I remain pretty sympathetic to the creditors here. As I wrote when the case was filed, ‘there is something off-putting about this whole [LME] process, a broad norm of ‘distressed companies should have to treat all of their creditors the same’ seems fine, and if all the creditors want to get together and agree on that then who am I to complain.'”
• “One way to think about it is that, when they make lending or trading decisions, these creditors are competitors with each other, but in their capacity as existing lenders to Optimum, they are something different. Ares and Apollo and Oaktree are not, now, competing with each other to make loans to Optimum; they are already Optimum lenders, already part of the company’s capital structure, already in a loose sense co-owners of Optimum. [2] They can get together to make decisions about Optimum’s debt, in the same way that multiple venture capitalists can be on the board of the same private company and meet to make decisions about the company. [3]”
• “As the lenders put it in their motion to dismiss the lawsuit (citations omitted):”
  • “Antitrust law protects competition — not a borrower’s desire for leverage in renegotiating its liabilities in times of distress. That is why every court that has addressed antitrust challenges to creditor cooperation has held that the antitrust laws do not reach the challenged conduct. ‘[T]hin to the point of invisibility,’ ‘border[ing] on the frivolous,’ ‘the very opposite of price-fixing.’ That is how courts in the past 50 years have characterized such antitrust claims—and they are right. …”
  • “Leveraged financing exists because risk is shared across many sophisticated lenders and bondholders, and the governing agreements hardwire collective action through voting thresholds, class votes, and consent rights. Plaintiffs acknowledge that so-called ‘liability management exercises’ (‘LMEs’) are ‘a creature of contract,’ often pitting creditors against one another to ‘create individual winners and losers.’ The creditor cooperation alleged here is a permissible response to that dynamic. It prevents opportunistic maneuvers that reward certain creditors at the expense of others; it reduces transaction costs and the destructiveness of brinkmanship; and it promotes the very mutual forbearance that can keep a borrower operating while preserving the contractual expectations that made the original financing possible. In short, the cooperation Plaintiffs attack is not merely lawful—it is procompetitive, and it benefits borrowers and consumers alike.”
• “Still weird to make their lawyers quit though.”

“Judge rules howitzer applicant’s attorney can stay on case” —

• “The administrative law judge overseeing the Adirondack Park Agency’s upcoming adjudicatory hearing for a proposed howitzer testing range in the town of Lewis ruled on Friday that the applicant’s attorney and law firm will be allowed to remain on the case.”
• “The decision denied a challenge from Adirondack Council, an environmental conservation advocacy group — a party to the hearing — which is opposed to the proposed howitzer range. Adirondack Council asked that attorney Matthew Norfolk, who represents project sponsor Michael Hopmeier, through his company, Unconventional Concepts, Inc., be removed from the hearing process.”
• “Adirondack Council contended that Norfolk and his firm, Norfolk Beier, should have been disqualified because of a conflict of interest stemming from the firm’s hiring of attorney Sarah Reynolds in May 2025. Reynolds previously worked as an associate counsel for the APA, and had been involved in the agency’s handling of the howitzer matter. Norfolk submitted a seven-point rebuttal for Administrative Law Judge David Greenwood to consider. More on Adirondack Council’s motion, along with Norfolk’s objection, can be found at [here].”
• “No other parties, including the APA, submitted material on the matter. Greenwood originally wrote that he would rule on this by Feb. 10. It was unclear what caused the delay, though the hearing’s start had since been pushed back until April 22.”
• “Greenwood’s 10-page ruling framed the decision as a balancing test, with the reasons against disqualifying Norfolk outweighing the reasons for doing so. He listed factors in favor of Adirondack Council’s motion as being the nature, duration and severity of the alleged conflict of interest, its potential to harm Adirondack Council’s interest as a hearing party, the hearing’s integrity and the avoidance of the appearance of impropriety going forward.”
• “Greenwood’s reasons against the motion include what he found was a lack of standing from the Adirondack Council to make the motion. This was something Greenwood said the APA would have if it had chosen to file this type of challenge. Similarly, another reason against the motion was the APA’s lack of action on this matter, which Greenwood wrote, ‘one could infer that the Agency does not feel that the conflict requires
• disqualification.'”
  “The administrative law judge also found that Norfolk Beier had implemented screening measures to prevent Reynolds from discussing or being involved in the howitzer matter in any way once she was employed by the firm. Even though he wrote that these measures were ‘imperfect,’ Greenwood said they constituted a reason against Adirondack Council’s motion to disqualify Norfolk. Another reason Greenwood listed was Reynolds’ subsequent departure from Norfolk Beier in December, stating that ‘the term of conflict has ended.'”
• “Greenwood’s final reason against disqualifying Norfolk was that removing Hopmeier’s chosen counsel would create a ‘substantial burden’ for him, given that Norfolk has represented him in the howitzer matter since the early days when it was before the APA in 2022.”
• “‘Requiring the Project Sponsor to obtain new counsel after so much time and on the eve of the public hearing commencement would be a substantial burden,’ he wrote.”
• “Greenwood cited case law that stated disqualification motions carry a ‘heavy burden and must satisfy a high standard of proof.'”
• Complete ruling: here.

“Beasley Allen Ethics Showdown Rattles J&J Talc Litigation” —

• “Lawyers nationwide are gearing up for bellwether ovarian cancer trials against Johnson & Johnson this year, but a plaintiff firm’s ethics quagmire is testing litigation management for roughly 70,000 cases in novel ways.”
• “Beasley Allen, co-lead counsel for the sprawling federal multidistrict litigation over allegedly tainted talc products, was on a hot streak. It’s won two trials in recent months against J&J after the pharma giant’s third failed effort to force a mass settlement in bankruptcy, setting the stage for further trial verdicts where the New Jersey-based health company has already lost billions.”
• “Then last month, the Alabama-based firm’s preparation for three of the six bellwether federal litigants nearing trial was undercut by a novel ruling disqualifying the firm from 435 of the roughly 2,700 cases in New Jersey state court—called multicounty litigation—raising questions about past verdicts, key experts, and who could represent the firm’s thousands of clients in the federal cases if courts apply that disqualification nationwide.”
• “Key players and experts wonder whether the fallout could delay initial trials, or potentially edge the overall litigation closer to universal settlement due to the jettisoning of one of the loudest voices against resolution through bankruptcy.”
• “‘Clearly J&J thinks this is a worthwhile thing to scream and jump around about, which tells you something about whether they are more willing to play with the remaining firms,’ said complex litigation researcher and University of Georgia Law School Professor Elizabeth Chamblee. ‘They clearly see Beasley as a hindrance.'”
• “The US District Court for the District of New Jersey has scheduled a Tuesday conference to discuss J&J’s call to toss Beasley Allen from thousands of cases due to ‘association’ with former J&J lawyer James Conlan in mediation.”
• “The firm’s attorney in this ethics dispute, Jeffrey Pollock of Pollock Law, said in a federal brief that disqualifying it ‘based on a single state appellate court’s unprecedented expansion of an ethics rule would disrupt coordinated leadership, impair settlement negotiations, and prejudice litigants who have relied on their chosen counsel for the better part of a decade.'”
• “J&J argues Conlan, a former restructuring counselor who spent hundreds of hours representing the company before leaving to start a mass torts settlement consultancy, ‘switched sides.’ A New Jersey appeals court found that collaboration in a mediation between Beasley Allen and Conlan violated a rule—one that all states have adopted in some form—limiting ‘assistance’ from nonlawyers with conflicts in a case.”
• “‘Conlan’s prolonged access to J&J’s privileged information, followed by collaborative efforts with its most prominent adversary, leaves us with clear concern for the preservation of trust intrinsic to the attorney-client relationship,’ the court said.”
• “In a February hearing urging a disqualification pause while Beasley Allen seeks reversal from the New Jersey Supreme Court, Pollock said a decision like this hasn’t been reached anywhere else.”
• “J&J’s lawyer Peter G. Verniero, a former New Jersey Supreme Court justice now with Sills Cummis & Gross PC, said demanding proof of a shared secret would eviscerate ethics protections against collusion. The company is leaning into its win, saying a Beasley Allen exit could get the litigation closer to a deal—something Beasley Allen fought when it meant going through bankruptcy.”
• “‘Beasley Allen’s disqualification for its egregious ethical violations should facilitate—not impede—the progress of this proceeding,’ Erik Haas, J&J’s worldwide vice president of litigation, said in a statement.”
• “If Beasley Allen is disqualified from the MDL, the fallout could be tough on other plaintiff firms, some attorneys involved in the litigation said.”
• “For 10 years Beasley Allen has taken the lead on developing trial testimony experts, taking depositions, and gathering evidence for use by all plaintiffs to litigate talc personal injury cases, said attorney David Selby of Bailey & Glasser LLP.”
• “‘The impact is just enormous,’ Selby said. ‘All of that has been organized and run by Beasley Allen.'”
• “One of Beasley Allen’s co-counsel is fine with ditching the firm: Allen Smith, a lawyer who has been jointly representing clients with the firm. He informed the court that he’s capable of moving forward with their thousands of cases on his own.”
• “Mississippi-based Smith Law Firm and Beasley Allen had a public falling out over Smith’s support to settle their more than 11,000 joint cases when J&J launched its third bankruptcy gambit in 2024, as both firms accused the other of betraying their clients’ interests. Beasley Allen has sued Smith, accusing the joint venture partner of failing to pay its share of litigation expenses as it racked up more than $240 million in litigation funding debt.”
• “The potential loss of Beasley Allen will only be felt acutely by firms that ‘don’t know how to work up their own experts,’ said plaintiffs’ attorney Majed Nachawati of Nachawati Law Group.”
• “‘We’re going to go forward with our cases,’ said Nachawati, who represents more than 4,000 talc plaintiffs and is gearing up for two trials. ‘We don’t need MDL leadership to try our cases for us.'”

Daniel J. Siegel wries: “Confidentiality Isn’t Just for Lawyers: Why Law Firm Staff Ethics Matter as Much as Lawyer Ethics” —

• “Recently, a trial court entered an order allowing limited discovery of a law firm’s IOLTA account in a divorce proceeding. Of course, IOLTA accounts contain confidential information, including the names of parties, settlement amounts and much more. While the order was, for the most part, reasonably tailored to preserve confidentiality—almost every identifying factor about the account was to be redacted—there were a couple of lines in the order that stopped me dead in my tracks.”
• “The judge wrote that the clients’ ‘identities were not confidential as to the staff if they were privy to them at the time they worked for the firm.’ I was shocked at the comment.”
• “Everyone knows, I thought, that confidentiality applies not only to lawyers but also to everyone who works for them, and even applies to legal assistants outside the firm. This point was made even clearer when Model Rule of Professional Conduct 5.3 was amended, as was its counterpart under the Pennsylvania Rules of Professional Conduct. Comment [3] to the Pennsylvania Rule to emphasize this point.”
• “Yet this judge misapprehended the rule and, in fact, stated that the information was confidential only to the lawyers, not to the staff. Respectfully, the court erred.”
• “Against this backdrop, I am writing to clarify the Rules of Professional Conduct regarding confidentiality and to emphasize a few points related to that concept.”
• “Lawyers consider confidentiality their professional birthright. It is one of the ingredients baked into their licenses, enforced by disciplinary boards, and hammered home every day of law school. But in the modern law firm, which often relies on so many components—in and out of the office—confidentiality is a shared ethical ecosystem.”
• “One commentator called today’s legal practice a team sport. There are so many components. Paralegals, assistants, intake specialists, billing staff, IT professionals, marketing teams, and outside vendors routinely have access to information that they would never have only a few years ago. At the same time, technology has made the transmission of information effortless, I would say too effortless in many ways. A chat message, an email, or an AI query can expose confidential information in seconds. That is why Rule 5.3 was amended, years before generative AI made information disclosure even easier.”
• “The truth is this: Most confidentiality breaches aren’t the result of bad actors or intentional misconduct. They come from a fundamental misunderstanding of the rules. Look at Pennsylvania’s Public Access Policy. It was meant—again, before generative AI—to protect confidential information. Yet lawyers often pay lip service; they check the box but don’t verify for confidential data. God knows, lawyers are still emailing medical records, still not recognizing that email is as confidential as a postcard. And they never think twice.”
• “That is why, now more than ever, it is important to consider who is bound by the rules of ethics, what ‘confidential’ really means, and where the invisible lines lie when using ever-changing modern tools. Three misconceptions, in particular, continue to create risk for firms of all sizes.”
• “Many firms train their lawyers on confidentiality. Far fewer invest the same energy in training their nonlawyer staff. This gap persists despite the fact that, ethically and practically, nonlawyer employees are extensions of the lawyer.”
• “Under the Rules of Professional Conduct, lawyers are responsible for ensuring that their staff’s conduct is compatible with the lawyer’s own ethical obligations. That means when a staff member mishandles confidential information, the lawyer—and by extension everyone in the firm—must bear responsibility.”
• “Still, many staff members view confidentiality as an abstract concept. They probably know they should not gossip. They probably know not to post client names on social media. But do they really understand that confidentiality also extends to intake calls, internal conversations, drafts, metadata, billing narratives or scheduling details? And do they realize that confidentiality extends to the fact that a particular person is a client?”
• “The risk is compounded by the reality that staff often operate at the crossroads of information. An intake specialist hears unfiltered facts before a conflict check is complete. A legal assistant may see drafts that never make it into a final pleading. A billing professional reads time entries that describe strategy, vulnerabilities or settlement posture. IT personnel may have broad system access without any substantive legal context for what they are seeing.”
• “When staff members are not taught that confidentiality is their obligation—not just the lawyer’s—they may default to their everyday norms and not their professional ones. What may be harmless in another industry becomes a time bomb in a law firm.”
  Policies do not create a culture of confidentiality. They are created by clear explanations of why these rules exist. Staff who understand that confidentiality protects clients, the firm, and their own professional standing are far more likely to treat it with the seriousness it deserves.”
• “No discussion of modern confidentiality is complete without addressing artificial intelligence. AI tools are rapidly becoming part of everyday workflows, from drafting emails to summarizing documents to brainstorming arguments. Used carefully, they can be powerful. Used casually, they can be dangerous.”
• “The core problem is not that AI is inherently unethical. It is that many users do not understand how these tools process, store or reuse information. When someone types in client details into a generative AI prompt, they may be disclosing that information to a system outside the firm’s control, subject to terms of service they have never read.”
• “The ‘elevator test’ is a useful metaphor. Doctors have long been warned not to discuss patient matters in elevators where conversations can be overheard. It is obvious why. AI warrants the same level of caution from lawyers and law firm staff. If you could not comfortably speak a sentence aloud in a crowded elevator, don’t paste it into an AI prompt, especially the more public forms of AI that make it clear there are no privacy protections.”
• “What ties these three issues together is not technology or rules. It is culture. Confidentiality failures rarely occur because someone wants to violate their ethical duty. They happen because the firm failed to train its staff or adapt its old principles to new tools.”
• “There is a solution. First, treat all staff as professionals with ethical responsibilities, not as passive support. Second, give on-point guidance. Third, acknowledge that technology changes how confidentiality is threatened, but not why it matters.”
• “Confidentiality remains one of the legal profession’s defining principles. Preserving it requires more than rules. It requires every person in the firm—lawyers and nonlawyers—to recognize and understand that ethics is not someone else’s job. It is everyone’s responsibility.”

“Conflicts of Interest in Family Law Matters” —

• “Conflicts of interest can arise in any practice area, but the personal nature of family law litigation makes it all the more important for lawyers to be careful to avoid taking on representation where a conflict of interest claim could trigger a motion for disqualification or breach of fiduciary duty claim.”
• “The rules that govern lawyer conduct with respect to conflicts of interest arise out of a fundamental attorney obligation: the duty of loyalty. For practitioners in family law, as for all lawyers, that duty dictates that the lawyer’s primary concern in any representation is to protect and further the best interests of the client. If there are other interests at play that pose a risk of adversely affecting the lawyer’s ability to advocate for the client’s best interest and/or give advice untainted by other considerations, there is a conflict of interest. And in the absence of consent or where the conflict is not consentable, a conflict of interest means that the lawyer may not take on the representation.”
• “The most basic conflict of interest rule is that a lawyer may not represent a client who is directly adverse to another client, per the American Bar Association (ABA) Model Rules of Professional Conduct Rule 1.7(a)(1). To take the most obvious example of how the prohibition applies in family law: a lawyer may not represent both spouses in a marital dissolution action. That will be true even if the parties come to the lawyer together, saying that they have already worked out financial and custody issues between them and just need assistance formalizing the agreement and putting everything into writing. In such a situation a lawyer is likely to be unable to competently and diligently advise both parties.”
• “Imagine, for example, that the lawyer sees that one or more terms of the parties’ proposed agreement is unfairly detrimental to the interests of one spouse or that the agreement somehow takes advantage of one spouse’s misunderstanding of the parties’ respective rights. In that situation, the lawyer could not properly provide clarifying advice to the potentially disadvantaged spouse because such advice would likely be contrary to the interests of the other spouse (the one who would gain an advantage). But if the lawyer were to fail to give such advice, she would be exposed to a claim by the disadvantaged spouse that the inherent conflict of interest resulted not just in legal malpractice, but a breach of fiduciary duty, a much thornier claim to defend.”
• “Rule 1.7’s prohibition of direct adversity also means that a lawyer may not represent one spouse if the other spouse is a client of the lawyer in another matter, even if the other matter is unrelated to the dissolution action. And the same is true even if it is another firm lawyer who represents the adverse spouse in the unrelated matter. That is because under Rule 1.10 (Imputation of Conflicts of Interest: General Rule), the conflict of one lawyer at a firm will be imputed to all other lawyers at the same firm.”
• “Where a conflict arises out of a law firm’s representation of adverse parties in unrelated matters, such representation may be undertaken where both affected clients provide informed consent, confirmed in writing. But it may be wiser to forgo such representation. In the emotionally fraught circumstances common to so many family law matters, even to ask for consent may cause either or both of the affected clients to doubt the lawyer and the law firm’s loyalty. As explained in the Comment on Rule 1.7: ‘the client on whose behalf the adverse representation is undertaken reasonably may fear that the lawyer will pursue the client’s case less effectively out of deference to the other client, i.e., that the representation may be materially limited by the lawyer’s interest in retaining the current client.'”
• “In addition to ensuring that a prospective representation raises no conflicts with respect to a current client of the lawyer or her firm, lawyers must also consider whether there is a conflict under Rule 1.9 (Duties to Former Clients). Rule 1.9 does not create a blanket prohibition on representation adverse to a former client. Rather, under Rule 1.9, a lawyer is prohibited from undertaking representation adverse to a former client only if the new matter is ‘the same’ as, or ‘substantially related’ to, the matter in the prior representation. Where there is a claim of a former client conflict of interest—typically raised in the former client’s motion to disqualify a former attorney from representing an opposing spouse—the dispute will usually turn on whether the former matter is ‘substantially related’ to the current divorce proceedings. The Commentary to Rule 1.9 provides this gloss: ‘Matters are ‘substantially related’ for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.’ A leading resource for interpreting the Model Rules summarizes the development of the ‘substantial relationship’ analysis as follows: ‘Today, most courts and other authorities hold that the substantial relationship test is not a formalistic inquiry into degrees of closeness, but is in large measure a judgment as to whether former clients are at risk that their confidences will be turned against them.’ Geoffrey C. Hazard, Jr., W. William Hodes, Peter R. Jarvis, The Law of Lawyering, (4th Ed. 2018-2 Supp.) § 14.07.”
• “In marital dissolution matters, the question of whether there is a former client conflict commonly arises in the situation where a lawyer has previously jointly represented a married couple in their estate planning or in one or more real estate transactions, and later one of the spouses seeks the lawyer’s representation in the couple’s marital dissolution action. There are conflicting views about whether such ‘family lawyer’ representation is ‘substantially related’ when the couple subsequently divorces. In a 2005 opinion, the Oregon State Bar took the position that in most circumstances the joint estate planning representation does not present a conflict of interest with respect to subsequent representation of one of the spouses in a dissolution action. Oregon State Bar, No. 2005-148, Conflicts of Interest, Former Clients: Representing One Spouse in Dissolution after Joint Estate Planning (revised as of 2016). In that situation ‘it does not appear that Lawyer would be in possession of information relating to the representation of Husband that would not already be known to Wife or to which Wife would not otherwise have access,’ as is generally the case where there is a joint representation. By contrast, in a 2001 opinion, the New Hampshire Bar Association Ethics Committee, while not answering the question directly, offered a more cautious view: ‘It is likely that the potential to utilize information obtained during the prior matter will arise and place the lawyer in a position in which his or her obligation to protect a former client’s confidences conflicts with the obligation to represent the current client.’ New Hampshire Bar Association Ethics Committee, Practical Ethics Article, Conflict of Interest in Family Law Matters (2001).”
• “The analysis of whether matters are ‘substantially related’ for purposes of Rule 1.9 will necessarily turn on how the judge in any particular case views the underlying facts and particular circumstances of the case at issue. This can lead to considerable variation. For example, the Oregon State Bar’s conclusion that joint estate planning generally did not preclude subsequent representation rested in part on the premise that, in a joint representation, information is generally presumed to be shared and where that is the case, ‘no information-specific former-client conflict would exist.'”
• “Moreover, in a marital dissolution action, it is generally the case that the parties are required to make full disclosure of their income, assets, and other financial matters. The fact that financial information is discoverable in matrimonial cases should dictate against disqualification. This was the position a Connecticut trial court took in denying a disqualification motion in a dissolution action: ‘any disclosures to the attorney in the previous [real estate] matters were about the real estate itself or the parties’ respective sources of income-both topics subject to full disclosure in the present matrimonial action.’ Jensen v. Jensen, 2001 WL 1028897, at *2 (Conn. Super. Ct. 2001). But in a more recent decision, another Connecticut judge went in the opposite direction, granting a motion to disqualify the ‘family attorney’ from representing the husband in a divorce action, apparently concluding that disqualification was necessary to protect the wife’s confidential financial information. Lavey v. Lavey, 2020 WL 13907706, at *6 (Conn. Super. Ct. 2020).”
• “Once a lawyer has served as an arbitrator, mediator, or third party neutral in the course of a divorce proceeding, Rule 1.12(a) prohibits the lawyer from afterwards representing a party to the same proceeding. The concern with such representation is not one of client loyalty or protection of client confidences. As explained in the Rule 1.12 Comment, the prohibition follows from the fact that even though lawyers serving as third party neutrals do not have an obligation to protect client confidences, as Rule 1.6 requires, ‘they typically owe the parties an obligation under law or codes of ethics governing third-party neutrals.'”
• “The conflict of interest rules in the Model Rules do not expressly apply to an attorney who serves as guardian ad litem (GAL). But in many states, the code of conduct applicable to GALs dictates that a lawyer should decline an appointment as GAL in a matter if the lawyer, or someone at her firm, acted as counsel to, or has a prior relationship with, any of the parties, witnesses, or others connected with the family. See e.g. Commonwealth of Massachusetts, Standards for Category F Guardian ad Litem Investigators (in effect as of January 24, 2005), § 1.3.A (‘If the GAL has any prior or existing direct or indirect relationships with parties, their families, their attorneys, material witnesses, or someone else connected with the family, the GAL must consider whether the GAL’s impartiality is compromised as a result of these relationships’; situations in which a ‘GAL shall decline the appointment,’ include where ‘[t]he GAL or the GAL’s law firm previously advised or acted as counsel for a party, child, or other person closely aligned to a party, including but not limited to a party’s spouse, non-marital partner, or a material witness.’ (emphasis added)). Some states may permit service as a GAL under such circumstances, provided all parties are fully informed and waive any conflict. See e.g., Indiana State Office of GAL/CASA, Code of Ethics for GAL in Civil Family Law Cases (updated as of March 28, 2025), ¶ 11 (‘to avoid any actual or apparent conflicts of interest . . . GAL shall not serve on a case when GAL has been personally involved with a family or with the circumstances surrounding the case unless there is full disclosure of the potential conflict to all parties and any perceived or actual conflict is waived.’).”
• “Yet another situation that may give rise to a conflict is where a lawyer meets a prospective client and obtains information about the prospective client’s divorce matter, but the prospective client does not go on to become a client of the lawyer’s firm. The risk for the intake lawyer is that communications with the prospective client may disqualify the intake lawyer or her firm from representing a different client who, as it later turns out, is the other spouse, adverse to the prospective client who never became a client. Under Rule 1.18, ‘Duties to Prospective Clients,’ the extent of the risk will depend on the extent to which the intake lawyer received ‘disqualifying information’ from the prospective client, that is ‘information . . . that could be significantly harmful to’ the prospective client.”
• “But where Rule 1.10 would impute disqualification to all attorneys at a firm where one is disqualified due to a current or former client representation, under Rule 1.18(d)(2), imputation of the intake lawyer’s personal disqualification to other lawyers in the same firm may be avoided if: (1) the intake lawyer took ‘reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client’; (2) the disqualified lawyer is timely screened from any participation in the matter; and (3) the prospective client receives written notice.”
• “The prospective client dilemma is a commonplace occurrence in the area of family law, and the fact that many spouses facing a dissolution action will consult with multiple attorneys before choosing one increases the pool of potential conflicts. The Rule 1.18 Comment provides that ‘a person who communicates with a lawyer for the purpose of disqualifying the lawyer is not a ‘prospective client.’’ While this mean that a person who engages in that kind conduct would not be entitled to the protections of the Rule, difficulties of proof may limit the lawyer’s ability to rely on that provision in opposing a motion for disqualification.”

We always appreciate the diligent work, research, and commentary from Bill Freivogel:

Kudlacek v. Olson (Law Firm), 34 Neb. App. 83 (Neb. App. Feb. 17, 2026).

• Beneficiary of Trust sued Law Firm that represented Settlors of Trust. Beneficiary was unhappy about his rights under Trust and sued Law Firm for negligence. The primary issue is whether Beneficiary, a non-client, can sue Law Firm.
• The trial court granted Law Firm summary judgment. In this opinion the appellate court affirmed. The court ruled a non-client can sue a lawyer if the non-client was an intended third-party beneficiary of the lawyer’s work, but not if a conflict of interest for the lawyer results.
• Here, the Settlors’ expectation differed from what Beneficiary wanted. Thus, the conflict prevented non-client Beneficiary from suing Law Firm. Heavy reliance on Nebraska precedent.

Paciorkowski v. Jetson Elec. Bikes LLC, 2026 WL 438086 (N.J. App. Div. Feb. 17, 2026).

• Plaintiff attempted to be both a class representative and class counsel in a case involving allegedly defective electric bikes. The trial court denied class certification.
• In this opinion the appellate court affirmed, holding that Plaintiff could not be both, except “in certain public interest litigations.” No such “public interest,” here.

Lake v. Brennan, 2026 WL 401197 (M.D. Pa. Feb. 12, 2026).

• Plaintiff is suing City and a number of city-related individuals involving an allegedly improper petition for conservatorship for Plaintiff’s property. Law Firm appeared for City and the individuals.
• Plaintiff moved to disqualify Law Firm claiming that multiple representation was a conflict. Defendants raised Plaintiff’s lack of standing to make the motion. The court discussed standing in the Third Circuit at length.
• The court said because the law on standing is “not clear,” it would assume “arguendo” that Plaintiff had standing. Then, in a routine analysis, not worth pursuing here, the court found no conflict.

Bova v. Twp. of Jackson Planning Bd., 2026 WL 294936 (N.J. App. Div. Feb. 4, 2026).

• Planning Board approved construction of a private school. Plaintiffs (adjoining land owners) sued to overturn the approval.
• One objection was the lawyer (“Lawyer”) for the school/applicant had a relationship with the chair of the planning board (“Chair”).
• The relationship was this: Chair belonged to a synagogue (not a party here). Lawyer represented the synagogue before the township zoning board (different board from Planning Board).
• The trial court upheld the Planning Board’s approval of the private school project, finding the conflict argument “far too remote” to find a conflict. In this Opinion the appellate court affirmed. [Our note: The appellate court did discuss snippets of evidence suggesting Lawyer and Chair were pals of sorts, but said the trial court did not abuse its discretion in rejecting the conflict argument.]

Deel, Inc. v. People Center, Inc., 2026 WL 313505 (Del. Super. Ct. Unpub. Feb. 5, 2026).

• Plaintiff moved to disqualify law firm for Defendant (“Law Firm”) because Law Firm and Plaintiff had earlier contacts about Law Firm representing Plaintiff in a matter arguably related to this case.
• In this unpublished opinion the trial court denied the motion, primarily because Law Firm had erected a screen between the lawyer who contacted Plaintiff and the rest of the firm, in compliance with Delaware Rule 1.18.

“Beasley Allen Fights DQ Order: ‘You Need to Hit Pause for Now’” —

• “A federal judge in New Jersey plans to hear arguments next week on whether to disqualify Beasley Allen, one of the lead plaintiffs’ firms, from the talcum powder multidistrict litigation against Johnson & Johnson.”
• “In a Feb. 9 order, U.S. Magistrate Judge Rukhsanah Singh, of the District of New Jersey, ordered supplemental briefing after a New Jersey appeals court found that Beasley Allen should be disqualified from talc lawsuits because principal Andy Birchfield had partnered with a former Johnson & Johnson attorney to negotiate a proposed $19 billion settlement. Beasley Allen, which claims to represent 435 women in New Jersey state courts, and 5,500 in the multidistrict litigation, has argued to hold off the disqualification to give time to appeal the New Jersey Appellate Division’s Feb. 6 order to the New Jersey Supreme Court.”
• “‘My view is, judge, you need to hit pause for now—just briefly,’ Jeffrey Pollock, of Pollock Law in Trenton, New Jersey, told Law.com for Birchfield and Beasley Allen. ‘The reason being is let’s assume that the appellate division agrees with me, and the Supreme Court agrees with me that Beasley Allen is not out. You rearrange all the deck chairs in the MDL because we’re out, then have to do it all over again.'”
• “Johnson & Johnson, however, has suggested replacing Beasley Allen, whose principal Leigh O’Dell serves as co-lead counsel in the multidistrict litigation, with R. Allen Smith, of The Smith Law Firm, who obtained the first-ever talc verdict in 2013.”
• “‘In fact, in the majority of the Beasley Allen cases that have proceeded to trial since the inception of the litigation, Allen Smith served as lead trial counsel, devising the trial strategy, taking the examinations of nearly all experts, and handling nearly all openings and closings,’ Johnson & Johnson attorney Kristen Fournier, of Kirkland & Ellis in New York, wrote in a Thursday letter to Singh. ‘As such, the disqualification of Beasley Allen should not cause significant disruption to Beasley Allen’s clients (or this MDL) as one of their current attorneys, with significant trial experience and access to expert resources, can continue to represent them.'”
• “‘There is no need to ‘secure substitute counsel’ to replace Beasley Allen, nor is there any risk that denial of a stay of Beasley Allen’s disqualification will ‘irreparably prejudice’ the talc clients,’ he wrote. ‘I, through SLF [Smith Law Firm] will continue to represent the talc clients without disruption or prejudice.'”
• “The potential disruption to the existing talc cases would be ‘real and potentially irreversible,’ Pollock wrote in a Thursday motion, noting that Beasley Allen represents three of the six bellwether plaintiffs teed up for trials in the multidistrict litigation, which involves 67,000 talc cases.”
• “‘Disqualifying nationally selected MDL co-lead counsel based on a single state appellate court’s unprecedented expansion of an ethics rule would disrupt coordinated leadership, impair settlement negotiations, and prejudice litigants who have relied on their chosen counsel for the better part of a decade,’ Pollock wrote in a Thursday motion.”
• “As to the multidistrict litigation, Johnson & Johnson, pushing for disqualification, cited a joint venture agreement between Montgomery, Alabama’s Beasley Allen and the Smith Law Firm, based in Ridgeland, Mississippi, that would alleviate much of the disruption caused by the disqualification order. The firms share 11,000 talc clients.”

“Talcum Law Firm Accuses Litigation Funders of ‘Pirating’ Cases” —

• “A Mississippi-based plaintiffs’ firm accused three large investment firms of fraudulently inducing it to enter into two loan agreements on false grounds for talcum powder litigation. The Smith Law Firm filed suit Wednesday [2/11] against Ellington Financial, ICG Investments, and Stifel Financial alleging that funders misrepresented the availability of funds for a second tranche of a multi-million-dollar loan and conspired to gain control of the firm and its talcum powder litigation.”
• “‘The Defendants have executed what is commonly referred to as a ‘loan to own’ scheme,’ counsel for Smith Law firm at Carner & Rosemon wrote in the amended complaint filed in US District Court for the Southern District of Mississippi. ‘From the outset the Defendants conspired to defraud SLF knowing that this fraud would most likely result in SLF defaulting on its SLF1 loan interest payments and quarterly talc expenses which would allow the Defendants to pirate the SLF case fees.'”
• “According to the complaint, the three institutions provided loans to the firm for ‘tens of millions of dollars.’ The loans funded the law firm’s operations and supported the firm’s involvement in long-running litigation against Johnson & Johnson alleging its baby powder was tainted with cancer-causing asbestos. Smith Law says it brought the first case that went to trial in South Dakota in 2009. J&J denies allegations that its talc products caused cancer.”
• “It is now a multi-district litigation and faces more than 73,000 suits from consumers who blame baby powder for their cancers.”
• “After the talcum powder litigation was delayed by multiple bankruptcies filed by Johnson & Johnson, Smith Law says it submitted a request to draw on the second portion of the loan, around $30 million, but was denied. The firm could not meet its required cash interest payments due on the first loan and was put in default, they wrote in the complaint.”
• “Smith Law further alleged that the funders only included the $30 million tranche to artificially increase the overall size of the loan so it could be placed in a Collateralized Loan Obligation, which is a structured security that bundles lower-rated corporate loans and sells them to investors.”
• “The three investment firms manage billions of dollars and litigation finance is only a portion of their portfolio. Stifel is a global wealth management and investment banking company that manages over $550 billion in client assets. ICG is an alternative asset manager with $127 billion in assets under management. Ellington acquires and manages mortgage-related, consumer-related and corporate -related financial assets and has $18.2 billion in assets under management.”

“How to buy a law firm if you’re not allowed to buy a law firm” —

• “When Cohen & Gresser, known for defending white-collar criminals such as Sam Bankman-Fried and Ghislaine Maxwell, hired bankers to sell a stake in itself to private equity, it turned heads in the US legal profession. Outside investors are barred from owning law firms in most US states, including New York where Cohen & Gresser is based, under professional ethics rules designed to prevent commercial considerations from tainting legal advice.”
• “The complex financial structure that provides private equity with a workaround is inevitably coming to law, Larry Gresser said, and he wants the law firm he co-founded to be the most prominent so far to snag a deal from a buyout group.”
• “‘This is a moment of both uncertainty and opportunity,’ he told the FT. ‘One major benefit of the new structure is that the law firm can offer partners equity that will increase in value as the enterprise grows, thereby encouraging partners to think and act in the longer-term interest of the firm.'”
• “So, how exactly can you buy a law firm if you are not allowed to buy a law firm? The answer is that the law firm gets split into two parts: one entity, fully controlled by lawyers, that provides legal advice to clients, and a second, called a management services organisation, that houses technology and other back-office assets and all the non-lawyer staff.”
• “The MSO sells services back to the other side of the business in exchange for fees that are large enough to make the entity profitable, and it is the MSO that sells an ownership stake to private equity. That way, private equity does not fall foul of the American Bar Association’s Rule 5.4, which says non-lawyers cannot be in the business of law and firms cannot share fees with non-lawyers.”
  A diagram showing how institutional investors and law firm partners invest through a management services organisation, which provides services to a separate law firm under a services agreement.”
• “‘Investors are trying to fine-tune the structure and get a handle on what exactly constitutes legal work,’ said Austin Maloney, a lawyer at Hunton Andrews Kurth, which advises private equity. ‘The goal is to perform as many services as possible in the MSO. No investor is going to sign up to this if they can’t get the right amount of juice out of it.'”
• “The MSO structure has been used by a handful of small US firms over the past 20 years, and concentrated in those specialising in personal injury cases, but interest has exploded in recent months. There appear to be several reasons. Private equity has swept through the US accounting sector in the past five years, leaving law the last frontier in professional services.”
• “Private equity and their advisers are beginning to get confident about extracting significant amounts of a law firm’s value by shifting more assets into the MSO, potentially expanding the number of firms that could make a deal add up.”
• “‘We ask, how much does an outsourced marketing firm charge? An IT service provider? We iterate and iterate until the economics and the ethics align,’ he said. ‘The brand licensing is the big variable. If Kirkland & Ellis were ever to do this, how much of its value is in the brand? Is it 10 per cent? Or 20 per cent? It’s an interesting question, right?'”
• “It remains unclear what different state bar associations might think about all the potential variations — one reason major private equity firms are treading warily, and advisers caution the explosion of interest may not ultimately translate into deals. There is also a potential complication from draft legislation under consideration in Illinois, which would ban MSOs from directly and ‘indirectly’ sharing fees.”

“How Private Equity Is Challenging the Traditional Future of Law Firm Ownership” —

• “Advocates argue that small and mid-sized law firms often lack capital for technology, expansion, or operational improvements. Outside investors can address this gap and introduce operational discipline from other industries. Some also note generational shifts: younger lawyers with higher debt and fewer partnership opportunities may prefer stable employment models over traditional equity tracks, though this may reflect limited options rather than true preference.”
• “Skeptics raise significant concerns. Private equity firms typically operate on holding periods of three to seven years, which may conflict with the long-term relationships and reputational investments essential to successful practices. There are questions about the impact on client relationships and firm culture when owners prioritize exit strategies.”
• “The healthcare sector provides a cautionary example. Research has linked private equity ownership to increased costs, higher complication rates, and reduced staffing levels. A 2023 JAMA study found that private equity acquisition of hospitals was associated with a 25% increase in hospital-acquired adverse events. While legal services differ from healthcare, the tendency to prioritize short-term gains over service quality is a relevant consideration.”
• “Questions about who benefits from efficiency gains also deserve attention. If an MSO reduces costs but maintains the same charges, the savings are distributed to investors rather than partners or clients. Separating operations from the firm also complicates data protection, conflict checks, and regulatory compliance. The UK experience included notable ABS failures that required regulatory intervention.”

“Ex-client sues law firm King & Spalding for $1 billion over alleged malpractice” —

• “U.S. law firm King & Spalding and one of its former partners are facing a $1 billion legal malpractice lawsuit over allegations that they tried to wrest the ownership of a health care-based investment fund away from its client.”
• “White Oak Global Advisors alleged in a complaint, filed Saturday in New York County Supreme Court that former King & Spalding partner Terry Novetsky worked against its interests by secretly helping Isaac Soleimani, the then-CEO of White Oak’s health care-based fund.”
• “The lawsuit alleges that Novetsky and the law firm, while representing White Oak Global Advisors and White Oak Healthcare, worked with Soleimani ‘to craft and execute a multi-step plot to usurp control of White Oak Healthcare,’ including creating ‘pretextual litigation’ on Soleimani’s behalf. White Oak alleged that Novetsky and Soleimani communicated with each other through their personal Gmail accounts.”
• ‘The paper trail is damning,’ White Oak said in its lawsuit. It said King & Spalding’s malpractice caused it to suffer hundreds of millions of dollars in damages, as it prohibited White Oak from launching two multi-billion dollar health care funds.”
• “A spokesperson for King & Spalding did not immediately respond to a request for comment. White Oak said in its lawsuit that Terry Novetsky left King & Spalding for an unnamed law firm in 2023, where Novetsky continued the scheme. Novetsky did not immediately respond to a request for comment. The other law firm was not named in the lawsuit.”
• “White Oak said it is seeking at least $1 billion in damages, including at least $500 million in punitive damages. King & Spalding engaged ‘in an unprecedented conflict of interest and breach of fiduciary duty toward its clients,’ White Oak’s law firm Kasowitz said in a statement.”
• Full complaint: here.