Bressler Risk Blog

Interesting spot and review from Amy McClurg at Thompson Hine: “Utah Supreme Court: Lawyers represented former trustees, not the trust—no conflict” —

• “Conflicts of interest aren’t always straightforward, especially with trust and estate planning matters. The Supreme Court of Utah recently determined that there was no former client conflict under Utah’s Rule 1.9 where lawyers were found to have only represented the former trustees and not the trust itself in litigation.”
• “Trustees (“Trustees”) hired lawyers to represent them in their duties as Trustees of the trusts at issue. After a significant period, Trustees hired the same lawyers to hire them to defend a lawsuit brought by the trusts’ beneficiaries.”
• “A jury eventually found that Trustees breached their fiduciary duties to the trust. The court entered a $1.8 million judgment against the Trustees, which was mainly payable to the trusts. The court removed the Trustees and appointed Successor Trustees (“Successor Trustees”). Using the same attorneys, the now former trustees (“Former Trustees”) requested that the court reduce the judgment.”
• “The Successor Trustees moved to disqualify the Former Trustees’ attorneys… The argument was based on the view that the lawyers had represented the trusts in the litigation initiated by the beneficiaries and therefore were prohibited from assisting the Former Trustees in trying to reduce the judgment. They argued that to do so would be adverse to the interests of the trusts and the trusts were their former clients. The lawyers were disqualified by the district court.”
• “The Utah Supreme Court found that while an attorney can represent a trust, an attorney-client relationship does not arise with the trust solely due to the lawyer’s representation of a trustee. While a trust is capable of forming an attorney-client relationship with a lawyer, context determines whether such relationship was actually formed. The trust holds the attorney-client privilege and the trustee, as fiduciary, claims the privilege on the trust’s behalf.”
• “While substantive law regarding trusts will vary from state to state, former client conflicts are fairly common. Different states with the nearly identical former client conflict rules, may very well issue opinions with a vastly different result. For those states without clear cut answers to the questions raised in this opinion, engagement letters become even more crucial. This case was not ultimately decided on the content of the engagement letter, but it is a wonder how far the case would have made it in court had the Former Trustee’s engagement letter explicitly mentioned who the client was not—rather than just mentioning who the client was. This case surely raises the question of when it would be advantageous for trusts and estates lawyers (and those in other fields of practice as well) to follow suit.”

And for those missing the Olympics: “Head of Panel That Ruled Against Jordan Chiles Represents Romania in Other Cases” —

• “The head of a panel that ruled that the American gymnast Jordan Chiles had to give up her Olympic bronze medal in favor of a Romanian athlete has represented Romania for almost a decade in arbitration cases, documents show.”
• “The three members of a special tribunal convened for the Olympics by the Court of Arbitration for Sport after Romania lodged a complaint ruled that a successful appeal made by Chiles’s coach over the points awarded to her in the floor exercise competition was initiated four seconds late. The Romanian athlete, Ana Barbosu, was awarded the bronze medal as a result of the panel’s decision, and Chiles was dropped to fifth place.”
• “The decision to reallocate the medals in the floor exercise outraged U.S. Olympic and gymnastics officials, who have threatened to take their fight to the Swiss courts. The revelation that Hamid G. Gharavi chaired the panel that resolved the dispute in favor of a Romanian athlete despite having a long relationship with Romania’s government is sure to inflame the case further.”
• “Very little is known about the deliberation and how the panel reached its verdict, with the court publishing just a one-page statement confirming the decisions it made. A detailed document outlining the full reasoning behind the outcome will eventually be sent to all the parties involved.”
• “U.S.A. Gymnastics said on Monday it had been notified by the court that under its rules, the decision cannot be reconsidered ‘even when conclusive new evidence is presented.'”
• “The gymnastics federation said it would continue to pursue “every possible avenue” for an appeal, including before the Swiss Federal Tribunal. That body, the only one that can hear an appeal against a decision by CAS, the sports court, only considers breaches of process and not new evidence related to the case itself.”
• “Under the court’s rules, panel members, including the chair, must complete a conflict of interest form before reviewing each case that lists three possible outcomes.”
• “The first and third are explicit, revealing no conflict or a conflict so significant that they would require their recusing themselves from a case. The second is more nuanced, allowing arbitrators to reveal potential conflicts but giving them a chance to explain why the potential conflict should not prevent them from hearing a case.”
• “‘The issue is whether an Olympic arbitrator who currently represents a country on the global stage can decide a case involving a gymnast of that country, in an unbiased manner,’ three arbitration experts wrote in an opinion published on the institute for conflict resolution’s website. ‘Is it realistic to expect such arbitrator can decide against the interests of that country or of that country’s gymnast, who in this case is represented by the Federation of Romanian Gymnasts?'”
• “Katherine Simpson, an international arbitrator and one of the authors of the opinion piece that first disclosed Mr. Gharavi’s work for Romania, said that even if none of the parties objected, his work on behalf of Romania was significant and meant he would automatically have had to recuse himself under the IBA’s so-called red list of non-waivable activities.”

Whistleblower DQ of Assistant US Attorney Denied: “United States v. Standard Chartered Bank, 18 Civ. 11117 (PAE), 6-11 (S.D.N.Y. Aug. 12, 2024)” —

• “Brutus Trading’s motion is premised primarily on the witness-advocate rule, as set forth in Rule 3.7 of the New York Rules of Professional Conduct. It provides that, subject to certain exceptions, ‘[a] lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact.'”
• “In moving to disqualify AUSA Barnea, Brutus Trading contends that his continued representation of the Government in connection with the pending motion to set aside the judgment pursuant to Rule 60(d)(3) would violate New York Rules of Professional Conduct 3.7 and 1.7.”
• “In that pending motion, Brutus Trading alleges that the Government committed fraud on this Court by falsely denying that Standard Chartered Bank transacted with Iranian entities and foreign terrorist organizations after 2007.”
• “Brutus Trading contends that because AUSA Barnea represented the Government throughout the underlying litigation, he participated in the alleged fraud. It argues that AUSA Barnea would be an indispensable fact witness were the Court to conduct an evidentiary hearing in connection with the Rule 60(d)(3) motion.”
• “For several reasons, Brutus Trading’s contentions are meritless, to the point where they verge on vexatious and fii volous. They fall far short of the ‘high standard of proof’ necessary to justify disqualification.”
• “AUSA Barnea’s continued representation does not violate the witness-advocate rule embodied in New York Rule of Professional Conduct 3.7 because the Court has not scheduled- and does not have plans to schedule-a trial or evidentiary hearing in the case at which AUSA Barnea would have to testify.”
• “In relevant part, New York Rule of Professional Conduct 3.7(a) provides that a ‘lawyer shall not act as advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact.'”
• “As the Government rightly notes, there is no trial or evidentiary hearing scheduled in this case. Nor is there any prospect of an upcoming trial or evidentiary hearing.”
• “Quite the contrary, the case is currently closed. The Court dismissed it in July 2020 and the Second Circuit affirmed the dismissal. Brutus Trading’s current bid to reopen the case almost four years later by filing the pending Rule 60(d)(3) motion is exceptionally unlikely ever to necessitate a trial or even an evidentiary hearing.”
• “The Court expects the Rule 60(d)(3) motion to be readily resolved on the papers, without a need for an evidentiary hearing. The Court, notably, did not need to conduct an evidentiary hearing when it resolved (and denied) Brutus Trading’s October 2020 motion for an indicative ruling that, had the Court retained jurisdiction, it would have vacated the dismissal based on newly discovered evidence.”
• “Even if there were a colorable basis to project that an evidentiary hearing might be held in the future, with the Court not having scheduled one, under settled case law, it would be premature to disqualify AUS A Barnea based on Brutus Trading’s conjecture that his representation of the Government at such a hearing would breach the witness-advocate rule.”
• “That is because, at such a preliminary stage, ‘it is impossible to determine how significant [counsel] might be as a witness or whether he is likely even to be called as a witness; whether his testimony would likely hurt or help his client; or whether his testimony would or would not be cumulative of other witnesses.’ Prout v. Viadeck, 316 F.Supp.3d 784, 810 (S.D.N.Y. 2018).”
• “The Court therefore denies the motion to disqualify on the basis of the witness-advocate rule. There is no risk that AUSA Barnea’s continued participation will taint this case. In the improbable event that an evidentiary hearing is one day scheduled, Brutus Trading will be at liberty to renew such a motion, provided one can then be filed consistent with Federal Rule of Civil Procedure 11.”
• “Brutus Trading also briefly argues that disqualification is necessary under Rule 1.7(a)(2)… Brutus Trading declares that ‘[a]s an alleged participant in the fraud, Barnea should also be disqualified from representing the Government because:a reasonable lawyer would conclude that there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own … personal interests.” Relator Mem. at 8 n.2 (citing Rule 1.7(a)(2)).”
• “This argument is undeveloped and specious. For one, Brutus Trading’s allegation of fraud is wholly threadbare.”
• “But, even assuming the truth of Brutus Trading’s claim that the Government wrongly denied that Standard Chartered Bank conducted unlawful transactions post-2007, that is a far cry from meaning that AUSA Barnea or any other government attorney intentionally deceived the Court. Indeed, in its Rule 60(d)(3) motion briefing, Brutus Trading claims that ‘[w]ith the assistance of forensic data analysis, Brutus [Trading] was only recently able to reveal or ‘decloak’ countless illegal transactions that were hidden deep in the Bank’s electronic spreadsheets, which Brutus [Trading] gave to the Government.’ Dkt 102 at 1.”
• “Given the difficulty that Brutus Trading itself purports to have had in ‘decloak [ing]’ these alleged illegal transactions, there would be no reason to assume that Government counsel were aware of such misconduct by the bank, as opposed to not having investigated to a degree necessary to uncover such machinations.”
• “Brutus Trading’s allegations do not come to close to supporting the serious allegation that the Government or AUSA Barnea committed fraud on the Court by denying that Standard Chartered Bank engaged in illegal transactions. There is no basis to infer a conflict of interest between the AUSA Barnea and the Government-and Brutus Trading has done nothing to substantiate that claim.”
• “The Court denies Brutus Trading’s motion to disqualify.”

“Indicted pro-Trump lawyer is ousted as counsel for ex-Overstock CEO in Dominion case” —

• “It is exceedingly difficult to persuade a federal judge to disqualify your opponent’s chosen counsel. And for good reason: Courts are loath to interfere with the right to select one’s own lawyer and generally don’t like the disruption that ensues when a client is forced to pick a new lawyer.”
• “The disqualification test in Washington, D.C. — where Dominion Voting Systems is litigating a defamation lawsuit accusing former Overstock CEO Patrick Byrne of falsely claiming that the voting tech company tainted the 2020 presidential election — is particularly stringent. Unless one side can show that the other side’s lawyer is conflicted, Washington judges may only resort to disqualification if the targeted lawyer has engaged in ‘truly egregious misconduct likely to infect future proceedings.'”
• “U.S. Magistrate Judge Moxila Upadhyaya found all that and more in a decision on Tuesday to disqualify Michigan attorney Stefanie Lambert from serving as Byrne’s counsel in the Dominion case.”
• “Upadhyaya concluded in Tuesday’s ruling that Lambert repeatedly violated both a protective order shielding Dominion documents and subsequent court orders directing Lambert to abide by the protective order. The judge also found that Lambert engaged in a pattern of misrepresentations about her conduct.”
• “The alleged misconduct began, according to the opinion, even before Lambert first entered an appearance in the case last March. Unbeknownst to Dominion, Lambert had joined Byrne’s team a couple of months before entering that appearance, signing onto the protective order Dominion had previously negotiated with Byrne’s lawyers from McGlinchey Stafford.”
• “But at the beginning of March, Lambert disclosed protected Dominion documents. She attached some documents to a filing in a separate Michigan criminal case accusing her of election interference. She also, according to the judge, gave a right-wing Michigan sheriff confidential log-in information to allow him access to the full repository of documents Dominion produced in discovery in the Byrne case.”
• “The sheriff, Dar Leaf, subsequently posted links to more than 2,000 Dominion documents on social media sites. Leaf’s posts attracted hundreds of thousands of views, according to Upadhyaya’s opinion.”
• “Upadhyaya asked Lambert why she had not consulted the court before disclosing protected documents. Lambert said she was obligated as an officer of the court to inform law enforcement officials when she found evidence of Dominion’s crimes.”
• “‘Lambert’s misrepresentations reflect a deeply concerning pattern that does not appear to have any sign of stopping,’ the judge wrote. ‘Dominion has raised a plausible narrative that Lambert became involved in this litigation so that she could gain access to Dominion’s documents and use them for improper purposes.'”
• “Upadhyaya noted that the stringent test for disqualification is meant to insulate clients from the consequences of their lawyers’ misconduct. But that principle doesn’t apply in this case, the judge said, because Lambert’s client, Byrne, has engaged in similarly ‘egregious’ violations of the protective order. (Dominion has not yet sought sanctions against Byrne but has reserved that right.)”

“Opposing Counsel Want Judge’s Son Off the Case” —

• “An oil and gas exploration company wants the Texas Supreme Court to assist in the disqualification of Justice Debra Lehrmann’s son from a case pending in a state district court.”
• “Jonathan Lehrmann, currently an appellate attorney and associate at Houston-based Buck Keenan, became the subject of a disqualification motion after he was hired by opposing counsel in a dispute with RSM Production Corp., which is based in Denver, Colorado.”
• “As explained in the petition, Jonathan Lehrmann once worked as an attorney with Wright Close & Barger, a firm that at the relevant time represented RSM in a breach-of-fiduciary duty and fraud-by-non-disclosure lawsuit filed against Jim Ford and companies formed by him, such as Rodeo Resources, collectively referred to as the Rodeo defendants.”
• “‘Days before Rodeo filed its notice of appeal, Buck Keenan hired Lehrmann,’ the RSM petition states, adding Buck Keenan attorney E.F. Mano DeAyala asked Lehrmann if he had previously represented RSM and Lehrmann responded that he ‘did not remember.'”
• “DeAyala allegedly tasked Lehrmann with drafting Rodeo’s opening brief for the appeal. RSM’s counsel, noticing the conflict, asked Buck Keenan to voluntarily withdraw but DeAyala refused to respond, the RSM petition claims.”
• “The issue before the Supreme Court is a complaint against the First District, alleging Justice Gordon Goodman, ‘acting individually,’ denied RSM’s notice of motion to disqualify Rodeo’s counsel, and Goodman’s granting of Rodeo’s emergency motion for a temporary stay of all further trial court proceedings.”
• “RSM asked the Supreme Court if the First District clearly abused its discretion by staying the trial court’s consideration of RSM’s motion on the basis the issue may be arbitrable, ‘when courts have the sole power and duty to regulate attorney conduct.'”

“Ethics panel clarifies recusal standards for judges with previous prosecutorial roles” —

• “A judge must recuse from all cases involving defendants whom the judge previously prosecuted, according to the [Florida] Judicial Ethics Advisory Committee.”
• “‘The test for the appearance of impropriety is whether the conduct would create in reasonable minds, with knowledge of all the relevant circumstances that a reasonable inquiry would disclose, a perception that the judge’s ability to carry out judicial responsibilities with integrity, impartiality, and competence is impaired,” the ethics panel said in Opinion Number 2024-12, citing commentary to Canon 2A. “This Committee finds that a reasonable mind would perceive that a judge who previously prosecuted the same defendant would not be impartial.'”

“Alaska Prosecutor Accused of Exploiting Judge Ties for Recusal” —

• “A federal public defender has accused the US attorney’s office in Alaska of trying to force a judge’s recusal in a controversial murder case last year by adding a prosecutor to the trial team who had sent nude photos to the judge.”
• “In early 2023, Karen Vandergaw, a senior prosecutor, suddenly joined a case overseen by Joshua Kindred, then one of two active judges on the Alaska federal bench. At the time, Kindred’s cases involving Vandergaw had for months been reassigned away from him, though the federal defenders office didn’t know why.”
• “Gary Colbath, the Alaska federal defender’s office No. 2, said he confronted the lead prosecutor on the case about his suspicions of improper maneuvering and warned he planned to accuse the office of misconduct in a motion to dismiss. Kindred had a reputation for being more lenient toward criminal defendants.”
• “‘There was no reason that she noticed an appearance, in our eyes, other than as a strategic attempt to cause Kindred’s recusal,’ Colbath said in an interview.”
• “The following business day after Colbath said he raised concerns, Vandergaw was withdrawn from the prosecution team without explanation, court records show.”
• “The case is one of dozens now under scrutiny since Kindred resigned last month amid findings that he sexually harassed a law clerk and created a hostile environment for other employees.”
• “Now, both the US attorney’s and federal defenders offices are conducting their own reviews into Kindred’s past cases for potential conflicts of interest. The Justice Department is deploying a veteran lawyer who has previously helped other troubled offices to support the case review.”
• “Legal ethics experts outside of Alaska said it would be inappropriate for a US attorney’s office to add an attorney to a case to disqualify the judge.”
• “It’s possible that Vandergaw’s addition to the case may have been negligence or a failure by the office to conduct proper ethical reviews, said Jeremy Fogel, executive director of the Berkeley Judicial Institute and a former California federal judge.”
• “Private attorneys are also eyeing current and past cases for potential relief due to the conflicts. Defense lawyers and academics outside of Alaska have said there may be grounds to reopen any cases Kindred heard involving the US attorney’s office.”

Previous and additional detail on this situation: “Prosecutors Flag More Possible Case Conflicts From Alaska Judge.“

Reminder, The 2024 IG Staffing Compensation Survey will close at the end of the month.

If you missed the original announcement, you can read more about this survey here.

This survey looks to capture data on the broad range of law firm IG roles. So if you’re an individual contributor looking to understand how your comp compares to your peers, or you’re an IG manager looking to benchmark yourself + to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

(If you’re not on the IG side of your firm’s house, I encourage you to pass along details to those who are, as I suspect they’ll regret missing the chance to participate and see the results when they become available!)

For those who are wondering, yes we’ll be running the risk (e.g. intake/conflicts/terms) staffing compensation survey again this year. (In fact, I hope to have that exercise kicked off quite soon…)

And if anyone has questions, or would like a reasonable deadline extension, please feel free to reach out to me directly. (Email readers can do that by just replying to this message in their inbox — it’ll reach me. Others can use the contact form.)

“Sidestepping Conflicts and Other Ethical Pitfalls in Employee Depositions” —

• “Quite often corporate employers want outside counsel to represent both the corporation and potential employee-witnesses during pretrial discovery depositions. Conflicts of interest are obviously lurking in these scenarios, although, in the case of current employees — particularly current management employees — the likelihood of an ethical misstep is small. In fact, a lawyer’s representation of current, highly placed corporate employees will have the effect of protecting with attorney-client privilege information they provide to the corporation’s attorney.”
• “The real problems arise when a corporation’s attorney seeks to represent both the corporation and former employees who may possess information adverse to the corporation and may even be facing personal liability themselves.”
• “The recipe for ethically representing a nonparty witness at a deposition in a case in which the lawyer also represents a party (usually a corporate employer) has four ingredients:
  • Limited Scope Representation. Representing the witness during a deposition could be a “limited scope representation,” meaning that the lawyer would provide some, but not all, of the legal services that attend a traditional lawyer-client relationship. “Limited representation” could include no more than a pre-deposition preparation session and legal advice on whether the witness’s testimony could subject him or her to criminal or civil liability. Any limitations on the usual attorney-client relationship would have to be reasonable under the circumstances.
  • Is There a Conflict? Can It Be Waived? The lawyer should next consider if representing the witness creates a conflict of interest with the corporate client. If so, and if the conflict can be waived, the lawyer must obtain signed, written conflict waivers from both the witness and the corporate client. The lawyer’s ethical obligation to inform both clients about the possibility that conflicts of interest may arise, to independently monitor the case for conflicts of interest, and to address these conflicts continues throughout the litigation.”
• “Even though it is not necessarily an ethical violation for a corporation’s lawyer to also represent an employee witness at a deposition, in reality, most witnesses likely possess information that is unfavorable to the corporation’s case, thus creating a strong potential for a conflict of interest. It can be very difficult for the lawyer to determine the witness’s full knowledge before the deposition.”
• “Finally, if a conflict arises, it can be waived only if the witness gives informed consent to representation despite the conflict. Informed consent means that the witness must be advised of all of the negative consequences that could occur as a result of his or her testimony.”

“CapRadio audit details ‘possible conflicts of interest’ for 5 ex-board members. Here’s who they are.” —

• “An audit released this week into financial practices at Capital Public Radio flagged five contracts involving possible conflicts of interest on the part of five different former board members — three more than previously known to the public.”
• “The forensic analysis released Monday of finances at CapRadio, an auxiliary of Sacramento State, found that those three board members were “either a founder or a partner” at businesses that entered into contracts with the station totaling tens of thousands of dollars.”
• “‘As such, the contracts with CPR may have provided a financial benefit to the Board members associated with each vendor,’ part of the audit reads.”
• “Two of the three board members are partners at two different law firms with offices in Sacramento, according to the audit. The third is the founder of a management consulting firm. All three were among the 14 board members who resigned last October, days after a separate audit revealing vast financial mismanagement was released by the California State University system.”
• “The [Sacramento] Bee determined the identities of two other board members, both attorneys, based on the descriptions of their law firms and their roles described in the audit. “
• “A person knowledgeable of CapRadio’s finances, who wished to remain anonymous because the person was not authorized to speak about the matter, confirmed the identities of those two, as well as the board member who runs a consulting firm.”
• “From January 2019 until May 2023, Downey Brand was paid more than $42,000 for legal services related to ‘lease negotiations,’ the audit said.”
• “However, CLA did not determine whether Clark recused herself from the discussion and votes pertaining to the contract, the audit said.”
• “The audit noted the payments ‘appear reasonable based on the stated services rendered’ for this contract.”
• “‘There may be another contract with (Downey Brand) in addition to the contract CLA reviewed,’ the audit states. ‘However, Sacramento State has been unable to locate any other contracts and no further outreach was made to (Downey Brand).'”
• “Another law firm, Stoel Rives, was paid more than $11,000 for two years while a CapRadio board member was employed at the firm.”
• “Stoel Rives, through a Portland-based attorney, helped CapRadio file a trademark application in 2021, according to the U.S. Patent and Trademark Office.”
• “The station entered into a contract with Stoel Rives in October 2020 for “legal services” related to trademark matters, the audit said.”
• “The audit noted that the ‘payments and contract appear reasonable for the stated services.'”
• “The discussions surrounding the contract were not noted in the minutes from the Board of Directors meeting, executive or the finance committees, the audit said.”
• “Though [General Manager] Eytcheson said the contracts were properly vetted, the 2023 financial audit by the CSU said annual documents that were supposed to track board members’ conflicts of interest could not be located.”
• “‘Conflict‐of‐interest (COI) statements for board members were not retained,’ a portion of last year’s audit reads, in part.”
• “‘The COI policy states that members of the board should complete an annual COI statement. However, CPR could not locate signed statements during the audit period because the staff member responsible for maintaining the statements was on sabbatical leave.'”

For more, see: “‘Absolutely unacceptable’: Forensic examination finds misuse of funds, possible conflicts of interest and $700,000 in mysterious reimbursements at CapRadio”

“Micron, Dell, HP win appeal over conflict claims tied to US patent official” —

• “A U.S. appeals court on Friday upheld U.S. Patent and Trademark Office rulings for Micron, Dell, and HP, finding that the decisions could stand even though the attorney who represented the tech companies later became the office’s director.”
• “The U.S. Court of Appeals for the Federal Circuit said the companies’ adversary in the USPTO case, patent owner Unification Technologies, had not shown that Kathi Vidal’s previous participation in the case influenced the administrative judges who invalidated its patents.”
• “Unification sued Micron, Dell and HP for infringing the patents, which relate to managing and deleting data in memory chips, in Texas federal court in 2020. The HP and Dell cases have since been dismissed, while the Micron case is ongoing.”
• “The tech companies — represented by Vidal, then a partner at Winston & Strawn — asked the USPTO’s Patent Trial and Appeal Board (PTAB) to invalidate the patents later that year. President Joe Biden nominated Vidal to head the office in 2021 and she was confirmed in 2022, after which she recused herself from the case.”
• “The board invalidated Unification’s patents later that year. Unification argued at the Federal Circuit that the case improperly required PTAB judges to ‘evaluat[e] the arguments of their boss’ and said they were ‘monetarily disincentivized’ from ruling against Vidal because she reviews their performance.”
• “U.S. Circuit Judge Raymond Chen wrote for a three-judge panel on Friday that Unification ‘provided no evidence that the Director controls [PTAB judge] bonuses or performance reviews,’ and that a PTAB judge would have no reason to think that their decision ‘could affect their bonus determination because of the way that the Director might react.'”

“How Kirkland Uses Court Shopping to Get an Edge in Bankruptcy” —

• “In this system, Kirkland & Ellis LLP—the biggest player in giant corporate bankruptcies, and the largest law firm in the world by revenue—stands out.”
• “Kirkland didn’t invent forum or judge shopping, and it’s not the only firm that scouts judges and districts in its quest to help its clients quickly get in and out of Chapter 11. But an analysis of its forum shopping playbook, part of Bloomberg Law’s examination of the inner workings of US bankruptcy courts, shows how one firm can give—and take away.”
• “When rulings don’t go in its favor or controversy erupts in courts where Kirkland has been a steady presence, it often stops taking its business there and brings new cases elsewhere, a Bloomberg Law analysis of its court filings shows.”
• “In at least three instances, the shift from one district to others came after questions surfaced in cases in which Kirkland was involved, a review of court filings compiled by BankruptcyData.com found. Its actions in Houston, Delaware, and Richmond reveal the pattern. In Houston, the newest example, a romance scandal involving a judge and local lawyer cast a spotlight on cases in which Kirkland was lead counsel. After the controversy broke, the firm went from filing multiple Houston cases annually to filing none, Bloomberg Law found.”
• “‘If a court doesn’t come through for Kirkland in one case, Kirkland won’t take them another one,’ bankruptcy expert Lynn LoPucki, a professor at the University of Florida Levin College of Law, said in an interview.”
• “Chicago-based Kirkland is a driving force in the bankruptcy system. From 2011 to 2020, it represented the debtor in more than 20% of large public company bankruptcies, more than double its nearest competitor. Kirkland bills heartily for its services, with top partners charging more than $2,000 an hour to help distressed companies navigate their financial trouble.”
• “In a system in which law firms have great discretion on where they file cases, Kirkland is noteworthy for its ability to shift its cache of major bankruptcies to favored courts. Those filings deliver a financial jolt to the local legal community and help transform sleepy bankruptcy districts.”
• “‘Unlike any other firm around, Kirkland exercises market power over bankruptcy courts,’ Georgetown University law professor Adam J. Levitin wrote in a 2023 law review article about venue shopping, a practice ingrained in the US bankruptcy system.”
• “For decades Kirkland regularly filed large Chapter 11 bankruptcies in Delaware, a favored spot for law firms. Then in 2015, a judge raised sharp questions in the bankruptcy of Samson Resources Corp., in which Kirkland was the debtor’s counsel, suggesting senior lenders would ‘kill’ the oil and gas company if they didn’t get what they wanted… Then Kirkland stopped bringing cases in Delaware.”
• “‘Coming from a firm that handles a fifth of all megacase filings, it is a weighty threat, especially to a judicial district like Delaware that is able to justify its seven temporary bankruptcy judgeships based solely on its flow of large chapter 11 filings,’ he [Levitin] added.”

Regular blog readers know that I like experiments. Last week, I was catching up with an old risk friend (who taught me and one of my favorite CEOs the ins and outs of ethical walls, nearly two decades ago).

As we reached the end of our call, he said: “Well, I actually have more to say.” To which I said: “Why don’t you write it all down for me?” And, just to show me, he went and did just that.

So in today’s update, I’m pleased to spotlight a guest article from industry veteran and legal risk management expert Mike Guernon: “A Blueprint for Better Conflicts Management: Balancing Precision, Process, and Professionalism.”

It’s a bit longer than our typical posts, so you can read the entire linked article as a pdf. In his essay:

• Mike share his thoughts and advice on building a better law firm conflicts and intake function, taking into account the “realities” of people, process, data and technology.
• He advocates for the use of advanced technology and data-driven approaches to streamline processes, particularly in ways that allow lawyers and risk staff to focus on higher-level analysis and resolution strategies.
• He also emphasizes human factors, noting the importance of building checks and balances to address (inevitable?) errors, and to understand the important of supporting work-life balance in building, training, and growing risk teams.
• Finally, he highlights the value of risk leaders and staff building strong professional networks, including participating in formal industry forums and informal peer discussions, as a way to stay on top of emerging trends, navigate new ethical dilemmas, and make “good practices” even better.

Intrigued? See the entire article here.

“Vinson & Elkins Pursues Narrower Role in Enviva’s Bankruptcy” —

• “Vinson & Elkins LLP is seeking a new role in Enviva Inc.’s bankruptcy weeks after a judge rejected its bid to serve as debtors’ counsel.”
• “The request comes after Judge Brian F. Kenney of the US Bankruptcy Court for the Eastern District of Virginia in May ruled that Vinson & Elkins couldn’t represent Enviva in its bankruptcy because it has a longstanding relationship with Riverstone Investment Group LLC, a private equity firm that held 43% of Enviva’s publicly traded shares. Kenney declined Enviva’s request for reconsideration in July.”
• “When Kenney rejected Vinson & Elkins’ initial employment application, he left open the possibility that the firm could represent Enviva in a different capacity under a section of the bankruptcy code that is less restrictive on conflicts of interest.”
• “‘The Court explained in the Reconsideration Order that there may nevertheless be an important role for V&E in these chapter 11 cases as special counsel under section 327(e) of the Bankruptcy Code due to its deep institutional knowledge of the Debtors,’ Enviva said in a Tuesday filing.”
• “Under 327(e), Vinson & Elkins can work on the case as long as the matters it works on don’t involve its other clients.”
• “Under the Tuesday proposal, Vinson & Elkins will continue to work as Enviva’s company counsel, handling governance issues, regulatory filings, tax matters and other issues, according to filings.”
• “Vinson & Elkins said it conducted ‘a thorough conflicts analysis’ and determined none of its lawyers working in the Enviva bankruptcy has an adverse interest to Enviva on the matters they will be working on.”
• “Vinson & Elkins narrowed the scope of its representation after talking to the US Trustee, the Justice Department’s bankruptcy watchdog, it said. Enviva and the two firms will coordinate to ‘avoid unnecessary duplication,’ Enviva said in a filing.”

“Attorneys – Disqualification – Conflict of interest [Massachusetts]” —

• Koch, et al. v. Curley, et al. (Lawyers Weekly No. 09-092-24) (14 pages) (Squires-Lee, J.) (Suffolk Superior Court) (Civil Action No. 2384CV02766-BLS2) (July 16, 2024).
  • “William Koch (Koch) owns and manages a number of businesses including Renegade Management, Inc. (Renegade), a family office management company, and Nauticus Marina, Inc. (Nauticus Marina) (together with Koch and Renegade, Plaintiffs), which holds a commercial marina in Osterville, Massachusetts. Mark Curley (Curley) was employed by Koch and his entities from 1994 until December 2018. His duties included managing aspects of the family business and overseeing Nauticus Marina.”
  • “This case arises, in part, from a sale-leaseback transaction involving one of Nauticus Marina’s assets, 138 Bridge Street (Property), a marina with numerous docks. Plaintiffs allege that although the Property was worth at least nine million dollars, Koch received only a $500,000 promissory note and Curley’s promise to continue to work for Koch and his entities for twenty years without his annual six figure bonuses. Plaintiffs maintain that Curley’s promise to remain employed turned out to be ‘a gross and intentional misrepresentation… regarding the most material term of th[e] agreement.’ … Plaintiffs bring claims against Curley and Bridge Street Marina, LLC (Bridge Street) (together with Curley, Defendants), the entity to which the Property was transferred, of Fraudulent Inducement (Count I), Breach of Contract (Count II), Unjust Enrichment (Count III), and Breach of Fiduciary Duty (Count IV).”
  • “Plaintiffs have filed a Motion to Disqualify Defendants’ counsel, Albert J. Schulz (Schulz). Because I conclude that, at a minimum, Shulz represented both parties to the transaction — Plaintiffs and Defendants — the Motion must be allowed.”
  • “Plaintiffs seek to disqualify Shulz as Defendants’ counsel. They argue that he has a current conflict of interest prohibited by the Mass. R. Prof. C. 1.9(a). Alternatively, they argue that Shulz is prohibited from representing Defendants pursuant to Mass. R. Prof. C. 3.7(a) because Shulz is a necessary witness at trial. As explained below, I conclude that disqualification is required under Mass. R. Prof. C. 1.9(a).”
  • “I conclude that Shulz represented Plaintiffs in the transaction in addition to Curley. It does not matter that there was no engagement letter. … Here, there is sufficient evidence to conclude that there was an implied attorney client relationship in connection with the 2015 transaction.”
  • “Having determined that Shulz represented Plaintiffs in the very transaction Plaintiffs now claim was fraudulently induced, it would be an affront to the legal system and denigrate the high ethical standards required of attorneys in the Commonwealth to permit Shulz to represent Curley against Plaintiffs.”

“City fends off bid by county to have its law firm tossed” —

• “The city of Tulsa can keep the private law firm it has hired to sue Tulsa County over a new jail agreement, a judge ruled Tuesday.”
• “The county had filed a motion seeking to have the firm of Norman, Wohlgemuth, Chandler and Dowdell disqualified from the case, claiming that the law firm has a conflict of interest because it also is representing the Tulsa County Retirement Board.”
• “The county called two witnesses and presented several exhibits showing that the county had paid the law firm for services related to a Retirement Board case.”
• “But an attorney for the law firm, Jo Lynn Jeter, told Tulsa County District Judge Jefferson Sellers that the county had failed to meet the legal standard for disqualification.”
• “Jeter said the county did not show that the law firm’s involvement in the Retirement Board case would likely hinder proceedings in the jail lawsuit or that the law firm has possession of some kind of information that would be harmful or prejudicial to the county.”
• “Sellers said that for him to disqualify the city’s law firm, he needed evidence of a conflict of interest or improper possession of confidential information.”

“Decision of the Day: Attorney’s Familial Relationship With Client Found Not to Warrant Disqualification” —

• “Based on alleged misrepresentations, plaintiff Francesco Zanghi and his company Zanghi LLC made investments in pizzerias in Italy and the United States between June and November 2018. On Jan. 30, 2024, the court learned of a familial relationship between Zanghi and his counsel Andrea Natale.”
• “Zanghi’s deposition testimony and emails from Natale in 2018 and 2019 raised concerns over Natale’s direct involvement in contested issues in the instant case. To ensure that Natale’s participation did not violate New York State Rule of Professional Conduct 3.7(a), the “attorney-witness rule,” U.S. District Judge Naomi Reince Buchwald of the Southern District of New York ordered Natale to show cause why he should not be disqualified.”
• “The court later sought clarification as to Natale’s familial relationship with plaintiff Zanghi. Based on his responses, the court was satisfied that Natale need not be disqualified. Natale’s involvement occurred after the complained-of investments. Nor was there any indication that his familial relationship with client Zanghi would mean that he was a possible witness on any significant factual issue that would require his disqualification under the attorney-witness rule.”

“Ex-Irwin Mitchell Solicitor Rebuked Over Unsent Email” —

• “A former Irwin Mitchell solicitor has been rebuked by the Solicitors Regulation Authority after an error in correspondence with the court.”
• “Charles Westwood failed to successfully submit an appeal on behalf of a client to the Court of Appeal, according to a report by the U.K. industry watchdog published on July 26. Westwood believed he had submitted the appeal by the court’s deadline by email, but did not check receipt of his email with the court nor did he check Irwin Mitchell’s case management system.”
• “The solicitor told interested parties that he had successfully submitted the appeal. The time window for his client, who had been sentenced to prison, to make an appeal then ran out.”