Bressler Risk Blog

An interesting story relating to lateral movement of staff and movement of client data (or metadata): “In dispute over client list with former employee, Webb Law Firm of Pittsburgh loses motion for judgment” —

• “A judge in the Allegheny County Court of Common Pleas last year ruled against a law firm that was sued by one of its former employees for breach of contract and tortious interference.”
• “Alexander worked at the firm for five years but was terminated in April 2016. Two months later, he emailed Michael Somerhalder, the firm administrator, requesting a list of application numbers, client names, applicant names, assignee names and inventor names for all patent applications that Alexander worked on while he was with the firm, the suit says. Alexander says he wanted the information for another job he was applying for at Reed Smith. The list of clients was a stipulation if Alexander wanted to work at Reed Smith, he claims. Reed Smith did not return a message seeking comment.”
• “The Webb firm denied Alexander access to those records and the plaintiff was unable to procure the job at Reed Smith, the lawsuit says. ‘There is no language in the offer letter discussing any duty on the part of Webb to comply with the Pennsylvania rules or the USPTO rules, let along supply plaintiff with the client list he requested,’ Webb firm lawyers said in court documents.”
• “The Webb firm also contacted the Pennsylvania Bar Association Ethics Counsel to inquire if it had an obligation under the Pennsylvania Rules of Professional Conduct to provide the list requested by plaintiff. Webb was told it did not have such an obligation, it says.”
• “Alexander said in filings that professional conduct rules impose an ethical obligation upon Webb to produce the requested listing of client names and impose an ethical obligation plaintiff to avoid conflicts of interest based on the requested information.”

“Michigan Supreme Court proposes changes to attorney rules in light of new technology” —

• “The Michigan Supreme Court on Monday proposed adding technological competency to the list of required skills under the state’s rules of professional conduct for attorneys.”
• “Attorneys would be required to engage in continuing education within the realms of developing technology. Attorneys would also be held to a higher standard in regard to confidentiality when transmitting information electronically. It would be required for attorneys to take reasonable measures to prevent the unwarranted dissemination of client information.”
• See the text of the proposed new rules: here.

Not a law firm (yet)… but are we witnessing the birth of a trend? “$10 trillion custodian Northern Trust is exploring shutting off external email for thousands of its employees as it tries to thwart cyber threats” —

• “Northern Trust, which oversees roughly $10 trillion, is looking at restricting the ability of some employees to send email outside the company as it beefs up its cybersecurity, according to a top executive at the company who requested anonymity because the policy hasn’t yet been formalized.”
• “The Chicago-based firm is exploring limiting external email to only employees who work with clients and other groups outside the company to avoid potential privacy breaches.”
• “Right now, the firm’s email system cautions employees not to send any information externally, with warnings that pop up about sending such a message. These warnings are typically disregarded, the executive said, so the firm is thinking about taking more drastic measures.”

“Re-Fingerprinting Of California Lawyers Turns Up Thousands Of Criminal Records” —

• “The State Bar of California has received more than 6,000 criminal history reports to review as a result of the ongoing re-fingerprinting of lawyers in the state.”
• “Slightly more than 2,200 of the records involve attorney convictions for which the bar had no previous record, according to data from early March. Almost all of those crimes were misdemeanors, and less than one percent were felonies.”
• “The 20 previously unreported felonies have already been sent to the bar’s Office of Chief Trial Counsel for review and possible disciplinary action.”
• “Re-fingerprinting is underway because the California bar was required by a 1989 law to ensure the retention of submitted fingerprints so it could receive notifications of attorney arrests and convictions, but the agency did not seek to comply with the statute until recent years.”

It can be fascinating to observe how other professions and industries navigate their own conflicts landscape, and how those rules evolve (or are created) over time. For those similarly fascinated (and similarly interested in what show runner David Simon has to say): “Why Hollywood Writers Are Firing the Agents They Love” —

• “Now the Writers Guild of America is fighting back. The union represents about 13,000 screenwriters—some 8,500 of whom have agents—and it provides them with health and pension benefits and advocates for writers’ interests with studios and producers. Last week, the guild sued the four biggest talent agencies—WME, Creative Artists Agency, ICM Partners, and United Talent Agency—on the grounds that their packaging practices violate California and federal laws by pitting the financial interests of the agencies against those of their clients. The union also instructed its members to fire their agents after failed negotiations on a new industry code of conduct to replace the compact that governs how agents represent writers.”
• “David Simon, the creator of The Wire and Homicide: Life on the Street, recently wrote an impassioned blog post, reprinted on Deadline, about the inherent conflict that packaging presents: ‘The problem is that the agency incentive to package shows and provide larger payments to themselves has obliterated any serious thought about aggressively negotiating on behalf of any writer, or actor, or director, large or small. Why bother to fight for 10 percent of a few dollars more for this story editor or that co-executive producer when to NOT do so means less freight on the operating budgets of the projects that you yourself hope to profit from? Why serve your clients as representatives with a fiduciary responsibility and get the last possible dollar for them, when you stand to profit by splitting the proceeds of a production not with labor, but with management—the studios who are cutting you in on the back end? Why put your client’s interest in direct opposition to your own?'”

More in the tune of legal ethics, I’ve been fascinated to see some stories percolate on the theme of access to the law — not representation, the actual words. Here are a few stories and updates of that ilk:

“Despite Losing Its Copyright Case, The State Of Georgia Still Trying To Stop Carl Malamud From Posting Its Laws” —

• “When we last checked in with Carl Malamud and his Public.Resource.Org, they were celebrating a huge victory in Georgia, where the 11th Circuit had ruled that of course Malamud was not infringing on anyone’s copyrights in posting the “Official Code of Georgia Annotated” (OCGA) because there could be no copyright in the law.”
• “Last week Malamud sent a letter describing how the state is now trying to block him from purchasing a copy of the OCGA. He’s not looking for a discount or any special deal. He wants to buy the OCGA just like anyone else can. And the state is refusing to sell it to him, knowing that he’s going to digitize it, put it online and (gasp) make it easier for the residents of Georgia to read their own damn laws…”
• More history on this issue, and a call for interested parties to sign on to an amicus brief heading to the Supreme Court.

“Can the law by copyrighted” —

• “The question is at the center of a lawsuit involving YC-backed UpCodes and the nonprofit that develops the most widely used building codes in the U.S… UpCodes wants to fix one of the building industry’s biggest headaches by streamlining code compliance. But the Y Combinator-backed startup now faces a copyright lawsuit filed against it by the International Code Council, the nonprofit organization that develops the code used or adopted in building regulations by all 50 states.”
• “The case may have ramifications beyond the building industry, including for compliance technology in other sectors and even individuals who want to reproduce the law. At its core are several important questions: Is it possible to copyright the law or text that carries the weight of law?”
• “UpCodes’ first product, an online database, gives free access to codes, code updates and local amendments from 32 states, as well as New York City. For building professionals and others who want more advanced search tools and collaboration features, UpCodes sells individual and team subscriptions.”
• “It argues that its use of building codes is covered by fair use. The ICC, on the other hand, claims that products like UpCodes’ database harm its ability to make revenue and continue developing code. The ICC wants UpCodes to take down the building code on which it claims copyright, and has also sued for damages.”
• “A lawsuit filed by the state of Georgia’s Code Revision Commission in 2015 sought to stop it from publishing the Official Code of Georgia Annotated (OCGA) after founder Carl Malamud purchased a hard copy of the OCGA, scanned it and sent copies on USB sticks to Georgia legislators. The Code Revision Commission argued that the annotations they wrote placed it under state copyright, but the Eleventh Circuit ruled in Public.Resource.org’s favor last year.”
• “One difference between the Public.Resource.org cases and UpCodes’ is that Public.Resource.org is a non-commercial group, a fact that strengthens their fair use argument. UpCodes, on the other hand, is a commercial company, which will become part of the fair use analysis if their case makes it to trial.”

Colorful titls from Above the Law at the end: “PACER, Or Your First Amendment Right To Go F**k Yourself For $0.10/Page” —

• “Many have complained, but few have complained as eloquently as Seamus Hughes, the deputy director of George Washington University’s Program on Extremism. His op-ed for Politico is definitely worth reading. It highlights everything wrong with the PACER system, including its amazing profitability.”
• “This money is supposed to be used to improve PACER and fund other U.S. Courts’ efforts. A visit to PACER makes it clear none of that money is being routed towards making PACER less awful. At least one federal court has ruled the way the U.S. Courts spend this money is illegal.”

Any firm can find itself making risk news for any number of reasons. This one just happens to have had several hits on radar this week:

“Bill Cosby is fighting a $6.7 million lawyer bill” —

• “Cosby says he hired Quinn Emanuel to represent him after ‘public claims of sexual misconduct against [him] began to snowball at the end of 2014,’ and that the firm ended up working on 10 different matters representing Cosby. At that point, Cosby had the firm on a retainer. However, Cosby claims that the partner in charge of his cases, Christopher Tayback, son of actor Vic Tayback, did not talk to Cosby about the specifics of the retainer contract prior to its signing.”
• “Cosby is now serving three to 10 years in a state prison after he was convicted last year of drugging and sexually assaulting Andrea Constand at his home 15 years ago.”
• “Cosby also accused AIG and Quinn Emanuel of failing to disclose a conflict of interest for not revealing the fact that the insurance company had previously and was continuing to use the firm’s services on other legal matters, and the firm had knowledge that AIG had filed declaratory relief actions against Cosby — seeking to avoid having to cover his legal fees to be paid to the very same firm.”

“In Fight to Stay in Case Against Former Client Uber, Quinn Emanuel Faces Skeptical Judge” —

• “The federal judge who will decide whether lawyers at Quinn Emanuel Urquhart & Sullivan get to pursue an antitrust case against former client Uber Technologies Inc. greeted a lawyer from the firm with extreme skepticism and a flurry of difficult questions Friday.”
• “U.S. Chief Magistrate Judge Joseph Spero of the Northern District of California opened a hearing on Uber’s motion to disqualify the Quinn Emanuel lawyers by raising concerns about the similarities between the lawsuit he’s overseeing and an earlier suit where Quinn played the defense role for Uber.”
• “Uber’s lawyers at Gibson, Dunn & Crutcher filed their motion to disqualify the Quinn lawyer in February. Uber contends that Quinn Emanuel represented it in at least 20 cases from 2012 to 2016 that delved into competition issues similar to the ones in the Sidecar case.”
• “Spero also took issue with language included in declarations by Quinn lawyers, including firm co-founder and chairman John Quinn, which said that they ‘had no particular recollection’ of discussing antitrust issues that in-house lawyers at Uber claimed the firm had advised on. ‘My presumption has got to be that if the lawyer doesn’t remember it and the client does, that the client is right,’ Spero said.”

“Soccer Charity Says Bid To DQ Quinn Emanuel A Distraction” —

• “A soccer charity is pushing back on a bid to disqualify Quinn Emanuel from a trademark dispute against the U.S. Soccer Federation, calling the request a baseless distraction.”
• “The move to disqualify Quinn Emanuel Urquhart & Sullivan LLP comes in a suit by the charity, called the U.S. Soccer Federation Foundation Inc., which is aiming to prove it can legally use the name after USSF pushed the charity to give it up in November. According to the charity, Raskopf was an associate with the now-shuttered Townley & Updike in the early 1980s when the firm was hired by USSF to obtain certain trademarks.”
• “‘The mere existence of decades-old, uncontested registrations for non-foundation marks, for which other Townley & Updike personnel were primarily responsible, cannot bar Quinn Emanuel’s representation of the foundation for the simple reason that any such facts are irrelevant to this case,’ the charity wrote. The charity added that at the time, Raskopf was only four years out of law school, and the documentation doesn’t even establish what actual work, if any, he did with those trademarks.”

“Quinn Emanuel Gets Suit Brought by Partners in NYC Spinoff Routed to Arbitration” —

• “If the decision by a New York state judge stands and Quinn Emanuel prevails in arbitration, Selendy & Gay partners could be forced to turn over 10 percent of the fees they got from former Quinn Emanuel clients in the 18 months after they departed.”
• “Partners at Selendy & Gay had argued that Quinn Emanuel’s effort to make them turn over a share of the legal fees they took with them violated state ethics rules, but Manhattan Supreme Court Justice Saliann Scarpulla ruled this week she could not evaluate that dispute.”
• “In an emailed statement, Phillip Beck of Bartlit Beck, which represented Selendy & Gay’s partners alongside the firm of Vladeck, Raskin & Clark, saw a silver lining in the decision. He noted that the judge acknowledged his side’s arguments that Quinn Emanuel was simply using the fees provision as a cudgel to convince Selendy & Gay to not try to poach its associates.”
• “Quinn Emanuel founder John Quinn previously told ALM that he wasn’t too worried about the dispute. ‘Last year was the best year we have ever had and, by reports, they have done well also,’ he said in an email for a February article. ‘The dispute is only about money and will eventually be resolved one way or another for an immaterial amount.'”

Yesterday we shared an update from the world of records, and with today being Arbor Day we have a timely related story about paper to share. (Technically, it’s Arbor Day in the United States — our international readers in mind, I have now confirmed that the holiday is celebrated across the world, though at different times based on local climate and custom).

FileTrail, which has a clear commercial interest in advancing the cause of records management, published: “Beyond Paper: Automating the Destruction of Physical Records,” arguing not just for the risk mitigation benefits of keeping up with disposition, but also the economic benefits:

• “This Arbor Day, we encourage all law firms to reflect on the state of their paper-based archives and in reducing the total volume of paper generated in the future.”
• “In recent years, a growing number of law firms have been moving to “paperless” or paper-light systems, with electronic records regarded as the “official” record of the organization. Certainly, law firms have come a long way in reducing their usage of paper and helping to save trees — striking a positive note this Arbor Day. But for many firms, the elephant in the room is the large volume of physical records that have accumulated over decades — extremely costly to store and difficult to manage.”
• “Many firms know they need a large-scale purge of physical records but procrastinate. Often, their hesitation is that it will take too long to go through each box to identify which files can safely be destroyed.”
• “You may be shocked to find out the potential cost savings. One firm we work with estimated that by destroying 43,000 boxes — starting with physical records from client matters that have been closed for ten years or more — it would save more than $114,000 per year in storage costs and recoup the cost of destruction in less than two years.”

Another flavor of original content to share with the community this week. Last we highlighted an in-depth interview on industry risk trends. This week I wanted to highlight a piece on our sister site Off the Record, featuring our discussion with John Churchill, Record Department Manager, Nelson Mullins.

As he notes, clients and prospects are increasingly requesting more detailed information in RFPs about information governance policies and procedures, including records management:

• “As a result, the role of Records Management has become more prominent. The attorneys, Risk and General Counsel all value what we do now. Similarly, the CIO and the Security team also value our input and are trying to ensure that we’re more integrated with Security.”
• “Legal technology is changing the role of the records manager. We’re expected to have a more well-rounded view. Records staff are now expected to be more technically savvy. It’s offering growth opportunities, including re-training. Most of the team is really up for the transition.”

See the entire interview for more detail on the evolving structure, role and prominence of record/IG at his firm, and how the organization is navigating its own path to becoming more ‘paper light.’

“5th Circuit Strikes Gibson Dunn’s Pro-Obamacare Brief for Recusal Issue” —

• “A federal appeals court on Monday blocked the law firm Gibson, Dunn & Crutcher from filing a pro-Obamacare amicus brief because the submission would have caused the disqualification of an unidentified judge.”

• “The U.S. Court of Appeals for the Fifth Circuit’s order pointed to a newly amended federal rule for appellate litigation and to a local court rule, both of which address circumstances where a court can reject an amicus brief if allowing it would force a judge to recuse.”

• “Former Gibson Dunn partner James Ho was confirmed in 2017 to a seat on the Fifth Circuit… firm. Ho’s wife, Allyson Ho, is a Gibson Dunn partner in Dallas.”

• “James Ho, who’d been a Gibson Dunn appellate partner continually since 2010, said in a U.S. Senate questionnaire at the time of his confirmation: ‘For a period of time, I anticipate recusing in all cases where my current firm, Gibson, Dunn & Crutcher, represents a party.’ He also said he would recuse in any case where his wife represents a side and that he would ‘evaluate any other real or potential conflict, or relationship, that could give rise to appearance of conflict.'”

• “An amendment to the federal rules of appellate procedure that took effect in December 2018 said ‘a court of appeals may prohibit the filing of or may strike an amicus brief that would result in a judge’s disqualification.’ Several appellate courts had adopted local rules forbidding the filing of an amicus brief that could cause the recusal of one or more judge, and the new federal rule harmonized how courts were handling amicus briefs and recusals. There was some opposition to the proposed rule, including the argument that amicus-based recusals are rare and the fact that the rule could ‘prove wasteful if an amicus curiae pays an attorney to write a brief which the court then strikes.'”

“Developer On Hook For $5.2M Despite Atty DQ, 8th Circ. Says” —

• “A law firm that previously represented a historic Iowa building’s owner should have been disqualified from representing a bank suing the developer over lease payments, but the owner still must face a $5.2 million judgment despite the conflict of interest, the Eighth Circuit ruled Thursday.”

• “Winthrop had represented Mako in 2011 and 2012 on a $6 million tax credit bond offering related to a $17 million restoration project for Badgerow. But U.S. District Judge Leonard T. Strand said the law firm’s representation of CRBT in the present case was acceptable because of a conflict of interest waiver signed by both the bank and Mako.”

• “The appeals panel disagreed. Finding that the waiver — inked years before the litigation — was not signed by Mako with ‘informed consent,’ the panel said it did not lay out the ‘advantages, disadvantages, risks or benefits’ Mako would face by allowing Winthrop to serve as counsel for CRBT. But despite the insufficient waiver, Mako was not adversely affected by Winthrop’s representation of CRBT, the appeals court said, citing First Circuit precedent.”

“Breyer, Alito Say ‘No Way’ to Know About Conflict They Missed” —

• “Two U.S. Supreme Court justices said there was ‘no way’ to know about a conflict of interest they missed in January when the court turned away an appeal involving a United Technologies Corp. unit.”

• “Justices Stephen Breyer and Samuel Alito both owned stock in the company as of December 2017, according to their most recent financial disclosure reports, but neither disqualified himself as required under federal law.”

• “‘Because the respondents waived the right to respond to the petition, there was no requirement based on the rules to provide a corporate statement,’ Breyer and Alito said in a statement issued by the court Monday. ‘The court has a diligent conflict-checking process but without a response there would be no way to find out there was a conflict.'”

• “The statement responded to a report by Fix the Court, the watchdog group that discovered the missed recusal.” Fix the Court’s executive director stated: “Supreme Court justices, like any judges ruling on publicly traded companies, should be cognizant of potential conflicts at all times, and that includes an awareness of M&A activity of the companies in their stock portfolios. Better yet: the three justices who own individual stocks should divest from these holdings and invest solely in blended funds and retirement accounts like the rest of their colleagues.”

Not something you read every day: “PwC Seeks To Depose NY Atty In Conflict-Of-Interest Query” —

• “PricewaterhouseCoopers told a California judge Tuesday it wants to depose a New York class action lawyer about possible conflicts of interest over his representation of both the city of Los Angeles and utility customers in separate lawsuits over PwC’s overhaul of LA’s billing system.”

• “PwC wants to question him about allegations he worked as special counsel for the city while also representing the lead plaintiff in a class action against the city on behalf of LA Department of Water and Power customers…”

• “After LADWP’s new billing system in 2013 sent out ludicrously inaccurate bills and overcharged tens of thousands of customers, Paradis represented Antwon Jones in his 2015 class action complaint against the city alleging PwC’s system led thousands of utility customers to be overbilled, according to a brief PwC filed Feb. 28. Los Angeles reached a $70 million settlement with the customers in 2016, with customers receiving a full credit to their account or a refund if their accounts were closed.”

• “Around the same time, however, Paradis agreed to represent LADWP with regard to any potential claims against PwC, the brief said, but never told Jones that he would no longer be representing him in the class action.”

• “PwC alleged in court filings that Paradis has a conflict of interest that was part of a larger scheme to work with the city to choose the lead plaintiff, Jones, and the attorney, Jack Landskroner of Landskroner Grieco Merriman LLC, to handle the class action lawsuit in an effort to get an agreeable settlement for LADWP.”

“Madoff Victims May Proceed With Suit Against Attorney” —

• “Victims of Bernie Madoff’s Ponzi scheme convinced a federal magistrate judge April 11 that their class action against the attorney who represented them belongs in federal court. The investors sued Becker & Poliakoff LLP and Chaitman LLP alleging attorney Helen Chaitman improperly represented clients with competing interests while at the two firms.”

• “‘The more money collected from some of her clients (the net winners), the more available to be distributed to her other clients (the net losers),’ the suit alleges. The two firms moved to dismiss, arguing the court lacks jurisdiction. But the court agreed with the investors that CAFA applies.”

• See the decision here.

Bill Freivogel notes ” In Re Earl Gaudio & Son, Inc., 2019 WL 1429978 (C.D. Ill. March 29, 2019)” —

• “We have written often of Section 327 of the Bankruptcy Act. It sets forth standards for the employment of professionals in bankruptcy proceedings. We have mentioned less frequently Rule 2014 of the Bankruptcy Rules, which sets forth disclosure requirements in connection with Section 327 applications. This includes disclosure of ‘all of the person’s connections with the debtor, creditors,’ and other parties ‘in interest.‘”

• “In this opinion the bankruptcy judge denied large chunks of compensation for Debtor’s counsel (‘Law Firm’) and a corporate custodian (‘Bank’) for repeatedly failing to make required disclosures. They failed to disclose their work on trusts for Debtor’s owners and involvement in state court proceedings directly involving Debtor and its property. The court also found Law Firm’s accounting and billing accuracy woefully deficient. We see little point in providing further details here. We just wanted to re-emphasize the importance of Rule 2014 to bankruptcy practitioners.”

A bit of everything has caught my eye recently. First, an interesting reminder about financial risk and professional responsibility with regard to managing client funds: “What Lawyers Must Know Before Acting As Escrow Agents” —

• “There is a strong case to be made that the moment an attorney agrees to serve as an escrow agent for a client, the attorney assumes some of the most important obligations attorneys are charged with in the legal profession. All too often, however, an attorney who serves as an escrow agent for a client is unaware of these obligations.”
• “All too often, attorneys readily agree to serve as an escrow agent for a client without giving it a second thought, in order to facilitate the client’s payment of outstanding legal fees from the escrowed funds — entirely unaware of their potential obligations to third parties under the rules. Before taking on this role, attorneys should first evaluate whether or not any third persons who are not clients can claim or have claimed an ownership interest in the funds to be escrowed (for instance, any secured or contractual creditors that the client might have may have priority to the escrowed funds), and the duties that the attorney could owe to such third persons as an escrow agent.”
• “Before agreeing to serve as an escrow agent for a client, attorneys should also consider that if, and to the extent that, such third persons exist, an attorney might be required to act contrary to the client’s interests, and his or her law firm’s interests, with respect to the escrowed funds.”

Next, an interesting story about the evolution of conflicts standards in other industries in the general news. In this case, consulting: “McKinsey Broke the Rules, Now It Wants to Rewrite Them” —

• “A federal bankruptcy judge has authorized McKinsey & Co. to devise industry conflict-of-interest guidelines, even as the firm recently has paid $32.5 million to settle allegations that its undisclosed conflicts tainted its own bankruptcy work.”
• “The surprising move by Judge David Jones of Houston will allow the big consulting firm to craft a conflicts protocol that will be used in a current chapter 11 case, Colorado coal miner Westmoreland Coal Co., and could serve as a model for all bankruptcy practitioners, including law firms and financial advisers.”
• “In court papers, Judge Jones approved McKinsey’s request to develop new disclosure guidelines, saying: ‘The court hopes that the protocol to be developed by McKinsey will lead to a comprehensive national standard for all professionals.”

Finally, not the sort of title you read every day (and perhaps best accompanied by a certain sitcom’s theme music, or questions about who will own the movie rights to this story): “$1 Million Sanction Over Wilmette Condo Lawsuits Ordered By Judge” —

• “A Cook County judge ordered a Wilmette man and his attorney to pay more than $1 million in sanctions amid years of legal wrangling among residents at a lakefront condominium.”

• “Marshall Spiegel, a resident of the condo, and his attorney John Xydakis engaged ‘simply obscene’ and ‘egregious conduct’ by filing a serious of frivolous or false lawsuits during a legal battle over the condo association’s boards and its rules, according to Circuit Judge Margaret Brennan, who granted four sanctions orders on March 29.”

• “Xydakis, of River Forest, said the ruling was retaliation against him for seeking to disqualify Brennan over a series of private conversations between the judge, her clerk and one of the opposing party’s attorneys. He said the judge’s phone records he obtained through a Freedom of Information Act request and the billing records of attorney Eugene Murphy show improper private conversations.”