Bressler Risk Blog

For those of you not so much in the technology world, IT analyst firm Gartner is famous for its “Magic Quadrant” framework for evaluating plays in market categories along two axes (completeness of vision versus ability to execute). We’ll see how vision and execution play out in: “Gartner Seeks To DQ Norton Rose In $340M Coverage Suit” —

• “Global research firm Gartner Inc. has moved to disqualify Norton Rose Fulbright LLP from representing U.S Specialty Insurance Co. in three federal disputes over up to $340 million in insurance coverage for events canceled because of COVID-19, saying that Gartner is a client of the law firm and did not consent to the conflict.”
• “Gartner said Saturday in a New York lawsuit against U.S. Specialty that Norton Rose attempted to modify its guidelines agreement with Gartner rather than advise Gartner of the conflict and seek a waiver in an above board manner.”
• “‘NRF’s representation of defendants in a matter directly adverse to Gartner, its client for over a decade, violates prevailing Second Circuit law, ethical rules, and the Gartner Guidelines,’ Gartner wrote in the New York motion.”
• “According to Gartner, it has been a client of Norton Rose’s Australia office, or one of its predecessor firms for 15 years, and the firm has advised Gartner in matters throughout the Pacific region, including in Beijing and Singapore. The firm has also done significant work for Gartner recently as the research firm was forced to lay off staff during the pandemic, the motion said.”
• “Despite the longstanding relationship, Gartner alleged, Norton Rose did not openly disclose the conflict when it chose to represent U.S. Specialty in filing the Texas lawsuits. Rather, the firm tried after the fact to amend the agreement with the firm, which expressly forbids conflicts of interest, to make the agreement more amenable to such arrangements, Gartner said.”

With a hunch that the provocative title a NYT editor crafted might raise eyebrows, I nevertheless found the substance of this discussion interesting, and certainly risk radar worthy: “Law Firms Pay Supreme Court Clerks $400,000 Bonuses. What Are They Buying?” —

• “Supreme Court justices make $265,600 a year. The chief justice gets $277,700. Their law clerks do a lot better. After a year of service at the court, they are routinely offered signing bonuses of $400,000 from law firms, on top of healthy salaries of more than $200,000.”
• “Still, the former clerks are typically young lawyers just a couple of years out of law school, and the bonuses have a second and more problematic element, said Stephen Gillers, an expert on legal ethics at New York University. ‘They’re buying something else: a kind of inside information about how the court is thinking and how individual justices might be thinking,’ he said.”
• “The Supreme Court appears to recognize that this is a problem. Its rules impose a two-year ban barring former clerks from working on ‘any case pending before this court or in any case being considered for filing in this court.’ (The rules also impose a permanent ban on working on ‘any case that was pending in this court during the employee’s tenure.’)”
  “Professor Gillers said the rule was a partial solution. ‘The two-year ban is meant to dissipate the value of the inside information,” he said. “You cannot eliminate it altogether.'”
• “Letting lawyers exploit that relationship raises concerns about fairness, the study said. ‘Law firms throw money at former clerks for the same reason companies, unions and organized interests hire former government officials as lobbyists: They expect these insiders to influence their previous employers,’ the study said.”
• “Former clerks have come to dominate Supreme Court arguments. In the past 15 years, the study found, about 75 percent of arguments before the court included at least one former clerk.”
• The article cites two studies on the matter: available here and here.

Curious, I looked for other discussion of this topic beyond the Supreme Court, surfacing a few relevant and interesting resources. First: “What to do when your adversary was the Judge’s clerk?” —

• “Most of the reported cases involving judges and former clerks deal with the situation where the clerk was employed while a matter was pending and later joins a firm involved in the same matter or representing one of the parties. That law is well-settled.”
• “But suppose the issue is not whether the case was in front of the judge in some fashion when your adversary was clerking; what if the issue is more thorny? Do they still have a close enough relationship to put your client at a perceived or actual disadvantage?”
• “After reading about In Re: Gizella Pozsgai, case number 19-3872 in the U.S. Court of Appeals for the Third Circuit, you have to consider raising the delicate issue before the judge and the adversary and hope for honest and complete answers. (Although that doesn’t always work so well. See below).”
• “In Patzner v Burkett, 779 F. 2d 1363 (8th Cir. C.A. 1985), the court noted recusal is left to the judge’s discretion and declined to act when the adversary made no claim of bias towards the former clerk, although the clerk had worked for the judge only nine months prior to the inception of the case.”
• “The case is heading to the Third Circuit and bears watching. In the meantime, if you clerked and have a case assigned to your judge, promptly notify your adversary of the details of the clerkship and your present relationship with the judge.”

Next, Maryland on the matter, which mentions and distinguishes its treatment from other jurisdictions, all focusing on the judge side of the equation, in “Maryland Judicial Ethics Committee 2017-21”

• “Is a judge required to disclose the fact that a lawyer appearing before the judge is his/her former law clerk?”
• “Absent a relationship between the judge and the former law clerk that would otherwise require the judge to recuse, a judge is not required to disclose the fact that a lawyer in a case over which the judge is presiding is a former law clerk.”
• “Some states have addressed the law clerk issue by enacting rules or policies that impose temporal restrictions upon a judge’s ability to preside over cases in which former law clerks appear as counsel. See New Jersey Revised Code of Judicial Conduct Rule 3.17(e) (Judge should not preside over an action in which a former clerk appears for six months following termination of clerkship.); Delaware Conflict of Interest Policies for Law Clerks (same). There is no analogous provision in the Maryland Code of Judicial Conduct.”

This paper explores the “side switching” aspect of clerks movement, not the playbook element: “Conflicts of Interest for Former Law Firm Clerks Turned Lawyers” —

• “There is no consensus for how the legal profession should treat a lawyer who has a conflict that arises from their time working as a law clerk while in law school.”
• “Clerkships are beneficial to both the student and the potential employer, and to limit these educational experiences due to fear of subsequent imputed disqualification would be a detriment to the legal community.”
• “It is necessary to implement a change in the ethical approach to a clerk’s conflicts of interest. One potential solution states could adopt is to permit a clerk to be screened in the same manner as a paralegal or legal assistant would. Consideration must be given to how a client would feel if they knew someone who had previously worked on their case was now working for the opposing law firm, and for this reason the ethics rules should be empathetic to a client’s legitimate concerns for a conflict of interest.”

Further, Karen Rubin digs into details on relevant Texas and Ohio opinions, in: “Hiring student law clerks and avoiding disqualification — two states weigh in.”

“Houston Immigration Firm Sues Legal Assistant For $1M After Move to Competitor Firm” —

• “A small immigration firm based in Houston has sued a legal assistant, alleging she violated a noncompete when she jumped to a competitor, by taking with her knowledge of the firm’s proprietary procedures for handling immigration cases.”
• “Law Offices of Manuel Solis seeks more than $1 million in damages from Lizzett Aguilar Navarrete in the breach of noncompetition suit it filed last week in state district court in Houston.”
• “Manuel Solis’ firm alleges in the petition that its success in the competitive business of representing individuals in immigration work is due to confidential and proprietary procedures for managing cases, such as ‘procedures, internal forms and checklists for screening clients, and procedures for the oversight and tracking of each client’s case,’ Those procedures, the firm alleges, allow it to operate more efficiently, reduce client costs and ‘constitute an important competitive advantage’ over other immigration firms.”

“Ex-Pierce Bainbridge Atty Wants Firm DQ’d In Defamation Suit” —

• “Attorney Don Lewis told the Southern District of New York on Thursday that because he previously sought counsel from Wigdor attorney David Gottlieb and shared ‘privileged and confidential information’ that is “substantial[ly]” related to the case later filed by Selina Kyle, the court should bar the firm from representing her.”
• “Lewis contends that because Wigdor is a relatively small firm, legal precedent holds that it would be insufficient to attempt to screen the attorneys working on Kyle’s case from the lawyer Lewis spoke with, according to a memorandum in support of the disqualification bid.”
• “Kyle contends in her August complaint that Lewis sexually assaulted her shortly after she began working at Pierce Bainbridge Beck Price & Hecht LLP in June 2018 as a legal assistant.”
• “Lewis has vehemently denied the allegations and claims the assault was fabricated to prevent him from blowing the whistle on sketchy financial dealings at Pierce Bainbridge. He and his former firm have engaged in various litigation battles since his departure.”

And Brian Faughnan reminds us that: “Truth is stranger than fiction.” —

• “Christopher Brady used to be a Florida lawyer. He got disbarred for some Hollywood (California not Florida) style breaking and entering to steal a computer server from his former law firm.”
• “I got pulled into writing about his story originally because the ABA Journal online ran a headline about how he got disbarred over punctuation which was, at best, partially correct. (He created a new law firm that had the same name as the firm that had terminated him but that added periods to the abbreviation part of the law firm name, so that his former employer was Barak Law Group, PA but his new firm was Barak Law Group, P.A.)”
• “So, why am I rehashing this guy’s story? Well, because the ABA Journal got me with a headline again, but this time it appears the headline was 100% accurate: ‘Disbarred lawyer is convicted even though twin took responsibility for the crime.'”
• “The criminal case that captured the ABA Journal’s attention this week involves a crime that has much more of a ‘Better Call Saul’ flavor rather than the ‘Breaking Bad’ style of the truck-door-computer server heist. The criminal act was the faking of a court order impacting child custody for the benefit of the lawyer’s twin brother.”

This month’s sponsor thank you features the PDF summary and expanded commentary of a soon to be released audio podcast discussion with conflicts expert Scott Goodwin at Aurora North.

Their discussion explores: current conflicts trends, the pressures facing conflicts teams, the opportunity for innovation in staffing model and technology. Here’s a direct link to the PDF article: “In Discussion with A Law Firm Conflicts Expert” —

• “Firms need to get work done and consistently get more and more work and business in the door — and that dynamic can create more pressure on the conflicts process, for example. At the same time, firms definitely intellectually understand the critical importance of effective risk management. That includes evaluating not only ethical risks, but reputational and financial risks. But there are tensions there as well.”
• “Another area we see firms focusing on is restructuring Conflicts teams. That function has evolved over the years.”
  “These are among the reasons why some firms invest in creating more rigorous conflicts approaches, increasingly organizing teams in a centralized model… I’d also note that not every lawyer has the same level of knowledge and training on conflicts. How much time in law school is spent mastering conflicts? There’s some. But it might have been covered in a day, and the knowledge of every lawyer in the firm may not cover the latest developments, thinking, or decisions on the topic.”
  “Rather than wholesale, department-wide change, it’s often incremental. Usually those resources start by taking on the duties of reviewing conflicts reports generated by their colleagues, and then helping to resolve potential issues.”
  “That’s a great first step, which helps shift the burden away from the billing lawyers, and brings the benefits I outlined earlier, in terms of cost savings and risk management.”
  “I think a key emerging area is Artificial Intelligence and intelligent use of data… But it does work, and can really reduce the burden on conflicts in terms of having to manually review hits and result on reports to evaluate which are true conflicts or issues requiring greater review. I really think adoption of this approach and these AI tools is the future of conflicts.”

“Judge Boots Defense Firm From Medical Malpractice Case Over Fraud Allegations” —

• “A Fulton County judge has disqualified defense firm Peters & Monyak from defending a medical malpractice case that sparked a mistrial in February after the firm’s possible role in the withholding of a key piece of evidence became an issue.”
• “On Friday, State Court Judge Eric Richardson ruled that the firm had an unwaivable conflict with the defendants and would need to step aside.”
• “Lead plaintiffs attorney Lloyd Bell said he had not initially sought to cast suspicion on the defense firm’s involvement in the handling of the medical records, but that its decision to involve itself in the production of documents before the lawsuit was filed and its subsequent insistence that all records were produced placed the firm squarely in the middle of the case.”
• “Bell’s team then filed a motion to disqualify the firm, ‘arguing that the allegation of negligence or fraud against [it] creates an inherent conflict of interest between defendants and their counsel.’ Peters & Monyak opposed the move and Payne signed a conflict waiver hoping to keep them aboard, hiring Balch & Bingham partner Benjamin Brewton to review the case.”
• “The allegations that the firm fraudulently concealed documents ‘necessarily raises the issue of a direct and personal conflict of interest between defense counsel and their clients,’ he wrote. The firm ‘attempts to side step the potential conflict of interest issue by asserting that it will never take the position that defendants withheld anything—thereby nullifying any potential conflict,’ he said.”
• “‘This contention is unavailing, however. Regardless of whether [Peters & Monyak] refrains from accusing their clients of fraudulently or negligently withholding documents, the implication would remain should [it] hold fast to its denial of any alleged fraudulent concealment or inadvertent failure to produce the document on its part,’ Richardson wrote. ‘Thus, a conflict arises by implication.'”

The conflicts alleged in this piece are well beyond the scope of the law firm-ethical variety we typically cover, though there are firms noted: “‘One of the Most Significant Potential Conflicts of Interest in American History’: How Everyone From Foreign Governments to Federal Contractors Is Quietly Lining Trump’s Pockets” —

• “Why would anyone, much less an entity that serves as an arm of the Qatari government, bother outfitting an empty office space in an expensive San Francisco skyscraper? Consider who owns the building. The lobby features signs for Vornado Realty Trust, the publicly traded firm, with innumerable shareholders, that has a 70% stake in the tower. The other 30% belongs to a single man: Donald J. Trump, the president of the United States… Trump’s 30% share of the rent in the two office towers amounts to an estimated $99 million annually, or roughly 52% of the commercial rent flowing into the Trump Organization.”
• “Trump, in other words, personally holds 30% of the space the Qataris are leasing. Strip away the layers and it boils down to just the sort of arrangement the founding fathers feared. A foreign government, it seems, has been paying the president of the United States for more than a year. With so many other scandals brewing, this one has managed to go entirely undetected—until now.”
• “By law, the president has to disclose every company that pays him, but he does not have to reveal who, in turn, pays those companies. That means that Trump, who holds his commercial real estate portfolio through a web of entities, does not have to disclose who his tenants are. It’s a massive loophole in federal disclosure laws, one that allows the president to accept money from entities all over the world without ever having to tell federal ethics officials who is paying him.”
• “Then there were law firms who served as tenants while lobbying on behalf of various foreign clients, including some with disastrous reputations.”
• “Jones Day helped Huawei, the Chinese technology company that Trump labeled a national security risk, with issues before the White House while also paying the president an estimated $1.5 million a year.”
• “Venable LLP, a firm renting space inside 1290 Avenue of the Americas for an estimated $12.2 million a year, lobbied the Treasury Department and Congress on behalf of Russian state-controlled bank Sberbank, weighing in on bills designed to expose corruption around the Kremlin and combat Russian interference in elections.”
• “A spokesperson for Venable suggested that connecting its rent payments to its lobbying efforts requires ‘an incredible leap of logic.'”
• “Fair enough. But it’s still remarkable that a Trump tenant was apparently pushing Vladimir Putin’s agenda in Washington. And because of lax disclosure laws that leave the details of these transactions secret, it took more than three years into Donald Trump’s presidency for anyone to notice.”

“McDonald’s joint employer victory could be marred by potential conflict of interest” —

• “The House Committee on Education and Labor subpoenaed the National Labor Relations Board on Tuesday for alleged ethical violations involving a December ruling that found McDonald’s not liable for violations committed by franchisees, resulting in a roughly $170,000 settlement from the chain’s franchisees to employees. Fight for $15 and other labor groups accused the chain of firing workers for engaging in union activity in 2012.”
• “NLRB board member William Emanuel was asked not to participate in the case since he worked for a law firm that helped McDonald’s franchisees looking for legal assistance in response to employee protests. But Emanuel was involved in the process, which House Education Committee spokesperson Josh Weisz told The Washington Post violated an executive order that bars board members to be involved in decisions ‘directly and substantially related’ to former employers or clients.”
• “The House Committee on Education and Labor is also investigating Emanuel’s participation in the NLRB’s decision to clarify the joint employer rule in February. The updated terms of the rule insulate franchisors from being held liable for labor infractions committed by their operators.

“SRA fines leading firm for money laundering check failures” —

• “Well-known law firm Taylor Vinters has been fined by the Solicitors Regulation Authority (SRA) for failing to undertake proper money laundering checks on millions of pounds paid into its client account.”
• “The agreement said that, from October 2014 onwards, Taylor Vinters acted in 161 matters for 88 clients, who were overseas nationals purchasing off-plan property plots in London.”
• “Taylor Vinters had what it described as its ‘quadruple lock’ process, which required a form of photo ID, confirmation of address, copy of the client’s bank statement (or other bank confirmation) and an online anti-money laundering check. It would enquire as to the client’s source of wealth on an exception basis, when deemed appropriate. In relation to these matters, an employee or manager of the firm only met half of the clients in person – for the rest, the firm received the money before any or all of the customer due diligence had been done.”
• “The firm admitted failing to conduct: adequate customer due diligence before the receipt of funds into its client account; adequate ongoing monitoring, including source of funds checks; and adequate enhanced ongoing monitoring as required by the money laundering regulations.”

“UK Firm Employee Banned For Identifying Client On Facebook and Overbilling” —

• “A former employee at U.K. law firm DAC Beachcroft been issued with a work restriction order by the Solicitors Regulation Authority for identifying the name of a client on Facebook and for overbilling his working hours.”
• “In a notice posted on the SRA’s website on Friday, the regulator said that Howell had ‘breached client confidentiality by identifying the name of a client in a post on Facebook, and in a second post commenting on a case being conducted for that client.'”
• “The regulator added that Howell had failed to act in his clients’ best interests and in a way that maintains public trust in him by ‘spending excessive time dealing with clients’ matters and recording billable time in excess of what was reasonable.'”

“Mississippi’s full-time state AG commissioner still works second job as lawyer” —

• “Despite holding a full-time, statewide elected position, Agriculture Commissioner Andy Gipson continues to practice law and is representing companies before another state agency.”
• “Gipson, who receives $90,000 a year from taxpayers as agriculture commissioner, said he has taken ‘a significant reduction in pay’ from the law practice because of his limited work. He said his legal work doesn’t pose any conflict with his elected office, and that he limits his law practice and manages his time well, giving taxpayers their full due as commissioner of agriculture and commerce.”
• “While Mississippi’s weak ethics laws and enforcement don’t appear to prohibit Gipson’s side work or representing a private company before a state agency, an ethics expert said it could easily be questioned by the public.”
• “‘It’s not unusual or uncommon for a state or local official to still continue private employment after they are elected or appointed,’ said John Pelissero, a senior scholar in government ethics with the Makkula Center for Applied Ethics at Santa Clara University. ‘But the problem comes in when their private actions, in this case as a private attorney, seem to be at odds with serving the public interest.'”
• “‘What we have here is at least the appearance of a conflict of interest, which could be judged as unethical, if in representing private clients before this other commission he’s putting private interest of the client ahead of the public.'”

I’ve very much enjoyed the virtual risk round table events presented by my friends at InOutsource. While remote, the attendee discussion and exchange has been real, revealing, collaborative and constructive.

They have a third scheduled for October: “VIRTUAL ROUND TABLE: Navigating Today’s Pressing Risk Challenges” —

• October 1^st at 1 pm Eastern.
• Focus on: Lateral intake processes and navigating challenges of lateral lawyer on-boarding
• Discussion of compliance with Outside Counsel Guidelines
• Exchange on navigating audit letter processes
• and other peer exchange

Registration link.

Hat tip to my wife, who texted me yesterday (from the passenger seat of our car, as we drove back from a bit of safe, secluded outdoor time with the little ones) as news broke about the FinCEN leak. For general detail, see Buzzfeed’s original reporting: “Dirty money pours into the world’s most powerful banks.”

While the meat of the story to date focuses on banks, I was curious about any mentions of law firms finding their names in print, and discovered at least a few passing references (text checked and searches conducted all from safer confines, not in motion): “The FinCEN files: The billion dollar a month money trail” —

• “Up to a billion dollars a month went through an international money-laundering network whose Russian operators charged those using the service a 5 per cent fee, according to a classified US report seen by The Irish Times.”
• “The network of bank accounts was used over a number of years to move enormous amounts of capital out of Russia and into the West, and the banks involved included one near Moscow that had a cousin of the Russian president, Vladimir Putin, as one of its directors.”
• “The leaked report from the Financial Crimes Enforcement Network (FinCEN), an agency in the US Department of the Treasury, lists 54 “network controlled shell entities” that were the nominal owners of core bank accounts through which the billions of dollars flowed.”
• “The money laundering network was operated by four named Russian businessmen and may have existed from as early as 2011, according to the undated FinCENreport, which appears to have been written in late 2016 or early 2017.”
• “Another document in the Lota Sales file, dated June 2008, stated that a London solicitor, James Pearson, of Pearson Lowe solicitors, 48 Queen Anne St, London, had certified the Lota Sales documents that had been sent to the bank. The law firm has since been sold and efforts to contact Pearson, who is now believed to be retired, were not successful.”
• “The [Quinn] family said that it had put in train a scheme to prevent the IBRC seizing the portfolio, but that it had in turn been double-crossed by those it had engaged to frustrate the State-owned entity’s efforts. The IBRC told the courts it did not accept what the family was claiming.”
• “In 2013, it emerged that two payments totalling €265,527 that had been made in 2011 to the Dublin law firm Eversheds, which was acting for the family in the case, had come from a company in New Zealand called Corlex Sales LLP.”
• “In an affidavit in June 2016, one of the IBRC liquidators, Kieran Wallace, said the payments from Corlex were among a number made to the Quinn children that had come from ‘unusual sources’.”
• “‘The plaintiffs [the IBRC] have been unable to identify who the beneficial owners of the company are,’ he told the court, three years after the payments from Corlex had first been disclosed to the IBRC.”

“Does your Heart Break for this Patentee?” —

• “In its argument, Snyders suggested that it should receive some particular treatment from the court because of a potential conflict of interest with Dir. Iancu. Prior to joining the USPTO, Iancu was in private practice and represented St. Jude in a parallel proceedings. Although Dir. Iancu has recused himself from the case, Snyders argues that the Director’s conflicts are not so easily erased.”
• “Rather, an attorneys conflicts regularly extend to subordinate employees as well. Here, the Arthrex remedy comes into play because the court in that case gave more direct authority supervisory to the PTO Director. The following argument comes from Snyders’ brief:
  • The concept that disqualification of an attorney may extend to that attorney’s subordinate employees is well established. For example, the American Bar Association’s Model Rules of Professional Conduct recognize a conflict where representation of a client is materially limited by an attorney’s personal interest. See Model Rules of Prof’l Conduct R. 1.7(a)(2) (2016). Those rules also recognize that disqualification of an attorney due to a personal conflict may be imputed to fellow employees where the employees would be materially limited due to their loyalty to the attorney.”
• “The Federal Circuit found the argument here ‘without merit . . . the Deputy Director’s role sufficiently removes any potential taint of the Director’s conflict.’ The Court did not address the particular issue here regarding the heightened supervisory authority of PTAB judges coming-out-of Arthrex.”

I was curious about “Arthrex” and found: “Arthrex Update: New Amicus Briefs and USPTO Petition” —

• “The petition sets forth US Inventor’s position that the CAFC was correct in holding that Administrative Patent Judges (APJs) are unconstitutionally appointed, but incorrect in its remedy, i.e. ‘abolition of APJ tenure protection’, because it does not ‘change anything about the character of APJ validity decisions that might downgrade APJ employment status from principal officer to that of inferior or non-officer.'”
• “US Inventor suggested an alternate remedy for consideration by the Supreme Court: “sever[ing] the statute so that patentability determinations continue as Congress intended, only with APJs downgraded to making advisory patentability decisions”, thereby making APJs inferior or non-officers. According to US Inventor, “all that would need to happen under this alternative remedy…is severance of the part of the statute that makes final written decisions on patentability binding.” In conclusion, US inventor requested that the Supreme Court grant certiorari to consider the correct remedy and at least retroactively convert APJ decisions into advisory and non-binding decisions.

If this is up your risk alley, see also: “One Way or Another, Arthrex Promises to Put the PTAB on Trial”