Bressler Risk Blog

David Kluft asks: “Can I mediate a dispute about ownership of a company and then appear as counsel in a related dispute about the same company?” —

• “A TX lawyer mediated a dispute between a sister and brother over part ownership of an investment company. Later, an Investor sued the sister in a separate litigation, claiming that the terms of the settlement with the brother in the first litigation constituted a misuse of company assets.”
• “The mediator’s law firm appeared in the second case for the Investor, and the sister moved to disqualify the mediator under Rule 1.12 (neutral can’t represent party in same matter).”
• “Apparently, the mediator’s firm ran a conflict check before taking the case, but the sister had gotten married and changed her name in the interim, so they didn’t notice the conflict.”
• “The mediator’s firm argued they should not be disqualified anyway because it was not the same ‘matter’ (i.e., it was a different litigation), but the TX Court of Appeals disagreed, holding that what qualifies as a ‘matter’ under the rule depends on the facts and circumstances, and here it was the same matter because it involves the same company and even some of the same payments.”
• “The Court also found that the firm’s screening was inadequate, so the whole firm was disqualified. However, another firm that that had already appeared as co-counsel for the Investor alongside the mediator’s firm was not disqualified by imputation absent specific evidence it received information from the mediator.”
• Decision: here.

“Bradley Arant Facing Convicted CEO’s Malpractice Claims, Bid for Removal From Case” —

• “Bradley Arant Boult Cummings is facing charges of legal malpractice in Alabama from a disgraced former health care CEO who alleges the firm dually represented him and his former company while it worked to oust him and then ‘concealed the conflict for more than two decades.'”
• “Richard Scrushy, founder and former CEO of HealthSouth—a company now called Encompass Health—also wants Bradley removed as his counsel in a separate civil case dating from the early 2000s because of the alleged conflict. The move could lead to overturning a $3.2 billion verdict against him.”
• “Scrushy’s attorney, Johnathan Austin of Austin Law in Birmingham said in an interview Bradley was not involved in mere ‘concurrent representation’ of both parties. ‘This was Bradley Arant representing Richard Scrushy and then going and representing HealthSouth directly adverse to Richard Scrushy,’ Austin said.”
• “The malpractice case followed Scrushy’s filing of new motions in a civil case dating from the early 2000s in which Scrushy was found liable for $3.2 billion in damages related to a high-profile accounting fraud and bribery scheme that led to his ouster from his job and ultimate prison time.”
• “Scrushy wants Bradley removed as his attorney in the civil case, titled Wade Tucker v. Richard M. Scrushy, because he did not know the firm was representing him and HealthSouth until he discovered documents earlier this year that a now-deceased company official had in his possession, Austin said.”
• “Austin said Scrushy believes the firm knew about the conflict even as the firm was representing both him and HealthSouth while the company was accusing him of fraud, filing false corporate reports and making false statements in court.”
• “In 2003, Scrushy was accused of filing false corporate reports and making false statements in Alabama state court related to a multi-billion-dollar accounting fraud scheme at HealthSouth—which included an FBI raid of his office.”
• “He was later acquitted of fraud but then was charged in federal court with money laundering, extortion, racketeering, bribery and obstruction of justice related to charges he bribed then-Gov. Don Siegelman. Scrushy was found guilty of bribery and conspiracy to commit wire fraud in 2007, sentenced to prison, and released in 2012.”
• “However, while in prison, a civil case related to the HealthSouth accounting fraud led to him being found liable for $3.2 billion in damages—a case in which Scrushy now is wanting Bradley disqualified from representing him so the verdict could be overturned and the case reopened.”
• “In the Wade Tucker case, Judge Elisebeth French heard arguments in the disqualification case Nov. 13. Scrushy made motions to disqualify Bradley under Bar rules 1.7, 1.9 and 1.10 dealing with current and former clients and imputation of conflicts of interest, as well as rule 3.7 concerning attorneys not representing Bradley in the Nov. 13 hearing because they were necessary witnesses in the case, Austin said. The judge denied the rule 3.7 motion from the bench and has not ruled on the others, he said.”
• “In the malpractice case, Scrushy names as defendants the Bradley firm and firm partner Chris Glenos, retired partner Meade Whitaker, and ‘John/Jane Doe Partners 1-10’ who were ‘decision-making partners’ and ‘responsible for authorizing of concealing the conflicted representation.'”
• “Bradley was scheduled to file its answer Friday but convinced the judge to delay filing because the firm’s new lawyer in the case, Tabor Novak III of Starnes Davis Florie in Birmingham, needed more time to learn about it, Austin said.”
• “Scrushy alleges that Bradley lawyers in 1998 were hired to represent him and his interests but later began representing HealthSouth in 2002 ‘first on corporate matters, then in positions increasingly adverse to Mr. Scrushy.'”
  ‘Bradley never notified Mr. Scrushy of this dual allegiance,’ the complaint states. ‘Instead, it suppressed and concealed this conflict while benefiting from privileged access to [Scrushy’s] strategy and decision-making.'”
• “But an affidavit by the firm’s former partner, Whitaker, that was filed in the Wade Tucker case in August stated that he represented the firm in Scrushy’s personal real estate and trademark matters but said he was not part of the firm’s representation of HealthSouth as part of the fraud investigation.”

“Rule on Multidistrict Litigation’s First Steps Goes Into Effect” —

• “A new federal rule governing the first steps for multidistrict litigation is set to take effect Monday [12/1], the result of years of debate over the measure and what it should include.”
• “Multidistrict litigation now makes up well over half of all federal civil cases, with lawsuits that address product liability and other topics consolidated before one judge to avoid them being filed in different courts and resulting in potentially different pretrial rulings. The new rule, 16.1 under the Federal Rules of Civil Procedure, is meant to give judges and parties a framework to get those cases off the ground, while still giving them the chance to modify them as needed for each case.”
• “Those opening steps include an initial management conference to figure out pretrial proceedings. The rule also says parties should provide a report ahead of that conference to lay out their views on whether leadership counsel should be appointed in the case, and if so, what their roles should be.”
• “Parties should also tell the court their initial views on discovery in the litigation, how parties will share information about the factual bases behind their arguments, and the main factual and legal issues that are likely to come up, the rule says.”
• “Some lawyers told Bloomberg Law they had concerns about earlier drafts of the rule, saying too much rigidity would hurt the MDL process by forcing courts to follow steps that don’t fit all cases. The Judicial Conference’s Committee on Rules of Practice and Procedure unanimously approved a version that its authors said was meant to be adaptable.”
• “Some plaintiffs’ lawyers also testified that they thought too many topics were included in the list of items that could be addressed at the initial hearing. The advisory committee drafting the rule said it’s not meant to serve as a mandatory agenda that requires a view on each listed issue.”
• “Class action lawyers also told Bloomberg Law the rule seemed focused more on mass tort MDLs rather than their cases, which commonly involve data breaches, privacy, and antitrust issues.”
• “The rule has its supporters. Implementing initial steps in the cases gives a pathway for finding and dismissing claims that don’t belong in the litigation, said Alex Dahl, general counsel for the advocacy group Lawyers for Civil Justice, which has pushed for the new MDL rule.”
• “‘This rule should strongly discourage the filing of meritless claims and give courts and parties an effective mechanism for identifying and dismissing them at the early stages of a new MDL,’ Dahl said in a statement.”

“Hochul Approved Permits That Could Help Clients of Her Husband’s Firm” —

• “Gov. Kathy Hochul created at least the appearance of a conflict of interest when her administration approved permits benefiting two recent clients of a large law firm that employs her husband, environmental activists and two New York State lawmakers said this week.”
• “The criticism stemmed from her administration’s announcement on Monday that it would allow the construction of a contentious natural gas pipeline and issue a permit to a Central New York cryptocurrency mine whose operations have been opposed by the activists.”
• “In separate statements over the past few days, the activists and lawmakers — two Democratic members of the State Assembly who are aligned with Zohran Mamdani, the mayor-elect of New York City — said Ms. Hochul should have at least recused herself from the decisions.”
• “They noted that Ms. Hochul’s husband, William Hochul, works as a lawyer for the firm Davis Polk & Wardwell, which has represented the owner of the pipeline company and a private equity firm that has a large stake in the cryptocurrency mine.”
• “A spokesman for the governor’s office vigorously disputed the claims, calling them ‘ridiculous.'”
• “Mr. Hochul ‘does not take on any clients with any matters before New York State — period,’ said the spokesman, Anthony Hogrebe, who added that Davis Polk was ‘one of the largest law firms in the world.'”
• “The governor’s office said that Ms. Hochul follows a strict recusal policy to avoid conflicts with her husband’s work. But the decisions in question required no recusal, Mr. Hogrebe said, because Davis Polk did not represent either the pipeline or the crypto miner in their efforts to obtain permits.”
• “At Davis Polk, Mr. Hochul ‘advises clients on complex government and internal investigations, crisis management, communications strategy, risk mitigation and other matters,’ according to the firm’s website.”
• “One of the firm’s clients, Tulsa-based Williams Companies, is planning to build a $1 billion underwater gas pipeline off New York City. The pipeline project had previously been rejected three times by New York State regulators over environmental concerns. But on Monday, Ms. Hochul said she would allow it, citing a need to hedge against possible energy shortages.”
• “Another recent client of Davis Polk, Atlas Holdings LLC, was a major investor in the cryptocurrency mining firm, Greenidge Generation, which has faced criticism for using a gas-fired power plant to run computers that mine Bitcoin. Atlas retained Davis Polk from June to August for help with an unrelated matter, the development of a data center in Pennsylvania.”
• “Separately, Davis Polk has provided advice on developing investment products to President Trump’s social media company, Trump Media & Technology Group, after it announced a partnership with a digital asset trading platform called Crypto.com. Neither Trump Media nor Crypto.com has any relationship with Greenidge, a spokesman for Atlas said.”
• “An opponent of both the pipeline and the Greenidge operation, Kim Fraczek, said Mr. Hochul’s work for Davis Polk raised questions regardless of whether he had personally worked on behalf of the projects.”
• “The governor’s ethics disclosures show that Mr. Hochul has earned between $850,000 and $950,000 a year from the firm, but he is not a partner and does not share in its profits.”
• “In a statement, Davis Polk said that it had represented Atlas only on the Pennsylvania matter. The firm said the pipeline owner, Williams, was a ‘longstanding firm client’ but ‘had no involvement in the pipeline project.'”

“Charlie Javice wants fraud conviction tossed — claiming judge’s clerks got jobs at law firm repping JPMorgan” —

• “Charlie Javice, who was convicted for defrauding JPMorgan Chase out of $175 million, is demanding a new trial — claiming the judge’s law clerks got jobs with the banking giant’s law firm after her trial finished.”
• “In a motion filed in Manhattan federal court, the 33-year-old’s lawyers alleged that both of US Judge Alvin K. Hellerstein’s clerks had accepted jobs at Davis Polk & Wardwell, the powerhouse law firm that represents JPMorgan Chase.”
• “‘This commitment … was not disclosed to defense counsel until October 2025 (after trial and sentencing), is an apparent conflict of interest that creates, at a minimum, an appearance of impropriety,’ Javice’s lawyers wrote in the Monday filing.”
• “Javice, 33, was sentenced after a jury found her guilty of conspiracy, wire fraud, bank fraud and securities fraud. Prosecutors said she duped JPMorgan into buying her company for $175 million by falsely claiming her fintech startup Frank had 4.25 million users when it only had about 300,000.”
• “According to the motion, both of Hellerstein’s clerks worked as summer associates at Davis Polk in 2023 and accepted full-time job offers at the end of the summer. They deferred their start dates to September 2025 to complete their clerkships.”
• “The motion cites an instance during the trial when the judge, after conferring with his clerk, allowed a prosecutor to re-ask a question over a defense objection. ‘My law clerk agrees with you. You can ask the question,’ Hellerstein said, according to the transcript.”
• ‘This episode shows that the clerk was participating in real time in decisions concerning the permissible scope of examination on one of the most consequential subjects in the case, and that the clerk’s input aligned with the prosecution in a way that benefitted her future employer Davis Polk and her future client JPMC,’ Javice’s lawyers wrote in the filing.”
• “Javice’s lawyers said they only learned of the conflict after the trial and sentencing, when Davis Polk sent a letter to the court saying it had implemented an ‘ethical screen’ to prevent the clerks from working on the case.”
• “Davis Polk was not a peripheral player in the case, according to Javice’s attorneys. The firm’s lawyers appeared at hearings, litigated discovery issues and attended every day of the six-week trial, the filing alleged.”
• “The legal battle over the clerks’ alleged conflict comes as JPMorgan is fighting to stop paying Javice’s legal bills, which have ballooned to more than $73 million — with another $13 million added after her conviction.”
• “In a separate court filing in Delaware Chancery Court, the bank accused Javice and her lawyers of treating the fee advancement as a ‘blank check,’ billing for personal items like cellulite butter and luxury hotel upgrades.”

“Latham & Watkins Disqualified in Inspire IP Suit Against Nyxoah” —

• “Latham & Watkins LLP was barred from representing Inspire Medical Systems Inc. in a patent dispute over a competitor’s sleep apnea product.”
• “Latham’s ‘continued representation of Inspire in this matter would appear deeply improper,’ given the confidential information Latham obtained in its four-year relationship with Nyxoah SA‘s stock offering underwriters, Magistrate Judge Eleanor G. Tennyson of the US District Court for the District of Delaware said in a Tuesday order.”
• “Inspire sued Belgium-based Nyxoah for allegedly infringing several of its US patents ahead of Nyxoah launching its Genio sleep apnea therapy device in the US. Nyxoah sued Inspire in a separate case in September, asserting Inspire is infringing its own patents related to Inspire’s therapy systems.”
• “Nyxoah went public in 2021 to finance the development of Genio. Nyxoah retained Cantor Fitzgerald LP, and eventually Morgan Stanley, to underwrite several offerings. Both firms were represented by Latham during the due diligence process.”
• “Latham withdrew from representing Morgan Stanley and Cantor Fitzgerald before a stock offering earlier this year due to a business conflict, which was later revealed to be the firm’s representation of Inspire in this case.”
• “Nyxoah moved to disqualify Latham, arguing that based on Latham’s years of access to Nyxoah’s confidential information, including on the accused product, Latham’s representation of Inspire gives the appearance of impropriety.”
• “Although Latham never had any fiduciary or attorney-client relationship with Nyxoah, Latham ‘obtained access to confidential information from Nyxoah that is extremely pertinent to the present dispute,’ Tennyson said.”
• “Latham had access to Nyxoah’s financial information and internal documents detailing the company’s views on competing products, such as Inspire’s. The firm also participated in ‘no fewer than six intellectual property due diligence calls with Nyxoah’ while advising its underwriters, during which Nyxoah would provide its views on its own IP assets and products, including Genio, the magistrate judge said.”
• “To the outside, it appears Latham used confidential information Nyxoah provided to ‘garner business in the form of a patent-infringement suit against Nyxoah’ by its competitor. Whether that’s what happened is irrelevant, Tennyson said, adding that the appearance of impropriety is ‘glaring.'”
• “The magistrate judge rejected Latham’s assertion that Nyxoah can’t point to any case where a court disqualified an underwriter’s counsel for being adverse to the stock issuer in a later case. The character of the relationship between Latham, Nyxoah, and the underwriters isn’t the basis for disqualification. Rather, the record shows Nyxoah provided confidential information to Latham, as the underwriters’ counsel, that is ‘highly relevant’ to use against Nyxoah in this case, Tennyson said.”
• Decision: here.

“US law firm McDermott Will & Schulte weighs sector’s first private equity tie-up” —

• “McDermott Will & Schulte is exploring a restructuring that would allow it to sell a stake to private equity groups, a move that would test ethics rules preventing non-lawyers from owning legal firms.”
• “The reorganisation would involve creating a complex structure giving investors a slice of the law firm’s revenues without breaking traditional ownership rules, according to five people with knowledge of the matter.”
• “Such a move, by one of the world’s largest law firms by revenue, could set a precedent for other large players in an industry that — in the US — has been impervious to outside investment.”
• “Zack Coleman, the son of the firm’s chair Ira Coleman, joined McDermott from private equity and venture capital group Odyssey Investment Partners in July and had been sounding out bankers, advisers and private equity executives about the structure, the people said. However, no agreement had been finalised and no commitments had been made, the people cautioned, with some saying it was at an exploratory stage.”
• “The younger Coleman, who started his career at the investment bank Moelis in 2015 and joined McDermott as senior director of business opportunities, is considering a model in which some of the revenues that lawyers generate will be diverted to buy services from a separate entity in which outside investors could own a stake.”
• “The Chicago-headquartered firm, formed in a merger of McDermott Will & Emery and Schulte Roth & Zabel this year, has $3bn in revenues, it said in August. That would put it in the top 20 firms globally by revenue.”
• “The structure under consideration would split it into two parts: a business giving advice to clients that is fully owned by its lawyers, and a separate ‘managed service organisation’ that the lawyer-owned firm would buy services from. That could include back-office work, licensing its brand and buying IT services. Investors could buy a stake in the MSO, giving them a revenue stream designed to be attractive to private equity investors.”
• “There has been an explosion of interest in the potential use of the structure in law this year, but no large firm has adopted it and opponents believe it could breach professional ethics rules designed to keep commercial considerations out of the provision of legal advice.”
• “Ethics rules set by the American Bar Association that ban non-lawyer ownership of US firms are being questioned after some states, such as Arizona, have explicitly licensed alternative business structures that can include private equity control. The potentially more controversial MSO structure has so far been used by only a handful of small practices or start-up law firms.”

“Swiss Vereins: Lessons from Big Law Breakups” —

• “Swiss vereins may offer the impression of unity, but for global law firms they can resemble long-distance romances—captivating at first, until the strain leads to a messy split.”
• “Norton Rose Fulbright confronted that hard reality when the break-up with its South African partners became public last week. Norton Rose and its Johannesburg, Cape Town and Durban offices framed the separation as a ‘natural evolution’ of their 14-year relationship, the legal world’s equivalent of ‘it’s not you, it’s me’.”
• “Beneath the PR polish, undercurrents of conflict have been simmering for months though, including sniping from the City of Gold and other offices about low client referrals, consternation over declining deal visibility, rising associate departures, and an allegation of discrimination. The split also comes after the South African offices were sidelined during the financial integration of Norton Rose’s Australian practice with the EMEA, and their chairperson was passed over in the global chair rotation.”
• “Sometimes, breakups come down to one question: Are we stronger together or better apart? NRF partners announced their decision jointly: South Africa will go it alone starting April 1, meaning there are months of tricky discussions still ahead, not least delicate matters involving client custody.”
• “This highlights a broader problem with Swiss vereins. While the arrangement binds firms across borders, even the most disciplined structures can’t contain ambition, ego, and competing interests. While financially integrated law firms are the equivalent of a marriage, verein offices are more like a perpetual engagement, which means splits can happen more easily.”
• “The Swiss verein lets firms flaunt a single brand and governance structure while keeping offices financially separate. While they don’t necessarily share profits, they do share the name—and, at times, the drama. Disputes, scandals, and failures in one jurisdiction can seriously impact a firm’s global reputation and even lead to litigation.”
• “In the last few years, Baker McKenzie has experienced uncomfortable headlines from South Africa to the UAE to Belgium. And who can forget the Gary Senior saga? The former London managing partner was accused of trying to kiss and embrace a junior colleague and then improperly influence an internal law firm inquiry. The firm was cleared of mishandling an investigation in 2020 (eight years later) but Senior was fined £55,000 plus £40,000 in costs ($125,000 in all) for what the Solicitors’ Disciplinary Tribunal described as his ‘extraordinary abuse of position’ and a ‘lack of integrity’.”
• “The Senior scandal didn’t rupture the Chicago-headquartered firm’s ties with London, but Big Law’s #MeToo moment made for uncomfortable headlines. Baker McKenzie’s verein model has always drawn attention and it was back in the headlines again last month, when Baker McKenzie failed to strike out a malpractice claim tied to its former Russian affiliate.”
• “Dentons’ 2015 tie-up with China’s Dacheng allowed both firms to boast about their massive headcounts, turning scale into a badge of prestige and a competitive edge. When the partnership fizzled in 2023, Dentons blamed China’s ‘evolving regulatory environment’. But as Asia Editor Jessica Seah pointed out, the rupture may have also been a face-saving tactic to disguise that Dacheng had grown weary of footing Dentons’ franchise fees.”

“A Dominatrix, Cyberstalking, And Sour Grapes: Lawsuit(s) Against Biglaw Partner By Former Firm Is Quite The Journey” —

• “Last week, a lawsuit against Blank Rome finance partner James Cretella was filed by his former firm, Otterbourg P.C., for breach of contract, breach of fiduciary duty, fraudulent concealment, and unjust enrichment. The allegations in the suit are a roller coaster ride that swings between the banal and sensational. For example, Otterbourg alleges Cretella didn’t disclose his impending departure until after he’d collected a seven-figure bonus and that he solicited clients to join him at his new firm. From the complaint: ‘He accepted [the bonus] knowing full well he was leaving and that he had perpetuated a scheme to try to hobble the Firm and bolster a competitor while conspiring with another exiting partner and concealing material facts that would have changed the Board’s decision to give him a bonus.'”
• “Which are interesting, if somewhat expected, allegations following a partner’s lateral move. These things don’t typically come to litigation, but they’re certainly known pain points. But then there are the escort allegations.”
  “According to the complaint, Cretella met up with an escort and other women while traveling on firm business. During a forensic examination of Cretella’s firm-issued and firm-paid phone, it was revealed that he allegedly engaged in ‘highly inappropriate and potentially unlawful personal conduct that Cretella engaged in during Firm-funded travel,’ that included texts messages with an ‘upscale dominatrix’ known as ‘Goddess Kat.'”
• “Then there’s the cyberstalking allegations. There’s a separate federal suit in the U.S. District Court for the District of Connecticut by Otterbourg’s chairman, Richard L. Stehl, and its president, Richard G. Haddad, over those claims, and Cretella has filed a motion to dismiss. The Otterbourg firm leaders allege Cretella engaged in repeated ‘unauthorized surveillance’ of their personal lives. As reported by Law.com:”
• “‘Forensic evidence shows that over a period of years, Cretella repeatedly accessed private, non-client files belonging to both men without their permission or legitimate purpose,’ the most recent suit states. ‘These were not stray clicks or accidental views. The data shows hundreds of deliberate intrusions – often in the dead of night – targeting files that … had nothing to do with firm business.'”
• “Some of this sensitive information allegedly included home security system codes and login credentials for live camera feeds inside and outside the Stehl family residence, personal tax returns and Social Security password files, privileged legal communications relating to ‘deeply personal family matters,’ including divorce proceedings and custody arrangements involving grandchildren, confidential medical records, private financial statements, as well as ‘intimate personal details,’ including children’s employment documents and home renovation plans.”
• “But in Cretella’s motion to dismiss the federal action, he alleges the personal information was saved on the firm’s computer system and accessed through a preview function after performing searches. ‘Although plaintiffs try to hide behind irrelevant allegations about how Otterbourg’s computer system was intended to operate, the complaint confirms a simple fact fatal to plaintiffs’ standing: Using firm-provided credentials, Cretella and other attorneys searched the firm’s computer network and viewed the results of those searches, which allegedly included files plaintiffs saved to the firm-wide network. The only plausible conclusion is that plaintiffs failed to take any measures to prevent their files from being accessed through routine, firmwide network searches.'”

“Copy-paste now exceeds file transfer as top corporate data exfiltration vector” —

• “It is now more common for data to leave companies through copying and paste than through file transfers and uploads, LayerX revealed in its Browser Security Report 2025.”
• “This shift is largely due to generative AI (genAI), with 77% of employees pasting data into AI prompts, and 32% of all copy-pastes from corporate accounts to non-corporate accounts occurring within genAI tools.”
• “‘Traditional governance built for email, file-sharing, and sanctioned SaaS didn’t anticipate that copy/paste into a browser prompt would become the dominant leak vector,’ LayerX CEO Or Eshed wrote in a blog post summarizing the report.”
• “The report highlights data loss blind spots in the browser, from shadow SaaS to browser extension supply chain risks, and provides a checklist for CISOs and other security leaders to gain more control over browser activity.”
  “GenAI now accounts for 11% of enterprise application usage, with adoption rising faster than many data loss protection (DLP) controls can keep up. Overall, 45% of employees actively use AI tools, with 67% of these tools being accessed via personal accounts and ChatGPT making up 92% of all use.”
• “Corporate data makes its way to genAI tools through both copying and pasting — with 82% of these copy-pastes occurring via personal accounts — and through file uploads, with 40% of files uploaded to genAI tools containing either personally identifiable information (PII) or payment card information (PCI).”
• “Tackling the growing use of AI tools in the workplace includes establishing allow- and block lists for AI tools and extensions, monitoring for shadow AI activity and restricting the sharing of sensitive data with AI models, LayerX said.”
• “Monitoring clipboards and AI prompts for PII, and blocking risky copy-pastes and prompting actions, can also address this growing data loss vector beyond just focusing on file uploads and traditional vectors like email.”
• “AI tools are not the only vector through which copied-and-pasted data escapes organizations. LayerX found that copy-pastes containing PII or PCI were most likely to be pasted into chat services, i.e. instant messaging (IM) or SMS apps, where 62% of pastes contained sensitive information. Of this data 87% went to non-corporate accounts.”

Amy McClurg at Thomson Hine unpacks and analyzes this one: “Playing with Fire: Avoid Getting Burnt by the Unworthy Client” —

• “While perceptions and descriptions may vary, the term ‘unworthy client’ generally includes dishonest clients whose lawyers get entangled in their client’s web of deceit. Even reputable law firms can easily become entangled with dubious clients if they aren’t paying close enough attention. Not surprisingly, lawyers and firms caught up in these situations are at risk of getting brought down—and hard. A recent example comes from reports of a case settled in the Southern District of Florida which gives attorneys 38 million reasons to be more careful about taking on questionable clients.”
• “The [250+ attorney] firm’s client was an individual financial advisor associated with an investment company. The individual client had initially asked the firm to conduct due diligence on the investment company. After spending 20k in legal fees, the client told the attorney he did not wish to pay for any additional investigation—and so the attorney stopped its due diligence investigation. Had the lawyer continued to investigate—he might not be entangled in the mess that still remains today.”
• “The client later became heavily involved with the investment company, including raising $100,000,000 from investors. The client advertised to investors pointing to how reputable the attorney and law firm were—effectively using the firm to vouch for the integrity of their investment. More details emerged as the representation continued, and they weren’t good. The Company’s founder had been released from prison right before he started the company. He had served time for money-laundering. He apparently had created several fake names for himself, and hired a ‘reputation manager’ to obfuscate his criminal convictions online.”
• “But information about the founder’s past criminal history, his role in the company, and the company’s default rate, profitability and underwriting process wasn’t disclosed to the investors. Investments continued to be solicited until the company was placed in receivership. The resulting fraud loss was over $400,000,000. The founder eventually pleaded guilty to a RICO charge, securities fraud, tax crimes, and perjury and was sentenced to serve many years in prison.”
• “Unsurprisingly, a class action was filed against the Firm for its alleged role in the underlying scheme. The Plaintiffs claim the Firm aided and abetted the Company’s fraud by advising agent funds used to solicit investors in the company’s merchant cash advance loans, creating false and misleading offering documents that were disseminated to investors, and effectively performing as investment underwriters. The law firm denied liability but agreed to pay 38 million dollars in potential damages to settle—avoiding additional and very complex litigation.”
• “The lawyer against whom the allegations were targeted not only faced issues with the SEC but is also currently fighting disciplinary charges related to his entanglement with this client. The disciplinary petition included violations of Rules 1.1 (competence), 1.3 (diligence), 1.7 (conflicts), 4.3 (dealing with unrepresented persons), and 8.4 (misconduct) of the Pennsylvania Rules of Professional Conduct. It did not mention but could have also included violation of Rule 1.16 (failing to withdraw from a representation that results in a violation of law).”
• “Unworthy clients often use others, including their law firms, as pawns in their schemes. And just like the others, the clients often need to deceive their lawyers as well as their victims to accomplish their fraudulent goals. And they’re good at what they do. That is why lawyers need an objective list of signs or ‘red flags’ that will help them spot when a client is unworthy. Lawyers who ignore these signs in favor of the urge to take on another lucrative client are bound to get burnt. Law firms must implement ‘red flag’ policies and put the processes in place to enforce them otherwise they will be on the hook too. “
• “The bottom line is that lawyers need to learn and pay attention to who they are working with. Do your own research on the client until you are satisfied one way or the other. If the representation feels wrong, it probably is. If there is any uncertainty, discuss the potential representation with those in charge at the firm. There will always be more clients, but you’re never guaranteed another law license (or job).”
• “Not only should the red flag list be considered during the business intake process, but it should also be considered throughout the course of any representation as new facts or circumstances reveal themselves. But you must know what you’re looking for—which signs to spot.”

And, applicable to both starships and law firms, Brian Faughnan highlights: “The importance of knowing how things work” —

• “…the existence of a particular local rule that made a lot of difference in the outcome. But this particular story does provide sufficient underpinning for discussion of a larger topic of overall significance to the ethics rules when it comes to technology usage.”
• “The story involves the imposition of sanctions against a law firm for doing research about potential jurors using LinkedIn. It arises from federal court in the Northern District of California, it involves the imposition of sanctions against a fairly well-known [Am Law 50] law firm, and you can read the full opinion below:”
• “Now, it is worth stressing again that the court issuing the sanctions order had a standing order that specifically prohibited any use of LinkedIn for the purpose of research about prospective jurors. Thus, for this particular case, knowing how LinkedIn works wouldn’t matter.”
• “In any other context though, knowing the way that LinkedIn works is a helpful educational point about a practical application of what it means to need to have technological competence sufficient to comply with the language in the comment to ABA Model Rule 1.1 which says: ‘To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology . . . .'”
• “More than five, and fewer than ten, years ago I did a presentation on ethics issues and the use of social media that included a specific hypothetical about a lawyer who used LinkedIn to research the backgrounds of prospective jurors. I did that for two reasons at the time: (1) Tennessee’s RPC 3.5(b) prohibits a lawyer from ‘communica[ting] ex parte’ with a potential juror during a proceeding ‘unless authorized to do so by law or court order;’ and (2) many lawyers did not understand that unless they make changes to their settings in LinkedIn, other LinkedIn users are sent a communication through LinkedIn that you have viewed their profile.”
• “Thus, even absent the California judges standing order, using that platform to investigate information about a prospective juror, much less a seated juror, would present an ethical problem if you haven’t changed your settings so that the platform does not automatically send a communication to the person on your behalf.”
• “All of that being said, the standing order appears to be so strict as to be unreasonable. That judge appears to quite strongly believe that even a notification from LinkedIn that someone anonymously viewed your profile is problematic.”
• “If people post things on social media that are accessible to the public at large (rather than say restricted to ‘friends’ or ‘connections’ or whatever noun a platform uses as an equivalent limitation) then lawyers ought to be free to digest that information if they are trying to determine if someone should sit as a juror over their client’s case. If when that happens, the prospective juror gets a message that says: [person’s name] viewed your profile. That is one thing, and I agree that is sufficiently communicative to be a problem under Model Rule 3.5(b). If it just says that you got a profile view, or your profile was viewed by an anonymous user, or something else that doesn’t reveal who was looking, then that simply cannot be the kind of ‘communication’ the law or the ethics rules should prohibit.”
• “Nevertheless, the overall point remains relevant. Almost every technological tool has a variety of settings about things that happen when you use it if you don’t establish other defaults or invoke other settings. If you are a human being, you should probably familiarize yourself with how those work when using social media. If you are a human being who also is a lawyer, then if you are going to use such things as part of your representation of your clients, you have an ethical obligation to familiarize yourself with how those work.”

David Kluft asks: “Can a judge disqualify me based on evidence I’m not allowed to see?” —

• “A NJ law firm represented a company in financial dispute, and a couple years later appeared adverse to the company in a different financial dispute. The company moved to disqualify the firm on the grounds that the firm understood its former client’s financial condition and how that would impact its ability and willingness to settle.”
• “In support of the disqualification motion, the company’s new counsel submitted a declaration from the company’s owner in camera, without letting the law firm see it. The judge disqualified the firm, stating that he would not have done so but for the declaration, which was ‘personal in nature.'”
• “The law firm appealed its disqualification on the grounds that it was based on evidence it couldn’t see. The NJ Appellate Division vacated and remanded: it was error for the Court to consider the declaration without providing some mechanism for the law firm to review the information and respond, such as providing the document under a protective order, allowing cross-examination of the affiant, and/or letting the firm engage substitute counsel for the motion.”
• Decision: here.

“Court of Appeals Affirms Disqualification for Former Client Conflict” —

• “Division II of the Washington Court of Appeals in Tacoma recently affirmed the disqualification of a law firm in two related cases that were consolidated on appeal. “
• “Day v. Tacoma RV Center, Inc., 2025 WL 2910726 (Wn. App. Oct. 14, 2025) (unpublished), arose on relatively simple facts. In each case, a law firm was pursuing claims against a recreational vehicle dealer and a manufacturer. Although each varied somewhat, they were both oriented around asserted sales practices at the dealer framed as alleged violations of the Washington Consumer Protection Act. A lawyer who had been defending the dealer joined the plaintiffs’ law firm. Although lateral-hire screening is permitted in Washington under RPC 1.10(e), the trial court found (and Court of Appeals agreed) that the law firm failed to meet the requirements of the rule. Therefore, to the extent the new lawyer had a conflict under the former client conflict rule—RPC 1.9RPC 1.9—it would be imputed to the hiring law firm as a whole under RPC 1.10(a) that generally imputes a law firm lawyer’s conflicts to the entire firm. “
• “When the defendants learned of the former defense lawyer’s new position, they moved to disqualify the law firm from the two cases. Following a number of procedural twists at the trial court, the law firm was eventually disqualified. The Court of Appeals affirmed. “
• “The Court of Appeals noted that the leading case in Washington interpreting RPC 1.9 is Plein v. USAA Casualty Insurance Company, 195 Wn.2d 677, 453 P.3d 728 (2020)—which was also a disqualification case. In Plein, the Washington Supreme Court parsed the phrase ‘same or substantially related matter’ that is the benchmark for determining a former client conflict under RPC 1.9. In Plein, the Supreme Court found that the case at issue was factually different from those the law firm had handled earlier and that the law firm’s knowledge of the former clients’ general business practices was not, in and of itself, sufficient to trigger a conflict. By contrast, the Court of Appeals in Day found that the cases involved were ‘nearly identical’ and focused specifically on the same asserted sales practices. The Court of Appeals, therefore, concluded that the law firm had a former client conflict and affirmed its disqualification. “
• “Day highlights both the importance of adequate screening to avoid lateral-hire conflicts in the first place and how the information that a lawyer has acquired in an earlier representation for a former client may be sufficiently relevant to a new matter to trigger a former client conflict. “

“Alaska fires law firm Motley Rice in opioid litigation, joining Utah” —

• “The state of Alaska has terminated a contract with a national plaintiffs law firm it hired eight years ago to pursue a lawsuit over opioid painkillers, claiming it violated confidentiality and conflict-of-interest provisions. Law firm Motley Rice failed to disclose that it was representing other clients in separate opioid litigation at the same time it represented the state, Republican Alaska Attorney General Stephen Cox’s office said in an October 23 letter to the firm.”
• “Alaska has ‘reason to believe that the firm may have shared confidential information obtained through its representation of the state,’ Cox’s office said. The letter, obtained by Reuters through a records request, said the state would hire new counsel.”
• “Alaska’s move is the latest setback for Motley Rice, after Utah’s attorney general terminated a similar contract with the firm on October 16. Motley Rice had been representing the states in lawsuits alleging that pharmacy benefits managers prioritized opioid access for patients despite the drugs’ high risk of addiction and harm.”
• “Motley Rice in a statement said it had represented Alaska in opioid litigation for nearly a decade and helped the state recover tens of millions of dollars to benefit Alaskans. It said it was proud of its work for the state.”

“Stocks, Recusal, and Copycats- ‘No problem’ on APJ Conflict” —

• “The US Court of Appeals for the Federal Circuit found that an administrative patent judge’s (APJ) recusal in an inter partes review (IPR) based on ownership of stock in one of the defendant’s corporations in an amount below the statutory monetary threshold was not erroneous but remanded the case for further consideration of the copying evidence. Centripetal Networks, LLC v. Palo Alto Networks, Inc., Case No. 23-2027 (Fed. Cir. Oct. 22, 2025) (Moore, Hughes, Cunningham, JJ.)”
• “In September 2022, Centripetal learned that a member of the Board panel owned stock in Cisco. However, Centripetal did not move for recusal until December 30, 2022, when
• it sought recusal of the entire panel and vacatur of the institution decision.”
  “In January 2023, the Board panel denied Centripetal’s rehearing request and granted Cisco’s joinder motion. Nevertheless, two of the three members of the panel withdrew to narrow the issues before the Board. The reconstituted panel then denied Centripetal’s motion for vacatur and held that the recusal motion was untimely, because Centripetal
• had been aware of the potential conflict since September 2022.”
  “In May 2023, the Board found certain claims of Centripetal’s patent to be unpatentable as obvious. Centripetal appealed to the Federal Circuit, arguing that the Board’s decision should be vacated because the allegedly conflicted APJ recused himself only after institution and because the Board failed to address Centripetal’s copying arguments.”
• “The Federal Circuit determined that it had jurisdiction to hear the appeal, noting that the case turned on the interpretation of ethics rules and was not the first instance in which the Court reviewed a conflict-of-interest challenge involving an institution decision. The Court concluded that the Board did not abuse its discretion in determining that Centripetal’s recusal motion was untimely, as Centripetal had been aware of the potential conflict for three months before its filing.”
• “The Federal Circuit also addressed the substance of the recusal motion and explained that the APJ’s stock holding in Cisco was less than the statutory $15,000 threshold at all times. Although Centripetal argued that different statutory provisions applied to APJs, the Court concluded that those provisions did not govern a federal employee’s personal financial holdings. Under the applicable statute, which requires recusal only when an employee owns more than $15,000 in a party, the Court found that the APJ was not required to recuse himself.”
• “The Federal Circuit further found that Centripetal’s due process rights were not violated. The Court explained that ethics rules for Article III judges do not apply to administrative proceedings before APJs. The Court further noted that a recent (USPTO) memorandum directing the Board to avoid empaneling judges with any stock ownership in a party was not intended to apply retroactively and therefore did not affect Centripetal’s case.”

“Judge Disqualifies Attorney From Malpractice Trial He’s Implicated In” —

• “A magistrate judge for the U.S. District Court for the Southern District of Florida disqualified a Boca Raton attorney from trying his client’s legal malpractice case after finding he will be a key witness for the defendant — who is also his former co-counsel — when the case goes to trial.”
• “Judge Lisette M. Reid kicked Andre G. Raikhelson off trial portion of the case in a Tuesday order, noting her decision was backed by legal precedent which holds that attorneys cannot represent clients in cases in which they are ‘central figures’ or when there is risk the client’s representation will be limited ‘by a personal interest of the lawyer.'”
  ‘Here, Mr. Raikhelson arguably has a personal stake in the outcome of this litigation, namely avoiding liability for Plaintiff’s damages himself,’ Reid opined.”
• “At the heart of the case is a 2020 civil complaint filed by the Securities and Exchange Commission against Joseph Cole Barleta for seven violations of the Securities Exchange Act while participating in a ‘fraud scheme’ that deceived investors of the Philadelphia-based financing firm Par Funding.”
• “Barleta tapped New York-based attorney Bettina Schein to represent him, with Raikhelson soon joining his legal team as local co-counsel. Schein advised Barleta to sign a consent agreement she described as a ‘no admit — no deny’ agreement. Per Reid’s order, Schein warned Barleta that should he refuse to sign, he was likely to be found liable of at least one count and that a lengthy, costly trial would ensue.”
• “Barleta signed the consent agreement in November 2021, effectively waiving his right to appeal, consenting to the entry of a disgorgement and acknowledging the allegations lodged against him by the SEC to be true. At a disgorgement hearing in October 2022, Barleta was ordered to pay $10.8 million in disgorgement damages and a civil penalty of more than $1.3 million.”
• “Represented by Raikhelson, Barleta filed a more than $12 million legal malpractice suit against Schein in September 2023, alleging she misrepresented the effect of the consent decree.”
• “But Schein argues it wasn’t her fault Barleta was left with such a large bill, but rather Raikhelson’s.”
• “By the time of the disgorgement hearing, Schein had withdrawn from the case, leaving Raikhelson as the sole counsel. Despite having attended every other hearing in the case, Raikhelson was not there to represent Barleta at the disgorgement hearing, telling the Daily Business Review Friday that he missed it for ‘personal reasons.'”
• “‘Our position is that though I wasn’t present at the hearing, for personal reasons, the argument that (Barleta) had at that hearing was carried on by other members of the joint defense team,’ Raikhelson said.”
• “Bob Jarvis, law professor at Nova Southeastern University, said Raikhelson’s absence at the disgorgement hearing was ‘mind-boggling.’ ‘To not show up at that hearing, and to essentially have other lawyers say that he was resting on his brief, I mean, that’s just mind-boggling … It’s like leaving a play right before they reveal who the murderer is,’ Jarvis said.”
• “He added that had Barleta approached a different lawyer, it’s likely they would have advised him to file the malpractice suit against both Schein and Raikhelson.”
  ‘Raikhelson has every reason to convince Barleta, ‘Oh, it’s Schein’s fault,’ whereas a conflict-free lawyer would have said ‘We’ll sue both of them and then the court or the jury can decide how much responsibility each one of them has,’’ Jarvis said.”