Bressler Risk Blog

“Covington Revenge Deepens Worries of Defending Trump Targets” —

• “President Donald Trump’s decision to punish Covington & Burling for representing former Special Counsel Jack Smith will feed some firms’ worries about letting lawyers volunteer to represent former Justice Department attorneys.”
• “Private attorneys seeking to represent DOJ workers being forced out or investigated had already faced pushback from their firms’ executive committees over concerns such work will hurt their brands and cut into billings, according to interviews with 12 attorneys.”
• “Some firm leaders, citing corporate clients threatening to walk if they get crosswise with Trump, have rejected outright or put up roadblocks to partners seeking approval to represent DOJ lawyers, FBI agents, and other civil servants who’ve faced various forms of attack, three lawyers familiar with the decisions told Bloomberg Law. That was before Trump’s executive order Tuesday pulling the security clearances of Covington lawyers and vowing to cancel any government business with the firm.”
• “‘I continue to see as I reach out and recruit lawyers to help me that there is an absolute battle in many of the firms between playing a role or staying out of it,’ said Mark Zaid, a national security lawyer who’s been helping Trump’s perceived foes at DOJ and other agencies match with pro bono counsel from large and small shops.”
• “Zaid last month sued on behalf of FBI agents to halt the administration from releasing identities of those involved in Trump-related investigations. He said the problem is pronounced at law firms that have well-established Washington offices and are governed by out-of-town managing partners.”
• “There are Democratic and Republican partners at firms who are ‘gung ho and really want to play a role in challenging this administration,’ but they’re getting pushback from leadership, Zaid said. It’s typically over the unprofitable time suck of pro bono matters and the potentially negative public relations impact on existing and prospective clients, added Zaid, who himself had his security clearance pulled by Trump earlier this month.”
• “The attorneys declined to name law firms due to the sensitive nature of internal deliberations.”
• “Individual attorneys want to enter what they see as a nonpartisan battle to preserve democracy by filing merit systems complaints for terminated federal employees, representing Jan. 6 prosecutors under investigation from DOJ and Congress, or participating in litigation to halt Trump policies. Firms’ senior decisionmakers, however, agonize about the sustainability of representing current and former government employees opposite the administration, according to multiple attorneys.”
• “Such strain isn’t new, but one Big Law partner said he’s never witnessed this level of concern in which firm leadership worries they could jeopardize their economic future by protecting the rule of law.”
• “‘I am seeing from individual attorneys who are former DOJers a real wakeup moment with the Thursday night massacre’ in which multiple prosecutors resigned over leadership’s order to dismiss charges against New York’s mayor, said Erica Newland, who leads Protect Democracy’s civil service protection project. ‘They are enraged and understand the existential nature of the threat for both the culture and norms of the Department of Justice.'”
• “Zaid said that some Big Law partners have found a workaround when firm leaders block their involvement. They’ve continued supporting the cause in the background, while letting lawyers from other firms sign court filings, he said. This can protect the reputation of white collar defense partners when later advocating for corporate clients, such as in urging DOJ to decline prosecution.”
• “Adding to firm leaders’ concerns is that a few competitors have warmed up to Trump, a significant turnabout from when much of Big Law shunned the president following the Jan. 6 Capitol insurrection.”

“Elon Musk’s DOGE Adventure Leads to Knotty Accounting Question for Tesla” —

• “How much influence does Elon Musk have over the U.S. government? Enough that Tesla will need to make a judgment call on a disclosure issue that once would have been unthinkable for an American private-sector company to contemplate.”
• “Here is the question at hand: Are Tesla and the government ‘related parties’ for purposes of generally accepted accounting principles?The answer would appear to be yes, as wild as that might seem.”
• “As the functional leader of the Trump administration’s Department of Government Efficiency, or DOGE, Musk has rapidly amassed enormous power over vast portions of the U.S. government, nearly wiping out entire agencies and targeting others for elimination, while directing mass employee layoffs. Officially, Musk has been designated a ‘special government employee.’ He also is synonymous with Tesla, the electric-vehicle maker where he is chief executive, the largest shareholder and the face of the company.”
• “The related-party designation would mean Tesla, in its disclosures to investors, could have to start reporting transactions it has with the government if they are significant. It also would underscore how powerful Musk has become. U.S. accounting standards say the reason for requiring such disclosures is that ‘transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.'”
• “Other public companies have named the U.S. government as a related party before in their disclosures, including American International Group, General Motors, Fannie Mae and Freddie Mac. But that was because the government had bailed them out and taken large ownership stakes during the 2008 financial crisis. If Tesla were to start identifying the government as a related party in its reports to investors, it would be because of the amount of control Musk wields over the government, not the other way around.”
• “Under U.S. accounting standards, Tesla and the government would be considered related parties if one of them ‘can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.'”
• “Jack Ciesielski, founder of the asset manager R.G. Associates in Towson, Md., and a member of the Financial Accounting Standards Board’s Emerging Issues Task Force, said Tesla and the government fit that description. ‘Tesla and Musk have significant influence over the U.S. government,’ he said. ‘I don’t think there’s any definition you can come up with that says they’re not related parties.'”
• “The same analysis would apply in principle to Musk’s other companies, including SpaceX, which has billions of dollars of federal contracts, and the social-media company X. However, unlike Tesla, those other companies aren’t publicly held, so they don’t file their financial statements with securities regulators.”
• “Tesla in its latest annual report identified several of Musk’s other companies as related parties, including SpaceX and X. It said its transactions with those companies didn’t have a material impact on its financial statements. Tesla didn’t say how much of its $98 billion of revenue last year came from the government. The company didn’t respond to requests for comment.”
• “The importance of Tesla’s relationship with the government goes beyond commercial transactions. Tesla customers can receive as much as $7,500 in federal tax credits for the purchase of electric vehicles, under current law. Tesla also has been the subject of numerous government investigations, including by the National Highway Traffic Safety Administration, where DOGE has been directing layoffs.”
  Tesla mentioned DOGE only once in its last annual report, filed Jan. 30. In a risk-factor disclosure, Tesla said it is highly dependent on Musk’s services and that ‘he does not devote his full time and attention to Tesla,’ noting that he holds management positions at five other companies and is involved with other ventures, as well as DOGE.”
• “Listing the U.S. government as a related party might not trigger any other immediate changes to Tesla’s books, and it shouldn’t be a problem for Tesla shareholders. If the government and Tesla do significant amounts of business together, the related-party designation would help provide transparency into the extent of those dealings. Investors would be the intended beneficiaries of the disclosure. Taxpayers, too, could benefit from some additional sunlight.”

“Ethics ruling bars law firm from taking hospital clients in Blue Cross case” —

• “A judge in Alabama has barred a large U.S. law firm from representing plaintiffs in major litigation accusing Blue Cross Blue Shield of underpaying hospitals, physicians and other medical providers for years.”
• “The decision on Wednesday [2/26] was a rebuke for 1,100-lawyer law firm Polsinelli, which is known for representing healthcare companies and which had been advising clients on potentially opting out of a $2.8 billion class-action settlement in the Blue Cross case in order to sue the insurer on their own.”
• “Chief U.S. District Judge R. David Proctor in Birmingham said in his ruling that attorneys who now work at Polsinelli had earlier represented Blue Cross Blue Shield of Alabama in the case, creating an ethical conflict.”
• “‘Lawyers who until recently did substantial work for (Blue Cross) in this litigation are now at a firm that is taking materially adverse positions against it — in that same litigation,’ Proctor wrote in his order.”
• “In the underlying litigation, hospitals and other health providers claimed Blue Cross and some of its affiliates violated antitrust law by dividing the country into exclusive areas where they agreed not to compete with each other. The providers’ class action, filed in 2012, said the alleged conspiracy increased the cost of insurance and drove down reimbursements. Blue Cross Blue Shield denied wrongdoing but agreed in October to settle with the plaintiffs for $2.8 billion.”
• “Alabama-founded law firm Maynard Nexsen had been one of the firms defending a Blue Cross affiliate in the case, Blue Cross Blue Shield of Alabama, billing thousands of hours. In 2024, some of the Maynard Nexsen attorneys left the firm to join Polsinelli, the decision said.”
• “Lawyers for the plaintiffs who negotiated the settlement complained earlier this month that a different Polsinelli lawyer was talking with clients about opting out of the deal and potentially filing their own lawsuits, violating ethics rules against conflicts of interest.”
• “Attorneys for Polsinelli denied that Polsinelli’s hiring of a handful of lawyers from Maynard Nexsen created a conflict. Polsinelli said clients that are weighing whether to accept the settlement did business with non-Alabama Blue Cross companies. ‘The right to counsel of one’s choosing is a bedrock principle of American jurisprudence,’ Polsinelli told Proctor.”

“KPMG Wins Approval to Launch First US Law Firm for Big Four” —

• “KPMG gained approval to practice law in Arizona, making it the first Big Four accounting, tax, and consulting company set to operate a law firm in the US.”
• “The Arizona Supreme Court today [2/27] granted KPMG a license to operate a so-called alternative business structure. KPMG Law US will be an independent law firm operated as a wholly-owned subsidiary of the company.”
• “The law firm will provide legal services that include integrating legal contracts and tech systems after corporate mergers, KPMG has said. KPMG’s tech capabilities, scale, and pricing structure give it an advantage over traditional law firms, Stuart Bedford, the company’s global head of legal services said in an interview earlier this month.”
• “‘KPMG Law US is uniquely positioned to transform the delivery of legal services,’ Rema Serafi, KPMG’s vice chair for tax, said in a statement. ’By combining cutting-edge artificial intelligence and advanced technology solutions with legal services, we are proud to be a first mover with this capability and to offer the most holistic range of tech-enabled services in the marketplace for our clients’ evolving needs.'”
• “The move follows years of Big Four expansion into legal services in other markets, such as the UK and Australia. Professional regulations for US lawyers have largely barred non-lawyers from owning law firms. The Arizona ABS program created an exception in 2021, hoping new law firm models would spur better access to costly lawyer advice. Mass tort firms have taken to Arizona’s alternative business structures and use them for lead generation and advertisement nationally.”
• “KPMG Law US can practice law in the state on the condition that it refrains from performing legal services for any of KPMG’s audit clients, the court said in the Thursday order. The restrictions have broader application beyond US securities law that prohibit accounting firms from performing legal services for its US clients.”
• “The initiative faces several questions, including to what extent, or how, KPMG Law will provide services in other states. Law firms tracking new competition will be watching to see what types of legal matters clients hire KPMG to handle.”
• “‘One question is are they engaged in the unauthorized practice of law in other states in which they are giving advice because that’s where the clients are located,’ said legal ethics professor Bruce Green, who teaches at Fordham Law School.”

“Move Over KPMG, This Accounting Firm Has a Vision for Providing Legal Services Nationwide” —

• “When Atlanta-based accounting and business advisory firm Aprio announced a merger with an Arizona business law boutique earlier this month, leaders from the new entity—dubbed Aprio Legal—indicated that they aimed to deliver legal services to clients beyond the Grand Canyon State.”
• “Representatives from both Aprio, with 25 U.S. offices but no presence in Arizona, and Radix Law, with 15 attorneys in Scottsdale, emphasize they will use co-counsel relationships to serve clients around the country. But some observers, however, question whether the traditional co-counsel relationship is being stretched when used in conjunction with a firm that is, in reality, supposed to only be offering legal services in Arizona under an intrastate Alternative Business Structure license.”
• “Both firms were already previously approved to operate ABS law firms – Radix in 2021, the year the Arizona program began, and Aprio in 2024 – but firm leaders say the joint venture could lead to better servicing of Arizona legal clients and could also potentially open up the opportunity for cross-border legal work.”
• “‘We believe we are pioneering a new, holistic approach that re-imagines the client experience,’ Kopelman said in written comments. ‘Ultimately, working alongside the Arizona Supreme Court’s Alternative Business Structure Program, we hope our model inspires similar collaborations across the U.S. and helps reshape how legal services are delivered. As we look forward, we will work closely with the ABS program to shape any expansion beyond Arizona.'”
• “Kopelman and Kveisc did not say which law firms outside of Arizona could serve as possible opportunities for co-counsel relationships.”
  Crossing State Lines”
• “‘Only Arizona lawyers can practice law in, and be employed in, an Arizona ABS, at least in theory,’ said Lynda Shely, an Arizona ethics lawyer.”
• “Because most other states have ethics rules that prohibit the formation of ABS law firms, they would likely frown upon an Arizona ABS attempting to open an office in states outside of Arizona, Shely said.”
• “Aprio and Radix, however, do not seem overly concerned, given their focus on delivering services outside of Arizona through the use of co-counsel relationships, which is something that is generally already permitted in other circumstances.”
• “‘None of us are aware of any jurisdiction that has that type of limitation,’ Lucian Pera, a partner at Adams and Reese who focuses on legal ethics, said about co-counsel relationships. Arizona lawyers are already permitted to enter into co-counsel relationships with attorneys in other states, Pera said, and the only limitation on this would be if a court were to issue rules preventing such cross-border relationships.”
• “Another way the Aprio Legal Arizona ABS lawyers could partner with outside counsel is to operate as a multi-jurisdictional practice, according to Pera. In 2002, he said, the ABA issued a rule that has since been adopted by around 40 states that would permit some temporary practice of law by lawyers in different states.”
• “Under this setup, lawyers in one state—Arizona, in this example—could become associated with a local attorney, get temporarily admitted to practice law in a state other than their own, and then handle certain legal work outside of their home state, including arbitration, mediation and other matters that are ‘reasonably related to your practice back home,’ Pera said.”
• “Pera also said this type of cross-border legal work can also be done through the use of legal staffing companies. Essentially, there are already numerous ways lawyers can handle certain legal matters in states in which they’re not licensed. ‘I don’t know what Aprio has got in mind, but those are some tools they can use,’ Pera said. ‘They would be using the same tools that my law firm and I use to do the same thing.'”
• “Pera said as far as he knows, there do not currently appear to be any restrictions on the use of these various methods in situations where the firm seeking to develop a co-counsel relationship is structured as an ABS versus a traditional law firm.”
• “Pera called Kvesic, of Radix, ‘a really fine, smart lawyer,’ and he acknowledged the scope and reach of Aprio, saying the joint venture will likely see success and could possibly spur other accounting firms or consultancies to get involved in the legal business.”
• “‘My feeling is the fact that someone is trying this is as important as how many clients that particular firm reaches, because it will, frankly, expand the imagination of other lawyers and accountants as to what’s possible,’ Pera said. ‘They could be the next behemoth. I think it’s as important for people to see what they’re doing, and ask the questions you’re asking.'”

“You Can Buy Me Dinner, But Don’t Expect to Choose My Entrée: Motion to Disqualify for Non-Party Litigation Funding Conflicts of Interest” —

• “You can pay for the dinner, but you cannot pick when, where or what we’re eating. At least that’s what a Magistrate Judge in the District of New Jersey decided last week in Harish v. Arbit, No. CV 21-11088-EP-AME, 2025 WL 354434 (D.N.J. Jan. 31, 2025), a patent dispute that resulted in the disqualification of two law firms from representing two defendants because the defense was funded, at least in part, by a non-party with an interest in the patent.”
• “Plaintiff maintained that defense counsel violated N. J. Rule of Professional Conduct 1.8(f) when they represented defendants and a non-party payer. The Court held that the plaintiff, as an adversary, had standing to raise a potential conflict of interest and bring a motion to disqualify. While the Court noted that the Third Circuit had not ruled on the issue directly, ‘this District has held that ‘[a]dversaries, as well as former clients, may raise conflict of interest concerns.’'”
• “The Court found that the issues were governed by the New Jersey Supreme Court’s opinion in In re State Grand Jury Investigation, 200 N.J. 481 (2009) because a non-party was paying for the defense. The Court rejected defendants’ argument that Grand Jury only applied when evaluating whether an attorney may accept payment from a nonclient and not when an attorney is jointly representing multiple clients with a common interest.”
• “Under the Grand Jury test, an attorney may represent a client, accepting payment directly or indirectly from a non-party, only if each of the following six factors is satisfied:

1. 1. There is informed consent by the client.”
   2. Non-party payer may not direct, regulate or interfere with the attorney’s professional judgment in representing the client.”
   3. There may not be any current attorney-client relationship between the attorney and non-party payer.”
   4. The attorney may not communicate with the non-party payer regarding the substance of his representation of his client.”
   5. The non-party payer shall process and pay such invoices within the regular course of its business, consistent with manner, speed and frequency it pays its own counsel.”
   6. Once a non-party payer commits to pay for the representation of another, they shall not be relieved of that obligation without leave of court brought on prior written notice to the attorney and the client.”

• “Applying these factors to the facts, the Court here found that there was objective evidence from email communications between the parties that the non-party payer’s interests have ‘commandeered, or at least directed with primacy, Defense Counsel’s approach to its defense of Defendants.'”
• “The Court further stated that ‘[t]he record makes clear that [the non-party] is directing, regulating, and interfering with Defense Counsel’s professional judgment in its representation of Defendants.’ The Court found that there was clearly an attorney-client relationship between the attorneys and non-party payer because defense counsel stated they represented the non-party and were advising both the defendants and the non-party payer.”
• “The Court further noted that defense counsel continuously and regularly informed the non-party about the substance of defendants’ representation and a representative from the non-party was present and participated in a settlement conference. Finally, the Court found that Grand Jury’s sixth condition was not met because there was an indemnity clause that would release the non-party payer from its obligation to pay if legal fees surpassed a certain threshold.”
• “This case is an important decision on the impact and contours of what litigation funders can and cannot do. It serves as a roadmap for representation letters, waivers and communications with non-parties whenever a separate entity is involved in paying for litigation, and a cautionary tale for joint representation.”

“Russian Oligarch Wants Court Nemesis’ Litigation Funding Details” —

• “A sanctioned Russian billionaire is asking a Florida court for details about a Miami litigation funder that bankrolled an overseas case against him.”
• “Andrey Guriev claimed in a filing on Wednesday that 777 Partners was among a group of funders financing cases filed against him by former friend Alexander Gorbachev claiming he owned 24% of Guriev’s company. 777 and subsidiary Sphinx Funding LLC paid Gorbachev’s litigation costs, after-the-event insurance and living expenses to the tune of over £‎11 million ($13.9 million), according to court documents.”
• “Guriev now seeks discovery from Gorbachev’s funders asking for documents relating to 777 Partners’ general funding standards and policies, an organization chart of 777, corporate meeting minutes, and documents and communication relevant to Sphinx’s agreement with Gorbachev. He also seeks to depose a representative of 777.”
• “‘Mr. Guriev hopes to discover information relevant to the identities and ultimate sources of the funds provided by the third-party funders who financed Mr. Gorbachev’s failed, frivolous, and potentially fraudulent claims, as well as the true motives and objectives in bringing those claims,’ counsel for Guriev from Boies Schiller Flexner wrote in the memorandum of law supporting the discovery application.”
• “Guriev is a founder of Russian phosphate fertilizer company PhosAgro and a close associate of Russian President Vladimir Putin, according to the UK Office of Financial Sanctions Implementation. He was sanctioned by the US Office of Foreign Assets Control in 2022 for operating within the Russian Federation economy.”
• “In 2023, Gorbachev revealed that third parties were paying his litigation expenses, with two paying direct costs for the UK proceedings. Sphinx was one of those funders and had an agreement with him since 2021. It fronted the cost of a £5 million ($6.3 million) after-the-event insurance policy and Sphinx was entitled to the higher of either £40 million ($50.7 million) or 20% of the case proceeds.”
  Funders’ Role”
• “Guriev applied to have the funders added as parties to the litigation. In response, Joshua Wander wrote that he is the managing partner and co-founder of 777 Partners and Sphinx is a subsidiary. Wander wrote that 777 has no entitlement or any stake in the outcome of the proceedings and never has, despite 777 paying some of the funding payments to Gorbachev.”
  “The case is v. 777 PARTNERS LLC, S.D. Fla., 25-mc-20896, 2/26/25”

“Holland & Knight Must Face Breach of Fiduciary Duty Claims After Ex-Partner Allegedly Viewed Client Files for Divorce Leverage” —

• “A Pennsylvania federal judge ruled Thursday that Holland & Knight can’t escape breach of fiduciary claims in a case involving a former partner who allegedly accessed confidential client files to gain leverage in his divorce proceedings.”
• “U.S. District Judge John Milton Younge of the Eastern District of Pennsylvania found that Philadelphia personal injury firm Fritz & Bianculli sufficiently pleaded facts alleging that former Holland & Knight partner Patrick McCabe, former associate Jean Donohue, and current senior research analyst Eric Berg either did not have authorization or exceeded their authorization to access its files after the firm retained Holland & Knight as counsel in 2022”
• “The underlying litigation, initially filed in state court in August 2024 before being removed to federal court, accused Holland & Knight of failing to flag a conflict of interest regarding Fritz & Bianculli and McCabe, who was in the midst of divorcing his wife who worked as an associate at the personal injury firm. The suit specifically alleged that as a result of failing to flag the conflict, McCabe, along with Donohue and Berg acting on his behalf, accessed files belonging to Fritz & Bianculli to gain an advantage in his divorce proceedings even after the firm terminated its relationship with Holland & Knight in 2023 upon discovering the conflict.”
• “The suit further claimed that McCabe accessed his soon-to-be-ex-wife’s work email to monitor and record communications between his wife and her employer Brian Fritz, whom he suspected were having an affair.”
• “In addition to allowing the breach of fiduciary claims to move forward, Younge permitted the charges against McCabe for violating the Stored Communications Act by accessing Fritz & Bianculli’s email servers through his wife’s work computer to continue.”

“‘Discordant Dots’: Why Phila. Zantac Judge Rejected Bid for His Recusal” —

• “The judge overseeing Philadelphia’s Zantac mass tort did not look favorably upon a bid from plaintiffs to boot him from the litigation. In a Tuesday [1/7] opinion, Judge Joshua Roberts of the Philadelphia Court of Common Pleas said the Zantac plaintiffs ‘fell woefully short of presenting any concrete facts that could support recusal.'”
• “The plaintiffs in the Philadelphia Zantac mass tort had requested that Roberts step away from the litigation on the grounds that Roberts’ wife is a partner at the Am Law 50 firm Reed Smith, which represents Zantac manufacturer GlaxoSmithKline, in litigation over the drug. The plaintiffs contended that the connection between GSK and Roberts’ wife, Shannon McClure, could create the appearance of impropriety.”
• “Roberts criticized the plaintiffs’ arguments as too speculative, writing that the plaintiffs ‘presented plenty of hopeful supposition in the form of discordant dots that they could not connect.'”
• “Roberts noted that Reed Smith’s representation of GSK in Zantac litigation was all outside of Philadelphia and that the firm had placed an ethical wall for McClure regarding matters involving GSK. Roberts ruled that none of the facts asserted by the plaintiffs constituted a basis for recusal under the Code of Judicial Conduct.”
• “The plaintiffs did not allege that McClure, who works in Reed Smith’s global commercial disputes group, was directly involved in the Zantac litigation. However, they argued that McClure’s role at her firm meant she—and, by extension, her husband—had a financial stake in the litigation’s outcome.”
• “The defendants opposed the motion, countering that the judge’s purported connection to GSK was too tenuous to create the appearance of potential bias.”
• “Roberts agreed with the defense, and said in his opinion that the basis for the plaintiffs’ motion creates a ‘slippery slope.’ He questioned what other circumstances would warrant his recusal if he were to accept the plaintiffs’ argument.”
• “Without boundaries on what is and is not considered a conflict, he said, ‘It is easy to conceive that litigation-savvy attorneys could push for recusal under a myriad of tenuous circumstances.'”
• “According to the opinion, Roberts had told counsel about his wife’s role at Reed Smith in December 2023, but the plaintiffs waited until May 2024 to file their motion. While the delay in filing did not appear to afford the plaintiffs a strategic advantage, Roberts said, it was nonetheless an issue.”
• “In a footnote, he wrote, ‘A more cynical view of the circumstances is that plaintiffs’ counsel used the motion as a broadside against my oversight of the entire mass torts program.'”
• Read the full opinion: here.

“Latham Defends Steward Bankruptcy Effort Despite TRACO Concerns” —

• “Latham & Watkins LLP said the Justice Department’s bankruptcy watchdog has ‘no valid basis’ to oppose its retention in Steward Health Care System LLC’s bankruptcy.”
• “In a separate filing, one of the Latham attorneys who would represent Steward, Ray C. Schrock, disclosed that he and his colleague Candace M. Arthur can’t work with Steward on matters related to TRACO International Group, an insurer and non-bankrupt affiliate, because TRACO has refused to grant a requested waiver.”
• “The two attorneys recently joined Latham from Weil, which has been the private health network’s lead bankruptcy counsel since last spring. Steward’s retention application described them as ‘essential’ for its Chapter 11 bankruptcy.”
• “Schrock and Arthur were previously part of the Weil team that advised Steward and its subsidiaries, including Tailored Risk Assurance Company and TRACO, on the Chapter 11 cases. As of August 2024, the insurer is no longer a client of Weil and has retained Steptoe LLP as counsel. TRACO filed a complaint last year in bankruptcy court against Steward for allegedly withholding payments, including insurance premiums of $3.5 million per month.”
• “‘It apparently does not wish for Ms. Arthur and myself to represent the Debtors in matters against TRACO,’ Schrock wrote in the supplemental declaration.”
• “Despite TRACO’s refusal to grant the waiver, he said, he doesn’t believe the retention of Latham represents ‘any interest adverse’ to Steward’s estate or precludes the firm from being a disinterested party.”
• “Schrock said Weil would handle those matters. As a precaution, Latham established an ‘internal ethical wall’ to prevent attorneys and staff who previously worked on TRACO-related matters while at Weil, including Arthur and himself, from accessing TRACO-related files or participating in any matters specific to the insurer.”
• “The US Trustee opposed Latham’s retention last month, saying Steward ‘cannot afford the fees of another large multinational law firm,’ as Weil has already billed nearly $70 million in legal fees.”
• “Latham argued that the US Trustee overlooked that Schrock and Arthur logged 2,000 hours of Weil’s legal services during the bankruptcy, saying their continued involvement would benefit the company.”

“Law Firm Partner Suspended for Taking Clients on the Side” —

• “The New Jersey Supreme Court has imposed a two-year suspension on an attorney who represented clients on the side and kept the fees to himself while employed as a non-equity partner at a law firm.”
• “While William C. Kelly was employed at Tompkins, McGuire, Wachenfeld & Barry in Roseland, he handled seven client matters under the firm name, but sent invoices stating that payment should be made directly to him, rather than to the firm, the Disciplinary Review Board said. Kelly kept the proceeds from the seven cases, which totaled $11,415, for his personal use, the DRB said.”
• “But the Supreme Court suspended Kelly from practice for two years. The court found he violated RPC 1.15(a) and the principals of In re Siegel, knowingly misappropriating law firm funds; and RPC 8.4(c), engaging in conduct involving dishonesty, fraud, deceit or misrepresentation.”
• “Kelly attributed his engagement in outside work and misappropriation of funds to ‘financial insecurity and the collapse of’ his marriage and home life, ‘exacerbated by his alcoholism,’ according to the DRB.”
• “Kelly allegedly first issued his own invoice to a client in March 2013, then issued more between January 2018 and August 2019. Those invoices were not on firm letterhead but were emails sent to the clients indicating payment should be made to William C. Kelly, Esq.”
• “Kelly admitted to the DRB the impropriety of ‘providing outside legal services under the firm’s name, on matters for which he did not open files at the firm.’ The parties acknowledged, however, that he did not have a partnership or written employment agreement with the firm, and the firm did not have a written policy governing the provision of legal services under the firm’s name without the firm’s authorization, the DRB said. In addition, Kelly said he did not take money owed to a client or money from the firm’s trust account, according to the DRB. The parties also acknoweldged, in mitigation, Kelly’s alcoholism, cuminating in his 2021 hospitalization, and his continuing success in treatment, continuing sobriety, residence in a sober house, and regular attendance at Alcoholics Anonymous meetings, the DRB said. Kelly pointed out, however that he was not relying on an intoxication defense or any other psychiatric defense.'”

“Connell Foley Can’t Refute DQ Bid, NJ Investment Firm Says” —

• “A Black-owned investment firm suing New Jersey for discrimination in federal court said the court must disqualify Connell Foley LLP from representing the state because of a conflict of interest, even though the supposedly conflicted attorney has denied any ethical breach.”
• “Blueprint Capital Advisors LLC said in a brief filed Tuesday that its principal, Jacob Walthour, has provided specific details in multiple affidavits about the interactions he has had with the allegedly conflicted Connell Foley attorney, Elnardo Webster, documenting how Webster began effectively representing Blueprint before he joined Connell Foley.”
• “Walthour pointed to detailed claims that he has provided of a conversation he had with Webster in 2016, a follow-up email with proprietary and confidential company information, and an hours-long long in-person meeting between him and Webster later in 2016, among other things, as evidence to back his disqualification bid.”
• “In contrast, Webster has relied on arguing that he does not remember or only vaguely recalls the conversations Walthour has referred to, Blueprint argued, although that has not stopped him from denying that he offered any legal advice at those meetings.”
• “Webster ‘claims certainty that he did not receive any confidential information or provide any strategic or litigation advice during any of those meetings or discussions that he otherwise does not really recall,’ it said.”
• “The court now faces a ‘binary credibility determination,’ Blueprint wrote, saying it has proven more credible than Connell Foley and deserves to have its disqualification motion granted, or at least get an evidentiary hearing.”
• “‘On this record, this court must credit Mr. Walthour’s effectively unrebutted declarations corroborated by the testimony of others and contemporaneous evidence, and afford no weight to Mr. Webster’s incredible, conclusory, and admittedly speculative declaration,’ the company said.”
• “Blueprint sued New Jersey Attorney General Matthew Platkin, Gov. Phil Murphy’s former chief of staff George Helmy, and other state employees as well as the investment giant BlackRock in 2020.”
• “Blueprint urged the court to remove Connell Foley as the state defendants’ counsel in December, claiming that after Webster joined the firm in 2023, it unethically used the privileged information Walthour had given him to launch a separate action against Blueprint in state chancery court.”
• “Connell Foley fought that motion in January, saying that far from establishing an attorney-client relationship, Webster met Walthour socially no more than a handful of times before joining Connell Foley, and he never discussed the litigation between Blueprint and the state at those meetings.”

“Trump targets law firm connected to ex-special counsel Jack Smith with executive order” —

• “Donald Trump has signed an executive order suspending security clearances held by lawyers at a law firm connected to Jack Smith, the former special counsel who investigated the president.”
• “Trump signed the retaliatory executive order Tuesday in the Oval Office. It directs the attorney general and heads of other agencies to immediately suspend any active security clearances held by members, partners and employees of Covington & Burling who assisted Smith during his time as special counsel. It also directs the government to review all contracts with the law firm.”
• “‘This is a good one,’ Trump told reporters during a press conference before signing the order. ‘Deranged Jack Smith. We’re going to call it the deranged Jack Smith signing or bill.'”
• “After signing the order, Trump said he wanted to ‘savor’ the moment, then threw the marker he used to a person, suggesting they then send it to Smith.”
• “Smith had led two federal investigations into Trump: one concerning the alleged retention of classified documents from his first term, and the other over efforts to overturn the 2020 election.”
• “Despite a lack of evidence, Trump has long claimed that the cases against him were a weaponization of the Justice Department, something he has vowed to end under his administration and to hold those responsible to account.”
• “Asked Tuesday what he would say to those who claim he was targeting a law firm over its association with Smith, Trump said he was the one who was targeted. ‘I was targeted for four years — longer than that — so you don’t tell me about targeting,’ he said. ‘I was the target of corrupt politicians for four years and then four years after that. So don’t talk to me about targeting.'”

“Why [Corporate] Compliance & [Corporate] Legal Still Need to Break Up” —

• “The relationship between legal and compliance departments has always been complicated. Now, with fresh evidence that reporting structures significantly impact compliance officer effectiveness and well-being, law professor and compliance officer Joseph Burke explores why it’s time for organizations to finally embrace CCO independence.”
• ‘Ever since the issuance of the US Sentencing Guidelines in the mid-1980s, there has been debate in the legal and compliance communities about how the compliance department should be managed and more specifically, where it should report. Traditional legal leadership has most often preferred that compliance report to the general counsel, or elsewhere within the legal department, while compliance specialists have argued for a more independent structure with the compliance leader reporting directly to the CEO of the company, or failing that, the board of directors.”
• “Peter Driscoll, then the director of the OCIE, shared his perspective on this in a November 2020 speech at the National Investment Adviser/Investment Company Compliance Outreach 2020: ‘Empowerment, seniority and authority. These three words matter,’ Driscoll said. ‘We notice on exams when firms hire someone for the role to check the box but do not support or empower them. … We notice when a firm positions a CCO too low in the organization to make meaningful change and have a substantive impact, such as a mid-level officer or placed under the CFO function.'”
• “More specifically, Driscoll emphasized that ‘[I]n terms of authority, I am often asked who the CCO should report to in an organization. Is it to the CEO, the COO, the general counsel or directly to a board if one exists? There is no easy answer to this. It depends on the size of the organization, the leadership structure, the experience of the CCO and the compliance culture. … I do believe that, at a minimum, a CCO should have a direct line of reporting to senior management, if not be part of senior management.'”
• “According to 2024 research by recruiting firm BarkerGilmore, 53% of public company CCOs reported to the GC/managing counsel and 30% reported to the CEO, with the remaining 7% reporting elsewhere, including 1% to the board. In private companies, there was a more even split, with 43% reporting to the GC, 43% to the CEO.”
• “In a December 2010 essay titled ‘Don’t Divorce the GC and Compliance Officer,’ Heineman presented a vision of a strong, broad-ranging GC who could manage both the legal and compliance functions without creating organizational overlap. In his view, compliance was really only a process management function and not a matter that required judgment or reasoning. His model required a strong GC who operated as a virtual ‘statesman’ for the company, relying on years of experience and a deep and trusted relationship with the CEO to provide all compliance advice, when required, to the board and the CEO with an air of gravitas and a statesman’s influence. This model may have described his own personal experience at GE, but outside a small handful of very large companies, the model simply did not (and does not today) reflect the practical reality of general counsel leaders.”
• “As Boehme and others have pointed out, the role of the CCO is not a purely legal role. The CCO is charged with building and developing non-legal compliance tools and programs, such as the anti-corruption program, the trade compliance program and the anti-money laundering program, all of which rely on business controls, auditing, periodic and regular training and periodic risk assessment. The CCO must develop tracking tools to report on compliance risk and trends, internal company audit trends and results and internal compliance with company controls. CCOs must also focus on building relationships with the regulators who are most important to the success of the business. Traditionally, legal departments do not build the compliance tools, processes and relationships that have today become commonplace elements of an effective compliance program but rather provide the legal analysis and advice germane to the legal function generally.”

“Developer seeks to end suit as city’s law firm leaves case” —

• “Developer Dominic Marchionda and two of his companies named in Youngstown’s $834,608 civil lawsuit against them asked the judge to dismiss the case while ex-city Finance Director David Bozanich, the other defendant, called the claims ‘frivolous and time-barred.'”
• “Meanwhile, the city’s legal counsel didn’t oppose a request from the attorney for Marchionda and his two companies to withdraw from the case because of an alleged conflict of interest and asked for the city to have more time to file motions while it looks for new representation.”
• “The city’s lawsuit contends Bozanich, Marchionda, U.S. Campus Suites LLC and Erie Terminal Place LLC participated in a ‘calculated scheme’ to defraud Youngstown of $834,608.”
• “Attorneys for Marchionda and his two companies as well as for Bozanich responded that the lawsuit should be dismissed because it’s past the statute of limitations and barred by a previous plea bargain agreement, among other issues.”
• “Rossi filed a Jan. 2 motion asking McKay to disqualify attorneys with the Roetzel & Andress law firm, which were representing the city in this lawsuit. Roetzel & Andress acquired the law firm of Brouse McDonald with two partners from the latter firm — Timothy Reardon and Ed Smith — employed in 2022 as Marchionda’s personal attorneys and corporate attorneys for the two companies.”
• “The attorneys, Rossi wrote in that motion, obtained confidential information regarding the finances of Marchionda and the companies.”
• “In a Tuesday filing, Benjamin Chojnacki of Roetzel & Andress didn’t oppose the motion and the law firm is helping the city to hire other attorneys in its place.”
• “‘Given the complicated nature of this case, substitute counsel will need time to be engaged, familiarize him / herself with the case, and file the requisite pleadings, motions and brief in response to defendants’ pending counterclaim and motion for summary judgment. These activities take time,’ Chojnacki wrote.”
• “Chojnacki asked McKay to give the city a second extension until March 31 to respond to the counterclaim and until April 28 to respond to the summary judgment request.”

“No Conflict In Judge’s Friendship, John Deere, Farmers Say” —

• “John Deere and the farmers suing it in a right-to-repair suit said they have no concerns about the potential conflict of interest an Illinois federal judge flagged, saying there was ‘no reason’ for the jurist to recuse himself, according to a joint letter filed by the parties.”
• “Both sides thanked U.S. District Judge Iain D. Johnston for telling them that he is friends with a person mentioned in ‘allegedly privileged documents’ submitted to the court, but, ultimately, neither the plaintiffs nor John Deere thought this was serious enough to necessitate bringing in a new judge, according to the joint notice.”
• “‘The parties have conferred regarding the potential conflict and agree that Your Honor’s relationship with [the individual named in court documents] does not present a conflict in this case,’ the letter said. ‘To that end, the parties agree that there is no reason for the court to make any changes to the court’s role in this litigation.'”
• “Judge Johnston, who is overseeing a proposed right-to-repair class action against John Deere, informed the parties in a letter issued Jan. 13 that he recognized the name of an individual, Thomas P. Walters, identified in the company’s filings. “
• “‘To quote Buddy the Elf, I know him,’ Judge Johnston said.”
• “While he said he had ‘no idea what, if any, role Tommy plays in this litigation,’ Judge Johnston said that he and Walters were ‘extremely close’ friends and teammates during their college days. While the judge, based in the Northern District of Illinois, knocked Walters for being a fan of the St. Louis Cardinals, he said that he still likes ‘Tommy a lot,’ and that they remain close, the letter said.”
• “Judge Johnston has had the case since 2022, when the Joint Panel on Multidistrict Litigation transferred six consolidated complaints to his court.”
• “Plaintiff farmers say John Deere, the Illinois-based agricultural equipment manufacturer, has monopolized the repair market for its equipment by forcing consumers to use Deere’s authorized dealership mechanics for many repairs. According to the farmers, the bulk of the repairs could easily be completed with tools and software to which the company has withheld access.”
• “In 2023, Judge Johnston denied John Deere’s motion for judgment on the pleadings, holding that the plaintiffs had enough evidence of the company’s market power.”

David Kluft, Assistant Bar Counsel at Massachusetts Office of Bar Counsel, notes this recent Ohio opinion: “Tidbit: Must a judge recuse herself from a case in which her opponent for elected judicial office is representing a party?” —

• “Not in Ohio. The OH Board of Professional Conduct opines that, when a judge’s political opponent appears before the judge, recusal is not necessary unless the judge’s impartiality could reasonably be questioned. When can impartiality reasonably be questioned?”
• “The opinion doesn’t go into much more detail except to suggest the judge ‘search her feelings’ for the right answer. [Editor’s Note: this opinion seems pretty on the edge to me – Ohio tends to presume a lack of partiality where other states may presume partiality or at least the appearance of bias in the same circumstances].”
• Read the opinion: here.

“Federal Judge’s Recusal Sought in Transgender Sports Case” —

• “A Colorado federal judge is being asked to recuse himself from a case regarding a collegiate athletic conference’s policy for transgender athletes over procedures that he adopted for the use of preferred pronouns in his courtroom.”
• “US District Judge Kato Crews adopted practice standards in December that say attorneys are ‘invited and encouraged to identify the applicable pronouns of counsel, litigants, and witnesses at the earliest juncture possible.'”
• “Outlined in the ‘Uniform Civil Practice Standards,’ if someone uses the wrong pronoun, lawyers are encouraged to ‘bring that to the Court’s attention at the time, or through a subsequent email to Chambers.'”
• “Lawyers leading the challenge against the Mountain West Conference’s transgender participation policy argue that the civil practice standards restrict the speech of plaintiffs and their lawyers, and also demonstrates potential bias on the topics at issue in the case.”
• “‘An impartial forum cannot exist where the Court has so forcefully signaled the Courts’ personal views on sex and gender identity that the Court is willing to use its contempt power to enforce those views,’ the lawyers say in the motion.”
• “Crews, an appointee of President Joe Biden who began service in 2024, is one of six judges on the Denver-based federal trial court who’ve adopted similar practice standards. The motion calls for Crews to both step back from the case and for the standards to be scrapped.”

“NAFTA Case Useful In Bid To DQ Quinn Emanuel, Judge Says” —

• “A Florida federal judge has ruled that a Mexican oil company can use information on dismissed NAFTA arbitration and other documents in a bid to disqualify former counsel Quinn Emanuel, saying the evidence is relevant to underlying litigation over alleged funds transfers.”
• “In an order filed Thursday in the Southern District of Florida, U.S. Magistrate Judge Enjoliqué Lett granted a motion allowing Oro Negro Drilling Pte. Ltd. and various Singapore-based subsidiaries to supplement the record with three pieces of evidence. The companies are seeking to disqualify Quinn Emanuel Urquhart & Sullivan LLP from representing itself as they try to get the firm to hand over information in Mexican proceedings over the alleged improper diversion of at least $27 million.”
• “Judge Lett allowed Oro Negro to supplement the record with documents relating to a New York state court disqualification order, bank statements and a final award in North American Free Trade Agreement arbitration. The oil company brought a Section 1782 application in Florida federal court in May seeking discovery to use in separate but related bankruptcy and criminal cases in Mexico.”
• “Oro Negro’s Section 1782 application stems from 2021, when Quinn Emanuel represented the oil company in New York federal bankruptcy court. The law firm brought an adversary proceeding on behalf of Oro Negro and its subsidiaries, alleging unjust enrichment by the bondholders of one of the oil company’s projects.”
• “The application is an effort by Oro Negro to gather evidence of an alleged improper diversion of at least $27 million that should have remained in its accounts or in a bankruptcy estate in Mexico to benefit creditors. Gonzalo Gil White, the former CEO of Oro Negro’s parent company, is accused of improperly placing it into bankruptcy and also paying Quinn Emanuel $8.4 million to fund litigation against the bondholders.”
• “In December, Oro Negro filed a motion seeking permission to introduce the three categories of documents, arguing that Quinn Emanuel faces a conflict of interest in the Florida case.”
• “In a July 2024 motion to expedite discovery and disqualify Quinn Emanuel brought by Oro Negro, the company argued that the law firm is the sole possessor of records relating to its prior representation following a change in leadership at the oil drilling company.”
• “Quinn Emanuel responded to Oro Negro’s December motion in January, saying the records that the oil company wanted to introduce are irrelevant, duplicative and unrelated.”
• “The firm argued that a New York state court disqualification order due to its client relationship with a financial adviser to Oro Negro’s bondholders is irrelevant because the oil company wasn’t a party to that action. The bank statements showing an alleged $19 million improper transfer from a Mexican bank account are duplicative because Oro Negro already submitted them with its 1782 application, according to Quinn Emanuel. The firm also said a 134-page decision in the NAFTA arbitration decision is unrelated because the decision was based on jurisdictional grounds that have nothing to do with the application.”
• “But Judge Lett rejected Quinn Emanuel’s arguments, saying in her order that ‘a complete and comprehensive record should be before the court.'”
• “Judge Lett said the New York disqualification order ‘evinces a similar conflict of interest issue’ at the heart of Oro Negro’s request to take expedited discovery and its own disqualification motion, while the bank statements ‘provide evidence of petitioners’ contention’ that Quinn Emanuel improperly received $19 million and that the NAFTA arbitration dismissal decision ‘support[s] petitioners’ averments’ that the alleged improperly transferred money funded meritless litigation.”

“Hamilton lawmaker files suit against ‘Big Tobacco’ for flouting law” —

• “A Montana lawmaker who is also a vape store owner has filed a lawsuit in federal court against large tobacco companies for what he believes are illegal lobbying activities that violate a settlement agreement while forcing their vaping products onto shelves.”
• “Rep. Ron Marshall, R-Hamilton, in a lawsuit filed Wednesday, said that big tobacco lobbyists from some of the largest American companies like Altria Group and R.J. Reynolds Tobacco Company, are working against laws that would restrict vaping products for youth, while simultaneously using a Food and Drug Administration process to make only their products available to vape shop retailers.”
• “The lawsuit also accuses Montana Attorney General Austin Knudsen of failing to enforce Montana laws against the same tobacco companies because of donations those companies made to him during the 2024 election cycle and after. Marshall is suing under the ‘private attorney general doctrine,’ which, if the lawsuit is successful, allow him to collect attorney fees for the lawsuit.”
• “Marshall’s lawsuit says that, as part of the 1998 Tobacco Master Settlement Agreement in which Montana participated, the tobacco companies being sued are prohibited from certain lobbying and marketing activities, especially those which target youth.”
• “Marshall claims that lobbyist Mark Baker, acting on behalf of Altria and NJOY, as well as Edward Redding, lobbying for Reynolds and Reynolds Vapor, have lobbied members of the Legislature against his bill, which survived committee on a 11-9 vote along party lines, only to see it stall on the floor of the Montana House of Representatives. The bill has been on the floor since Jan. 28.”
• “Marshall said in his lawsuit that two ‘big tobacco’ lobbyists are instead trying to stall his legislation while advocating for an FDA registry law in Montana that would make it so that only vaping products endorsed by the Food and Drug Administration could be sold in Montana.”
• “‘Knudsen has an inextricable conflict of interest by virtue of the fact that both Altria and Reynolds were ‘platinum’ sponsors of his Jan. 11, 2025 inauguration party,’ the lawsuit stated. ‘Further, Attorney General Knudsen provided a Jan. 28, 2025 op-ed in the Montana Newsroom media publication, similar to those authored by other state attorneys general after lobbying from Altria and Reynolds, which evidences an abdication of his duties to enforce the portions of the Master Settlement Agreement.'”

“Willkie Removal in Bankruptcy Case Is Lesson in Ethics’ Limits” —

• “Willkie Farr & Gallagher LLP’s disqualification as bankruptcy counsel for brand manager Franchise Group Inc. is a lesson for Big Law firms that ethical walls and conflicts counsel won’t always solve larger issues over impartiality.”
• “The ruling from Judge Laurie Selber Silverstein of the US Bankruptcy Court for the District of Delaware severing a large company from its preferred Chapter 11 counsel is rare, but it signals to other law firms that building in ethical walls much earlier is key to keeping their lucrative debtor counsel positions.”
• “Willkie’s prior work with Franchise Group’s ex-CEO Brian Kahn and investment adviser B. Riley Financial Inc. on various matters that have become central to the bankruptcy raised conflict concerns that ultimately doomed its role in the case. The heart of the bankruptcy surrounds claims related to a soured 2023 take-private transaction involving all three parties.”
• “Silverstein’s ruling shows that ethical walls are fine if they’re put in place before there’s a problem, said Nancy Rapoport, a University of Nevada, Las Vegas law professor. But not afterward.”
• “‘Law firms have to think proactively every time they take on a new matter whether there is a risk that representing one client will cause the firm to want to pull its punches on behalf of a different client,’ Rapoport said.”
• “Franchise Group, which operates companies like Pet Supplies Plus, Vitamin Shoppe, and Buddy’s Home Furnishings, filed for bankruptcy in November 2024. It siloed four separate groups of Willkie attorneys from one another as they handled interactions involving the company, Kahn, and B. Riley, but there were staffing overlaps, Silverstein noted.”
• “‘What I hope is that this case sends up a flare that warns large law firms that ethical walls need to be put up sooner rather than later,’ London said.”
• “The Justice Department’s bankruptcy watchdog and a lender group argued that Willkie’s prior work for Kahn and B. Riley rendered the firm too conflicted to represent the company in bankruptcy. Kahn led Franchise Group in the controversial take-private deal worth about $2.6 billion that also involved B. Riley, which acquired a stake of about 31%.”
• “Wood pellet maker Enviva Inc. faced a similar conflict situation last year. Vinson & Elkins LLP was prevented from becoming bankruptcy counsel by a judge in the US Bankruptcy Court for the Eastern District of Virginia despite saying it had built ethical walls for its attorneys.”
• “The ruling also highlights that even with conflicts counsel in place, big issues like negotiating a bankruptcy plan is a core function of main counsel, Rapoport said. Conflicts counsel—lawyers brought in to handle smaller matters that lead counsel is conflicted out of—is intended to deal with a need for the ‘person-power’ of Big Law in major bankruptcies, she said.”
• “Large law firms represent so many clients that it’s impossible to find one that doesn’t have any conflicts, she said.”
• “‘What I’ve been seeing, starting with really broad advance conflicts waivers and continuing in cases like this one, is a Big Law philosophy that ethics rules can be finessed by client agreement alone,’ Rapoport said. ‘I’m seeing a trend toward pretending that conflicts aren’t a ‘thing’ for lawyers to worry about any more, and that troubles me.'”
• “Lawyers are subject to both the statutory rules in the bankruptcy code, the ethical rules governing lawyer conduct from the American Bar Association, and Delaware’s rules of professional conduct, she said.”
• “‘Interpreting these rules is like unpacking a colorful set of Russian nesting dolls, only to find that the center isn’t there,’ London said. ‘It’s empty.'”

“Proskauer Fights Another DQ Bid In NJ Hospital Antitrust Suit” —

• “A New Jersey federal magistrate judge was right to allow Proskauer Rose LLP to continue as counsel for RWJBarnabas Health Inc. since the firm’s prior advice to CarePoint Health on its use of COVID-19 relief funds is unrelated to the antitrust lawsuit currently playing out between the two companies, according to the firm.”
• “Proskauer Rose’s 2020 advice to CarePoint regarded only CarePoint’s use of Coronavirus Aid, Relief, and Economic Security Act funds. But the current dispute between CarePoint and RWJBarnabas has nothing to do with the CARES Act, the firm told a New Jersey federal court Tuesday.”
• “CarePoint also waived any conflict, first when it retained Proskauer Rose to advise it on its use of CARES Act funds and then again when it gave its consent to the firm’s representation of RWJBarnabas at the beginning of the antitrust litigation. Its two-year delay in raising the issue since also waives the conflict, according to the firm.”
• “So U.S. Magistrate Judge Cathy L. Waldor was right when she denied CarePoint’s effort to disqualify the firm and her ruling should stand, Proskauer Rose said in a brief in opposition to CarePoint’s appeal of Judge Waldor’s ruling.”
• “‘[N]ot only did CarePoint waive the conflict at the outset, this case has nothing to do with the CARES Act. Judge Waldor got it right. CarePoint’s motion is a litigation tactic, pure and simple,’ Proskauer Rose said.”
• “CarePoint sought to disqualify Proskauer Rose as counsel to RWJBarnabas in August, saying the firm’s prior representation of CarePoint related to CARES Act funds necessitates the firm’s ouster from the case.”
• “During the course of the antitrust litigation, more information has been revealed demonstrating further levels of involvement on the part of Proskauer Rose in CarePoint’s finances than the company was previously aware of, CarePoint argued in calling for the firm’s disqualification.”
• “And RWJBarnabas’ defense strategy of arguing that CarePoint’s financial difficulties stem from its founders’ extraction of cash from their hospitals rather than Barnabas’ alleged anticompetitive conduct has increased the relevance of the firm’s prior representation, according to CarePoint.”
• “Judge Waldor rejected those concerns and refused to disqualify the firm in December, when she said the present case wasn’t substantially related to work the law firm previously did for CarePoint.”
• “CarePoint has said the magistrate judge erred and asked the court to hear its disqualification motion de novo. But that’s the wrong standard, according to Proskauer Rose, which said that findings of fact and mixed questions of fact and law can only be reviewed for clear error.”
  “And disqualification decisions can only be reversed over an abuse of discretion, the firm added.”
• “CarePoint also argued in its appeal of Judge Waldor’s ruling that the magistrate judge used the ‘wrong standard’ in reaching her decision. The judge should have used New Jersey Supreme Court jurisprudence that found a waiver of conflict is appropriate only in ‘extraordinary circumstances,’ according to CarePoint.”
• “But Judge Waldor isn’t bound by those state Supreme Court cases, Proskauer Rose countered Tuesday. And even if extraordinary circumstances were required in order to find that CarePoint waived the conflict, Judge Waldor found that CarePoint’s two-year delay in raising the issue qualifies as extraordinary, the firm pointed out.”

And the latest from Bill Freivogel:

• In re Elna Medical Group Inc., 2025 QCCS 370 (CanLII) (Que. Super. Ct. Feb. 12, 2025).
  • This is a proceeding under the Canadian federal Companies’ Creditors Arrangement Act (“CCAA”). Elna is the primary debtor. The court has raised the issue of Law Firm’s representation of the monitor (“Monitor”) while representing other parties interested in the proceeding, including bidders in the Sale and Investment Solicitation Process (“SISP”).
  • Monitor has described various steps Law Firm has taken to guard the loyalty and confidentiality of various, some adverse, parties. However, the court expressed concern Law Firm is advising Monitor on the efficacy of these steps. The court requested Monitor to obtain from a law firm other than Law Firm to ensure Law Firm’s measures do not “compromise the integrity of the SISP and the judicial system.”
• Perry v. Monaco, 2025 WL 460804 (S.D.N.Y. Feb. 10, 2025).
  • In denying class certification, the court held a lawyer could not be both class representative and class counsel, citing Second Circuit authorities.
• Sniper Pressure Servs. Ltd v. Northbridge Gen. Ins. Co., 2025 ABKB 77 (CanLII) (Ct. K.B. Alb. Feb. 11, 2025).
  • Insured’s roof collapsed. InsCo paid Insured for the loss and has commenced a subrogation action against the tortfeasors. Insured brought this action against InsCo for additional amounts Insured says InsCo owes Insured.
  • The problem is Lawyer is representing InsCo in this case and is acting on InsCo’s behalf in the subrogation case. Insured claims Lawyer is acting as Insured’s lawyer in the subrogation case. Thus, Lawyer “represents” Insured in the subrogation case and opposes Insured in this case. In this very brief opinion the applications judge said the law was not “black and white.” Given the “circumstances” of these representations, the judge denied Insured’s application to remove Lawyer from this case.
• Brown v. Sprague, 2025 ABCA 41 (CanLII) (Ct. App. Alb. Feb. 7, 2025).
  • “[31] A lawyer who does business with a client has onerous fiduciary duties.” Lawyer, while in a law firm, represented a business client. At some point, the client entered into an agreement for Lawyer to become in-house general counsel of the client. That did not work out, and Lawyer brought this action against the client for breach of contract. The trial court dismissed the action. In this opinion the appellate court affirmed.
  • From our point of view, the concurring opinion is significant in two respects. First, it is a review of the ethics implications of lawyers doing business with clients across Canada and across other common law jurisdictions, including the U.S. (particularly application of Rule 1.8(a) of the ABA Model Rules). Second, the concurring opinion lays out a number of hypotheticals (which the majority did not endorse) illustrating what sorts of transactions might, or might not, implicate the fiduciary duties of lawyers. Common principles across common law jurisdictions is the transaction must be fair and reasonable to the client, and the client must be given an opportunity to get advice from another lawyer.