Bressler Risk Blog

“Panel finds no conflict of interest in divorce, probate matters” —

• “An attorney need not withdraw from representing a client in a divorce proceeding despite opposing counsel serving as the probate judge overseeing an unrelated matter in which the attorney represents a different client, the Rhode Island Supreme Court Ethics Advisory Panel has ruled.”
• “The attorney inquired into whether withdrawal from representing the client in the divorce proceeding was required under the Rules of Professional Conduct.”
• “‘The inquiring attorney represents a client (‘Client 1’) in a divorce proceeding. The lawyer for the opposing party in the divorce proceeding is also a probate judge before whom the inquiring attorney represents a different client (‘Client 2’) as an heir against a surviving spouse in an unrelated contested matter,’ the panel noted.”
• “‘The Panel finds that under the facts as described by the inquiring attorney, no conflict of interest exists here. The interests of Client 1 and Client 2 are not directly adverse because they are unrelated parties involved in unrelated matters — one a divorce proceeding, the other a contested probate matter,’ the panel wrote.”
• “‘Additionally, neither representation is materially limited by the inquiring attorney’s responsibilities to either Client 1 and Client 2 or any other party. … Therefore, the inquiring attorney is under no obligation to withdraw from representing either Client 1 or Client 2,’ the panel added.”
• “The two-page decision, Rhode Island Supreme Court Ethics Advisory Panel Op. 2024-11, can be found by clicking here.”

“As Global Law Firm Mergers Keep Coming, Could There Ever Be a New Swiss Verein?” —

• “The Swiss verein model for law firm combinations has benefited a handful of global firms looking to sustain growth and increase size and scale, but the fact that only a small number of firms have combined using the verein structure has experts wondering whether it is still a viable business strategy.”
• “Large firms such as Dentons, DLA Piper and Baker McKenzie embraced the verein approach in the early part of the 21st century, using the model to place them in the upper echelons of the Am Law 100. Other recent trans-Atlantic mergers, however, including the combination between Allen & Overy and Shearman & Sterling that created A&O Shearman, and the merger between Herbert Smith Freehills and Kramer Levin Naftalis & Frankel to become HSF Kramer, have avoided the Swiss verein route, leading to questions over whether the model is losing luster.”
• “‘The verein model for law firm combinations is still a prominent business model for many international law firms, but its popularity and effectiveness have come under scrutiny in recent years,’ said Zain Atassi, a principal with recruiting firm Lateral Link. ‘Whether it remains a favored model depends on the perspective of the firm, its clients, and the specific markets in which it operates.'”
• “One of the draws to operating as a verein is the ability for large firms to expand internationally while still respecting local regulations. Another is liability protection, since firms under the verein model are considered to be separate legal entities. And yet another benefit is M&A flexibility, since the structure makes it easier to bring in new firms or dissolve relationships without having to restructure the entire organization, Atassi said.”
• “But some experts say it’s not all upside when it comes to vereins, which is reflected by the fact that only a small number of global firms today are actually structured as Swiss vereins.”
• “‘One of the biggest criticisms of the verein model is that it can create a fragmented culture, coupled with leadership and governnance issues,’ said Atassi, of Lateral Link. ‘Because member firms operate independently, there can be challenges when it comes to aligning strategies, managing conflicts, or implementing firm-wide initiatives.'”
• “Clients can also develop the perception that firms under the verein model are ‘fragmented rather than fully integrated,’ which can pose an issue for firms, Atassi said.”
• “Critics of vereins note that the impression that firms who merge this way are looked at as one, single global law firm is illusionary, and also that vereins open up the door to greater risks of conflict of interest for attorneys associated with verein firms.”
• “One example of verein conflicting interests involved global firm Dentons, which had been representing a company in an international investigation for patent infringement brought by a U.S. clothing retailer, which sought to have Dentons disqualified from the case because the retailer was also a client of Dentons, according to a 2017 paper written by then-law student Gabriela Chambi of American University, Washington College of Law, who now works as a senior associate with Hudson Cook.”
• “The verein structure serves the purpose of globalization and limited risk, but ‘you’re not going to be a proper, true firm in the sense that a partnership typically is,’ Mclaren said. ‘The question for the verein is, is there clear direction globally and what (are they) trying to achieve? Are all the partners in their organizations aligned and are they committed in the same way?'”
• “Also, ‘bigger from a global perspective isn’t always better,’ said one recruiter who has experience working with Big Law firms who spoke anonymously because of potential client conflict.”
• “Furthermore, partners looking to move to another firm will not necessarily consider whether a firm is structured as a verein as a determining factor when deciding to make a lateral leap, one industry expert said.”
• “‘All they really want to know is, ‘How is this going to affect me personally, and will it affect the amount of money that I make,” said Jeffrey Lowe, a legal recruiter with CenterPeak. ‘They’re really looking more at the quality of the firm, so they’re much more focused on the perception of the firm’s profitability and prestige rather than the structure that they have.'”

“Law firm Keller Postman moves to oust Tubi lawyers in epic mass arbitration showdown” —

• “Keller Postman filed a motion to disqualify and sanction Tubi’s lawyers at Jenner & Block, asserting that Jenner breached California ethics rules by engaging an ex-FBI agent to interview nearly two dozen Keller clients who had dropped their demands for arbitration against Tubi.”
• “Jenner knew the former claimants had been represented by Keller Postman, Keller argued, but nonetheless sent an investigator to interview them outside of the presence (or even awareness) of Keller Postman lawyers.”
• “Moreover, according to Keller Postman, Jenner’s investigator used harassing, deceptive and intimidating tactics — such as implying that she worked for Keller Postman and refusing to leave someone’s home without a signed declaration — to squeeze privileged and confidential information out of the former claimants.”
• “‘This misleading and oppressive conduct would have violated ethical rules even if the clients were no longer represented by Keller Postman,’ the firm wrote in its motion to disqualify Jenner. ‘It is doubly improper because the clients are still represented.'”
• “In an email statement on Wednesday, Jenner & Block denied any impropriety, describing its investigation as ‘ethical, necessary and warranted.’ The firm previously said in a court filing that it took care to respect ethics rules prohibiting communications with represented parties when it tracked down people who had withdrawn arbitration demands against Tubi. Its investigator, Jenner said in the filing, first asked the erstwhile arbitration claimants whether they were still represented by Keller Postman and only proceeded if they said they were not.”
• “The context for this latest fusillade of accusations is Tubi’s request to file an amended complaint against Keller Postman in its lawsuit before U.S. District Judge Ana Reyes in Washington, D.C.”
• “Tubi’s original complaint alleged that Keller Postman put its own interests ahead of its clients’ when it advised clients to file arbitration demands without engaging in a contractually mandated informal dispute resolution process.”
• “The company also claimed that Keller Postman did a woefully inadequate job of vetting its clients, asserting that about 40% of the alleged subscribers demanding arbitration did not have an email in Tubi’s database or had not watched content from the streamer in the relevant time frame.”
• “That particular statistic came into question after some of Keller Postman’s clients sought to intervene in an Illinois state-court class action over Tubi’s alleged violations of video privacy laws. I’ll spare you the details of that dispute, but what you need to know is that Tubi acknowledged an additional database of customer emails that turned out to include purportedly missing information about some of Keller’s clients.”
• “Tubi and Keller Postman have dramatically different views of the significance of the second database. Tubi insists that it doesn’t much matter because thousands of Keller Postman clients still cannot show that they signed up for Tubi accounts or watched Tubi content. Keller, meanwhile, contends that the revelation shows Tubi’s accusations against the mass arbitration firm were baseless, making the Fox subsidiary desperate to distract attention away from its overblown assertions.”
• “Tubi also disclosed, for the first time, that it had engaged an investigator to interview claimants who had dropped arbitration demands. The company said its investigator’s findings were alarming.”
• “Of the 21 former claimants located by its investigator, Tubi said, only three indicated that they were still represented by Keller Postman. Nine of the remaining 19 said they were not familiar with the firm. Three others said they knew of the firm but did not think Keller had represented them in claims against Tubi. Three others said they hadn’t filed arbitration demands or didn’t know demands had been filed in their names.”
• “Not one of the former claimants, according to Tubi, was aware of the streamer’s informal dispute resolution requirement. That fact, Tubi said in its proposed amended complaint, is strong support for its contention that Keller Postman failed to obtain informed consent from its clients when it skipped that process and filed arbitration demands.”

“Attorneys – Letterhead – Client’s delinquent customers” —

• “Where a lawyer has asked whether a client can use the lawyer’s letterhead to send form letters to the client’s customers who have delinquent invoices, that would be a false and misleading communication in violation of Rule 7.1 of the Massachusetts Rules of Professional Conduct.”
• “‘It is not permissible for a lawyer to allow a client to send form letters on the lawyer’s letterhead to customers who have delinquent invoices. Similarly, it is not permissible for a lawyer to send letters to the client’s delinquent customers without performing a conflicts check and other due diligence customary when opening a new matter…”
• “‘It would of course be permissible for a lawyer to send out letters to a client’s delinquent customers, provided that before sending those letters the lawyer follows the procedures typically used when opening new client matters. First, for each of the client’s customers who is to receive a letter, a conflicts check must be done to confirm that the client’s customer is not a current client of the firm, … and is not a former client of the firm in the same or a substantially related matter…”
• “‘Second, the lawyer’s duty of competence requires the lawyer to make at least a preliminary inquiry into the legal and factual basis of the claims asserted by the client against the customer…”
• “‘Third, if the customer is not represented by counsel, the lawyer’s letter must make the lawyer’s role in the matter clear and avoid giving the customer legal advice… In addition, depending on whether the client’s customers are ‘consumers’ as defined under the Fair Debt Collection Practices Act, 15 U.S.C. §§1692-1692o (‘Act’), compliance with the Act may be required. …”
• “‘Finally, to avoid a possible violation of Mass. R. Prof. C. 4.2, it would be prudent for the lawyer to ask the client whether the customer receiving the letter is represented by counsel… Knowledge of the fact of the representation may be inferred from the circumstances.”
  Full text of the opinion here.

“C.A. Affirms Denial of Disqualification of Century City Firm” —

• “Opinion Says No Conflict in Representing Both Supervisory, Non-Supervisory Employees in Wage Class Action Despite Tension With Supervisors Over Challenged Policies, Reporting of Attorney to State Bar”
• “Div. Three of the First District Court of Appeal has held yesterday that there is no conflict of interest for a law firm to concurrently represent both supervisory and non-supervisory class members in a wage-and-hour class action despite tension between some attorneys and supervisors.”
• “That tension was spawned by intense deposition questioning of supervisors over the challenged practices and the reporting by a supervisor of one of the firm’s lawyers to the State Bar.”
• “For disqualification, the court said, the ‘salient question’ is whether the concurrently represented clients have directly adverse interests and not whether some have differing opinions about counsel’s legal strategies, theories, and competence. Surviving the disqualification motion was the Century City firm of Capstone Law APC.”
• “In November 2022, Alameda Superior Court Judge Michael M. Markman granted Mendoza’s motion to certify a class of all nonexempt, hourly employees of the silicon parts manufacturer for the four years leading up to the filing of the complaint. Markman also certified six subclasses, including one relating to meal periods.”
• “At issue for the meal-period subclass was a written policy requiring that employees take their first break within six hours of their start time, which was inconsistent with well-established law mandating meal breaks within the first five hours.”
• “Markman rejected WCQ’s contention during the class certification hearings that there was a conflict in having the same lawyers represent the nonexempt supervisors as they ‘created and enforced break schedules,’ finding that there was no evidence that they played any role in setting policy.”
• “In April 2024, WCQ moved to disqualify Capstone, providing evidence that certain supervisory class members were opposed to the lawsuit and that Capstone attorney Daniel Jonathan had ‘viciously’ cross-examined them. The supporting evidence included a handwritten letter by supervisory employee Virgilio Presa opining that ‘[t]he case is a lie’ and expressing concerns about how the deposition had been handled.”
• “Markman denied the motion, saying that even if certain class members contradicted Mendoza’s allegations, ‘this conflict in evidence does not give rise to a disqualifying conflict between class members and class counsel,’ as certification was based upon written policies and statistical evidence. The judge also ruled that WCG lacked standing and expressed concern that the motion was being ‘used to gain tactical advantage.'”
  “Acting Presiding Justice Carin T. Fujisaki wrote the unpublished opinion, filed Tuesday, affirming the denial. Justice Victor Rodríguez and Justice Gordon B. Burns of Div. Five, sitting by assignment, joined in the opinion. Fujisaki noted that ‘[t]he challenge here is to representation by counsel that is concurrent, as opposed to successive’ and said that the primary duty implicated is one of loyalty. She further pointed out that courts must be skeptical of disqualification motions brought by opposing parties.”
• “‘That the class consists of nonexempt employees at different levels of authority does not, by itself, signal that Capstone’s loyalty is divided. In this regard, we observe federal courts have held that class counsel is not impermissibly conflicted due to the mere fact that ‘the class cuts across levels of authority in a company, with some class members supervising other class members.’….Like the federal courts, we decline to recognize a per se rule against including employees at different levels of an employment hierarchy in the same class.'”
• Read the decision: Mendoza v. West Coast Quartz Corporation, A170409

“Decision of the Day: Firm, Founding Partner Disqualified From Probate Case Amid Investigation on Undue Influence Claim” —

• “In a probate proceeding, Richard Feigen’s children allege that his will offered for probate, which was prepared by Zabel and Schulte Roth & Zabel, was the product of undue influence and fraud by Mr. Feigen’s third wife.”
• “Discovery produced by Feigen’s surviving spouse showed that while Feigen was alive, the firm was in direct communication with his third wife, who the firm did not represent at the time, about decedent’s estate plan. It was also revealed that, before decedent died, firm name partner William Zabel made additions and deletions to a physician’s letter concerning decedent’s mental capacity, anticipating that such a letter would be used by decedent’s spouse in a future probate contest.”
• “Westchester County Surrogate Brandon Sall disqualified Zabel as counsel for the executors, finding his testimony will be necessary on the issue of undue influence and likely prejudicial to his own clients. Sall also found that the entire law firm of Schulte Roth should be disqualified by imputation, effective at the time of trial.”

“Challenger in VLSI-Intel Patent Dispute Ordered to ID its Owners” —

• “VLSI Technology LLC is closer to identifying who filed an administrative challenge to a patent that Intel Corp. was found to have infringed by a Texas jury almost four years ago.”
• “A federal judge on Thursday ordered Patent Quality Assurance LLC to comply with heightened disclosure rules in the US District Court for the Eastern District of Virginia where it’s defending a VLSI abuse-of-process lawsuit. Judge M. Hannah Lauck stated PQA violated the rule, rejecting the company’s argument that it was only required to identify “entities which pose potentially disqualifying financial conflicts.”

The order notes:

• “This matter comes before the Court on Plaintiff VLSI Technology LLC’s (‘VLSI’) Motion to Compel Defendant Patent Quality Assurance, LLC to Comply with Local Civil Rule 7.1 (the ‘Motion’).”
• “PQA filed a Financial Interest Disclosure Statement. (ECF No. 2.) PQA left the first two sections of the Disclosure Statement blank and filled out the third portion as follows:
  • “Pursuant to Local Rule 7.1 of the Eastern District of Virginia and to enable Judges and Magistrate Judges to evaluate possible disqualifications or recusal, the undersigned counsel for Patent Quality Assurance, LLC in the above-captioned action, certifies that there are no parents, trusts, subsidiaries, and/or affiliates of said party that have issued shares or debt securities to the public.”
• “On April 9, 2024, VLSI filed a Motion to Compel Defendant PQA to Comply with Local Civil Rule 7.1.”
• “Local Rule 7.1 (A) concerns disclosure statements and provides:
  • ‘(A) Nongovernmental Corporations: A nongovernmental corporation, partnership, trust, or other similar entity that is a party to, or that appears in, an action or proceeding in this Court shall: (1) file a statement that (a)identifies all its parent, subsidiary, or affiliate entities (corporate otherwise) that have issued stock or debt securities to the public and also identifies any publicly held entity… b. Identifies all parties in the partnerships, general or limited, or owners or members of non-publicly traded entities such as LLCs or other closely held entities.'”
• “In short, an LLC “that is a party to, or that appears in, an action or proceeding in this Court” and fails to identify its ‘owners or members’ has violated the Court’s Local Rules. E.D. Va. Local Civil R. 7.1(A).”
• “PQA is a South Dakota limited liability company (‘LLC’). (ECF No. 14-1, at 2.) PQA acknowledges that it did not disclose its individual members in its Local Rule 7.1 Disclosure Statement. (ECF No. 22, at 13.) However, PQA argues that its Local Rule 7.1 Disclosure Statement is complete because Local Rule 7.1 only requires the disclosure of parties that pose potentially disqualifying financial conflicts. (ECF No. 22, at 15) (emphasis in original).”
• “This is incorrect. The plain language of the rule requires parties to ‘file a statement that… identifies all parties in the partnesrships, general or limited, or owners or members of non-publicly traded entities such as LLCs or other closely held entities.’ E.D. Va. Local Civil R. 7.1(A)”
• “Local Rule 7.1 does not distinguish between ‘individual’ and ‘entity’ members of an LLC. The purpose of Federal Rule of Civil Procedure 7.1 is to require parties to provide information to courts that will enable judges to make disqualification decisions in accordance with Canon 3C(1)(c) of the Code of Conduct for United States Judges. Fed. R. Civ. P. 7.1, 2002 Advisory Committee Notes. Federal Rule of Civil Procedure 7.1 specifically ‘does not prohibit local rules that require disclosures in addition to those required by Rule 7.1.’ Id. The Eastern District of Virginia’s corresponding Local Rule does just that, requiring additional disclosures to those contained in Federal Rule of Civil Procedure 7.1. Specifically, parties must identify ‘all parties in the partnerships, general or limited, or owners or members of non-publicly traded entities such as LLCs or other closely held entities.’ E.D. Va. Local R. 7.1 (emphasis added).”
• “Local Rule 7.1’s requirement that parties disclose individual members of an LLC advances the Rule’s purpose of ferreting out conflicts of interest because individuals may enter into financial arrangements with judges. Further, judges may have personal relationships with individuals necessitating disqualification. PQA’s assertion that the possibility of such a relationship is ‘vanishingly slim’ (ECF No. 22, at 18) insufficiently satisfies the Court’s burden to ensure that no grounds for recusal exist, financial or otherwise. See Uieky v. United States, 510 U.S. 540, 548 (1994).”
• “Thus, the Court will grant VLSI’s Motion and require PQA to file a Disclosure Statement identifying its members as required by Local Rule 7.1.”

“Lab Owner’s Atty DQ’d After Repping Doctor In Fraud Inquiry” —

• “New Jersey prosecutors succeeded in disqualifying the lawyer for a lab owner accused of paying kickbacks to a New York City doctor in a $20.7 million fraud scheme because the attorney previously represented the doctor.”
• “On Friday [11/6], U.S. District Judge Susan D. Wigenton in New Jersey ordered that Abe George of the Law Offices of Abe George PC must step away from his defense of laboratory owner Richard Abrazi against a criminal charge that he took part in an illegal Medicare billing scheme with Queens, New York-based physician Dr. Alexander Baldonado.”
• “George previously represented Baldonado amid the government’s investigation into the alleged healthcare fraud scheme.”
• “Abrazi and Baldonado are facing separate but related charges over their respective roles in an alleged plot to defraud the government by conducting about $20.7 million worth of unnecessary medical tests. The Justice Department says the tests were ordered by Baldonado and conducted by Abrazi, with the doctor accused of accepting kickbacks for his patient referrals.”
• “Court records show Baldonado was first indicted in May 2021 and charged with eight counts in a superseding indictment in February 2024. Abrazi was indicted separately in June 2024 and charged with one count.”
• “In July, prosecutors filed a letter to Judge Wigenton alerting her to the potential conflict and requesting she remove George from the suit.”
• “In their letter, the government warned the court of the danger of an ‘actual or potential conflict of interest’ arising under the New Jersey Rules of Professional Conduct.”
• “At the time, prosecutors noted that both Baldonado and Abrazi signed waivers to permit George to represent Abrazi in the criminal proceeding, and entered each of the waivers into the record as exhibits.”
• “In Baldonado’s waiver, George informed him that his case and Abrazi’s were ‘substantially related’ and therefore it was ‘possible that Mr. Abrazi’s interest might be adverse to yours, which could create an actual conflict of interest.’ For instance, the waiver stated, either of the defendants could choose to cooperate with the government and testify against the other.”
• “George also said in Baldonado’s waiver that he did not believe he had ‘any privileged confidential information from you that could impact your case or help Mr. Abrazi gain any advantage.'”
• “In Abrazi’s waiver, George likewise recognized the substantial overlap between the laboratory owner’s case and Baldonado’s, and acknowledged that the two defendants could find themselves at odds, including the potential that questions could arise about the thoroughness of George’s advocacy in light of his prior relationship with the doctor.”
• “Despite these waivers, prosecutors told Judge Wigenton at the time, Third Circuit precedent has established that district courts may still disqualify counsel at their discretion.”
• “On Friday, Judge Wigenton found the government was right to raise the issue of actual or potential conflicts arising from George’s appearance on behalf of Abrazi, determining that such conflicts cannot be waived and therefore the attorney must be disqualified.”

Last noted here in 2021, here’s an update: “Graham Weston can go forward with lawsuit against ex-lawyer over him representing wife in divorce” —

• “Graham Weston’s lawsuit against San Antonio attorney Jason Davis and his law firm over their representation of the prominent downtown developer’s ex-wife in the couple’s divorce can go forward. Davis had moved to dismiss the complaint, but a state appeals court denied his motion.”
• “Weston, who’s also a co-founder of Rackspace Technology Inc., said the attorney and his firm Davis & Santos breached their fiduciary duties and committed fraud by agreeing to ‘secretly represent’ Elizabeth Weston in the divorce while serving as counsel for Graham Weston and entities he manages. “
• “On Friday, a three-judge panel of the 3rd Court of Appeals in Austin affirmed a Comal County District Court judge’s order denying Davis’ request to toss the case.”
• “‘The firm intends to continue vigorously defending themselves for the work they did in loyally representing a long-standing client who came to them in a time of great need,’ said Austin lawyer Amanda G. Taylor, who represents Davis and Davis & Santos.”
• “He originally sued Davis and the law firm in the summer of 2021 after the divorce proceedings were underway. Davis appeared as Elizabeth Weston’s attorney of record in the divorce case after accepting more than $2.9 million in legal fees for representing Graham Weston and businesses he manages in at least nine matters between 2009 and 2021, according to the lawsuit.”
• “‘This is a case about an attorney who violated the solemn tenets of his professional creed in the name of personal financial gain,’ Graham Weston says. “
• “Elizabeth Weston filed for divorce on Oct. 26, 2020, with Davis as her lawyer. She accused her husband of sexually assaulting her and carrying on several extramarital affairs with women in London. Graham Weston accused his wife of recording him and hiring a private investigator to track him for a year and a half.”
• “Davis and his firm were disqualified from the case case after Graham Weston’s counsel accused them of conflicts of interest. She petitioned the 3rd Court of Appeals to set aside the disqualification order but it denied the petition.”
• “Elizabeth Weston ultimately represented herself in the divorce trial after hiring and terminating numerous other lawyers but she presented no evidence to support her allegations of abuse. The trial proceeded on claims Graham Weston made in his counterpetition for divorce.”
• “A judge granted a divorce in October 2022, ending the Westons’ marriage of more than 27 years.”

“Gorsuch steps down from major environmental case amid ethical conflict” —

• “Justice Neil Gorsuch won’t sit for next week’s environmental showdown because of ethical conflicts in the review of a proposed Utah oil and gas rail line.”
• “According to a letter from the high court’s clerk Scott Harris, the Donald Trump appointee determined he would not continue to participate in the case consistent with the justices’ code of conduct. “
• “Gorsuch did not detail his ethical conflict, but he has been pressured to recuse from the case because of his ties to an oil billionaire who stands to profit from the ruling. “
• “The U.S. Surface Transportation Board approved a permit to build a Utah railway that would quadruple oil production in the Uinta Basin. Philip Anschutz, the owner of Anschutz Exploration Corporation, operates oil wells in the area and could benefit from the 88-mile line. “
• “Gorsuch served as counsel to Anschutz and his companies in the early 2000s and maintained a cozy relationship with the oil billionaire in the ensuing years. Gorsuch said he went on annual hunting retreats on Anschutz’s estates and has property with business associates with the company. “
• “Anschutz’s company filed a friend of the court brief, asking the justices to narrow the scope of NEPA. A government watchdog said the Uinta Basin Railway would cut Anschutz’s freighting costs and increase the company’s profits. However, Anschutz also has oil and gas operations in other regions in Utah as well as Colorado and Wyoming that are all subject to environmental reviews. “
• “Ethics experts were initially skeptical of the validity of the calls for Gorsuch’s recusal since it has been almost two decades since he worked as outside counsel for the company and there is no public information about their relationship after 2017. “
• “It’s not clear if Gorsuch’s relationship with Anschutz led to his recusal or if another conflict arose. “
• “Gorsuch’s recusal is rare despite the increased focus on the justices’ ethical standards over the last few years. “

“Cooley Hid Tech CEO Fraud From Company, Bankruptcy Trustee Says” —

• “Cooley LLP is facing a new round of malpractice accusations related to a messy bankruptcy fight, this time from the court-appointed trustee in the case.”
• “The firm’s lawyers concealed fraud by a Carbon IQ executive from the tech company and its shareholders, according to a complaint filed Friday in an Ohio federal court. James Coutinho, the trustee in Carbon IQ’s bankruptcy proceedings, said the lawyers violated their ethical duties while representing Carbon IQ and CEO Ben Cantey.”
• “‘This case shows what happens when lawyers try to serve conflicting interests,’ Coutinho said in the complaint.”
• “Cooley partner Michael Tu learned of fraud allegations against Cantey as early as June 2022, while the firm was defending Carbon IQ and Cantey in a suit by a co-founder, according to Coutinho.”
• “The co-founder claimed Cantey forged business documents and had been investigated by the Texas State Securities Board for fraud in a previous business venture. Cantey later admitted to falsifying business records to shareholders, paying himself large commissions, and failing to pay taxes in an Oct. 7 email to Cooley partner Matt Hallinan, according to an exhibit attached to the complaint.”
• “Cooley lawyers allegedly withheld that information from shareholders and continued to assist Cantey as he tried to obtain additional investor financing. Coutinho cited a September 2022 email in which the lawyers said they were ‘trying to avoid’ calls from board members regarding potential fraud and requests for documents. Those calls turned into multiple shareholder lawsuits against the company, according to the complaint.”
• “‘This created a clear conflict of interest that caused substantial harm to Carbon IQ and its shareholders,’ Coutinho said.”
• “Discovery is necessary ‘to reveal the full extent of defendants’ knowledge regarding Cantey’s misconduct and the full extent of Defendants’ actions to conceal or aid Cantey’s misconduct,’ Coutinho told the court.”
• “‘If lawyers represent a corporation and learn that the CEO may be committing fraud, the lawyers can’t ignore the issue,’ Cooper Elliott partner Bart Keyes said in an email. ‘They have to protect the corporation, and this case shows just how devastating the consequences can be if they don’t.’ “

“Coinbase CEO Threatens Law Firms Over Government Hires” —

• “Coinbase Global Inc. is warning its law firms not to hire any anti-crypto government lawyers or risk losing the company’s work in what could be a sign of things to come for Biden administration attorneys.”
• “Coinbase CEO Brian Armstrong wrote in a post on X on Dec. 2 that ‘we’ve let all the law firms we work with know, that if they hire anyone who committed these bad deeds in the (soon to be) prior administration, we will no longer be a client of theirs.'”
• “Armstrong then singled out Milbank LLP’s hire of Gurbir Grewal in October, who was the former enforcement director of the US Securities and Exchange Commission, saying the firm ‘messed up’ while noting that ‘we don’t work with them now (and never will while he works there).'”
• “Grewal, the former New Jersey attorney general, joined the SEC in 2021 and led the agency’s stepped-up enforcement against the cryptocurrency industry. The agency filed more than 100 actions, including ones against Coinbase, Binance, Kraken and Gemini.”
• “The value of Armstrong’s message is to communicate directly to those firms that are not yet on Coinbase’s roster that this is a consideration that they should bear in mind when they’re when they’re recruiting people to their firm, Paul Grewal, the company’s general counsel, said in an interview.”
• “Coinbase’s Grewal said he hoped Armstrong’s tweet ‘does provoke a wider conversation among industry leaders about the revolving door in Washington and the historic assumption that lawyers in government can essentially do what they want without any consequence.'”
• “Coinbase was charged in June 2023 for operating a trading platform without registering with the SEC as a broker. Coinbase sued the SEC last year demanding new rulemaking for digital assets following a denied petition filed by Coinbase in 2022. Gibson Dunn & Crutcher’s Eugene Scalia represented Coinbase in its appeal.”
• “‘Let your law firms know that hiring these folks means losing you as a client,’ Armstrong said.”
• “Threats like Coinbase’s aren’t anything new, but making a public statement about it is unusual, said Washington-based legal recruiter Jeffrey Lowe at CenterPeak.”
• “‘It might be something that a client will be telling its law firms privately, but to just put it out there just really draws a line in the sand,’ he said.”
• “Firms know when they hire certain people, whether they’re from an administration, a different firm, or a competing company know that they run a risk of there being a perceived business conflict with other potential clients out there, Lowe said.”
• “‘Which position do we want to take? Do we want to be pro Google, or do we want to be pro Amazon or pro Apple or Samsung?’ Lowe said.”
• “‘These are all things that law firms are considering every single day and with the size of the companies and the kinds of engagements at stake, you can be talking easily tens if not hundreds of millions of dollars in lost revenue if you bet on the wrong horse,’ he said.”

Hat tip to Simon Chester at Gowlings for sending word of this recent decision from the Supreme Court of British Columbia: “R. v Gagne, 2024 BCSC 2183 (CanLII)” —

• “On March 26, 2024, the date that had been set for the Gardiner hearing, Mr. Chesterley and Crown counsel John Boccabella, not Mr. Grabe, appeared before me. Mr. Chesterley advised the Court as follows:
  • ‘… An issue has come up, Justice, and I think I am placed in the position on behalf of Mr. Gagne to seek to adjourn this. And I won’t go into too much detail, but the court will recall that during the course of this trial my paralegal, Ms. Eddy had been accompanying me and taking notes and so forth.’
  • ‘It turns out – and it wasn’t entirely unknown to me, but she was also dating the prosecutor at the time and this has led to a confidence issue from the standpoint of Mr. Gagne, perhaps understandably. I don’t think she did anything inappropriate, but nonetheless certainly that raises an issue and he wants to seek independent legal advice about that.’
• “On June 14, 2024, the defendant swore and filed an affidavit in support of his Mistrial Application, which includes the following:
  • …The day after the above noted conversation, I again spoke with Mr. Chesterley at which time he advised me that his paralegal and Mr. Grabe were in a romantic relationship and that the relationship was ongoing during my trial. I was in a state of shock and disbelief upon learning of this relationship. Mr. Chesterley’s paralegal was assisting him both before and throughout the trial. She was sitting next to him at counsel’s table and was taking and passing him notes. She was also present during our meetings to discuss trial strategy. As far as I was aware, she was part of my legal representation.’
  • ‘After the complainant testified in my trial, I relied on their collective advice in reaching my decision to not testify in my own defence. Had I known in advance that my lawyer’s paralegal was involved in a romantic relationship with the Crown counsel who was prosecuting my case, I would have immediately asked for a new lawyer.'”
• “On July 22, 2024, Crown counsel filed the affidavit of Nicolas Grabe, which includes the following:
  • ‘In approximately August 2022 I began dating a woman named Mary-Anna Eddy. We are still together today. We maintain separate residences and have never lived together… Ms. Eddy is employed at Eric Chesterley’s law office as a legal assistant. She does not have any legal training, but I understand Mr. Chesterley has made her a designated paralegal. I do not know the extent of her role as a designated paralegal, but understand she has from time to time attended court with Mr. Chesterley to assist with note-taking. I do not know exactly when she started working for Mr. Chesterley, but believe she was so employed throughout the relevant time of the Gagne prosecution.’
  • ‘As a government employee, I am aware of my duty to keep information received in the course of my employment strictly confidential. I am also aware of my confidentiality obligations as a lawyer pursuant to the Code of Professional Conduct. At no time during my relationship with Ms. Eddy have I disclosed to or discussed with Ms. Eddy any information about the Gagne prosecution or any other prosecution file.'”
  • ‘As a general rule I do not work from home and do not bring file materials to my residence. I am confident that Ms. Eddy would not have had access to any confidential information while in my residence. Ms. Eddy has never discussed with me any confidential information about Mr. Gagne, his defence, or matters involving the prosecution. I have never seen, been provided, or reviewed any information relating to Mr. Gagne’s matter while at Ms. Eddy’s residence or in her presence. I understand, based on my discussions with Ms. Eddy, that Mr. Chesterley was aware of my relationship with Ms. Eddy prior to the Gagne prosecution.'”
• “The Crown argues the defendant has failed to establish a basis for a mistrial. Crown argues that post-conviction, a defendant seeking a mistrial must establish an actual conflict of interest, and not just an appearance of one, and that the facts in this case do not give rise to an actual conflict of interest. The Crown argues that even if an actual conflict of interest existed, the defendant has not established an adverse effect on Mr. Chesterley’s representation at trial, which it argues is required where conflict of interest is raised after the trial.”
• “However, the case before me does not involve a relationship between two lawyers. It involves a relationship between one lawyer and a person who Mr. Grabe acknowledges ‘does not have any legal training’. There is no evidence before me that ‘paralegals’ (however that may be defined) are a profession regulated in the public interest, guided by a code of ethics by which the conduct of members is gauged.”
• “In my view, the dating relationship between prosecuting Crown counsel and a member of defence counsel’s firm, who was part of the defence team, constituted a conflict of interests for Mr. Chesterley. Ms. Eddy, and by extension Mr. Chesterley and his firm, were personally aligned with the prosecutor. There was a substantial risk both that Mr. Chesterley’s representation of the defendant would be materially and adversely affected by that relationship. There was a risk that Ms. Eddy, a key member of the defence team, would favour Crown counsel because of that relationship. In addition, there was a substantial risk that confidential information to which Ms. Eddy was privy would be disclosed to Crown in the course of that personal relationship. The risk that such confidential information could have been disclosed to Crown by Ms. Eddy is implicitly acknowledged by the fact that Crown counsel prepared an affidavit in which he deposed that no such evidence was received by him. If there was no risk of disclosure, such an affidavit would have been unnecessary.”
• “The relationship was concealed from the defendant. For counsel, for both sides, to have failed to disclose that information to the Court, is conduct so egregious that it creates an appearance of unfairness to such a degree that it would taint the administration of justice in the eyes of a reasonable and objective observer: Ball at paras. 119, 120. A reasonable and objective observer would consider it a betrayal and a fundamental breach of trial fairness for an accused to learn only after he has been convicted at trial that a member of his defence team had been, at least metaphorically, sleeping with the enemy, by being involved in a personal relationship with the Crown, a relationship known to both counsel, but concealed from him.”
• “The defendant’s application is granted. I order a mistrial.”

Steven W. Teppler is a partner and chair of the privacy and cybersecurity practice group and chief cybersecurity legal officer at Mandelbaum Barrett writes: “The Expanding Universe of Attorney Cyber Liability” —

• “Law firms face unprecedented cybersecurity threats, increasing in number and severity, which can result in significant liabilities. The legal profession, especially in New Jersey, is grappling with growing responsibilities to protect client data, third-party data, and employee information, all while complying with complex regulations. Breaches in cybersecurity not only expose firms to legal and financial repercussions but can also result in violations of professional responsibility.”
• “Law firms have become attractive targets for cybercriminals due to the highly sensitive information they manage, including trade secrets, financial data, health care and other personal information. The American Bar Association’s 2023 annual Cybersecurity Tech Report consistently highlights law firms’ vulnerabilities, noting that many are ill-prepared to defend against sophisticated cyberattacks. These attacks typically include phishing schemes, ransomware, and data breaches, all of which can expose a firm to liability.”
• “The duty of confidentiality is fundamental to the lawyer-client relationship. Rule 1.6 of the New Jersey Rules of Professional Conduct (RPC) requires lawyers to protect client information. If a lawyer’s failure to implement adequate cybersecurity measures results in a data breach, this could lead to a breach of confidentiality and potential malpractice claims.”
• “Liability becomes even more complex when a breach affects third-party data belonging to a client’s clients. For example, a law firm representing a corporation may have access to sensitive customer data or intellectual property. If this information is exposed during a breach, both the client and its customers or business partners could file lawsuits, expanding the firm’s liability.”
• “For instance, a firm representing a health care provider may have access to patient data subject to HIPAA protections (See 45 C.F.R. Section 160.101 et seq.). A breach involving personal health information (PHI) could trigger regulatory investigations, civil penalties, and lawsuits from affected individuals. The concept of ‘downstream liability’ is gaining traction, with courts increasingly willing to entertain claims from third parties whose data was compromised due to a firm’s cybersecurity failures.”
• “To protect against such risks, law firms should take these steps:
  • “Adopt comprehensive cybersecurity measures, such as encryption, secure communications, and regular employee training on data protection protocols.”
  • “Negotiate indemnification clauses in engagement letters, particularly when handling third-party data.”
  • “Encourage clients to adopt their own strong cybersecurity practices to reduce the firm’s overall risk profile.”
• “Provide clear communication with clients about cybersecurity practices to help limit liability in the event of a breach. For example:”
• “Cybersecurity Policies in Engagement Letters: Include a section in the engagement letter that outlines the firm’s cybersecurity policies and procedures. Informing clients upfront about how their data is handled sets clear expectations and may help limit liability if a breach occurs.”
• “Example: ‘Our firm uses industry-standard encryption protocols to secure client data in transit and at rest. We also employ two-factor authentication and regularly update our systems to protect against potential threats.'”
• “Cybersecurity Protocol Discussions During Client Meetings: During initial client meetings, lawyers should discuss the specific data security measures relevant to the client’s case, especially if sensitive or regulated data (such as health care information or financial records) is involved. This can include informing clients about the secure platforms the firm uses for document sharing and case management.”
• “Example: ‘For this matter, we will be using a secure cloud-based platform for document sharing, which complies with HIPAA standards due to the sensitive nature of the information. We will also assign limited access to specific team members to further protect your data.'”
• “Breach Notification Procedures: Clients should be informed about how they will be notified in the event of a cybersecurity breach. This ensures transparency and helps maintain client trust in a worst-case scenario. It also shows the firm’s preparedness to address any potential issues swiftly.”
• “Example: ‘In the unlikely event of a data breach, we have a rapid response plan in place. We will notify you within 24 hours of detecting a breach, provide an assessment of the potential impact, and outline the steps we are taking to address the situation.'”
• “Law firm employees, whether through negligence or malicious intent, can be a major source of cybersecurity risk. The rise of hybrid work arrangements has increased the chances that insider threats will compromise a firm’s data security. For example, an employee might inadvertently leak sensitive client information through unsecured email, or a malicious insider could steal confidential data for personal gain.”
• “To address these risks, law firms should implement strict policies on data access, secure device use, and data transmission. These policies typically include data access controls, multi-factor authentication and encrypted data transmission.”
• “Law firms must navigate an increasingly complex landscape of cybersecurity and data privacy regulations. New Jersey’s Data Breach Notification Law requires prompt disclosure of any breaches involving personally identifiable information (PII) N.J. Stat. Ann. Section 56:8-163—66 (2005); as amended (2019), and firms serving clients across multiple jurisdictions must comply with various state and federal laws, such as HIPAA and the Gramm-Leach-Bliley Act. (Pub. L. No. 106-102 (1999).”
• “Failure to comply with these laws can result in significant financial penalties and reputational damage. Law firms must conduct regular compliance audits and work closely with cybersecurity experts to ensure their policies meet the latest regulatory requirements.”
• “Violations of the New Jersey RPC related to cybersecurity breaches or exposure can lead to disciplinary actions by the New Jersey Supreme Court’s Office of Attorney Ethics. Depending on the severity of the violation, sanctions can range from a formal reprimand to suspension or even disbarment. Specifically, a lawyer who negligently fails to safeguard client data may receive a public reprimand, but a pattern of negligence or intentional disregard for cybersecurity obligations could result in more severe penalties, including suspension or disbarment.”

“Shipman & Goodwin Atty Dodges DQ In Waste Permit Case” —

• “A Connecticut Superior Court judge has refused to disqualify Shipman & Goodwin LLP attorney Joseph P. Williams from a lawsuit that started as a dispute over a $3 million transfer station performance bond, finding he is not a necessary witness to the remaining issues in the case.”
• “Judge Sheila A. Ozalis on Thursday [11/21] turned away Country Holding Co. LLC’s Sept. 23 motion to remove Williams as trial counsel for defendants Covanta Projects of Wallingford LLC and Covanta Energy LLC in litigation first brought in August 2021 arising from the sale of a waste-to-energy facility in Wallingford. Country Holding argued that Williams was involved in a ploy to force it to settle, leading to the facility’s closure in February amid the litigation.”
• “Country Holding alleged that the transfer station closed because of an agreement between the Covanta parties and an entity called Country Disposal Services LLC, which held the permit to operate the facility from the state Department of Energy and Environmental Protection, or DEEP. Country Disposal allegedly agreed not to turn over the permit to Country Holding without Covanta’s approval, and Covanta demanded a settlement, the disqualification motion said.”
• “‘A necessary witness is not just someone with relevant information; a necessary witness is someone who has material information no one else can provide,’ the ruling said. ‘It is clear to this court that attorney Williams is not a necessary witness on this subject matter, as the representatives or Country, Covanta and Country Disposal that participated in such discussions could easily provide such testimony.'”
• “In its Oct. 7 objection to disqualifying Williams, Covanta said, ‘Country’s grievance is with the substance of the settlement proposal, not attorney Williams’ transmission of that proposal in his capacity as counsel, who had no personal knowledge beyond conveying his client’s proposal.'”
• “During a Nov. 7 oral argument, Williams’ co-counsel Alison P. Baker, also of Shipman & Goodwin, said that removing him from trial would discourage other litigants from trying to settle claims and argued that his testimony would be protected by the litigation and attorney-client privileges.”
• “‘The court notes that at no time during the course of this case, prior to the entry of new counsel for Country, while the firm of Cummings and Lockwood was representing Country, did it raise the issue that attorney Williams was a necessary witness for trial and should be disqualified,’ the ruling said. ‘There is no reasonable basis that this court can find for Country to have waited until the eve of trial to have made this motion to disqualify and finds that the disqualification of attorney Williams would render a substantial hardship on Covanta.'”
• “The judge pointed out that Williams has served as counsel for Covanta since before the litigation started, and represents the entities on Country Holding’s appeal of her summary judgment decision. He also negotiated a settlement between Covanta, as guarantor, and the five municipalities to ‘compensate them for Country’s breaches of disposal agreements,’ according to the ruling.”

New York: “Judicial Ethics Opinion 24-62” —

• “Digest: Where a judge’s association with his/her former law firm ended less than two years ago, the judge must disqualify in a matter involving a current client of the judge’s former law firm, even if the party has not appeared in the matter. This disqualification is subject to remittal.”
• “Opinion: The inquiring judge’s connection with his/her former law firm ended less than two years ago. The judge has recently learned that one of the defendants in a case assigned to the judge is a current client of the judge’s former law firm. [1] After disclosure, plaintiff’s counsel requested that the judge recuse him/herself. The judge’s former law firm has no apparent involvement in the matter before the judge, as the law firm’s client, one of several defendants in the case, was served well over a year ago but has not appeared or filed a notice of appearance. Nor has any motion been made for default judgment against that defendant. The judge believes he/she can be fair and impartial, and asks whether disqualification is ethically required.”
• “A judge must always avoid even the appearance of impropriety (see 22 NYCRR 100.2) and act to promote public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2[A]). A judge must disqualify him/herself in a proceeding in which the judge’s impartiality ‘might reasonably be questioned’ (22 NYCRR 100.3[E][1]).”
• “For two years from the date that the relationship between a judge and their former law firm completely ends, the judge is disqualified from all matters ‘involving a party the judge recognizes as a current or former client of the law firm, even though a different law firm is representing the client’ (Opinion 16-36; see also Opinion 17-100 [disqualification required for two years after representation of client ends or final payment to judge, whichever is later]).”
• “This defendant is a party to the action before the judge, notwithstanding its failure to appear, and is also a client of the judge’s former law firm in another case. As the judge is still within the two-year disqualification period for current and former clients of the judge’s former law firm, the judge is therefore obligated to disqualify him/herself, subject to remittal. [2]”
• “Remittal is a multi-step process which requires full disclosure on the record and the voluntary, affirmative consent of the appearing parties and (if represented) their counsel. First, the judge must fully disclose the basis for disqualification on the record (see 22 NYCRR 100.3[F]). Second, without participation by the judge, all the parties who have appeared and not defaulted, and their lawyers, must agree that the judge should not be disqualified (id.). Then, if the judge believes he/she will be impartial and is willing to participate, the judge may accept remittal of disqualification and preside in the matter. The agreement must ‘be incorporated in the record of the proceeding’ (id.).”
• “Although the inquiring judge here has made a disclosure, the parties that have appeared in the case do not ‘all agree’ that the judge should not be disqualified (22 NYCRR 100.3[F]). The judge is therefore disqualified.”

“Solar Co. Ex-CEO Attys Say DQ Request ‘Untethered To Facts‘” —

• “Lawyers representing the former CEO of a now-defunct solar energy company against fraud and racketeering claims have told a Michigan federal judge that their previous in-house work for the company is not grounds to disqualify them from the suit, calling the plaintiffs’ attempt to have them removed ‘untethered to facts’ and improperly delayed.”
• “In a response filed Wednesday, DarrowEverett LLP told U.S. District Judge F. Kay Behm of the Eastern District of Michigan that there was no conflict of interest and no precedent for removing it from representing William Jayson Waller against claims that he and the company, Power Home Solar LLC, now called Pink Energy, took part in a scam to sell vastly overpriced solar energy systems to Michigan residents.”
• “The suit names the solar company, Waller and Florida-based private equity firm Trivest Partners LP and its investment company, TGIF Power Home Investor, as defendants. The company filed for bankruptcy in October 2022, weeks before the proposed class action was filed.”
• “The plaintiffs’ arguments for having New York-based DarrowEverett removed hinge on ‘a nonexistent legal theory based on equally nonexistent facts,’ the firm argued. Though the firm provided ‘successive representation,’ first to the company and then to Waller, no conflict has arisen, it told the court.”
• “‘Moreover, even if the facts asserted by [the] plaintiffs could for some reason support disqualification of opposing counsel, [the] plaintiffs sat on that knowledge for over a year before acting,’ the firm added, ‘and their failure to raise the issue until now waives any arguable claim they could possibly have had.'”
• “DarrowEverett’s response follows a motion filed by the proposed class of Michigan residents claiming that they fell victim to the alleged fraud conspiracy, led by named plaintiffs Aaron Hall, Katherine Glod and Jeffrey Binder, who asked Judge Behm to remove the firm in a Nov. 6 motion citing ‘multiple conflicts of interest.'”
• “The plaintiffs accused DarrowEverett of ‘stonewalling’ discovery, a move they said could be attributed to numerous conflicts, including that firm chair Zachary Darrow, with assistance from other firm lawyers, worked as a C-suite officer and chief counsel for the solar panel company.”
• “The firm’s inside involvement means its attorneys are witnesses in the action, the motion claimed, with Darrow potentially an ‘unnamed member of the RICO organization.'”
• “Plaintiffs further argued that since the firm has a fiduciary obligation to Power Home Solar’s bankruptcy trustee, its representation of Waller, whose ‘interests in this case are materially adverse to those of PHS,’ represents a conflict.”
• “But DarrowEverett told Judge Behm that Power Home Solar is not a party to the suit, and that ‘no entity with which DarrowEverett has or has had an attorney-client relationship is seeking the firm’s disqualification.'”