Bressler Risk Blog

“ABA Requests Public Comment on Possible Regulatory Implications of Exploring Possible Amendments to Model Rule of Professional Conduct 5.5 to Increase Permissible Cross-Border Practice” —

• “The ABA Center for Professional Responsibility Working Group on ABA Model Rule of Professional Conduct 5.5 (MRPC 5.5) is requesting public comment on an Issues Paper it developed regarding possible regulatory implications associated with exploring possible amendments to MRPC 5.5 to increase permissible cross-border practice.”
• “‘Since the last large-scale review of ABA MRPC 5.5 (Unauthorized Practice of Law; Multijurisdictional Practice of Law), technology, globalized legal practice, and client expectations regarding the delivery of legal services have continued to evolve.'”
• “‘In light of these developments, as described further below [in the Issues Paper], questions have arisen as to whether Model Rule 5.5 remains fit for purpose, or whether the reality of 21st-century legal practice and delivery of legal services merits changes to the current manner in which multijurisdictional practice is permitted.'”

“New Guidelines on Conflicts of Interest in International Arbitration”

• “The Arbitration Committee of the International Bar Association has published revised Guidelines on Conflicts of Interest in International Arbitration (“IBA Guidelines“). The new text modernizes the previous version of the Guidelines (2014) without fundamentally amending them and will continue to be widely applied in all types of arbitrations (commercial, investment, sports, maritime, etc.).”
• “First published in 2004, the IBA Guidelines have become a widely accepted instrument reflecting international standards of impartiality and independence of arbitrators.”
• “Some of the most relevant amendments to the general standards in Part One of the Guidelines:
  • Arbitrator’s disclosure impeded by secrecy rules: the new General Standard 3(e) calls on arbitrators not to accept an appointment or resign if the arbitrator considers that he or she should make a disclosure, but that professional secrecy rules or other rules of practice or professional conduct prevent such disclosure.
  • Failure to disclose: the new General Standard 3(g) expressly recognizes that a failure to disclose certain circumstances does not necessarily mean that a conflict of interest exists;
  • Parties’ due diligence obligation: General Standard 4(a) includes a presumption that a party shall have learned of any fact or circumstance which a reasonable enquiry would have yielded if conducted at the outset of or during the proceedings and waived the right to raise an objection based on that fact or circumstances if not raised within 30 days.
  • Relationship between the arbitrator and the arbitrator’s law firm or employer: the text of General Standard 6 – in particular the concept of “law firm” – has been modernized to reflect the evolution in the structure and mode of international legal practice.”
• “The following additions to the orange list are the amendments which are most relevant in practice.
  • Experts: arbitrator currently serves, or has acted within the past three years, as an expert for one of the parties or an affiliate of one of the parties in an unrelated matter (Item 3.1.6), or has, within the past three years, been appointed as an expert on more than three occasions by the same counsel, or the same law firm (Item 3.2.9). At the same time, it is clarified that the arbitrator, when acting as arbitrator in another matter, heard testimony from an expert in the current proceedings constitutes a Green List Item (Item 4.5.1).
  • Co-arbitrators: arbitrator and counsel for one of the parties currently serve together as arbitrators in another arbitration (Item 3.2.12), or an arbitrator and their fellow arbitrator(s) currently serve together as arbitrators in another arbitration (Item 3.2.13).
  • Relationship between arbitrator and expert: arbitrator is instructing an expert appearing in the arbitration proceedings for another matter where the arbitrator acts as counsel (Item 3.4.3).
  • Mock trials: arbitrator appointed by one of the parties to assist in mock-trials or hearing preparations on two or more occasions within the past three years (Item 3.2.10).
  • Publicly advocating an opinion on the case: the 2024 version of the Guidelines clarifies that this orange list situation includes advocating an opinion through social media or on-line professional networking platforms (Item 3.4.2).”

For more, here’s a redlined version:“IBA GUIDELINES ON CONFLICTS OF INTEREST IN INTERNATIONAL ARBITRATION
(COMPARE 2014 AND 2024 VERSIONS)”

“Sublime’s Ex-Lawyers Hit Back at Malpractice Lawsuit, Calling It a ‘Pathetic’ Attempt to Avoid Legal Bills” —

• “Top music law firm King Holmes Paterno & Soriano is firing back at a legal malpractice lawsuit filed by the band Sublime, arguing that the group has “falsely and maliciously” sued to get out of paying their hefty legal bills.”
• “‘While Sublime had the right to terminate its lawyers at any time, it has no right to sidestep its responsibility to pay fees it incurred,’ the firm wrote. ‘Yet, in an obvious and pathetic attempt to do exactly that, plaintiffs, presumably at the prodding of reputationally challenged new advisors, have cynically elected to file a trumped-up preemptive malpractice suit falsely and maliciously accusing the law firm of conflicts of interest they claim caused them unspecified damages.'”
• “The filing from King Holmes aimed to rebut many of Sublime’s specific allegations, including the band’s accusation that the firm steered it into a merchandise deal without disclosing that the company was another one of the firm’s clients — a move Sublime claimed cost the band millions.”
• “In Monday’s filing, the firm said it had disclosed that potential conflict of interest to the band members and that they had consented to the arrangement. King Holmes said it even invited the band members’ personal attorneys to be involved in the negotiations to avoid any doubt.”
• “‘At the request of Sublime and its partners, KHPS helped secure a state-of-the-art merchandising agreement with one of the world’s few most preeminent music merchandisers, which also was Sublime’s merchandiser of choice,’the firm wrote. ‘That merchandiser paid and continues to pay Sublime higher royalties on a much broader range of products and with other more favorable terms than its main competitor offered.'”
• “The firm went even further, suggesting that Sublime had perhaps been motivated by ‘predatory new advisors’ to file baseless allegations in court.”
• “‘A cursory investigation done in good faith, had plaintiffs or their advisors cared to make the minimal effort needed to conduct one before pulling the litigation trigger, would have demonstrated what plaintiffs and their advisors already knew or should have known — that nothing could be further from the truth,’ the firm wrote.”
• “In technical terms, Monday’s filing accused Sublime and its surviving members of breach of contract and other related violations, saying they had violated their agreement by failing to pay the firm $108,852 in past-due legal bills. The case will be litigated alongside the original allegations filed in January.”

For those following the Corporate Transparency Act: “Court Challenge to Corporate Transparency Act Prevails – For Now” —

• “On March 1, 2024, U.S. District Judge Liles C. Burke for the Northern District of Alabama, Northeastern Division, issued a Final Judgment ruling in favor of the Plaintiffs’ (National Small Business United, et al. ‘NSBU’) motion for summary judgment, and against the U.S. Treasury (Defendants).”
• “This judgment held that the Corporate Transparency Act (CTA) is unconstitutional because it exceeds the Constitution’s limits on Congress’ power.”
• “Further, FinCEN is permanently enjoined from enforcing the CTA against the Plaintiffs in that case (but only the Plaintiffs in that case).”
• “It is currently unclear as to the implications of this ruling for the business community at large. This ruling may be persuasive in similar cases brought against Treasury outside of the Northern District of Alabama, but is not precedential, meaning that other judicial forums may rule differently on the issues presented in this case.”
• “In reaching its conclusions, the court reviewed all of the arguments made by Treasury and the Plaintiffs. First, the court dispensed with Treasury’s standing argument finding that the Plaintiffs had a redressable injury and the NSBU had associational standing in order to bring the suit in federal court. Next, the court discussed the various constitutional arguments the Plaintiffs made, determining the CTA did not pass muster under the Necessary and Proper Clause (referring to foreign affairs and national security), the Commerce Clause, nor Congress’s taxing power under the Necessary and Proper Clause. The court extensively discussed Supreme Court precedent to reach the result that the CTA cannot be justified as a constitutional exercise of Congress’s powers. The Court indicated that its conclusion made it unnecessary to decide whether the CTA violates the First, Fourth, or Fifth Amendments of the Constitution, as also asserted by the Plaintiffs.”
• “Because this case only included questions of law, and was decided on summary judgment based solely on dispositive motions by the parties, the appeals court will have de novo review of this case. That is, the appeals court will decide all issues in the case, as if the case was being heard for the first time.”

State Bar of Michigan: “Ethics opinion details the judicial ethical obligations when invited to attend firm-sponsored events” —

• “Judicial officers should decline to attend law firm-sponsored events with limited exceptions, according to a new ethics opinion from the State Bar of Michigan’s Standing Committee on Judicial Ethics.”
• “‘It may be permissible for a judicial officer to attend an event if the judicial officer has a personal connection to the firm and has weighed the ethical limitations to ensure that there is no appearance of impropriety, it does not detract from the dignity of the office, and it does not interfere with the performance of judicial duties,’ the opinion states.”
• “The opinion analyzes Canon 2, which deals with the appearance of impropriety, and Canon 4, which outlines allowable extrajudicial activities, as to why judges should not attend events at law firms.”
• “The opinion concludes by saying that judicial officers play a crucial role in maintaining public trust in the judiciary, necessitating careful consideration of their participation in law firm-sponsored events. The opinion advises that judicial officers should therefore decline invitations unless they have personal connections to the firm and that, when considering attendance, they should conduct thorough analyses to ensure they are in compliance with the Code of Judicial Conduct.”
• “Factors to consider include being aware of the event’s public visibility, avoiding ex parte communications, and refraining from discussions regarding pending cases. These factors should be considered for the judicial officer to ensure that they continue to uphold the dignity of their office and to ensure activities align with ‘ordinary social hospitality.'”
• Text of full opinion here.

“Virginia senator who does legal work for skill game industry will help write skill game bill” —

• “A state senator whose law firm has helped the skill game industry fight Virginia’s ban on the slots-like gambling machines is among the handful of senators picked to write legislation behind closed doors that could determine whether the industry remains profitable or ceases to exist in the state.”
• “Many members of the Virginia General Assembly are lawyers, and it’s not uncommon for them to vote on legislation that could conceivably impact a client.”
• “Glancing associations aren’t usually enough to trigger Virginia’s conflict of interest laws, which are meant to prevent elected officials from taking public actions that benefit their private interests.”
• “But the professional connection Sen. Bill Stanley, R-Franklin, has to Georgia-based skill game company Pace-O-Matic is unusually direct, touching on his work as a private attorney, his interest in car racing and the political punditry he offers in podcast form. Pace-O-Matic has lobbied heavily for the bill Stanley will now help finalize in the last week of the session.”
• “In an interview Thursday, Stanley said the Virginia Conflict of Interest and Ethics Advisory Council determined his ties to Pace-O-Matic don’t amount to a legal conflict.”
• “‘They found that there was no conflict because I don’t own Pace-O-Matic,’ Stanley said. ‘I don’t own one of these skill games. And I don’t own a convenience store that has a skill game in it.'”
• “Stanley and his firm worked with Pace-O-Matic on a lawsuit seeking to overturn the previous ban passed by his General Assembly colleagues, a legal challenge that bought skill game companies nearly two years of revenue with no taxation and regulation before the ban was reinstated last year.”
• “Pace-O-Matic also sponsors a racing team partnership between Stanley and former NASCAR driver Hermie Sadler, who has hosted skill games at his Southside Virginia truck stop and served as a plaintiff in the lawsuit trying to keep them legal. The company also sponsors the ‘Leaning Right and Turning Left’ podcast Stanley hosts with Sadler. Fliers promoting that podcast are laid out on the reception desk outside Stanley’s General Assembly Building office and include the phrase ‘Powered by Pace-O-Matic.'”
• “Asked if he remains retained by Pace-O-Matic and Sadler today, Stanley said, ‘Of course.'”
• “Getting the bill passed is critical to Pace-O-Matic’s continued business in Virginia. Its failure would mean the company would have to pack up thousands of skill machines that are currently deactivated due to their illegal status. Its passage would allow the machines to be turned back on and start making money again, but the bill’s specifics could determine exactly how profitable they could be.”
• “The law also says a conflict doesn’t exist if a legislator’s interest in a matter considered by the General Assembly isn’t ‘substantially different’ from that of “the general public” or a broader ‘class or group’ of businesses that could potentially be impacted. In other words, if Stanley only works with one of several skill game companies operating in Virginia, that could be enough to clear him under the “substantially different” rule.”
• “Though the skill game legalization bill affects multiple companies and the public, roughly half the skill machines in Virginia are believed to be Pace-O-Matic machines, according to the limited state data available.”
• “Stanley said he had previously abstained from gambling votes and opposes gambling generally, but was ‘surprised’ to learn that the Ethics Council found he could act freely on skill game legislation because there was no conflict.”

“Sundholm v. Hollywood Foreign Press Assn.” —

• “The case involves Magnus Sundholm, a former member of the Hollywood Foreign Press Association (HFPA), who sued the HFPA for breach of contract and other claims after his expulsion from the organization. The HFPA moved to disqualify Sundholm’s attorneys from the case, asserting that they had reviewed privileged documents that belonged to the HFPA. The trial court granted the motion, leading to Sundholm’s appeal.”
• “The Court of Appeal of the State of California, Second Appellate District, Division Seven, found that while Sundholm’s attorney had improperly refused to produce documents in response to a subpoena from the HFPA, disqualification of the attorney was not the appropriate remedy. This is because disqualification affects a party’s right to counsel of choice and should not be used to punish an attorney for improper conduct. The court further found that there was no evidence that the possession of the HFPA’s documents by Sundholm’s attorney would prejudice the HFPA in the proceeding.”
• “Thus, the court reversed the trial court’s order disqualifying Sundholm’s attorneys.”

“New opinions from the Ohio Board of Professional Conduct” —

• “The Ohio Board of Professional Conduct has released two advisory opinions concerning in-house counsel and lawyers serving in the dual role of guardian ad litem/lawyer. Each opinion replaces an earlier opinion that analyzed the issue presented under the former Code of Professional Responsibility.”
• “Advisory Opinion 2024-01 addresses the ethical issues that can arise when an in-house lawyer for a corporation privately represents a customer of the corporation. The board advises that the representation should be avoided due to potential issues with conflicts of interest, the impairment of the lawyer’s independent professional judgment, the unauthorized practice of law, and the impermissible sharing of fees with a nonlawyer. This opinion replaces Adv. Op.1992-17.”
• “Advisory Opinion 2024-02 concerns a lawyer’s communication with a represented party when the lawyer serves in the dual role as guardian ad litem and lawyer for a child in juvenile or domestic court matters. The Rules of Professional Conduct generally prohibit communication with represented parties unless the opposing lawyer gives permission, or the conduct is permitted, by law or court order. The board concludes that communication with a represented person, usually the child’s parent, is permitted when the sole purpose of the communication is to obtain information about how to initially contact the child. This opinion replaces Adv. Op. 2006-05.”

“Blackstone Racked Up $165M in Kirkland Fees in Just 3 Years” —

• “Blackstone paid Kirkland & Ellis $164.6 million in legal fees over the past three years, the New York-based private equity giant disclosed in a new regulatory filing.”
• “Blackstone makes the unusual legal fee disclosures to comply with U.S. Securities and Exchange Commission rules on potential conflicts of interest stemming from having an attorney on the board who’s employed by a law firm that receives work from the company.”
• “Those rules came into play for the private equity firm when Reginald ‘Reg’ Brown, a partner in Kirkland’s Washington, D.C., office, joined its board in 2020.”
• “Brown, who earlier in his career was an associate White House counsel under President George W. Bush, came to Kirkland after 15 years as a partner at Wilmer Cutler Pickering Hale and Dorr, where he was chair of its Financial Institutions Group and vice chair of its Crisis Management and Strategic Response Group.”
• “That rule also has come into play at Meta, where Robert Kimmitt, senior internal counsel at Wilmer, joined the board in 2020. Meta paid Wilmer $67 million in 2022. The tech giant has not yet disclosed how much business it did with the law firm in 2023.”

“Opioid Judge Has Concerns About Motley Rice: ‘I Can’t Understand Why You Don’t See That’” —

• “A federal judge is weighing whether to disqualify Motley Rice from dozens of opioid lawsuits because the firm obtained confidential information when representing the state of Hawaii, the District of Columbia and the City of Chicago in separate actions.”
• “At a Feb. 12 hearing, U.S. District Judge Dan Polster, who is overseeing the opioid multidistrict litigation in the Northern District of Ohio, raised several questions to Motley Rice’s Linda Singer about her responsibilities as outside counsel in government lawsuits against the same defendants her firm has sued in the opioid cases—specifically, pharmacy benefit manager OptumRx Inc., owned by United HealthCare.”
• “Brian Boone, of Alston & Bird in Charlotte, North Carolina, has alleged in a disqualification motion that Motley Rice, in the government cases, used its subpoena powers to obtain confidential documents from his client, OptumRx, and some of them pertain to opioids.”
• “At the hearing, Singer insisted Motley Rice never shared the confidential documents with other clients and, in any event, Hawaii’s lawsuit, filed last year, did not even reference opioids. ‘I want to be clear,’ she said. ‘It’s our legal position that, again, none of that matters.'”
• “‘Well, I disagree with that,’ Polster said. ‘I can’t understand why you don’t see that there is a difference between your work for these—your firm’s work for these three entities and your work for all of your other clients, and particularly the four—you know, the four bellwether clients that you’re representing.'”
• “Though the bellwether clients, as cities and counties, also are public entities, Polster drew a distinction because Motley Rice had subpoena powers in the state cases.”
• “The debate addresses a thorny but longstanding issue when private plaintiffs’ firms serve as outside counsel to government entities, particularly state attorneys general. At the hearing, liaison counsel Peter Weinberger, of Cleveland’s Spangenberg, Shibley & Liber, referenced ‘a move afoot’ to ‘curtail the rights of state and cities and counties to retain outside counsel who are prepared to represent them on a contingent fee.'”
• “But OptumRx’s motion says Motley Rice has violated both the American Bar Association’s Rules of Professional Conduct and the Ohio Rule of Professional Conduct 1.11(c), which prohibits a lawyer with confidential government information about a person from representing a private client ‘whose interests are adverse to that person.'”
• “In opposition, the plaintiffs’ executive committee, which includes Motley Rice’s Joe Rice, insisted the firm had no conflict because the government investigations involved allegations of overbilling for insulin and other prescription drugs, not causing the opioid epidemic. As such, the information wasn’t even material, they wrote.”

“ABA Clarifies Rule on Information Obtained During Public Service” —

• “Attorneys with government jobs can’t represent private clients in cases where confidential information learned about an individual through the attorney’s public work could disadvantage the individual, the American Bar Association said on Wednesday.”
• “The opinion clarified the scope of ABA Model Rule of Professional Conduct 1.11(c). The prohibition extends to both current and former government workers, including attorneys who hold part-time public jobs, the ABA said.”
• “This is the case even though 1.11(c) was once aimed at regulating the ‘revolving door’ of lawyers moving from government to private practice, the ABA explained.”
• “‘We do not perceive any countervailing considerations that would justify exempting current public officers and employees from a disqualification provision designed to prevent that lawyer from misusing confidential government information for a private client,’ the ABA said.”
• “The rule ‘applies irrespective of whether lawyers served in a representational capacity when they acquired’ the information, the ABA said. It’s scope therefore includes legislators and public executives. The ABA cited a 2019 New York State Bar Association ethics committee ruling that applied the rule to a part-time town supervisor who also worked as a private attorney.”
• “The ABA also said it interpreted ‘private client’ to include even public ‘entities and officials whom the lawyer represents in private practices, if those clients are not legally entitled to employ the confidential information.'”

See complete text: “Formal Opinion 509 (February 28, 2024).”

Bill Freivogel has been quite busy, keeping an eye on all decisions and update conflicts and risk related. With his kind permission, and my continuing thanks for that making some days of this blog thing easy, I’m sharing some of his commentary and detail on his latest spotted stories of note:

Gottlieb v. Beckerle, 2024 WL 678007 (N.J. App. Div. Feb. 20, 2024).

• Derivative action on behalf of Company.
• Company’s board hired Lawyer to conduct an investigation on whether the action should continue. Lawyer was of counsel to Law Firm. Lawyer’s principal occupation is law professor. Lawyer submitted a report recommending that the board should seek dismissal of the suit. On Defendants’ motion to dismiss the case, Plaintiff claimed, among other things, that Lawyer’s recommendation should be rejected because Lawyer and Law Firm had conflicts of interest because they had been representing Company “for over thirty years.”
• The trial court dismissed the case. In this opinion the appellate court affirmed. The court said that, without more, the fact that the law firm doing a derivative action investigation has been representing the company on other matters does not mean the board could not rely upon the investigation.
• The court also noted that Lawyer’s own work for Company had been minimal, that his investigation in this case was quite thorough, and that Lawyer and Law Firm had no relationships with individual Defendants. Therefore, Company’s board was reasonable in relying upon it.

AGI Suretrack, LLC v. Farmers Edge Inc., 2024 WL 693971 (D. Neb. Feb. 20, 2024).

• Patent infringement case.
• Defendant proposes to use lawyer Robert Stoll as an expert witness. Stoll is a partner at Faegre.
• Faegre is not handling this infringement case. But, Faegre has represented Plaintiff and Plaintiff’s parent company, including an executive termination matter, arguably involving information relevant to this case.
• Faegre claims it has screened Stoll from any matters related to this case. Nevertheless, the magistrate judge, in this opinion, has granted Plaintiff’s motion to disqualify Stoll as an expert witness.
• The court distinguished the holding in Commonwealth Ins. Co. v. Stone Container Corp., 178 F. Supp.2d 938 (N.D. Ill. 2001) (also a magistrate judge opinion), which was one of the early cases holding that, for conflicts purposes, a lawyer/expert does not have a client.

Original LULAC Council No. 2 v. Rey Feo Scholarship Foundation, Inc., No. SA-23-CV-1307-XR (W.D. Tex. Feb. 14, 2024).

• The parties are fighting over who has the rights to certain trademarks. Plaintiff moved to disqualify the defendant’s lawyer (“Lawyer”) on former-client (Rule 1.9) grounds. There were two primary issues: (1) whether Lawyer previously represented Plaintiff, and (2) whether the earlier matter was substantially related to this case.
• In this opinion the court denied the motion, on both grounds. The analyses were too routine and fact-specific to be of precedential value.
• The most interesting aspect was that Lawyer had represented a predecessor company to Plaintiff. The court found that the predecessor was too defunct, and predecessor’s relationship to Plaintiff too attenuated, for Plaintiff to claim that Plaintiff had been Lawyer’s client.

Bold, Ltd. v. Rocket Resume, Inc., 2024 WL 589116 (N.D. Cal. Feb. 13, 2024).

• Copyright infringement case. Bold moved to disqualify Resume’s law firm (“Law Firm”). In this opinion the court granted the motion. Lots of lawyers with various affiliations moving around, some of whom had done work for Bold and were later with Law Firm.
• The key issue was substantial relationship under Rule 1.9. Routine analysis of questionable precedential value. Very California-centric.

In re The Norwich Roman Catholic Diocesan Corp., 2024 WL 535120 (D. Conn. Bankr. Feb. 9, 2024).

• The Bankruptcy Court appointed the Unknown Claims Representative (“UCR”) in 2022. This opinion responds to UCR’s application to employ Law Firm as its counsel.
• The problem is that Law Firm as been serving as Debtors’ counsel in a number of other church sexual abuse cases. In denying the application, the bankruptcy judge said that representing the UCR here seems “at odds” with serving “as parish counsel in several other pending bankruptcies.”
• The court discussed the application of Section 327 of the Bankruptcy Act and the distinction between “actual conflicts” and “potential conflicts,” but clearing all that away, this application simply did not pass the “straight-face” test (our phrase, not the court’s).

“‘One Firm’ or Separate Entities? Vereins’ Growth Bumps Into Conflicts, Liability Concerns” —

• “A venue dispute in a malpractice case against global firm Baker McKenzie has put the structure of Swiss vereins in the spotlight, with many commentators highlighting the existence of unanswered questions about the liability of these entities when a member firm faces malpractice allegations.”
• “Last week’s ruling from an Illinois appeals court defied Baker McKenzie’s request that a case levied by a former client should be relocated overseas where, as the firm stated, ‘witnesses and evidence reside.’ The judges found the plaintiffs supported their allegations regarding the ‘legal unity of liability of defendants’ sufficiently to allow the case to be heard in the state where the firm was founded in 1949.”
• “The case recalls Dentons’ litigation with former client RevoLaze in 2020, when the firm was accused of malpractice for representing the plaintiff in a patent infringement case despite an alleged client-related conflict of interest. At the time, the firm argued that under its verein structure, its U.S. and Canadian offices were separate entities, though, the argument was rejected, with the judge noting that the firm ‘holds itself out to the public as a single firm.'”
• “In Baker McKenzie’s case, the firm is accused of failing to ‘disclose several conflicts of interest’ to a client. Among its defenses is that the client, investment firm Lehram Capital, engaged the firm’s Russian entity Baker & McKenzie CIS-Limited and not the wider firm. Since the suit was filed in 2018, Baker McKenzie’s Russian operations have relaunched as an independent firm in the wake of Russia’s invasion of Ukraine.”
• “In Baker McKenzie’s case, the firm is accused of failing to “disclose several conflicts of interest” to a client. Among its defenses is that the client, investment firm Lehram Capital, engaged the firm’s Russian entity Baker & McKenzie CIS-Limited and not the wider firm. Since the suit was filed in 2018, Baker McKenzie’s Russian operations have relaunched as an independent firm in the wake of Russia’s invasion of Ukraine.”
• “In times of conflict, like the malpractice claim, this model has proven to be ‘a smart way of navigating conflict while keeping work under one roof,’ according to Fort Stratford Partners co-founder Jonathan Fort. ‘A conflict is a huge problem for any international firm regardless of the structure and some clients aren’t going to like that but in a structural way vereins are a smart move,’ Fort said.”
• “Michael McCabe, a D.C.-based managing partner of McCabe Ali and expert witness in malpractice cases, said he doesn’t see a disproportionate number of verein lawyers accused of malpractice or conflicts. In fact, he said vereins ‘bring something to the table’ with talent and global reach.”
• “Yet the Baker McKenzie case suggests a maturation of the verein structure for law firms, as questions about whether liability can be imputed to a parent company have frequently surfaced in corporate law but not in global law firms, at least not prior to emergence of law firms’ use of the verein structure, Robertson [Cassandra Burke Robertson, a law professor at Case Western Reserve School of Law] said”
• “Marketing speak can make the issue a little more fraught, often undermining the divided structure of these entities. Commentators, as well as courts, have noted some vereins send conflicting messages to the market. ‘This is because they present themselves as one unit while legally acting as separate entities,’ explained consultant Tony Williams, a principal with Jomati Consultants.”
• “Baker McKenzie defended against its former client’s claim of legal malpractice, which emerged out of a deal in Russia in 2013, by contending that the client engaged the firm’s Russia-based entity, not the LLP as a whole and the claim had no merit in the U.S. because none its attorneys “in Chicago or anywhere else in the U.S. participated in the Russian litigation regarding the mine.”
• “‘You still see courts that are struggling with the concept of one law firm versus multiple law firms,” McCabe said. ‘Is Baker McKenzie, for example, one gigantic law firm, or is it a dozen or so smaller geographically centric separately created entities that are all within the same overarching family within the Baker & McKenzie brand?'”
• “‘You can’t be a global law firm and say you have 4,000 global lawyers on one hand, but on the other hand [say], ‘We’re not so global and we operate separately even though we are under the same umbrella,’’ McCabe said. ‘There aren’t many cases that talk about this matter.'”
• “A firm’s growth in scale is attended by the higher risk of conflicts, McCabe said, since every client engagement is a potential source of a conflict. This problem is magnified by the global nature of the clients served by global firms, often with complex structures of subsidiaries and joint ventures of their own.”
  “McCabe said vereins need to have a robust conflict checking system because they are ‘convenient targets’ for malpractice claims brought by dissatisfied clients.”
• “‘The benefits of being a Swiss verein or LLP are far more limited these days. I think it won’t be long before people say they are complicated and become limited companies. This would of course come with its own challenges but forward-looking firms might look to move to a different structure,’ said one head of a professional services firm.”

“US court says Baker & McKenzie LLP can face malpractice suit in Chicago” —

• “The lawsuit, amounting to US$200 million, was filed by overseas clients attempting to reclaim ownership of a Siberian coal mine, challenging the firm’s handling of the case. By a majority of 2-1, the appellate court rejected the motion to dismiss the case based on the doctrine of forum non conveniens, allowing courts to decline cases that might be more appropriately or conveniently tried elsewhere. Although the alleged misconduct occurred in Russia, the court determined that legal proceedings could not be conducted there, making Chicago – a major operational base for Baker & McKenzie LLP – a suitable venue for the trial.”
• “At the heart of the dispute is whether Baker & McKenzie LLP, headquartered in Chicago, can be held accountable for the actions of its Moscow branch, Baker & McKenzie CIS-Limited. The plaintiffs argue that the firm’s organizational structure – a Swiss verein comprising legally independent entities sharing a brand and certain management functions – does not exempt the Chicago office from liability for the Moscow office’s alleged malpractice.”
• “The claimants, Lehram Capital Investments and its principal shareholder, Daniel Rodriguez, had sought Baker & McKenzie’s services following the detention of a Lehram official by Russian authorities in 2013, shortly after acquiring the coal mine. The lawsuit contends that Baker & McKenzie CIS-Limited’s mishandling of the legal proceedings, including filing in an inappropriate court with a shorter statute of limitations and exposing Rodriguez to dangerous negotiations, led to the loss of the mine.”
• “Baker & McKenzie LLP had proposed London as a more appropriate venue for the case, given the involvement of its London office in the initial review and referral of the coal mine case. However, the plaintiffs maintain that all entities under the Baker & McKenzie brand operate as a single unit, making the Chicago office equally responsible.”