Bressler Risk Blog

The ALM/Law Journey Editorial Board writes: “In Support of ABA Proposal on Lawyer Due Diligence” —

• “At its mid-year meeting in February, the American Bar Association passed a resolution that brought ABA policy current in light of the enactment of the Corporate Transparency Act (CTA) in 2021, which addressed anti-money laundering. At the heart of the law, and efforts to fight not just money laundering, but terrorist financing, human trafficking and other such crimes, is disclosure of beneficial ownership. Beneficial owners are those who are the actual, behind the scenes owners of business entities.”
• “The filing obligations under the CTA will start to become effective Jan. 1, 2024. Subject to certain exemptions, domestic business entities and foreign entities registered to do business in the United States that meet certain employee and revenue thresholds are required to report certain information relating to beneficial ownership.”
• “Nonetheless, the issue of whether lawyers have responsibility to ask appropriate questions and otherwise be obligated to engage in a certain level of due diligence remains a matter of public concern, as well as a legitimate concern to the profession as to how lawyers are perceived.”
• “Those who remember the Sixty Minutes program some years ago, where lawyers appeared to have been caught on film discussing potential representation of a fraudster seeking to park illicit money in the U.S., will recall the negative reaction of the public to lawyers seen as aiding and abetting money laundering.”
• “The ABA proposal would add the prefatory language to the overall rule regarding representation to state that “a lawyer shall assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation.” It also adds to the mandatory conditions for refusal to represent or to withdraw the provision that ‘the client or prospective client insists on using the lawyer’s services to commit or further a crime or fraud.'”
• “Nonetheless, the proposal is a necessary addition to address not only the appearance of lawyers to the public, but the substantive obligations of lawyers. If lawyers do not regulate themselves, other measures loom on the horizon, such as the ENABLBERS Act, passed last year by the U.S. House of Representatives but killed by the Senate, or new rulemaking by U.S. Treasury Department under the Bank Secrecy Act.”
• “It is anticipated that the proposal to amend the Model Rules, or a proposal substantially like it, will be considered by the ABA at its annual meeting in August. The proposal has undergone substantial public comment. If adopted, then of course it does not become binding until and unless the respective jurisdictions adopt it. We add our voice to support this proposal.”

“Attorney Disqualified in Amber Heard Coverage Battle” —

• “A California federal judge’s tentative ruling has delivered a surprising twist in the heated battle between insurers New York Marine and General Insurance Co. and Travelers. The two insurance giants are embroiled in a fierce dispute over coverage in a defamation lawsuit involving actress Amber Heard and her ex-husband, Johnny Depp. In a surprising development, the judge has granted New York Marine’s bid to disqualify Maynard Nexsen from representing Travelers, shaking up the legal landscape and heightening the drama surrounding this high-profile case.”
• “The judge’s decision is based on the fact that one of Maynard Nexsen’s associates, Matthew A. Chipman, previously worked for McCormick Barstow Sheppard Wayte & Carruth LLP, the firm representing New York Marine in the lawsuit. This revelation creates an intriguing legal conflict, raising questions about potential conflicts of interest and adding a layer of complexity to the case.”
• “The involvement of Amber Heard and Johnny Depp in the underlying defamation lawsuit forms the backdrop of this insurance coverage dispute. Travelers accused New York Marine of failing to fulfill its obligation to provide coverage to Heard, who was a co-insured party.”
• “As the legal battle between New York Marine and Travelers intensifies, the disqualification of Maynard Nexsen adds a new layer of intrigue to an already captivating case. The implications of this ruling are significant for both insurers and the high-profile individuals involved. The disqualification not only disrupts Travelers’ legal representation but also underscores the complexity and intensity of the dispute surrounding Amber Heard and Johnny Depp’s defamation lawsuit.”
• “Moving forward, the focus will shift to the actions and strategies of the parties involved. It remains to be seen how Travelers will regroup and respond to the disqualification, as well as how New York Marine will leverage this development in their pursuit of a favorable outcome. The case’s outcome could potentially reshape the landscape of insurance coverage disputes, setting precedents for future cases involving co-insured parties and complex legal conflicts.”
• For more detail and background, see: “Amber Heard Defense Cost Drama: Insurer Fights to Disqualify Law Firm Over Conflict of Interest“

(I’m curious to see if they start going to bank and payment processors to get this data, or even “recruiting laterals.”) “SEC, Covington dig in their heels as judge weighs US demand for client names” —

• “A federal judge on Wednesday urged the U.S. Securities and Exchange Commission to resolve its dispute with law firm Covington & Burling over the agency’s demand for the names of 300 clients affected by a cyberattack on the firm.”
• “The SEC sued Covington in January to force the prominent Washington-based firm to identify public company clients whose information was accessed or stolen in the breach. The hack was carried out by the Chinese-linked Hafnium cyber-espionage group, according to court filings, and the SEC said it needed the client names to probe for securities law violations associated with the attack.”
• “Covington, represented by law firm Gibson, Dunn & Crutcher, has resisted the subpoena, arguing that its clients are confidential and identifying them would run afoul of legal ethics standards and constitutional privacy protections.”
• “U.S. District Judge Amit Mehta called the SEC’s request “concerning” at Wednesday’s hearing, but also appeared skeptical that he had the legal authority to block the agency’s demand.”
• “Mehta told an SEC lawyer that the subpoena puts Covington in the “very awkward position” of having to identify its clients to an enforcement agency without evidence of wrongdoing.”
• “The SEC has said the client identities are necessary to investigate potential insider trading associated with the hack and to ensure that the companies affected made required disclosures.”
• “The judge appeared to search for a resolution short of a court order, asking Hansen if the SEC could narrow its demand to only clients that had private information material to investors accessed during the cyberattack.”

(Curious, I tried to identify the brother and his oeuvre. IMDB reported about 30 individuals with the surname.) “AMC Shareholder Case Judge Refutes Special Master Bias Concerns” —

• “A lawyer deputized to assist in shareholder litigation over preferred equity units issued by AMC Entertainment Holdings Inc. doesn’t appear to have any conflicts of interest, a Delaware judge said Wednesday.”
  “Amato is reviewing a tidal wave of letters from AMC retail investors writing to oppose a legal settlement allegedly worth more than $100 million.”
• “Zurn, writing for Delaware’s Chancery Court, said the risk of retaliation by Hollywood elites against Amato’s brother, who allegedly works as a film editor, is too remote to justify removing her from the case. “I can envision no set of circumstances” in which her recommendations “could so anger Hollywood’s entertainment industry that it would blacklist” him, the judge said.”
• “Nor does Amato appear to have any conflicts of interest stemming from her past work as co-counsel with one of the lawyers for the investors leading the litigation, Zurn found. But the judge said she would wait to formally reject that argument until Amato submits an affidavit stating that she’s unbiased.”
• “The motions didn’t fully back up the assertions about Amato’s brother or say where the information came from—they simply flagged film industry work by someone sharing a last name with her—but Zurn said she had taken the claims at face value.”
• “The settlement—worth more than $100 million at current trading prices, according to recent court filings—would resolve claims that the APE conversion reflects a complex corporate engineering scheme aimed at unfairly sidelining ordinary shareholders. AMC would get to move ahead with its recapitalization plan, while each owner of common stock would receive an additional share for every 7.5 they hold.”

Further, from the ruling: “RE: In re AMC Entertainment Holdings, Inc. Stockholder Litigation” —

• “The second motion alleges Special Master Amato may not be impartial with regard to Mark Lebovitch, Esq., of Bernstein Litowitz Berger & Grossmann LLP, who has entered his appearance on behalf of plaintiffs in this case. The motion asserts Special Master Amato and Mr. Lebovitch worked together on In re Globe Specialty Metals, Inc. Stockholders Litigation, C.A. No. 10865-VCG (Del. Ch.).”
• “A review of that docket indicates that indeed, Special Master Amato’s firm and Mr. Lebovitch’s firm served as co-lead  counsel for the plaintiffs in that case, and both Special Master Amato and Mr. Lebovitch entered appearances.”
• “The motion states that Special Master Amato’s co-representation of lead plaintiffs with Mr. Lebovitch in that matter, which concluded nearly seven years ago, “raises reasonable questions regarding her impartiality.”
• “I interpret the motion as seeking disqualification under Rule 2.11(A)(1).”
• “Special Master Amato’s past representation in In re Globe Specialty Metals does not give rise to an objective appearance of bias in favor of Mr. Lebovitch or his clients. Serving as co-lead counsel in a case nearly seven years ago creates no logical concern that Special Master Amato would favor Mr. Lebovitch or his clients in her recommendations in this matter.”
• “The fact that the movant ‘has no way of knowing if both parties have been communicating outside this court’ does
  not change that result. One could say this of any judicial officer and any other person, but absent any reason to think such communications exist and that such communications are of such a nature that would create or reflect a bias, this unknown does not contribute to the objective appearance of bias.”

Last week: “Baker McKenzie Should Drop Tucker Carlson, Ex-Fox Producer Says” —

• “Tucker Carlson risks being dumped by the lawyers defending him in a suit by a former Fox News producer, thanks to his recent firing, an attorney for the producer says.”
• “Baker McKenzie lawyers are currently representing Carlson and Fox News in the civil suit filed by Abby Grossberg, the former head of booking for Fox’s ‘Tucker Carlson Tonight’ program. Grossberg’s lawyer says that presents a conflict, now that Carlson has accused Fox of fraud and breach of contract stemming from his April 24 firing.”
• “‘It is our belief that Mr. Carlson may need to obtain independent legal counsel, given the conflictual nature of his relationship with his now former employer Fox News Network,’ Parisis Filippatos said in a May 9 letter to Judge Jesse Furman.”
• “Grossberg alleges in her lawsuit that Carlson and others at Fox fostered an ‘overtly misogynistic work environment’ and that she suffered ‘countless’ examples of sexism and antisemitism while employed by the news network.”
• “Filippatos, a White Plains, N.Y. employment lawyer, said Baker McKenzie ‘seems to be engaged in a likely conflict’ that could harm his client by delaying the case.”
• “Filippatos in a May 5 letter to Evans and Katzenstein, cited separate leaks of racist statements by Carlson, which Filippatos said ‘presumably’ came from the network. The leaks ‘clearly indicate the existence of an inherent and unwaivable conflict of interest between Fox News and Mr. Carlson, which would make your joint representation of those two parties highly problematic for various reasons.'”

And then, on Sunday: “Baker McKenzie Drops Tucker Carlson in Fox Discrimination Suit” —

• “Baker McKenzie is dropping former Fox News star Tucker Carlson as a client after a former producer argued the firm had engaged in a conflict by also representing Fox.”
• “‘Mr. Carlson will be represented by separate counsel in this matter, who will enter an appearance reflecting as much,’ New York-based Baker partner Paul Evans wrote to US District Court Judge Jesse Furman on Friday.”

“Judge rejects bid to disqualify JPMorgan’s law firm in Epstein litigation” —

• “A federal judge on Thursday rejected an effort to disqualify the law firm defending JPMorgan Chase & Co (JPM.N) against a lawsuit by women who claim they were abused by Jeffrey Epstein and that the bank aided in the late financier’s sex trafficking.”
• “U.S. District Judge Jed Rakoff in Manhattan said the firm WilmerHale did not have a conflict of interest because it once represented an anti-sex trafficking group that supported Courtney Wild, one of Epstein’s accusers.”
• “Rakoff also found no proof Wild gave WilmerHale confidential information that was material to the JPMorgan case, and said the bank would suffer “great prejudice” from being disqualified “so late in this litigation,” five months before the Oct. 23 trial.”

Previously: “Law firm for JPMorgan in Epstein case fights disqualification bid” —

• “Law firm Wilmer Cutler Pickering Hale and Dorr pushed back on Monday against an effort to bar the firm from defending JPMorgan Chase & Co (JPM.N) in a lawsuit accusing the bank of helping to facilitate late financier Jeffrey Epstein’s abuse of women and girls.”
• “WilmerHale lawyers said in a court filing that the firm’s past work for an anti-sex trafficking organization that supported an alleged Epstein victim, Courtney Wild, was ‘unrelated to and had nothing to do’ with the case against JPMorgan, which was brought by a different Epstein accuser in U.S. District Court for the Southern District of New York.”
• “WilmerHale lawyers authored a friend-of-the-court brief in 2021 on behalf of the anti-trafficking organization ECPAT-USA urging the U.S. Supreme Court to take up an appeal by Wild, who had sued to invalidate a 2007 non-prosecution deal between Epstein and U.S. prosecutors.”
• “WilmerHale said in Monday’s filing that it did not represent Wild and that its work with ECPAT-USA was limited to filing the Supreme Court brief on a legal issue unrelated to the JPMorgan case. The firm argued that ECPAT-USA as an outside organization was not directly involved in Wild’s case.”
• “WilmerHale attorneys accused the plaintiff of ‘gamesmanship’ in attempting to disqualify JPMorgan’s preferred law firm.”

“FTX’s law firm is back in the cross-hairs as Bankman-Fried kicks off defense” —

• “Indicted FTX founder Sam Bankman-Fried has renewed his attacks on the bankrupt cryptocurrency exchange’s law firm as he mounts his defense against a raft of fraud, money laundering and campaign finance charges.”
• “Bankman-Fried late Monday asked a judge to designate FTX’s current leadership and the exchange’s attorneys at law firm Sullivan & Cromwell as part of the ‘prosecution team’ in the criminal case against him.”
• “FTX and Sullivan & Cromwell provided such extensive cooperation to the government that prosecutors had ‘effectively deputized the company to aid the prosecution,’ Bankman-Fried argued.”
• “Sullivan & Cromwell, a prominent Wall Street law firm with about 900 lawyers, represented FTX on transactions and regulatory matters before its collapse last year. The firm secured court approval in January to advise FTX in its bankruptcy, overcoming objections from some FTX creditors and U.S. lawmakers that its past work created a conflict of interest.”
• “Bankman-Fried publicly assailed Sullivan & Cromwell following the exchange’s collapse, claiming the firm rushed FTX into bankruptcy and downplayed its prior work for the exchange. The firm has denied the claims.”
• “Monday’s filing in Manhattan federal court indicated that the one-time crypto billionaire would target Sullivan & Cromwell and current FTX CEO John Ray in his criminal defense as well.”
• “If the judge grants Bankman-Fried’s request to designate them as part of the prosecution, they would be required to turn over any documents relevant to the case, including evidence that potentially bolsters Bankman-Fried’s defense. Normally only prosecutors face that obligation.”

“Proskauer Goes Even Harder After Former Firm Executive With Amended Complaint” —

• “The explosive lawsuit between Biglaw firm Proskauer and its former chief operating officer, Jonathan O’Brien, continues to be filled with eye-popping rancor.”
• “You’ll recall, the firm alleged in its initial complaint, filed in December, that the now-former COO downloaded 34 gigabytes of internal data to a USB drive before announcing he was leaving the firm to work for a competitor. O’Brien was poised to join Paul Hastings, but that deal blew up when the lawsuit was filed.”
• “Now Proskauer has filed an amended complaint, adding a lot more color to the dispute between the two parties. As reported by Bloomberg Law, the new complaint accuses O’Brien of a scheme to recruit a number of Proskauer executives to Paul Hastings:
  • Jonathan O’Brien conspired with “key executives,” including Proskauer’s former chief financial officer, Leigh Anne Whyte, in the effort to bring senior officials and staff with them in a move to Paul Hastings, Proskauer said Monday. The new allegations came in an amended complaint filed in a Manhattan federal court.
  • The firm also accused O’Brien of sharing recruiting information with the “chair of the competing law firm,” a reference to Frank Lopez, the Paul Hastings chair and a Proskauer alum. The two law firms are among the largest in the US, with each eclipsing over $1.2 billion in gross revenue in 2022.”
• “Proskauer also notes in the amended complaint that, after the first complaint was filed, O’Brien deleted communications.”
• “In a statement, Paul Hastings said the firm ‘neither solicited nor received any confidential or proprietary information,’ and that, ‘This continues to be another firm’s personnel dispute and we do not comment on other firms’ personnel matters.'”
• “O’Brien’s attorney, Russell Beck, said in a statement the amended complaint was ‘drafted with an eye towards using the media.'”

“Cannabis License Conflict Draws Sanction” —

• “A conflict of interest and related violations drew a six-month suspension followed by eighteen months of probation from the Arkansas Committee on Professional Conduct Panel D.”
• “The conflict involved a client who had retained Respondent regarding a medical marijuana cultivation license. The client had created an entity (“Courageous Ann”) to pursue a license to establish an Arkansas medical marijuana cultivation company.”
• “Respondent had access to a client-created dropbox and maintained such access after leaving his firm. The firm and the Respondent continued as counsel after his departure. The Arkansas Democrat-Gazette reported on the sharing of dropbox documents:
  • “An Arkansas Democrat-Gazette review of public records found that large portions of Delta Medical Cannabis Co.’s successful cultivation license application had the same wording — verbatim in some cases and slightly tweaked in others — as the language used in 46th-ranked Courageous Ann’s application.”
  • “Electronic fingerprints on Delta Medical’s internal documents and company emails — provided by sources — show how the contents of Courageous Ann’s application funneled into Delta Medical’s hands through accounts linked to its previous attorney, Michael Langley.”
  • “Langley is the former director of the Arkansas Alcoholic Beverage Control Division, the agency that now oversees the state’s burgeoning medical marijuana industry. Langley was not involved with medical-marijuana issues during his time at the agency, having left several years before voters approved the constitutional amendment on the drug in 2016.”
• “The order finds a violation of the duty of confidentiality as well as a conflict of interest by representing Delta in competition with Courageous Ann.”

“Lawyers suspended for copying client data, unilaterally notifying clients about new firm” —

• “Two Florida associates who hoped to take their clients with them when they left their personal injury law firm have been suspended from law practice for violating bar rules during that process.”
• “They formed their firm before leaving the Dan Newlin firm in January 2021. They did not give advance notice of their intent to resign, according to their conditional pleas (here and here) for consent judgment.”
• “The lawyers were accused of making digital copies of confidential client data while at the Dan Newlin firm. They were also accused of disabling a feature in the case management system that allowed the firm to mass email clients.”
• “After leaving the firm, the lawyers contacted clients they hoped to take with them without first approaching the Dan Newlin firm to negotiate a joint letter to the clients, as required by ethics rules, their pleas said.”

On the above, see also Michael Kennedy, Vermont’s Bar Counsel: “The story of the 2 Florida lawyers who were suspended for misconduct associated with leaving a law firm prompts me to share some observations” —

• “To lawyers who want to notify clients before (or without) informing the firm, answer me this: why?”
• “In my experience, the answer is most often ‘I want the clients to come with me.’ Trust me, I understand the answer. Really, I get it.”
• “But it’s not the answer that is problematic. It’s the thought process. It’s not too different than the child/spouse who decides to do something without telling their parents/spouse. And, usually, that’s a decision born of a realization that ‘I don’t think that telling them will work out too well for me.'”
• “To lawyers who learn that a lawyer is leaving and want to ban the lawyer from contacting clients, answer me this: why?”
• “In my experience, the answer is most often “I want the clients to stay here.” Trust me, I understand the answer. Really, I get it.”
• “But it’s not the answer that is problematic. It’s the thought process. It’s not too different from the spouse who asks a friend ‘please don’t ask my spouse if we’ll go with you.’ And, usually, that’s a question born of a realization that the spouse might say ‘yes, we’d love to.'”
• “Whatever feelings the departure engenders between departing lawyer and firm, professional responsibility includes putting those feelings aside and complying with the obligation to communicate to the client sufficient information to allow the client to make informed decisions about the representation.”

“Departing Ethically – 5 Things IP Lawyers and Law Firms Should Evaluate When Transitioning Firms” —

• “Lawyers and their Law Firms Don’t Own Clients…Both departing lawyers and their law firms must pay close attention and not get emotionally attached to the idea of ownership or control. While law firms cannot generally contract with their lawyers to prohibit solicitation, they may have an ownership interest in certain things—like trade secrets or confidential business records of the firm itself. Nevertheless, as noted below, departing lawyers may have overriding ethical obligations that require disclosure of certain materials (i.e., information to evaluate conflicts of interest).”
• “Since lawyers and law firms don’t own clients, and it is a client’s right to choose their counsel, how do we appropriately notify clients of their rights? The answer is seemingly simple—work together to notify them. However, that does not always go smoothly, as each side often desires to put a ‘spin’ on their contributions and the ability for the other to continue the representation.”
• “The test for communication does not rely on whether it would be reasonable for a client to depart with the lawyer, but just whether there was significant contact. As such, a Fortune 500 company could still require some notice as to the transition of a lawyer with whom they had regular contact, even if that lawyer would be entering into solo practice and might be unable to handle the client.”
• “Speaking of communication, lawyers owe fiduciary duties to their law firms. As such, they should avoid informing clients of a transition prior to notifying their law firms. Simply stated—it is not unethical to have separate conversations with clients regarding the departure, but lawyers should be mindful of their obligations and loyalty to their firm when having these discussions. In fact, these discussions should be about the clients right to transition, and not a sales opportunity.”
• “Conflicts (and Duty of Disclosure)… However, lawyers should carefully review the former client conflict and imputation rules under 37 CFR 11.109 and 11.110 to ensure they fully understand that simply terminating the representation or not transitioning the client does not always solve a problem when dealing with the same or substantially related matter.”
• “Moreover, while the Duty of Disclosure obligations under patent law are not usually imputed to others in the firm, it is important to carefully review disclosures by the client to others within the firm, and even departed lawyers, to make sure that disclosures to the USPTO are properly made.”
• “…law firms should not re-assign lawyers to client matters to avoid notification or prevent a client from leaving, though it may be prudent to introduce new lawyers to a client in case a client does stay, in order to have some level of continuity. More importantly, lawyers and law firms should not block access or hide files. This common tactic is used by firms (and sometimes the departing lawyer) to make the transition more difficult but has the added result of potentially harming clients.”

“Epstein accuser suing JPMorgan seeks to disqualify bank’s law firm” —

• “A Jeffrey Epstein accuser suing JPMorgan Chase & Co (JPM.N) for allegedly aiding the late financier’s sex trafficking of girls and women asked a judge to disqualify the bank’s law firm on Thursday, arguing it has a conflict of interest.”
• “Lawyers for the woman, who claims she was a victim of Epstein and is not named in court papers, said the judge should bar law firm Wilmer Cutler Pickering Hale and Dorr from representing JPMorgan because it previously represented an anti-sex trafficking organization that supported a different Epstein accuser.”
• “The accuser’s attorneys argued that WilmerHale had learned confidential information about the case of Courtney Wild, an alleged victim of Epstein who is also a potential member of the class suing JPMorgan, according to a court filing.”
• “WilmerHale represented the anti-trafficking organization ECPAT-USA in a legal brief urging the U.S. Supreme Court to accept Wild’s appeal to invalidate a 2007 non-prosecution deal between Epstein and U.S. prosecutors. The court ultimately did not take the case.”
• “A lead WilmerHale lawyer on JPMorgan’s defense team, Felicia Ellsworth, signed the Supreme Court brief. Wild’s attorneys also consulted with WilmerHale attorneys on legal strategy, Thursday’s filing said.”
• “‘WilmerHale is obviously undertaking a representation in which JPMorgan’s interests are materially adverse to ECPAT’s (as well as Ms. Wild’s),’ the filing said.”

“West Haven’s attorney suspended after awarding work to his own law firm” —

• “West Haven’s corporation counsel has over the past three years funneled city work to his own private law firm, enabling him and his wife to represent the city in foreclosure cases and to bill up to $225 per hour for their services.”
• “As West Haven’s top attorney, Lee Tiernan has the power to hire outside counsel to assist the city in legal matters. But public documents show he used that authority to assign work to his wife, Amanda Tiernan, through a private law practice that bears his name.”
• “The arrangement is now drawing scrutiny. Moments after this story initially published Tuesday afternoon, West Haven Mayor Nancy Rossi suspended Tiernan, for purportedly not filling out an ethics report properly.”
• “‘A top official engaging in conflicts of interest for personal gain is exactly the type of bad, inherent culture the MARB has been harping on,’ said Rep. Dorinda Borer, D-West Haven, referring to the state Municipal Accountability Review Board that has been overseeing the city’s finances for years. ‘But clearly their calls for change are not resonating. The only way this is going to change is a clean sweep.'”
• “State court records indicate Tiernan appointed his wife to represent West Haven in at least 10 different court cases between 2020 and 2022 in which the city sought to foreclose on various properties for back taxes.”

Continued bubbles surfacing on this one, starting with: “Coke’s Quest to Disqualify Paul Hastings Faces Big Hurdles” —

• “Legal experts say they can understand why Coca-Cola would be unhappy with Paul Hastings’ representation of a company suing the beverage giant for $100 million, but they call the company’s efforts to disqualify the law firm an uphill battle.”
• “Atlanta-based Coke asserts in its April 12 motion that Los Angeles-based Paul ‘abandoned its ethical obligations’ when it took on the case, even though Coke was a long-standing client.”
• “But Paul Hastings characterizes the motion as baseless, given that Coke in April 2021 signed an engagement letter with the law firm on a human rights matter, giving it wide latitude to work with any client it wishes, so long as the subject is ‘not substantially related to a matter in which we have represented you.'”
• “Attorneys not involved in the dispute say courts normally uphold such advance waivers, unless the party granting the waiver lacks the sophistication to understand its consequences.”
• “‘It is in my view quite unfair for one of the largest, oldest, most successful and most sophisticated corporate entities in the world to induce a law firm’s reliance by agreeing to a waiver and a short time later say, ‘No, not so much, we really didn’t have enough information to inform our consent,’’ said Michael McCabe Jr., managing partner of McCabe & Ali in Washington, D.C.”
• “‘Give me a break. If Coke can’t be held to an advance waiver, why would anyone honor an advance waiver?'[McCabe added]”
• “After reviewing the language in Paul Hastings’ advance waiver with Coke for Law.com, University of Minnesota law professor Richard Painter said: ‘Is it a clear waiver? It appears to be.'”
• “For its part, Coke argues that the advance waiver was ‘buried in a boilerplate attachment’ to the engagement letter and was so general as to be unenforceable. It noted that the waiver did not even include an expiration date.”
• “Coke said courts have found that such ‘open-ended advance waivers, like the one at issue here, do not provide ‘informed’ consent because they do not provide the signer with adequate information to evaluate the conflict… Paul Hastings knew that Coca-Cola did not intend for every potential future conflict to be waived in perpetuity.'”
• “Furthermore, Coke says its guidelines for outside counsel explicitly state that the company does not grant advance conflict waivers. It says those guidelines require full prior disclosure and written approval of potential conflicts.”
• “But Paul Hastings counters that such guidelines are subordinate to the letter of engagement containing the waver, which was signed by Derek Gilliam, who at the time was a Coke senior counsel and now is chief of staff for the Office of General Counsel.”
• “One case similar to Coke’s involved Texas-based Galderma Laboratories, which in 2012 filed a motion to disqualify one of its outside law firms, Vinson & Elkins. The law firm had been representing the company on employment matters but also represented a company that Galderma sued over an intellectual property dispute.”
• “Galderma had asked V&E to withdraw, but it refused, citing a conflicts waiver that was part of the engagement letter Galderma had signed. Texas federal Judge Ed Kinkeade rejected the disqualification request, calling the waiver language unambiguous. ‘Galderma is a sophisticated client who has experience engaging multiple large law firms and has twice signed similar waiver provisions with at least one other law firm it has hired,’ the ruling said.”

For those curious to read the specific language of the engagement letter, see page 37 of Coke’s: “Motion to Disqualify“. Here’s a snapshot of that:

And for other interesting perspective, see this from Rob Chesnut (former GC at Airbnb, former Justice Department prosecutor): “Paul Hastings Burns Coca-Cola, Reputation in Conflict Fight” —

• “No matter how the dispute shakes out, advance conflict-of-interest waivers are bad business. According to some courts, they’re also unenforceable.”
• “The Paul Hastings-Coke saga isn’t terribly surprising. It highlights an inherent conflict between law firms and their clients. Firms want to cast their nets as widely as possible to bring in work. Clients, of course, want lawyers that are loyal to them above all.”
• “Law firms, which have grown exponentially over the last three decades, face continued pressure to bring in new clients. Lawyers have jumped from one firm to the next more frequently over the same time, raising complicated questions about potential conflicts.”
• “During my time leading legal departments at companies like Airbnb and eBay, my relationships with outside counsel boiled down to a few questions: Do we approach legal problems the same way? Is the lawyer smart, well-versed in the relevant area of the law, practical, solutions-oriented, highly responsive and invested in the success of my company?”
• “If the answer to those questions is “yes,” we were likely to have long relationship. Even if the lawyer’s firm ticks up billing rates over the years. A total of seven outside lawyers—four men and three women—met this criteria for me. I trusted them completely to deliver what I wanted. If they moved law firms, I moved law firms. If I changed jobs, I retained them to advise my new company.”
• “By the same token, my outside counsel wouldn’t want to do anything to hurt my company. They would never, for example, send me an annual letter with an advance conflict-of-interest waiver buried in small print.”
• “Instead, I’d expect us to have a mature conversation about the issue up front. It usually would go something like this:
  • Outside counsel: Hey Rob, if we ever get approached for representation in a situation that might present a conflict of interest with your company, I’ll call you and we’ll discuss it. I know that you’ll be fair, and if there’s not a real conflict, you’ll waive it so that you can support my firm’s success. If the conflict is real, there won’t be much of a conversation…I’ll ensure that our firm turns down the work.
  • Me: Done.“

“My advice to firms is to rip these waivers out of your terms of service, now. Don’t show up on the other side of a lawsuit, suing my company, without so much as an advance phone call and a discussion.”
“Paul Hastings might manage to get a court to enforce the waiver in this case. But, by allegedly failing to have the conversation with Coke—and later threatening to walk away from the company if it doesn’t agree to waive the conflict—the firm hurt its own brand.”

“Paul Hastings Slams Coke Bid to Boot Firm From SuperCooler Suit” —

• “Coca-Cola Inc. is seeking a ‘tactical advantage’ by asking a federal judge to have Paul Hastings removed from a lawsuit against the beverage giant, the Big Law firm said in a case highlighting its fallout with a one-time client.”
• “Paul Hastings lawyers should not be barred from representing a company suing Coke for more than $100 million, the law firm said Wedenesday in a filing in federal court in Orlando, Florida. Coke, which Paul Hastings represents in a human rights matter, has accused the firm of trying to ‘fire’ it as a client by working for SuperCooler Technologies Inc. in an unrelated lawsuit against the soda-maker.”
• “The dispute tests the limits of ‘advance conflict waivers,’ in which firms ask clients to agree ahead of time to allow their lawyers to represent others in situations that could otherwise pose an ethical problem.”
• “Paul Hastings called Coke’s attempt to remove the firm from the SuperCooler case a ‘technique of harassment’ designed to help the company fight off the lawsuit. Coke agreed Paul Hastings could represent other clients in future litigation against the company when it signed an engagement letter in 2021 that included a ‘waiver of prospective conflicts,’ according to the firm.”
• “SuperCooler alleges Coke misused its trade secrets and broke promises to use its technology that rapidly chills beverages, according to court filings.”
• “A group of lawyers from Cahill Gordon & Reindel representing SuperCooler jumped to Paul Hastings over the last two months, bringing the case with them. Coke said at least one of those lawyers, Bradley Bondi, did not alert the company he was joining Paul Hastings to work on the lawsuit even after Coke raised concerns about the firm taking a case against it.”
• “The conflict waiver Coke signed was ‘fully informed’ and signed by a ‘sophisticated consumer of legal services,’ the firm said.”

“Advance Conflict Waivers: Use Them or Lose Them?” —

• “Many lawyers use advance or future conflicts waivers to streamline the conflict waiver process for future matters involving current clients, including those who may subsequently become former clients. An effective advance conflict waiver will permit lawyers to take on matters adverse to a client without the need for a subse- quent waiver from that client.”
• “This article offers two suggestions for the possible use of advance waivers. First, advance waivers may permit lawyers to seek more streamlined consents to conflicts that come up repeatedly with the same client or clients.”
• “Second, recent case law suggests that con- flicts waivers may be an effective tool for maintaining representation of one client when adversity arises during a joint representation. Courts appear to be more likely to enforce advance waivers in the context of jointly represented clients because the lawyer is at least arguably able to be more specific as to both 1) the clients whose interests may become adverse in the future, and 2) the types of matters covered by the waiver.”
• “Although not the focus of this article, two other points bear noting. First, a lawyer seeking a conflict waiver, whether for a current conflict or a future one, would be well-advised to discuss the waiver with the client before signing. Such discussions are especially important in the context of an advance waiver. Second, all waivers should, at a minimum, discuss loyalty/zealousness and confidentiality/privilege, as noted in greater detail below.”

“As Holland & Knight Grows, Another Partner Leaves Because of Conflicts” —

• “With two recent major mergers in the books, Holland & Knight is losing another partner to a dispute resolution firm in South Florida, the latest in a string of conflict-related departures.”
• “Rodolfo ‘Rudy’ Sorondo Jr., a longtime partner and former state court judge, is leaving the Am Law 100 firm after more than 20 years. He’ll join newly launched alternative dispute resolution firm Private Resolutions, founded by another local ex-judge, Alan Fine, after he left the bench earlier this year.”
• “Sorondo is referring to being conflicted out of certain arbitration cases at Holland & Knight because of the firm’s size.”
• “‘The conflict database [at Holland & Knight] is enormous. And consequently, there are many arbitrations and special master assignments that I simply cannot take,’ he said. ‘In those instances, you are an adjudicative officer and people don’t feel comfortable if there is a conflict.'”
• “And although mediations typically avoid conflict issues because a mediator has less power than an arbitrator, Sorondo said the conflicts also bled into mediation at times.”

“Cadwalader Partner Steps Down to Represent Trump in Manhattan DA’s Criminal Case” —

• “Todd Blanche, a partner at Cadwalader, Wickersham & Taft, has resigned from the law firm to join the defense team representing former U.S. President Donald Trump in a criminal case brought by the Manhattan District Attorney’s office. According to reports by Politico and Law.com, Blanche will eventually lead Trump’s representation. A spokesperson for Cadwalader confirmed Blanche’s departure but declined to comment further.”
• “In an email obtained by Politico, Blanche stated that he resigned from Cadwalader because he had been asked to represent Trump in the recently charged Manhattan District Attorney’s case. He further explained that after careful thought and consideration, he believed it was the best opportunity for him and an opportunity he should not pass up. Blanche’s LinkedIn profile indicates that he was a partner at Cadwalader from September 2017 to April 2023 and is now listed as the founding partner of Blanche Law.”
• “Blanche will join a defense team that includes lawyers Joe Tacopina and Susan Necheles. In a statement to Law.com, an anonymous source described Blanche’s departure from Cadwalader as a ‘happy uncoupling.'”

“Pitfalls for Corporate Counsel in Business Divorce Disputes” —

• “No corporate lawyer wants to get drawn into a nasty litigation between an entity’s owners. But the reality is that corporate and general counsel often find themselves unwittingly ensnared in business divorce cases. Sometimes a corporate transaction is the genesis of litigation, and corporate counsel’s role or advice may be exceedingly important.”
• “Other times, corporate counsel may have served in a joint, dual, or uncertain capacity, providing advice to the entity and its owners simultaneously. This can create particular problems when formerly aligned interests diverge.”
• “In this week’s business divorce, we’ll consider three doctrinal pitfalls for corporate and general counsel in business divorce litigation: the fiduciary exception to the attorney client privilege, the joint representation exception to the attorney-client privilege, and a virtual per se rule of disqualification for litigation counsel who previously served as corporate counsel for a closely-held entity whose owners become adverse.”
• “A final rule of law that crops up repeatedly in business divorce cases: ‘One who has served as attorney for a corporation may not represent an individual shareholder in a case in which his interests are adverse to other shareholders’ (Matter of Greenberg, 206 AD2d 963 [4th Dept 1994]).”
• “Under this principle of law, an attorney may not serve as corporate or general counsel for an entity, or its owners jointly, then morph roles to become litigation counsel for one owner adverse to the other.”
• “The bottom line of all of these concepts is that corporate and general counsel should be exceedingly careful when taking on taking on new representation to spell out in their engagement letters exactly who are the clients, who are not the clients, and the precise scope of the representation.”
• “Recently, my firm and I successfully relied upon the Deerin line of case law for disqualification of opposing counsel in a pair of cases involving a 50% / 50% father-son shareholder dispute in the Suffolk County Commercial Division.”
• “According to our client (the father), opposing counsel previously served as both trust and estate counsel for the father and as corporate counsel for the entity and its shareholders, including drafting the shareholders’ agreement on behalf of both shareholders. Opposing counsel then switched roles, becoming litigation counsel for the son suing the father for attempted rescission and damages relating to a stock purchase agreement both sides allege the other breached. You can read the resulting disqualification decisions here and here.”