Bressler Risk Blog

“Why Lowenstein Sandler Was Barred From Representing a Client” —

• “A New Jersey appeals court granted a motion to disqualify Lowenstein Sandler from representing one of the executors of the estate of a pharmaceuticals executive.”
• “The appeals court overturned a ruling denying a motion by Angela Krivulka to disqualify Lowenstein Sandler from representing an attorney from the firm, Michael Lerner, as co-executor of the estate of Krivulka’s late husband, Joseph. But the panel also affirmed a lower court ruling removing Krivulka from her post as co-executor.”
• “Krivulka sought to disqualify Lowenstein from administration of her late husband’s estate based on the firm’s representation of both her and her husband in their estate planning matters, beginning in 2009. And the appeals court, in an unsigned opinion, said her husband deliberately structured his estate, and concealed information from Krivulka, so that certain of his assets, as community property, would not pass to her.”
• “‘Thus, we are satisfied that Lowenstein’s obligations to Mrs. Krivulka as her estate planning attorney presented a clear conflict that should have precluded Lowenstein from representing Mrs. Krivulka and Lerner jointly as coexecutors,’ the appeals court said.”
• “Lowenstein, noting that the couple asked the firm to provide them joint representation, advised them about a potential conflict in that type of representation, and obtained waivers of the conflict. However, two weeks after signing the waiver, Angela Krivulka raised concerns about a conflict arising over Lerner’s relationship to Lowenstein. Later, in July 2020, Krivulka sued Lowenstein and Lerner for malpractice in federal court in New Jersey, claiming Lerner failed to provide her certain information about the estate.”
• “Joseph Krivulka’s will gave Lerner the authority to appoint a third co-executor, and he named Harriet Derman, a former state judge now with DiFrancesco Bateman Kunzman Davis Lehrer & Flaum in Warren to that post. Derman proceeded to file a complaint in Monmouth County Probate Court, seeking confirmation that two out of three of the co-executors could authorize use of estate assets to pay administrative expenses of the estate.”
• “The panel said Lerner’s interest in administering Joseph Krivulka’s estate consistent with his will ‘is clearly adverse to Mrs. Krivulka’s individual interest to obtaining the maximum financial benefit from the estate.'”

“El Paso County sex assault convictions overturned due to lawyer’s offenses” —

• “A defense lawyer had an actual conflict of interest when he represented an El Paso County defendant at the same time the lawyer’s own drunk driving cases were pending before the same prosecutor’s office, Colorado’s second-highest court determined on Thursday.”
• “Because the U.S. Constitution guarantees the right to conflict-free legal representation and District Court Judge David A. Gilbert failed to ensure the defendant knowingly gave up that right, a three-judge panel for the Court of Appeals reversed the convictions of Matthew Rodolfo Vansant Lopez.”
• “‘Here, the court only asked if Lopez was aware of ‘current circumstances,’ and made no mention of the fact that defense counsel had been criminally charged,’ wrote former Supreme Court Justice Alex J. Martinez, who sat on the panel at the chief justice’s assignment. ‘Thus, the court’s inquiry was procedurally deficient.'”
• “Unusually, at the same time he was representing Lopez, prominent defense attorney Dennis Hartley had cases pending against himself in El Paso County. Court records show a lengthy series of charges for driving under the influence, driving without a license and other traffic infractions. Most recently, Hartley pleaded not guilty in March of this year to five other driving-related charges.”
• “The Court of Appeals previously recognized that when a defendant and his lawyer are both being prosecuted by the same district attorney’s office, there is a danger prosecutors ‘might take umbrage at a vigorous defense’ from the attorney and treat them more harshly in their own criminal case. Therefore, a conflict of interest is not hypothetical, but real.”

“Coaching an Attorney’s Kid Doesn’t Automatically Disqualify Judge, Ethics Panel Says” —

• “Judges who coach should watch for curveball facts that might lead someone to reasonably wonder if they can be impartial in a case involving an attorney whose child is a player on their team, the Supreme Court Committee on Judicial Ethics Opinions wrote.”
• “The Supreme Court Committee on Judicial Ethics Opinions warned in a formal opinion, however, that judges who coach should disclose on the record ‘reasonably relevant’ information about why they did not step away from such a case.”
• “San Joaquin County Superior Court Judge Barbara Kronland and Bryan Borys, director of research and data management at the Los Angeles County Superior Court, both raised concerns about the draft opinion’s use of the phrase ‘discretionary disqualification.’ The formal opinion includes a footnote discussing the differences between a judge stepping away from a case for ‘mandatory’ or ‘discretionary’ reasons.”
• “As long as a judge-coach does not have a shared financial interest with the athlete’s parent, an insider’s knowledge of facts in a case or some other obviously disqualifying trigger, he or she can hear the parent-attorneys case, the formal opinion said. But the judge-coach must consider three other questions: Does the judge believe disqualification is in the interest of justice? Does the judge doubt his or her ability to be impartial? Would the average person doubt the judge’s impartiality?”
• “The 12-page opinion does not say who or what prompted a review of the issue. The committee posted a draft version of the opinion in June and received just three responses.”
• “‘THIS IS ABSOLUTELY RIDICULOUS TO BE SPENDING TIME DEALING WITH THIS ALLEGED ISSUE!!!!!!’ Los Angeles County Superior Court Judge Kelvin Filer wrote. ‘as a judge, let’s just NOT get involved in our children’s activities?'”

“The ‘Conflict of Interest’ Defense to Shareholder Derivative Standing” —

• “In shareholder derivative litigation, defendants occasionally argue that the plaintiff – who ostensibly sues on behalf of the company and its owners in a fiduciary capacity – has some form of conflict of interest with the company or its remaining owners, so the court should disqualify the plaintiff from serving as plaintiff.”
• “The classic, most simple conflict of interest is where the plaintiff herself has engaged in some form of wrongdoing against the company, for which the entity or its owners have lodged (or may lodge) counterclaims.”
• “The theory is that if the plaintiff is herself a bad actor, she cannot be expected to be an adequate steward and representative of the legal rights and interests of the entity she herself has harmed.”
• “Other disqualification cases in New York followed Steinberg. A fairly comprehensive discussion of the state of New York law (up to that time) of shareholder derivative plaintiff conflicts of interest was found in Pokoik v Norsel Realties, 55 Misc 3d 1208[A] [Sup Ct, NY County 2017]), in which former Manhattan Commercial Division (now Appellate Division – First Department) Justice Jeffrey K. Oing ruled that there was a ‘prototypical conflict of interest’ requiring disqualification because the plaintiffs purported to sue on behalf of an entity’s partners while at the same time suing them as defendants.”
• “Similarly, in Delaware, there is a line of case law emanating from Katz v Plant Indus., Inc. (an unpublished 1981 Delaware Chancery Court decision) and Youngman v Tahmoush, 457 A2d 376 [Del Ch 1983]), both holding that Delaware’s class action statute, Court of Chancery Rule 23.1, applies to shareholder derivative suits, and that Delaware courts should under Rule 23 examine the plaintiff’s adequacy as a derivative plaintiff (both at the pre-answer dismissal stage and at the final approval of any derivative settlement), including whether any conflicts or ‘economic antagonism’ between the plaintiff, the entity, or the other owners.”
• “Youngman announced the Delaware standard that ‘purely hypothetical, potential or remote conflicts’ are not enough, and that to prove the need to disqualify a derivative plaintiff, ‘a defendant must show that a serious conflict of interest exists, by virtue of one factor or a combination of factors, and that the plaintiff cannot be expected to act in the interests of others because doing so would harm his other interests.'”
• “The Youngman standard has worked its way into New York jurisprudence, including a decision last fall from Manhattan Commercial Division Justice Joel M. Cohen, TNJ Holdings, Inc v Rubenstein (Decision and Order [Sup Ct, NY County Sept. 13, 2021]), in which the Court, applying Delaware law, dismissed a shareholder derivative suit for lack of standing under CPLR 3211 (a) (3) because the plaintiff brought a mix of direct and derivative claims, the value of the direct claims eclipsing the derivative claims.”
• “In the past month and a half, a pair of decisions in both New York and Delaware have thrown cold water on the “conflict of interest” defense to shareholder derivative standing.”
• [See the complete article for more detail on]:
  • “The first was Larsen v Larsen (2022 NY Slip Op 32415(U) [Sup Ct, Kings County July 18, 2022]“
  • “Less than a month after Larsen, the Delaware Supreme Court, in Griffith v Stein (___A3d ___ [Del Aug. 16, 2022]“

“Trump’s Lawyers May Become Witnesses or Targets in Documents Investigation” —

• “Two lawyers for former President Donald J. Trump are likely to become witnesses or targets in the investigation into how he hoarded documents marked as classified at his Florida estate — and secretly held onto some even after they claimed all sensitive materials had been returned, legal specialists said.”
• “During the visit, Mr. Trump’s representatives turned over 38 documents with classified markings and indicated that all the records had been kept in a storage room, that no other records were stored elsewhere and that all available boxes had been searched, prosecutors said.”
• “According to the statement, Ms. Bobb signed on behalf of Mr. Trump that ‘based upon the information that has been provided to me,’ all documents responsive to the subpoena were being returned after a ‘diligent’ search.”
• “The sequence of events raises the question of whether the two lawyers knowingly misled the Justice Department. If so, they could be charged with crimes like obstruction and making false statements. But they could defend themselves by saying they in turn had been lied to by someone else and so did not know the statements were misleading.”
• “It is not clear whom Ms. Bobb was referring to — Mr. Corcoran, Mr. Trump, both, or someone else — when she qualified her statement with the phrase “based upon the information that has been provided to me.” Investigators may seek to ask her that. If Ms. Bobb were to single out Mr. Corcoran, the focus would shift to him.”
• “Notably, if either of them were to say that Mr. Trump had assured them that no other documents marked as classified remained at Mar-a-Lago, that would create a conflict of interest, specialists said: Mr. Trump’s defense would likely be to deny he had said that. If such a clash arises, it is doubtful they could continue representing him as a matter of legal ethics.”

In the United States: “Lawyers Fight Bill Forcing Them to Report Suspicious Client Acts” —

• “Lawyers are pushing back against anti-money laundering legislation that would require them to report suspicious transactions by clients, as banks already must do.”
• “Opponents worry the plan would disrupt attorney-client privilege and empower the Treasury Department to conduct random audits. ‘The audit power really is quite broad and unconstrained,’ Covington & Burling partner Nikhil Gore said in an interview.”
• “The legislation, prompted in part by Pandora Papers disclosures last year, is aimed at shutting down what supporters see as loopholes in the Bank Secrecy Act that let oligarchs such as those allied with Vladimir Putin take advantage of US entities to launder money.”
• “The American Bar Association said the legislation would regulate services law firms provide, such as trust formation and company registration, and interfere with attorney-client relationships.”

In Australia: “90% of lawyers concerned with money laundering” —

• “More Australian lawyers are concerned about money laundering than ever; new research has revealed.”
• “A new report conducted by anti-money laundering (AML) and counter-terrorism financing (CTF) platform First AML has shown that 90 per cent of lawyers and accountants are more concerned about money laundering since discussions around Tranche 2 — the name of the part of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 that applies to legal professionals, accountants, real estate agents and trust and company service providers.”
• “According to the research, the two main reasons for this are that 79 per cent of Australian companies are increasing their focus on customer transparency and ethical customer onboarding, with 70 per cent preparing for expected Tranche 2 implementation. Other reasons include reducing siloed documentation (64 per cent), increased risk of fines (61 per cent) and external risks (47 per cent).”
• “In addition, a whopping 95 per cent of respondents admitted that a money laundering incident would impact their company’s ability to attract new clients and retain existing ones and 89 per cent said they are proactively putting more rigid AML policies in place.”
• “Compliance steps being put in place include technology, outsourcing services such as a policy consultant or external training and hiring AML experts.”

“Baker McKenzie DQ’d From Russian Bank Case” —

• “A Georgia federal judge has disqualified Baker McKenzie from representing a Russian bank in its loan fraud fight against an agricultural supply business that the law firm had advised on restructuring, affirming a magistrate judge’s decision in July.”
• “Discovery for the bank fraud case will be placed on hold until VUZ-Bank JSC finds new counsel, as Baker McKenzie has a conflict of interest with the defendant in the case, Dubai, United Arab Emirates-based Hakan Agro DMCC, U.S. District Judge Victoria Marie Calvert found on Wednesday.”
• “The bank filed the suit in Atlanta to get discovery from Anderson in its bid to bolster criminal proceedings against Hakan Agro and affiliates in Dubai. But its chosen law firm Baker McKenzie had met with Hakan Agro’s agent in June 2021 to discuss the company’s insolvency and possible liquidation following Bahceci’s death in May 2020.”
• “The firm received ‘at least some confidential information’ from the agent during the consultation, Judge Calvert said, at a time when its client VUZ-Bank had interests ‘materially adverse’ to Hakan Agro.”
• “‘It is also undisputed that neither VUZ Bank nor Hakan Agro gave informed consent in writing to the conflict, particularly given that Baker McKenzie lawyers had represented that there were no conflicts with the representation of Hakan Agro,’ the judge said.”
• “Baker McKenzie said it had not officially represented Hakan Agro and had not shared or misused any of the company’s information.”
• “The firm had represented VUZ against the Hakan entities since September 2020, case filings show. Baker McKenzie provided insolvency advice to Hakan Agro several months later, claiming that it had no conflicts. However, by the time the firm was giving advice to Hakan Agro on its liquidation, it had already won judgments against Hakan Holdings on that very issue.”

“Top Ohio Court Rejects Dentons Appeal Testing Big Law Model” —

• “Dentons on Tuesday lost a bid to have the Ohio Supreme Court review a $32.3 million malpractice verdict in a case with implications for law firms that use a Swiss verein model.”
• “The decision means Dentons remains on the hook for a malpractice award given to the plaintiff in the case, RevoLaze Inc., an Ohio company that uses lasers for denim products.”
• “RevoLaze argued that Dentons shouldn’t have taken on the company’s patent case in 2015 because one of the firm’s Swiss verein affiliates in Canada had represented Gap Inc., which RevoLaze sued for patent infringement.”
• “The verein structure lets law operations affiliate to market services under one brand while avoiding a full-on merger. Affiliates limit liability between offices and keep separate on matters such as profits, pay and taxes.”
• “The RevoLaze case tests whether firms using the Swiss verein model must do conflicts checks with all affiliates in their networks before deciding to take on a client.”
• “Verein firms risk losing business if they’re required to disclose conflicts related to affiliates’ work. Existing clients may balk at other representations, and potential clients could decide to go elsewhere.”
• “At least six major U.S. law firms adopted the Swiss verein model, including DLA Piper, Squire Patton Boggs, Baker McKenzie, Norton Rose Fulbright and Littler Mendelson. Clients of the six firms may raise new questions about the process to ferret out possible conflicts, said Cassandra Burke Robertson, director of the center for professional ethics at Case Western Reserve University School of Law. The clients may find new firms if they don’t like the answers, she said.”
• “‘What’s more important is that these law firms be more proactive with their clients’ about conflicts, Robertson said.”
• “Dentons said in a statement that the case isn’t about its structure but whether a firm can rely on a client’s consent regarding a future conflict of interest.”

“Boies Schiller tripped up in apparent conflict in FirstEnergy derivative suit” —

• “The weirdest shareholder litigation saga I’ve ever encountered has snagged Boies Schiller Flexner in what appears to be a conflicts kerfuffle.”
• “On July 26, David Boies filed an application before U.S. District Judge John Adams of Akron, asking Adams to appoint Boies Schiller to represent shareholders pursuing derivative claims against directors of the Ohio utility FirstEnergy Corp, which has admitted to paying millions of dollars in bribes to Ohio lawmakers in exchange for favorable legislation. In the application, Boies emphasized his firm’s stellar record in complex litigation and pledged that Boies Schiller would expend whatever time and money is needed to hold the company’s officers and board members to account.”
• “What Boies did not mention in the July 26 filing with Adams is that Boies Schiller is actually defending a former FirstEnergy vice president, Eileen Mikkelsen, in parallel derivative litigation before a different Ohio federal judge, U.S. District Judge Algenon Marbley of Columbus.”
• “Boies Schiller, in other words, sought appointment to launch a big new discovery push for shareholders in a case it had already settled on behalf of a defendant.”
• “That is, um, not something you see every day.”
• “Adams said in the Aug. 15 order that one applicant had withdrawn its bid ‘following the discovery of a possible conflict of interest.’ He did not name the possibly conflicted firm, but it was presumably Boies Schiller.”
• “It would have been interesting to see how Bernstein Litowitz, Saxena and Cohen Milstein would have reacted if Boies had been appointed. As veterans of countless lead counsel battles, shareholder firms like these are great at impugning competitors. I can only imagine the sputtering indignation that would have greeted Boies’ appointment as shareholder counsel after the firm signed a global settlement releasing the very claims being investigated.”

“Walmart Gets Plaintiff’s Lawyer Disqualified in Negligence Suit” —

• “Walmart Inc. convinced a federal judge in Wisconsin to disqualify the law firm of a plaintiff suing over a slip and fall at a Walmart store, due to a conflict of interest.”
• “Jennifer Gnaciski sued Walmart and subsidiaries in January, saying their negligence caused the plaintiff to slip and fall at a store in Fond du Lac, Wisconsin. The suit was removed to federal court, and the defendants moved to disqualify Eric L. Andrews of Dunk Law Firm due to his previous employment with MHW Law Group LLP, which represents Walmart in that action.”
• “Judge Pamela Pepper of the US District Court for the Eastern District of Wisconsin granted that disqualification bid on Tuesday, noting that Andrews had been employed with MWH Law Group as recently as December 2021.”
• “The court highlighted the fact that Andrews regularly represented Walmart in slip-and-fall cases, many of them with similar fact patterns as this one.”
• “‘There is a substantial risk that Andrews obtained information about the defendants’ confidential litigation strategies obtained through his representation of the defendants that would materially advance the plaintiff’s position in this case,’ Pepper wrote in the court’s opinion. ‘He has had access to the defendants’ settlement pay ranges, payment thresholds, internal interests and motives and nonpublic information about store operations.'”

“District Court Must Reconsider Legal Mal Suit Against Cozen O’Connor Over $20M Deal, Third Circuit Says” —

• “A Pennsylvania appeals court improperly dismissed a legal malpractice suit against Cozen O’Connor, the U.S. Court of Appeals for the Third Circuit has ruled in a precedential decision that sheds new light on standing principles in shareholder litigation.”
• “Wading into an open question of law, the appellate court ruled Wednesday in Potter v. Cozen O’Connor that the U.S. District Court for the Eastern District of Pennsylvania improperly analyzed and dismissed the case on jurisdictional grounds, when in fact it should have viewed the defendants’ challenge as a merits-related standing issue.”
• “In remanding the case for further review, Judge Cheryl Ann Krause, who wrote the court’s 18-page opinion, drew a distinction between ‘Article III standing and ‘prudential’ standing for shareholders.”
• “The dispute stems from allegations that an alleged conflict of interest by Cozen O’Connor attorneys during a $20 million deal led to significant losses for shareholders of the company that was sold. Specifically, the plaintiff Adam Potter alleged that attorneys Anne Blume and Anne Madonia were involved in the sale, and that, unbeknownst to him and the only other shareholder, Moxie HC LLC, Cozen O’Connor had represented the company called The Institutes LLC, which ended up making the purchase.”
• “Potter further alleged that, when he asked Blume directly if there was a conflict, the lawyer ‘brushed aside the question and continued to provide legal advice.'”
• “However, after the close, the shareholders allegedly learned their company had been sold substantially below market value, and that confidential information Blume learned while working with Potter had been used to aid the purchaser.”
• “Focusing on that discrepancy, Cozen O’Connor sought to dismiss the case, arguing that under the “shareholder standing rule” the shareholders did not have the legal right to bring the corporate entity’s claims in their own names. Potter, however, countered, arguing that Cozen O’Connor was attacking their Article II standing to be in federal court.”
• “Krause said the district court took elements of both arguments, and ultimately determined that, because only the corporate entity suffered the harm, the shareholders lacked Article III standing. On appeal, Krause, who was joined by Judges Kent Jordan and David Porter, looked to whether the shareholder standing rule can actually deprive a party of Article III jurisdiction.”

“Which Top Law Firms are Turning Down Clients on Ethical Grounds?” —

• “Law firms have traditionally been reluctant to draw ethical lines in the sand. The profession prides itself on the premise that everyone is entitled to legal representation. But recent events have forced them to start taking an ethical stance where they might not have previously. Now, research by Law.com International reveals just how seriously they are taking it—and why.”
• “Russia’s invasion of Ukraine sped up a debate that was already starting to take place. Most Big Law firms cut ties with Russian clients because they were “not consistent with our values”. Nevertheless, there is strong evidence of law firms acting for clients that have been strongly censured for their involvement in controversies such as environmental disasters, human rights abuses, contraventions of the rule of law, and forced labour.”
• “But driven by a rising chorus among younger lawyers, an enhanced focus on environmental, social and governance issues, as well as the reputational fallout from acting for certain clients, firms are now increasingly considering other areas where they may want to take an ethical stand, and perhaps even deny counsel. Many have started drawing up more robust ‘ethical’ policies, and, coupled with increasing public scrutiny, this is prompting firms to take a more critical eye to sectors such as gambling and defence, to mandates that could pose a risk to human rights, and child or animal welfare.”
• “Now, a Law.com International survey of more than 30 major law firms finds that many are declining taking instructions for purely ethical reasons. So what types of work are law firms most likely to turn down, and what sectors are being scrutinised by law firm leaders most closely?”
• “However, none of the respondents said they are ruling out entire sectors, nor would they automatically refuse work, but instead assess every mandate on a case-by-case basis. Many respondents stated that they have specific committees, boards and teams dedicated to reviewing and accepting responsible business.”
• “A common understanding among law firms, which are structured in a variety of different ways, is made particularly complex for those with a particularly international network. Dentons highlighted this, claiming that as it has no global headquarters, each jurisdiction has different laws and standards.”

“Fox Rothschild Booted From Athlete Startup Case For Conflict” —

• “A New York federal judge on Tuesday disqualified Fox Rothschild LLP from representing investors in a $1 million fraud lawsuit against a startup, finding that the firm represented the startup’s parent company in a “substantially related” matter and likely had access to relevant privileged information.”
• “U.S. District Judge Lorna G. Schofield granted a disqualification motion filed by startup SportBLX’s parent company GlassBridge Enterprises, noting that Fox Rothschild has conceded that it represented GlassBridge in negotiations about a pension plan and that the work involved looking into GlassBridge’s assets — including SportBLX. That means Fox Rothschild can’t represent named plaintiff Cypress Holdings III LP, according to the order.”
• “‘Cypress’s claims are not limited to discrete issues that can be neatly separated from Fox’s prior representation,’ the judge said.”
• “In its April disqualification bid, GlassBridge said Fox Rothschild represented it ‘before and during the time period at-issue in this litigation on substantially related matters,’ including the company’s directors and officers liability insurance policy. GlassBridge said it paid Fox Rothschild $847,285 in legal fees before the firm ended the representation in early November 2021, two months before Cypress filed its lawsuit, according to a letter filed in Manhattan federal court. The next month, SportBLX founders George Hall and Joseph DePerio asked to join the disqualification bid, telling the court that Fox Rothschild attorneys repeatedly reassured them in emails throughout 2019 that the firm and attorney Marc Gross were not also representing Cypress.”
• “In Tuesday’s order, Judge Schofield noted that the firm’s representations of its work for GlassBridge weren’t inconsistent with GlassBridge’s description of that work. Still, she rejected the firm’s argument that it didn’t possess any privileged information because it was just a conduit of information, calling that argument ‘extremely conclusory with no supporting details or documents.'”

“Technical Conflicts of Interest Are Not the Mayor’s Problem. It’s the Oath.” —

• “As you know, shortly after Eric Johnson took a job as mayor of Dallas, he took another job as an attorney with the Locke Lord law firm. He said he could do both jobs at the same time, no problem, and that he would keep a sharp eye out for any possible conflicts of interest.”
• “Judging by yesterday’s City Council briefing, he is doing just that. When the council went into an ‘executive’ closed-door session to hear from the city attorney about litigation matters, Johnson recused himself and did not go into the session because he said the second item on the list of matters to be considered presented him with a conflict of interest.”
• “The matter in question was a federal lawsuit in which the city is asking a judge to sort out conflicting claims between airlines and the Federal Aviation Administration regarding gates at the city-owned Love Field Airport. In that case, American Airlines is represented by Locke Lord.”
• “The mayor is a smart guy and a well-trained lawyer, and he will know how to keep himself out of legal conflicts in those specific matters. But public finance also is a very small world with a few key players at the top, and it’s an inherently political world, because, well… public.”
• “The really consequential conflicts in Johnson’s dual role will not be technical or even legal. They are more likely to involve social and business relationships than law. And it is those conflicts that point to the core question: Whose man is this anyway?”

I’m issuing “last call” to participate in the BRB Risk Staffing Compensation Survey.

With strong interest and healthy participation, the present summary report shows detail on about 300 staff positions. 

The survey will remain open through the end of this week. Come Monday, we’ll export the data and dig into analysis.

REMEMBER: There’s still time to participate
I’d like to encourage those of you who are or manage risk staff to take the survey. (Remember, the one way assure you’ll receive a copy of the eventual summary report is to participate by contributing your/your team data…)

As I noted previously, some of you have reached out with questions about privacy. Understanding the sensitivities involved, information is being treated with the strictest confidence. And, to be clear, the report will not be identifying firms or individuals.

But if you’re itching to participate but have concerns about privacy, please feel free to drop me a direct note. I’ve worked with a few firms on creative approaches here.

Click here to take the survey!

Not quite yet back attending ILTACON (I hope to attend next year and connect live with many of you), I’ve been following updates from the event virtually, with interest. This article caught my eye: “Firm Turns To Tech To Manage Outside Counsel Guidelines” —

• “As law firms grapple with complicated outside counsel guidelines, some are turning to technology to manage the protocols with increased accuracy and transparency, according to experts.””The 2022 International Legal Technology Association Conference, or ILTACON, hosted a panel discussion on Wednesday featuring law firm leaders and technology providers discussing the struggles with and solutions for effectively managing client outside counsel guidelines, or OCGs.”
• “Mark J. Agin, the senior manager of global new business intake and information management at Shearman & Sterling LLP, described his law firm’s management of OCGs as a ‘journey in progress.'”
• “He said during the panel session that the firm previously did not do a great job of monitoring OCGs, resulting in confusion in the conflict resolution process. Agin said the firm’s conflict attorneys were ‘resolving conflicts one way while not knowing that we have outside counsel guidelines in place’ that may stipulate other obligations that the attorneys were not aware of.”
• “Seeing the problems associated with collecting and understanding client commitments, Agin said the firm recently implemented the risk and compliance platform Terms from the software company Intapp. By using technology, Shearman & Sterling hopes to create a workflow for managing outside client guidelines.”
• “Shearman & Sterling will also use the tool to track updated versions of guidelines, access data on agreements and integrate with other systems such as billing and conflicts. Agin added that the firm will leverage machine learning to review the exact clauses in guidelines. He said that it would be impossible to manage these guidelines without the use of technology.”
• “Scott Springer, a vice president at HBR Consulting, said that the rise of e-billing and specific outside counsel requirements for areas such as diversity, equity and inclusion are making it more difficult to manage these relationships. He added that even though most law firms have a formal process to review and summarize OCGs, many lack the tools to automate the process.”

“Stinson’s Murdock: Tech use, cybersecurity permeate firms’ work (and budgets)” —

• “For an easy gauge of how vital technology has become for law firms, simply look at their spending.”
  “‘The budget for technology certainly has increased over the years to where it’s now one of the top costs that a law firm sees,’ said Allison Murdock, managing partner of Kansas City-based Stinson LLP.”
• “Clients drive some of that expense. Their outside counsel guidelines, engagement letters and requests for proposals set out requirements regarding privacy and security for the technology Stinson uses, Murdock said.”
• “‘So there are a lot of requirements we follow, whether it’s related to the secure transfer and storage of information and only giving privileges to those people who it is necessary to complete the task,’ she said. ‘Those types of requirements from clients really drive our technology budget, as well as having all the resources necessary to efficiently handle matters for our clients, whether that’s matter management, document review, due diligence capabilities or whatever.'”
• “Now that its prevalence shows no signs of diminishing, technology spending is shifting a bit more toward ensuring security and privacy. Law firms must navigate myriad cyber threats, with the danger elevated considering they typically control a lot of sensitive client information.”
• “‘We’ve established a fortified risk assurance program that focuses on mitigation of risk to the business and their clients,’ Murdock said. ‘That includes incident response plans, training to address real-world scenarios and to teach people to identify cyber threats, know who to notify and how to document an incident. We do a lot of cyber awareness training, including random tests such as phishing emails to people in the firm to ensure they’re identifying the threat correctly and reporting it. So in addition to embracing the use of technology, we’re really training and educating people to ensure we’re meeting our firm’s standards and our clients’ standards for risk that come with using so much technology.'”

Finally, looks like ILTA’s tech survey is out. For those like me, who aren’t members of participating law firms (and have to pony up for a copy, alas), this writeup from the Orange Rag included a stat on law firm cloud conflicts adoption that caught my eye:

(This update also highlights the value in participating in these types of industry surveys in order to get the full report…)

Updates for those like me who are intrigued by the evolving conflicts discussion unfolding on this side of the landscape: “Big Four Firms Test Audit Safeguards as Consultancy Booms” —

• “The Big Four accounting firms increasingly rely on consulting and advising to drive their profits and boost partner paychecks, but it comes at a cost.”
• “That resurgence of consulting—now the biggest slice of Big Four revenue—comes packaged with potential conflicts of interest that could threaten what was once their core business: the audit.”
• “US regulators, alarmed that the outsized influence of that advisory work could undermine the job of auditors, are closely monitoring firms’ business deals. Ernst & Young has been exploring a possible split of its operations in part to fend off such ethics crackdowns, including a record $100 million settlement with the Securities and Exchange Commission for ethics violations.”
• “‘What happens when we essentially have a consulting firm who also does audit work—what does that do to say the firm culture?’ said Stephen Rowe, associate accounting professor at the University of Arkansas and a former Big Four auditor. ‘It is problematic and the culture itself could deteriorate to the point where we could see large scale frauds again.'”
• “The Big Four have built up extensive systems to track clients and their affiliates around the world to prevent the sale of restricted services to audit clients. Those systems also track the personal finances of their global workforces to comply with SEC and international ethics requirements.”
• “Managing independence requirements for the firm’s 327,000 staff requires a ‘huge investment but it is an investment worth making, as we believe the multidisciplinary model is the best one to deliver quality audits for our stakeholders and the best experience for our people,’ PwC’s global arm said in a recent statement to Bloomberg Tax.”
• “New ethics rules with new categories of prohibited services could be coming as independence rules also have not kept pace with the market growth or expanding lineup of consulting services the firms offer, he said.”
• “SEC Chairman Gary Gensler said in late July that he wanted the PCAOB to bolster its independence standards and the board has added a project to update its requirements to its rule-writing agenda.”

“Big Four Firms, AICPA Report Lobbying on Federal Contractor Conflicts Bill” —

• “A bill to implement new conflict-of-interest safeguards for federal contracting drew the attention of lobbyists at the AICPA and three Big Four firms in the second quarter of 2022, according to quarterly lobbying disclosures filed with Congress in July.”
• “The main accounting industry trade group, along with Ernst & Young LLP, KPMG LLP, and Deloitte LLP, listed the Preventing Organizational Conflicts of Interest in Federal Acquisition Act on their lobbying activity for the months of April, May, and June.”
• “The bill was at least in part a response to a controversy surrounding management consulting firm McKinsey & Company’s previous overlapping work as a contractor to the Food and Drug Administration (FDA) and as a consultant to opioid manufacturers, prompting an Oversight Committee investigation.”
• “The Preventing Organizational Conflicts of Interest in Federal Acquisition Act would direct the Federal Acquisition Regulatory Council to revise the Federal Acquisition Regulation to, among other things, provide executive agencies with solicitation provisions and contract clauses for avoiding conflicts ‘that require contractors to disclose information relevant to potential organizational conflicts of interest and limit future contracting with respect to potential conflicts of interest with the work to be performed under awarded contracts.’ The bill would also direct executive agencies to update their anti-conflict procedures to implement the changes.”

Deborah A. Winokur, counsel at Cozen O’Connor has an excellent article out which reminds us: “Attys Should Note Judges’ Financial Conflicts Of Interest” —

• “Given these recent developments, what steps should attorneys practicing in the federal courts consider?”
• “First, be proactive in your Rule 7.1 disclosures, so that a judge has a clear understanding of the corporate structure of your client, including its immediate parent, and the ultimate parent corporation. As Judge Erickson wrote in his email to the policymakers, ‘[i]t seems to me that more information rather than less is prudent in today’s environment.'”
• “Second, do not assume that a judge’s order against the party with which the judge has the financial interest removes the risk of prejudice. Centripetal unsuccessfully argued that Judge Morgan should not be disqualified because he ruled against Cisco, thereby demonstrating his impartiality.”
• “But the appeals court found that ‘[w]here a judge becomes aware of a possible appearance of impropriety, there is a substantial risk that he or she might bend over backwards to rule against that party to try to prove that there is no bias.'”
• “Third, remember that use of a blind trust is not the same as a divestment under the Disqualification Statute. Per Subsection (f), if a judge presiding over a matter for a substantial amount of time later learns that either the judge or a member of the judge’s household has a financial interest in a party, the conflict may be cured if the judge divests himself or herself of that interest.”
• “A lawyer relying on a judge’s representation that the conflict has been resolved because the judge put the contested security in a blind trust may find that the judge will be removed on appeal, and any findings or judgment may be remanded and relitigated.”
• “Fourth, run the names of your client and the other parties involved in the litigation through the publicly available databases at the outset, to independently determine if the judge may have a financial conflict of interest. Promptly bring any issues you identify to the attention of the judge and the other litigants.

“Polsinelli Fights Littler TRO Bid In Trade Secrets Case” —

• “Polsinelli PC is fighting back against Littler Mendelson PC’s bid to bar Polsinelli from using 30,000 client files the firm obtained when it poached a Littler attorney last year, calling the request a thinly veiled anti-competitive ploy in the pair’s ongoing feud over home health care business.”
• “In a 32-page brief filed Friday, Polsinelli said that not only are the overwhelming majority of the 30,000 files in question simply routine client files and not trade secrets, as Littler has asserted, but also that Littler knew about Polsinelli’s possession of the documents for more than a year before filing its temporary restraining order request roughly two weeks ago.”
• “Polsinelli said Littler’s motion is clearly aimed at undercutting POSH, or the Polsinelli Online Solution for Homecare, an online document platform similar to a competing product offered by Littler, and which lies at the heart of the two firms’ dispute.”
• “Littler’s recent TRO motion centers on 30,000 client documents that were transferred to Polsinelli after Spinola joined the firm. Polsinelli claims the overwhelming majority of those documents are simply routine client files, but Littler claims Spinola intentionally downloaded Toolkit templates and other sensitive documents and then improperly squirreled them away in his client files.”
• “Polsinelli said it did identify a handful of documents, like a Toolkit subscriber database, that could be considered proprietary information. But Polsinelli said it promptly notified Littler of those documents and vowed not to read or use their contents.”
• “Polsinelli said the fact that it’s been in communication with Littler about those files for more than a year puts the lie to Littler’s claims of impending harm.”

“7th Circuit affirms insurance co. must pay USA Gymnastics ‘reasonable and necessary’ fees incurred from Nassar-related claims” —

• “An insurance company that balked at representing USA Gymnastics against lawsuits stemming from Larry Nassar’s sexual abuse of hundreds of female athletes has failed in its challenge to an order that it pay significant fees to the Indianapolis-based athletic organization.”
• “‘It is undisputed that USAG paid nearly 70 percent of the attorneys’ fees for which it now seeks reimbursement,’ Brennan continued. ‘That is compelling evidence of a market test. This element of the (Thomson Inc. v. Ins. Co. of N. Am., 11 N.E.3d 982 (Ind. Ct. App. 2014)) presumption supports, rather than contradicts, the bankruptcy and district courts’ conclusions that the fees USAG claimed are presumed to be reasonable and necessary.'”
• “Discussing three special circumstances that Liberty argued rendered Thomson inapplicable, the 7th Circuit began with an alleged conflict of interest with USAG’s chief legal officer, C.J. Schneider, who was also an attorney with a law firm that served as outside counsel for USAG.”
• “‘Despite Liberty’s contentions, the governing case law does not hold or suggest that the presumption is inapplicable when there is an apparent conflict of interest,’ it wrote. ‘To the contrary, an insurer’s objections to a policyholder’s selection of defense counsel lose force when the insurer disclaims its duty to defend and turns out to be wrong on the law.'”
• “It also noted that the lower court was aware of Schneider’s dual role and concluded USAG’s practices were nevertheless sufficient to support the Thomson presumption’s application.”
• “It further pointed to the bankruptcy court’s conclusion that the entire amount USAG claimed for Gibson Dunn & Crutcher LLP’s work was reasonable and necessary. That factual finding, the appellate court concluded, posed a ‘high hurdle’ for Liberty in seeking to overturn it.”