Bressler Risk Blog

“Texas Attorneys Avoid Lawsuit Over Gas-Technology Settlement” —

• “After Betty died in 2012, her daughter Carol Sousa disputed the [IP licensing] agreement between the law firms and her mother in a state trial court, alleging that the law firms had taken advantage of her mother… The trial court therefore affirmed the parties’ arbitration award and granted attorneys’ fees.”
• “Sousa argued on appeal that the arbitrator had a conflict of interest, because he had a prior business relationship with Wilson Elser, the law firm representing the IP attorneys. Sousa alleged that the arbitrator signed a false arbitrator oath.”
• “The appeals court said Thursday there was no evidence of the arbitrator’s disqualification because he disclosed the relationship in his oath. The arbitrator disclosed that he had conducted 11 mediations involving seven attorneys who were associated with Wilson Elser from 2006-2019.”
• “These disclosures were made after the arbitrator’s appointment, but before his confirmation and before any proceedings in the arbitration began, the court said.”
  “Sousa previously alleged the arbitrator refused to hear material evidence and allow cross-examination. But the court found no evidence of actual bias at the hearing, with the court saying her ‘arguments aren’t consistent with the record.'”
• “‘Sousa offers a long list of complaints but offers little discussion or explanation as to how the excluded evidence was material and therefore its exclusion deprived her of a fair hearing,’ the court said. The appeals court affirmed the judgment of the trial court.

“Abbott Labs’ Judge Choice Leads To JPML Conflict Questions” —

• “The Judicial Panel on Multidistrict Litigation raised no red flags Thursday about consolidating 18 lawsuits alleging that Abbott Laboratories’ Similac infant formula caused a deadly illness in premature babies, but at a Seattle hearing the panel questioned whether Abbott’s choice of judge has an appearance of conflict because he once represented the company.”
• “The six-judge panel heard attorneys for the plaintiffs and Abbott argue in support of consolidating the cases currently in federal courts in six states. The judges peppered Abbott attorney James Hurst of Kirkland & Ellis LLP with questions about Abbott’s choice of U.S. District Judge John F. Kness, who represented Abbott in a lawsuit prior to joining the bench in 2020.”
• “Hurst said more than 15 years has passed since Judge Kness represented Abbott in a lawsuit related to an explosion at a pharmaceutical plant, which makes it implausible that the judge would still have any allegiance to the company.”
• “U.S. District Judge Madeline Cox Arleo challenged Hurst, noting that Judge Kness has listed his Abbott representation as one of the most significant cases he handled in his career.”
• “‘Judge Kness’ extensive, personal handling of significant litigated matters on behalf of Abbott invites the appearance of bias. While no motion for recusal has been filed, issues surrounding such representation may introduce unnecessary delay and inefficiency to the litigation,’ according to a brief filed by plaintiff Arturo Andaluz.”

“3rd Circ. Vacates Grant of Summary Judgment for Attorney on Ex-Client’s Breach-of-Fiduciary Claim” —

• “The U.S. Court of Appeals for the Third Circuit has reinstated a lawsuit alleging a Pennsylvania attorney breached her fiduciary duty by representing a plaintiff in a claim against one of her former clients.”
• “Lycoming Engines sued its former attorney on claims of breach of fiduciary duty seeking damages, disgorgement, and declaratory relief after she represented plaintiffs in Torres v. Honeywell Inc., a case involving an engine manufactured by the company, according to the Third Circuit’s July 22 opinion.” https://www2.ca3.uscourts.gov/opinarch/212750np.pdf
• “‘The type of injury a plaintiff must establish, however, depends on the type of remedy sought,’ stated Judge D. Michael Fisher in his written opinion for the court. ‘We consider, in turn, the kinds of monetary remedies at issue: disgorgement, compensatory damages, attorney’s fees and costs, and nominal damages.'”
• “Fisher laid out the plaintiff’s burden of proof in a claim of breach of fiduciary duty: ‘(1) a fiduciary relationship existed, (2) the defendant ‘negligently or intentionally failed to act in good faith and solely for [the plaintiff’s] benefit,’ and (3) the breach caused an injury to the plaintiff.'”
• “Fisher cited Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, a Pennsylvania Supreme Court opinion that stated, ‘[c]ourts throughout the country have ordered the disgorgement of fees paid or the forfeiture of fees owed to attorneys who have breached their fiduciary duties to their clients by engaging in impermissible conflicts of interests.'”
• “‘In other words,’ stated Fisher, ‘an attorney may not argue that she should be paid because her conflict of interest did not hurt her client.'”
• “Fisher further agreed with the district court finding that Avco cannot recover attorney’s fees as compensatory damages citing the American Rule: ‘in this Commonwealth, a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties, or some other established exception.’ According to Fisher, the Pennsylvania Supreme Court has consistently upheld that rule.”
• “Avco introduced, on appeal, that breach of fiduciary duty by an attorney entitles nominal damages, according to the opinion. Fisher, in his dismissal of that claim, stated a nominal damages claim appeared in neither the complaint nor at summary judgement. Since Avco made no argument for exceptional circumstances, it cannot be asserted for the first time on appeal.”

“Firm’s Prior Work For Defendant Doesn’t Amount To Conflict” —

• “A Tulsa, Oklahoma-based law firm’s previous work for a man doesn’t mean the firm should be barred from representing a couple who sued him after he developed a marijuana farm near their property, a judge found Tuesday.”
• “Bacon, meanwhile, accused GableGotwals, the firm representing the Grants, of harboring a conflict of interest in the case because an attorney with the firm previously represented him in a separate case. He moved for the firm to be removed from the case in April.”
• “Magistrate Judge Christine D. Little, however, found that there was no evidence GableGotwals had done any work for Bacon after wrapping up the lawsuit over the loan agreement in 2019. The judge lifted a stay issued in late March in her decision, allowing the Grant’s claims to proceed.”
• “‘The evidence indicates that the attorney-client relationship terminated well before GableGotwals contacted Bacon on behalf of the plaintiffs in this case,’ according to the judge’s decision.”
• “Bacon claimed to be bewildered when he learned in August an attorney with GableGotwals was suing him over his marijuana operation. An attorney with the firm previously represented Bacon in a case over a 2015 stock purchase agreement, and Bacon argued he thought the firm still worked for him when the Grants sued over the marijuana farm.”
• “GableGotwals’ involvement, Bacon argued, amounts to a violation of the Oklahoma Rules of Professional Conduct, which sets a standard for how attorneys must work in Oklahoma federal courts. He argued the firm had access to information about his disaster restoration business that the Grants could use in their case against him.”
• “The judge, however, found Bacon had failed to show GableGotwals had any information that would help the Grants. The judge also dismissed Bacon’s argument that the Grants filed suit in the first place because GableGotwals knew his net worth and what assets he held.”

“11th Circ. Won’t Nix $40M Arbitral Award Over Conflict Claims” —

• “The Eleventh Circuit affirmed a $40 million arbitral award in an oil refinery construction dispute that involved an attorney switching sides during arbitration, with the judges noting Friday that the losing side improperly waited more than a year before objecting.”
• “In a 15-page opinion, a three-judge panel sided with a Florida federal court’s decision to grant the $40 million award, agreeing with its finding that the rule otherwise would allow one party to ‘keep a proverbial ace up its sleeve.'”
• “The decision follows the tenor of oral arguments held in Atlanta a week ago, where Chief U.S. Circuit Judge William H. Pryor Jr. said Peruvian construction company Tecnicas Reunidas de Talara SAC, or TRT, was fully aware during the arbitration with a subcontractor that one of its lead attorneys in the matter joined the law firm representing the subcontractor in the dispute.”
• “‘Because Técnicas Reunidas de Talara SAC, the losing party in the arbitration, had knowledge of the attorney side-switching but did not object until Técnicas received an adverse award more than a year later, Técnicas waived its right to complain,’ the appeals court ruled on Friday. ‘We affirm the judgment confirming the arbitral award.'”
• “TRT further raised three arguments for why it did not waive the public-policy violation, but the panel determined they all fail. In particular TRT tried to argue that it had no avenue to challenge the side-switching during arbitration, and that it could only raise its defense during the award-enforcement stage.”

“Lawyers Who “Dabble” In USPTO Trademark Matters Face Nightmare Of OED Ethics Investigations, Discipline” —

• “The USPTO’s Office of Enrollment and Discipline has become increasingly active in the last several years, particularly in investigating business or general practice attorneys who dabble in trademark law. Many have learned the hard way–through an ethics inquiry and possible disciplinary decisions–regarding the intricacies and nuances of practice before the USPTO in trademark matters.”
• “A ‘dabbler,’ almost by definition, is dangerous–at least in the sense that he or she has not invested the hours, days and years of regular engagement to achieve mastery of a particular area of law. “
• “There is nothing, of course, per se wrong with ‘dabbling,’ provided the lawyer provides competent legal representation. Dabblers must answer the question: Even though I may have never done this before, or have only done this service once in a while, do I have (or can I get) the knowledge, education, skill and training to provide the service that is asked of me, and to otherwise accomplish the objectives of my client, all at a reasonable fee (among my other ethical obligations)?
• “Trademarks and copyright applications, on the other hand, present differently. At first blush, they appear relatively simple… Some lawyers are deceived by the apparent simplicity of those form-based filing practices. The truly complexities often do not become apparent until the application is examined and the Office issues a lengthy office action with multiple unexpected rejections. The dabbler may find themselves looking down a barrel of rejections they barely understand and asking a lot of questions for which they have no answers.”
• “An attorney who appears before the USPTO is subject to discipline by at least two different authorities: (1) the USPTO’s Office of Enrollment and Discipline; and (2) the state bar (or bars) in which the attorney is admitted.”
• “But sadly, that attitude fails to account for the fact that each disciplinary jurisdiction in the United States gives full faith and credit to the disciplinary decisions of every other authority. And it is a violation of the rules of professional conduct in any state for an attorney to be disciplined by another jurisdiction. Thus, a license suspension from the USPTO will not just cause the attorney to lose his or her ability to practice before the agency. It could impact their state law license too.”

“NJ Atty Can’t Use Own Firm To Advise Side Business” —

• “The New Jersey Advisory Committee on Professional Ethics on Friday released an opinion finding that a Garden State attorney who owned a business in addition to his legal practice created a conflict of interest impacting his entire firm when he retained his own firm to perform legal work for an entity owned by his business.”
• “The committee received an inquiry about a law firm that was retained to advise a client entity in a commercial loan refinancing, according to the opinion. The client entity is fully owned by a limited liability company that has two members, each owning equal shares.”
• “Since the attorney owns an equal part of the parent company, the attorney also owns 50% of the client entity, the committee found. The financial stake created a ‘personal interest’ on behalf of the lawyer, the committee said.”
• “‘It is well-established that lawyers who have a personal financial interest in a client’s business have a conflict of interest,’ the committee wrote. ‘A lawyer’s professional judgment, when advising a client in a financial transaction, could be influenced by the lawyer’s interest as a stakeholder in the business.'”

“U.S. law firm is latest to pull golf sponsorship over Saudi-backed tour” —

• “U.S. law firm Cozen O’Connor said Thursday that it has dropped its sponsorship of golfer Jason Kokrak after he left the PGA Tour to join the Saudi Arabia-backed LIV Golf Invitational Series.”
• “The move comes amid a wider rift in the professional golfing world over the new LIV Golf series, which has lured players with the promise of guaranteed, big-money paydays and a reduced schedule.”
• “Cozen said Thursday that it had ‘mutually agreed’ with Kokrak that he will no longer serve as an ‘ambassador’ for its brand, citing Kokrak’s decision Wednesday to affiliate with the new LIV tour.”
• “Forbes reported in June that Rocket Mortgage, the Royal Bank of Canada and UPS had dropped players for their involvement with LIV Golf. Accounting firm KPMG ended its sponsorship of Phil Mickelson in February over comments he made about the Saudi backing of the LIV Golf series.”
• “In addition to concerns over the future of the PGA Tour, critics say LIV Golf, which is bankrolled by Saudi Arabia’s Public Investment Fund, amounts to ‘sportswashing’ by a country trying to counterbalance the reputational effects of human rights abuses.”
• “Cozen, and its founder and chairman Stephen Cozen, represented families of victims of the Sept. 11, 2001, attacks in litigation against Saudi Arabia, alleging it provided material support to al Qaeda.”

For more on the KPMG sponsor change, see this from February: “Mickelson apologises for ‘reckless’ comments on Saudi-backed league” —

• “In a November interview that was published on the firepitcollective.com last weekend, Mickelson criticised the government of Saudi Arabia for its ‘horrible record’ on human rights, which he said included the 2018 killing of journalist Jamal Khashoggi and the execution of gay people.”
• “Despite the government’s ‘scary’ actions, he said he would use the prospect of a new, highly-lucrative tour to gain economic leverage over the PGA Tour, a position that drew the ire of fellow golfers including Rory McIlroy and Justin Thomas.”
• “‘Although it doesn’t look this way now given my recent comments, my actions throughout this process have always been with the best interest of golf, my peers, sponsors, and fans,’ Mickelson said at the beginning of a lengthy social media post, where he claimed his previously reported comments were ‘off the record,’ a charge the journalist denies.”
• “‘The bigger issue is that I used words I sincerely regret that do not reflect my true feelings or intentions. It was reckless, I offended people, and I am deeply sorry for my choice of words. I’m beyond disappointed and will make every effort to self-reflect and learn from this.'”
• “Mickelson praised LIV Golf Investments, Super Golf League’s financial backer, and called the people he has worked with there ‘visionaries.'”

“Judge Hummel Accused of Intimidating Oil and Gas Counsel” —

• “An attorney for an oil and gas company has accused Second Judicial Circuit Judge David Hummel of pointing a gun at her and also at her colleagues in his courtroom during a bench trial earlier this year.”
• “Lauren Varnado, a Texas-based managing partner of the law firm Michelman & Robinson LLP, told The Intelligencer that Hummel had been openly hostile toward her team after they sought to have the judge disqualified from a case in Wetzel County involving oil and natural gas royalty payments.”
• “The case Hummel was appointed to oversee involved EQT Corp. and local residents over royalty payments. Varnado said she and Hummel had gotten off on the wrong foot, starting with her attempt at having him removed from the case. In 2020, Circuit Judge Jeffrey Cramer had voluntarily recused himself from the matter over a potential conflict of interest. That case then went to Hummel, who Varnado believed may have had a similar conflict of interest.”
• “The West Virginia Supreme Court of Appeals declined to disqualify Hummel, who Varnado said may have relatives who receive oil and gas payments. Afterward, Varnado said Hummel conducted the legal proceedings with an air of open hostility.”
• “‘He kind of started [the status hearing] off with, ‘I’m Judge Hummel, and I don’t have any conflicts, nice try,” she said. ‘He turned to the plaintiff’s lawyers and said, ‘This is a bench trial, right?’ and winked at him.'”
• “By the time the matter had gone to trial earlier this year, Varnado said Hummel’s behavior had become significantly worse, devolving into screaming matches and interrupting opening arguments, among other things. In her affidavit, Varnado also states that Hummel berated and ridiculed counsel throughout the trial, calling her ‘despicable.'”
• “Varnado also claims that Hummel would gesture toward his stenographer to go on and off the record during the trial, one instance of which was prior to Hummel’s alleged brandishing of a handgun.”
• “During the hearing, Hummel allegedly told Varnado that the courtroom security officer, and Hummel personally, would be enough security for her team, according to Varnado’s affidavit. Hummel allegedly said that his guns were bigger than the guns of her security personnel before drawing his holstered weapon, pointing it at the defendant’s table where EQT’s legal team was waiting, and then at the podium where Varnado was stationed. Hummel then allegedly laid his weapon on the desk before deliberately rotating the gun so that the barrel was pointing directly at Varnado, she said.”
• “According to that reporting, Hummel first denied anything had taken place in his courtroom, then called the reporter back later to say he had a gun on his person but never brandished it, then called back again to say he did show Varnado and her team a foil packet of blood coagulant from a first aid kit, but not a gun.”

I’m pleased to invite our law firm risk readers to participate in the 2022 Risk Staffing Compensation Survey.

Designed with input from risk leaders at three firms [Thank you risk braintrust!], this exercise is designed to shed a bit more light on current compensation standards, practices, and trends.

So if you’re an individual contribution looking to understand how your comp compares to your peers, or you’re a risk manager looking to keep your team (and potential new hires) on par with changing market standards, we’re looking to generate some data and benchmarks to help.

SURVEY DETAILS:

• Participation open to law firm risk professionals only
• All responses will be treated confidentially
• Participants will receive a report summarizing key findings and analysis
  • (The report may be shared internally within your firm, but not redistributed externally. So if you want the results, your best path is to participate!)
• Individual contributors will be asked to share data about their role and compensation
• Managers of several contributors will be asked to share data on their team members

The survey will be open for the next month and can be accessed here: 2022 Risk Staffing Compensation Survey.

Feel free to share the link with law firm peers and colleagues.

Let’s see what we learn…

“Disciplinary Commission publishes advisory opinion on conflicts of interest” —

• “The Indiana Supreme Court Disciplinary Commission has issued an advisory opinion focused on when attorneys must decline to represent a client or withdraw from a current representation due to a conflict of interest.”
• “‘While realized and potential conflicts inevitably arise in one’s practice, attorneys must be diligent to avoid damaging the interests of those to whom they owe a duty,’ the commission wrote. ‘To that end, it is vitally important that attorneys have a thorough conflicts check procedure in place.'”
• “‘Conflicts analysis is nuanced and fact specific,’ it continued. ‘Attorneys should carefully evaluate who the actors are and what interests are at stake in a matter. Thought should be given as tohow potentially far-reaching the effects of the representation are to avoid damaging the interests of someone to whom the attorney owes a duty but who may not even be a party to the instant matter.”
• “In its July 2022 advisory opinion, the commission posed four hypothetical ‘ethical minefields'”:
  • “The first hypothetical situation concerns duties to prospective clients. In that scenario, the commission presented a hypothetical dissolution case in which a wife comes to a law office seeking help and offers material information to an attorney. Ultimately the lawyer isn’t retained, but three weeks later the husband hires the lawyer to represent him in the dissolution proceeding.”
  • “The second hypothetical presents a scenario in which four individuals who form a limited liability company, each owning 25% shares, insist that a lawyer represent each of them individually and agree to waive all conflicts. However, it quickly appears that one of the individuals, individual A, will contribute the lion’s share of monetary funding to start the LLC.”
  • “In the third hypothetical, the Disciplinary Commission gave the example of a lawyer who served as a client’s go-to for all legal questions and representation needs for many years. One day, the client approached the lawyer with an offer: The lawyer would provide legal services to the client’s business, Widget Corp., for two years in exchange for 5,000 shares of stock in Widget Corp. The lawyer accepted the offer and agreed to continue representing the client in his individual capacity in addition to representing Widget Corp.”
  • “In the final hypothetical, the commission gave an example of a conflict that might arise during representation. Specifically, a lawyer has represented Client A, a bricklayer, for years and is currently representing Client A in contract negotiations with a supplier. The lawyer was just hired by Client B, a homeowner, for a potential lawsuit against Client B’s builder due to water seeping into Client B’s home. After Client B’s suit against the builder is filed, the builder files a third-party complaint against Client A claiming that all damage to the home is due to faulty bricklaying. Client A calls the lawyer and asks him to represent Client A in Client B’s lawsuit.”
• For the Court’s review of those scenarios in detail, see the complete opinion: “Detecting and Navigating Conflicts of Interest.“

“Why Judges Keep Recusing Themselves From a N.Y.C. Vaccine Mandate Case” —

• “The city’s teachers, who sued over vaccine requirements, said the judges assigned to the case owned thousands of dollars of Covid-19 vaccine-maker stock, which could affect their rulings.”
• “Over two weeks, the teachers’ lawyers have asked three successive judges assigned to the case to recuse themselves and have it reassigned. The lawyers cited financial disclosure forms, listing each judge as owning thousands of dollars of stock in Covid-19 vaccine manufacturers, whose share price, they argued, could be helped or hurt by their rulings.”
• “‘The ownership of this stock constitutes a direct financial conflict of interest in the outcome of this case,’ the lawyers wrote on June 9 to Judge Valerie E. Caproni, the first judge assigned to the case.”
• “The escalating dispute highlights a question that has drawn increasing scrutiny in the news media, the courts and in Congress: When should judges disqualify themselves from cases?”
• “Several ethics experts who examined the dispute in the teachers’ case said the successive recusal requests showed how lawyers might find it advantageous to seek a judge’s disqualification if it served a strategic purpose.”
• “Under the law, judges must step away if they own even one share of stock in a party to a lawsuit, said Stephen Gillers, a professor at New York University School of Law. “The one-share rule is easy,” he said. ‘It’s a bright line. It either exists or it doesn’t exist, and there’s nothing to argue about.'”
• “In the teachers’ case, however, the parties were public officials and the city education department — not a company. Then, Mr. Gillers said, the question is whether the judge’s financial interest ‘could be substantially affected’ by a ruling, which is vague.”
• “There was disagreement among the experts over whether the judges needed to withdraw. Rebecca Roiphe, a professor at New York Law School, said it seemed to her that none were required to do so.”
• “‘The chance that this lawsuit in New York would affect the stock prices of a company like Pfizer, which has a market cap of around $300 billion, are negligible,’ she said. ‘It seems that the judges were instead caving to unreasonable assumptions about their ability to be fair.'”
• “But James Sample, a Hofstra University law professor, said the issue of appearing impartial is real. ‘Do I think that Judge Caproni and Judge Ramos could have been fair in hearing this case? Absolutely,’ he said. ‘But hearing the case once it was clear that they own significant positions in an interested party fails the optics test. And in recusal law, the optics test matters.'”

“Louisville judge disqualified from Breonna Taylor protester cases” —

• “Kentucky’s Supreme Court has disqualified a Louisville judge from presiding over several cases regarding people who were arrested in the summer of 2020 during a protest regarding Breonna Taylor’s death.”
• “The court cited Judge Josephine Buckner’s potential bias based on her previous employment and social media posts.”
• “According to the motion for removal, the prosecution said Buckner should be disqualified from presiding over the protestors’ cases because she worked for Louisville Attorney Sam Aguiar’s law firm while he represented Taylor’s family.”
• “Other members at the law firm also represented other protestors who had been arrested that summer, the Commonwealth said.”
• “In response to the prosecution’s affidavit, Buckner confirmed that she did work for Aguiar before her appointment to the bench. However, she says her previous employment with the Jefferson County Attorney’s Office, which defended the civil action regarding Taylor’s death, ‘is as relevant to the present case as her previous employment with the Aguiar firm.'”
• “The Commonwealth further argued in their motion that Buckner shared three Facebook posts relating to Taylor’s death between August 2020 and June 2021. Three of the posts were made by Aguiar and Lonita Baker, who also represented Taylor’s family.”