Bressler Risk Blog

“Law Firm Has Potential Conflict of Interest in Doyle Investigation” —

• “If you described an investigation where the person works with the investigator and makes decisions about future engagements with the investigator, most people would call it a conflict of interest.”
• “But that’s exactly what’s happening at Santa Clara City Hall. The same law firm that worked with Santa Clara City Attorney Brian Doyle for two years litigating a 2018 pension dispute, Liebert Cassidy Whitmore and its attorney Morin Jacob, is also investigating Doyle’s professional conduct. It’s no secret that Liebert Cassidy Whitmore is conducting the investigation: The City refers information requests about it to Jacob.”
• “Liebert Cassidy Whitmore specializes in labor law for local governments. In 2019 a former Humboldt County Counsel sued the firm and other county officials, alleging he was pushed out when he brought to light inflated billings by the firm, according to the Spotlight story.”
• “The law firm’s 2014 agreement with the City states that Liebert Cassidy Whitmore ‘shall make a good faith effort to identify and shall apprise City of those possible conflicts of interest which could affect Firm’s duties to City or to the City Attorney under the California Rules of Professional Responsibility.'”
• “‘There’s nothing legally improper, but it certainly doesn’t look good,’ said well-known trial attorney James McManis of McManis Faulkner. “You now have someone with a relationship [with Doyle] investigating him. ‘Santa Clara would have been better served,’ McManis continued, ‘if they had hired an attorney with no connection to the City and who didn’t know any of the people involved,” McManis said. Hiring a firm with years of experience working with Doyle to investigate him “is not a very smart thing.'”

“Curtiss-Wright Wants DLA Piper DQ’d In $30M Supply Fight” —

• “Curtiss-Wright Electro-Mechanical Corp. said in a disqualification motion on Thursday that it was represented in 2013 by a Swedish attorney, now working for DLA Piper, in a substantially similar dispute with Westinghouse Electric Co. LLC over the supply of reactor coolant pumps for nuclear power plants in China. That dispute is ongoing and subject to arbitration in Sweden, Curtiss-Wright said.”
• “Because the Swedish DLA Piper attorney, Karl-Oskar Dalin, received confidential information about Curtiss-Wright’s defenses against Westinghouse’s claims in the China supply dispute, DLA Piper has a conflict of interest in representing Westinghouse in the Georgia case, Curtiss-Wright said.”
• “‘Mr. Dalin represented C-W with regard to substantially similar liquidated damage terms in the China purchase order as are in issue in the above-styled litigation,’ Curtiss-Wright said in a brief supporting its motion for disqualification. ‘C-W does not consent to DLA Piper’s representation of Westinghouse in this action or in a related arbitration proceeding in Sweden … with or without some form of screening efforts with respect to Mr. Dalin and C-W’s communications with him regarding such matters.'”
• “Curtiss-Wright said in its disqualification motion that related circumstances exist between the Vogtle and Summer purchase orders and the China one being arbitrated in Sweden, with respect to the timing of supply of the reactor coolant pumps.”
• “It said Dalin was retained by Curtiss-Wright in October 2013, when he was at Swedish law firm G. Gronberg Advokatbyra, to represent it in the dispute with Westinghouse over the supply of reactor coolant pumps for the Chinese power plants. Dalin received confidential information from Curtiss-Wright about the strengths and weaknesses of its defenses in that case, it said. Dalin joined DLA Piper in 2016 and is a partner in its Stockholm office, according to the law firm’s website.”
• “Curtiss-Wright said Georgia’s professional conduct rules prohibit a lawyer who has formerly represented a client in a matter from representing another person in the same or a substantially related matter, in which that person’s interests are materially adverse to the interests of the former client. This rule can be worked around if the former client gives informed written consent, which Curtiss-Wright, as the former client of Dalin, does not, it said.”
• “Curtiss-Wright argued that DLA Piper can’t avoid disqualification through ‘screening’ under Georgia’s professional conduct rules, which allow attorneys who are former judges or former government attorneys to be screened to avoid disqualifying their new law firms or organizations by imputed conflicts. ‘The [rules] do not, however, allow other types of attorneys to avoid imputed conflicts by screening,’ Curtiss-Wright said.”

Law.com pulls together several surveys and points of view to remind us: “Outside Counsel Guidelines Are Straining Law Firm-Client Relationships” —

• “OCGs are becoming increasingly prevalent. They’re also becoming increasingly varied and complex, leading many law firms to either waste time trying to reconcile them all or to just ignore them altogether. Needless to say, neither of those scenarios is ideal for a healthy law firm-client relationship.”
• “Only 32% of responding firms said they were confident that more than 50% of their lawyers actually knew the OCGs for their matters… But remaining ignorant to clients’ OCGs creates the potential for firms to leave money on the table—or at least leave the proverbial check in the mail.”
• “‘Law firms may find themselves in a difficult situation if they do not comply with a client’s guidelines because they failed to read them,’ Dentons partners Klevens and Clair wrote. ‘Such a defense may not be particularly strong in a subsequent dispute or may otherwise create friction with a client that could be avoided.'”
• “Klevens and Clair pointed out that while law firms’ engagement letters are often drawn specifically to define the client relationship and, at times, to shape a law firm’s potential exposure to the client, OCGs may not provide those same protections.”
• “‘For example, the definition of who the ‘client’ is in a set of outside counsel guidelines could be expansive, including not only the direct corporate client but also related entities,’ Klevens and Clair wrote. ‘Such a scenario could create complications for a law firm’s exposure or in future conflicts analysis. Indeed, the law firm could be found to owe duties to an entity that the law firm did not expect—but might have been able to consider or negotiate if the risk had been identified.'”
• “But to the extent that OCGs are creating more nonbillable headaches for outside counsel, clients can help by streamlining their communications to highlight what’s most important to them.”
• “Argopoint partner Jason Winmill told Law.com’s Guzman that OCGs are often unfocused and stuffed with minutiae. ‘Counsel guidelines are both too strict and not strict enough,” Winmill said. “And I’d say counsel guidelines often are lengthy and focus a lot on minutiae that doesn’t ultimately add up to much more than a hill of beans.'”
• “The problem is compounded when lawyers have to work for more than a dozen clients, in many cases.”

Lawrence A. Kasten, General Counsel at Lewis Roca reminds: “Beware Of Midstream Conflicts” —

• “The judge glances at you as he announces his ruling granting your opponent’s motion to disqualify your law firm. You think back to the day, one year earlier, when the case came in the door. It was a cold Tuesday morning. The phone rang at 7:30 a.m. You remember it well, because you hadn’t even had a chance to take your first sip of coffee.”
• “Even without caffeine, you remembered to caution Ms. Jones not to reveal any confidential information and to provide you with the names of all parties who foreseeably might be involved in the case. After running the names through your firm’s conflicts database, you received the all-clear. You diligently filed a record of the conflicts check and the steps you took. For the past year, you have worked hard on the case, putting it in good position for a satisfactory result for Widgets.”
• “So how did you end up getting disqualified? Ten months into the litigation, a representative of your co-defendant, the manufacturer of the allegedly defective product, testified at a deposition that a component was made by Sprockets, Inc., a small company in a remote part of the state. Plaintiff amended the complaint to add Sprockets as a defendant, and, without doing a new conflicts check, you filed a cross-claim. As it turned out, unknown to you, one of your firm colleagues has been giving Sprockets advice about its employment contracts.”
• “Even though the matters are entirely unrelated, Sprockets sought to disqualify you and your firm, on the ground that you had an imputed concurrent client conflict of interest under ER 1.7 and ER 1.10. The judge agreed.”
• “Too often, attorneys view conflicts clearance solely as a new-matter intake issue. Once conflicts clear, lawyers may forget to analyze subsequent developments that may create midstream conflicts of interest.”

Read the full article for commentary on incorporating supplemental conflicts checks, new party shifts, non-party awareness, and parties “changing character.”

“OptimisCorp Seeks Suit Halt Amid Bid To DQ Plaintiffs, Bayard” —

• “OptimisCorp wants to pause a derivative suit in Delaware Chancery Court involving claims against the company’s CEO and other officers, pending decision on its bid to have plaintiffs and their counsel, Bayard PA, disqualified because of ‘conflicts’ it says ‘threaten’ to prejudice the case.”
• “In a letter brief to Vice Chancellor Morgan T. Zurn on Monday, OptimisCorp attorney Theodore A. Kittila of Halloran Farkas & Kittila LLP argued that a suit filed by William Atkins, Gregory Smith, and John Waite, former company officers, should be put on hold pending a decision about whether they and their counsel will be disqualified. ‘Over the last two years, Waite, Atkins, and Smith played keep-away with a multi-million company asset while simultaneously levying on company accounts,’ the letter asserted.”
• “In its disqualification motion, OptimisCorp argued that since the three are also represented by Bayard in the other suit related to their handling of the arbitration award, conflicts could arise… Among potential conflicts, OptimisCorp argued, is that ‘discovery will commence against Atkins, Smith, and Waite in the related action, and such discovery will directly implicate Bayard’s advice concerning the handling of the prior derivative award.'”
• “Also, allowing the derivative suit to proceed before a decision is made on disqualification ‘would result in a waste of judicial and party resources if disqualification is ultimately ordered as a remedy,’ the motion argued.”

“Ex-Client Gets Trial Against Lawyers Who Helped Him Sue Ex-Wife” —

• “A New York man who sued the attorneys representing him in litigation against his ex-wife can go to trial in federal court on claims the firm placed its interests ahead of his, but not on his claim for attorney deceit.”
• “A trial is needed to determine whether Ames Ray fully appreciated the potential conflict posed by his law firm’s interest in protecting its reputation when he chose to proceed with Balestriere Fariello as his counsel, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York ruled Thursday.”
• “Failla’s ruling is ‘but another chapter’ in the ‘decades-long litigation saga’ between Ray and his ex-wife, Christina. In this case, Ray sued his attorneys, John G. Balestriere and Balestriere Fariello, for failing to act in his best interests. Ray says the lawyers were more concerned with preserving their reputation before the judge that ultimately imposed frivolous litigation sanctions than they were with properly litigating his case.”

More history from 2019: “Ray v. Balestriere Fariello LLP” —

• “In broad summary, Ray alleges that Defendants, who represented him in filing a fraudulent conveyance action in New York state court, failed to advise him of a conflict of interest that existed when the state court announced that it would hold a hearing to impose sanctions on both Ray and Defendants, and then pursued their own interests despite purporting to represent him.”
• “At no time in considering whether to file a second fraudulent conveyance action against Ms. Ray and Guarnerius did Defendants apprise Ray of a potential conflict of interest that could exist if Justice Ramos were to determine to apportion sanctions between them.”
• “Ray’s Complaint alleges that Defendants breached their fiduciary duties by: (i) failing to apprise him of the conflict of interest that would arise, and did in fact arise, when Justice Ramos imposed sanctions jointly on Ray and Defendants; (ii) abandoning Ray on the eve of the sanctions hearing; (iii) threatening to disclose confidential and privileged communications to Ms. Ray’s counsel; and (iv) threatening to sue Raimond.”
• “Ray alleges that Defendants took these actions so that they could settle Ms. Ray’s sanctions claim and avoid Justice Ramos issuing a formal written decision sanctioning them, which decision would no doubt harm their reputations and professional standing. In order to prevent Justice Ramos from issuing a written decision, it is alleged, Defendants waged a campaign to prevent Ray from filing a JL § 487 action against Ms. Ray’s counsel on the theory that a new lawsuit against Ms. Ray’s counsel would hurt Defendants’ chances of settling the sanctions claim.”
• “Defendants argue that they did not breach their fiduciary duties to Ray because they informed Ray of the potential existence of a conflict of interest as soon as it became clear to them that their interests were no longer aligned.”
• “Defendants claim that the conflict did not arise until Ray insisted on initiating the JL § 487 action and refused to consider a settlement offer, which conduct Defendants believed to be against both Ray’s and their own interests.”
• “All the while, however, Defendants were acting in their own interest — pursuing settlement with Ms. Ray’s attorneys to forestall Justice Ramos formally imposing sanctions against them. Not only did Defendants act in their own best interest, without advising their client of the conflict of interest, but they also took actions expressly adverse to Ray: Defendants threatened to sue the attorney representing Ray in the JL § 487 suit against Ms. Ray’s attorneys; threatened to withdraw as Ray’s counsel for the upcoming sanctions hearing; and threatened to disclose their confidential and privileged communications. These actions are enough to establish that Defendants engaged in a chronic, extreme pattern of delinquency.”

“Why Scarlett Johansson’s Black Widow Lawsuit May Be Losing Its Judge” —

• “Scarlett Johansson’s lawsuit against Walt Disney Studios has already been a heated topic with both sides going back and forth at each other in the press. It makes one wonder just will happen when this all actually gets in front of a judge. However, that may now take a bit longer than anticipated, as the judge on the case has now offered to recuse himself from the case due to a potential conflict of interest.”
• “According to Spectrum News, the judge is now offering to step aside because, prior to being appointed as a judge, he was a partner at the law firm of O’Melveny & Meyers LLP, which is a firm that currently represents The Walt Disney Company. The judge still receives a pension from that position.”
• “If both parties want to keep Judge Draper, they can file a joint agreement by September 10, otherwise the recusal will take effect and the case will be reassigned. It’s unclear at this point what either party thinks of the recusal.”

“Alito Recusal Lifted, Will Participate in Case Involving Boeing” —

• “Supreme Court Justice Samuel Alito will now participate in an arbitration case involving Boeing Co., a company in which he or his family members once owned stock.”
• “The one sentence notation didn’t explain why Alito, who had previously sat out proceedings in the case, was now able to participate. The court also didn’t immediately return a request for comment.”
• “But Alito in 2019 sold shares in Oracle Corp. to allow him to hear a multibillion-dollar copyright dispute with Alphabet Inc.’s Google. And his 2019 financial disclosures, the latest available for the justice, show he or family members owned as much as $50,000 in Boeing stock, which is a party in the arbitration case.”

“Defendant in Critical TCPA Appeal Seeks to Disqualify Judge Based On Family’s TCPA Work–Will it Pay Off?” —

• “The Defendant/Appellee in the huge Lindenbaum appeal to the Sixth Circuit Court of Appeals is seeking recusal of one of the three judges assigned to the panel overseeing the appeal.”
• “According to the motion Judge Stranch–who vocally advocated against Defendant’s position during oral argument— is married to an attorney who works at a firm that brings TCPA [Telephone Consumer Protection Act] cases within the Sixth Circuit. Apparently the judge’s son and daughter also work at same firm.”
• “While it is unclear from the filing whether Judge Stranch’s relatives directly work on such cases the appearance that Judge Stranch might be profiting through TCPA revenue while determining the fate of the TCPA is sufficient that disqualification of the Judge is ‘mandatory’ in the Defendant’s view.”
• “Seeking recusal of an empaneled appellate judge is always a risky enterprise–and doing so after oral argument is almost unheard of (at least, I’ve never heard of it.) Indeed Defendant’s counsel notes that no one in their entire law firm had ever filed such a motion before. And the fact that Defendant is taking aim at Judge Stranch after she seemingly tipped her hand at oral argument is.. [insert word for ‘seems crazy but might be brilliant but you really can’t tell’ here].”
• “So I get it, I guess. But this still this feels like quite the gamble… To be sure, if any case justifies extra special care it is this one. Again, this case will literally impact trillions of dollars in statutory damages and critically important First Amendment rights (from a certain perspective it will determine whether the First Amendment is even still a thing anymore.)”
• “So that makes the Defendant’s request for disqualification among the highest stakes bets in the highest stakes game of poker you can imagine. Will it pay off? We’ll have to wait and see.”

More backstory, as I was curious too, with clear commentary from one side on the matter: “ORAL ARGUMENT HELD IN LINDENBAUM: Free Speech Hangs in the TCPA Balance (Again)” —

• “As I’ve explained a few times now, the Creasy argument–that the TCPA is unenforceable from November, 2015 to July 6, 2020–is the single BIGGEST AND MOST IMPORTANT legal ruling in American History–at least as judged based upon the the financial impact of the ruling.”
• “Literally TRILLIONS of potential TCPA statutory exposure was wiped off the books as a result of the determination that the TCPA was unconstitutional–and therefore could not be enforced–to robocallers during the HEIGHT of the robocall epidemic.”

“Large Law Firms Inherit Attorneys From Dissolving Employment Law Firm” —

• “After struggling to bring up the next generation of firm leaders, an employment law boutique in Boston is closing, and its partners are taking their work to two larger firms.”
• “Armstrong Teasdale has added five Boston-based employment lawyers Monday now that their former firm, employment boutique Bello Welsh, is set to dissolve after 18 years. Meanwhile, Bello Welsh co-founder Ken Bello has joined Barclay Damon in Boston, effective Monday.”
• “According to Welsh, Bello was planning to join Armstrong Teasdale along with the other former Bello Welsh attorneys. But one of his most significant clients presented a conflict of interest. ‘He was not willing to give up that relationship at that time,’ Welsh said. ‘I wasn’t going to throw this opportunity away for a client of Ken’s.'”
• “Bello confirmed the same in an interview Monday. ‘It was sad for us to go our separate ways after 18 years…but I think each firm is happy with the attorneys they got,’ Bello said.”

“Effort By NHL Insurers To DQ Skadden, Proskauer Rejected” —

• “During a video hearing, New York Supreme Court Justice Melissa A. Crane turned aside a motion by Chubb and other insurers to remove the BigLaw firms from a dispute over who will be on the hook for what insurers say are $92 million of legal bills associated with an underlying $19 million concussion settlement.”
• “The defendant insurers dispute liability and, in a 2021 motion, some claim that ‘Skadden and Proskauer’s fees and expenses for the underlying litigation were, in large part, unreasonable and unnecessary.’ In a later filing, they say fees and expenses have thus far totaled $92 million.”
• “The law firms counter that the insurers are using a meritless disqualification bid as a ‘ploy’ to further their effort to angle for a ‘lowball’ settlement.”
• “During brief argument Tuesday counsel for the insurers, Andrew Poplinger, said the firms are unable to be ‘objective’ about their own billing practices. Counsel for Skadden, Lawrence Spiegel, said insurers are engaging in ‘gamesmanship,’ with a ‘borderline frivolous” motion.'”
• “The judge found not only that the NHL has waived the conflict, but also that different groups of lawyers will be at work on the fee case than were at work in the underlying concussion litigation.”

“Law firm’s investigation of HRC head seen as conflict of interest” —

• “After a damning report on sexual misconduct allegations that forced Andrew Cuomo to resign as governor of New York and that ensnared the Human Rights Campaign president for having a potential role in the cover-up, the nation’s leading LGBTQ group has arranged for a law firm to conduct an independent review of its president’s role in the scandal — but legal experts see a conflict of interest looming over the process.”
• “The scandal with the Human Rights Campaign president began when New York Attorney General Letitia James issued her report finding Cuomo violated the law by sexually harassing as many as 11 women on the job. David, who before taking over as Human Rights Campaign president was counselor to the governor of New York, was named nearly a dozen times in the report.”
• “David has continued to deny wrongdoing. However, the findings indicate after his tenure as counselor to Cuomo, he kept the personnel file of an employee accusing the governor of sexual misconduct, then assisted in returning that file to Cuomo staffers seeking to leak it to the media in an attempt to discredit her. (A representative has disputed the characterization of material David kept as a personnel file, saying it was memorandum on an internal employment matter David kept because he, in part, worked on it.)”
• “Sidley Austin LLP, the law firm chosen to conduct the review, has a self-described ‘long standing pro-bono relationship’ with the Human Rights Campaign and was chief among its legal partners announced in October 2019 for a new direction to litigation in LGBTQ advocacy, which was an engagement Alphonso David undertook when he took the helm as HRC’s president.”
• “As a result of the 2019 announcement, which was brokered soon after David took the helm of the Human Rights Campaign, some legal experts see a conflict of interest that undermines the perception of impartiality in Sidley’s ongoing review and could color any finding of no wrongdoing, which would arguably be in the interests of all parties involved in the review.”
• “Brenner Fissell, a law professor who teaches legal ethics at Hofstra University in Long Island, N.Y., told the Blade the independent review Sidley is undertaking ‘appears less than credible… Sidley in the press release calls HRC a long-standing pro bono client, and they’re also doing PR for them. I mean, they’re really inextricably connected, right?'”
• “Fissell said no ethical rules are in place for conducting independent investigations per se, especially because Sidley has never represented David before as a client. As a result, Fissell said there is likely no technical violation of ethics rules over conflict of interest in this scenario.”
• “‘If you had previously engaged such counsel, that makes it less independent,’ Fissell said. ‘So the answer to your question is, this is not good if you want to do a truly independent investigation.'”
• “Sidley didn’t respond to repeated email requests from the Blade for answers to a series of written questions on the independent investigation and its pre-existing relationship with the Human Rights Campaign, including whether or not Phillips, the attorney quoted in the news statement would participate in the ongoing review.”
• “A Human Rights Campaign representative, however, responded to similar inquiries… The representative in the bullet points said the Human Rights Campaign chose Sidley ‘because of its vast experience in internal investigations and reviews” and is “grateful that Sidley has always represented us on a pro bono basis, including in this matter.'”
• “The Human Rights Campaign representative said Sidley is one of many firms that has worked for the LGBTQ organization, but has “never represented Alphonso David on any matter.” In conducting the investigation, the representative said Sidley reports to an independent Board of Directors for the Human Rights Campaign.”
• “‘When any outside entity is retained to conduct an independent review, it has to be truly independent,’ [Michael Frisch, an ethics counsel and adjunct professor at Georgetown Law School] said. ‘To me, if you’re going to conduct an independent inquiry. Your bonafides to give independent advice in a report is always subject of concern, and one should be above reproach in those situations.'”
• “‘You analyze any conflict of interest from the point of view of is there a substantial risk that the lawyers’ advice will be colored by some interest, other than the client who’s getting the advice,’ Frisch said. ‘The magic language in the rule is substantial risk of material limitation, that’s essentially the test. Every client is entitled to independent advice.'”

“Jussie Smollett Attorney Can Stay on Case Despite Conflict of Interest Concerns” —

• “Former ‘Empire’ star Jussie Smollett will be allowed to retain his lawyer of choice to represent him in his criminal matters, following questions of a possible conflict of interest between the attorney and two key witnesses in the high-profile case.”
• “Those efforts came following allegations of a conflict of interest between Uche and Olabinjo and Abimbola Osundairo, the two brothers Smollett allegedly hired to carry out a hoax attack against him in January 2019.”
• “‘The court firmly believes that the interest of Mr. Smollett to have the lawyer of his choice when his liberty is at stake outweighs any other valid and good faith concerns of the (Office of Special Prosecutor) and the Osundairo family witnesses,’ Linn wrote in his ruling.”
• “While Uche can stay on the case, Linn ruled that some other member of Smollett’s defense team must cross examine the Osundairo brothers if they are called to testify at trial.”
• “Gloria Rodriguez, the attorney representing the brothers, has claimed her clients spoke about the case with Uche before Smollett’s arrest back in 2019, and that any information shared — while privileged — could be used to damage them as witnesses at trial.”
• “Uche strenuously denied having spoken to the brothers, but said he did receive calls from other members of the Osundairo family asking him to represent the brothers after they were brought in for questioning about the case. But once Uche understood that the brothers had already retained Rodriguez, he said he refused to speak or meet with them.””
• “In his ruling, Linn found that ‘the totality of evidence shows clearly and convincingly’ that Uche did, in fact, speak to the brothers and their mother, and discussed topics including: immunity, items seized during the execution of a search warrant, how to handle the media and the $3,500 check Smollett allegedly paid to the brothers to carry out the hoax attack.”
• “But the judge found that the Osundairos never paid Uche, nor did they sign any contracts with him to retain him as an attorney. However, Linn ruled that due to the topics discussed, ‘the threshold for an attorney-client relationship’ was met and “requires further analysis.'”
• “While he acknowledged that the Osundairo family still wants Uche removed from the case, Linn noted that Smollett is the only one on trial, and his right to select the attorney of his choice trumps the ‘good faith concerns’ of Webb and the brothers.”