Bressler Risk Blog

“New York City claims conflict of interest in request to disqualify Sidley Austin” —

• “Last week’s intervention by the city of New York to disqualify a law firm from a qui tam case involving alleged price fixing of municipal bonds brings conflicts of interest to the forefront of already prolonged and complex litigation.”
• “In a Nov. 16 filing in New York’s state supreme court, New York City and the New York City Transitional Finance Authority (TFA) requested to disqualify law firm Sidley Austin from representing Morgan Stanley in an ongoing case involving variable rate demand obligations (VRDOs).”
• “The city’s motion stems from the fact that Sidley Austin and its predecessors, i.e. Sidley Austin Brown & Wood LLP and Brown & Wood LLP, had served as the city’s bond counsel for three decades: 1986 to 2016. The firm also served as counsel for the TFA for almost twenty years, i.e., 1997 to 2016. In that capacity, according to the filing, Sidley Austin ‘was instrumental’ in drafting and negotiating the bond remarketing agreements that are at issue in the current litigation.”
• “Consequently, the city contends that the firm has an impermissible conflict of interest because the interests of Sidley’s current client, Morgan Stanley, are materially adverse to those of New York City and the TFA.”
• “The City of New York also believes that allowing Sidley Austin to continue its representation of Morgan Stanley means that the firm would be in a position to ‘use privileged and/or confidential information about the drafting, negotiation, and interpretation” of the agreements at issue.'”
• “In its filing, the city claims that Sidley Austin did not seek its consent to represent Morgan Stanley. It also contends that Sidley Austin ‘failed to act promptly once the city brought this conflict to their attention.'”
  Said Sidley: “‘Sidley had no role in advising the city regarding the issue raised in the complaint and was not itself involved in any of those activities.’ Sidley Austin further argued in the letter that it has fully met its confidentiality obligations with respect to its representation of the city. The firm also notes that the attorneys who worked on bond matters for the city and for the transit authority are no longer with the firm.”
• “The city sees the latter argument as insufficient in part because of an ABA rule, which says that a conflict stays with the firm, even if attorneys who worked on the conflicted matter(s) leave the firm.”

“Novartis Wants Atty DQ’d From MS Drug Patent Row In Del.” —

• “In a brief filed Nov. 22 in support of its disqualification motion, Novartis asserted that the court should bar Chidambaram S. Iyer of Sughrue Mion PLLC from representing plaintiff Shilpa Pharma Inc. because the company has identified him ‘as the only named Shilpa witness to several 2016 discussions with Novartis about licensing the patent’ at issue in the suit.”
• “‘Mr. Iyer allegedly was the first to tell Novartis about the patent’s existence in a one-on-one discussion in February 2016; he then set up and attended a meeting with unnamed Shilpa representatives and Novartis to discuss a license in March 2016; and he then followed up with one or more one-on-one discussions with Novartis in April 2016,’ the brief said. ‘Ultimately, Novartis declined the license.'”
• “Those discussions are central to Shilpa’s patent infringement case, with Shilpa relying ‘on the licensing discussions to claim willful and intentional direct and indirect infringement,’ Novartis said.”
• “Under American Bar Association professional conduct guidelines, ‘[a] lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness;’ thus, Iyer should be disqualified, the company said.”

“SEC Sanctions Ex-Cozen O’Connor Conflict Counsel for Insider Trading” —

• “A former Cozen O’Connor lawyer has agreed to pay more than $20,000 to settle charges by the nation’s top securities enforcer that he misappropriated client information to enrich his personal earnings, while serving as the Am Law 100 firm’s conflicts counsel.”
• “Bala Cynwyd-based trial lawyer William Gericke, 60, was barred from practicing as an attorney before the Securities and Exchange Commission, according to an administrative proceeding filed Nov. 19 by the SEC.”
• “According to the SEC, Gericke purchased 1,000 shares of stock in Cozen O’Connor client Liberty Property Trust in 2019 after obtaining ‘material nonpublic information’ regarding an impending merger between LPT and another real estate investment trust, Prologis. Gericke allegedly sold all the stock after the trading price ballooned in the days following the merger’s announcement.”
• “Gericke practiced at Cozen O’Connor from 1997 until August of this year, when he went to work at Dugan, Brinkmann, Maginnis and Pace in Bala Cynwyd, Pennsylvania. Gerald Dugan, the firm’s chairman, declined to comment.”
• “He has also spoken about legal ethics in other settings. As late as June 10, 2021, Gericke could be seen as a panelist leading a continuing legal education webinar on “Key Ethical Considerations for Lawyers Acting As Local Counsel,” hosted by The Knowledge Group.
• “‘The actions that were alleged by the SEC against Mr. Gericke violated law as well as the firm’s policies and procedures that all employees are obligated to follow,’ [Cozen] firm leaders said in an email statement. ‘When we became aware of Mr. Gericke’s activity, we took prompt and appropriate action, including cooperating with the SEC. We are glad that this matter has been resolved and that the behavior of the former employee resulted in no harm to our client.'”

(Interesting risk question in that Mr. Gericke still lists a Cozen affiliation in his LinkedIn presence. I’m sure learned minds out there may have comment about the rules or standards regarding such things. And I do wonder what consideration and attention, if any, firms pay to these details. Though, at least one person was curious enough to check…)

“Ex-LeClairRyan general counsel gets prison time, while firm insurer agrees to pay $10M to bankruptcy trustee” —

• “The former general counsel of the defunct law firm LeClairRyan was sentenced to 44 months in prison in Richmond, Virginia, on Monday for lying to the U.S. Trustee Program while trying to thwart an investigation into his embezzlement of more than $4 million.”
  “Disbarred Richmond, Virginia, lawyer Bruce Matson, 64, was sentenced following his guilty plea to obstructing an official proceeding, report Law360 and the Richmond Times-Dispatch.”
• “Matson misappropriated about $800,000 between 2015 and 2018 while serving as the court-appointed trustee in the bankruptcy of LandAmerica Financial Group Inc., according to a press release by the U.S. attorney for the Eastern District of Virginia. He also manipulated the budget for the post-bankruptcy wind-down to allow himself to pay $3.2 million in bonuses to himself and others, prosecutors say.”
• “The sentencing happened days after LeClairRyan’s management liability insurer, the Columbia Casualty Co., agreed during a settlement conference to pay $9.475 million to settle claims by the bankruptcy trustee covered by the policy, as well as $525,000 to settle claim expenses.”
• “The settlement leaves outstanding ‘garden variety’ bankruptcy claims against the defendants and claims against legal services provider UnitedLex, the article reports.”

“UnitedLex still faces $128M lawsuit from LeClairRyan trustee” —

• “In 2018, Richmond-based LeClairRyan struck a deal to outsource about 300 of its support workers through a partnership with enterprise legal services provider UnitedLex, which created ULX Partners LLC. The workers were intended to perform back office support tasks for LeClairRyan and other law firms, with LeClairRyan holding a 1% stake in the venture. At the time of the firm’s failure, LeClairRyan still owed UnitedLex more than $8 million related to the venture.”
• “Federal Judge Kevin R. Huennekens of the U.S. Bankruptcy Court for the Eastern District of Virginia ruled that an unauthorized practice of law allegation — specifically that a non-lawyer had been given control of LeClair Ryan — and a misappropriation of funds allegation — that client funds were mismanaged by firm leaders and UnitedLex employees— supported statutory and common law civil conspiracy claims. Huennekens ruled that other allegations in the suit, including converting the business from a professional corporation to a professional limited liability company, were not illegal on their own.”

“DC Moves Toward Array Of Ethics Rules Reforms” —

• “A submission now being readied for the D.C. Court of Appeals — the district’s final arbiter of lawyer discipline and ethics — to curb overreaching outside counsel guidelines also promises to jump-start similar reforms in other lawyer-heavy jurisdictions.”
• “‘Collectively, I expect the changes will have a holistic impact across many rules and areas of practices,’ said Hope Todd, associate director for legal ethics and regulation counsel at the District of Columbia Bar. ‘Of course, one end result will be a big rules education push, which is something the D.C. bar is used to doing.'”
• “It includes new guidance on the duty to tell clients about ‘outsourced’ legal work and the identities of contract attorneys. Another provision would strengthen Rule 1.6 on client confidentiality regarding the duty to safeguard clients’ electronic and other information.”
• “Amy E. Richardson, who heads the legal ethics and malpractice practice at Wiltshire & Grannis LLP, said the city’s legal community should also be watching a still-in-the-works rule proposal aimed at curtailing some of the more extreme components of outside counsel guidelines.”
• “Far-reaching corporate requirements on outside firms have been a simmering issue for the profession for years, as large clients have sought signed agreements that many lawyers believe force them to choose between adherence to ethics rules and signing new clients.”
• “Depending on the OCG, some of the contracts define the firm’s ‘client’ as any and all affiliates and subsidiaries of the company, or even any future affiliates, creating a broad potential conflict problem for firms. Others contractually block outside firms from representing any competitor at any time, even if that hypothetical future work is unrelated.”]
• “The most onerous OCG provisions require outside counsel to bear legal liability for any loss connected to the legal work, even in the absence of an error on the part of the lawyer.”
• “Richardson said the OCG issue is of particular interest to the D.C. legal community. The bar has an especially high concentration of lawyers working with large corporations, and includes many smaller regulatory practices that tend to work with many companies in the same industry.”
• “The bar’s draft report on OCGs from last November includes a long series of recommended rule changes meant to solidify lawyers’ independence and prevent attorneys from granting an ‘open-ended’ scope of conflicts of interest. A change to Rule 1.8 on specific conflicts would also prohibit lawyers from signing any indemnification provision that holds them responsible ‘for errors and omissions for which neither statutes nor common law impose liability.'”

“A case of over-zealous prosecution: Solicitors fined for limiting liability in line with SRA guidance” —

• “Inevitably, there is a little more to this than can be encapsulated in a headline but
  the issue is of major concern because it may apply to the terms of business commonly used by most large solicitors’ firms and many smaller firms.”
• “It was alleged that on various dates between 2010 and 2014 the solicitor improperly sought to limit liability in respect of claims and/or limit the timeframe in which a claim could be made in breach numerous provisions of the Solicitors’ Code of Conduct 2007 (the 2007 Code) and the SRA Code of Conduct 2011 (the 2011 Code).”
• “In any event, should the SRA, through conduct rules, prevent solicitors from limiting their liability to the mandatory insurance limit? There may be many circumstances in which that level of cover is not available to meet a claim, for example –
  • A) Multiple similar claims may be subject to a single limit of indemnity due to the operation of the aggregation clause, as the SRA will be only too well aware, having intervened in the leading case on the point in the Supreme Court, AIG Europe Ltd v Woodman [2017] UKSC 18 – and the facts of the present SDLT scheme case involved multiple similar instructions;
  • B) Other policy exclusions may apply – developments are currently awaited on the extent of any cyber exclusion;
  • C) A firm switches regulator after engaging the client – no other regulator’s compulsory insurance scheme is as extensive in policy limit or breadth of cover, and run off cover in particular is substantially less under other schemes;
  • D) Solicitors may be exposed to liability for many years, even beyond the 15 year period provided by section 15B of the Limitation Act 1980, but insurance cover does not continue indefinitely – and the SRA has been resolute until now that the Solicitors Indemnity Fund must close.
• “By section 28 of the Legal Services Act 2007, the SRA is required to act in a manner which is proportionate. Can it be proportionate to prevent solicitors from limiting liability below the minimum insurance limit, when that figure is arbitrary because it may not in fact be available to meet a claim for any of a number of reasons, and adversely impacts a solicitor’s right to protection of property under Article 1 of the First Protocol of the European Convention on Human Rights? And no such provision applies to freelance solicitors, indeed no insurance is required at all unless they are conducting reserved legal activities, and even then it will not be on terms equivalent to the MTC. The time is now ripe for a review of the SRA restriction on limiting liability, and guidance on what is and is not considered appropriate.”

“The Lawyers Who Helped Build, and Bring Down, Carlos Ghosn” —

• “In the three years since Carlos Ghosn was detained on a Tokyo airport tarmac, much has emerged about how forces within Nissan Motor Co. worked to remove him. Yet a key group has avoided close scrutiny of their role in the once-powerful car executive’s downfall: the lawyers.”
• “A small clutch of attorneys from Latham & Watkins LLP, one of the world’s largest law firms, advised Nissan for years on how to compensate its then chairman and CEO. That included the remuneration package that would become the basis of the first charges against Ghosn, for concealing the full extent of his income. Then, as Ghosn’s pay became the subject of a criminal investigation in 2018, Latham & Watkins was enlisted to investigate his alleged wrongdoing, despite warnings to Nissan’s board that it posed a serious conflict of interest.”
• “‘I was concerned right from the get-go about their involvement’ in the company-ordered probe, said Ravinder Passi, Nissan’s former global general counsel. Passi sued the carmaker last year for wrongful termination, saying that he was dismissed after questioning whether the law firm acted in Nissan’s best interests. ‘I was incredibly surprised, and shocked. How is this going to appear when you’ve got the same lawyers investigating things, including their own work? The situation was ripe for misbehavior.'”
• “Despite what Passi, who reported to Nada, calls its deeply conflicted position, Latham & Watkins remains Nissan’s top legal adviser, as the carmaker continues to grapple with the fallout from Ghosn’s undoing — including in court. Nissan is facing a raft of lawsuits across the globe from disgruntled shareholders, business partners and former employees.”
• “Azusa Momose, a Nissan spokeswoman, said that Latham & Watkins’s probe into Ghosn and Kelly was ‘robust, thorough and appropriate,’ and that its findings were corroborated by multiple government agencies in their own ‘thorough, independent investigations’ … ‘Latham & Watkins were not at any time conflicted in assisting Nissan to carry out its investigation,’ Momose said.
• ‘Their client is, and always was, Nissan. Any suggestion that Latham & Watkins were conflicted, or that any potential conflict prevented them from assisting in the conduct of a robust investigation, is not supported by any facts.’
• “In a statement provided to Bloomberg, Latham & Watkins said it ‘regularly discussed the firm’s engagement on the internal investigation with Nissan and its executives and employees — including Nissan’s former general counsel, Ravinder Passi — all of whom approved of and agreed to continue with the firm’s engagement.'”
• “James Wareham, Kelly’s U.S. attorney, called Latham & Watkins the ‘most conflicted law firm on earth’ for leading the investigation into its own advice, and that it should never have agreed to take on the probe. Nissan’s board ‘must engage truly independent counsel to revisit the entire affair — Nada’s role, as well as the role of other conspirators; the role of the Ministry of Economy, Trade and Industry; and the role of the Japanese prosecutors,’ he said.”

And with thanks to Sean Ginty, Risk Control Director at CNA who sent in: “‘SPAC’ Clients Pose Unique Risks for Law Firms: Lessons Learned from Defending Lawyers in Malpractice Cases” —

• “Representing the sponsor of a ‘Special Purpose Acquisition Company’ or ‘SPAC’ poses unique risks to law firms.”
• “In this article, we explain what SPACs are and why representing their sponsors may pose risks for law firms and lawyers. We also offer suggestions—based upon experience defending law firms against malpractice and other claims after investments have gone bad—for reducing risks to law firms representing SPAC sponsors. Whether firms represent SPACs or other investment sponsors, these suggestions may make claims less likely. They also may reduce the disruption, expense, and embarrassment if claims arise.”
• “Although all representations pose litigation risks, the sources of litigation risks for lawyers representing SPAC sponsors can differ from other types of investment-fund representations.”
• “After the SPAC raises money, the risk of alleged conflicts- of-interests among the sponsor, the sponsor’s principals, and the SPAC becomes more prominent. With the benefit of hindsight, disgruntled individuals or entities also may criticize the adequacy of the law firm’s advice or other legal services in connection with merger target selection and vetting.”
• “In addition, even if the sponsor and the SPAC elect not to sue the law firm, it is conceivable that the law firm may encounter a derivative claim brought by disgruntled SPAC share- holders alleging a conflict between their interests and those
  of the sponsor. See Padgett v. Mitchell, 2002 WL 991022, at *9 (Cal. Ct. App. May 15, 2002) (fiduciary duty claim in shareholder derivative suit targeting outside counsel for the corporation), as modified on denial of reh’g (June 12, 2002).”

“DLA Piper Withdraws From $30M Ga. Case Amid DQ Bid” —

• “The firm’s attorneys Robert L. Crewdson and John S. Ducat are being replaced as lawyers for Westinghouse Electric Co. LLC by three attorneys from Kilpatrick Townsend & Stockton LLP.”
• “Westinghouse’s notice of substitution of counsel gave no explanation for the change, which followed a Nov. 2 hearing in the Georgia State-wide Business Court on a motion by Curtiss-Wright Electro-Mechanical Corp. to disqualify DLA Piper from the case.”
• “Curtiss-Wright, accused by Westinghouse of failing to timely deliver reactor coolant pumps for nuclear power plants in the Southeast, sought the firm’s disqualification on the basis that it was represented in a related case against Westinghouse by one of DLA Piper’s lawyers.”
• “DLA Piper defended its involvement in the Georgia case, saying its representation was separate from a yearslong dispute between Westinghouse and Curtiss-Wright over the supply of reactor coolant pumps for nuclear power plants in China. That case is being arbitrated in Sweden.”
• “On Nov. 11, the arbitral tribunal in that Swedish case dismissed DLA Piper’s Ducat and Crewdson from representing Westinghouse, at Curtiss-Wright’s request. The tribunal said in an order that Dalin was given confidential and sensitive information about Curtiss-Wright’s defenses and therefore had a conflict of interest… In the Georgia case, Judge Walter W. Davis has not yet ruled on Curtiss-Wright’s bid to disqualify DLA Piper. Curtiss-Wright has also filed a motion to dismiss the case, which is pending.”

“Contract lawyers face a growing invasion of surveillance programs that monitor their work” —

• “Facial recognition systems have become an increasingly common element of the rapid rise in work-from-home surveillance during the coronavirus pandemic. Employers argue that they offer a simple and secure way to monitor a scattered workforce.”
• “Contract attorneys such as Anidi have become some of America’s first test subjects for this enhanced monitoring, and many are reporting frustrating results, saying the glitchy systems make them feel like a disposable cog with little workday privacy.”
• “Contract attorneys sift through thousands of documents entered as potential evidence during a lawsuit, redacting sensitive information and highlighting relevant details lawyers may need while arguing a case, and they have become a backbone of the legal economy: Law firms hire them on an as-needed basis — such as when a complicated lawsuit involves lots of internal records or emails — and ditch them when they are no longer necessary.”
• “The Washington Post spoke with 27 contract attorneys across the United States who had been asked to use facial recognition software while working remotely. The pandemic pushed many of them out of secure document-review offices and into remote work, and many expected some additional security, since they look at sensitive files for legal cases with strict confidentiality rules.”
• “But most of them hadn’t expected anything like the facial recognition monitoring they’ve been asked to consent to. The software uses a worker’s webcam to record their facial movements and surroundings and will send an alert if the attorney takes photos of confidential documents, stops paying attention to the screen or allows unauthorized people into the room. The attorneys are expected to scan their face every morning so their identity can be reverified minute by minute to reduce potential fraud.”
• “Attorneys of color also worried that the facial recognition systems’ varying performance on different skin tones left them disadvantaged from the start. One attorney said he filed a complaint with New York City’s Human Rights Commission last year, arguing that he was being denied the right to work by refusing to consent to being monitored. He worries that the facial recognition scans could threaten his legal license or livelihood if it falsely led to accusations that he had compromised client data.”
• “The technology isn’t perfect, Fetgatter said: One law firm client recently complained that the number of false positives made it ‘honestly more of a nuisance than it was worth.’ But much of the attorney feedback about the system so far, she said, has ‘been positive because of how much attention we put on keeping the team engaged.’ Attorneys who are uncomfortable with that level of monitoring, she added, can decline the job.”
• “But other lawyers said they felt infantilized or distrusted by monitoring software that gave no weight to their experience or careers. One attorney said the software treated ‘people who have taken oaths as if they are common criminals.’ Said another: ‘Didn’t my work record speak for itself that I had integrity?'”

“Clyde & Co lawyers suspended in Dubai for ‘upsetting powerful Emirati’” —

• “Four Clyde & Co lawyers working in the United Arab Emirates have been temporarily banned from working after they crossed paths with a powerful Emirati.”
• “The solicitors have been suspended from practising law for three months by the Dubai Legal Affairs Department for a ‘breach of certain conflict of interest rules.'”
• “Details are scant. Unlike legal regulators in the UK, the DLAD does not publish records of its proceedings, judgments and sanctions, nor does it identify lawyers against whom it has taken action. The DLAD did not respond to requests for comment.”
• “RollOnFriday understands that the DLAD honed in on Clyde’s four lawyers, as well as local lawyers, after a powerful Emirati successfully overturned a judgment made in 2013 where Clyde & Co acted for the other side.”
• “A source suggested the influential figure had pulled strings to ‘take revenge,’ and that ‘there appears very little in the way of any wrongdoing or negligence highlighted in the bringing of the sanction.'”
• “In a statement, Clyde & Co told RollOnFriday, ‘We are aware of a decision by the Dubai Legal Affairs Department (DLAD) against a number of lawyers in the UAE. While we are pleased that two of the three allegations that were contained in the original complaint to the DLAD were dismissed, the DLAD has upheld the decision that there was a breach of certain conflict of interest rules. We maintain that our lawyers acted with integrity at all times and are exploring avenues to challenge the decision.'”

“Advising both Chinese state companies and the Pentagon, McKinsey & Co. comes under scrutiny” —

• “Global consulting giant McKinsey & Co.’s work with both the Pentagon and powerful Chinese state-owned enterprises poses a potential risk to national security that federal agencies can no longer ignore, lawmakers and critics say.”
• “McKinsey’s consulting contracts with the federal government give it an insider’s view of U.S. military planning, intelligence and high-tech weapons programs. But the firm also advises Chinese state-run enterprises that have supported Beijing’s naval buildup in the Pacific and played a key role in China’s efforts to extend its influence around the world, according to an NBC News investigation.”
• “Asked about its work in China and the United States, McKinsey told NBC News that it abides by U.S. laws on federal contracting and that it has extensive internal rules to prevent conflicts of interest and to protect clients’ information.”
• “‘We follow strict protocols, including staffing restrictions and internal firewalls, to avoid conflicts of interest and to protect client confidential information in all of our work. When serving the public sector, we go further: in addition to managing potential staffing conflicts, we are subject to our Government clients’ organizational conflict of interest requirements and comply with these obligations accordingly,’ a company spokesperson, Neil Grace, said in an email.”
• “The Pentagon and other federal government agencies rely on McKinsey to carry out often sensitive work touching on national security strategy, cybersecurity and cutting-edge technology, paying the firm hundreds of millions of dollars for its advice and data-crunching.”
• “‘I can’t see how you could work in the areas they’re working in for the Defense Department and at the same time have the extensive connections in China, and not be compromised,’ said Marianne Jennings, a professor of legal and ethical studies in business at Arizona State University. ‘If you just step back objectively, there’s a great deal of risk here for the United States.'”
• “In four federal contracts obtained by NBC News, including with the Defense Department and the Navy, McKinsey made no mention of its clients in China or any possible conflict of interest. Under federal law, contractors must disclose any possible conflicts of interest.”
• “But McKinsey does not view its consulting for Chinese enterprises as a conflict, and experts say the federal government often doesn’t focus on a contractor’s foreign clients. Instead, federal officials usually look at whether a company has foreign ownership or control, and vet contractors’ employees for any security concerns. Still, the burden is on the contractor to divulge even the appearance of a potential conflict.”
• “Lawmakers from both parties and critics of McKinsey worry its work with Chinese state-owned companies could allow Beijing access to valuable information associated with the firm’s extensive consulting with U.S. government agencies, possibly giving China an upper hand in its competition with the U.S. Even if no secret material was obtained by China, McKinsey could inadvertently provide Beijing with valuable insights into senior leadership and strategic thinking in the U.S. government, critics say.”
• “Apart from its consulting in China, McKinsey has come under sharp criticism from lawmakers and faced legal challenges over alleged conflicts of interest in other fields.”

I spent some time reviewing the 20-page 2021 Intapp risk staffing and trends report, which just hit the presses and is definitely worth a look: “2021 Risk Management Survey” —

• “Law firm risk management continues to increase in complexity. A centralized risk management function can help firms achieve a consistent and scalable global application of risk policies and processes. But firms have taken a piecemeal approach to how they handle the various types of risk management activities. Intapp conducted a survey of law firms to understand how firms organize their risk teams and invest in technology across their offices globally.”
• “Topics include:
  • Pandemic-driven impacts on risk-management activities and staffing
  • Increased range of dedicated risk-management staffs
  • Ongoing risk-management challenges
  • Key risk-management staffing and business-agility metrics”

One area I noted, given reader interest, was outside counsel guidelines, where the report notes:

• “The survey data captured the total number of outside counsel guidelines (OCGs) and other client-tendered engagement terms reviewed by respondents’ firms. Although the data shows an expected increase based on firm size, firms with 1,000 or more lawyers are reviewing more than twice as many client terms compared to their large counterparts, and large firms are reviewing almost double the quantity as their midsize counterparts.”
• “Survey data reveals a year-over-year increase in the number of OCGs and engagement terms reviewed across firm size, with enterprise firms outpacing midsize and large firms overall.”
• “Further, the 2020 survey data shows that across firm size, firms are reviewing a range of 1 to 2 OCGs per lawyer annually.”
• “For staff involved in the review of OCGs, the data shows that in-house counsel and risk lawyers are heavily involved across firm size; further, survey results reveal that members of accounting, IT, and finance teams also play significant roles.”
• “When we drilled down into the data by firm size, we observed that large firms with 1,000 or more lawyers rely on a larger, more diverse set of reviewers compared to teams from small and midsize firms.”

See the complete survey report for more.

Brad Risinger, partner at Fox Rothschild, shares analysis of recent conflicts matter: “One Law Firm. Two Clients. Three Times the Complexity.” —

• “Counsel in North Carolina Derivative Actions can Represent Company, and Targeted Directors who do not Face ‘Serious Charges of Wrongdoing'”
• “Amidst a “bitter family dispute” over future control of a closely held oil company, can the same law firm represent the directors paving the way for their son to take the reins and the company that minority shareholders seek to protect from the heir’s perceived shortcomings?”
• “In Mauck v. Cherry Oil Co., Inc, 2021 NCBC 59, the Business Court took a first impression look and adopted a subjective standard that would disapprove of such dual representations only when allegations of ‘serious wrongdoing’ are made against the directors sued in a “derivative action.”
• “Womble Bond Dickinson (US) was counsel for defendants Jay and Ann Cherry, and over the repeated objections of the plaintiffs, the firm subsequently was retained to represent Cherry Oil. As Judge Davis aptly noted, the plaintiffs drew little comfort from Womble Bond purporting to protect the interests of the majority shareholders and the company (id.¶¶ 13, 25): ‘In essence, the Plaintiffs’ argument is that an attorney cannot represent one client at the same time that it is investigating that client for potential wrongdoing against another client.'”
• “The Business Court surveyed differing approaches from other jurisdictions, but ultimately settled on a rule that would allow the same law firm to represent both company and directors in a derivative action unless there are “serious charges of wrongdoing” against the directors.”
• “There are, Mauck concludes, instances when a law firm should not represent both company and targeted directors in a derivative action but discerning them depends on a subjective determination of when alleged director misconduct amounts to ‘fraud, theft, self-dealing, or usurpation of corporate opportunities.'”
• “Instead, the Court held, alleged efforts by the defendant directors to consolidate their power and lessen the influence of the minority shareholders was a debate about ‘current mismanagement and future direction,’ not the sort of ‘theft, fraud, or gross financial conflicts of interest that courts have found sufficient to constitute serious charges of wrongdoing.'”