Bressler Risk Blog

My friend and colleague Meg Block at Intapp dropped me a line to remind folks that their annual Risk Staffing Survey is closing soon (Deadline: May 14th). You can read more and participate via this link.

I asked Meg if the analysis that’s sure to come out the other end was reserved solely for participants, and she was mysterious…

So if the topics below are on your mind, it’s probably safest to share your thoughts and contribute, to ensure a spot on the report distribution list.

Survey Overview:

• “The annual Risk Staffing Survey explores the ways you and your colleagues conduct various risk-related activities. We’ve expanded the questions this year to understand how the COVID-19 pandemic changed the ways in which risk teams work.
• “Participate in this year’s survey to share your insights on topics such as:
  • Conflicts resolution
  • Client due diligence
  • Business acceptance operations
  • Risk research
  • Client engagement terms management”

I attended their recent webinar on last year’s findings, featuring commentary by Meg, Patty Fitzpatrick (Seyfarth Shaw) and Jennifer Schwendemann, which is available here: “Intapp Risk Staffing Survey Readout: Risk Staffing Trends Helped Firms Craft a Stronger Pandemic Response.”

That report was definitely a slice in time, presenting a view of the world at a particular point during the pandemic:

• “The COVID-19 pandemic dealt law firms and other professional service firms an unprecedented hand, but research shows that the professionalization of risk teams — and their firms’ support for distributed staff — helped position risk services to continue without interruption during stay-at-home restrictions. Tune in to hear a panel of experts reflect on key findings from our recent Intapp Risk Staffing Survey that firms can use to inform their strategies in the new normal.”

I’ve no doubt things have shifted, adjusted and evolved since last year’s survey. And I look forward to reading the eventual 2021 report.

You can read more, contribute your thoughts and get on the mailing list for the summary report: Risk Staffing Survey

Sometimes the headlines write themselves (along with the miniseries): “Old Friends Split over Napa Cab” —

• “They were great friends until one stopped sending the other wine… But in 2016, Schrader stopped sending his annual shipment of 17 cases of his expensive Schrader Cellars Napa Valley Cabernet Sauvignon to Roach. ‘I stopped sending Roach wine in 2016 when he stopped giving me legal advice,’ Schrader said in a deposition.”
• “Then, in 2017, Schrader sold his very high-end wine brand for about $60 million to Constellation Brands, a shocking upscale move at the time for Constellation. Now Roach and Schrader are suing each other in state and federal courts over Roach’s claim that he was an investor in Schrader’s business. Roach filed a lawsuit in Harris County, Texas (Houston is the largest city) against Schrader and Constellation. Schrader then filed a federal lawsuit arguing that while all his exes may live in Texas, the jurisdiction for this case resides elsewhere.”
• “It’s a nasty battle and the court records show how the two men’s former friendship curdled into hatred. Constellation’s attorney Casey Low accused Roach’s attorney – who is also Roach’s law firm partner – of deliberately filing timely document requests while Low’s wife was undergoing a medical emergency.”
• “Roach and Schrader agree that they were very good friends, and that in 2000, Roach gave Schrader $135,000 to buy grapes, and that several years later Schrader repaid Roach $150,000. That’s where their stories diverge. Roach claims that the money was for a very specific purpose: to enter into a longterm lease to buy specific rows of Clone 337 Cabernet Sauvignon grapes from Beckstoffer To Kalon vineyard. Schrader claims the money was just to ‘buy grapes,’ but not those in particular. Schrader claims the $135,000 he got from Roach in 2000 was a loan that he paid back in full.”
• “A complicating factor is that in 2002, Roach and Schrader formed a company in California called Roach Brown Schrader (RBS) LLC. The ‘Brown’ is winemaker Thomas Rivers Brown, who has apparently managed to avoid being sued by either so far. In 2003, the company charter was amended to cut out Brown, but kept the name RBS…In 2013, Schrader cancelled the Roach Brown Schrader LLC. Roach claims he didn’t learn about this until 2017, when Schrader Cellars was sold.”
• “Schrader claims the statute of limitations for Roach to complain about the cancellation of the LLC has expired, because Roach didn’t file a lawsuit until 2018. He has also asked the court to disqualify Roach’s attorney John W. Newton III, a partner in Roach’s law firm, because Roach has access to Schrader’s records; Roach gave Schrader legal advice for years.”
• “Then there’s the question of jurisdiction. Though almost every aspect of the case happened in California, Roach is trying very hard to keep the case in Harris County. Roach argued that he helped promote Schrader wines in Texas, and that Schrader attended several wine dinners in Texas… Roach argued that Harris County has jurisdiction because Constellation sells wine there… The wine shipments have stopped, but both the state and federal lawsuits are ongoing.”

I have yet to regret spending an hour with the InOutsource crew and 75+ of their closest colleagues and contacts talking risk as part of their ongoing risk round table series.

The discussion a few weeks ago was fascinating indeed. And commentary from the group in attendance clearly led to the creation of May’s session topic and title, which I just love: “Sneaky Lawyer Intake Tricks and How to Sniff Them Out” —

• “During our last roundtable on successful new business intake, general matters, and how law firms balance the legitimate need for general billing repositories against the occasional use of those repositories as ways to circumvent the firm’s intake policies and process.”
• “In our next roundtable, we’ll have some fun sharing examples of the lengths lawyers sometimes go to avoid the system but we will also have some very serious discussion about why that happens, what the day-to-day work of a lawyer at a law firm is like, and ways conflicts and new business intake folks can come up with solutions that satisfy both firm risk management and practical lawyer interests.”

Registration link and more details: here.

“Law Firms in Hot Seat: Lowenstein, Porzio Sued Over Alleged Conflict in Bankruptcy Case” —

• “New Jersey-based law firms Lowenstein Sandler and Porzio, Bromberg & Newman are accused in a suit of breaching their fiduciary duties to shareholders in the bankruptcy of pharmaceutical maker Aceto Corp.”
• “The suit, which concerns the award of $13 million in legal work by a bankruptcy plan administrator who was hired as a partner in the firm getting the work, could be a serious distraction for the defendant firms.”
• “Lowenstein’s work for Aceto general counsel Steven Rogers, the bankruptcy plan administrator, coincided with Rogers’ employment as a Lowenstein partner, the suit said. By failing to make timely disclosure of Rogers’ status as a Lowenstein partner, ‘Lowenstein intentionally put itself, and Rogers, in positions of divided loyalty,’ the suit claims. And by failing to report that divided loyalty to beneficiaries of the bankruptcy plan or to the court, Porzio ‘acted to perpetuate the Rogers-Lowenstein conflict,’ the suit claims.”
• “Rogers, for his part, was removed from his position as plan administrator under an agreement approved on Oct. 16, 2020, after the oversight committee in the case raised objections to his relationship with Lowenstein. The agreement called for Rogers’ replacement, a company called BAK Advisors, to conduct a review of fees awarded to Lowenstein in the case.”
• “A Lowenstein spokesman said in a statement about the suit, ‘Lowenstein is proud that the Aceto bankruptcy case has had a highly successful outcome to date, well-exceeding the expectations of all stakeholders. At the end of the day, it is expected that all of Aceto’s creditors will have been paid in full, and that there may well be a sizable distribution to Aceto’s former public shareholders. The bankruptcy court has expressly recognized this successful outcome. The newly filed class action is the fifth or sixth attempt by these plaintiffs to improperly steer funds to themselves through a questionable penny stock strategy… These claims recycle spurious allegations made in a prior lawsuit that is currently the subject of a dismissal motion and is in mediation.'”

“Attys From BYU-Idaho Title IX Suit Won’t Be DQ’d” —

• An Idaho federal judge has agreed that a law firm is conflicted by representing both Brigham Young University – Idaho and the Church of Jesus Christ of Latter-day Saints in litigation involving allegations that the school failed to properly respond to reports that a late professor sexually abused a student, but declined to disqualify the firm from the case.”
• “Rather than toss Kirton McConkie, U.S. District Judge B. Lynn Winmill opted Friday to order the firm to maintain two separate sets of attorneys for its clients in the case and to ensure that they do not share with each other certain privileged information involving the student, according to his opinion.”
• “The privileged information concerns communications between the former student, Lori Stevens, and a church official and a bishop that the church and its attorneys possess, according to court documents. Judge Winmill noted that the church and its attorneys have promised they will not share the information with the school and its attorneys.”
• “The church intervened in the case in February 2018, saying that Stevens had requested documents held by the church that are privileged. The disqualification fight is rooted in the fall 2020 move of three attorneys for the university, Wade Woodard, Steve Andersen and Christine Arnold, from Andersen Schwartzman Woodard Dempsey to Kirton McConkie. Stevens urged the court in November to disqualify Kirton McConkie, as there was a danger that the privileged documents could fall into the school’s hands, despite the firm’s assurances that it would implement a firewall between the attorneys representing each party.”

“Eckert Seamans Can’t ‘Pinky Promise’ To Duck Casino Conflict” —

• “A Pennsylvania federal judge wouldn’t accept a “pinky promise’ from Eckert Seamans that it has stopped representing a casino against a former client who manufactures games, so the law firm must face the game maker’s motion for a preliminary injunction.”
• “U.S. District Judge Jennifer Wilson rejected the law firm’s request to dismiss Pace-O-Matic Inc.’s motion for a preliminary injunction as moot, reasoning that Eckert Seamans Cherin & Mellott’s declarations that it had withdrawn from representing Greenwood Gaming & Entertainment Inc. — which does business as Parx Casino — weren’t enough to guarantee that it wouldn’t resume that representation.”
• “‘Without suggesting that Eckert intends to renege on the commitments made in the declarations submitted to the court, the court observes that commitments made in a declaration are akin to ‘pinky promises,’ inasmuch as they are not easily enforceable in the event of breach (as compared to a court order).'”
• “Georgia-based Pace-O-Matic, also known as POM, had hired Eckert Seamans to represent it in a lawsuit in Virginia in 2016, where the firm argued that POM’s game machines required the use of skill and therefore weren’t illegal gambling machines.”
• “But in 2018, when POM filed two lawsuits in Pennsylvania over the removal of its games, Eckert Seamans allegedly took the opposite position and argued in an amicus brief for the casino operator that POM’s gadgets were gambling machines and should be barred. When POM brought up the alleged conflict of interest and asked the firm to drop Parx in Pennsylvania, it instead dropped POM in Virginia, the court noted.”

I recently discovered an amazing podcast. I love story podcasts and would listen constantly back when I had a commute, back when people worked in offices — and this one is addictively well crafted. From Foreign Policy Magazine, I Spy has it all, drama, tension, amazing historical details, and star moderator — renowned character actress Margo Mardindale.

What am I telling you this? Well, I’m not quite branching out into general media taste making. I have no instagram feed to hype, risk or otherwise. But it did lead me to a relevant story in the magazine itself: “U.S. Lawyers Are Foreign Kleptocrats’ Best Friends” —

• “And the problem appears to be getting worse as law firms expand the scope of their work, which the case of former Ukrainian President and kleptocrat Viktor Yanukovych illustrates. In 2019, a series of DOJ filings revealed the lengths to which Gregory Craig, a senior partner at a white-shoe U.S. law firm, would go to bolster the international image of a foreign corrupt autocrat—and how many services these firms now provide.”
• “…the senior Skadden partner, was indicted but in 2019 was found not guilty of making false statements to the Justice Department’s FARA unit about his Ukraine-related work. Skadden—which had failed to register much of its work the DOJ and whose efforts for their Ukrainian clients the new DOJ filings detail—eventually settled for $4.6 million and agreed to register retroactively as an agent of Ukraine.”
• “What, then, can be done to encourage more responsible representation by U.S. lawyers implicated in these transnational money- and reputation-laundering schemes? We spy two needed remedies.”
• “First, there needs to be far more understanding and scrutiny of the roles U.S. lawyers play in transactions on behalf of clients. A good place to start would be the implementation of the FATF recommendations mentioned above, which require both reasonable and meaningful due diligence obligations and suspicious activity filings for lawyers regarding things like bank accounts, financial transactions, or even the purchase of real estate on behalf of their clients. This can, and should, be part of a far broader effort from Washington to expand anti-money laundering requirements in the Bank Secrecy Act (recently extended to encompass virtual currency transactions and antiquities dealers as well as allow for the subpoena of foreign banks’ financial records that hold correspondent accounts with U.S. institutions) and to end, or at least limit, the two-decade-old anti-money laundering exemptions in the Patriot Act.”
• “In addition, we should consider introducing—if not through legislation, then updated ethical guidance—demands that attorneys disclose their sources of direct and indirect compensation, in particular when clients engage with any public authorities or the media. In doing so, U.S. lawyers would hopefully begin to think twice before helping kleptocratic clients open secret bank accounts, purchase high-end real estate, or aid their clients in dodging the United States’ patchwork anti-money laundering regime.”
• “On the reputation-laundering side, one solution is clear: In addition to beefing up FARA enforcement, the DOJ should consider ending its exemption for lawyers. FARA registration isn’t exactly strenuous, requiring little more than filing basic paperwork with the department. The DOJ should issue clear guidelines, such an exemption permits—and should illustrate a clear willingness to enforce such limitations.”

And, similar drama of the Better Call Saul variety: “Afternoon Briefs: Lawyer accused of laundering cash from undercover agent; Justice Barrett lists home for nearly $900K” —

• “Prominent Dallas lawyer Rayshun “Ray” Jackson of the Jackson Law Firm has been charged with laundering money acquired from an undercover agent who said the money came from drug trafficking.”
• “Jackson allegedly suggested setting up a shell corporation and a cash business like a coin laundry or car wash that would make it difficult to track proceeds, prosecutors alleged. He allegedly negotiated a 4% fee, plus a bonus.”

Fifteen years and no gray hair ago, as firms were investing in replacing memoranda-driven screening with electronically-enforced ethical wall software, I had a few discussions with firms about the implications of the move from paper to digital.

Specifically, I recall discussions regarding how electronic paper trails and logs can capture a great deal of (sometimes surprising to lawyers) information — and that questions of “what was possible” versus what “actually happened,” or even what system configuration were in place at what times —  were sure to follow as the arguments caught up to technology and practice.

I recall a story or two about about a brief, accidental access to a document in a shared library created a disqualifying data point for a firm, permanently logged. So I’m not surprised to see the “how” behind the why under the microscope as firms engaged in walls-related disqualification fights. Without judgement on the specific to this one, I noted: “DOJ Wants More Info On Morgan Lewis’ Glenmark, Teva Work” —

• “Prosecutors urged U.S. District Judge R. Barclay Surrick to require Morgan Lewis to answer a series of questions about its ability to ethically represent Glenmark Pharmaceuticals Inc. USA in the generic-drug price-fixing case. The department has taken issue with the firm’s prior representation of fellow defendant Teva Pharmaceutical Industries Ltd. in the criminal probe and its continued representation of both companies in parallel civil litigation.”
• “Morgan Lewis has rejected the DOJ’s conflict of interest concerns, arguing that it has strict safeguards in place to prevent attorneys assigned to each client from accessing confidential information about the other. But the government said in a Friday letter that the firm must explain exactly how these safeguards work and answer explicitly whether any of its attorneys have performed overlapping work on the two companies.”
• “‘[The U.S. requests] additional details regarding the ethical wall put in place at Morgan Lewis to address the firm’s representation of both Glenmark and Teva, including whether any Morgan Lewis attorneys working on this criminal matter on behalf of Glenmark had access to Teva’s confidential information, either during the pre-indictment stage of this criminal matter, during the time when Morgan Lewis attorneys were representing Teva after Teva was indicted in this matter, or in relation to the pending parallel civil matters,’ the DOJ wrote.”
• “Glenmark’s attorneys at Morgan Lewis and Wilkinson Stekloff LLP urged the court to reject the DOJ’s request in a response letter on Monday, saying the government’s ‘overbroad, intrusive and entirely unnecessary’ list of questions is wrongly attempting to elicit its trial strategy.”

“‘Not a Close Question’: 5th Circuit Trump Pick Faced Recusal Bid in Voting Case” —

• “Judge S. Kyle Duncan, appointed by former President Donald Trump to the U.S. Court of Appeals for the Fifth Circuit, appears to have stepped aside Friday from hearing a dispute between Texas and voting rights lawyers over nearly $7 million in attorney fees in a major civil rights case.”
• “In the case Veasey v. Abbott, lawyers for a number of state and national civil rights and voting rights organizations filed a motion just 24 hours earlier in which they called on Duncan, appointed to the bench in 2018, to recuse because of his prior participation in the case as a private lawyer at a law firm in Washington. The original litigation was a challenge to a Texas voter ID law.”
• “‘This is not a close question,’ Ezra Rosenberg of Lawyers Committee for Civil Rights Under Law wrote in the recusal motion. ‘Judge Duncan was a lawyer who advocated against [the plaintiffs] in this case. He cannot also be a judge in this case. Given the standard—requiring disqualification in close cases—disqualification is mandatory here.'”
• “Lawyers for Texas on Friday had opposed the request that Duncan recuse, arguing essentially that Duncan was not presiding in the identical matter in which he had earlier participated. The dispute now is over legal fees, and not the merits of the voter ID law.”
• “Besides citing the judicial recusal statute and the Code of Conduct for U.S. Judges as reasons for recusal, Rosenberg wrote that Duncan, during his Senate confirmation hearing, had committed to recuse from any matter in which his former firm had submitted an amicus brief. The motion also stated that recusal was warranted to avoid the appearance of partiality.”

“Ex-Littler Client Wants Substitute From Judge’s Old Firm” —

• “After lies from a Littler Mendelson PC partner to an Alabama federal judge resulted in a five-figure sanction for the employment powerhouse and an Atlanta partner being scrubbed from the Littler website, the firm’s former client is seeking to substitute in a lawyer from the judge’s old law firm.”
• “In a defense filing Wednesday, steel mill operator Outokumpu Stainless USA LLC asked U.S. District Judge Jeffrey Beaverstock of the Southern District of Alabama to let it to be represented by an attorney from Burr & Forman LLP after the court kicked out its former lead counsel, Littler partner Gavin S. Appleby.”
• “The reason: Judge Beaverstock practiced at Burr & Forman, of Birmingham, Alabama, before being tapped for the bench and taking over the case three years ago.”
• “Moreover, Outokumpu acquired a facility at issue in still-pending litigation from ThyssenKrupp Stainless USA LLC. Burr & Forman has also represented that company ‘extensively,’ according to a plaintiffs filing in 2018, as well as Outokumpu in various other litigation. And Judge Beaverstock himself was listed as a Burr & Forman counsel on two active cases for Outokumpu at the time he went on the bench, according to court filings.”
• “At that time, the plaintiffs agreed that the judge’s work for Outokumpu and the company’s ongoing relationship with Burr & Forman did not represent a conflict of interest or necessitate Judge Beaverstock’s recusal. But following Appleby’s misconduct and the Thursday substitution bid, they changed their tune, saying that hiring the Burr firm ‘creates a very significant, and very obvious, issue about potential recusal’ for the judge.”
• “In a revised position filed Thursday, plaintiffs’ counsel then softened that position, saying it would only object to the substitution if Judge Beaverstock decided on his own that his recusal ‘would be a consequence of that substitution… If there is no recusal, then plaintiffs do not oppose the substitution of counsel. Plaintiffs’ position reflects the substantial delay that would result from recusal and reassignment,’ the filing states.”

“Disqualification Sought for Connecticut Lawyer in Personal Injury Case” —

• “A new twist in a case involving the alleged poaching of clients from one law firm to another now has one attorney—citing a conflict of interest—trying to disqualify a fellow lawyer from a separate case.”
• “The attorneys at Cicchiello & Cicchiello have been fighting with a former associate who allegedly absconded with the firm’s client list. But now that fight has come back to haunt them in separate litigation.”
• “The defense lawyer opposing Cicchiello & Cicchiello in a car accident tort case is asking a Connecticut judge to remove the attorney serving as the plaintiff’s expert witness.”
• “Now, Adler’s motion for disqualification notes that Connelli, the expert that Dzialo Pickett hired for his client’s case, is also opposing counsel against Dzialo Pickett in the Cicchiello & Cicchiello litigation.”
• “It claims Connelli is therefore an unsuitable expert witness in the car accident case. It argues that Connelli has a conflict in the accident case, where he is on the Dzialo Pickett payroll as a legal expert, while litigating against it as opposing counsel in the Cicchiello dispute.”

“NJ Firm Faces DQ Bid For ‘Abusing’ Ability To Work In Calif.” —

• “A New Jersey law firm is ‘abusing’ the system that allows lawyers to temporarily practice in California, applying at least 22 times since last year on behalf of the same client in similar putative class actions alleging accessibility violations, a casino services company has contended.”
• “The Northern District of California should disqualify Marcus & Zelman LLC from a case in which Bruce Begg alleges that an online casino owned by Sutter’s Place Inc. lacks certain accessibility options for the visually impaired, as the firm has sought temporary admission in at least 22 different cases in California since lasClt year, all on Begg’s behalf, the company argued Friday… Zelman has applied for temporary admission in California at least 64 times since 2017, according to Sutter’s Place.”
• “Begg alleges that Sutter’s Place has violated the federal Americans with Disabilities Act and California’s Unruh Civil Rights Act. When he attempted to use its website in June 2020, Begg was not able to learn about casino locations, hours of operation and contact information because the technology the site uses is not accessible to him, according to an amended complaint he filed in March.”
• “Sutter’s Place contended in its motion to disqualify Friday that Marcus & Zelman uses the same accessibility technology on its own website as the casino services company.”

“Biglaw Partner’s Suspension Quadrupled On Appeal Following Fraudulent Billing Scandal” —

• “Back in 2019, we told you about the hot water Duane Morris partner Doreen Zankowski was in. The issue stems from her time at Saul Ewing — specifically her time entry in 2015, the year she made equity partner. Zankowski billed 3,173 hours and worked more than 720 non-billable hours that year, but during a compensation review, the firm became concerned with her hours. And though Zankowski left Saul Ewing in 2016 and joined Duane Morris, the investigation into her timesheets continued.”
• “According to the initial ethics opinion, Zankowski ‘falsely inflated the number of hours on final bills sent to several clients, improperly entered her time as work by her associates, and knowingly billed clients for taking depositions that she did not attend.'”
• “But after an appeal to the Massachusetts Supreme Judicial Court, the suspension was quadrupled to two years… ‘[Associate Justice David A.] Lowy — writing for a four-judge panel of the top court — increased the penalty to two years on Thursday. ‘Our focus, however, is not on the quantum of excessive fees that were billed, but on the fundamental dishonesty inherent in the respondent’s client billings themselves,” Justice Lowy wrote. “It is not the sheer number of unworked hours that establishes the misconduct but, rather, the dishonesty manifested by billing for them at all.””

For more, see Legal Profession Blog: “Billing Misconduct Sanction Increased”

Next up: “Five Things You Can Do to Help Keep Your Malpractice Insurance Premium in Line” —

• “Unfortunately, for some lawyers, there is an elephant in the room, which is failing to accept the reality that there really is a strong correlation between aggressive collections actions and malpractice claims. If you regularly sue for fees, meaning 2-3 times or more every year, that decision is costing you money. Thus, tip number two is if you regularly sue for fees, consider stopping this practice and focusing on finding ways to prevent serious delinquencies from ever developing in the first place.”
• “Accordingly, tip number four is to encourage you to proactively manage your firm’s claims history by way of a robust risk management program. Insurers prefer to insure firms that consistently use engagement and closure letters, rely on effective rules-based calendaring and docket control systems, have deployed a state-of-the-art conflict checking system, and regularly conduct file reviews just for starters. Time spent on developing and maintaining risk management processes and procedures will be well worth it in the long run.”