Bressler Risk Blog

“USAA Slams Akerman DQ Bid In Medicare Repayment Row” —

• “The United Services Automobile Association shot back on Tuesday against MSP Recovery Claims’ bid to disqualify Akerman LLP from representing USAA in their dispute over Medicare secondary payer claim reimbursements, arguing that the conflict of interest allegations are speculative and come years too late.”
• “USAA argued that MSP Recovery — an assignee of Medicare Advantage organizations that provide health care to Medicare enrollees — had four years to bring up its allegations that Akerman has violated the Florida Bar’s conflict of interest rules by representing other insurers with connections to the same claims. MSP Recovery has known of this speculative conflict of interest since at least March 2017, according to USAA’s response.”
• “‘Rather than immediately seek to disqualify Akerman in 2017, 2018, 2019 or 2020, plaintiffs have continued to actively litigate against Akerman, including in this case,” USAA said. “By continuing to litigate against Akerman and defendants for four years, without seeking disqualification, plaintiffs have waived the right to do so.'”
• “The company said that MSP Recovery also has no legal basis for demanding Akerman’s disqualification because the motion is based on hypothetical assertions that MSP Recovery thinks Akerman could make in the future.”
• “Akerman’s attorney Angel Cortiñas declined to comment aside from pointing to an order issued on Tuesday by U.S. District Judge Cecilia Altonaga, who is overseeing a similar case by MSP Recovery, in which she denied a motion to disqualify Akerman.”
• “‘Plaintiff indicates there is yet-to-be-developed evidence — not presently before the court — that ‘would be applicable to the issues reflected in plaintiff’s motion to disqualify,” the judge said. ‘Plaintiff should consider filing its motion to disqualify when it is prepared for the court to resolve it, not before.'”

“Why Taking Another Look at the Risk of Inadvertent Disclosure at Your Firm Might Be Worthwhile” —

• “A lawyer and non-lawyer business partner own a business. These two have a falling out and litigation ensues. The non-lawyer business partner and other third parties have access to and are continuing to use one of the business’s shared calendars. The lawyer can therefore see when any of these folks schedule an appointment, to include appointments relating to the litigation. In the course of posting an appointment with the attorney who now represents the non-lawyer business partner, one of the third parties cut and pasted in information from an email between their attorney and the nonlawyer business partner. Of course, the lawyer was able to view this sensitive and privileged information.”
• “While we commonly think about inadvertent disclosure in the context of sending an email to the wrong person or not being as attentive or thorough as called for during a document review process in response to a discovery order, the above story is an example of why it might be worthwhile to take another look at how an inadvertent disclosure might occur at your firm. After all, you can’t address a potential problem until you first recognize that a potential problem exists.”
• “Taking time to think through how someone at your firm might slip up means you really do need to understand the inherent risks that come with the digital tools and tech devices in use at your firm. (Also see Comment 8 to ABA Model Rule 1.1 Competence.) For some, this may not be the easiest of tasks. However, it seems to me that the time spent trying to avoid a problem is time better spent than the time spent having to deal with the fallout of an actual problem that was never addressed — all for want of any effort to look for it.”

“No DQ For Polsinelli In Slot-Maker’s ‘Sham’ Patent Suit” —

• A Delaware federal judge has declined to boot Polsinelli LLP from an antitrust case brought by its slot-maker client, NRT Technology Corp., calling any conflict-of-interest risk in the case “minimal.”
• “Turning back a disqualification request from Everi Holdings Inc., the court said Friday that legal work done for an Everi predecessor by the former firm of Polsinelli intellectual property attorney Colby Springer wasn’t sufficiently related to the case to justify the firm’s removal.”
• “Moreover, the time frames of the matters didn’t overlap, and Springer wasn’t personally involved in state gaming probes for the Everi predecessor, known as Global Cash Access, Inc., while he was at Lewis Roca Rothgerber LLP.”
• “Springer ‘did not represent GCA in the [Arizona Department of Gaming] investigation, and the differences in the legal issues presented in the proceedings reduce the likelihood that LRR obtained any confidential information from GCA that could prove useful against Everi in this case,’ U.S. Magistrate Judge Sherry R. Fallon said.”

SRA WEBINAR (March 16): “Anti-money laundering: what we learnt from law firm visits” —

• “We visited 74 firms to check on their money laundering systems. Two thirds were told to make changes to the way they work. Would yours pass?”
• “Join us for a free webinar to get practical advice on how to help keep the proceeds of crime out of legal services. You will hear about the types of issues – and good practice – we have seen from our visits to review practice within law firms.”
• “With a focus on examples from the everyday issues you face, this webinar will offer support to make sure you are doing the right things to keep your firm and the public safe. Areas we found that needed the most work included:
  • independent audit
  • screening of employees
  • matter risk assessments
  • source of funds checks.”

Clyde and Co continue their analysis of Secretariat v A Company [2021] EWCA Civ 6, with a focus on “implications for all accounting firms offering dispute support and/or expert services”: “Navigating stormy waters: experts’ duties and conflicts of interest” —

• “The recent Court of Appeal decision in Secretariat PTE Ltd & Ors v A Company [2021] EWCA Civ 6, upholding an injunction against a global expert services firm on the grounds of conflict of interest, has implications for all accounting firms offering dispute support and/or expert services.”
• “This judgment underscores the risk for professional firms offering expert and/or litigation support services of accepting instructions which place them in conflict of interest. Such a conflict can exist even where (as here) the relevant instructions were accepted by separate legal entities within an organisation in completely different parts of the world. While in some cases it might in theory be remedied by both clients’ consent, this was not a situation which could be addressed or mitigated by the firm implementing Chinese walls (which can assist particularly with so-called “former client conflicts” where the concern is the protection of a former client’s confidential information but not where, as here, there is an “existing client conflict”).”
• “Such a conflict may breach a contractual duty to the first client, which as this judgment demonstrates may be construed as binding not just the contracting expert entity but – depending on how the expert organisation conducts its conflicts procedures and presents its services – also other or all entities within the organisation. Absent a contractual duty, this judgment has left open the possibility that it may still breach a fiduciary duty of loyalty to the first client – and of course an accounting firm will have its regulatory duties to avoid conflicts too.”
• “As a result, firms – particularly those operating through multiple legal entities and in multiple jurisdictions – need robust/joined-up conflicts procedures and clear terms of engagement with their clients. Such terms might, for example, expressly provide that any commitment relating to conflicts is limited to the entity being instructed and does not bind any other entity in the group – though as the judgment observes, if a firm seeks to limit client protection in this way ‘whether … it will secure the instruction, is another matter.'”

“Boies Schiller Partner Joshua Schiller Continued Working Through Leave of Absence After Arrest: Sources” —

• “Boies Schiller Flexner partner Joshua Schiller, son of firm co-founder Jonathan Schiller, has continued working with clients despite a leave of absence the firm said he took after he was arrested following an alleged domestic violence incident at his California home in January, according to three sources with knowledge of the firm. The firm ‘rejects the claims’ that he has not honored his leave of absence.”
• “Two sources say Joshua Schiller has continued to send around conflict checks even after his suspension, with one source adding that he sent around a conflict check Jan. 23—roughly a week after the leave of absence began.”
• “The two sources also said Joshua Schiller has continued to talk to clients during his suspension, and a third source said that Joshua Schiller asked an associate to work on his behalf shortly after he announced his leave.””
• The firm published a statement, including:
  • “‘To be clear, a professional leave of absence for any of our employees is a mandate to decidedly step away from any active servicing of the firm’s work. However, our first and highest responsibility remains to our clients and the important matters that we handle for them. The requisite of minimal hand-off and delegation of that work to ensure that the firm’s clients are properly represented, which is a more difficult task in an ongoing pandemic, is not in our view a violation of the spirit and the substance of a leave of absence. While the review of the matter is ongoing, based on the information we presently have, the firm rejects the claims that Josh is not acting in compliance with his leave and that he continues to work.'”

And hat tip to Simon Chester for dropping me a note about: “Australia’s largest law firm in uproar after taking Christian Porter as client” —

• “The chief executive of the law firm representing Christian Porter is under fire after reportedly sending an all-staff email critical of the lawyer who took the case.”
• “On Friday the Australian Financial Review reported that Annette Kimmitt, the chief executive of Australia’s largest law firm, MinterEllison, had sent an email to the firm’s more than 2,500 staff saying she was sorry for any ‘pain’ caused by the decision to take the attorney general as a client.”
• “Porter sought legal advice from a senior MinterEllison partner Peter Bartlett, one of Australia’s best-known defamation law experts, before revealing he had been accused of an alleged rape dating back 33 years. He has strenuously denied the claims.”
• “The email from Kimmitt reportedly said Bartlett had not gone through the firm’s approval process before accepting the brief, and that she had only become aware of it through the media.”
• “The email has reportedly caused uproar within the firm’s senior ranks. The Australian reported the board had met on Wednesday to discuss the email, and partners had held a Zoom meeting with the chairman, David O’Brien, on Thursday. According to the Australian, O’Brien informed them the board would investigate the appropriateness of Kimmitt’s email.”

“Maxell Can’t Disqualify DLA Piper In Patent Row With Apple” —

• “A Texas federal judge Tuesday denied Maxell’s bid to disqualify DLA Piper LLP from representing Apple in a wide-ranging patent dispute after the law firm hired one of Maxell’s former attorneys from Mayer Brown, saying DLA Piper has provided “exhaustive” evidence that no confidential Maxell information has been circulated.”
• “U.S. District Judge Robert Schroeder rejected Maxell’s motion, finding that DLA Piper timely put in place an ethical wall screening attorney Justin Park — who moved from Mayer Brown to DLA Piper — from disclosing any confidential Maxell information with anyone at his new firm and every DLA Piper attorney working on Apple matters was told not to communicate with Park about Maxell, according to the order.”
• “Even when Park found some confidential Maxell emails, an information technology investigation showed the emails had never been in the email mailbox of any other DLA Piper employee nor were they saved on DLA Piper’s document management system or Park’s cloud storage, the judge said.”
• “Judge Schroeder said he can’t conclude that DLA Piper’s screening procedures were ineffective. ‘DLA Piper has now provided exhaustive evidence demonstrating that no attorney working on any matters involving Apple or Maxell received or viewed any confidential Maxell information, as well as sworn testimony confirming that Maxell’s confidential materials were not accessed by any attorneys other than Mr. Park and [DLA Piper’s Office of General Counsel],’ the judge added.”
• “After Maxell filed its motion to disqualify DLA Piper in October, the firm — represented by attorneys from Gibson Dunn & Crutcher LLP — staunchly asserted that it did not receive any privileged information about Maxell. Maxell hit back criticizing DLA Piper’s ethical screen.”
• “The judge denied Maxell’s motion, but ordered DLA Piper to provide written updates to the company regarding the law firm’s continued compliance with the ethical screening requirements. He also ordered DLA Piper to return or destroy all copies of the Maxell materials at issue within the next week.”

My colleague Max Welsh at InOutsource sent word about his  latest article, which I found fascinating: “Managing Bankruptcy Conflicts: Navigating a critical and complex risk scenario” —

• “The heart of conflicts management is identifying potential issues based on diligent analysis, reporting and review. And whether your firm’s conflicts model leaves it to practicing lawyers to review reports generated by your risk team and clear their own conflicts, or you have centralized or decentralized risk staff charged with both identifying potential conflicts and working to resolve them, the big conflicts questions are always a constant:
  • Whose interests do we represent — that is, who is a client?
  • Whose interests are adverse?”
• “For many types of matters — a straightforward piece of litigation or a simple asset purchase, perhaps — the answers to those two questions likely are straightforward. There might be some question regarding the extension of the attorney-client relationship through affiliates and the conflict check might return some ambiguous information about whether an attorney-client relationship is ongoing, but usually it’s simple to identify whose interests the firm represents and whose interests are adverse.”
• “In bankruptcy matters, however, those issues can be significantly harder to navigate — both to identify and to resolve.”
• “On top of the conflicts in the rules of professional conduct, the bankruptcy laws impose their own set of conflicts and what I will call ‘conflicts-adjacent’ obligations on lawyers involved in bankruptcy proceedings, particularly for lawyers representing the debtor or the Committee.”
• “Like the ethics rules, the Bankruptcy Code prohibits the involvement of lawyers who possess an ‘adverse interest.’ If the lawyer is involved on behalf of the debtor, the Committee, or the Trustee, the Bankruptcy Code also requires that the lawyer meet a standard of disinterestedness; the lawyer/firm cannot itself be a creditor of the debtor, for example.”
• “All of this leads bankruptcy lawyers — and firms that have bankruptcy practice groups — in a complicated position when navigating the conflicts of interest and new business intake process.
• “We have now reviewed some of the problems lawyers and firms face in navigating the conflicts and intake
  process when bankruptcy matters are implicated. Here are some solutions…”

“Former Associate Accused of Client Poaching Wants Cicchiello & Cicchiello’s Lawyer Disqualified” —

• “In an unusual move, the attorney for former Cicchiello & Cicchiello associate Alex Sarris, who the personal injury law firm said conspired with another law firm to lure clients away, has filed a motion asking Superior Court Judge David Sheridan to disqualify plaintiffs counsel Lawrence Connelli.”
• “In a lawsuit filed last month, Cicchiello & Cicchiello alleges Sarris used the firm’s computer system to obtain information on all its workers’ compensation and personal injury clients.”
• “The reason New London attorney Michael Bonnano, who represents defendant firm Dzialo, Pickett & Allen, gives in filing the motion Monday is that Connelli not only represents plaintiff Cicchiello & Cicchiello, but is also working for the defendant law firm giving expert advice in a pending car accident case.”
• “The motion notes Connelli, an Avon solo practitioner, ‘is under contract to provide consulting and testimonial services to DPA. He has now sued his own client.'”
• “But Leslie Levin, a Hugh Macgill professor of law at the University of Connecticut School of Law, said Bonnano should have been looking at a different part of the rule. ‘The defendant’s argument is that (Connelli) is the law firm’s client, but an expert witness for a firm is not serving as the firm’s lawyer,’ Levin said Tuesday. Levin isn’t a party to the litigation at hand.”
• “Levin added: ‘It would be a bad thing if lawyers who are serving as expert witnesses were considered to be the lawyers for the law firm, because law firms would have too much authority to direct the lawyer’s testimony.'”
• “Levin continued: ‘The better argument the defense could have made, but didn’t, is that Connelli would be materially limited in his ability to represent the plaintiff law firm in this action while also serving as an expert witness for the defendant client in the car accident litigation.'”

“It’s Out: Sills Cummis Forced Off Case That Could Affect Future Work” —

• “A New Jersey judge has disqualified Sills Cummis & Gross from representing the defendant in a real estate dispute, after the firm represented a plaintiff in a related matter. The ruling suggests Sills Cummis, which has long represented the Nuckel family in connection with extensive real estate holdings, could find itself shut out of future work for the family.”
• “Sills Cummis was disqualified from representing Jill Nuckel in a dispute with her brothers, Donald Nuckel and James Nuckel Jr., over management of an apartment complex. Superior Court Judge James DeLuca granted the motion to disqualify after hearing details of the firm’s 2015 representation of James Nuckel in a dispute with his sister over the same property.”
• “James Nuckel claimed in court papers that Sills Cummis worked with him for many years on real estate matters, including disputes with his sister and brother… ‘Because of that representation, Sills Cummis knows intimate details of my life and business interests,’ he said.”
• “The motion papers said Sills Cummis’ representation of Jill Nuckel violated a New Jersey Supreme Court directive barring a lawyer from representing an individual whose interests are adverse to another party the lawyer represents, even if the two representations are not related.”
• “Fiorentino asserted that disqualification was not warranted because his consultation with James Nuckel was brief and narrow in scope and that he had no contact with James Nuckel in more than five years.”

“Ex-Goldman Sachs analyst, brother charged in UK with insider trading” —

• “Britain’s financial watchdog said it has started fraud and insider dealing proceedings against two brothers, one who worked as a Goldman Sachs analyst, the other as a lawyer at Clifford Chance.”
• “‘Mohammed Zina was employed by Goldman Sachs International as an analyst in the Conflicts Resolution Group in their London office. Suhail Zina was a solicitor at Clifford Chance, also in London,’ the FCA said in a statement on Tuesday.”
• “Goldman Sachs said the protection of confidential client information is of paramount importance for the bank, and it has worked very closely with the FCA. ‘Neither the firm nor any other current or former employee of the firm is the subject of an investigation into the matters giving rise to the proceedings,’ Goldman Sachs said.”
• “Clifford Chance, a member of the elite group of ‘magic circle’ law firms, said Suhail Zina left in 2018, declining further comment.”

I just spotted the story below, which was published in January. That makes three firms known to be affected by the Accellion breach. That got me looking into more details, which I thought I’d share. First: “Australian Law Firm Allens Falls Prey to Cyberattack” —

• “The top-tier Australian law firm Allens was struck in a cyberattack after an IT company it used to share sensitive information and client data was compromised, according to a media report.”
• “The Australian Financial Review reported that a file-sharing system provided by Californian cloud company Accellion and used by Allens was accessed illegally earlier this month.”
• “The sensitive information shared via Accellion included commercial-in-confidence documents related to Westpac, an Australian bank and financial services provider, in its defense of a case in which it was charged with breaching anti-money laundering laws, the newspaper reported.”
• “In a statement, Palo Alto-based Accellion said it was made aware of the vulnerability in mid-December and released a patch within 72 hours. Fewer than 50 customers were affected, it said.”

“Hack of Software Provider Accellion Sets Off Global Ripple Effects” —

• “The hack of software provider Accellion USA LLC has renewed security experts’ fears of attacks on suppliers and highlighted the difficulty of defending against them in real time.”
• “A growing list of affected customers have shared timelines of the attack and claims of inadequate software patches that at times contradict the vendor’s account of events. The disclosure this week that victims include Jones Day—a law firm that handles sensitive information for clients—underscores how individuals who don’t interact with Accellion directly nonetheless might be exposed, security experts say.”
• “Palo Alto, Calif.-based Accellion said in a Jan. 12 blog post that it learned in mid-December of a vulnerability in its File Transfer Appliance software, a 20-year-old tool to share large documents. ‘Accellion resolved the vulnerability and released a patch within 72 hours to the less than 50 customers affected,’ the company said. In an update posted Feb. 1, Accellion said it notified “all FTA customers” of the vulnerability on Dec. 23.”
• “Some customers affected by the hack have offered a different sequence of events. The Washington State Auditor’s Office, which reported that personal data of more than 1 million applicants for unemployment benefits might have been accessed through the FTA tool, said in a Feb. 1 news release that it ‘first learned of the incident on Jan. 12.'”
• “Accellion shared information ‘over the next few weeks’ that helped the office conclude it was affected, Kathleen Cooper, a spokeswoman for the Washington State Auditor’s Office, said in a statement.”
• “New Zealand’s central bank reported some of its files stolen in the attack… ‘Accellion failed to notify the bank for five days that an attack was occurring against its customers around the world, and that a patch was available that would have prevented this breach,’ bank Governor Adrian Orr said in a Feb. 9 statement.”
• “The conglomerate Singapore Telecommunications Ltd. , known as Singtel, reported that the incident lasted weeks and led to hackers taking data, including information from 129,000 individual customers and 23 enterprises such as suppliers and corporate clients.”

“Accellion Hack Prompts Class Action From Washington Residents” —

• “Accellion Inc. is to blame for a recent hack of the Washington State Auditor’s Office because it negligently marketed the outdated file transfer system targeted in the cyberattack, according to a new proposed class action filed in California federal court.”

“Accellion Security Incident Impacts Kroger Family of Companies Associates and Limited Number of Customers” —

• “The Kroger Co. (NYSE: KR) Family of Companies today confirmed that it was impacted by the data security incident affecting Accellion, Inc. Accellion’s services were used by Kroger, as well as many other companies, for third-party secure file transfers.”
• “At this time, based on the information provided by Accellion and its own investigation, Kroger believes that less than 1% of its customers, specifically customers of Kroger Health and Money Services, have been impacted. In addition, current and certain former associates will be notified that certain HR records have been impacted.”

“Akerman Faces DQ Bid In USAA Medicare Repayment Row” —

• “MSP Recovery Claims asked a Florida federal judge Tuesday to disqualify Akerman LLP from representing the United Services Automobile Association in their dispute over Medicare secondary payer claim reimbursements, alleging that Akerman has violated the Florida Bar’s conflict of interest rules by representing other insurers with connections to the same claims.”
• “‘Any time that Akerman advances an argument on behalf of defendants, it takes a position contrary to the other Akerman clients’ interests,’ MSP Recovery told the court.”
• “MSP Recovery argues that disqualification is required because Akerman’s conduct violates several of the Florida Bar’s Rules of Professional Conduct, and it asserts that the rules provide that opposing counsel may request such a disqualification. ‘The standard is not whether the movant ‘stands in the shoes’ of a current or former client, but rather whether the conflict of interest involves representation of someone other than the movant and where it is such ‘as clearly to call in question the fair or efficient administration of justice,” MSP Recovery said.”
• “MSP Recovery contends that it is in line to be harmed by the current situation because Akerman’s alleged conflicts would stand in the way of negotiating a potential settlement. ‘Plaintiffs do not suggest disqualification lightly. Plaintiffs are the real victims here,’ MSP Recovery said. ‘Counsel’s continuous representation of the defendants and the other Akerman clients will wreak havoc with the settlement and mediation process.'”
• “The motion also alleges that a Florida Bar rule prohibits a lawyer from participating in making a global settlement while representing two clients who are jointly and severally liable. Additionally, the motion said it is likely that Akerman has had access to confidential information belonging to its various clients that would provide an unfair informational advantage to USAA.”
• “MSP Recovery said an analysis of its claims data found that in 381 of 970 instances where the USAA and its related entities reported to the federal Centers for Medicare & Medicaid Services that they had a contractual obligation to make primary payments for enrollees’ injuries, and Akerman attorneys represented both the defendants and another client whose policies were implicated in the same incident involving the same enrollee. Included in the 381 were 356 instances where Akerman was still currently representing the other implicated client, MSP Recovery says.”

Bill Freivogel always rewards careful readers with bits of color commentary. From his latest:

• Current Client/Former Client. In re Bowen, No. 20-13 (Vt. Feb. 12, 2021)
• “Disciplinary case opinion upholding a three-month suspension. Pure conflict-of-interest disciplinary cases are rare. This is one worth mentioning. It involves two married couples, H1 & W1, and H2 & W2. H1 and W1 divorced. In a post-decree dispute, Lawyer represented H1 against W1. The result favored W1.”
• “H1, unhappy with the result, refused to pay Lawyer’s final invoice of $11,000. At the end of the day, H1 did wind up owning an undeveloped residential lot (“the Lot”). H2 & W2, owning a house next to the Lot, wished to buy it to enhance the value of their house. H2 & W2 hired Lawyer to represent them in purchasing the Lot from H1 (Recall, H1 is Lawyer’s former client who owes Lawyer $11,000.). H1 had another lawyer (“New Lawyer”) for the sale of the Lot. Lawyer told New Lawyer that Lawyer planned to withhold purchase funds to satisfy H1’s $11,000 debt to Lawyer. New lawyer said Lawyer should not do that because there were no liens on the Lot.”
• “Lawyer immediately, without telling H2 & W2, or New Lawyer, obtained an ex parte writ of attachment on the future sale proceeds and recorded a lien on the Lot. Once everyone became aware of what Lawyer had done, all hell broke loose.”
• “H1 was furious that his former lawyer was ‘working him over’ (our words) in the Lot sale transaction to secure the $11,000 fee. Lawyer’s new clients, H2 & W2, were upset that the Lot purchase deal was jeopardized over Lawyer’s ex parte proceeding, etc. At ‘the eleventh hour,’ just before closing, Lawyer agreed to accept one-half of the $11,000. As a result the deal closed and H2 & W2 got the Lot.”
• “During this disciplinary proceeding against Lawyer the hearing panel found that Lawyer had violated Rules 1.9(c)(2) and 1.8(b). Lawyer conceded that he violated Rule 1.9(c)(2) (revealing information about his issues with his former client, H1). In this appeal Lawyer contests the finding as to Rule 1.8(b) and the three-month suspension. In this opinion the court affirmed both.”
• “We are not sure about the court’s analysis of the applicability of Rule 1.8(b). You should read the opinion if you are curious about that. We believe that Lawyer violated two rules not raised: Rule 1.7(a)(2) (protecting his own interests, jeopardizing sale of the Lot); and Rule 1.4 (failing to tell H2 & W2 about his dispute with H1, and his ex parte proceeding, which would inevitably complicate their ability to close on the Lot).”