Bressler Risk Blog

“In $100M Suit, a Moody Alleges Galveston Firm Used ‘Parasitic Relationship’ to Get Rich at His Family’s Expense” —

• “A member of Galveston’s prominent Moody family has sued Greer, Herz & Adams, alleging that the boutique law firm represented the Moodys in too many different interests, making so much money off his family that it wouldn’t exist in its current form without that work.”
• “Moody Jr.’s allegations raise questions about conflicts of interest that may arise when a firm or lawyer represents numerous related business entities and family members at the same time. He is seeking more than $100 million in damages, and he is represented by Houston trial lawyer Anthony Buzbee.”
• “‘This is an egregious case of a trustee and lawyer taking advantage of his position to exponentially enrich himself, his law firm and his family,’ Moody Jr. alleged in a petition filed May 21 in state district court in Harris County. In a footnote, the suit referred to the ties between the firm and the family as a ‘parasitic relationship’ that existed for more than 35 years.”
• “But, Moody Jr. alleged, after his father stepped down from numerous business and charitable boards that control billions of dollars worth of Moody family interests, Herz and Ross Moody used that power of attorney as an opportunity to enrich themselves and their law firm.”
• “In a 35-page petition, Moody Jr. alleged that Greer Herz “simply would not exist” in its present form without Moody Sr. and the ‘sprawling’ Moody interests as clients. He alleged that members of the firm are routinely appointed to boards that manage Moody business interests, and most of the legal work is provided without a formal fee agreement that would include a waiver to the ‘innumerable conflicts of interest inherent in the multiple representations.'”
• “According to the petition, Herz simultaneously is legal counsel to the testator of the Moody trust; legal counsel to multiple beneficiaries of the trust; general counsel to two major competing publicly traded corporate entities controlled directly or indirectly by the trust; and legal counsel to every corporate entity within the trust, among other Moody-related representations.”

“Pa. Justices Ask If Trust Conflicts Warrant Separate Attys” —

• “When conflicts arise between the people running a trust and its beneficiaries, Pennsylvania’s Supreme Court justices wondered Wednesday why the parties wouldn’t all retain and pay for their own lawyers rather than fight over whether the beneficiaries get to see legal bills paid for by the trust or if they’re protected by attorney-client privilege.”
• “In arguments held via videoconference, members of Pennsylvania’s highest court probed what made trust attorneys special in a conflict where a deceased Allegheny County man’s two stepsons accused the trustee of his estate — the man’s biological son and a co-beneficiary of the trust — of overspending the trust’s money on attorney fees to resolve their other disputes.”
• “The trustee claimed that much of the legal billing his stepbrothers demanded was protected by attorney-client privilege, but two of the justices asked why the trustee and the beneficiaries hadn’t all retained new, separate attorneys. Justice Sallie Mundy compared it to a criminal case, where the same attorney could represent more than one defendant up until the point that some conflict arises.”
• “Del Sole replied that trustees need to be able to consult their attorneys on matters of running the trust without worrying about disclosures to beneficiaries or other parties, so there is an attorney-client relationship and privilege between them. He urged the court not to create a so-called fiduciary exception that would require otherwise-protected information to be turned over to beneficiaries when a client was acting in a fiduciary capacity.”

“Atty Says Suit Over VidAngel’s $62M Trial Loss Is Barred” —

• “David Quinto, who co-founded Quinn Emanuel Urquhart & Sullivan LLP in 1986 and began working with VidAngel in 2014, the same year he left the law firm, wants the court to dismiss trustee George Hofmann’s legal malpractice suit against him, saying the suit is barred by an arbitration provision in his VidAngel contract.”
• “Hofmann claims that an opinion letter provided by Quinto in 2015 played a key role in how the company operated. But Quinto, who left Quinn Emanuel to form new firm Kupferstein Manuel Quinto LLP and later became VidAngel’s general counsel, said Tuesday that his 2014 engagement letter with VidAngel clearly said disputes would be resolved by arbitration under California law, he told the court.”
• “‘It is for good reason that [the trustee] chose not to attach a copy of the 2014 engagement letter to his complaint, or even allege its terms. The 2014 engagement letter prohibited him from bringing this action,’ Quinto wrote.”
• “The letter ‘addressed the possibility that disputes might later arise between the parties and provided that ‘any claim for breach of contract, professional negligence or breach of a fiduciary duty,’ or any other claim arising out of KMQ’s representation of VidAngel or provision of legal services to VidAngel, would be resolved confidentially and exclusively under JAMS arbitration rules,’ Quinto said.”
• “Quinto left KMQ in August 2015 to go to Davis Wright Tremaine LLP, he said. When that firm had a conflict, Quinto had to drop VidAngel as a client, he said. But when VidAngel was sued by the studios, it asked Quinto to become its general counsel, and he joined in July 2016, he said.”

“Ice Cube’s Big3 Sues Quinn Emanuel Over Alleged Qatar Conflicts; Firm Says Client Just Doesn’t Want to Pay” —

• “The Big3, a three-on-three basketball league featuring former NBA stars and co-owned by rapper and actor Ice Cube, is suing Quinn Emanuel Urquhart & Sullivan for allegedly putting its lucrative relationship with the Republic of Qatar ahead of its far-less remunerative arrangement with the fledgling sports project.”
• “In a state court complaint filed in Manhattan on Thursday, Big3 contends that Quinn Emanuel inserted itself into litigation between the league and former commissioner Roger Mason, whom the league believed had aligned himself with Qatari agents seeking to gain control of the asset.”
• “Attorneys with Beys Liston & Mobargha in New York and Freedman + Taitelman in Los Angeles wrote that the law firm ignored “inescapable” conflicts of interest when offering to represent the league in a lawsuit brought by Mason, and used its involvement to shift the defense strategy away from a focus on Qatar’s conduct.”
• “‘Any rational person would question why a law firm would undertake the representation of a fledgling basketball league that might generate a few hundred thousand dollars in fees when the league was adverse to its existing Qatari clients who generate tens of millions of dollars in fees annually,’ the league said in its complaint. ‘The only logical answer is that Qatar wanted Quinn to undertake the representation… In effect, Quinn would become a spy for Qatar, a nation known for supporting terrorism and aligned with Iran,’ the complaint asserts.”
• “Quinn Emanuel aimed to recast the matter as a simple fee dispute. ‘No firm fights harder for its clients than Quinn Emanuel, and we fought hard for Big3. Unfortunately, Big3 doesn’t want to pay us for the work we did,’ the firm said in a statement. ‘After the firm pursued them to collect fees, Big3 waited until a week before the collection arbitration to file this fantasy-laden lawsuit. Big3 was fully advised about the firm’s other various representations and is simply trying to avoid paying its bills.’

More also via Above the Law: “Quinn Emanuel Law Firm Accused Of Serving As A Spy For Qatar“

“Firm Accused of Advising One Client to Hide Cameras in Another Client’s Closet” —

• “Did a name partner at an AmLaw 200 firm advise one client—who is serving as the trustee of his late brother’s estate—to hide recording devices in a master bedroom closet of another client—the late brother’s widow? And did the cameras capture her undressing? Or prove she was trying to steal from the estate?”
• “Right after Joe’s death but before Elizabeth returned from Bermuda, Aaron in court papers said he learned that ‘Elizabeth’s friends were entering [Joe and Elizabeth’s] house for hours at a time and had removed art from the walls.'”
• “Aaron also said he knew that his brother kept large amounts of cash in the house, and that there was a wall safe in his brother’s master bedroom closet. (Elizabeth has her own separate closet.) ‘On advice of counsel, the trustee had motion-activated cameras installed inside Joe’s closet to ensure the preservation of the trust’s valuables contained therein,’ wrote Aaron’s current lawyers Howard Weitzman of Kinsella Weitzman Iser Kump & Aldisert and Jeryll Cohen of Freeman, Freeman & Smiley.”
• “Elizabeth in her complaint says the lawyer was Jeffer Mangels name partner Burton Mitchell, and that in conversations with her probate counsel, Mitchell ‘acknowledged telling Aaron he could install these recording devices in Elizabeth’s home.'”
• “A Jeffer Mangels spokeswoman said, ‘The attorney-client privilege prevents the firm from disclosing what, if anything, was discussed with the client Aaron Kaplan.'”
• “‘It is despicable—and unlawful—for an attorney or a law firm to advise anyone to invade another individual’s legally protected privacy and to break various California penal laws and civil laws in doing so. It’s even worse when the victim is a client, as Elizabeth was a client of Mitchell and [Jeffer Mangels Butler & Mitchell],’ Cohen wrote.”
• “When asked whether representing both Aaron and Elizabeth presented a conflict, a Jeffer Mangels spokeswoman responded, ‘There were signed explicit conflict waiver letters signed 10 years ago when Elizabeth was a client and the attempt to pretend that she did not sign one is as meritless as the rest of her claims.'”

We covered disqualification news tied to the Pierce Brainbridge saga a few months ago. More news on the latest developments relating to that firms advancing journey here: “Accusation of Fraud on the Court Against Attorney David Hecht of Hecht Partners and ex-Pierce Bainbridge Partner“.

Short update today, mostly to share an interesting statistic I just heard. And to highlight that when risk readers connect, good things happen.

In this instance, hat tip to Bill Freivogel for connecting me with Douglas Richmond, Managing Director at AON, for some of the latest industry data he keeps tally of. Doug shares:

• “Over the years, there have been 76 publicly-reported settlements by, or verdicts against law firms of $20 million or more.  Fifty of them are attributable in whole or part to the firm’s representation of an unworthy client. Other leading causes include what we label ‘mistakes,’ i.e., some sort of professional negligence on a lawyer’s part, and conflicts of interest.”

At a recent public risk forum, I found myself graciously name-checked by a longtime reader and friend. Gracious indeed to be included in the same breath with risk hawk Bill Frievogel, who notes several recent playbook matters:

• Former Client; Playbook (Rejected) (posted May 22, 2020) Plein v. USAA Cas. Ins. Co., No. 97563-9 (Wash. May 21, 2020.)
  • “…USAA balked at providing coverage for additional work, and the Pleins sued USAA for bad faith. Law Firm joined in the representation of the Pleins. The problem was that Law Firm had just recently terminated its representation of USAA.”
  • “That representation spanned some ten years and involved ‘at least 165 cases,’ some of which involved bad faith claims by homeowners. One case involved a bad faith claim arising out of defective remediation of smoke damage. USAA moved to disqualify Law Firm in this case.”
  • “The trial court denied the motion. The appellate court reversed. That court pretty clearly adopted the playbook approach to the substantial relationship test under Rule 1.9. The court noted the ‘legal strategies and defenses developed between USAA’ and Law Firm. The court concluded that Law Firm’s knowledge goes beyond the ‘general knowledge of the client’s policies and practices’ as discussed in Comment 3 to Rule 1.9.”
  • “In this opinion the Washington Supreme Court reversed the appellate court, holding that Law Firm’s knowledge of USAA’s attitudes and procedures in matters similar to this one do not rise to the level of ‘substantial relationship.’ The court focused largely on Comment 3 to Rule 1.9 (Evidently, Comment 3 in the Model Rules is quite similar to that in the Washington Rules.)”
• Persichette v. Owners Ins. Co., No. 19SA188 (Col. May 4, 2020).
  • “Plaintiff is suing InsCo over an uninsured motorist matter, including claims of bad faith. Law Firm appeared for Plaintiff. Law Firm previously represented InsCo in 455 bad faith cases between 2004 and 2017. Twenty-three cases ‘mirror’ Plaintiff’s claim. Law Firm had put in place several of InsCo’s procedures and trained the adjuster handling this case. InsCo moved to disqualify Law Firm. The trial court denied the motion. In this opinion the Colorado Supreme Court reversed (made ‘the rule to show cause absolute’).”

“Atty’s Internal Work For Insurer Spells DQ In Coverage Row” —

• “In an en banc decision, the court said Englewood, Colorado, litigator Marc Levy carried a former client conflict of interest into a case he joined against Owners Insurance Co. and should not have been allowed to stay in the litigation by a lower court.”
• “The seven-member panel said it was particularly troubled by the prospect of Levy being in position to ‘attack’ his own internal advisory and training-related work at Owners on behalf of an insured, even if he didn’t have specific factual information about his client’s case from his time working for the other side.”
• “Overturning a district court decision not to disqualify Levy, the court said the district court judge misinterpreted the ‘substantially related’ standard of former client conflicts to mean a conflict was created by a lawyer working both sides of the same matter.”
• “The court then incorrectly concluded that information Levy’s firm likely has from its prior work for Owners ‘is neither confidential nor advantageous to plaintiff,’ the decision states.”
• “After initially hiring an Aurora-based firm, Persichette later hired Levy as co-counsel for the case. According to the decision, Levy Law PC was intimately familiar with the people and practices of Owners, having represented the insurer in more than 450 cases over a 13-year period ending in 2017 and collecting more than $5 million in fees in the last five years of that relationship.”

This one caught my eye as I considered the potential implications for information sharing typically conducted during lateral lawyer moves… If you’re in a specialized practice looking to make a lateral move, and the hiring firm asks for a list of clients… what then? Ask all clients for permission?

“Fifth Circuit Reaffirms That Client Identity Is Privileged Only in Narrow Circumstances” —

• “As a general proposition, a client’s identity is not protected by the attorney-client privilege and is therefore subject to subpoena. However, in cases where the disclosure of the client’s identity necessarily discloses the substance of the legal advice provided to the client by the attorney, the privilege may apply.”
• “The U.S. Court of Appeals for the Fifth Circuit recently addressed how specific the link between client identity and advice given must be in order to constitute a disclosure of the substance of the legal advice provided to clients by their attorneys in Taylor Lohmeyer Law Firm P.L.L.C. v. United States, in which the IRS used a ‘John Doe’ summons that sought the identity of clients for whom the law firm had performed certain work.”
• “Lawyers who receive subpoenas requiring the disclosure of client identities should carefully consider whether the clients’ identities and the substance of the legal services are inextricably connected, and they should be prepared to document this position in camera.”

And on the topic of what’s “public” (like client identity?) see: “New Jersey Supreme Court reiterates generally accepted notion that even if information is available to the public it is confidential if it is not generally known” —

• “For this reason, the generally accepted definition of confidential information does not use the adjective “public.” According to this definition, confidential information is information related to the representation that is not generally known. (A couple of years ago, the ABA issued an ethics opinion clarifying the notion of generally known information.)”
• “Thus, information can be public (in the sense that it is available to the public) but not generally known, in which case, the fact that the information is public does not change the fact that it is still confidential.”
• “… recent decision by the New Jersey Supreme Court, again reiterates that this distinction is important and can result in problems for lawyers, often when the lawyers discuss information about former clients. The case is called In the Matter of Calpin, and the facts are similar to many other cases that have raised this issues in recent years. A client (or former client at the time) wrote a negative review about the lawyer in Yelp! and the lawyer decided to reply by, among other things, disclosing some information about the client. The information was “public” in the sense that it was available in public records, but is was not generally known and for that reason the court held that the lawyer violated the duty of confidentiality.”
• For more, see: text of opinion

“Legal malpractice claims on the rise – study” —

• “In its 10th annual survey of lawyers’ professional liability claims, the broker polled 10 leading lawyers’ professional liability insurers, which, on a combined basis, provide insurance to about 80% of AmLaw 100 firms. Ames & Gough found that the number of claims resulting in large multimillion-dollar payouts – as well as the dollar amounts involved – spiked for the second straight year. Most of the insurers surveyed had made a claim payout of more than $150 million in the past two years, and at least two settlements exceeded $250 million.”
• “‘Yet, according to the survey, the actual large-claims experience may be worse than reported; due to the increased cost to defend claims, a number of matters settled quickly (to avoid the added expense) with the resulting claims above their primary layer of insurance,’ Ames & Gough said.”
• “Every year, insurers surveyed in the study have cited conflict of interest (including perceived conflicts) as the most common alleged legal malpractice error. This year followed the trend, with five of the 10 insurers surveyed citing conflicts as either the first or second leading cause of legal malpractice claims.”
• “‘Law firms should not underestimate the importance of conducting thorough conflict checks, as well as the need to have systems in place to flag and address any situation involving a potential conflict,’ Garczynski said. ‘This calls for an ongoing and robust internal process that goes well beyond conducting a conflict check upon accepting a new engagement or making a lateral hire.'”
• “The cost of defending malpractice claims continued to climb, the survey found. Nine of the 10 insurers surveyed said that defense costs had increased in 2019. The rates insurers paid defense counsel also continued to rise, with 80% reporting an increase in rates paid to defense counsel during the past year.”

“Malpractice Insurance Bills To Climb Even Higher After Virus” —

• “The BigLaw bill for legal malpractice insurance, already riding an upward trend in commercial coverage rates, is expected to head even higher amid an expected onslaught of pandemic-era disputes with attorneys.”
• “If elite firms with solid claims histories ‘can demonstrate they’re still managing their risk really well, they will be able to get better terms than some others,’ said Ed Pickard of U.K.-based broker Miller Insurance, whose client list includes about 1,000 U.K. and international law firms. ‘But they’ll likely still see a 10-to-15% increase in premiums for the year, which we saw in April [policy] renewals and which we’re forecasting for October renewals as well,’ he said.”
• “Eileen Garczynski, senior vice president at insurance broker Ames & Gough, said a significant bump in malpractice claims last year and more mega-payouts from insurers have already helped push up premiums for some large U.S. firms as much as 30%, representing millions of dollars in additional overhead this year.”
• “Garczynski said an increasingly skittish insurance market has also forced some large firms to scramble to get hundreds of millions of dollars of coverage in place in ‘stacked’ policies that may include scores of underwriters that split up levels of policy coverage and risk… ‘Some insurers are saying they’re just not going to write large firms. It’s too risky, that they’re going to lose their entire $10 million or whatever it may be,’ Garczynski said.”
• “An Ames & Gough survey of 10 legal malpractice insurers released this week found that seven had paid a claim of over $150 million in the last two years. Eight of 10 also reported that the overall number of claims filed in 2019 was the same or higher than the volume from 2018, marking a turnaround after a long period of relatively flat reported claims.”
• “Earlier this month, broker and risk management biggie Marsh, a unit of Marsh & McLennan Companies, issued a report saying commercial insurance prices globally rose 14% on average in the first three months of the year compared with last year’s Q1.”

“The inside story behind a 15-partner exodus at elite law firm Boies Schiller” —

• “Fifteen partners are leaving law firm Boies Schiller Flexner to join King & Spalding, marking a culmination of exits that insiders say can be traced, at least in part, to internal friction following a merger with a California firm.”
• “The moves sent tremors throughout the national legal community because Boies Schiller is no ordinary firm, led by the famous trial attorney David Boies, who earned star status by grilling Bill Gates in the Justice Department’s antitrust case against Microsoft and then representing Al Gore in the 2000 Florida recount.”
• “Over the past three years, though, Boies has come under scrutiny after media reports of his role as Harvey Weinstein’s fixer, as well as his hardball tactics in representing Theranos, the failed medical technology startup, as chronicled in “Bad Blood,” the book by John Carreyrou.”
• “Numerous partners in the recent batch of departures had joined Boies Schiller in 2017 as part of a merger with the California litigation boutique Caldwell Leslie, known for representing Hollywood studios, artists and other corporations. By at least five accounts, the merger did not go smoothly.”
• “Hollywood studios, for instance, found Boies Schiller’s higher billing rates tough to swallow, according to three people familiar with the matter. And press coverage of David Boies’ representation of Harvey Weinstein didn’t do the Boies Schiller name any favors in those circles, these people said.”
• “He [Nick Gravante, co-managing partner of Boies Schiller] said Caldwell Leslie did not integrate well with Boies Schiller overall, noting that some partners wanted to bring in ‘small matters’ that he said ‘would potentially present major conflicts for us down the road.'”
• “During a months-long recruiting effort by King & Spalding, Willingham met… talks accelerated over Zoom and virtual conference meetings, as the coronavirus prevented in-person talks, marking the end of a process that included some 50 King & Spalding partners, according to interviews with Los Angeles managing partner Peter Strotz, and another partner and longtime friend of Willingham, Joe Akrotirianakis… The incoming Boies Schiller group, altogether, is expected to bring over to King & Spalding some tens of millions in revenue, according to Los Angeles partner Peter Strotz.”