Bressler Risk Blog

David Kluft, Assistant Bar Counsel at Massachusetts Office of Bar Counsel, notes another recent Ohio opinion:

• “If I appear before a Judge who my partner represents in an unrelated matter, does the judge have to recuse? The Ohio Bd. Of Prof. Conduct opined that a judge must recuse herself if her own lawyer appears before her. However, the opinion also states that the judge would not have to recuse herself if someone else from the same firm appeared before her.”
• “To my understanding, this NOT the rule in other states. If a judge is represented by a lawyer at a firm, she is represented by the firm and should recuse from cases involving that firm. The only citation in the opinion for the opposite proposition is a matter in which conflicts were not imputed among lawyers of the same Attorney General’s office. Perhaps the appearance of bias could be rebutted in the unique case of an AGO, which is massive and must necessarily represent judges in some cases, but how can anyone seriously justify applying it to say, a two-person law firm that represents a judge in a private matter?If I’m crazy, you tell me. Anyway, good luck to Ohio lawyers.”
• See the complete opinion.

“Revoking Security Clearances: How Bad Could It Get for Lawyers?” —

• “Washington lawyer Mark Zaid’s security clearance gives him access to information, like whether a client works for the Central Intelligence Agency and what happened to the US intelligence officers he represents who are suffering from ‘Havana Syndrome.'”
• “Zaid is one of a relatively small number of lawyers with ‘full’ security clearances, he says, listed in databases with mysterious titles such as the Director of National Intelligence’s ‘SCATTERED CASTLES’ and ‘DISS’ at the Defense Department. The status, which Zaid has had for 23 years, allows him to be quickly granted access to classified material impacting his clients.”
• “Now Zaid is part of another select group of lawyers: Those whose security clearances President Donald Trump wants to revoke. He believes he’s being retaliated against for representing a whistleblower whose claims led to Trump’s first impeachment.”
• “‘That is not how this system ever has worked,’ Zaid said in an interview. ‘It is unprofessional, un-American, unethical, and just in total poor taste.'”
• “The president also is pulling clearances for lawyers at two major firms, Perkins Coie and Covington & Burling. The moves sent shock waves through the legal industry, but it’s unclear how much impact they will have on the firms’ bottom lines.”
• “‘For a lawyer that practices in the security or intelligence arena, the fact that your clearance has been revoked could have a substantial impact on their business,’ said Greg Rinckey, a former Army Judge Advocate General who represents clients in security clearance matters. ‘That’s because they aren’t able to review classified documents anymore or have access to specific buildings.'”
• “It’s unknown how many attorneys at Perkins Coie and Covington have been granted clearances. Lawyers do not typically advertise their security clearance status.”
• “Critics slammed the orders as attempts to chill lawyers from representing parties adverse to the president and his administration. Perkins Coie intends to challenge the order against the firm, which it called ‘patently unlawful.'”
• “Many lawyers receive clearances on a case-by-case basis, national security experts said. A federal agency will sponsor the lawyer’s request for a clearance, allowing the attorney to review classified evidence in a specific case. The clearances can grant lawyers access to certain federal buildings or to secure rooms where the evidence is kept, known as SCIFs.”
• “That became an issue in the criminal case against Trump over his possession of classified documents at Mar-a-Lago. Trump’s lawyers objected to the government’s request that they only access the classified material in a SCIF. They applied for security clearances to see the documents themselves.”
• “Big Law firms like Perkins and Covington could be more significantly impacted if they are handling major litigation or transactional matters for defense contractors interacting with the federal government. Those companies’ lawyers often require security clearances, experts said.”
• “Perkins Coie’s clients include massive contractors like Boeing, Microsoft, Noble Supply, and Northrop Grumman, according to its website. Covington’s government contracts practice represents ‘large aerospace and defense contractors,’ according to its website.”
• “Zaid read about his security clearance being potentially revoked in a February New York Post report. He’s heard nothing since, and said he still maintains his clearance. Losing it would not significantly impact him from a financial standpoint, Zaid said, because much of his work requiring a clearance is done on a pro bono basis.”
• “The real victims of the moves will be clients who need lawyers with security clearances, he said. That includes Trump administration officials.”
• “‘I’ve helped a number of people already who are senior in the administration to ensure that they have security clearances,’ Zaid said. ‘I am not political, regardless of what they want to make me out to be.'”

“Judge Won’t Disqualify Firm In Solar Co. Fraud Fight” —

• “A federal judge denied Michigan residents’ attempt to disqualify attorneys representing a bankrupt solar company’s former founding CEO in their fraud case, holding that the law firm’s allegedly obstructionist discovery tactics don’t amount to an actual conflict of interest.”
• “Plaintiffs claiming deceptive sales tactics left them stuck with overpriced solar systems that don’t work or deliver promised energy savings argued that DarrowEverett LLP’s stonewalling is driven by various conflicts, including in-house counsel work for Power Home Solar, which is now operating as Pink Energy, and its representation of former CEO William ‘Jayson’ Waller in nearly two dozen similar lawsuits.”
• “‘It seems that fundamentally, plaintiffs’ issue is with [DarrowEverett] and Waller’s discovery practices,’ the judge said in an opinion issued on Wednesday. ‘Alleged bad behavior in discovery is not a conflict of interest, nor does it appear that the alleged bad behavior here resulted from actual, unwaived conflicts of interest.'”
• “At a hearing in January, the Michigan residents charged that Waller’s counsel have purposefully stymied discovery based on multiple conflicts of interest, and that the delays have destroyed their case schedule.”
• “According to the judge, however, Waller and a number of nonparties that the residents have subpoenaed have all consented to DarrowEverett representing them, something the firm provided signed conflict waivers to prove.”
• “‘Under the applicable rules of professional conduct, such a waiver ends this inquiry,’ the judge said in the decision.”
• “The judge also rejected assertions that the New York-based firm is limited in its ability to represent Waller based on its own self-interests under the Model Rules of Professional Conduct, since some of its lawyers, including Zachary Darrow, are likely to be witnesses in the litigation.”
• “While the law firm acknowledged that Darrow may be a witness if the suit proceeds to trial, the judge said, it also rightly argued that such a situation does not warrant a disqualification as things stand now.”
• “‘[DarrowEverett] argues that neither rule 1.7 nor 1.9 are at issue because any conflict has been waived and moreover, any such disqualification is premature until the time of trial,’ the judge said. ‘[DarrowEverett’s] analysis of this issue is correct and disqualification of Mr. Darrow is not warranted at this time.'”

“Justices Asked To Recuse Fitbit Judge Over Google Ties” —

• “A Silicon Valley-based patent-holding company that lost its infringement case against Fitbit is telling the U.S. Supreme Court that a California federal judge and her husband’s financial ties to Fitbit parent Google are so strong that ‘if these circumstances do not warrant recusal … then nothing does.'”
• “A new petition for certiorari, docketed Tuesday, wants the U.S. Supreme Court to take a look at a ruling out of the Federal Circuit last year that rejected an effort from Cellspin Soft to force the recusal of U.S. District Judge Yvonne Gonzalez Rogers after she rejected Cellspin’s patent case against Fitbit, which was picked up by Google in 2021.”
• “Back in 2022, Judge Rogers granted summary judgment to the handful of companies that remained in these cases, which included Fitbit, Nike, Under Armour, the Fossil Group, Garmin International Inc. and Nikon. The ruling found that the patent-holding company’s allegations were ‘conclusory and lacking substance’ and, ‘ultimately, do not carry evidentiary weight.'”
• “The petition from the patent-holding company focused in large part on Judge Rogers’ husband, Matt Rogers, and his work as an operating partner at the venture capital firm Ajax Strategies, which takes money from Google to operate at least three startups.”
• “‘The venture capitalist spouse has taken $700 million in part from Google, the spouse has five separate publicly-announced strategic partnerships with Google, and the judge herself owns anywhere between $5-$25 million in a specific hedge fund,’ read the petition, pointing to Judge Rogers’ investment in a Vanguard S&P Index fund.”
• “Last year’s Federal Circuit ruling had pointedly avoided looking at the merits of that last argument by pointing out that it was filed way too late and could have been filed before Judge Rogers rejected Cellspin’s case.”

“Courts Soften Stance Against Law Clerks Seeking Political Work” —

• “The federal judiciary is walking back an ethics opinion that told judges to prevent their law clerks from seeking jobs with political groups while still working for the court, instead leaving that decision up to individual judges.”
• “The Judicial Conference Committee on Codes of Conduct in September had said such job searches by law clerks “may run the risk” of associating a judge’s chambers with political activity. In updated opinions released Friday, the committee now says that while it’s “critical” to separate the judiciary from politics, it’s up to individual judges to determine ‘to assess this risk and to impose restrictions or limitations, if any.'”
• Guide to Judiciary Policy, Vol. 2B Last revised (Transmittal 02-087) March 6, 2025:
  • “III. Future Employment with Political Organizations. Canon 4C(4) of the Employees’ Code permits law clerks and staff attorneys to seek future employment opportunities during their judicial employment provided such pursuits are in consultation with their appointing authority. The Employees’ Code does not qualify this permission based on the type of prospective employment. Although seeking and obtaining future employment while clerking is generally acceptable under the ethics rules, prospective employment with a political organization may trigger Canon 5 concerns. The commentary to Canon 5 in the Code of Conduct for United States Judges explains that a political organization is “a political party, a group affiliated with a political party or candidate for public office, or an entity whose principal purpose is to advocate for or against political candidates or parties in connection with elections for public office.”
  • “The Committee has advised that keeping the judicial branch removed from politics and political preferences is critical. See Advisory Opinion No. 92 (‘Political Activities Guidelines for Judicial Employees’). It is necessary, therefore, to safeguard against risks that may potentially associate a judge or chambers with politics. Under some circumstances, a law clerk’s employment discussions with a political organization during a clerkship or judicial employment may pose such a risk. Ultimately, the appointing judge retains discretion to assess this risk and to impose restrictions or limitations, if any. Assessments should be made on a case-by-case basis in full consideration of all the facts, circumstances, and potential risks involved, underscoring the importance that the judge, as the law clerk’s appointing authority, should be completely informed.”

“Bar Bid by Attorney General’s Brother Prompts Lawyers’ Concerns” —

• “Some Washington lawyers are raising concerns over a campaign by the brother of Attorney General Pam Bondi to lead the DC Bar, as the body fields ethics charges against attorneys linked to President Donald Trump.”
• “Brad Bondi, a partner at Paul Hastings, was named in February as a candidate for DC Bar president. Also running for a bar leadership position is Alicia Long, chief deputy for Ed Martin, Trump’s pick to lead the US attorney’s office in Washington. She’s one of two nominees for treasurer. If elected, both would be among the 20 lawyers who sit on the bar’s board of governors.”
• “Current and former bar officials and members said that, if elected, Bondi wouldn’t oversee the disciplinary proceedings, and any other influence he could have over that work would be tempered by other bar leaders or the District of Columbia Court of Appeals. DC Bar elections begin on April 15 and run until June 4.”
• “Concerns about the two attorneys come as Senate Judiciary Committee Democrats on Thursday filed a misconduct complaint with the bar’s disciplinary counsel against Martin, alleging he abused his position while handling Jan. 6 Capitol riot cases.”
• “If elected, Bondi—through his role on the bar’s board of governors—would help recommend members for the Board on Professional Responsibility, a panel that reviews disciplinary findings against Washington attorneys. Final disciplinary decisions are made by the local District of Columbia Court of Appeals, which appoints the members of the professional responsibility board.”
• “‘The disciplinary system operates independently from the D.C. Bar, and we have no control or influence over cases that are investigated or prosecuted by the Office of Disciplinary Counsel,’ Robert Spagnoletti, CEO of the D.C. Bar, said.”
• “The board of governors also approves the bar’s budget, including money set aside for the disciplinary counsel’s office. Any conflict over those funds are taken to the DC Court of Appeals, and former bar officials say they don’t recall that ever happening.”
• “The president also has influence over who chairs the bar’s standing committees, which include panels overseeing the bar’s budget and investments. The treasurer helps oversee the budget, but changes would require approval from a majority of the board of governors.”
• “David Cole, a Georgetown University law professor, said that even though the disciplinary proceedings aren’t run by bar leadership, he’s still concerned that the process could be manipulated as a retaliatory move due to cases against Trump allies. He raised the possibility of charges being filed against Washington lawyers who’ve worked on lawsuits against early Trump administration actions.”
• “Charles Work, who served as one of the bar’s first presidents, said he’s concerned that a person related to a top Trump administration official leading the group could give the impression of partisanship, even if Bondi doesn’t take any overtly partisan actions.”
• “Bondi, a longtime white collar attorney, currently co-chairs Paul Hasting’s investigations and white collar defense practice. He was recently hired by YouTube personality ‘MrBeast’ Jimmy Donaldson and a group of investors for legal advice on a bid to buy TikTok Inc., and has also given advice to top Trump ally and billionaire Elon Musk’s Tesla, Inc. on SEC matters.”

“Connecticut Standing Committee on Professional Ethics: “Informal Opinion 2023-01: Whether Prior Co-counsel Relationship Presents a Conflict” —

• “The Committee has been asked whether a criminal defense lawyer (the ‘Requester’) who periodically serves as co-counsel with another defense attorney in serious criminal cases may represent an individual charged with conspiracy to commit murder, where the other attorney with whom he has co-counseled has been retained to represent a co-defendant in the same alleged conspiracy. The Requester explains that he and the other attorney maintain separate law practices in separate office locations. The request presents the following questions: 1. Would the representation create a conflict of interest or potential conflict of interest in violation of Rule 1.7 of the Rules of Professional Conduct (the ‘Rules’)? 2. If so, are there procedures to avoid violation of the Rules?”
• “Rule 1.7(a) provides that a lawyer shall not represent a client if the representation involves a concurrent conflict of interest, unless the conflict is waivable and the client provides his or her informed consent in writing to that representation. ‘A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.'”
• “Rule 1.7(a)(1) would typically prohibit the same lawyer from representing both co-defendants in a criminal case, since there is significant risk that the defendants might have incompatible defense strategies.”
• “Here, however, there are two lawyers—one representing each defendant. The issue presented under Rule 1.7(a)(1) is thus whether the potential adversity between the two codefendants is imputed to the lawyers based on the fact that the two lawyers have served as co-counsel together in various other criminal cases. Rule 1.10 governs imputation of conflicts and provides that ‘while lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so.’ “
• “Thus, the Commentary suggests that there may be some informal arrangements among lawyers that may rise to the level of constituting a ‘firm’ for purposes of imputation. However, the Commentary also explains that, even where two practitioners share office space and consult with one another from time to time, this would ordinarily not be regarded as a firm unless other factors were present—such as operational integration or if they held themselves out to the public in a way that suggested that they were a firm.”
• “Here, the Requester indicates that he and the other lawyer maintain separate office space and periodically work together as co-counsel to clients in specific cases (approximately two cases per year). In the Committee’s view, this type of co-counseling arrangement does not transform the lawyers into a ‘firm’ for purposes of imputation under Rule 1.10. Thus, based on the facts presented, the Committee concludes that there is no conflict under Rule 1.7(a)(1) that would preclude the Requester from taking on the representation.”
• “The representation is therefore permissible unless, under Rule 1.7(a)(2), there is a significant risk that the Requester’s representation of his client would be materially limited by the lawyer’s responsibilities to his former co-counsel or by his personal interest in his relationship with this other attorney. In the absence of unique factors (such as reliance on the other lawyer for a significant portion of the Requester’s business or an extremely close personal relationship), the Committee’s view is that a periodic co-counseling arrangement such as the one described here would not rise to the level of creating a material limitation conflict.”
  In fact, in some circumstances, it may benefit the client for a lawyer in the Requestor’s position to have knowledge about a co- defendant’s counsel. Ultimately, however, as described below, the Requester is in the best position to make the determination of whether the relationship with the other lawyer creates a material interest conflict.”

“Michigan Counties Say Firm’s Client Solicitations Merit DQ” —

• “Michigan counties sought to disqualify plaintiff firm Visser & Associates PLLC Tuesday, telling a federal judge that the lawyers went back on their word by soliciting potential class members in a suit claiming the government entities improperly kept a surplus of foreclosed home sales.”
• “The counties said that Visser belatedly reported its misconduct and urged the court to partially lift a stay in the case to determine whether the firm and attorneys Donald Visser and Donovan Visser should be disqualified or face some other discipline for 2022 solicitations sent out to potential class members..”
• “The Visser firm solicited potential members of the class in 2022 despite telling the court it wouldn’t roughly a year earlier, said the roughly 30 Michigan counties named as defendants, including Macomb, Washtenaw, Saginaw, Bay and Genesee counties.”
• “The lengthy saga began in 2020, when the class, led by named plaintiff Thomas Fox, sought to enjoin Visser from soliciting members of the then-certified class, but later withdrew that request after telling the court it would work with Visser. In 2021, class counsel and Visser came to an agreement, under which Visser agreed to stop attempting to retain victims and agreed not to enforce any retainer agreements it issued. As part of the agreement, the Visser firm agreed to ‘support prosecution of these matters’ under the class counsel, according to a filing from class counsel in 2021.”
• “In 2022, Visser sent two batches of letters to about 1,200 addresses related to foreclosures in Macomb County, according to court filings. Visser also filed a motion for surplus proceeds in Macomb County Circuit Court on behalf of an individual who fit the profile of the then-certified class, the counties said. The counties said Visser tried to ‘escape sanctions’ for what the plaintiffs had previously called a ‘clear violation of ethical rules.'”
• “‘Now, more than two years after disregarding its promises to the court, Visser has filed a notice belatedly reporting its misconduct, accompanied by some proposed excuses,’ the counties said, referencing Visser’s previous promise to the court that it would not solicit represented members.”

ABA Formal Opinion 515: “A Lawyer’s Discretion to Report When a Client Commits a Crime Against the Lawyer or Against Someone Associated with, or Related to, the Lawyer” —

• “A lawyer who is the victim of a crime by a client or prospective client may disclose information relating to the representation to the appropriate authority in order to seek an investigation and potential prosecution of the alleged offender or other services, remedy, or redress. To the extent that the information would otherwise be subject to the lawyer’s duty of confidentiality under Model Rule of Professional Conduct 1.6, the information is subject to an implicit exception to the Rule.”
• “This implicit confidentiality exception also applies when someone associated with the lawyer or related to the lawyer is a victim of the client’s crime and the lawyer is a witness to that crime.”

“Trump expands clash with law firms with order against Perkins Coie” —

• “U.S. President Donald Trump on Thursday signed an executive order suspending security clearances for employees of law firm Perkins Coie and targeting the firm’s business with federal contractors, citing its diversity practices and political activities.”
• “Seattle-founded Perkins Coie has long drawn criticism from Trump allies over its prior work for Trump’s 2016 Democratic election opponent Hillary Clinton.”
• “The order also directed federal officials to investigate other ‘large, influential, or industry leading law firms’ over their compliance with laws against racial discrimination.”
• “‘This executive order will suspend security clearances and access to certain federal resources for that law firm and also launch a holistic review of unlawful DEI (diversity, equity and inclusion) practices at some of the nation’s largest law firms,’ Trump aide Will Scharf said during an Oval Office signing event with reporters.”
• “Perkins Coie in a statement said the executive order is ‘patently unlawful, and we intend to challenge it.'”
• “The executive order targeting Perkins Coie went further, ordering agencies to require that federal contractors must disclose any business with the firm and saying contracts related to that business may be terminated. The order also said Perkins Coie employees’ ability to access federal government buildings would be restricted to protect U.S. interests and national security.”
• “White House officials said federal agencies would refrain from hiring Perkins Coie employees ‘unless specifically authorized’ and block business with contractors that work with Perkins Coie because of the firm’s involvement in ‘partisan lawsuits against the United States.'”
• “Perkins Coie and Covington are among nearly a dozen major U.S. law firms representing clients in lawsuits against the Trump administration, challenging executive actions related to immigration, transgender rights and other issues.”
• “Legal scholars said they were not aware of a U.S. presidential administration ever taking such official actions against specific law firms in the past.”
• “University of Minnesota law professor Richard Painter, who served as associate White House counsel from 2005 to 2007, said he could see no direct connection between law firm diversity initiatives and risks to national security that would entail stripping a law firm’s security clearances.”
• “Perkins Coie is widely known for its legal work for tech companies and other clients. It is defending Alphabet’s Google against a lawsuit by the Republican National Committee accusing the tech giant of sending its emails to users’ spam filters. The firm has represented Amazon in a number of court cases. The companies did not immediately respond to requests for comment.”
• “Its work for Hillary Clinton’s campaign led to criticisms from Trump supporters, including Elon Musk.”

“The Expanding Cyber Liability Landscape for Attorneys: Upstream and Downstream Risks” —

• “Attorneys and law firms face increasing cyber liability from multiple directions, including regulators, state attorneys general, and class action litigants. As stewards of highly sensitive client data, legal professionals are being held accountable not only for their own cybersecurity practices but also for those of their vendors and service providers.”
• “Cybersecurity threats to law firms are intensifying as regulators, clients, and the courts impose stricter requirements on the legal profession’s handling of sensitive data.”
• “Downstream liability, by contrast, arises when clients, affected individuals, or business partners seek damages due to a law firm’s cybersecurity failures, leading to compliance and negligence claims, breach of fiduciary duty lawsuits, or class actions. Attorneys must navigate these risks while maintaining ethical duties to safeguard client information.”
  Regulatory and Enforcement Risks (Upstream Liability)”
• “Federal and State Regulatory Scrutiny”
  • “Regulatory agencies and state authorities are poised to hold attorneys and law firms accountable for cybersecurity failures. Agencies such as the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and state attorneys general have broadened their enforcement actions against businesses, including law firms that fail to maintain reasonable cybersecurity.”
  • “Gramm Leach Blilely Act (GLBA): Revised in 2023, the GLBA Safeguards Rule (16 CFR Part 313) covers those entities involved in activities ‘incidental to…financial activities’ of covered institutions and requires both enhanced breach disclosure and reporting requirements.”
  • “SEC Cybersecurity Compliance Requirements: Effective December 2023, Regulation S-K 106, law firms advising publicly traded companies or handling material nonpublic information (MNPI) must comply with SEC cybersecurity disclosure rules, which require firms to assess and disclose cyber risks and incidents. Advisors to covered companies may similarly be subject to heightened regulatory scrutiny.”
  • “Health Insurance Portability and Accountability Act (HIPAA): When counsel is deemed a business associate of a covered entity and experiences a cybersecurity incident involving a covered entity’s PHI, a law firm is subject to investigation and fines for violations of the HIPAA Security Rule (45 CFR Part 160 and Subparts A and C of Part 164). In 2016, Business Associate Catholic Health Care Services of Philadelphia (CHCS) entered into a settlement with the U.S. Department of Health and Human Services in connection with CHCS’s alleged violation of HIPAA’s Security Rule. https://www.hhs.gov/hipaa/for-professionals/compliance-enforcement/agreements/catholic-health-care-services/index.html “
  • “State Attorneys General Actions: State attorneys general (AGs) enforce data breach notification laws and consumer protection statutes. Firms failing to report breaches or safeguard consumer data may face investigations, fines, and consent decrees mandating stronger cybersecurity programs. Enforcement actions against law firms have commenced by the New York Attorney General for violations of the New York SHIELD ACT (General Business Law 899-aa and 899-bb). https://ag.ny.gov/press-release/2023/attorney-general-james-secures-200000-law-firm-failing-protect-new-yorkers”
• “Ethical and Professional Responsibility Risks”
  • “State bar associations and legal ethics committees impose strict obligations on attorneys that unquestionably now include cybersecurity compliance. The ABA Model Rules of Professional Conduct, particularly Rules 1.1 (Competence), 1.6 (Confidentiality), and 5.3 (Supervision of Non-Lawyers), require attorneys to safeguard client data and oversee third-party service providers.”
  • “Failure to implement cybersecurity safeguards can result in disciplinary action, malpractice claims, and reputational damage. Attorneys must not only secure their own systems but also ensure that MSPs entrusted with client data meet equivalent security and compliance standards.”
• “MSP Risks: Upstream Cyber Liability from Service Providers”
  • “Law firms increasingly rely on third parties (MSPs) for document management, cloud storage, e-discovery, and cybersecurity solutions. While these MSP enhance efficiency, they also introduce significant upstream liability risks when they experience breaches or fail to comply with legal and ethical obligations.”
    Common MSP-Related Cyber Risks”
• “Client and Third-Party Litigation Risks (Downstream Liability)”
  • “Law firms are also vulnerable to downstream liability, as clients, clients or customers of clients, and even non-clients affected by a breach, as well as business partners seek legal recourse after cybersecurity incidents.”
• “Common Legal Theories in Cyber Liability Lawsuits”
  • “Negligence Claims: Clients may argue that a law firm failed to implement reasonable cybersecurity measures, leading to a data breach that exposed sensitive information.”
  • “Negligence Per Se: Affected individuals may file claims based on violation of cybersecurity laws even where the laws themselves do not provide a private right of action.”
  • “Breach of Fiduciary Duty: Attorneys owe clients a fiduciary duty of confidentiality. A cyber incident exposing client data can lead to claims that the firm breached this duty.”
  • “Breach of Contract: Engagement agreements often contain confidentiality and data security provisions. A breach may result in contractual liability if security commitments are not met.”
  • “Consumer Protection and Privacy Statutes: Clients may sue under state consumer protection laws, the CCPA, or GDPR, seeking statutory damages for improper handling of their data.”
    “Mitigating Downstream Liability”
• “Provide Client Transparency on Cybersecurity Measures: Firms should educate clients about their cybersecurity practices and clearly define data protection obligations in engagement letters.”
• “To mitigate these risks, attorneys must adopt proactive cybersecurity governance, including service provider risk management, contractual safeguards, regulatory compliance, and robust client data protection strategies. As cyber threats and legal obligations continue to evolve, law firms that prioritize cybersecurity will be best positioned to protect their clients, their reputations, and their legal standing.”

“Judge disqualified for unusual conflict prior to bench” —

• “Justice Cameron Moore stepped away from the Greensill Bank AG v Insurance Australia Limited proceedings after concerns were raised about his involvement in the matter prior to his appointment.”
• “In his recent judgment, Justice Moore explained he appeared as senior counsel for one of the parties in November 2024 – just a month before his appointment to the bench – on an interlocutory application concerning the Harman obligation.”
• “While the issue itself was not for determination, or had any direct bearing, in the substantive hearing, the application was ‘collateral’.”
• “‘I was briefed on that application because both senior counsel briefed for the Marsh [Limited and Marsh Pty] entities in the proceedings were unavailable on the date set down for the hearing of the Harman application. I was not briefed in the matter generally,’ he said.”
• “In January this year, after the proceedings were allocated to Justice Moore, he said he considered whether his involvement in the Harman application would prevent him from the allocation.”
• “Justice Moore said that the fact a judge may have appeared in the same matter they presided over ‘does not of itself necessarily give rise to a reasonable apprehension of bias’, nor would the mere identification of the issues during an interlocutory dispute.”
• “On the face of the matter, Justice Moore said his prior involvement would not necessarily require his disqualification.”
• “‘However, the [Greensill] parties contend the submissions advanced by me on behalf of the Marsh entities went further than merely identifying uncontroversial issues in the proceedings and suggested how those issues might be approached and resolved,’ he said.”
• “Having reviewed the material provided by Greensill, Justice Moore said he agreed certain passages ‘went further and were suggestive of a particular outcome on issues’ that require resolution in the substantive proceedings and interlocutory issues.”
• “‘In those circumstances, a fair-minded lay observer might reasonably apprehend that I might not bring an impartial mind to the resolution of those issues, and I am satisfied that I ought to recuse myself from further involvement in the proceedings,’ Justice Moore said.”

“Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies” —

• “The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.”
• “The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.”
• “‘This is a victory for common sense,’ said U.S. Secretary of the Treasury Scott Bessent. ‘Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.'”

“KPMG Must Pivot Around Audit Clients in Creating US Law Practice” —

• “KPMG must overcome a prohibition against giving legal advice to audit clients as it becomes the first Big Four accounting firm to practice law in the US.”
• “The prohibition stops the company from gaining potential legal customers from the hundreds of Fortune 500 and privately held companies it audits. KPMG agreed to the limitation to win Arizona Supreme Court approval Thursday to practice law in the state.”
• “‘This is the biggest challenge when you’re dealing with the Big Four—they have conflicts,’ said Howard Rosenberg, head of talent intelligence and acquisition at Baretz + Brunelle. A prohibition against accounting firms providing consulting and auditing services under the same roof prompted, in part, EY to scrap the spin-off of its consulting business in 2023.”
• “KPMG said it never planned to offer legal services to audit clients. The firm will apply the service restriction to both its public company and privately held audit clients, including those served by affiliates around the globe. Rather than shedding clients to comply with the order, the firm said it expects to gain ‘many’ customers as a result of being able to practice law in Arizona.”
• “KPMG has said it seeks to provide services to multinational corporations that largely complement the work of traditional law firms, such as harmonize thousands of legal contracts as part of post-merger integration or help re-orient supply chains.”
• “US auditor independence rules generally bar accountants from acting on behalf of company managers and US securities laws specifically prohibit auditors from providing legal services to their publicly traded clients.”
• “The Arizona high court’s decision extends that logic to prevent possible conflicts of interest, said Robert Knechel, director of the International Accounting and Auditing Center and accounting professor at the University of Florida. ‘Law is by definition an advocacy service, and auditing is not,’ Knechel said.”
• “The Arizona court’s decision ‘still leaves open a wide market of non-audit clients to sell services to,’ said Tom White, a retired Wilmer Hale partner and lecturer at Columbia Law School.”
• “Over the past two decades, the Big Four have amassed lucrative consulting arms despite strict conflict-of-interest rules set after accounting scandals toppled Enron Corp. and WorldCom Inc. and now policed by the Securities and Exchange Commission. KPMG’s US advisory business generated roughly 40% of the firm’s $12.6 billion in revenue in 2024.”
• “As an Arizona alternative business structure, KPMG will have an internal compliance watchdog, said Natalie Knowlton, associate director for legal innovation for Stanford Law School. This watchdog, identified by KPMG Law US as longtime KPMG attorney David Rizzo, will be required to comply with Arizona’s requirement to file compliance reports twice a year.”
• “‘This is a much more heavily regulated environment than any other jurisdiction in the US,’ Knowlton said. ‘There’s a compliance lawyer who is required to report to the bar in case there are any incidences of malfeasance or any lawyers have gone outside of the boundaries the court has set up. You don’t see that in any other law firms.'”

“Covington Revenge Deepens Worries of Defending Trump Targets” —

• “President Donald Trump’s decision to punish Covington & Burling for representing former Special Counsel Jack Smith will feed some firms’ worries about letting lawyers volunteer to represent former Justice Department attorneys.”
• “Private attorneys seeking to represent DOJ workers being forced out or investigated had already faced pushback from their firms’ executive committees over concerns such work will hurt their brands and cut into billings, according to interviews with 12 attorneys.”
• “Some firm leaders, citing corporate clients threatening to walk if they get crosswise with Trump, have rejected outright or put up roadblocks to partners seeking approval to represent DOJ lawyers, FBI agents, and other civil servants who’ve faced various forms of attack, three lawyers familiar with the decisions told Bloomberg Law. That was before Trump’s executive order Tuesday pulling the security clearances of Covington lawyers and vowing to cancel any government business with the firm.”
• “‘I continue to see as I reach out and recruit lawyers to help me that there is an absolute battle in many of the firms between playing a role or staying out of it,’ said Mark Zaid, a national security lawyer who’s been helping Trump’s perceived foes at DOJ and other agencies match with pro bono counsel from large and small shops.”
• “Zaid last month sued on behalf of FBI agents to halt the administration from releasing identities of those involved in Trump-related investigations. He said the problem is pronounced at law firms that have well-established Washington offices and are governed by out-of-town managing partners.”
• “There are Democratic and Republican partners at firms who are ‘gung ho and really want to play a role in challenging this administration,’ but they’re getting pushback from leadership, Zaid said. It’s typically over the unprofitable time suck of pro bono matters and the potentially negative public relations impact on existing and prospective clients, added Zaid, who himself had his security clearance pulled by Trump earlier this month.”
• “The attorneys declined to name law firms due to the sensitive nature of internal deliberations.”
• “Individual attorneys want to enter what they see as a nonpartisan battle to preserve democracy by filing merit systems complaints for terminated federal employees, representing Jan. 6 prosecutors under investigation from DOJ and Congress, or participating in litigation to halt Trump policies. Firms’ senior decisionmakers, however, agonize about the sustainability of representing current and former government employees opposite the administration, according to multiple attorneys.”
• “Such strain isn’t new, but one Big Law partner said he’s never witnessed this level of concern in which firm leadership worries they could jeopardize their economic future by protecting the rule of law.”
• “‘I am seeing from individual attorneys who are former DOJers a real wakeup moment with the Thursday night massacre’ in which multiple prosecutors resigned over leadership’s order to dismiss charges against New York’s mayor, said Erica Newland, who leads Protect Democracy’s civil service protection project. ‘They are enraged and understand the existential nature of the threat for both the culture and norms of the Department of Justice.'”
• “Zaid said that some Big Law partners have found a workaround when firm leaders block their involvement. They’ve continued supporting the cause in the background, while letting lawyers from other firms sign court filings, he said. This can protect the reputation of white collar defense partners when later advocating for corporate clients, such as in urging DOJ to decline prosecution.”
• “Adding to firm leaders’ concerns is that a few competitors have warmed up to Trump, a significant turnabout from when much of Big Law shunned the president following the Jan. 6 Capitol insurrection.”

“Elon Musk’s DOGE Adventure Leads to Knotty Accounting Question for Tesla” —

• “How much influence does Elon Musk have over the U.S. government? Enough that Tesla will need to make a judgment call on a disclosure issue that once would have been unthinkable for an American private-sector company to contemplate.”
• “Here is the question at hand: Are Tesla and the government ‘related parties’ for purposes of generally accepted accounting principles?The answer would appear to be yes, as wild as that might seem.”
• “As the functional leader of the Trump administration’s Department of Government Efficiency, or DOGE, Musk has rapidly amassed enormous power over vast portions of the U.S. government, nearly wiping out entire agencies and targeting others for elimination, while directing mass employee layoffs. Officially, Musk has been designated a ‘special government employee.’ He also is synonymous with Tesla, the electric-vehicle maker where he is chief executive, the largest shareholder and the face of the company.”
• “The related-party designation would mean Tesla, in its disclosures to investors, could have to start reporting transactions it has with the government if they are significant. It also would underscore how powerful Musk has become. U.S. accounting standards say the reason for requiring such disclosures is that ‘transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.'”
• “Other public companies have named the U.S. government as a related party before in their disclosures, including American International Group, General Motors, Fannie Mae and Freddie Mac. But that was because the government had bailed them out and taken large ownership stakes during the 2008 financial crisis. If Tesla were to start identifying the government as a related party in its reports to investors, it would be because of the amount of control Musk wields over the government, not the other way around.”
• “Under U.S. accounting standards, Tesla and the government would be considered related parties if one of them ‘can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.'”
• “Jack Ciesielski, founder of the asset manager R.G. Associates in Towson, Md., and a member of the Financial Accounting Standards Board’s Emerging Issues Task Force, said Tesla and the government fit that description. ‘Tesla and Musk have significant influence over the U.S. government,’ he said. ‘I don’t think there’s any definition you can come up with that says they’re not related parties.'”
• “The same analysis would apply in principle to Musk’s other companies, including SpaceX, which has billions of dollars of federal contracts, and the social-media company X. However, unlike Tesla, those other companies aren’t publicly held, so they don’t file their financial statements with securities regulators.”
• “Tesla in its latest annual report identified several of Musk’s other companies as related parties, including SpaceX and X. It said its transactions with those companies didn’t have a material impact on its financial statements. Tesla didn’t say how much of its $98 billion of revenue last year came from the government. The company didn’t respond to requests for comment.”
• “The importance of Tesla’s relationship with the government goes beyond commercial transactions. Tesla customers can receive as much as $7,500 in federal tax credits for the purchase of electric vehicles, under current law. Tesla also has been the subject of numerous government investigations, including by the National Highway Traffic Safety Administration, where DOGE has been directing layoffs.”
  Tesla mentioned DOGE only once in its last annual report, filed Jan. 30. In a risk-factor disclosure, Tesla said it is highly dependent on Musk’s services and that ‘he does not devote his full time and attention to Tesla,’ noting that he holds management positions at five other companies and is involved with other ventures, as well as DOGE.”
• “Listing the U.S. government as a related party might not trigger any other immediate changes to Tesla’s books, and it shouldn’t be a problem for Tesla shareholders. If the government and Tesla do significant amounts of business together, the related-party designation would help provide transparency into the extent of those dealings. Investors would be the intended beneficiaries of the disclosure. Taxpayers, too, could benefit from some additional sunlight.”

“Ethics ruling bars law firm from taking hospital clients in Blue Cross case” —

• “A judge in Alabama has barred a large U.S. law firm from representing plaintiffs in major litigation accusing Blue Cross Blue Shield of underpaying hospitals, physicians and other medical providers for years.”
• “The decision on Wednesday [2/26] was a rebuke for 1,100-lawyer law firm Polsinelli, which is known for representing healthcare companies and which had been advising clients on potentially opting out of a $2.8 billion class-action settlement in the Blue Cross case in order to sue the insurer on their own.”
• “Chief U.S. District Judge R. David Proctor in Birmingham said in his ruling that attorneys who now work at Polsinelli had earlier represented Blue Cross Blue Shield of Alabama in the case, creating an ethical conflict.”
• “‘Lawyers who until recently did substantial work for (Blue Cross) in this litigation are now at a firm that is taking materially adverse positions against it — in that same litigation,’ Proctor wrote in his order.”
• “In the underlying litigation, hospitals and other health providers claimed Blue Cross and some of its affiliates violated antitrust law by dividing the country into exclusive areas where they agreed not to compete with each other. The providers’ class action, filed in 2012, said the alleged conspiracy increased the cost of insurance and drove down reimbursements. Blue Cross Blue Shield denied wrongdoing but agreed in October to settle with the plaintiffs for $2.8 billion.”
• “Alabama-founded law firm Maynard Nexsen had been one of the firms defending a Blue Cross affiliate in the case, Blue Cross Blue Shield of Alabama, billing thousands of hours. In 2024, some of the Maynard Nexsen attorneys left the firm to join Polsinelli, the decision said.”
• “Lawyers for the plaintiffs who negotiated the settlement complained earlier this month that a different Polsinelli lawyer was talking with clients about opting out of the deal and potentially filing their own lawsuits, violating ethics rules against conflicts of interest.”
• “Attorneys for Polsinelli denied that Polsinelli’s hiring of a handful of lawyers from Maynard Nexsen created a conflict. Polsinelli said clients that are weighing whether to accept the settlement did business with non-Alabama Blue Cross companies. ‘The right to counsel of one’s choosing is a bedrock principle of American jurisprudence,’ Polsinelli told Proctor.”

“KPMG Wins Approval to Launch First US Law Firm for Big Four” —

• “KPMG gained approval to practice law in Arizona, making it the first Big Four accounting, tax, and consulting company set to operate a law firm in the US.”
• “The Arizona Supreme Court today [2/27] granted KPMG a license to operate a so-called alternative business structure. KPMG Law US will be an independent law firm operated as a wholly-owned subsidiary of the company.”
• “The law firm will provide legal services that include integrating legal contracts and tech systems after corporate mergers, KPMG has said. KPMG’s tech capabilities, scale, and pricing structure give it an advantage over traditional law firms, Stuart Bedford, the company’s global head of legal services said in an interview earlier this month.”
• “‘KPMG Law US is uniquely positioned to transform the delivery of legal services,’ Rema Serafi, KPMG’s vice chair for tax, said in a statement. ’By combining cutting-edge artificial intelligence and advanced technology solutions with legal services, we are proud to be a first mover with this capability and to offer the most holistic range of tech-enabled services in the marketplace for our clients’ evolving needs.'”
• “The move follows years of Big Four expansion into legal services in other markets, such as the UK and Australia. Professional regulations for US lawyers have largely barred non-lawyers from owning law firms. The Arizona ABS program created an exception in 2021, hoping new law firm models would spur better access to costly lawyer advice. Mass tort firms have taken to Arizona’s alternative business structures and use them for lead generation and advertisement nationally.”
• “KPMG Law US can practice law in the state on the condition that it refrains from performing legal services for any of KPMG’s audit clients, the court said in the Thursday order. The restrictions have broader application beyond US securities law that prohibit accounting firms from performing legal services for its US clients.”
• “The initiative faces several questions, including to what extent, or how, KPMG Law will provide services in other states. Law firms tracking new competition will be watching to see what types of legal matters clients hire KPMG to handle.”
• “‘One question is are they engaged in the unauthorized practice of law in other states in which they are giving advice because that’s where the clients are located,’ said legal ethics professor Bruce Green, who teaches at Fordham Law School.”

“Move Over KPMG, This Accounting Firm Has a Vision for Providing Legal Services Nationwide” —

• “When Atlanta-based accounting and business advisory firm Aprio announced a merger with an Arizona business law boutique earlier this month, leaders from the new entity—dubbed Aprio Legal—indicated that they aimed to deliver legal services to clients beyond the Grand Canyon State.”
• “Representatives from both Aprio, with 25 U.S. offices but no presence in Arizona, and Radix Law, with 15 attorneys in Scottsdale, emphasize they will use co-counsel relationships to serve clients around the country. But some observers, however, question whether the traditional co-counsel relationship is being stretched when used in conjunction with a firm that is, in reality, supposed to only be offering legal services in Arizona under an intrastate Alternative Business Structure license.”
• “Both firms were already previously approved to operate ABS law firms – Radix in 2021, the year the Arizona program began, and Aprio in 2024 – but firm leaders say the joint venture could lead to better servicing of Arizona legal clients and could also potentially open up the opportunity for cross-border legal work.”
• “‘We believe we are pioneering a new, holistic approach that re-imagines the client experience,’ Kopelman said in written comments. ‘Ultimately, working alongside the Arizona Supreme Court’s Alternative Business Structure Program, we hope our model inspires similar collaborations across the U.S. and helps reshape how legal services are delivered. As we look forward, we will work closely with the ABS program to shape any expansion beyond Arizona.'”
• “Kopelman and Kveisc did not say which law firms outside of Arizona could serve as possible opportunities for co-counsel relationships.”
  Crossing State Lines”
• “‘Only Arizona lawyers can practice law in, and be employed in, an Arizona ABS, at least in theory,’ said Lynda Shely, an Arizona ethics lawyer.”
• “Because most other states have ethics rules that prohibit the formation of ABS law firms, they would likely frown upon an Arizona ABS attempting to open an office in states outside of Arizona, Shely said.”
• “Aprio and Radix, however, do not seem overly concerned, given their focus on delivering services outside of Arizona through the use of co-counsel relationships, which is something that is generally already permitted in other circumstances.”
• “‘None of us are aware of any jurisdiction that has that type of limitation,’ Lucian Pera, a partner at Adams and Reese who focuses on legal ethics, said about co-counsel relationships. Arizona lawyers are already permitted to enter into co-counsel relationships with attorneys in other states, Pera said, and the only limitation on this would be if a court were to issue rules preventing such cross-border relationships.”
• “Another way the Aprio Legal Arizona ABS lawyers could partner with outside counsel is to operate as a multi-jurisdictional practice, according to Pera. In 2002, he said, the ABA issued a rule that has since been adopted by around 40 states that would permit some temporary practice of law by lawyers in different states.”
• “Under this setup, lawyers in one state—Arizona, in this example—could become associated with a local attorney, get temporarily admitted to practice law in a state other than their own, and then handle certain legal work outside of their home state, including arbitration, mediation and other matters that are ‘reasonably related to your practice back home,’ Pera said.”
• “Pera also said this type of cross-border legal work can also be done through the use of legal staffing companies. Essentially, there are already numerous ways lawyers can handle certain legal matters in states in which they’re not licensed. ‘I don’t know what Aprio has got in mind, but those are some tools they can use,’ Pera said. ‘They would be using the same tools that my law firm and I use to do the same thing.'”
• “Pera said as far as he knows, there do not currently appear to be any restrictions on the use of these various methods in situations where the firm seeking to develop a co-counsel relationship is structured as an ABS versus a traditional law firm.”
• “Pera called Kvesic, of Radix, ‘a really fine, smart lawyer,’ and he acknowledged the scope and reach of Aprio, saying the joint venture will likely see success and could possibly spur other accounting firms or consultancies to get involved in the legal business.”
• “‘My feeling is the fact that someone is trying this is as important as how many clients that particular firm reaches, because it will, frankly, expand the imagination of other lawyers and accountants as to what’s possible,’ Pera said. ‘They could be the next behemoth. I think it’s as important for people to see what they’re doing, and ask the questions you’re asking.'”

“You Can Buy Me Dinner, But Don’t Expect to Choose My Entrée: Motion to Disqualify for Non-Party Litigation Funding Conflicts of Interest” —

• “You can pay for the dinner, but you cannot pick when, where or what we’re eating. At least that’s what a Magistrate Judge in the District of New Jersey decided last week in Harish v. Arbit, No. CV 21-11088-EP-AME, 2025 WL 354434 (D.N.J. Jan. 31, 2025), a patent dispute that resulted in the disqualification of two law firms from representing two defendants because the defense was funded, at least in part, by a non-party with an interest in the patent.”
• “Plaintiff maintained that defense counsel violated N. J. Rule of Professional Conduct 1.8(f) when they represented defendants and a non-party payer. The Court held that the plaintiff, as an adversary, had standing to raise a potential conflict of interest and bring a motion to disqualify. While the Court noted that the Third Circuit had not ruled on the issue directly, ‘this District has held that ‘[a]dversaries, as well as former clients, may raise conflict of interest concerns.’'”
• “The Court found that the issues were governed by the New Jersey Supreme Court’s opinion in In re State Grand Jury Investigation, 200 N.J. 481 (2009) because a non-party was paying for the defense. The Court rejected defendants’ argument that Grand Jury only applied when evaluating whether an attorney may accept payment from a nonclient and not when an attorney is jointly representing multiple clients with a common interest.”
• “Under the Grand Jury test, an attorney may represent a client, accepting payment directly or indirectly from a non-party, only if each of the following six factors is satisfied:

1. 1. There is informed consent by the client.”
   2. Non-party payer may not direct, regulate or interfere with the attorney’s professional judgment in representing the client.”
   3. There may not be any current attorney-client relationship between the attorney and non-party payer.”
   4. The attorney may not communicate with the non-party payer regarding the substance of his representation of his client.”
   5. The non-party payer shall process and pay such invoices within the regular course of its business, consistent with manner, speed and frequency it pays its own counsel.”
   6. Once a non-party payer commits to pay for the representation of another, they shall not be relieved of that obligation without leave of court brought on prior written notice to the attorney and the client.”

• “Applying these factors to the facts, the Court here found that there was objective evidence from email communications between the parties that the non-party payer’s interests have ‘commandeered, or at least directed with primacy, Defense Counsel’s approach to its defense of Defendants.'”
• “The Court further stated that ‘[t]he record makes clear that [the non-party] is directing, regulating, and interfering with Defense Counsel’s professional judgment in its representation of Defendants.’ The Court found that there was clearly an attorney-client relationship between the attorneys and non-party payer because defense counsel stated they represented the non-party and were advising both the defendants and the non-party payer.”
• “The Court further noted that defense counsel continuously and regularly informed the non-party about the substance of defendants’ representation and a representative from the non-party was present and participated in a settlement conference. Finally, the Court found that Grand Jury’s sixth condition was not met because there was an indemnity clause that would release the non-party payer from its obligation to pay if legal fees surpassed a certain threshold.”
• “This case is an important decision on the impact and contours of what litigation funders can and cannot do. It serves as a roadmap for representation letters, waivers and communications with non-parties whenever a separate entity is involved in paying for litigation, and a cautionary tale for joint representation.”

“Russian Oligarch Wants Court Nemesis’ Litigation Funding Details” —

• “A sanctioned Russian billionaire is asking a Florida court for details about a Miami litigation funder that bankrolled an overseas case against him.”
• “Andrey Guriev claimed in a filing on Wednesday that 777 Partners was among a group of funders financing cases filed against him by former friend Alexander Gorbachev claiming he owned 24% of Guriev’s company. 777 and subsidiary Sphinx Funding LLC paid Gorbachev’s litigation costs, after-the-event insurance and living expenses to the tune of over £‎11 million ($13.9 million), according to court documents.”
• “Guriev now seeks discovery from Gorbachev’s funders asking for documents relating to 777 Partners’ general funding standards and policies, an organization chart of 777, corporate meeting minutes, and documents and communication relevant to Sphinx’s agreement with Gorbachev. He also seeks to depose a representative of 777.”
• “‘Mr. Guriev hopes to discover information relevant to the identities and ultimate sources of the funds provided by the third-party funders who financed Mr. Gorbachev’s failed, frivolous, and potentially fraudulent claims, as well as the true motives and objectives in bringing those claims,’ counsel for Guriev from Boies Schiller Flexner wrote in the memorandum of law supporting the discovery application.”
• “Guriev is a founder of Russian phosphate fertilizer company PhosAgro and a close associate of Russian President Vladimir Putin, according to the UK Office of Financial Sanctions Implementation. He was sanctioned by the US Office of Foreign Assets Control in 2022 for operating within the Russian Federation economy.”
• “In 2023, Gorbachev revealed that third parties were paying his litigation expenses, with two paying direct costs for the UK proceedings. Sphinx was one of those funders and had an agreement with him since 2021. It fronted the cost of a £5 million ($6.3 million) after-the-event insurance policy and Sphinx was entitled to the higher of either £40 million ($50.7 million) or 20% of the case proceeds.”
  Funders’ Role”
• “Guriev applied to have the funders added as parties to the litigation. In response, Joshua Wander wrote that he is the managing partner and co-founder of 777 Partners and Sphinx is a subsidiary. Wander wrote that 777 has no entitlement or any stake in the outcome of the proceedings and never has, despite 777 paying some of the funding payments to Gorbachev.”
  “The case is v. 777 PARTNERS LLC, S.D. Fla., 25-mc-20896, 2/26/25”

“Holland & Knight Must Face Breach of Fiduciary Duty Claims After Ex-Partner Allegedly Viewed Client Files for Divorce Leverage” —

• “A Pennsylvania federal judge ruled Thursday that Holland & Knight can’t escape breach of fiduciary claims in a case involving a former partner who allegedly accessed confidential client files to gain leverage in his divorce proceedings.”
• “U.S. District Judge John Milton Younge of the Eastern District of Pennsylvania found that Philadelphia personal injury firm Fritz & Bianculli sufficiently pleaded facts alleging that former Holland & Knight partner Patrick McCabe, former associate Jean Donohue, and current senior research analyst Eric Berg either did not have authorization or exceeded their authorization to access its files after the firm retained Holland & Knight as counsel in 2022”
• “The underlying litigation, initially filed in state court in August 2024 before being removed to federal court, accused Holland & Knight of failing to flag a conflict of interest regarding Fritz & Bianculli and McCabe, who was in the midst of divorcing his wife who worked as an associate at the personal injury firm. The suit specifically alleged that as a result of failing to flag the conflict, McCabe, along with Donohue and Berg acting on his behalf, accessed files belonging to Fritz & Bianculli to gain an advantage in his divorce proceedings even after the firm terminated its relationship with Holland & Knight in 2023 upon discovering the conflict.”
• “The suit further claimed that McCabe accessed his soon-to-be-ex-wife’s work email to monitor and record communications between his wife and her employer Brian Fritz, whom he suspected were having an affair.”
• “In addition to allowing the breach of fiduciary claims to move forward, Younge permitted the charges against McCabe for violating the Stored Communications Act by accessing Fritz & Bianculli’s email servers through his wife’s work computer to continue.”

“‘Discordant Dots’: Why Phila. Zantac Judge Rejected Bid for His Recusal” —

• “The judge overseeing Philadelphia’s Zantac mass tort did not look favorably upon a bid from plaintiffs to boot him from the litigation. In a Tuesday [1/7] opinion, Judge Joshua Roberts of the Philadelphia Court of Common Pleas said the Zantac plaintiffs ‘fell woefully short of presenting any concrete facts that could support recusal.'”
• “The plaintiffs in the Philadelphia Zantac mass tort had requested that Roberts step away from the litigation on the grounds that Roberts’ wife is a partner at the Am Law 50 firm Reed Smith, which represents Zantac manufacturer GlaxoSmithKline, in litigation over the drug. The plaintiffs contended that the connection between GSK and Roberts’ wife, Shannon McClure, could create the appearance of impropriety.”
• “Roberts criticized the plaintiffs’ arguments as too speculative, writing that the plaintiffs ‘presented plenty of hopeful supposition in the form of discordant dots that they could not connect.'”
• “Roberts noted that Reed Smith’s representation of GSK in Zantac litigation was all outside of Philadelphia and that the firm had placed an ethical wall for McClure regarding matters involving GSK. Roberts ruled that none of the facts asserted by the plaintiffs constituted a basis for recusal under the Code of Judicial Conduct.”
• “The plaintiffs did not allege that McClure, who works in Reed Smith’s global commercial disputes group, was directly involved in the Zantac litigation. However, they argued that McClure’s role at her firm meant she—and, by extension, her husband—had a financial stake in the litigation’s outcome.”
• “The defendants opposed the motion, countering that the judge’s purported connection to GSK was too tenuous to create the appearance of potential bias.”
• “Roberts agreed with the defense, and said in his opinion that the basis for the plaintiffs’ motion creates a ‘slippery slope.’ He questioned what other circumstances would warrant his recusal if he were to accept the plaintiffs’ argument.”
• “Without boundaries on what is and is not considered a conflict, he said, ‘It is easy to conceive that litigation-savvy attorneys could push for recusal under a myriad of tenuous circumstances.'”
• “According to the opinion, Roberts had told counsel about his wife’s role at Reed Smith in December 2023, but the plaintiffs waited until May 2024 to file their motion. While the delay in filing did not appear to afford the plaintiffs a strategic advantage, Roberts said, it was nonetheless an issue.”
• “In a footnote, he wrote, ‘A more cynical view of the circumstances is that plaintiffs’ counsel used the motion as a broadside against my oversight of the entire mass torts program.'”
• Read the full opinion: here.

“Latham Defends Steward Bankruptcy Effort Despite TRACO Concerns” —

• “Latham & Watkins LLP said the Justice Department’s bankruptcy watchdog has ‘no valid basis’ to oppose its retention in Steward Health Care System LLC’s bankruptcy.”
• “In a separate filing, one of the Latham attorneys who would represent Steward, Ray C. Schrock, disclosed that he and his colleague Candace M. Arthur can’t work with Steward on matters related to TRACO International Group, an insurer and non-bankrupt affiliate, because TRACO has refused to grant a requested waiver.”
• “The two attorneys recently joined Latham from Weil, which has been the private health network’s lead bankruptcy counsel since last spring. Steward’s retention application described them as ‘essential’ for its Chapter 11 bankruptcy.”
• “Schrock and Arthur were previously part of the Weil team that advised Steward and its subsidiaries, including Tailored Risk Assurance Company and TRACO, on the Chapter 11 cases. As of August 2024, the insurer is no longer a client of Weil and has retained Steptoe LLP as counsel. TRACO filed a complaint last year in bankruptcy court against Steward for allegedly withholding payments, including insurance premiums of $3.5 million per month.”
• “‘It apparently does not wish for Ms. Arthur and myself to represent the Debtors in matters against TRACO,’ Schrock wrote in the supplemental declaration.”
• “Despite TRACO’s refusal to grant the waiver, he said, he doesn’t believe the retention of Latham represents ‘any interest adverse’ to Steward’s estate or precludes the firm from being a disinterested party.”
• “Schrock said Weil would handle those matters. As a precaution, Latham established an ‘internal ethical wall’ to prevent attorneys and staff who previously worked on TRACO-related matters while at Weil, including Arthur and himself, from accessing TRACO-related files or participating in any matters specific to the insurer.”
• “The US Trustee opposed Latham’s retention last month, saying Steward ‘cannot afford the fees of another large multinational law firm,’ as Weil has already billed nearly $70 million in legal fees.”
• “Latham argued that the US Trustee overlooked that Schrock and Arthur logged 2,000 hours of Weil’s legal services during the bankruptcy, saying their continued involvement would benefit the company.”

“Law Firm Partner Suspended for Taking Clients on the Side” —

• “The New Jersey Supreme Court has imposed a two-year suspension on an attorney who represented clients on the side and kept the fees to himself while employed as a non-equity partner at a law firm.”
• “While William C. Kelly was employed at Tompkins, McGuire, Wachenfeld & Barry in Roseland, he handled seven client matters under the firm name, but sent invoices stating that payment should be made directly to him, rather than to the firm, the Disciplinary Review Board said. Kelly kept the proceeds from the seven cases, which totaled $11,415, for his personal use, the DRB said.”
• “But the Supreme Court suspended Kelly from practice for two years. The court found he violated RPC 1.15(a) and the principals of In re Siegel, knowingly misappropriating law firm funds; and RPC 8.4(c), engaging in conduct involving dishonesty, fraud, deceit or misrepresentation.”
• “Kelly attributed his engagement in outside work and misappropriation of funds to ‘financial insecurity and the collapse of’ his marriage and home life, ‘exacerbated by his alcoholism,’ according to the DRB.”
• “Kelly allegedly first issued his own invoice to a client in March 2013, then issued more between January 2018 and August 2019. Those invoices were not on firm letterhead but were emails sent to the clients indicating payment should be made to William C. Kelly, Esq.”
• “Kelly admitted to the DRB the impropriety of ‘providing outside legal services under the firm’s name, on matters for which he did not open files at the firm.’ The parties acknowledged, however, that he did not have a partnership or written employment agreement with the firm, and the firm did not have a written policy governing the provision of legal services under the firm’s name without the firm’s authorization, the DRB said. In addition, Kelly said he did not take money owed to a client or money from the firm’s trust account, according to the DRB. The parties also acknoweldged, in mitigation, Kelly’s alcoholism, cuminating in his 2021 hospitalization, and his continuing success in treatment, continuing sobriety, residence in a sober house, and regular attendance at Alcoholics Anonymous meetings, the DRB said. Kelly pointed out, however that he was not relying on an intoxication defense or any other psychiatric defense.'”

“Connell Foley Can’t Refute DQ Bid, NJ Investment Firm Says” —

• “A Black-owned investment firm suing New Jersey for discrimination in federal court said the court must disqualify Connell Foley LLP from representing the state because of a conflict of interest, even though the supposedly conflicted attorney has denied any ethical breach.”
• “Blueprint Capital Advisors LLC said in a brief filed Tuesday that its principal, Jacob Walthour, has provided specific details in multiple affidavits about the interactions he has had with the allegedly conflicted Connell Foley attorney, Elnardo Webster, documenting how Webster began effectively representing Blueprint before he joined Connell Foley.”
• “Walthour pointed to detailed claims that he has provided of a conversation he had with Webster in 2016, a follow-up email with proprietary and confidential company information, and an hours-long long in-person meeting between him and Webster later in 2016, among other things, as evidence to back his disqualification bid.”
• “In contrast, Webster has relied on arguing that he does not remember or only vaguely recalls the conversations Walthour has referred to, Blueprint argued, although that has not stopped him from denying that he offered any legal advice at those meetings.”
• “Webster ‘claims certainty that he did not receive any confidential information or provide any strategic or litigation advice during any of those meetings or discussions that he otherwise does not really recall,’ it said.”
• “The court now faces a ‘binary credibility determination,’ Blueprint wrote, saying it has proven more credible than Connell Foley and deserves to have its disqualification motion granted, or at least get an evidentiary hearing.”
• “‘On this record, this court must credit Mr. Walthour’s effectively unrebutted declarations corroborated by the testimony of others and contemporaneous evidence, and afford no weight to Mr. Webster’s incredible, conclusory, and admittedly speculative declaration,’ the company said.”
• “Blueprint sued New Jersey Attorney General Matthew Platkin, Gov. Phil Murphy’s former chief of staff George Helmy, and other state employees as well as the investment giant BlackRock in 2020.”
• “Blueprint urged the court to remove Connell Foley as the state defendants’ counsel in December, claiming that after Webster joined the firm in 2023, it unethically used the privileged information Walthour had given him to launch a separate action against Blueprint in state chancery court.”
• “Connell Foley fought that motion in January, saying that far from establishing an attorney-client relationship, Webster met Walthour socially no more than a handful of times before joining Connell Foley, and he never discussed the litigation between Blueprint and the state at those meetings.”

“Trump targets law firm connected to ex-special counsel Jack Smith with executive order” —

• “Donald Trump has signed an executive order suspending security clearances held by lawyers at a law firm connected to Jack Smith, the former special counsel who investigated the president.”
• “Trump signed the retaliatory executive order Tuesday in the Oval Office. It directs the attorney general and heads of other agencies to immediately suspend any active security clearances held by members, partners and employees of Covington & Burling who assisted Smith during his time as special counsel. It also directs the government to review all contracts with the law firm.”
• “‘This is a good one,’ Trump told reporters during a press conference before signing the order. ‘Deranged Jack Smith. We’re going to call it the deranged Jack Smith signing or bill.'”
• “After signing the order, Trump said he wanted to ‘savor’ the moment, then threw the marker he used to a person, suggesting they then send it to Smith.”
• “Smith had led two federal investigations into Trump: one concerning the alleged retention of classified documents from his first term, and the other over efforts to overturn the 2020 election.”
• “Despite a lack of evidence, Trump has long claimed that the cases against him were a weaponization of the Justice Department, something he has vowed to end under his administration and to hold those responsible to account.”
• “Asked Tuesday what he would say to those who claim he was targeting a law firm over its association with Smith, Trump said he was the one who was targeted. ‘I was targeted for four years — longer than that — so you don’t tell me about targeting,’ he said. ‘I was the target of corrupt politicians for four years and then four years after that. So don’t talk to me about targeting.'”

“Why [Corporate] Compliance & [Corporate] Legal Still Need to Break Up” —

• “The relationship between legal and compliance departments has always been complicated. Now, with fresh evidence that reporting structures significantly impact compliance officer effectiveness and well-being, law professor and compliance officer Joseph Burke explores why it’s time for organizations to finally embrace CCO independence.”
• ‘Ever since the issuance of the US Sentencing Guidelines in the mid-1980s, there has been debate in the legal and compliance communities about how the compliance department should be managed and more specifically, where it should report. Traditional legal leadership has most often preferred that compliance report to the general counsel, or elsewhere within the legal department, while compliance specialists have argued for a more independent structure with the compliance leader reporting directly to the CEO of the company, or failing that, the board of directors.”
• “Peter Driscoll, then the director of the OCIE, shared his perspective on this in a November 2020 speech at the National Investment Adviser/Investment Company Compliance Outreach 2020: ‘Empowerment, seniority and authority. These three words matter,’ Driscoll said. ‘We notice on exams when firms hire someone for the role to check the box but do not support or empower them. … We notice when a firm positions a CCO too low in the organization to make meaningful change and have a substantive impact, such as a mid-level officer or placed under the CFO function.'”
• “More specifically, Driscoll emphasized that ‘[I]n terms of authority, I am often asked who the CCO should report to in an organization. Is it to the CEO, the COO, the general counsel or directly to a board if one exists? There is no easy answer to this. It depends on the size of the organization, the leadership structure, the experience of the CCO and the compliance culture. … I do believe that, at a minimum, a CCO should have a direct line of reporting to senior management, if not be part of senior management.'”
• “According to 2024 research by recruiting firm BarkerGilmore, 53% of public company CCOs reported to the GC/managing counsel and 30% reported to the CEO, with the remaining 7% reporting elsewhere, including 1% to the board. In private companies, there was a more even split, with 43% reporting to the GC, 43% to the CEO.”
• “In a December 2010 essay titled ‘Don’t Divorce the GC and Compliance Officer,’ Heineman presented a vision of a strong, broad-ranging GC who could manage both the legal and compliance functions without creating organizational overlap. In his view, compliance was really only a process management function and not a matter that required judgment or reasoning. His model required a strong GC who operated as a virtual ‘statesman’ for the company, relying on years of experience and a deep and trusted relationship with the CEO to provide all compliance advice, when required, to the board and the CEO with an air of gravitas and a statesman’s influence. This model may have described his own personal experience at GE, but outside a small handful of very large companies, the model simply did not (and does not today) reflect the practical reality of general counsel leaders.”
• “As Boehme and others have pointed out, the role of the CCO is not a purely legal role. The CCO is charged with building and developing non-legal compliance tools and programs, such as the anti-corruption program, the trade compliance program and the anti-money laundering program, all of which rely on business controls, auditing, periodic and regular training and periodic risk assessment. The CCO must develop tracking tools to report on compliance risk and trends, internal company audit trends and results and internal compliance with company controls. CCOs must also focus on building relationships with the regulators who are most important to the success of the business. Traditionally, legal departments do not build the compliance tools, processes and relationships that have today become commonplace elements of an effective compliance program but rather provide the legal analysis and advice germane to the legal function generally.”