Risk Update

Lawyer Conflicts, DQ and Privacy Debates — Amazon’s In-house IP Attorney Gets a Conflicts Call, Law Professor Learns a Lesson

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Software Co. Wants Amazon Atty DQ’d From Patent Suit” —

  • “MasterObjects wants a California federal judge to disqualify Amazon’s in-house lawyer and its outside counsel in a suit accusing the e-commerce giant of infringing search engine patents, saying the company’s staff attorney once worked for the law firm that filed a MasterObjects patent application in the early 2000s.”
  • “Scott Sanford, a senior in-house patent lawyer at Amazon.com Inc. who is leading the company’s defense case, once worked for MasterObjects Inc.’s long-standing patent prosecution firm, Fliesler Meyer LLP, according to a memo to disqualify him filed Monday. The software company said it only recently and “serendipitously” discovered Sanford’s two-year employment at the boutique firm that began in 2000, a job MasterObjects said he neglected to disclose.”
  • “‘Despite having dozens if not hundreds of calls or meetings about MasterObjects and its patents, including motions to depose Mr. Sanford’s former Fliesler Meyer colleagues, Mr. Sanford not once said, ‘Oh, by the way, I worked at Fliesler Meyer when the firm drafted the MasterObjects parent patent,” the motion said. ‘Why on earth not?'”

Chapman University says it didn’t authorize law prof’s representation of Trump, yet work was on server” —

  • “Law professors often use school emails when representing clients, but they may want to rethink that, following a recent subpoena sent to Chapman University from the House Select Committee investigating the Jan. 6, 2021, U.S. Capitol attack, seeking documents from former faculty member John Eastman.”
  • “The Jan. 20, 2022, subpoena relates to the constitutional law professor’s legal representation of former President Donald Trump and the 2020 election, and includes emails, contact lists and calendar entries on the university server.”
  • “Eastman had no expectation of privacy on the university server, and a written school policy said as much, according to the government’s Jan. 21 motion opposing Eastman’s TRO request.”
  • “Also, when Eastman logged on to the Chapman network, he was greeted with a splash screen message, stating that use of the system constitutes consent his activities or information could be subject to monitoring, according to the government’s filing. Eastman is a former dean of the law school, and has served on the faculty for more than 20 years.”
  • “‘I suspect most law professors assume their emails are private. This surprises me a bit because I often comment publicly that people too frequently are lulled into carelessness about what they say in emails and then are shocked that emails are discoverable—in situations ranging from divorces to congressional subpoenas,’ Catherine Ross, a George Washington University Law School constitutional law professor, told the ABA Journal in an email.”
  • “He [Michael O’Brien, an Anchorage, Alaska-based partner at Perkins Coie who represents colleges and universities in employment matters] adds that universities usually vet any legal work a law professor wants to take on, and the process includes a conflict-of-interest check… Eastman has argued that this was a service component of his academic work. Based on my review, I doubt it was pitched that way.”
Risk Update

Information Risk and Confidentiality Management — A Primer on Protective Orders

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Having spent about two years of my early career swimming in this area, this is a topic near and dear to my heart. Interesting related information risk issues to consider when it comes to addressing internal access management and confidentiality controls within the firm tied to these obligations. Perhaps we’ll see a future article on that. In the meantime, Dentons partners Shari L. Klevens and Alanna Clair share: “What to Know About Protective Orders” —

  • “Protective orders are a tool used by litigators to help manage and prevent the public dissemination of sensitive documents and information a party receives during the course of litigation. Although such orders are very commonplace in commercial litigation, they are rarely ‘one size fits all.'”
  • “Indeed, most protective orders or confidentiality agreements governing discovery will require some tailoring to the specific needs of the case and client. This article provides some tips for lawyers considering the use of protective orders.”
  • “An effective protective order would typically be designed to protect financial information, trade secrets, or other proprietary information. To the extent the litigation is expected to involve production of documents or testimony that would otherwise be considered ‘confidential,’ a protective order will help minimize the risk of exposure.”
  • “In addition to the specific subject matter of the litigation, most lawyers will also consider whether the case calls for two tiers of protection. Two-tiered protection generally involves designating a broad category of documents and information as confidential and then designating a more finite subset as ‘Attorneys’ Eyes Only.’ Typically ‘Attorneys’ Eyes Only’ information is not permitted to be shared with the actual parties to the litigation, but only their lawyers. That heightened designation may be appropriate for cases involving trade secrets, patent infringement or other competitive commercial disputes.”
  • “If the client does not appreciate that it will not be permitted to access ‘Attorneys’ Eyes Only’ information, it could lead to some tension or even frustration on the part of the client. By taking time to explain the ramifications of that level of protection before the client agrees to the parameters of the protective order, lawyers could avoid such disputes.”
  • “In addition, some protective orders will include provisions that impose obligations on the litigants after resolution of the lawsuit. This could include provisions governing the destruction or return of materials exchanged during discovery. Advising the client of those obligations could help reduce the risk of violating the agreement by failing to comply.”
  • “Although many protective orders follow similar templates to protect confidential information, there are situations in which exceptions or carve-outs are appropriate. For example, most protective orders require the parties and their counsel to return or destroy confidential information after a lawsuit ends or settles. But what if the lawyer later receives a malpractice claim from the client involved in the suit?”
  • “If the lawyer followed the terms of the protective order, the lawyer may no longer have access to documents or transcripts that would assist the lawyer in proving what happened in the case. Absent a carve-out in the protective order, the lawyer could be deprived of one of the best defenses available to a malpractice claim: the full and complete file. To mitigate such risks, some lawyers will include carve-out provisions in protective orders to allow the lawyers to retain a copy of the file for use in malpractice actions.”
Risk Update

Ethics Updates — Another Judicial Stock-driven Recusal, Texas Ethics Opinion on Review Response

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Judge Exits $1B Nigeria Award Case Over Chevron Stock” —

  • “A New York federal judge who for almost four years presided over a lawsuit seeking to enforce a $1.1 billion arbitral award against Nigeria’s state-owned oil company has recused himself after discovering he owned stock in Chevron Corp., the parent company of one of the awardees.”
  • “U.S. District Judge Richard M. Berman informed Ruby J. Krajick, court clerk of the Southern District of New York, on Thursday that he sold the stock he owned in Chevron’s Texaco Nigeria Outer Shelf Ltd. while overseeing the case, but he will no longer oversee the dispute. Krajick updated the parties in the case on Friday.”
  • “The letter referenced Advisory Opinion 71 from the Judicial Conference’s Codes of Conduct Committee, which provides guidance for addressing disqualification that is not discovered until after a judge has participated in a case.”
  • “The guidance also suggests the ‘parties may then determine what relief they may seek, and a court (without the disqualified judge) will decide the legal consequence, if any, arising from the participation of the disqualified judge in the entered decision.'”
  • “The letter does not say how or when Judge Berman learned about his Texaco Nigeria Outer Shelf stockholding nor why he was not aware of his stockholder status.”
  • “Judge Berman’s recusal comes amid congressional efforts for more stringent stock trading disclosure requirements from federal judges. It follows a recent Wall Street Journal report revealing that more than 130 federal judges failed to recuse themselves from cases in which they or an immediate family member held stock in a company involved in a dispute. Following the report, several judges across the country have stepped back from cases they were overseeing.”

Ethics opinion addresses responding to online criticism from nonclients” —

  • “Florida lawyers now have guidance on how to respond to negative online reviews posted by those who are not current or former clients — keep it brief, factual, and don’t reveal information concerning a client’s representation without the client’s informed consent.”
  • “That’s the advice from recently approved Ethics Opinion 21-1 that was adopted by the Board of Governors in December.”
  • “‘If accurate, the lawyer may state that the person who made the post is not a current client or former client,’ the opinion, put forth by the Professional Ethics Committee, reads. ‘The lawyer may generally note that the comments in the review are inaccurate but that the lawyer’s response is constrained by the lawyer’s ethical obligations.'”
  • “The PEC had been asked by the Board of Governors to give an opinion on responding to negative online reviews posted by individuals that are not clients or former clients after the earlier adoption of Ethics Opinion 20-1, which discusses a lawyer’s response to a client or former client’s negative online review.”
Risk Update

Conflicts Concerns — Mayor’s Move Causes Concern, Shell Calls Out ERISA Class Conflict

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Hoboken Mayor Ravi Bhalla faces criticism over new law firm gig” —

  • “A number of Hoboken council members have called on Mayor Ravi Bhalla to provide more transparency about his position at a law firm he joined at the end of last year, a firm in which the city’s assistant corporation counsel also serves.”
  • “Bhalla joined Schenck, Price, Smith & King on Dec. 30, 2021, two days before he was sworn in for a second term as mayor. The firm issued a press release that day, but the news had not been publicized by either the mayor nor the city. The matter was brought up over the weekend by former City Council candidate Paul Presinzano.”
  • “The firm said Bhalla will help them in diversity and inclusion efforts as a member of their Diversity & Inclusion Committee. He will earn a salary of $60,000 there, along with his current salary of $116,950 as mayor.”
  • “When asked about why the mayor didn’t publicize his new role, Horowitz said that ‘since the fact that the mayor has been serving in the very limited role ‘of counsel’ to a law firm has been public for the past four years, the movement to a different firm in our view didn’t require a separate announcement from the mayor.'”
  • “Schenck, Price, Smith & King is the law firm where Assistant Corporation Counsel John Allen, who was Bhalla’s former Chief of Staff, also serves, which the council members say is a potential conflict of interest.”
  • “‘This once again reignites our long standing concern that Mayor Bhalla’s second job with a politically connected law firm will compromise the city’s interests in favor of his own,’ said the council members. ‘Mr. Allen may have solicited work for the firm in question, but the administration has blocked access to public records which would prove or disprove this accusation.'”
  • “The council members had brought up past concerns over other previous conflicts of interest regarding Allen, where he had formerly served as an attorney for the city’s Alcohol Beverage Control board.”

Shell Says Intra-Class Conflict Prevents Cert. In ERISA Suit” —

  • “Shell Oil Co. urged a Texas federal court to block a group of retirement plan participants from bringing their lawsuit over alleged 401(k) mismanagement on behalf of a sprawling class, claiming the proposed class improperly includes members with contradictory interests.”
  • “The oil and gas giant and its retirement plan trustees slammed a January motion for class certification lodged by three former Shell employees, pointing out in a filing Friday that the group contains members who the workers claim unfairly benefited from certain investments at the expense of putative class members who were harmed.”
  • “‘Plaintiffs’ proposed class is riddled with irreconcilable conflicts. Indeed, plaintiffs actually feature those conflicts as a centerpiece of their theory of the case,’ Shell said Friday.”
  • “The plan participants claimed in their January 2020 Employee Retirement Income Security Act lawsuit that Shell saddled its 401(k) plan with high fees and let Fidelity Investments Institutional Operations Co. Inc., the plan’s record-keeper, use participants’ personal information to market financial products.”
  • “A key issue with the proposed class is that putative members who invested in a specific tier of funds wound up in a very different position from those who didn’t, since the plan’s record-keeper was only paid fees from certain funds in this tier, Shell argued.”
  • “‘It is hard to imagine that absent class members, who did not invest in [this tier of funds], would (or could) be satisfied with being represented by a named plaintiff … who did, and whose counsel has maligned such absent members as free-riders,’ the oil and gas company continued.”
  • “This discrepancy between class members would come into sharp relief if a potential settlement would need to be split up between participants, Shell said.”
jobs (listed)

BRB Risk Jobs Board — Ethics & Conflicts Attorney, Business Intake Specialist

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Vanessa Becker, Senior Ethics & Business Intake Attorney at Holland & Hart LLP sends word of two open positions at her firm. The lawyer role has one of the best (short) application writing assignments I’ve ever seen in such a posting. (And if that’s not an intriguing enough reason to check out the opening, I may lose a bet…)

Ethics & Conflicts Attorney 

  • “Our ethics and conflicts attorneys help ensure that the firm and its lawyers do not inadvertently violate conflict of interest rules that govern the firm’s representation of clients.”
  • LOCATION: Boise, Idaho or Salt Lake City, Utah office
  • Read more on about this position and apply here.


Business Intake Specialist

  • “The Business Intake Specialist helps to provide the intake lawyers and their assistant with an efficient and seamless business intake process when opening new matters.”
  • LOCATION: Boise, Idaho or Salt Lake City, Utah office
  • Read more on about this position and apply here.


On Benefits and Work/Life Balance:

  • “Holland & Hart works hard to promote work/life balance with a 37.5-hour scheduled work week for most staff employees, a robust wellness program, and generous PTO and holiday pay for eligible employees.”
  • “Full-time employees become eligible for benefits on the date hire, with a benefits offering that includes medical, dental, vision, life, AD&D, EAP, STD, and LTD. Also available are voluntary income protection benefits such as supplemental life, accident, critical illness, and long-term care insurances, as well as a 401(k)-retirement plan with a company match.”
  • “In addition, the firm has programs that may provide for educational assistance, free or discounted legal services, and opportunities through the Holland & Hart Foundation, which is a non-profit organization dedicated to creating volunteer opportunities for lawyers, staff, families, and friends of Holland & Hart LLP. Part-time employees may have access to some of these benefits, which may be on a pro-rated basis.”

 

And if you’re interested in seeing your firm’s listings here, please feel free to reach out

Risk Update

Law Firm Conflicts “Curiosity” — Allegations of Conspiracy, Racketeering, Conflicts and More

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Leon Black drops racketeering claims against law firm Wigdor” —

  • “Billionaire investor Leon Black has dropped the Wigdor law firm as a defendant against civil racketeering claims in his lawsuit against a former model who accused him of rape, and dropped the law firm Quinn Emanuel Urquhart & Sullivan after it identified a potential conflict.”
  • “The changes were disclosed in Black’s amended complaint filed on Monday night in Manhattan federal court against Guzel Ganieva, with whom the former Apollo Global Management Inc chief executive has admitted to having had a consensual 6-1/2-year relationship, and the Wigdor firm.”
  • “Black has forcefully denied Ganieva’s rape and sexual abuse claims, and accused her of extortion. He sued Ganieva last Oct. 28, four months after she sued him in a New York state court for alleged defamation and sexual violence.”
  • “According to court records, Quinn Emanuel obtained the presiding judge’s permission to withdraw after partner John Quinn said the firm had identified a ‘potential conflict of interest’ that might implicate issues of privilege.”

The curious case of the Quinn Emanuel partner and the alleged conspiracy against Leon Black” —

  • “Quinn Emanuel Urquhart & Sullivan withdrew this week as counsel to Apollo Global Management Inc founder Leon Black in a lawsuit claiming that an ex-model who has accused Black of rape conspired with his business rival in a smear campaign to bring down the billionaire financier.”
  • “Quinn’s withdrawal letter to U.S. District Judge Paul Engelmayer in Manhattan federal court cited a potential conflict of interest. The letter provided no additional details about the conflict.”
  • “But Black’s amended complaint, filed at the same time as Quinn’s withdrawal request, contains some intriguing assertions about contacts between purported participants in the alleged anti-Black conspiracy and Quinn litigation partner Alex Spiro.”
  • “There is a one big clue that the conflict is linked to Black’s conspiracy allegations: Quinn has not asked to withdraw as Black’s defense counsel in the New York state court sexual assault and defamation case brought by the ex-model, Guzel Ganieva. The firm’s email statement confirmed that Quinn continues to serve as Black’s counsel in the state case.”
  • “And regardless of the reasons for Quinn’s withdrawal from the federal case, it’s notable that Black’s own complaint asserts unusual incidents involving Quinn partner Spiro – or, at least, people wielding his name – and purported participants in a vast conspiracy to defame and extort Black, who remains a client of Spiro’s firm.”
  • “You need some background to understand those incidents. The lawsuit asserts that Black’s onetime protégé, Josh Harris, was incensed that Black spurned him as a successor to lead Apollo. The complaint claims that Harris orchestrated a retaliatory legal and media blitz against Black, conspiring with Ganieva and a public relations expert to ruin Black’s reputation with false claims of rape and kidnapping.”
  • “In early 2021, Black’s complaint alleged, ‘confederates’ of Harris called Spiro to find out if Quinn Emanuel was interested in taking a case against Black. The amended complaint does not specify the identity of these purported confederates, except to describe them as ‘an unidentified shadowy internal faction at Apollo that was involved in ‘cagey business’ there.'”
Risk Update

Disqualification Debates — Engagement Letter Conflicts Clash, Brooklyn Bankruptcy Brawl

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Widow Wants Lowenstein Sandler DQ’d From Estate Fight” —

  • “A pharmaceutical executive’s widow has called on a New Jersey state appeals court to ban Lowenstein Sandler LLP from representing one of its attorneys as co-executor of her late husband’s estate in a probate matter, as she and the lawyer are battling over the handling of assets once valued at more than $170 million.”
  • “Lowenstein Sandler previously represented Angela Krivulka as co-executor of the estate along with Lerner, her interests are ‘materially adverse’ to Lerner’s, and the firm never obtained her ‘informed consent’ to its prohibited representation of Lerner, according to Wright.”
  • “With respect to such consent, the firm has pointed to a 2018 joint engagement letter that ‘at best seeks a future conflicts waiver, which is not enforceable,’ Wright said. As examples of their adversity, she noted that Lerner sued Krivulka in probate court to, among other things, remove her as a co-executor and to have the her marriage to Joseph declared invalid.”
  • “‘It’s the same matter. They’re adverse. They did not obtain informed consent,’ Wright told the panel. ‘So they should be disqualified.'”
  • “Lerner has countered that Krivulka consented in the engagement letter to Lowenstein Sandler continuing to represent him, court documents state. The letter included a provision stating that, if a conflict of interest arose between them, the firm may have to withdraw as counsel to one or both of them, court documents show.”
  • “After the firm began representing Lerner and Krivulka as co-executors, she raised the issue of Lowenstein Sandler’s purported conflict of interest, and Cravath Swaine & Moore LLP stepped in to represent her, court documents state.”

Bankrupt Brooklyn Hotel Gets to Keep Its lawyer” —

  • “A bankruptcy judge overseeing the Williamsburg Hotel bankruptcy case Thursday opted not to rule on a motion filed by the U.S. Trustee, who urged the court to disqualify law firm Mayer Brown LLP from representing the hotel owner, 96 Wythe Acquisition.”
  • “The U.S. Trustee argued in his motion that the law firm’s role in a separate bankruptcy case involving the same developers behind the hotel, Toby Moskovits and Michael Lichtenstein, poses a clear conflict of interest because a court-appointed examiner is now investigating fund transfers from the hotel to different entities owned by the developers.”
  • “Judge Robert Drain said the motion, based on the current evidence, was premature. But he also didn’t dismiss it, leaving a chance for a future discussion.”

 

Risk Update

Conflicts Concerns — ‘Entirely Appropriate’ Conflicts Review, Ex-clerk Conflicts Navigation

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King & Spalding faces plaintiffs’ grilling over new associate in San Francisco” —

  • “King & Spalding’s rehiring this month of an associate in San Francisco has become a flashpoint in a long-running antitrust lawsuit just weeks before the trial is set to begin in California federal court.”
  • “The law firm said it is taking steps to wall off the associate, who had served as a law clerk to the judge overseeing the antitrust case against longtime client Sutter Health, the Northern California health system.”
  • “The dispute came to light on Wednesday night in a series of emails and letters filed with the court among the firms handling the case. The correspondence indicates concerns plaintiffs’ lawyers have about potential conflicts of interest arising from the associate’s work for the judge.”
  • “The dustup began on Jan. 4, when a partner at King & Spalding notified the parties and Beeler that the judge’s former clerk, Meghan Strong, was returning to the firm. Strong earlier worked at the firm prior to the start of her clerkship last year.”
  • “‘Counsel has an obligation to get to the bottom of this issue on behalf of the class,’ Constantine Cannon partner Matthew Cantor said in a letter on Monday to Beeler about questions he posed to King & Spalding.”
  • “King & Spalding’s Stephen Goff in Sacramento, a lawyer for Sutter, told the court Strong is disqualified from representing parties in matters she worked on as a clerk. The firm said it has played a limited role in the Sutter case, with Jones Day attorneys serving as lead trial counsel.”

As John Pierce’s Jan. 6 Client List Grows, Conflict of Interest Concerns Follow” —

  • “Right-wing attorney John Pierce’s fiery pro-Trump and anti-establishment persona, and his reputation for backing causes championed by conservatives, has helped him amass nearly two dozen clients charged in the Jan. 6 attack on the U.S. Capitol. But as his client list grows, so too are concerns about potential conflicts of interest in his cases.”
  • “Judges in at least two multi-defendant cases have appointed a conflicts counsel in recent weeks to examine whether Pierce’s representation of multiple co-defendants charged together for allegedly breaching the Capitol presents ethical issues that may require Pierce to withdraw. Pierce is representing at least 22 people charged in the Capitol riot, according to a review of court documents, the most of any defense attorney.”
  • “But the sheer number of Pierce clients makes conflict issues more likely, experts said, leaving it to judges and conflicts counsel to sort out potentially thorny issues, such as how to proceed if arguments in one case may undermine potential defenses in other cases involving the same attorney.”
  • “Additionally, given his political posturing, Pierce will need to take care to avoid pushing an ideological agenda over the interests of his clients, ethics experts said.”
  • “Pierce maintains an active Twitter presence where he frequently lambasts the Biden administration, COVID-19 vaccine mandates, and the D.C. establishment. He earned significant attention on the right for his role in defending Kyle Rittenhouse, the Wisconsin teenager who shot and killed two people during a Black Lives Matter protest and was later acquitted after arguing self-defense. Pierce left Rittenhouse’s defense team before trial, reportedly over a bitter financial dispute with Rittenhouse’s family.”
  • “‘I have seen no such conflict to date. The court, which I greatly respect, is simply doing its job under Federal Rule of Criminal Procedure 44 to ensure the rights of defendants are protected,’ Pierce said. ‘That is entirely appropriate.'”
  • “The final decision will rest with the judge. And while Gillers said experienced trial court judges have likely dealt with similar issues in the past, it can be a difficult decision. If a judge disqualifies an attorney, a defendant can argue on appeal that they were denied counsel of their choosing. If, on the other hand, a judge allows a lawyer with a conflict to remain on the case, a conviction can be overturned due to ineffective assistance of counsel.”
Risk Update

Risk Roundup — ‘Ironic,’ Side-switching Conflicts Allegation, Judicial Recusal Rule Review and Continuing Concern

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Litigation Trendspotter: Federal Judge Recusals Could Soon Be On the Rise—But Requesting Them Remains Risky” —

  • “A bipartisan push in Congress for greater transparency on federal judges’ financial ties, a proposed rule change for amicus filers and a vow by Chief Justice John Roberts Jr. to ensure the judiciary’s compliance with ethics canons could soon combine to cause an uptick in recusals and disqualifications.”
  • “But, as demonstrated by one jurist’s reaction to recent allegations of a conflict of interest, lawyers who question a judge’s impartiality do so at their own risk.”
  • “The legislation is a direct response to the Wall Street Journal’s recent findings that, between 2010 and 2018, 131 federal judges failed to recuse from 685 cases in which they held a financial interest. The WSJ investigation itself has led to an increase in federal recusal motions and conflict-of-interest disclosures since its release in the fall.”
  • “The decision of whether to push for a judge’s recusal is often tactical. As Philadelphia-area criminal defense attorney Steven Fairlie told me a few years ago: ‘I could see a possible basis for recusal and keep my mouth shut because I think that judge is good for my case. I’d want to get my client’s approval. I don’t think you can do something like that without bringing your client into the loop.'”
  • “Conversely, a party and its attorneys may decide that pushing for recusal is worthwhile where a particular judge is considered to be less favorable to that party’s interests in the case. But recusal-motion-as-litigation-strategy can easily backfire if the motion is ultimately denied.”
  • “Judges are, of course, expected to remain impartial even when parties and/or attorneys get under their skin. But most litigators still go to great pains not to offend the judges they appear before—particularly when those appearances are frequent.”
  • “As James Sample, a constitutional law professor at the Maurice A. Deane School of Law at Hofstra University, noted in his 2007 paper, ‘Making Judicial Recusal More Rigorous,’ fear of reprisal is one of the chief deterrents of recusal motions. ‘…[L]itigants may be afraid of bringing recusal motions for fear of angering their judge. This fear may be particularly acute for parties and lawyers who are likely to be repeat players before the court,’ Sample wrote.”

School District Wants BB&K Disqualified From Cleanup Suit” —

  • “The school district that oversees the only school on an island off the coast of Los Angeles wants a California federal court to disqualify opposing counsel Best Best & Krieger LLP in a dispute over contamination on school property, arguing the district previously hired the firm for advice regarding the pollution.”
  • “The Long Beach Unified School District told the court in a motion to disqualify Tuesday that BB&K attorneys can’t represent the city of Avalon in the litigation over contamination at the Avalon School because the firm was previously retained as the school district’s sole environmental counsel for pollution at the site. The district told the court it only recently became aware of the apparent conflict and the law firm never requested, nor did the district sign off on, a conflict waiver that would have authorized the law firm ‘switching sides.'”
  • “According to the motion, the district’s counsel ‘ironically’ discovered the law firm’s previous work for the district while they were defending a claim for work product privilege over certain documents. The documents were communications between the district, its consultants, and counsel dating back to when the California Department of Toxic Substances Control issued an order regarding the pollution at the Avalon School site a decade ago. ‘This led the district’s counsel to discover that certain documents were privileged as a result of BB&K’s prior representation,’ the motion said.”
  • “The district told the court it asked BB&K to bow out of the lawsuit after it discovered the previous representation but the firm ‘refused to withdraw.'”
Risk Update

Accounting Conflicts Allegation — Restructuring, Bankruptcy Advising, RICO Clash Continues

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McKinsey Foe’s Chapter 11 Conflict-of-Interest Lawsuit Revived by Appeals Court” —

  • “A federal appeals court revived a McKinsey & Co. critic’s lawsuit alleging the consulting giant concealed conflicts of interest to obtain lucrative appointments advising bankrupt companies at the expense of rival firms.”
  • “Wednesday’s ruling by the Second Circuit Court of Appeals in New York revived a racketeering lawsuit accusing McKinsey of submitting false and misleading statements in 13 bankruptcy cases to hide financial conflicts that could have disqualified the firm from being retained.”
  • “Bankruptcy advisers legally are required to be disinterested and to disclose connections to other parties to a chapter 11 case that could give rise to a conflict of interest. In many bankruptcy cases that McKinsey worked on, the firm didn’t name any interested parties with whom it had a relationship, relying instead on broad references to unnamed clients. An investigation by The Wall Street Journal found McKinsey routinely disclosed far fewer potential conflicts than other bankruptcy advisers and that the firm’s investment unit held undisclosed financial stakes that gave it a direct interest in the outcome of several bankruptcy cases.”
  • “In 2020, McKinsey reached a settlement without admitting wrongdoing with the Justice Department’s bankruptcy division over how the firm discloses potential conflicts of interest. As part of the settlement, McKinsey agreed to walk away from $8 million in fees for work it did advising a bankrupt coal company. The firm also agreed to broaden the scope of disclosures made in future cases, including the names of confidential clients and potential conflicts involving its many affiliates.”

Second Circuit Revives Jay Alix’s RICO Claims Against McKinsey” —

  • “Had the bankruptcy engagements not been awarded to McKinsey, the judges reasoned, it was ‘entirely plausible’ that AlixPartners would have received about 24% of the work and resulting revenue, consistent with its historical market share in the niche advising space.”
  • “‘The loss to AlixPartners and the other large advising firms is plausibly alleged to flow directly from McKinsey’s fraud on the bankruptcy court,’ U.S. Circuit Judge Barrington D. Parker wrote for the court.”
  • “The ruling sent the suit back to the district court, allowing Alix to build out his allegations that McKinsey had violated the Racketeer Influenced and Corrupt Organizations Act and had employed an illegal pay-to-play scheme to secure work in large corporate bankruptcy cases.”
  • “A spokesman for McKinsey cautioned on Wednesday that the Second Circuit’s decision ‘solely addresses technical pleading standards and not whether Mr. Alix’s claims are true…To date, Mr. Alix has lost all six of his lawsuits against McKinsey, and we are confident the evidence will ultimately show that this lawsuit is similarly meritless.'”