Bressler Risk Blog

“Accounting firm EY calls off ‘Project Everest’ to break up firm” —

• “Accounting firm EY has called off its plan to break up its auditing and consulting divisions. The firm, formally known as Ernst & Young, announced it was ‘stopping work on the project’ because its US arm decided to not to move forward.”
• “The plan came as regulators called for major industry reforms over conflicts of interest and poor working practices.”
• “EY’s announcement ends a year-long battle to build internal support to split the units.”
• “‘We acknowledge the challenges with separating some of our businesses that have the deepest technical expertise in a way that gives both organisations the capabilities they need to compete in the market effectively,’ according to an internal note seen by the BBC.”
• “Financial supervisory bodies in the US, UK and Europe have raised concerns about large accounting firms, claiming they cannot fairly serve as an auditor of clients who also use their consultancy services.”
• “The project cost the firm more than $100m (£80.3m) according to the Wall Street Journal.”

“SEC fines Corvex Management $1M for SPACs conflicts” —

• “New York-based investment adviser Corvex Management agreed to pay $1 million to settle allegations it failed to disclose personnel ownership in certain sponsors of special purpose acquisition companies (SPACs) and didn’t have policies and procedures reasonably designed to thwart conflicts of interest.”
• “Between 2020 and 2021, unnamed Corvex personnel were involved in the formation of three SPACs and shared ownership of the SPACs’ sponsors, according to the SEC’s order.”
• “Corvex had the power “to make investment decisions on behalf of private funds that Corvex advised, including by causing such private funds to purchase securities … to assist with financing SPAC business combinations,” the order stated. The firm would cause its clients to participate in transactions amounting to $52.5 million, $45 million, and $25 million in connection with the business combinations, according to the SEC.”

“Independence, Conflict and the In House Solicitor” —

• “The SRA has in the past expressed concern that solicitors who represent clients whose business is particularly valuable to their firm can find themselves in a difficult position if the client instructs them to do something which potentially conflicts with their professional obligations. The SRA has therefore reminded the profession of the importance of acting with independence in such situations notwithstanding the obvious tension that this can create especially for solicitors working in an in house legal team where the instructions come from their employer. The possibility for conflict between the commercial needs of the business and the legal adviser’s regulatory obligations will inevitably be even greater.”
• “This issue has been highlighted by a recent thematic review conducted by the SRA of in house legal teams. In its survey the SRA asked over 1200 in house solicitors what the main issues that affected them were and in response 10% said that they felt that they had been forced to compromise their regulatory obligations to meet the needs of the businesses for whom they work.”
• “This is a worrying but arguably not surprising statistic. In times of economic downturn the pressure on businesses necessarily increases and the need to ‘get the deal done’ will likewise increase. Alternatively, if a solicitor is working in house for a business which itself is the subject of scrutiny, there is a risk that they could be asked to suppress information in a way that is again at odds with their regulatory duties. In fact 5% of those who responded to the SRA’s survey said that this had been their experience.”
• “The SRA described the results of its survey as “generally encouraging” but this has provoked an outcry from a number of GCs of large and reputable companies, who have posted their response on social media. These GCs say that the SRA has seriously underestimated the ethical challenges faced on a daily basis by many in house lawyers and has called for measures to be put in place by the Regulator to help to support those who find themselves in such situations.”

“Law Firm Can’t Represent Ex-DLA Piper Atty In Cannabis Row” —

• “A California state appeals court on Tuesday upheld the disqualification of an attorney who used emails his client provided him in a tort dispute over a cannabis company, finding that the emails were improperly acquired since they were protected by spousal privilege.”
• “Following an internal dispute, the owners of Cannaco Research Corp., a Northridge, California-based firm that manufactures and distributes cannabis products, engaged in a legal battle during which company emails between one of the owners, Ann Lawrence Athey, and her husband were given to an attorney, who then used the emails in a related case.”
• “The order noted that the courts cannot police what clients tell their lawyers, but it can police how information given attorneys is obtained. The panel said not to restrict the use of improperly obtained communications would be a breach of the public’s trust in the legal system.”
• “‘To allow continued representation of a client after counsel has been provided with, and then used, improperly obtained confidential information would undermine the public’s trust in the fair administration of justice and the integrity of the bar,’ Second Appellate District Justice Dennis Perluss wrote in the order.”

“Coca-Cola Says It Was ‘Fired’ by Law Firm Assisting Opponent” —

• “The Coca-Cola Co. is trying to stop one of its outside law firms, Paul Hastings, from representing a beverage cooling company suing Coke for more than $100 million over an alleged breach of contract.”
• “Paul Hastings ‘fired’ Coca-Cola to take on a more lucrative lawsuit by SuperCooler Technologies Inc., according to a motion the beverage maker filed Wednesday in federal court in Orlando, Florida.”
• “Judge Carlos Mendoza should remove Paul Hastings from the case because the firm has a conflict of interest, having represented Coca-Cola for years on ‘sensitive matters with respect to international human rights concerns,’ according to Coke’s motion.”
• “The motion shows the tangle law firms can get themselves into when a client objects to the representation of others with industry ties.”
• “SuperCooler’s representation in the case switched to Paul Hastings from Cahill Gordon & Reindel after Paul Hastings hired the Cahill lawyers who worked on the lawsuit.”
• “‘We have a long standing attorney-client relationship with Paul Hastings and are extremely disappointed that the firm would pursue litigation against The Coca-Cola Company while actively handling legal matters on our behalf,’ Coca-Cola said in a statement.”
• “Paul Hastings argues that an ‘advance waiver’ Coke agreed to allows the firm to represent SuperCooler, according to a court filing. Paul Hastings is prepared to end its Coke representation if the beverage maker doesn’t withdraw its demand on SuperCooler, according to an email attached to the motion.”
• “In the Coca-Cola case, the company says it only found out about the conflict when two associates representing SuperCooler alerted Coke’s outside counsel that they’d been hired by Paul Hastings and would be changing their information on the docket.”
• “‘Paul Hastings knew Coca-Cola would never voluntarily consent to such a representation and deliberately did not inform Coca-Cola of the conflict, nor try to obtain informed consent,’ the Coke motion says. ‘Paul Hastings should not be permitted to profit from this duplicitous and fundamental violation of its duty of loyalty to Coca-Cola, and its lack of candor with its own client.'”

“Johnny Doc Raises ‘Serious Concerns’ About Ballard Spahr’s Conflicts: Federal Judge” —

• “A Pennsylvania federal court judge found that Philadelphia union leader John Dougherty, who was convicted in November on federal bribery charges, has raised ‘serious concerns’ about potential conflicts of interests involving his former Ballard Spahr attorneys, but he concluded the issue did not stand in the way of a second embezzlement trial set to begin next month.”
• “U.S. District Judge Jeffrey Schmehl of the Eastern District of Pennsylvania on April 13 denied a request by Dougherty, the once politically powerful boss of Local 98 of the International Brotherhood of Electrical Workers, to vacate his public corruption conviction as well as the embezzlement indictment.”
• “But he concluded that it was necessary to hold an evidentiary hearing on the alleged conflicts of the Ballard Spahr team after the conclusion of the remaining proceedings. Dougherty specifically asserted that the firm’s lawyers were also beholden to client Comcast and an another attorney benefitted from the alleged embezzlement.”
• “‘The concerns raised by Mr. Dougherty are indeed serious,’ Schmehl said in the opinion. ‘If true, his allegations—that the importance of Comcast as a client to Ballard Spahr compromised the latter’s defense strategy, and that a Ballard Spahr attorney was implicated in the embezzlement scheme—suggest that the ‘personal interests of counsel’ … were ‘inconsistent, diverse or otherwise discordant’ with those of his client.””
• “Dougherty was first indicted in 2019 along with seven others on a total of 116 counts involving public corruption, including bribery and a conspiracy to steal from Dougherty’s former union, the Local 98 of the International Brotherhood of Electrical Workers. At a trial that concluded in November, Dougherty was convicted on eight counts and acquitted on three. Former City Councilmember Bobby Henon, who is due to report to prison Monday, was convicted on 10 counts and acquitted on three.”
• “According to the opinion, Dougherty and his current defense team have alleged that Ballard Spahr ‘stood on both sides of this prosecution [for public corruption] by representing both [Dougherty] and certain victims of his alleged crimes,’ namely Comcast and Local 98.”
• “The four Ballard Spahr attorneys who represented Dougherty in his first trial, David Axelrod, Emilia McKee Vassallo, Henry Hockeimer Jr. and Terence Grugan, requested to withdraw from the case in August 2022, when they claimed they held ‘significantly diverging opinions’ from Dougherty regarding defense strategy for his embezzlement trial.”
• “Hockeimer and Ballard Spahr media representative Robin Ireland both declined to comment on the matter. The firm’s ties to Comcast have been established for decades; former Ballard Spahr chairman David Cohen served as the company’s chief lobbyist from 2002 through 2019.”

Legal ethics and malpractice expert Chuck Lundberg writes :”Quandaries & Quagmires: Ethical emergencies when a lawyer makes a mistake“ —

• “Every law firm should have a designated ethics partner or firm counsel, a lawyer who advises the firm and its lawyers when ethics and risk management matters arise. For many reasons, the firm counsel role has become an essential part of managing a law firm.”
• “For ethical emergencies… firm counsel is the firm’s First Responder — someone designated to respond to an emergency.”
• “Everyone makes mistakes. A law firm is composed of people; to err is human. Mistakes will happen. Sometimes the mistake has grave consequences. For lawyers and law firms, mistakes can result in claims of malpractice or ethics violations. When mistakes happen, the key for firm counsel is not to compound the error.”
• “It is well-settled that lawyers have both legal and ethical duties to disclose to current clients material errors or mistakes during the representation. A failure to do so can give rise to liability for malpractice or breach of fiduciary duty; it also can have disciplinary consequences.”
• “As Hinderks notes, a potential claim between client and lawyer inserts itself as a wedge in the delicate fiduciary relationship of trust and confidence. Indeed, that kind of ‘diverging interests between attorney and client’ is the hallmark of a material limitation conflict of interest, which requires withdrawal of the lawyer and law firm from the underlying representation, in the absence of an informed and effective waiver.”
• “Malpractice policies typically require timely reporting of claims and known circumstances that might ripen into a claim. The firm’s decision whether and when to report… to the carrier may affect coverages, limits applicable to particular policy periods, and deductibles and self-insured amounts. Indeed, by the time a lawyer starts thinking about disclosing a potential malpractice problem to the client, there is already a legal duty to report it to the malpractice carrier.”
• “A firm facing a potential malpractice situation should report the claim to the malpractice carrier immediately and request counsel concerning whether, when, and how to disclose the matter to the client. Malpractice carriers will also consider bringing in outside ethics or malpractice experts to assist in fulfilling the attorney’s legal and ethical duties to advise the client in a way that will preserve any defenses to a potential claim.”

Cozen O’Connor counsel Deborah Winokur discusses the American Bar Association’s Model Rules of Professional Conduct; industry clients’ roles in diversity, equity, and inclusion initiatives; and seconding lawyers: “Don’t Let Client Demands Erode Law Firm Autonomy” —

• “When clients make demands that directly target the hiring practices and criteria used, a law firm’s culture can be shaken. As a self-regulating profession, the practice of law is unique in that lawyers have duties to clients and third parties under the American Bar Association’s Model Rules of Professional Conduct.”
• “Industry clients have had a significant role in moving the needle on diversity in large law firm settings. Compared to other industries, law firms lag on diversity measures related to women, racial and ethnic minorities, and other groups.”
• “Over the past 10 years, major corporations have been a driving force behind diversity initiatives implemented by their outside law firms. Some of these initiatives can be potentially invasive and risk jeopardizing attorney privacy.”
• “If a client’s policy requires that the firm provide detailed demographic information about all billing attorneys, including race, ethnicity, sexual orientation, gender identity, participation in the military, disability status, etc., the firm’s human resources department must confirm with the attorneys that they are agreeable to the sharing of this personal information.”
• “In addition, in order to protect their lawyers, law firms should perform due diligence about how this private personnel information will be used and stored.”
• “Certainly, in order to provide diversity of thought and experience, firms must have clear policies that meaningfully involve and remunerate lawyers who are assigned to matters as part of a DEI policy. In addition, as part of their duties to clients, law firms should be sensitive to their staffing needs in light of a client’s DEI policies.”
• “Another area where client demands relating to, and potentially infringing upon, a law firm’s autonomy is in the area of attorney secondment.”
• “When faced with a client’s demand to hand over a developing associate, the firm needs to consider a number of factors, both ethical and holistic, in terms of an attorney’s development.”
• “Furthermore, the seconded attorney must be particularly mindful of the duties of competence and confidentiality.”
• “In addition, the seconded attorney and the other attorneys at the firm must both be aware of the broad duties of confidentiality. It is possible that the seconded attorney may work on matters adverse to other clients of the firm. For example, the company may be performing in-house research about suing a different client of the law firm.”
• “The seconded attorney may not share that information with the firm, and may need to be screened from participation in the matters relating to that firm client upon return to the firm.”

“To Share or Not to Share: Avoiding Privilege Waiver When Working with PR Consultants” —

• “In today’s environment, clients are increasingly interested in retaining public relations (PR) firms, crisis managers or media consultants—especially when a potential scandal is about to break or an investigation is underway or on the horizon.”
• “Indeed, sometimes those responsible for internal or external PR are the first to get wind of a brewing crisis. The fast-paced news cycle and social media pressure often create a need for ‘instant’ responses, and shareholders, boards of directors and news outlets expect an immediate reaction to the possibility of a negative story.”
• “So, what is a practitioner to do in the face of this fluid state of the law? Although there is no one-size-fits-all approach, here are a few tips to mitigate the risk of waiver when engaging with a PR consultant:
  • “Ideally, outside counsel, rather than the client, should retain the PR consultant. And the engagement letter with the consultant should specify the purpose of the engagement and explain why that consultant’s services are necessary to enable counsel to provide legal advice to the client. Courts tend to disfavor a simple ‘to assist with media coverage’ or ‘to help rehabilitate [client’s] reputation.'”
  • “Exercise caution when considering the retention of a consultant who has previously worked with the client in a business capacity. Although such engagements have received more attention in the context of work product challenges, courts may scrutinize whether the new work is really just an extension of prior activity to which the privilege does not extend. See, e.g., In re Premera Blue Cross Customer Data Sec. Breach Litig., 296 F. Supp. 3d 1230 (D. Or. 2017).”
  • “Even with an engagement whose scope would satisfy the most rigorous application of Kovel, not all actions by or communications with the PR consultant will be in aid of legal advice. To that end, the lawyers, consultants and client should clearly mark as ‘confidential’ and ‘attorney-client privileged’ all communications that convey or facilitate legal advice. But merely affixing such a label to a communication with a consultant does not make it so. Counsel and clients should avoid reflexively copying the PR consultant on privileged communications without thinking through the potential privilege waiver consequences.”
  • “A PR firm retained by counsel should understand the importance of protecting privileged information and the risks of waiver, and should be instructed not to share protected information with anyone outside the scope of the privilege.”

Professor Alberto Bernabe opines: “Do Attorneys Need to Implement Email Encryption?” —

• “Most states have adopted the view that the duty of competence includes a duty to keep up with modern technology. Also, most states have adopted the view that the duty of confidentiality includes a duty to take reasonable measures to protect confidential information from unauthorized or negligent disclosure (which can happen if a lawyer is not familiar with certain aspects of modern technology).”
• “So, given those two facts, do lawyers need to implement e-mail encryption? I have not seen any specific decision or opinion that answers that question with an unequivocal “yes” but I have seen articles suggesting that it would be the logical answer.”
• And here is the latest, published in Law Technology Today.

“Lawyers and AI: How Lawyers’ Use of Artificial Intelligence Could Implicate the Rules of Professional Conduct” —

• “From chatbots to image generators, news outlets have been inundated with stories discussing the implications of artificial intelligence or ‘AI’ programs.”
• “Rather than relying on an AI program for a final product, it may be best to limit use to first drafts or a potential framework.[7] Even as these technologies improve, a lawyer ‘must review and be responsible for the work product of’ an AI program just as a lawyer must do for the work of any nonlawyer staff.[8]”
• “Rule 4-3.3 prohibits a lawyer from knowingly ‘making a false statement of fact or law to a tribunal or fail[ing] to correct a false statement of material fact or law previously made to the tribunal[.]’ Similarly, when representing a client, ‘a lawyer shall not knowingly… make a false statement of material fact or law to a third person[.]'[9]”
• “AI programs do not always cite to their sources, and some AI programs have been caught making ‘’surprising mistakes’ with basic math'[10] or even creating facts (or polling data) that doesn’t exist.[11]”
• “Lawyers are prohibited from voluntarily disclosing any information relating to the representation of a client absent the client’s informed consent or an applicable exception in the confidentiality rule.[14] While a lawyer is ‘impliedly authorized to make disclosures about a client when appropriate in carrying out the representation,’ that authorization is still subject to the ‘client’s instructions or special circumstances [which] limit that authority.'[15]”
• “Consistent with these obligations, The Florida Bar’s Professional Ethics Committee advised that a lawyer may utilize cloud computing services provided that the lawyer ‘take[s] reasonable precautions to ensure that confidentiality of client information is maintained, that the service provider maintains adequate security, and that the lawyer has adequate access to the information stored remotely.'[16] The lawyer must also research the cloud computing service prior to use[17] and assure that files stored electronically are ‘readily reproducible and protected from inadvertent modification, degradation or destruction.'[18]”
• “Given that many AI programs frequently rely on user input and proprietary methods to generate responses, it may be difficult or impossible to determine whether client information is kept confidential when shared with an AI program. Further, it is unclear whether sharing information with an AI program would be discoverable and would waive claims of attorney-client privilege. Absent answers to these questions, lawyers should exercise extreme caution when sharing client information with AI programs and should carefully explain the implications of these disclosures when seeking a client’s informed consent.”
• “Many questions regarding a lawyer’s use of A.I. programs are currently unanswered and may remain unanswered for the indefinite future. For this reason, lawyers are advised to maintain a healthy dose of skepticism regarding AI programs and to proceed with caution. While these programs may someday revolutionize the practice of law, a lawyer’s ethical obligations have not changed. Duties of candor, competence, and confidentiality have remained steadfast in the face of prior technological innovations and should be expected to guide the practice of law indefinitely into the future.”

“Kyle Roche Hidden Video May Be Deepfaked, Expert Says” —

• “Freedman Normand Friedland LLP told a California federal judge overseeing allegations Dfinity sold unregistered securities that the crypto company cannot rely on secretly recorded comments from ex-firm partner Kyle Roche to bolster its attempt to disqualify the plaintiffs’ firm, saying Wednesday an expert report shows the video clips might be deepfaked.”
• “Dfinity in October asked U.S. District Judge James Donato to disqualify Freedman Normand from representing a proposed class of investors, saying Roche boasted in video clips posted online in August that the firm uses litigation to advance the commercial interests of Dfinity’s rival Ava Labs, including to get confidential information about competitors through discovery.”
• “The video on the website CryptoLeaks purportedly shows Roche claiming that his firm — Roche Freedman, at the time — was acting on behalf of Ava Labs in filing the class action against Dfinity, the company said at a hearing last month. The attorney has denied forming a ‘secret pact’ with Ava Labs to sue competitors.”
• “Freedman Normand hit back in its opposition, arguing that the video clips were secretly recorded during a dinner meeting set up under false pretenses and published on a website controlled by Dfinity. Now, Freedman Normand said it has an expert report explaining ‘that many of the videos on which defendants rely are the product of manipulation, are inauthentic, and contain indicators consistent with the use of deepfake technology.'”
• “According to the report prepared by David Kalat, a director at Berkeley Research Group LLC with a film degree and experience in forensic computer examinations, the video segments that appear to show Roche talking about the instant case show signs of ‘repeated compression, tampering, and extensive manipulation.'”
• “The term ‘deepfake’ refers to technology that uses machine learning or artificial intelligence to create realistic looking but fake images, videos and audio, according to the report. Users of such software can edit the transcript of the video to delete words, rearrange existing words or add new words, Kalat said, while the AI makes the subject of the video appear to say the new transcript.”

“Disciplinary Commission issues advisory opinion on navigating conflicts of interests for government workers” —

• “The Indiana Supreme Court Disciplinary Commission issued a nonbinding advisory opinion Thursday discussing when a lawyer who is a current or former government worker should decline to accept a legal matter due to a conflict of interest. The advisory opinion is focused on Rules of Professional Conduct 1.9, 1.10 and 1.11.”
• “In short, the commission said a lawyer should not participate in a legal matter if the lawyer was ‘personally and substantially’ involved in the matter as part of their government role; if the lawyer learned “damaging confidential information” about a person involved in the matter; and if the representation would involve revealing information that all attorneys are prohibited from disclosing under rules regarding duties to former clients.”
• “The commission noted in its advisory opinion that the duty of loyalty in an attorney-client relationship requires the protection of information related to the representation. ‘However,’ the commission wrote, ‘because the conduct of government employees implicates public interest in a way that private practice usually does not, there are nuances to the conflict analysis.'”
• “For lawyers who are former government employees and are deciding whether a conflict exists, the commission said they should first examine whether the matters at issue are the same.”
• “The lawyer should next examine whether they learned confidential information about a person through their role as a government employee that could be used to damage the person in the new matter.”
• “If the answers to those questions are ‘no,’ the commission said the lawyer “likely is free” to represent the client, assuming other factors under the customary Rule 1.9 analysis don’t apply.”
• “The commission also recommended a screening process for partners at law firms who want to avoid ‘having imputed to them’ the conflicts of a colleague who is a former government employee.”

“Colorado Supreme Court approves licensing of paraprofessionals to perform limited legal services” —

• “The rules become effective on July 1, 2023. The new rules will permit the licensed paraprofessionals to complete and file standard pleadings, represent clients in mediation, accompany clients to court proceedings, and respond to a court’s factual questions. The rules will prohibit paraprofessionals from presenting oral arguments and examining witnesses in a hearing.”
• “According to the press release, the goal of the new rules is to make legal representation more widely available and more affordable in certain domestic relations matter.”
• “To obtain a license, the paraprofessional will be required to pass a written licensed legal paraprofessionals exam, submit to a character and fitness review, pass an ethics class, and pass a professional conduct exam. They will also have to complete 1,500 hours of law-related practical experience, including 500 hours of experience in Colorado family law. The rules provide for a disciplinary process which is similar to the process for Colorado lawyers.”
• “Bottom line: Colorado joins Arizona, Minnesota, Oregon, and Utah in authorizing paraprofessionals to provide limited legal services.”

“This ‘No extensions’ Policy Won’t Last Long” —

• “…the announcement (though it was more a leak of an internal email memo) that Morgan and Morgan will not be letting its lawyers grant any extensions or courtesies to insurance defense lawyers as a reaction to the latest tort reform initiative down in Florida. Here if you haven’t seen it is the screenshot of the internal email that Above the Law first publicized.”
• “The reaction within the defense bar, at least online in places like Twitter, was pretty heated. In addition to folks decrying this as contrary to tenets of civility and professionalism, some folks started tossing around assertions that this kind of policy was inherently unethical.”
• “I think this is not a smart policy. If it isn’t dropped before it starts, it will make many, many judges upset when they have to adjudicate motions for routine extensions. It also might lead to an influx of new clients for a while who think they want this kind of hard-nosed lawyering, but it will likely come back to bite a few clients when they find themselves in need of additional time and salty defense lawyers end up declining to grant a courtesy if only on a ‘tit for tat’ basis.”
• “Also, in any jurisdiction where some sort of ‘guidelines’ involving civility or professionalism or courtesy are adopted by reference as part of ethical rules for a particular court, then the ethical analysis is entirely different from what I offer below.”
• “When you talk about the role of lawyers in agreeing to things that delay litigation, most of the ethics rules are drafted with an eye towards trying to address whether lawyers have any latitude to be courteous and agree to extensions over any objections of their own clients. Not surprisingly, none of those rules are violated when a lawyer refuses to agree to proposed delays.”
• “Model Rule 3.2 for example actually makes it the ethical duty of lawyers to ‘make reasonable efforts to expedite litigation.’ Model Rule 1.3 requires lawyers to ‘act with reasonable diligence and promptness in representing a client.'”
• “That leaves us with Model Rule 4.4(a). This rule ‘might’ be the one that an opposing party or counsel could seize upon for arguing that implementation of this policy would be unethical. That rule prohibits a lawyer from using ‘means that have no substantial purpose other than to embarrass, delay, or burden a third person.'”

“‘No extensions’ – Part 2” —

• “Unlike opposing counsel, a lawyer within the firm attempting to live under this policy will at all times have to live with two ethics rules that can create real problems. The first is one that is rarely talked about: Model Rule 2.1. The first sentence of that rule reads: ‘In representing a client, a lawyer shall exercise independent professional judgment and render candid advice.'”
• “The duty to exercise independent professional judgment means that every time a situation comes up in which the lawyer is being asked by the other side for the extension of a deadline that the lawyer is supposed to use their own independent professional judgment, in consultation with the client, about what should be done.”
• “Slavishly applying the firm policy as the basis for action would always run the risk of technically violating Model Rule 2.1, but firms have lots of less publicized and less controversial policies that also arguably encroach on the independent professional judgment of lawyer employees.”
• “Now, of course, almost all of the above is largely academic because (a) one would hope the first time this comes up in reality that the firm will reexamine the situation and refine its stance to let their lawyers practice law as appropriate to each situation; and (b) even if they do not, lawyers who are not fans of the policy will more likely find other pastures rather than ever go down a path of filing a grievance against the powers-that-be in their own firm.”
• “Ironically, I think that the powers-that-be at M&M would be able to understand immediately that an insurance company could not demand through counsel guidelines that the lawyers it hires must refuse all extensions to opposing counsel because Model Rule 1.8 and 5.4 make certain that a lawyer can only accept payment of fees from someone other than their client if that third-party does not interfere with the lawyer’s independent professional judgment.”

“Judge Dismisses Legal Mal Suit Against Cozen O’Connor for Second Time” —

• “A federal judge has again dismissed a legal malpractice suit against Cozen O’Connor after an appeals court determined the district court improperly analyzed the plaintiff’s complaint the first time around.”
• “This time examining Cozen O’Connor’s motion to dismiss as a merits-related standing issue, U.S. District Judge Nitza Quiñones Alejandro of the Eastern District of Pennsylvania determined Thursday that the plaintiff’s amended complaint failed to state a claim.”
• “The plaintiffs, Adam Potter and Moxie HC, filed suit against Cozen O’Connor in 2020 over an alleged conflict of interest in selling several companies in which the plaintiffs owned 100% membership interest.”
• “According to the Thursday opinion, then-Cozen O’Connor attorney Anne Blume advised Potter on the sale of his companies to another firm client. Potter claimed that Blume denied the existence of a conflict of interest surrounding the firm’s representation of both the buying and selling entities in the transactions.”
• “After the deal’s close, however, the shareholders allegedly learned their company had been sold substantially below market value, and that confidential information Blume learned while working with Potter had been used to aid the purchaser.”
• “But Alejandro ruled that because the terms of the asset purchase agreement stated the companies were to receive the purchase price, an allegedly unfair sale would harm the companies themselves. As shareholders, Alejandro held, the plaintiffs did not suffer direct harm and therefore did hot have standing to sue.”

“FTX’s Law Firm Hit With Queries on Work Before Crypto Collapse” —

• “FTX’s legal troubles are reaching its law firm, Fenwick & West, which faces federal law enforcement subpoenas and a class-action lawsuit tied to the failed crypto exchange.”
• “Bankruptcy counsel for FTX has discussed ‘federal law enforcement subpoenas to Fenwick’ with the law firm’s general counsel, Kathryn Fritz, according to a court document filed in March.”
• “Fenwick is also among a number of companies targeted with a class-action lawsuit alleging the firm helped aid a massive fraud led by Sam Bankman-Fried, the FTX founder now facing 13 criminal charges. Services Fenwick provided were ‘central to SBF’s fraud,’ according to a February suit filed in Miami federal court on behalf of a proposed class of investors.”
• “It’s awkward for any law firm to answer questions about actions for a client but particularly for Silicon Valley-founded Fenwick, which cemented its reputation as a go-to operation for the world’s top tech companies after it helped Steve Jobs incorporate Apple Inc. in 1976. The firm, whose clients have included Amazon.com Inc., Tesla Inc. and Meta Platforms Inc., nearly doubled its revenue in the five years leading up to 2021.”
• “‘Any time you have even the hint of regulatory impropriety in the practice of law, you and the firm take a hit,’ said James Cox, a Duke University law professor. ‘It’s hard to say how long it lasts and how deep it is. But it’s certainly not a feather in your cap.'”
• “Fenwick advised FTX and its sister trading shop, Alameda Research, on areas including trademarks, tax and litigation before the crypto exchange’s implosion into bankruptcy in November. It also helped set up US-based companies affiliated with FTX and Alameda.”
• “Daniel Friedberg, once the Seattle-based chair of Fenwick’s payments practice, joined FTX in 2020 and would later become its chief regulatory officer. Former FTX general counsel Can Sun was a past Fenwick associate.”
• “Fenwick has axed references to FTX on its website. The firm trimmed FTX from a list of prominent clients on its homepage.”
• “‘Fenwick & West helped FTX to develop ‘compliance’ procedures designed to skirt FTX’s regulatory obligations or conceal its noncompliance,’ the class action suit, which seeks unspecified monetary damages from Fenwick, alleges. The complaint besides Fenwick targets 20 other third parties with an alleged FTX connection, including auditors and venture capital firms.”
• “Finding a third-party such as a law firm liable for any underlying fraud is a steep hurdle, said Patrick Coughlin, a Scott & Scott lawyer who represented shareholders of Enron following its collapse.”

A reader sent word of: “Clarence Thomas Secretly Accepted Luxury Trips From Major GOP Donor” —

• “In late June 2019, right after the U.S. Supreme Court released its final opinion of the term, Justice Clarence Thomas boarded a large private jet headed to Indonesia. He and his wife were going on vacation: nine days of island-hopping in a volcanic archipelago on a superyacht staffed by a coterie of attendants and a private chef.”
• “If Thomas had chartered the plane and the 162-foot yacht himself, the total cost of the trip could have exceeded $500,000. Fortunately for him, that wasn’t necessary: He was on vacation with real estate magnate and Republican megadonor Harlan Crow, who owned the jet — and the yacht, too.”
• “For more than two decades, Thomas has accepted luxury trips virtually every year from the Dallas businessman without disclosing them, documents and interviews show. A public servant who has a salary of $285,000, he has vacationed on Crow’s superyacht around the globe.”
• “These trips appeared nowhere on Thomas’ financial disclosures. His failure to report the flights appears to violate a law passed after Watergate that requires justices, judges, members of Congress and federal officials to disclose most gifts, two ethics law experts said. He also should have disclosed his trips on the yacht, these experts said.”
• “Through his largesse, Crow has gained a unique form of access, spending days in private with one of the most powerful people in the country. By accepting the trips, Thomas has broken long-standing norms for judges’ conduct, ethics experts and four current or retired federal judges said.”
• “‘It’s incomprehensible to me that someone would do this,’ said Nancy Gertner, a retired federal judge appointed by President Bill Clinton. When she was on the bench, Gertner said, she was so cautious about appearances that she wouldn’t mention her title when making dinner reservations: ‘It was a question of not wanting to use the office for anything other than what it was intended.'”
• “Virginia Canter, a former government ethics lawyer who served in administrations of both parties, said Thomas ‘seems to have completely disregarded his higher ethical obligations.'”
• “‘When a justice’s lifestyle is being subsidized by the rich and famous, it absolutely corrodes public trust,’ said Canter, now at the watchdog group CREW. ‘Quite frankly, it makes my heart sink.'”
• “Federal judges sit in a unique position of public trust. They have lifetime tenure, a privilege intended to insulate them from the pressures and potential corruption of politics. A code of conduct for federal judges below the Supreme Court requires them to avoid even the ‘appearance of impropriety.’ Members of the high court, Chief Justice John Roberts has written, ‘consult’ that code for guidance. The Supreme Court is left almost entirely to police itself.”
• “Thomas’ approach to ethics has already attracted public attention. Last year, Thomas didn’t recuse himself from cases that touched on the involvement of his wife, Ginni, in efforts to overturn the 2020 presidential election. While his decision generated outcry, it could not be appealed.”
• “Crow said that he and his wife have funded a number of projects that celebrate Thomas. ‘We believe it is important to make sure as many people as possible learn about him, remember him and understand the ideals for which he stands,’ he said.”

“Clarence Thomas says trips paid for by billionaire were ‘personal hospitality,’ not business” —

• “Thomas said in a statement that Crow and his wife, Kathy, are ‘dearest friends’ and that he and his wife have joined them on family trips for years.”
• “‘Early in my tenure at the Court, I sought guidance from my colleagues and others in the judiciary, and was advised that this sort of personal hospitality from close personal friends, who did not have business before the Court, was not reportable,’ Thomas said.”
• “‘I have endeavored to follow that counsel throughout my tenure, and have always sought to comply with the disclosure guidelines,’ he added.”

“Supreme Court justices under new ethics disclosures on trips, other gifts” —

• “Supreme Court justices and all federal judges must provide a fuller public accounting of free trips, meals and other gifts they accept from corporations or other organizations, according to revised regulations quietly adopted this month.”
• “The new requirements mark a technical but significant change that lawmakers and court transparency advocates hope will lead to more disclosure by judges and justices and also make it easier for parties in specific cases to request that judges remove themselves from cases when potential conflicts arise.”
• “Gifts such as an overnight stay at a personal vacation home owned by a friend remain exempt from reporting requirements. But the revised rules require disclosure when judges are treated to stays at commercial properties, such as hotels, ski resorts or corporate hunting lodges. The changes also clarify that judges must report travel by private jet.”
• “The revisions come after years of pressure from members of Congress, who say the judiciary should follow ethics guidelines closer to those that apply to the executive and legislative branches.”
• “Rules around subsidized trips are not the only questions of ethics at the Supreme Court recently. Separately, the court has been under pressure to adopt a code of conduct specific to the nine justices. The high court has failed to reach consensus on a policy despite discussion that dates to at least 2019. Last month, leaders of the American Bar Association joined those calling on the court to act, saying that ‘the absence of a clearly articulated, binding code of ethics for the justices of the Court imperils the legitimacy of the Court.'”
• “The justices are not bound by the code of conduct that covers other U.S. judges. They say they voluntarily comply with the same ethics standards. But scrutiny of the justices has increased with the court’s heightened profile as a new conservative majority has moved quickly to rule on polarizing cases.”
• “The new disclosure rules clarifying what constitutes personal hospitality apply to more than 3,000 judges nationwide, a group that includes senior judges, magistrate judges and Supreme Court justices.”
• “That change would not have been needed at all had the judiciary been following the law the way Congress and the executive branch claimed to be following it, according to Kedric Payne, senior director for ethics at the Campaign Legal Center, an advocacy group. ‘We don’t know if the Supreme Court justices are, on their own, interpreting this rule to allow them to hide these gifts,’ he said of the exemption.”

CNA reminds us: “A Bad Economy Increases Risks for Lawyers” —

• “Experts may disagree as to whether we are in a recession, but there is no question that our economy has been in a weakened state for a lengthy time period, which may impact professional liability claims for lawyers. For example, virtually all areas of practice for lawyers showed an increase in claims as a result of the 2008-09 recession. As a result, lawyers should be keenly aware of liability exposure as professional liability claims tend to increase during bad economies.”
• “Avoid the Risky Client. Financial pressures may force some law firms to consider potential clients that they would probably decline in better economic times. Such law firms need to balance the need for increased revenue against the liability risks of accepting a marginal client. Client intake represents a critical component in endeavoring to avoid legal malpractice claims.”
• “Decline to Dabble. During tough economic times, some lawyers may be tempted to dabble in practice areas in which they have no experience in order to earn more law firm revenues. However, the risks may outweigh the rewards for lawyers who deviate from their traditional areas of practice.”
• “Think Twice Before Suing a Client for Fees. Another tactic firms often employ to boost their accounts receivable is to bring collection actions against clients who have not paid their invoices for legal fees and expenses. Notably, such collection lawsuits often result in counterclaims for legal malpractice.”
• “Guard Against Conflicts of Interest. Financial concerns may lead law firms to slash expenses related to their risk control protocols, such as the personnel and resources devoted to conflict of interest checking systems… But saving a little money upfront in exchange for a weaker conflict of interest system and later expending money, time, and resources due to a professional liability claim arising from a missed conflict of interest issue becomes penny wise and pound foolish.”
• “Communicate Regularly with Clients and Discuss the Impact of a Bad Economy on Their Matters. Documenting your client file strengthens client communications and may protect lawyers against professional liability claims. A well drafted engagement letter with a narrowly tailored “Scope of Representation” provision will help set expectations at the outset of the attorney-client relationship. Throughout the course of the representation, lawyers should have a paper (or electronic) trail of correspondence with the client referencing any legal advice provided, summaries of discussions on the benefits and risks of a particular litigation or transaction strategy, and client decisions regarding settlement negotiations, among other issues. Memorializ- ing these interactions is critical in the event that the client decides to act contrary to your advice, sets time or financial constraints upon your representation, or tells you not to pursue certain causes of actions, defenses, or other important issues.”
• “Address Errors Promptly. Lawyers may commit errors at any point in their careers, but as noted earlier, claims typically rise in a bad economy and financial pressures may increase the likelihood of an error that leads to a professional liability claim. Errors can run the gamut from minor and correctible to substantial and damaging.”

“City of Atlanta Reaches $3.3M Settlement as Outside Counsel Hit With $584K Sanction” —

• “More than a decade after an improperly working traffic signal contributed to a deadly crash, the city of Atlanta has settled a nuisance complaint for $3.35 million.”
• “Plaintiff counsel credits the settlement as “the largest amount the city has ever paid to settle a personal injury [or] nuisance case,” but alleged the improper conduct of the defendant’s initial trial counsel has resulted in an additional $584,000 sanction for attorney fees and expenses.”
• “Rogers said plaintiff counsel learned of multiple occasions leading to the date of their client’s January 2012 death ‘where employees had reported this signal, and others, not working.'”
• “But it’s what the city’s outside defense counsel with Scrudder, Bass, Quillian, Horlock, Lazarus & Adele allegedly did after the jury had been selected that led the trial judge to later award a $584,000 sanction against it.”
• “‘We spent two days picking a jury, only at the last minute to have counsel for the city stand up and announce they had just discovered a conflict and needed to withdraw from the case,’ Rogers said. Led by Matthew Lazarus, Scrudder Bass counsel allegedly refused to divulge to the court and opposing counsel the specifics of the conflict, according to plaintiff counsel.”
• “When the city’s continued refusal resulted in Jacobs declaring a mistrial, plaintiff counsel said the trial judge issued its own sua sponte motion for sanctions against the city of Atlanta Law Department and Scrudder Bass. The court also allowed the Dietch + Rogers attorneys to conduct discovery to determine the conflict.”
• “The conflict turned out to be time records that revealed a city employee had not worked on the dates relevant to two service requests that’d been submitted bearing her credentials.”
• “But in his motion for sanctions, Jacobs determined ‘a review by Scrudder Bass and the City of Atlanta Law Department of the documents produced by their clients would have revealed the conflict years ago.'”
• “‘These records were not obscured, as they had been the subject of pretrial motions and relied upon in eliciting deposition testimony,’ Jacobs’ sanctions order read. ‘The prospect that [the employee] might not have authored the Service Requests was specifically raised during her deposition almost four years prior to trial.'”
• “Jacobs wrote that, because ‘the documents would and should have been in the possession of the City of Atlanta Law Department’ and ‘Scrudder Bass after their early 2018 entry of appearance,’ the firm’s discovery of the conflict ‘after the jury had been selected on March 2, 2022, rather than any point prior to trial cannot be the result of proper conduct.'”
• “‘Of course, to be clear, the disclosure of the conflict itself is not what the Court finds improper,’ Jacobs wrote. ‘The Court finds improper the overall conduct surrounding the disclosure, i.e., the failure to timely disclose an apparent conflict to the point that a mistrial resulted when the necessary disclosure was made after a jury had been selected. There was ample opportunity for counsel to satisfy their real professional duties and obligations without necessitating a mistrial.'”

“CNN anchor appears stunned as one Trump attorney throws another under the bus” —

• “There was an odd moment of apparent legal one-up-manship on CNN during an interview regarding the representation of Donald Trump following his indictment.”
• “Asked by CNN anchor Kaitlan Collins if Mr Tacopina was the ‘right person’ to defend the former president against the more than 30 charges purportedly in the sealed New York indictment, Mr Parlatore [one attorney for the former president] brought up a significant conflict of interest.”
• “‘As to who’s going to try the case? I know that Joe has certain potential conflict issues, given his prior contacts, with Stormy Daniels. So, who’s the right attorney, to take it to trial, is something that the client will have to decide.'”
• “Mr Parlatore walked back his reply when Collins pressed him on it and said he would not comment on Mr Tacopina, despite having just done so.”
• “Mr Tacopina had exchanges with Ms Daniels in 2018 regarding potential representation and these were handed over to the Manhattan District Attorney’s office by her current lawyer Clark Brewster who sees them as a conflict of interest.”
• “Mr Tacopina has denied any conflict of interest or that confidential information was shared with him or his office. He has also denied ever meeting or speaking with Ms Daniels.”
• “In addition, in a 2018 appearance on CNN, Mr Tacopina seemed to criticise Mr Trump’s payments to Ms Daniels as potentially ‘illegal’ and a ‘fraud.'”

“He already rocked MAGA world — twice. Now he’s Trump’s judge.” —

• “Donald Trump fumed last week that the judge conducting his arraignment Tuesday — and likely overseeing his criminal trial — ‘HATES ME.'”]
• “The basis for Trump’s assessment, made on Truth Social Friday, is that the judge, Juan Merchan, presided over two unrelated criminal tax fraud cases involving Trump’s real estate firm and his former CFO, both of which resulted in outcomes unfavorable to the defense. In the case of former CFO Allen Weisselberg, Merchan, citing corporate greed, said he would have imposed a ‘stiffer sentence’ than the five months jail time the ex-executive got from a plea deal.”
• “Given that history, some New York lawyers suggested it would be bad optics for Merchan to preside over the new case against Trump. The court’s chief judge could intervene and handle the trial herself or replace Merchan with a different judge, according to a former court official.”
• “But experts said there’s no legal basis to bar Merchan from presiding.”
• “‘If there were some facts showing that the judge had become irrational or infuriated then there might be an argument, but simply having sat in these other cases is not grounds for disqualification,’ said Steven Lubert, co-author of ‘Judicial Conduct and Ethics.'”

“New York Law Firm Pays $200,000 to State AG to Resolve HIPAA Violations” —

• “A New York law firm that suffered a LockBit ransomware attack has agreed to pay a financial penalty of $200,000 to the New York Attorney General to resolve alleged violations of New York General Business Law and the Privacy and Security Rules of the Health Insurance Portability and Accountability Act (HIPAA).”
• “On or around Christmas Day 2021, the LockBit ransomware gang gained access to its network and encrypted files. The investigation confirmed that files were exfiltrated in the attack, including legal documents, patient lists, and medical records. The patient information included names, birthdates, medical histories, treatment information, Social Security numbers, and health insurance information.”
• “The investigation confirmed the LockBit gang gained access to its network in November 2021 by exploiting unpatched Microsoft Exchange vulnerabilities.”
• “The incident was investigated by the Office of the New York Attorney General to determine whether the law firm had violated state laws and the HIPAA Rules. The NY AG determined the vulnerabilities exploited by the LockBit gang had been identified by Microsoft in April and May 2021 and patches had been released shortly thereafter to fix those vulnerabilities. Despite the vulnerabilities being well known, they remained unpatched for more than 6 months, which left firm’s email server vulnerable to attack.”
• “The NY AG determined 17 provisions of the HIPAA Privacy and Security Rules had been violated and there were also violations of New York General Business law by failing to implement reasonable security practices to protect private information and the failure to issue timely notifications to 61,438 New York residents.”

“ABA Outlines Choice-of-Law Issues for Multijurisdictional Ethics” —

• “A lawyer won’t be disciplined if their conduct complies with the rules of a jurisdiction where the attorney reasonably believes their conduct will have the most predominant effect, the American Bar Association clarified on Wednesday.”
• “The ABA clarification, issued as a formal opinion on Wednesday, highlights that litigation and non-litigation matters are treated separately for the purposes of determining which disciplinary authorities govern certain alleged misconduct, and which rules are applicable.”
• “Model Rule 8.5 in the ABA Model Rules of Professional Conduct dictates that, when there is a choice-of-law question in a case before a tribunal and a lawyer practices law in multiple jurisdictions, the lawyer must comply with the rules associated with the location of the tribunal. Conduct before a tribunal is considered under the disciplinary authority of the jurisdiction in which the tribunal sits, the association said.”
• “In matters for which there is no litigation in effect, a lawyer’s conduct is determined by the location in which the predominant effect is felt, regardless of where the attorney practices law, the opinion says.”
• “The rule stands firm when applied to fee agreements, law firm ownership, reporting professional misconduct, confidential duties, and screening attorneys making lateral firm moves, according to the ABA’s Standing Committee on Ethics and Professional Responsibility.”