Bressler Risk Blog

“Pa. Superior Court Denies Bid to DQ Husband’s Counsel From Divorce Case Over Brief Meeting With Wife in 2014” —

• “The Pennsylvania Superior Court has affirmed a lower court’s denial of a wife’s motion to disqualify her husband’s attorney from their divorce proceedings, determining the wife failed to prove her brief meeting with the attorney years prior had created a conflict of interest.”
• “In an Aug. 22 opinion, authored by Judge Judith Ference Olson, the court affirmed the order denying Tracy A. Cunningham’s motion to disqualify counsel for her husband Michael Spinneweber. Cunningham had alleged that her 2014 consultation with the attorney, Jill Sinatra, about potentially divorcing Spinneweber had created a conflict of interest in the current case. But the appeals court said Cunningham failed to show Sinatra acquired any significantly harmful information during that consultation.”
• “Cunningham sought to disqualify Sinatra and her firm, alleging that Sinatra and the firm had a conflict of interest because Spinneweber and Cunningham had allegedly met with Sinatra regarding litigation involving Spinneweber’s business in 2013. Further, Cunningham alleged that, in 2014, when Sinatra was associated with Lisa Marie Vari & Associates, she consulted with Sinatra about potentially divorcing Spinneweber. Cunningham alleged that, during the consultation, she ‘provided detailed and privileged information concerning the parties’ marriage, business assets and income,’ according to the opinion.”
• “But Sinatra said she had no recollection of the meeting and did not retain any documents from the consultation, according to the opinion.”

“High Court Rules That City Law Firm Breached Duties By Acting For Client Despite Conflict Of Interest And By Failing To Provide Adequate Costs Information Under CFA: Forster V Reynolds Porter Chamberlain [2023] EWHC 1150 (Ch)” —

• “In its recent decision in Forster v Reynolds Porter Chamberlain LLP, the High Court found that City law firm, RPC, had breached its duty of care to its client, Ms Forster, after failing to keep her adequately informed of costs incurred under a conditional fee agreement (‘CFA’).”
  “The Court also held that RPC were conflicted in acting for Ms Forster, and that in failing to enforce the settlement agreement in accordance with Ms Forster’s wishes, it caused her to suffer loss.”
• “The decision serves as a useful reminder that whilst a CFA governs the solicitor’s remuneration, it does not alter the duties owed to the client. Insofar as solicitors prioritise their own interests under a CFA, or the interests of one client at the expense of another, they risk incurring liability for negligence and for breach of fiduciary duty (in addition to possible regulatory exposure).”
• “RPC acted for Ms Forster under a CFA with a 100% uplift on their fees, as did the three Counsel who represented her at trial. Ms Forster arranged ‘after the event’ insurance (the “ATE Policy”) which covered limited adverse costs, non-lawyer disbursements payable to RPC and repayment of a loan taken out by Ms Forster at a late stage of the proceedings to fund her expert witness, a forensic accountant from Deloitte (the “Loan Agreement”). Ms Forster had reluctantly agreed to instruct Deloitte, having been persuaded by RPC.”
• “Ms Forster commenced proceedings against RPC for negligence. Her claim was essentially for loss of the opportunity to enforce the Tomlin Order by first converting the Order terms into a judgment debt and then promptly enforcing it and the costs order against the Opponents’ assets in 2010 and 2011. It was Ms Forster’s case that RPC had become conflicted in continuing to act for her given their interest in the Loan Agreement, and that they had preferred their own interests to hers in delaying enforcement action.”
• “In response to Ms Forster’s further claims of breach of duty, the Court concluded that RPC had not adequately advised Ms Forster in relation to the Loan Agreement, and that in failing to enforce the terms of the settlement agreement, it had preferred Mr Deacon’s interests over hers. Fancourt J found that RPC had ‘a clear conflict of interests in advising Ms Forster to borrow money from Mr Deacon and … acting for Mr Deacon in preventing Ms Forster from enforcing [the settlement agreement].'”
• “To properly advise or act for Mr Deacon and Ms Forster, RPC should have obtained both parties’ informed consent. On the matter of RPC’s failure to enforce the settlement agreement, it was irrelevant whether its strategy in delaying was well-intentioned or likely to result in a more substantial recovery, as ‘RPC were not entitled to refuse to act in accordance with [Ms Forster’s] instructions’. In doing so, RPC breached its duty and caused Ms Forster loss of opportunity to recover under the settlement agreement. Fancourt J awarded damages of £192,500, being 55% of the £350,000 settlement amount, on the basis that Ms Forster’s likelihood of full recovery would have been approximately 55% if enforcement action had been taken in 2011 and 2012.”

“Ex-Attorney at Gibson Dunn Charged With Insider Trading” —

• “A Brazilian attorney who was working at Gibson, Dunn & Crutcher has been arrested and charged with insider trading, accused of accessing internal law firm files to trade ahead of a major merger and acquisition.”
• “Federal prosecutors in D.C. said Romero Cabral Da Costa Neto, 33, of Rio de Janeiro, Brazil, was arrested on Tuesday in Washington, D.C., by agents with the FBI’s Washington Field Office. Costa is separately facing an SEC lawsuit over similar allegations.”
• “A spokesperson for Gibson Dunn said they are cooperating with authorities on the matter. ‘We are cooperating with authorities and have terminated our relationship with the individual, who was an international visiting attorney from another law firm,’ the spokesperson said in a statement to the National Law Journal.”
• “According to court documents, Costa is an attorney licensed to practice in Brazil and had been working in the United States for the law firm since September 2022. During that time, Costa has executed multiple stock trades in companies represented by the firm.”
• “During Costa’s one-year employment as a visiting attorney, he allegedly accessed confidential information about the law firm’s work on biopharmaceutical company Swedish Orphan Biovitrum AB’s acquisition of CTI BioPharma Corp (CTIC), according to the SEC complaint. According to a press release, Gibson Dunn served as legal counsel to CTIC in the transaction.”
• “As a non-U.S. Citizen, Costa was hired as a ‘visiting attorney’ from Brazil, and the law firm sponsored his temporary work visa, allowing him to reside and work in the United States during the time period of his employment, according to court documents. His term of employment with the firm was one year.”
• “On May 8 and 9, 2023, the SEC complaint alleges, Costa accessed the firm’s document management system and obtained nonpublic information about the CTIC impending merger with Sobi. Specifically, the SEC claims, Costa accessed and viewed draft SEC filings, board minutes, and other documents relating to the transaction. The law firm’s access logs show that Costa viewed as many as 25 unique documents relating to the Sobi transaction over 100 times in the week leading up to the public announcement.”

Leigh Isaacs, Sr Director Info Governance at DLA Piper US, sends word of this report produced by the Law Firm Information Governance Symposium (LFIGS), which she authored with several colleagues: “Generative AI and Law Firm Information Governance” —

• “This paper covers the use of artificial intelligence (AI), and in particular, Generative AI in law firms. Whereas AI usage is similar across industries, law firms have some unique characteristics because much of the data belongs to the clients and there is an extra obligation to keep it safe and private. This paper covers both unique and non-unique challenges of AI as it pertains to information governance (IG) in the legal community. It begins with a brief definition of AI, followed by benefits to the legal community, information governance-specific considerations, policy considerations, general advice, and guidance.”
• “Another important consideration is balancing privacy rules and regulations with system capabilities. Currently, there is no way to remove data from the system. This has led to concerns about ethical issues, IP usage, bias, and consent. As a result, many firms are taking a conservative approach to using generative AI technologies. Some firms have banned the use of their data, while others have not yet adopted the technology. As the technology evolves, so too will the restrictions and usage guidelines around it… A good  resource that offers insight into the early views on regulation between the EU and the US can be found HERE. In fact, using proprietary data is best done through APIs, as described in section 5.”
• Clients are starting to issue requirements around AI usage guidelines and/or restrictions where their data is involved. Audit and assessment questions will quickly start to include AI usage queries, as will cyber insurance renewal applications.”

“Orrick Hit With Class Action Over Breach Affecting 153,000” —

• “Orrick, Herrington & Sutcliffe LLP failed to protect the personal information of nearly 153,000 people that was exposed in a March data breach, a proposed federal class action said.”
• “Dennis Werley alleged that the international law firm failed to implement reasonable measures to ensure their computer systems were protected, take adequate steps to prevent and stop the breach, or provide timely notice to victims.”
• “Information exposed in the incident included names, addresses, dates of birth, and Social Security numbers, according to a complaint filed Aug. 11 in the US District Court for the Northern District of California.”
• “Orrick declined to comment.”
• “Werley and class members have suffered damages in the form of an increase in spam telephone calls, an increased risk of fraud and identity theft, invasion of privacy, reduced value of personal information, and lost time and out-of-pocket costs incurred mitigating the effects of the breach, the complaint said.”
• “The lawsuit brings claims of negligence, negligence per se, breach of fiduciary duties, breach of confidence, breach of implied contract, invasion of privacy, and declaratory relief.”

Brian Faughnan notes and opines on: “Breaking? BPR Issues Two Formal Ethics Opinions” —

• “The opinion now confirms certain core concepts in Tennessee as to departing lawyers and what the rules of the road are, including:
  • “That a joint notice to the client is preferred and that the departing lawyer and the firm should “attempt to agree” on a joint communication to the clients ‘with whom the departing lawyer has had significant contact.'”
  • “That firms ought to develop policies in advance so that lawyers can know what measures the firm will expect to implement address such situations, including issues of what kind of notice period prior to departure a firm will expect of its lawyers.”
  • “While firms can impose notice period requirements, they cannot then kneecap the departing lawyer’s ability to continue to represent clients during that time period by cutting them off from access to files or access to technology.”
• “In other words, this opinion attempts to establish rules of the road that have as their primary purpose ensuring that clients both have full choice of counsel and are not harmed or burdened by lawyer against lawyer disputes.”
• “Nevertheless, situations where lawyers depart firms for other private practice arrangements will likely always remain plagued by economic pressures and cutthroat instincts. Lawyers or firms that want to push the envelope may find some solace in certain parts of the opinion whether that be arguing over what ‘significant contact’means or playing coy about what constitutes attempting to agree, but this opinion offers much needed guidance.”
• “As a lawyer who represents lawyers making moves as well as firms dealing with departing lawyers, the existence of this opinion will be very helpful in counseling lawyers.”

Hat tip to the reader who sent in this WSJ piece containing additional detail commentary on last week’s update: “American Bar Association Votes to Amend Rule on Client Due Diligence” —

• “Supporters of the change hope the move will help ward off more stringent regulation from lawmakers concerned about the use of lawyers to facilitate financial crimes.”
• “U.S. lawyers on Tuesday voted to adopt a revised rule that imposes a more explicit obligation to vet potential clients, as part of an effort to quell concerns about the use of lawyers to facilitate money laundering and other financial crimes.”
• “In a speech ahead of Tuesday’s vote, Kevin Shepherd, the ABA’s Treasurer, said that the U.S. Treasury Department recently had informed him that a failure to pass the resolution would cause the agency to take immediate regulatory action as well as to lobby for legislation imposing additional obligations on lawyers. ‘It’s simple political reality, and we ignore it at our peril,” Shepherd said.'”
• “The ABA last year lobbied against a bill in the U.S. Congress that would have extended anti-money-laundering regulations for the financial sector to lawyers, accountants and other professional-service providers involved in company formation and money transfer.”
• “Lawyers who aid criminals can be criminally prosecuted, but critics have argued that a lack of enforceable regulation enables some lawyers to continue working for potentially problematic clients while ignoring red flags.”
• “Although the amendments approved Tuesday are only a slight change to the ABA’s existing rules, they proved controversial, with a number of the group’s most prominent members giving speeches both for and against the proposal. The group’s two largest sections, representing business and litigation attorneys, voted before the annual meeting to oppose the resolution. Critics argued that the amendments were vague and exposed lawyers to discipline.”
• “‘The proposed rule opens every lawyer up to potential liability,’ Paul “Chip” Lion, a delegate for the ABA’s Business Law Section, said during a speech before the vote. ‘The presumption will be that the lawyer should have known that the lawyer’s services were being used to commit a crime, had the lawyer just delved a little deeper into the facts and circumstances.'”
• “It isn’t clear how far the new rules will go in convincing the industry’s critics that further regulation is unnecessary. Scott Greytak, the advocacy director for Transparency International U.S., which seeks to fight corruption, called the new rules ‘window dressing,’ saying they would have little effect.”
• “The rules don’t spell out specific steps that lawyers should take in vetting a client, and several observers pointed out that they don’t appear to create a definitive obligation to determine the true identity of a client, such as the beneficial owner of a corporation or limited liability company that seeks a lawyer’s services.”
• “Instead, the amendments add guidance advising lawyers that their due diligence should vary based on the perceived level of risk represented by a client. Under the new guidance, a lawyer’s familiarity with a client might be one factor that gives assurance that less due diligence is needed.”

Same subject, different context, like worth tracking for real estate practices: “US set to unveil long-awaited crackdown on real estate money laundering” —

• “The U.S. Treasury Department will soon propose a rule that would effectively end anonymous luxury-home purchases, closing a loophole that the agency says allows corrupt oligarchs, terrorists and other criminals to hide ill-gotten gains.”
• “The long-awaited rule is expected to require that real estate professionals such as title insurers report the identities of the beneficial owners of companies buying real estate in cash to the Treasury’s Financial Crimes Enforcement Network (FinCEN).”
• “While banks have long been required to understand the source of customer funds and report suspicious transactions, no such rules exist nationwide for the real estate industry.”
• “Instead, FinCEN has operated real estate purchase disclosure rules, known as geographic targeting orders (GTOs), in just a handful of cities including New York, Miami and Los Angeles. The new rule is expected to effectively expand GTOs nationwide.”
• “Transparency advocates pushing for a nationwide rule point to the example of Guo Wengui, an exiled Chinese businessman who, according to prosecutors, used an anonymous shell company to channel illicit profit from a fraud scheme into the $26 million purchase of a 50,000-square-foot New Jersey mansion in December 2021.”
• “Had Guo brought property across the Hudson River in Manhattan, it would have been subject to a GTO and likely flagged immediately to law enforcement.”
• “Guo, a onetime business partner of former Donald Trump adviser Steve Bannon, has pleaded not guilty to fraud charges. His lawyers did not respond to a request for comment.”

Great response to the 2023 Risk Staffing Compensation Survey! 

I always appreciate the notes, questions and thoughts from readers. So with this update, I wanted to not only remind folks to participate (if they want to see and benefit from the eventual output) but also to address a few community questions.

“I have data sensitivity.”

• I feel you. I would too.
• To be clear, this data is confidential and kept private. The eventual report will not identify firms or individuals. Last year we collected 375+ data points from 80 participants and hopefully that experience put people at ease.
• But if you’re itching to participate but have concerns about privacy, please feel free to drop me a direct note. I’ve worked with a few firms on creative approaches here.

“What Kind of Roles?”

• Risk is a broad category, but we’re typically focused on roles associated with the general arena of client due diligence (e.g. intake, conflicts, terms/OCGs, and the operational roles supporting that). Perhaps next year we’ll go broader. I know we have an IG reader contingent out there…
• I’ve gotten a few of these “where do you draw the line on role/seniority” questions. In particular, I’ve had a few “director” level colleagues ask if they get to play (and see industry data) as well. And the answer is: yes!
• I suspect I may have just internalized “if you’re not a partner, you’re staff” in terms of naming this survey. But if you’re a director-level risk leader, please do feel free to submit data. (Depending on the volume collected, we might just see an national average in the final report vs breakouts by geography/firm size. But if every leader reading this blog participated, we’d certainly have a rich data set. The BRB reader squad out there contains multitudes…)
• When you take the survey, as an individual or a manager/director of staff, it will ask you not only for “titles” but also for a general classification of “role type” (to help best consolidate and compare apples-to-apples across roles, as best we can).
• If you’re already taken the survey providing staff details, you can just re-take it again. All the inputs are additive to the consolidated report/export used for analysis.

“Oh Canada?”

• Hat tip to those readers residing outside of US borders. I know we have an international contingent with a respectable set of Canadian, UK and event APAC subscribers.
• In terms of data, this exercise last year collected a slice of Canadian data. And we’ve received some again in 2023. So I want to encourage Canadian readers to participate. We’ll see if we collect enough inputs to generate some valuable output.
• And if there’s demand and interest from other geographies, feel free to get in touch and let’s see if we can be of help there as well.

Please keep those questions and comments coming. (Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

And please do take the survey by clicking here: 2023 Risk Staffing Compensation Survey.

Thanks!

“Court of Appeal: Ethics Rule Didn’t Justify Total Disqualification of Lawyers” —

• “The two members of a father-and-son law firm were properly barred from representing the firm in its fraud/breach-of-contract action against two former clients who failed to pay for services and a lawyer, the Fifth District Court of Appeal held yesterday, but declared that there was no reason to order that they play no role in the trial preparation.”
• “Presiding Justice Brad Hill said in an unpublished opinion: ‘We hold the trial court acted within its discretion in disqualifying the Firm’s attorneys from representing the Firm at trial because they will likely be called as witnesses, carrying a significant risk of juror confusion and prejudice to the defendants. However, the trial court abused its discretion by disqualifying the Firm’s attorneys from representing the Firm in all pretrial phases of the litigation without making any findings as to how their continued behind-the-scenes activities preceding trial would undermine the purposes of the advocate-witness rule.'”
• “It was Stanislaus Superior Court Judge John D. Freeland who barred Michael J. Dyer and Dustin J. Dyer from doing any legal work for their Stockton firm, The Dyer Law Firm, in its action against ex-clients Karla Sam-Sin and Fernando Sam-Sin and Modesto attorney Mark S. Nelson. The Dyer Law Firm was representing the San-Sins in litigation. Nelson was allegedly in complicity with the San-Sins in causing the Dyers to change a portion of their retainer agreement with the Sam-Sins to mirror the arrangement the clients supposedly had with their previous lawyer not to charge for a certain portion of the work, although there was no such arrangement.”
• “In his opinion partially reversing and partially affirming the order, the presiding justice said: ‘[T]his is not a matter of the Dyers representing themselves, as Nelson often puts it; nor is this a matter of the Firm representing itself, as the Dyers sometimes frame it. Despite the Firm being a closely held corporation owned and directed exclusively by the Dyers, this is still a case with a client (the Firm) being represented by counsel (the Dyers). This is not a case of self-representation. The distinction matters because, if the Dyers were truly representing themselves in propria persona, there would be a good argument that the advocate-witness rule would not apply. Various appellate courts around the country—though none in California, to our knowledge—have held that a ‘lawyer-litigant’ has a right to appear pro se and should not be disqualified from doing so under the advocate-witness rule.'”
• “Hill noted that when Nelson represented himself, he did so as a ‘lawyer-litigant.'”
• “Rejecting the contention that Nelson waived a disqualification motion by waiting 21 months before bringing it, the jurist said that ‘[a]bsent a prima facie showing of extreme prejudice caused by the delay, there was no waiver of the right to seek ‘ and no such showing was made. He remarked: ‘This was not an eleventh-hour, eve-of-trial motion (nor a midtrial motion…).New counsel will have plenty of time to get up to speed, and the Firm will not be duplicating any expenses in the process of replacing counsel because the Dyers had been representing the Firm for free.'”
• “He declared that Nelson’s motion ‘clearly has merit with respect to protecting the integrity of the judicial process at the forthcoming trial” because “having the Dyers serve as both attorneys and witnesses at trial carries an unnecessary risk of confusing the jury and biasing the jury.'”

“‘Conflict of interest’: Idaho AG gave officials legal advice, then investigated them” —

• “An Ada County judge ruled Thursday that Idaho Attorney General Raúl Labrador had a “notable conflict of interest” when his office began investigating officials with the Idaho Department of Health and Welfare over how it distributed federal child care grants.”
• “The health officials were the attorney general’s clients. And a lawyer under Labrador had advised them that the grants in question were legally distributed.”
• “‘The attorney general provided an opinion to a client and cannot now seek to investigate whether… the client violated the law on the same issue,’ 4th Judicial District Judge Lynn Norton wrote in Thursday’s ruling.”
• “Labrador’s office demanded that the health officials hand over records related to the program around the same time Idaho lawmakers approved an audit of the grants, amid concerns that the federal funds weren’t distributed properly. Lawmakers dictated that the funding go to programs serving kids 5 to 13. Labrador previously told the Idaho Statesman that he’s investigating whether those directions were followed.”
• “Central to the health officials’ case are two legal opinions, written by former deputy attorney general Daphne Huang, who advised health department officials that the child care grants were distributed legally.”
• “Huang issued one opinion in November, during former Attorney General Lawrence Wasden’s tenure, and a nearly identical opinion in January, after Labrador assumed office and lawmakers questioned Jeppesen about the grants.”
• “But the legal advice created ‘a client relationship’ with health department officials and a “duty to act in protection” of the department’s interests, Norton wrote. Idaho State Bar ethical rules prohibit attorneys from advocating against their clients’ interests.”
• “Norton also wrote that an attempt by Labrador’s aides to seize the work phone of a former attorney assigned to the department shows that the attorney general’s office failed to create a sufficient ethical firewall between investigating attorneys and the lawyers advising the Department of Health and Welfare.”
• “Thursday’s ruling is the first time a judge has publicly analyzed the unique conflict between the executive branch officials and their own attorney. It’s among a handful of clashes between Labrador and state agencies that have marked the Republican’s first term in office.”

“Quinn Emanuel sues Los Angeles over legal tab for embattled ex-sheriff” —

• “Quinn Emanuel Urquhart & Sullivan has sued Los Angeles to recoup more than $280,000 in fees for its work defending a top law enforcement official, marking a new flashpoint in a long-running fight stemming from an employment scandal at the county sheriff’s office.”
• “California-based Quinn Emanuel filed the lawsuit in Los Angeles Superior Court on Aug. 10, seeking compensation for the legal fees it incurred in its 2019 representation of then Los Angeles County Sheriff Alex Villanueva.”
• “The county sued Villanueva in 2019 over his reinstatement of a deputy sheriff who had been fired over domestic violence allegations. An appeals court said last year that the rehiring was unauthorized.”
• “Quinn Emanuel contends Villanueva was authorized to hire the firm as outside counsel because of a conflict of interest between the sheriff’s office and the Los Angeles county board.”
• “The firm’s new lawsuit follows its defeat in a previous fight with the county over Villanueva’s legal fees. In that 2021 case, Los Angeles sued Quinn Emanuel, alleging that the firm did not have a valid and enforceable engagement agreement because the county did not approve its contract with the sheriff.”
• “Los Angeles County Judge Holly Fujie granted summary judgment to Los Angeles in May. She also said Quinn Emanuel could not file a ‘cross complaint’ as part of that litigation. Quinn Emanuel last month filed an appeal.”

“Ontario lawyers’ auto insurance tribunal allegations – ‘at least’ three insurers hired adjudicators” —

• “In the aftermath of allegations around ‘conflicts of ‘ risk relating to a Tribunals Ontario LAT adjudicator who made decisions in favour of Aviva prior to joining the insurer, the Ontario Trial Lawyers Association (OTLA) has set out three more instances of LAT adjudicators moving to insurance companies that it claims warrant investigation, though it has not alleged any definite bias risk.”
• “This August, the Ontario Trial Lawyers Association (OTLA) called for an immediate investigation after an adjudicator, who had received an offer of employment from Aviva, went on to render at least nine decisions for the LAT before starting work with the insurer. OTLA has set out that all decisions went in favour of insurers, including Aviva – though this has been disputed by the ex-adjudicator in question, who has said that one went in partial favour of a claimant and that most decisions typically do go in insurers’ favor.”
• “OTLA has claimed to have unearthed three other cases of LAT adjudicators moving to insurers, named as Aviva, Definity Insurance, and Intact Financial Corporation, and it has called for further investigation into these people moves. However, in an interview with Insurance Business, OTLA president Laurie Tucker stopped short of levelling accusations of definite bias risk. Rather, she claimed that further information on the people moves was needed to assuage any potential conflicts of interest concerns.”
• “‘At least three other adjudicators we know of have left the LAT and gone to work for these insurance companies,’ Tucker said. “‘We don’t know the details of when they applied [for roles], when they accepted employment with those companies, when they left the LAT, and whether they were rendering decisions during that period. We’ve asked the LAT for information, and we are continuing to look into this matter.'”
• “Reilly has contended that she was unaware of any potential conflict of interest concerns from the insurer prior to her June 2023 split from the business. The ex-adjudicator has called on both the LAT and Aviva to bring in more comprehensive policies and people moves procedures to prevent any potential ‘appearance of bias.'”
• “She has denied any bias in decision making in the interim period between a conditional offer of employment being received from Aviva in June 2022 and her move to the company later that year and set out in a statement that she operated ‘based on the facts, evidence, and law as presented.'”

“Mar-a-Lago worker’s lawyer has conflicts of interest in documents case, prosecutors say” —

• “Special counsel prosecutors asked on Wednesday for a hearing to inform the Mar-a-Lago club’s maintenance chief, charged with helping Donald Trump to obstruct the government’s attempt to retrieve the classified documents at the property, that his lawyer might be hamstrung at trial due to potential conflicts of interest.”
• “The issue, according to prosecutors, is that De Oliveira’s lawyer, John Irving, represents three other witnesses who provided incriminating evidence against Carlos De Oliveira and could be called to testify against him at trial.”
• “In an 11-page court filing, the prosecutors explained the potential conflicts could mean Irving might not be able to defend De Oliveira as forcefully as he would have otherwise because he needed to protect the interests of those other clients, described as ‘Witness 1,’ ‘Witness 2’ and ‘Trump employee 3.'”
• “‘An attorney who cross-examines a client inherently encounters divided loyalties,’ prosecutors in the office of the special counsel Jack Smith wrote. ‘A hearing would permit colloquy with Mr Irving’s clients to inform them of potential risks and inquire into possible waivers.'”
• “Wednesday’s request to the US district court judge Aileen Cannon is the second for a conflict-of-interest hearing in the classified documents case after prosecutors revealed last month that Nauta’s lawyer Stanley Woodward also had three potential conflicts of interest.”
• “De Oliveira told prosecutors in April that the reason he was on tape taking photos of the surveillance cameras in the tunnel outside the storage room was because he was looking for a shutoff valve after a a water pipe rupture and also wanted to document a broken door below one of the cameras.”

The aptly named Meatingplace, which bills itself as “the premier multimedia information source for the red meat and poultry processing industry” noted: “Federal judge offers to step down in poultry antitrust case” —

• “A federal judge offered to recuse herself from an antitrust case after a lawyer from the judge’s husband’s former law firm made an appearance on behalf of Cargill Meat Solutions, which is a defendant.”
• “Maryland District Judge Stephanie A. Gallagher submitted a letter last week disclosing the connection and offered to step down if either side felt her objectivity was compromised.”
• “Judge Gallagher said her husband has not worked for WilmerHale for more than three years, but made a capital contribution to the firm, of which a small percentage remains. She added that will be fully paid back to him by the end of this calendar year and that the capital contribution has not affected in any way by the firm’s success or profits.”
• “The judge said she believes this connection does not disqualify her from presiding over the case but wanted to leave it up to the parties to decide.”
• “The United States Department of Justice filed a lawsuit against Cargill and several other poultry producers for allegedly monopolizing trade. The DOJ claimed the poultry processors agreed that they would assist each other by discussing and sharing information about how to compensate their plant workers.”

“Avoiding Ethical Risks in Your Online Bio” —

• “Whether through a law firm’s website or through a social media platform like LinkedIn, a lawyer’s online profile is often the first resource available to potential clients, opposing counsel, or others in the field when they want to learn more about a lawyer… But there are also ethical requirements that lawyers should keep in mind when revising and publishing their online bios. Here are three issues every lawyer can consider when reviewing and updating their online bios.”
• “California has some of the strictest rules on client confidentiality in the country. Business and Professions Code Section 6068(e) requires every lawyer ‘to maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.’ Rule 1.6—the ethical rule on confidentiality—then incorporates that obligation, providing that lawyers shall not reveal information protected by that statute.”
• “For lawyers drafting their online bio, they may need to consider whether publishing information about their prior representations runs afoul of this rule. The ABA’s Standing Committee on Ethics and Professional Responsibility’s Formal Opinion 480, from 2018, confirms the need to protect clients’ confidential information in online formats. The opinion states that, even if there is information about a client in a court’s order or other public record, the lawyer’s duty of confidentiality still applies to ‘information related to a representation, whatever its source and without regard to the fact that others may be aware of or have access to such knowledge.'”
• “Thus, just because a fact relating to a representation is publicly available does not mean that the lawyer is free to publish it in a bio absent express or implied client consent. The opinion advises: ‘Rule 1.6 does not provide an exception for information that is ‘generally known’ or contained in a ‘public record.'”
• “Notably, even an accurate statement about a past representation could still be viewed as misleading to prospective clients, if the statement suggests that the results could be repeated for another client. The comments to Rule 7.1 indicate that, in order to avoid creating an ‘unjustified expectation,’ lawyers generally exclude from their bios information about a specific amount of damage award, the lawyer’s record in obtaining favorable results, and client endorsements. Lawyers who describe the outcomes of their cases in this way (which is more common for plaintiff’s-side lawyers) may also consider using a disclaimer or other clarification to note that the outcome of any single representation will depend on the facts and circumstances.”

“You Keep Using That Word, I Do Not Think It Means What You Think It Means: Accountant-Client ‘Privileged’ Communications May Not Be Privileged as a Conflict of Law Matter” —

• “In Florida, the legislature deemed open dialogue between an accountant and a client so important that, in 1978, it adopted a privilege nonexistent in the common law: the accountant-client privilege.”
• “Akin to the attorney-client privilege, the privilege permits a client ‘to refuse to disclose, and to prevent any other person from disclosing, the contents of confidential communications with an accountant when such other person learned of the communications because they were made in the rendition of accounting services to the client.'”
• “Cases applying section 139 to a conflict of law regarding the accountant-client privilege, in Florida state court, are nearly nonexistent. In fact, the authors of this article are aware of only one such decision, in which they participated — Schaeffer v. Dowling & Hales LLC.”
• “The court began its analysis by noting that a conflict existed because Florida (the forum) recognized the accountant-client privilege while California (the state where the communications occurred) did not. From there, the court noted that Florida applies the “‘interest analysis methodology’ for determining choice of law questions,” and then quoted section 139.[6] The court went on to apply section 139 in the context of the accountant-client privilege, and relied on an example given by section 139 of when not to recognize a privilege.”
• “There is a sizeable body of case law from courts across the country applying section 139 of the Restatement (Second) of Conflict of Laws.[9] Importantly, section 139 favors disclosure when there is a conflict. Thus, litigants should be aware of the pitfalls and opportunities presented when faced with privileges arising in a conflict-of-law context.”

“‘Conflict of interest’: Watchdog berates Holyrood plan to keep Law Society as regulator” —

• “Britain’s senior consumer watchdog has strongly criticised plans by the Scottish government to allow the Law Society of Scotland to carry on regulating the nation’s 13,000 solicitors. The Competition and Markets Authority reiterated its call for a new regulator north of the border that is properly independent of both the legal profession and government.”
• “The CMA’s plea is contained in its consultation response to The Regulation of Legal Services (Scotland) Bill, which was introduced to the Scottish Parliament in April this year. The bill aims to ‘modernise’ the regulation of legal services in Scotland, informed by a Scottish government-commissioned independent review led by governance expert Esther Roberton.”
• “Crucially, the Scottish government rejected a principal recommendation of Roberton – the creation of a single independent regulator – in favour of an approach that would ‘seek to develop the existing regulatory framework.'”
• “In truth, the 2018 Roberton report was merely the latest chapter in a saga that has lasted for nearly three decades. As the CMA acknowledges, there have been many alleged examples where conflicts of interest ‘may have led the Law Society of Scotland and the Faculty of Advocates to prioritise the interests of their members over those of consumers.'”
• “The Society and Faculty have lobbied ferociously to retain control of regulating their members, occasionally in the face of allegations of a conflict of interest from disgruntled clients. Such allegations have been periodically raised in the Scottish Parliament, including by John Swinney MSP who rose to become deputy first minister. So far the bodies, which wield considerable power in Scottish civil society, have succeeded in their aim. This marks a stark contrast with their counterparts in England and Wales, where the representative and regulatory functions were formally split more than 15 years ago.”
• “The Scottish government’s chosen model contains new safeguards, including bolstering the independence of the Society’s regulatory committee. But the CMA says today: ‘The experience in England and Wales illustrates that any incomplete separation has the potential to give rise to an inherent conflict between the responsibility to regulate in the consumer interest and the responsibility to represent the interest of their members. That has the potential to affect regulatory outcomes.'”

Charles Russell Speechlys Lawyers Dalal Alhouti and Georgia Fullarton write an excellent and detailed piece on: ” Conflicts of Interest in International Commercial Arbitration” —

• “Conflicts of interest can arise when an arbitrator has a connection to one of the parties or has otherwise conducted himself or herself in a manner that may give rise to justifiable doubt as to their impartiality. International commercial arbitration is largely a private process but the adage that justice must not only be done but be seen to be done holds true just as much as in litigation. Without this essential principle arbitration would stop being an effective means of commercial dispute resolution as users would lose faith in the process.”
• “In this Practice Note we explore the general principles applicable to conflicts of interest in international commercial arbitration, and how such conflicts are assessed and resolved.”
• “International commercial arbitration is not a single uniform system, it arises from the operation of national arbitration systems and the ability to enforce awards in different countries (mainly as a result of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958[8 p.8]). A variety of different rules simultaneously apply to an arbitration, chief among them is the law of the seat (or legal place) where the arbitration is occurring and any institutional rules that the parties have agreed should be applied.”
• “It is not possible in this Practice Note to survey all national arbitration laws to determine what they say about conflicts of interest, but most will contain language to the effect that an arbitrator must be impartial and independent.”
• “Parties do not have to use an institution to help manage the arbitration process, but it is almost always recommended given the significant benefits using an institution brings. Most institutional arbitral rules address conflicts of interest, for example…”
• “Whilst the law of the seat and the institutional rules are the primary sources for rules concerning conflicts of interests, there may be other rules to consider. For example, an arbitrator may be a professional (such as a lawyer) with professional rules to avoid conflicts of interest and anything that may bring the profession into disrepute.”
• “There is also ‘soft law’, being guidance and rules generated by industry bodies which are not mandatory, but which parties either choose to follow or which are taken to reflect best practice and so may be consulted when determining whether there is a conflict of interest. The main soft law in this area is the International Bar Association’s ‘Guidelines on Conflicts of Interest in International Arbitration’, first issued in 2004. The IBA Guidelines divide possible conflicts into three traffic light categories…”
• “The IBA Guidelines divide possible conflicts into three traffic light categories:
  • Red list items, being situations where there is clearly a conflict. This is divided further into ‘Red Non-waivable’ situations which result in automatic disqualification of the arbitrator, and ‘Red Waivable’ situations which require notification of the parties and their express consent to be given (i.e., a specific waiver provided) for the arbitrator to act.
  • Orange list items, being situations which ‘in the eyes of the parties give[s] rise to doubts as to the arbitrator’s impartiality and independence’. These require notification of the parties and an invitation to the parties to make an informed decision whether to request that the arbitrator be disqualified on the basis that there is an objective, justifiable doubt as to an arbitrator’s impartiality and/or independence.
  • Green list items, being situations ‘where no appearance of, and no actual, conflict exists from an objective point of view’. No obligation to disclose arises or a limit to disclosure applies based on reasonableness.”
• “Conflicts of interest can arise in many different forms, but perhaps the three most common are where… connection with one of the parties can arise where, for example, the arbitrator has previously substantively advised one of them in a professional capacity or has a financial interest in one of them…. A common source of conflict is where an arbitrator has a connection with one of the lawyers in the case.”
• “Issue conflict arises where an arbitrator has previously expressed a view on a particular legal problem that also arises in the arbitration, such that it may be argued that the arbitrator is no longer impartial or open-minded on the issue. This is traditionally hard to prove and doesn’t arise as often as the other conflicts referred to above.”
• “Arbitrators should also take care to understand as fully as possible the relevant corporate structure of the parties to the dispute so that any conflict check is complete. In carrying out this assessment, an arbitrator may look to the IBA Guidelines to understand the General Standards (Part 1 IBA Guidelines) as well as guidance on their practical application and specifically which situations do and do not constitute conflicts of interest and should be disclosed (Part 2 IBA Guidelines) using the IBA Guidelines’ traffic-light system.”
• “Conflicts of interest are a fact of life that will continue to occur, they just need to be properly identified and managed. Although as detailed above, the exact test to be applied can vary between different laws and arbitral rules, the key points are that arbitrators should confirm their impartiality and identify any possible conflict as soon as they can, using the IBA Guidelines for guidance. After that any challenge should be made promptly to minimise the delay to the arbitral process as far as possible.”

I’m pleased to invite our law firm risk readers to participate in the 2023 Risk Staffing Compensation Survey!

Last year’s exercise proved to be a great success. We saw participation from 80+ individuals, who contributed data on 375+ individual risk staff positions. (Let’s see if we can’t top that figure this year, shall we?) The final report came in at 14 pages and certainly proved popular.

I also received many encouraging notes of feedback and input from risk staff, risk managers, and firm leaders.

• Kudos to those managers using this industry data to advocate for and ensure that their team’s compensation is kept in line with industry averages.
• It was great to see several firms using the data to inform their staff recruiting and offer processes
• And it was particularly nice to hear from several individuals who were able to use the data to self benchmark and support their personal career efforts and growth.

This year’s exercise incorporates some lessons learned from 2022.

So if you’re an individual contribution looking to understand how your comp compares to your peers, or you’re a risk manager looking to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

SURVEY DETAILS:

• Participation open to law firm risk professionals only
• All responses will be treated confidentially
• Manager participants sharing data on their/their team’s roles and compensation will receive a report summarizing key findings and analysis
  • (The report may be shared internally within your firm, but not redistributed externally. So if you want the results, your best path is to participate!)
• Individual contributor participants sharing personal compensation data will be receive a personal benchmark compensation summary relevant to their specific role and firm demographics.

The survey will be open for the next month or so and can be accessed here: 2023 Risk Staffing Compensation Survey.

Feel free to share the link with law firm peers and colleagues.

And if anyone has questions, please do reach out to me directly. (Email readers can do that by just replying to this note — it’ll reach me. Others can use the contact form as well.)

Let’s see what we learn this round!

“Will Dentons’ China Breakup Trigger a Domino Effect?” —

• “Dentons has decided to end its combination with Dacheng Law Offices, the mainland China arm of the firm… Dentons said in an email alert to its clients that its decision to end the combination is due to ‘an evolving regulatory environment for Chinese law firms in China—including new mandates and requirements relating to data privacy, cybersecurity, capital control and governance.'”
• “The breakup puts an abrupt end to Dentons’ long-touted tagline of being the world’s largest law firm. As of last year, the firm reported a headcount of over 12,000 lawyers. It will force an inevitable reduction to Dentons’ $2.94 billion gross revenue intake reported in 2022.”
• “The Big Four firms and their affiliated Chinese law firms have reportedly suffered raids from Chinese authorities, as did corporate investigations firm Mintz Group and American management consulting firm Bain & Company, according to The New York Times.”
• “‘The Chinese regulator tends to be pretty opaque,’ said one Beijing-based partner at a U.S.-headquartered law firm. ‘But I think that’s going to increasingly be a challenge for global law firms to be able to operate in the marketplace. The intrusion of the Chinese government regulator into law firm business will not stop with Dentons.'”
• “For international law firms that have substantial practices in mainland China, the country’s focus on national security and the broader geopolitical issues has major implications. Under the broad national security umbrella, Chinese lawyers can be required to divulge explicit client information to the state. Lawyers can also be prohibited from releasing China-related data to their international counterparts, all making basic conflict checks and due diligence on cross-border deals impossible to implement.”
• “The ‘Chinese Wall’—an old term used to describe corporate measures adopted by firms to prevent information leaks internally—is now neither relevant nor adequate.”
• “According to Kent Zimmermann, a U.S.-based principal at Zeughauser Group, there has been an increasing number of law firm leaders who have been reassessing their China operations in recent months. ‘Dentons is not the first professional services firm practicing law to pull out of China,’ said Zimmermann. ‘It is not going to be the last. Given the conditions, which make it virtually impossible to practice there as a Western firm and comply with the laws and regulations, it wouldn’t be unsurprising if other firms follow suit.'”
• “American law firms will not risk having their lawyers go to jail over conflict checks, due diligence and their right to act in their clients’ interest, Zimmermann said. They will also not tolerate having Chinese authorities barge into their offices unannounced.”
• “‘The solution may be exactly what Dentons is doing—to have an independent Chinese firm with which the Western firm has a close relationship, but they’re independent entities.'”

“Trump’s Legal Team Is Enmeshed in a Tangle of Possible Conflicts” —

• “Former President Donald J. Trump’s growing cast of lawyers is marked by a web of overlapping interests encompassing witnesses, co-defendants and potential targets.”
• “M. Evan Corcoran, a lawyer who accompanied former President Donald J. Trump to court this week for his arraignment on charges of trying to overturn the 2020 election, has given crucial evidence in Mr. Trump’s other federal case — the one accusing him of illegally hoarding classified documents.”
• “Another lawyer close to Mr. Trump, Boris Epshteyn, sat for an interview with prosecutors this spring and could be one of the former president’s co-conspirators in the election tampering case.”
• “And Mr. Epshteyn’s lawyer, Todd Blanche, is defending Mr. Trump against both the documents and election case indictments.”
• “While it is not uncommon for lawyers in complex matters — like large mob cases or financial inquiries — to wear many hats or to play competing roles, the Gordian knot of intertwined imperatives in the Trump investigations is particularly intricate and insular.”
• “Some of the lawyers involved in the cases are representing both charged defendants and uncharged witnesses. At least one could eventually become a defendant, and another could end up as a witness in one case and Mr. Trump’s defender in a different one.”
• “All of that sits atop another thorny fact: Many of the lawyers are being paid by Save America PAC, Mr. Trump’s political action committee, which has itself been under government scrutiny for months. Some of the witnesses those lawyers represent work for the Trump Organization, Mr. Trump’s company, but their legal defense has not been arranged by the company, but rather by Mr. Trump’s own legal team, a person with knowledge of the matter said.”
• “Although clients might choose to stick with their lawyers despite a conflict, just this week, prosecutors under Mr. Smith sent up a warning flare about these issues. They asked Judge Aileen M. Cannon, who is overseeing the documents case, to conduct a hearing ‘regarding potential conflicts’ arising from the complex client list of one lawyer, Stanley Woodward Jr.”
• “‘This is boundary breaking,’ Bruce Green, who teaches legal ethics at Fordham Law School in New York, said about the totality of the issues involved. ‘What I’m most curious about is why these lawyers want to play so many roles. Usually, lawyers just want to be lawyers.'”
• “Many potential objections to conflicts in these cases could be waived by the clients or otherwise mitigated by the courts, Mr. Green said. But he cautioned that judges often lean toward avoiding conflicts at all costs — up to and including disqualifying lawyers who face them — because the consequences of allowing them to continue could result in the dismissal of the case.”