Bressler Risk Blog

Careful with that administrator password, Eugene: “Connecticut lawyer faces disciplinary charges after firm network administrator allegedly accessed departing employee’s personal emails” —

• “According to the Presentment, in February 2021, the lawyer ordered his network administrator to improperly access the office computer of a departing associate to find his communications with the new law firm which hired him. The network administrator ‘retrieved, copied and downloaded personal emails’ from the associate’s personal gmail account. The emails were downloaded onto the law firm’s server.”
• “A lawyer from the associate’s new law firm contacted the lawyer to determine whether he wanted to send a joint letter to the clients. The lawyer is alleged to have responded with an email stating that the clients belonged to his firm and ‘I will say in unambiguous terms that should you proceed in this manner, we will not hesitate to sue Alex personally and your firm, as well as file grievances. If you act on your email and participate, we will include you and your firm in those grievances and lawsuits … By virtue of your email, you have in essence admitted to conspiring to commit a crime and exposed yourself and Alex to civil damages and potential criminal liability … Again, the clients are my firm’s, not Alex’s. DO NOT CONTACT THEM IN ANY MANNER.'”
• “The Presentment alleges, inter alia, that the lawyer committed a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer, used methods of obtaining evidence that violated the lawyer’s legal rights, engaged in improper solicitation, and engaged in conduct prejudicial to the administration of justice..”
• “Bottom line: This lawyer is alleged to have, inter alia, ordered his network administrator to improperly access a departing lawyer’s personal email account and committed a criminal act that reflected adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer, used methods of obtaining evidence that violated the lawyer’s legal rights, engaged in improper solicitation, and engaged in conduct prejudicial to the administration of justice. He partially admitted to misconduct and the court will determine whether the admission will be accepted and, if so, what discipline will be imposed.”

“IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE. No. 38363-6-III” —

• “Electronically stored information is ubiquitous in contemporary law practice. When an attorney responds to a discovery request by sending electronically stored information to opposing counsel, care must be taken to avoid inadvertent disclosure of embedded information that might be subject to a claim of privilege.”
• “Nevertheless, if an inadvertent disclosure happens, the receiving attorney must take corrective action, including notifying the sender. Sanctions must be imposed if an attorney fails to take corrective action, with the most severe sanction being disqualification.”
• “Counsel for Lloyd & Williams, LLC, and its members, Dewight Hall Jr. and Tod W. Wilmoth (collectively L&W), inadvertently disclosed information subject to a claim of privilege when it sent electronic discovery responses to opposing counsel that had been partially redacted but not scrubbed of embedded text. Instead of notifying counsel for L&W and sequestering the documents, opposing counsel cited portions of the embedded text in support of a summary judgment motion. This prompted L&W to move for opposing counsel’s disqualification.”
• “The failure of opposing counsel to take corrective action violated rules of civil procedure and professional conduct. Nevertheless, the trial court ruled disqualification was not an appropriate sanction because counsel’s rule violations were not intentional. Having accepted discretionary review of this matter, we find no abuse of discretion in the trial court’s choice of sanction. Accordingly, we affirm.”
• “Ms. Urness denied any wrongdoing. She provided various explanations for her conduct, including assertions that she did not understand metadata and that she had received at least some of the information from a third party.”
• “Ms. Urness was adamant she had not tried to uncover privileged information, but had simply performed a word search of the discovery materials.”
• “The court opined that some of Ms. Urness’s explanations were suspicious but credited Ms. Urness’s assertion that she did not knowingly search through privileged material. Furthermore, the superior court acknowledged that disqualification is an extraordinary remedy, imposed only in extremely rare circumstances. The court fashioned alternate remedies: it ordered Ms. Urness to destroy the files, promised to banish the e-mail excerpts from the court’s decision-making, and instructed the parties to not mention the excerpts again.”
• “The only material change caused by Ms. Urness’s rule violations is that L&W’s redacted materials have been made public. However, L&W has not articulated any reason why this revelation is prejudicial.”

“Growing Pains: Mid-Sized Auditing Firms Are Seeing an Influx of New Clients, But at What Cost?” —

• “The era of exponential growth among mid-tier accounting firms is upon us, driven largely by the trend of top-tier firms pushing to expand their advisory/consulting businesses. To manage the number of audits that could trigger independence impairments across service lines, they have taken steps to shed the bottom 10% to 20% of their audit clients.”
• “Meanwhile, mid-tier firms suddenly find themselves the recipients of these new business opportunities — opportunities that must be managed carefully.”
• “The environment is rapidly changing for mid-sized accounting firms and, possibly for the first time, introducing business triggers that force them to answer hard questions about risk processes.”
• “Finding independence impairments at various stages. Historically, mid-sized firms lacked focus on automating the evaluation of conflicts clearance and waivers. Some independence checks processes were simply emails asking if any partners had an independence issue with a new client the firm wanted to sign. These processes may have been sufficient when firms were smaller. But when a client windfall is created by a combination of industry split-ups, M&As and audit-needy clients who were denied or shed by the Big Four, the old method falls apart.”
• “The idea that risk processes need to be automated rarely arises until some conflicts start to occur. Whether as subtle as a general unease with the current process, or as traumatic as having a regulator find issue and force changes — conflicts take center stage during rapid growth. Mid-size firms are starting to ask: How will risk processes keep up?”
• “More private equity ownership of clients… And as private equity funds continue to buy more stakes in more companies, independence rules (which extend to all portfolio companies within PE funds) become more difficult to adhere to. Searching, tracking and monitoring complex private equity ownership data presents a perennial challenge to mid-tier accounting firms in their efforts to maintain independence with respect to a growing audit client base.”
• “Progressive mid-tier firms are beginning to employ third-party data sources to ensure structure around how they incorporate PE data into their risk management processes. Other firms are adopting a big-firm practice — namely, quarterly calls with the PE funds themselves to understand their changing portfolio company structure.”
• “Hitting the threshold number for audit companies. Accounting firms hit an increased level of scrutiny once their public audit client count crosses 100. For example, regulatory inspections increase from once every three years to once a year. As such, accounting firms try to balance their business between public and private companies.”
• “Accepting the wrong clients. If robust risk processes do not exist, an accounting firm might unintentionally take on the wrong clients, opening itself up to a malpractice suit. While accounting firms are often subject to expensive malpractice insurance premiums, they have the opportunity to cut costs by demonstrating that they have robust, centralized risk processes in place that ensure firms will take only the right clients.”
• “Effective processes help to confidently answer the big question at the heart of the acceptance issue: Who is the “right” client? To more easily answer this question in the future, the firm must define multiple factors: What is the ideal risk profile for a client? What is the firm’s risk appetite? What industries or geographies does the firm want to be involved in? Do the industries (such as cryptocurrency or cannabis) or geographies carry unique risks and unknowns? Anytime these questions are ill-defined or unable to be properly answered, the firm is opening the door to unidentified and therefore unmanageable risk.”

“Former PwC partner banned for 2 years in Australia for leaking information” —

• “A former partner at PwC has been banned from practising as a tax agent in Australia for two years in a scandal involving the sharing of confidential information about government plans to target multinational tax avoidance with the firm’s clients.”
• “Peter-John Collins, who was head of international tax for PwC’s Australian office, was a member of an advisory group involved in confidential discussions with Australia’s Treasury department about introducing laws targeting multinational tax avoidance and a diverted profits tax.”
• “Some of that information was later disclosed to PwC clients and potential clients, according to the Tax Practitioners Board, the industry watchdog, which on Monday deregistered Collins as a tax agent in the country for two years.”
• “The TPB also ordered PwC to improve its processes and training around potential conflicts of interest.”
• “A PwC official said the firm acknowledged that Collins had not complied with confidentiality agreements with the Treasury and that the company should have had specific conflict management procedures in place to prevent it from happening.”
• “Ian Klug, chair of the TPB, said: ‘Tax practitioners who breach this confidence will not be tolerated. Rules to manage conflicts of interest are equally important in protecting client interests, especially in a large firm.'”
• “Klug added that leaking information from confidential legal reform discussions ‘might be seen to elevate personal and commercial profit, breaching public interest, legal and ethical obligations.'”

“Auditors dialed back mandated disclosures: study” —

• “Auditors of large public companies disclosed fewer critical audit matters — a term for challenging or subjective material found in their client’s financial statements — in their audit reports after evidence emerged that investors interpreted increased CAM disclosures as an indication of business risk, according to a study completed this month by professors at the University of San Diego and Bucknell University.”
• “The new CAMs, or disclosures of key issues that surface during audits, were mandated by the Public Company Accounting Oversight Board for certain filers beginning in 2019.”
• “The ‘Disappearing Audit Disclosure Study’ provides “empirical evidence that auditors significantly dialed back the extensiveness of CAM disclosures in the second year of reporting,” and suggests the PCAOB and audit firms may need to rethink the approach to making audit reports more informative, the report states.”
• “The study also underscores the long-standing conflict of interest in the process whereby auditors are paid by the clients or companies they audit, even as they are responsible for disclosing potentially sensitive or negative information about those clients, Kate Suslava, one of the study’s co-authors and an assistant professor of accounting at Bucknell, said in an interview.”

“BDO in the spotlight over Home REIT audit” —

• “BDO is facing questions over its audit of troubled property investor Home REIT, after it was asked to look again at the social housing firm’s books amid accusations executives had been ‘round-tripping’ revenues and inflated the value of its property portfolio.”
• “Home REIT, which invests in housing for vulnerable groups, was forced to delay the publication of its annual accounts in December in order for BDO to deep-dive into its books with ‘enhanced audit procedures,’ following a slew of attacks from short seller Viceroy Research.”
• “However, BDO has now come under fire from activist investor The Boatman Capital which has laid out a series of demands to the firm and raised concerns over the independence of its audit process.”
• “The Boatman questioned the fact that Home REIT’s finance chief James Snape was previously a member of the BDO real estate audit team and asked for clarity on how the audit would be conducted ‘independently, without favour or undue influence.'”
• “‘We think it is reasonable for investors to ask for assurances that there will be appropriate professional distance and rigour between BDO as auditor and one of its ex-employees,’ the firm said.”

“‘Conflict of Interest’ in Bryan Kohberger Case Leaves Legal Experts Stunned” —

• “Bryan Kohberger’s court-appointed attorney was representing the mother of one of the four students he is accused of killing before taking his case, raising questions for legal experts about whether it poses a conflict of interest.”
• “Anne Taylor, the chief of the Kootenai County public defender’s office, began representing Kohberger, 28, after he was extradited to Idaho, where he is charged with four counts of first-degree murder and one count of felony burglary, earlier in January.”
• “Court records show Taylor filed an attorney withdrawal notice in Kootenai County Court for Kernodle’s mother, Cara Kernodle, on January 5—the same day Kohberger made an initial appearance in the Latah County courtroom. The substituted attorney, Christopher Schwartz, is listed as a ‘conflict public defender’ in the court documents.”
• “According to the Statesman, Taylor’s office has also represented another parent of a murder victim in four criminal cases since she became chief public defender. Taylor is named as an ‘inactive’ attorney in two of those cases, the newspaper reported.”
• “Legal experts say the details raise questions about possible conflicts of interest in what has become an extremely high-profile case.”
• “‘The mere fact that the public defender was forced to make a decision about which client to represent reflects a potential issue of competing loyalties,’ Michael McAuliffe, a former federal prosecutor and elected state attorney, told Newsweek.”
• “McAuliffe said Taylor ‘is surely acting in good faith, trying to navigate the applicable ethical obligations’ but the potential conflict of interest is ‘significant.'”
• “Taylor ‘may have withdrawn from the active case involving victim’s parent when she was assigned the Kohberger case, but she can’t unlearn the information she acquired in the course of those earlier representations,’ he said. ‘We have no idea to what extent that information might include the murder victim. Further, a murder victim’s relatives have a right to be heard in almost every jurisdiction in the U.S. in a charged homicide case. If the state files a notice of intent to seek the death penalty, the parent (the public defender’s former client) will have a specific right and special standing to be heard in the capital case including any proposed resolution or plea.'”
• “Neama Rahmani, an attorney and former federal prosecutor, said there is ‘a potential conflict of interest because Taylor presumably has to cross-examine the parent during the guilt or death penalty phase of the trial, if necessary… The parent is a former and not current client, so the ethical rules are very fact driven.'”
• “‘The analysis turns on whether Taylor received confidential information from the parent during her representation that may be relevant to Kohberger or the victim. If so, Taylor may have to ‘wall’ herself off and have another attorney handle the parent witness. If the wall does not effectively maintain the confidentiality of the parent communications, or if the wall would not allow Taylor to effectively represent Kohberger, Taylor would have to withdraw from the case entirely. If there is an actual conflict, it may be imputed to the public defender’s office, disqualifying anyone in the office from representing Kohberger.'”
• “[McAuliffe said] ‘The public defender’s assignment to the Kohberger case presents complicated scenario where the applicable code of professional conduct for Idaho lawyers provides guidance, but no easy or clear answers… The public defender’s role as the lawyer for a murder victim’s parent where she now represents the alleged murderer––at a minimum––presents an appearance of a possible conflict.'”

“How To Cost Your Biglaw Firm $62 Million. Not the best way to handle conflicts of interest.” —

• “You might suffer from imposter syndrome and feel like you have no idea what you’re doing, but at least you didn’t cost your Biglaw firm $62 million. So you’re doing better than Husch Blackwell partner Charles Renner.”
• “According to reporting by the Kansas City Star, Husch Blackwell found itself on the losing end of an arbitration against engineering firm Burns & McDonnell. The engineering firm blames Husch Blackwell and Renner for losing out on a contract to build the new Kansas City airport, arguing that Renner used his position as outside counsel for the city council to tank Burns & McDonnell’s bid in favor of Edgemoor Infrastructure and Real Estate, a company Renner represented.”
• “But the story gets even messier — that’s because Husch Blackwell and partner Ken Slavens have represented Burns & McDonnell since 1981. In fact, between 2007 and 2017, Husch Blackwell sought conflict of interest waivers 11 different times from Burns & McDonnell, something that weighed in the engineering firm’s favor, according to the arbitration panel.”
• “Renner was quoted in a May 12, 2017, KSHB story on the airport proposal and was critical of it. This raised the attention of Burns & McDonnell’s in-house counsel who asked Slavens about it. However, internal documents quoted in the arbitration panel’s decision reveal Renner denied talking to the press about the airport project, writing to Slavens, ‘I never spoke to that reporter other than to decline an interview. I have made no comment about the bidding process on this deal to the media at all.'”
• “But that’s not what the documents reveal. In fact, the panel wrote, ‘Renner intentionally misled Husch’s client about his activities,’ because he certainly seemed to have a lot of opinions on the project he was sharing with the press.”
• “These actions were particularly noteworthy to the arbitration panel, as they wrote, ‘There is no dispute that Renner knew that Burns & McDonnell was a client of the Husch law firm. His failure to disclose comments he had made to members of the City Council is a violation of his duty of loyalty to the firm’s client.'”
• “Renner’s work on both sides of the negotiations — as the city’s outside counsel while at the same time doing work on the airport project for Edgemoor — was in conflict with the firm’s longstanding obligations to Burns & McDonnell.”
• “Edgemoor was awarded the airport contract with members of the city council testifying that they were told by Renner they couldn’t vote for Burns & McDonnell’s proposal since it was out of compliance with city’s master bond ordinance. That master bond ordinance was later amended when it was discovered the winning bid from Edgemoor was out of compliance with it.”
• “Because the dispute was resolved via confidential arbitration, neither party has offered a comment on the case.”
• “The arbitration panel awarded Burns & McDonnell $62 million, which equals the profit they expected if awarded the airport contract.”
• “And professional responsibility law professors were gifted a wild set of facts they can pull hypos out of for years to come.”

January 19: “All 6 of Marilyn Mosby’s defense lawyers ask to be removed from case” —

• “The six defense attorneys representing former Baltimore State’s Attorney Marilyn Mosby against federal mortgage fraud and perjury charges asked Thursday to be removed from her case.”
• “Mosby’s lead attorney, A. Scott Bolden, and three others from his firm — Rizwan Qureshi, Kelley Miller and Anthony Todd, all of Reed Smith LLP — said that an order from U.S. District Judge Lydia Kay Griggsby that found Bolden violated the Maryland rules governing attorney conduct created a conflict of interest for them.”
• “At a pretrial hearing Tuesday, Griggsby ordered Bolden to explain in writing by Jan. 31 why she shouldn’t hold him in criminal contempt of court for using profanity to criticize the court, why he divulged confidential juror information in a legal motion, and why he filed that same motion without a Maryland lawyer’s signature. Based in Washington, D.C., Bolden is not licensed to practice in Maryland and needs to co-file all papers with someone who is, per the court’s rules of attorney conduct.”
• “Mosby, a Democrat who served two, four-year terms as state’s attorney ending earlier this month, is charged with two counts of perjury and two counts of making false statements on loan applications for down payments on a pair of properties in Florida.”
• “Her attorneys said in the filing she consented to their withdrawing from her defense. Griggsby has to approve the lawyers’ request to withdraw from the case.”
• “The reason Bolden would withdraw from the case is because he may no longer feel he can properly represent his client with possible criminal punishment hanging over his own head, said David Jaros, faculty director of the University of Baltimore School of Law’s Center for Criminal Justice Reform.”
• “‘While it’s not an inherent conflict, there are reasons to be concerned and you certainly wouldn’t want the attorney to be reluctant to challenge the decisions of the judge and argue on behalf of their client because they didn’t want to further anger the judge,’ Jaros said. ‘We don’t want the attorney to be thinking about what the judge thinks about them at trial. We want the attorney to be focused on the best defense for their client.'”

January 25: “Marilyn Mosby’s lead attorney in federal case says he can’t represent her because he might be in trouble, too” —

• “A. Scott Bolden, the lawyer leading former Baltimore State’s Attorney Marilyn Mosby’s federal criminal defense, can no longer represent her because he might soon be in legal trouble too, he said in a court filing Wednesday explaining why he wants off the case.”
• “Last Thursday, all six attorneys representing Mosby asked to be removed from the case and to have the city’s former top prosecutor represented by the federal public defender.”
• “Federal prosecutors said they’re fine with Bolden withdrawing from the case but argued the remaining five attorneys — including three from Bolden’s firm, Reed Smith LLP — should remain on the case to avoid another postponement of Mosby’s trial, slated for March.”

January 25: “Mosby’s lead attorney argues potential contempt charges present case conflict” —

• “The lead defense attorney representing Marilyn Mosby in a federal perjury trial filed a new motion Wednesday arguing why he and other colleagues of the Reed Smith law firm should be allowed to withdraw from the case.”
• “A. Scott Bolden suggests there is an existing conflict of interest since he personally faces potential criminal contempt of court charges.”
• “He states Mosby or his colleagues could be called as witnesses in future proceedings against him, and that would put the firm in an untenable position to fairly represent Mosby.”
• “‘As a general matter, the possibility of criminal sanctions against Mr. Bolden and the divided loyalties that it creates do not only affect Mr. Bolden, but the other Reed Smith attorneys as well,’ the new filing reads.”

“Reed Smith asks to drop representation of former Baltimore state’s attorney after judge threatens sanctions” —

• “During the press conference, Bolden criticized the government in a dispute over expert witnesses and referred to government action as ‘all bulls- – -.’ He also said: ‘If you’re in the federal government, you’re in the state government, you’re an African-American politician working for the government, you are at risk because of the U.S. attorney’s office’ in Maryland.”
• “Bolden apologized in court for his use of profanity.”
• “Bolden said he had used ‘anonymous quotations’ from jury questionnaires to respond to government arguments and to show that pretrial publicity had tainted the jury pool. The local rule didn’t specifically ban use of quotations from jury questionnaires, and if it did, there was no reasonable likelihood that it would interfere with a fair trial, the response said.”

“MSG probed over use of facial recognition to eject lawyers from show venues” —

• “The operator of Madison Square Garden and Radio City Music Hall is being probed by New York’s attorney general over the company’s use of facial recognition technology to identify and exclude lawyers from events. AG Letitia James’ office said the policy may violate civil rights laws. Because of the policy, lawyers who work for firms involved in litigation against MSG Entertainment Corp. can be denied entry to shows or sporting events, even when they have no direct involvement in any lawsuits against MSG. A lawyer who is subject to MSG’s policy may buy a ticket to an event but be unable to get in because the MSG venues use facial recognition to identify them.”
• “James’ office sent a letter (PDF) Tuesday to MSG Entertainment, noting reports that it ‘used facial recognition software to forbid all lawyers in all law firms representing clients engaged in any litigation against the Company from entering the Company’s venues in New York, including the use of any season tickets.”
• “‘We write to raise concerns that the Policy may violate the New York Civil Rights Law and other city, state, and federal laws prohibiting discrimination and retaliation for engaging in protected activity,’ Assistant AG Kyle Rapinan of the Civil Rights Bureau wrote in the letter. ‘Such practices certainly run counter to the spirit and purpose of such laws, and laws promoting equal access to the courts: forbidding entry to lawyers representing clients who have engaged in litigation against the Company may dissuade such lawyers from taking on legitimate cases, including sexual harassment or employment discrimination claims.'”
• “The AG’s office also said it is concerned that ‘facial recognition software may be plagued with biases and false positives against people of color and women.’ The letter asked MSG Entertainment to respond by February 13 ‘to state the justifications for the Company’s Policy and identify all efforts you are undertaking to ensure compliance with all applicable laws and that the Company’s use of facial recognition technology will not lead to discrimination.'”
• “‘To be clear, our policy does not unlawfully prohibit anyone from entering our venues and it is not our intent to dissuade attorneys from representing plaintiffs in litigation against us,’ said an MSG spokesperson in a statement. ‘We are merely excluding a small percentage of lawyers only during active litigation. Most importantly, to even suggest anyone is being excluded based on the protected classes identified in state and federal civil rights laws is ludicrous. Our policy has never applied to attorneys representing plaintiffs who allege sexual harassment or employment discrimination.'”

Some recent, relevant spots from Bill Freivogel:

Woroch v. Northfield Trim & Door Inc., 2023 ONSC 218 (CanLII) (Super. Ct. Ont. Jan. 9, 2023).

• “Company is owned by Family Members. In 2012 Family Members entered into a shareholders’ agreement prepared by Lawyer while representing Company. The agreement included an employment agreement for Plaintiff (also a Family Member) to be President. The shareholders’ agreement also contained a buy/sell provision.”
• “In 2021 a transaction occurred under the buy/sell provision. A dispute arose between Plaintiff and Company and other Family members as to the meaning and enforcement of the shareholders’ agreement. Lawyer withdrew as counsel to Company and immediately took Plaintiff’s side in the dispute.”
• “The dispute ripened into this proceeding, in which Lawyer is adverse to Company and Family Members. Defendants moved to disqualify Lawyer.”
• ” In this opinion the court granted the motion. The court held that Lawyer’s earlier representation of Company, including preparation of the shareholders’ agreement, was sufficiently related to this case, which is about the interpretation and enforcement of the agreement. Moreover, there was no showing that Lawyer had not learned relevant Company confidences while representing Company. The court seemed influenced by the rather shady (not dishonest) way Lawyer went about the business of firing Company with no advance notice and commencing to do battle for Plaintiff. Among other things, the case has a strong whiff of hot potato.”

Joint Representation (posted January 16, 2023) N.Y. Op. 1249 (Jan. 5, 2023).

• “Lawyer currently represents H and W simultaneously in estate planning. It is always a good idea to provide in an engagement document that Lawyer will keep no secrets of one joint client from the other. Authorities (including the Committee’s opinion) suggest that even absent a written provision, there is normally an expectation that Lawyer will share the information. Suppose, however, Lawyer learned something from, or about, H during an earlier single representation of H. This opinion says that the usual duty to reveal does not apply in the current joint representation.”

Changing Firms (posted January 9, 2023) Cole-Palmer Instrument Co. v. Prof’l Labs., Inc., No. 0:21-cv-61756-GOODMAN[CONSENT] (S.D. Fla. Jan. 6, 2023).

• “Florida Rule 1.10(c)((1)&(2) appears to be identical to Model Rule 1.10(b)(1)&(2). This is a rare reported decision applying that rule.”
• “Lawyer was at Firm 1 for about one year. Firm 1 represents Plaintiff. Defendant is claiming that Lawyer briefly represented Defendant on a matter related to this case and moved to disqualify Firm 1. In this opinion the magistrate judge denied the motion. The analysis is so fact-dependent, we will spare readers with a recitation of those facts.”
• “First, the judge held that Lawyer and Firm 1 never represented Defendant. Last, the judge held that, in any event, the matters were not substantially related and that any information received by Lawyer and Firm 1 from, or about, Defendant was now public.”

“Recreation Of Billing Records Led To Overbilling” —

• “The Ohio Disciplinary Counsel and Respondent have reached a consent agreement for public reprimand in a case of overbilling by a court-appointed counsel for indigent defendants” —
  • “Between at least 2019 and 2021, when it was time to submit a fee application form, respondent would recreate the time he had spent on a case by reviewing the case docket and his incomplete handwritten notes, and he would estimate both the time he had spent on a particular task, as well as the date on which he had performed the task.”
  • “Respondent’s failure to maintain accurate and contemporaneous time records led to him filing numerous incorrect fee application forms with the Hamilton County Court of Common Pleas and the Hamilton County Municipal Court that reflected excessive amounts of hours on certain days.”
  • “In early 2021, the OPD became aware that several Hamilton County attorneys were generating a significant number of hours for court-appointed work. Accordingly, the OPD conducted an audit on fee application forms submitted by those attorneys on or after January 1, 2019. (Exhibit 3.)”
  • “Respondent’s fee application forms indicate that on August 7, 2019 – the day that respondent billed for a total of 27 hours – he spent 14.1 hours ‘in court’ on behalf of his clients even though the Hamilton County courts are only open to the public for eight hours a day (8:00 a.m. to 4:00 p.m.) Monday through Friday. (Exhibits 4 and 6.)”

“US lawyer urged clients to infect opposing counsel with ‘nasty disease’” —

• “A US lawyer advised his clients to have someone with Covid or another ‘highly infectious, nasty disease’ lick and handle an envelope being sent to opposing counsel, it has emerged.”
• “The extraordinary request was revealed in a ruling that condemned the behaviour of Colorado bankruptcy lawyer Devon Barclay in acting for two debtors and banned him from operating in the US Bankruptcy Court of Colorado for three years.”
• “At the start, Mr Barclay and his firm failed to execute a written contract with the debtors. ‘In any event, Mr Barclay commenced the debtors’ Chapter 7 bankruptcy case by forging the debtors’ signatures on the petition, statement of financial affairs, and schedules.'”
• “He engaged in an ‘egregious pattern’ of misbehaviour in trying to have the case dismissed, lying ‘repeatedly’ to the trustee in bankruptcy and trying to manipulate the bankruptcy filing fee system ‘to cause the bankruptcy case to be dismissed.'”
• “The lawyer told his clients: ‘If either of you have Covid or some other highly infectious, nasty disease — or if you know someone who does — please make sure they lick the envelope and handle it as much as possible.'”
• “The US Trustee – a federal office that oversees bankruptcy cases – brought the misconduct action against Mr Barclay and his firm, although neither participated.”
• “The judge said it deserved “severe sanctions”. He suspended Mr Barclay from practising in the Colorado bankruptcy court for three years and ordered that he cease advertising bankruptcy law services during that time.”

Excellent overview and analysis from Francis G.X. Pileggi, a managing partner of the Delaware office of Lewis Brisbois Bisgaard & Smith, LLP: “Court Rejects Disqualification of Law Firm Based on Rules 1.9 and 1.10” —

• “The U.S. Court of Appeals for the Third Circuit recently addressed a motion to disqualify based on a partner who moved from a law firm representing one party in a bankruptcy proceeding to the firm representing the opposing party in the same case. The court applied Model Rules of Professional Conduct 1.9 and 1.10(a)(2). The attorney who made the lateral move was described in the oDetpinion as Jessica Lauria, née Boelter. (‘Boelter’).”
• “Rule 1.10(a)(2) imputes her conflict to her new firm unless she, among other things, ‘is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.’ The new firm timely screened Boelter, but Boelter’s former client moved to disqualify her new firm, White & Case, arguing that a screen was not enough. The appeal considers the decision of the U.S. Bankruptcy Court, which denied a motion to disqualify White & Case.”
• “Boelter was a partner at Sidley and participated in Sidley’s initial pitch to represent YPF. She recorded a total of 300 hours in the representation of YPF, mostly at the beginning of the case. YPF executives regarded her as an integral part of their legal team.”
• “Thomas Lauria, a partner at White & Case, did not record any time related to the case. Boelter started dating Lauria in 2017, before Boelter pitched Sidley to YPF. In late 2019, Boelter and Lauria began living together. Sidley knew of their relationship.”
• “Boelter moved to White & Case while engaged to marry Lauria. At that time, White & Case followed the applicable Model Rules of Professional Conduct, and Boelter followed the standard conflict-screening process. White & Case implemented an ethical wall that the parties agreed qualified as a screen, beginning on Boelter’s first day. Her new firm obtained her acknowledgement that she complied with the screen and periodically certified her compliance. Her new firm did not give any portion of its fee from the YPF adversary proceeding to Boelter. White & Case gave YPF written notice of Boelter’s employment the day she began with the firm, explained the nature of White & Case’s screen, and included the statement of the firm’s and Boelter’s compliance with the Model Rules. White & Case stated that review may be available before a tribunal, and the firm agreed to respond promptly to any written inquiries or objections about the screening procedures.”
• “YPF moved to disqualify based on its view that no screen would be satisfactory. The Third Circuit accepted appellate review. The standard of review for interpretation of the Model Rules, as a question of law, was de novo. The bankruptcy court’s denial of disqualification was treated as a sanction for which the standard of appellate review is abuse of discretion.”
• “The court regarded the Model Rule (1.10) as sufficient for its analysis and declined to follow the application by the bankruptcy court of an “exceptional circumstances” exception as well as a multifactor test that was based on a decision by the District of Delaware.”
• “The court of appeals held that White & Case complied with Model Rule 1.10(a)(2) and that the bankruptcy court did not abuse its discretion in reaching the same conclusion that the firm was not disqualified from representing the Trust. The bankruptcy court found that the ethical screen implemented by White & Case was thorough and robust between Boelter and the YPF adversary proceeding. Nor does YPF dispute that Boelter did not receive any part of the fees from White & Case’s representation of YPF.”
• “The bankruptcy court also found that White & Case gave YPF prompt notice of the screening procedures, as well as repeated statements that White & Case and Boelter would comply with the screening procedures. White & Case also confirmed that it would respond promptly to any inquiries from YPF about the screen and invited YPF to provide input.”

“Mississippi Rejects Implied Attorney-Client Relationship As Basis To Disqualify” —

• “The Mississippi Supreme Court overturned an order disqualifying counsel in litigation”
  • ‘This case presents an issue of first impression: whether an attorney’s representation of a general partnership creates an implied attorney-client relationship between the attorney and the individual members of the general partnership, and, if so, whether the Mississippi Rule of Professional Conduct prohibiting communication by a lawyer with an individual represented by other legal counsel was violated.’
  • ‘James L. Pettis, III, attorney for the plaintiff, appeals an order of the chancery court disqualifying him for a violation of Mississippi Rule of Professional Conduct 4.2, which prohibits a lawyer from communicating with a person they know to be represented about the subject of the representation. After a careful review of the law, this Court reverses the chancery court’s order, renders a judgment in favor of Pettis, and remands for further proceedings.’
  • ‘Sometime in 2019, two years after Rea had disassociated from the Partnership, Rea became aware that Karsten was attempting to sell land belonging to the Corporation. At Newell’s request, Rea and Newell met with Pettis on April 8, 2019, in his office to discuss the attempted sale. On April 11, 2019, Rea spoke with Lawson via telephone and informed her that she had met with Pettis. Pettis met Rea a second time when he attended the meeting of the shareholders and board of directors of the Corporation at Rea’s home on April 15, 2019.’
  • ‘At both meetings with Rea, Pettis asked whether she was represented by Lawson or any other attorney in the underlying litigation. Rea responded on both occasions that she was not represented by anyone, nor did she wish to seek representation in connection with the underlying litigation. Both Rea and Pettis submitted affidavits stating they only discussed how to prevent the sale of the Corporation’s land by Karsten and that Rea was not represented by counsel in connection with the underlying litigation.’
• “The trial court had disqualified Pettis”
  • ‘We hold that the chancery court erred by finding an attorney-client relationship existed between Lawson and Rea. Additionally, presuming such a relationship did exist, there was no evidence of knowledge or discussion of illicit subject matter which would provide the grounds for Pettis’s disqualification.’
  • ‘The representation of a general partnership by an attorney does not automatically give rise to an attorney-client relationship between the attorney and any of the individual partners.’
  • ‘Even if an attorney-client relationship had arisen between Rea and Lawson, the chancery court erred by disqualifying Pettis because there was no evidence concerning’
  • ‘Although not explicitly argued by the parties, as Hester’s law partner, Pettis’s disqualification does not fall under Rule 1.10 of the Mississippi Rules of Professional Conduct as an imputed disqualification of a law firm due to a conflict of interest because the chancellor only made a finding that Pettis violated Mississippi Rule of Professional Conduct 4.2, not that a conflict of interest existed.’
  • ‘Hester’s disqualification was within the jurisdiction and authority of the chancery court because he was engaged in practices and proceedings before the court as Newell’s attorney in the underlying litigation. Because Rea was not a party to the underlying litigation and because Pettis did not represent Newell in the litigation, no conflict of interest existed. Therefore, this Court finds the disqualification of Pettis under the theory of an imputed disqualification as a member of Hester’s law firm to be untenable.’

“NY Attorney Escapes Fiduciary Breach Lawsuit in Texas” —

• “A New York lawyer who is accused of wrongly advising a company to sign an unfavorable contract escaped a lawsuit in Texas because an attorney-client relationship wasn’t enough for a court in that state to have jurisdiction over him.”
• “While an attorney-client relationship existed between Hinduja Global Solution, Inc. and Ali Ganjaei, there’s no evidence the lawyer sought clients or otherwise affirmatively promoted personal business in Texas, the Texas Court of Appeals, Fifth District said, affirming the trial court’s decision.”
• “HGSI specifically claims that Ganjaei, the business’s legal counsel, gave the company bad legal advice by advising it to sign the perpetuity contract. It claims Ganjaei had a conflict of interest because he also worked for another organization, HBI Group Inc., which obtained a majority stock position in Synergy.”
• “Ganjaei challenged the court’s personal jurisdiction over him, arguing that he’s a resident of New Jersey, and never lived in Texas. He also said he’s licensed to practice law in New York and has never performed legal services in Texas. The trial court granted his motion to dismiss for lack of personal jurisdiction, but HGSI appealed.”
• “Because Ganjaei was sued in his individual capacity, ‘only his contacts in that capacity are relevant’ to the jurisdictional question, the court said Jan. 13.”
• “Ganjaei didn’t purposefully avail himself of the benefits and protection of Texas law because there is no evidence Ganjaei personally targeted the state, sought Texas assets, or sought customers there, the court said. ‘The record shows HBI, not Ganjaei acquired an interest in Synergy, and there is no assertion or evidence that HBI is Ganjaei’s alter ego,’ the court added.”

“FTX seeks to reassure court on bankruptcy lawyers’ potential conflicts” —

• “A U.S. judge on Friday signed off on FTX’s choice of legal advisers to navigate its bankruptcy, after the collapsed crypto exchange told the court it had reached an agreement with the U.S. Department of Justice removing one of the biggest obstacles to the law firm’s appointment.”
• “The U.S. Trustee, the Justice Department’s bankruptcy watchdog, and two of FTX’s creditors had objected to FTX hiring Sullivan & Cromwell, arguing the New York law firm had not disclosed sufficient information about its past ties to FTX. These ties, they said, include the fact that FTX’s U.S. general counsel, Ryne Miller, is a former partner at the firm.”
• “Dorsey said the objectors had not shown that there was an active conflict of interest between FTX and the firm, and to the extent that conflicts could arise there were procedures in place to deal with that.”
• “Former top FTX attorney Daniel Friedberg had also opposed Sullivan & Cromwell’s hiring in court filings on Thursday, saying that the law firm had overbilled for legal work and had conflicts of interest stemming from its connections to Miller.”
• “FTX creditor Warren Winter asked Dorsey to delay Sullivan & Cromwell’s approval until Friedberg’s allegations were investigated. The judge denied the request, saying that Friedberg’s court filing was not properly presented to the court and ‘full of hearsay, innuendo, speculation and rumors.'”
• “Sullivan & Cromwell has told the court it should not be disqualified simply because it performed some pre-bankruptcy work for FTX. A Sullivan & Cromwell spokesperson has said the firm had a ‘limited and largely transactional’ relationship with FTX prior to the bankruptcy and never served as primary outside counsel to any FTX entity.”

“Tulare hospital board settles suit against former attorney and law firm” —

• “The Tulare Local Healthcare District now has $3 million more in its bank account after settling a lawsuit against Bruce Greene – its former attorney – and the firm he works for, Baker Hostetler.”
• “The settlement doesn’t impact charges that the Tulare County District Attorney’s office has brought against Greene centering around his time working for Tulare and the district’s former management partner, Healthcare Conglomerate Associates (HCCA), and it doesn’t impact a California State Bar complaint lodged by the district against Greene.”
• “Kevin Northcraft, the district board’s president, told the Valley Voice that the settlement amount was nearly equal to what the district had paid Greene and the Baker firm.”
• “‘We have 88,000 people in our district, and they were all harmed by this law firm,’ he said. ‘Getting back virtually everything we paid them is some justice for the people that were harmed.'”
• “The lawsuit alleged that Greene and the Baker firm breached their fiduciary duty to act in the best interest of the district by drafting a resolution that would allow HCCA to seek $22m in loans on the district’s behalf, among other claims.”
• “The lawsuit also claimed Greene and the firm were professionally negligent by allegedly failing to disclose the potential conflicts of interest in representing HCCA, its owner Benny Benzeevi, and the district at the same time.”

“Senators, States and Creditors Challenge Sullivan & Cromwell’s Lead Role in FTX Bankruptcy” —

• “U.S. Bankruptcy Judge John Dorsey of the District of Delaware rebuffed four U.S. senators in a Wednesday hearing regarding the senators’ unsolicited request that Dorsey appoint an independent examiner in the FTX bankruptcy, calling the ex parte communication ‘inappropriate’ and stating that it would not factor into his decisions.”
• “Opposing Sullivan & Cromwell’s hiring as lead bankruptcy counsel, FTX creditor Warren Winter argued in a Tuesday amended objection that the firm’s retention represented multiple conflicts of interest. Most of the facts Winter brought derived from the law firm’s own application as lead counsel, which noted the firm collected $8.5 million in pre-petition legal fees for deal work prior to FTX’s collapse, and testimony founder Sam Bankman-Fried had planned to give to Congress before his arrest.”
• “Winter, a U.S. citizen living abroad who stated he lost hundreds of thousands of dollars in his FTX account, argued that Sullivan & Cromwell’s conflicts of interests included the firm’s relationship with FTX general counsel Ryne Miller, a former partner at the firm, and Tim Wilson, an in-house lawyer and former Sullivan & Cromwell associate. He also noted that Sullivan & Cromwell has scrubbed its website of references to its work for FTX in the acquisition of Voyager Digital, another crypto firm that filed for bankruptcy in July.”
• “Finally, Winter took issue with Miller’s demand—per Bankman-Fried’s planned testimony—for $4 million to retain Sullivan & Cromwell immediately after the Nov. 2 CoinDesk article called into question the company’s balance sheet and relationship with Bankman-Fried’s trading firm Alameda Research. FTX accordingly transferred Sullivan & Cromwell $2.2 million on Nov. 3, by far the largest payment it made to the law firm in the preceding six months. Miller’s demand for the $4 million transfer ‘is far from ordinary,’ Winter wrote, considering evidence that ‘untold’ assets were already stolen from the same asset pool.”

“Sam Bankman-Fried Says Law Firm Worked Closely With FTX Before Bankruptcy” —

• “Sam Bankman-Fried said cryptocurrency exchange FTX had a closer relationship than previously disclosed with its bankruptcy law firm Sullivan & Cromwell LLP, adding to questions about the law firm’s work for past FTX management.”
• “The founder and former chief executive of FTX, back online and in a new blog post that could suggest elements of his upcoming legal defense, said Sullivan & Cromwell was one of the main forces pushing him to resign and for the exchange to file for bankruptcy. Mr. Bankman-Fried is currently under house arrest at his parents’ California home as he faces federal fraud charges. He pleaded not guilty on Jan. 3. “
• “He added that FTX U.S.’s general counsel was a former member of the law firm without naming him. Ryne Miller previously served as a partner at Sullivan & Cromwell before joining FTX U.S. in August 2021. “
• “Law firms seeking to work on chapter 11 cases are required under bankruptcy rules to disclose any past representations that could pose a conflict of interest before they can be officially retained. A spokesman for Sullivan & Cromwell said it had no comment beyond a statement it issued on Jan. 10, in which it said the firm ‘never served as primary outside counsel to any FTX entity. The firm had a limited and largely transactional relationship with FTX and certain affiliates prior to the bankruptcy, as is common, and is disinterested as required by the bankruptcy code.'”
• “Companies commonly use existing law firms to handle bankruptcy filings. But the arrests of Mr. Bankman-Fried and other former FTX executives have drawn lawmakers’ attention to Sullivan & Cromwell’s prior work for the exchange.”
• “Sullivan & Cromwell charged FTX more than $8.5 million in legal fees for work it did for the firm before the bankruptcy, according to the law firm’s retention application.”