Risk Update

Conflicts and Ethics — Spotlight Shines on Solar Company Conflicts Clash, Judicial Relationships and Conflicts Ethics Opinion

Posted Dan Bressler

New York: “Judicial Ethics Opinion 24-62” —

  • “Digest: Where a judge’s association with his/her former law firm ended less than two years ago, the judge must disqualify in a matter involving a current client of the judge’s former law firm, even if the party has not appeared in the matter. This disqualification is subject to remittal.”
  • “Opinion: The inquiring judge’s connection with his/her former law firm ended less than two years ago. The judge has recently learned that one of the defendants in a case assigned to the judge is a current client of the judge’s former law firm. [1] After disclosure, plaintiff’s counsel requested that the judge recuse him/herself. The judge’s former law firm has no apparent involvement in the matter before the judge, as the law firm’s client, one of several defendants in the case, was served well over a year ago but has not appeared or filed a notice of appearance. Nor has any motion been made for default judgment against that defendant. The judge believes he/she can be fair and impartial, and asks whether disqualification is ethically required.”
  • “A judge must always avoid even the appearance of impropriety (see 22 NYCRR 100.2) and act to promote public confidence in the judiciary’s integrity and impartiality (see 22 NYCRR 100.2[A]). A judge must disqualify him/herself in a proceeding in which the judge’s impartiality ‘might reasonably be questioned’ (22 NYCRR 100.3[E][1]).”
  • “For two years from the date that the relationship between a judge and their former law firm completely ends, the judge is disqualified from all matters ‘involving a party the judge recognizes as a current or former client of the law firm, even though a different law firm is representing the client’ (Opinion 16-36; see also Opinion 17-100 [disqualification required for two years after representation of client ends or final payment to judge, whichever is later]).”
  • “This defendant is a party to the action before the judge, notwithstanding its failure to appear, and is also a client of the judge’s former law firm in another case. As the judge is still within the two-year disqualification period for current and former clients of the judge’s former law firm, the judge is therefore obligated to disqualify him/herself, subject to remittal. [2]”
  • “Remittal is a multi-step process which requires full disclosure on the record and the voluntary, affirmative consent of the appearing parties and (if represented) their counsel. First, the judge must fully disclose the basis for disqualification on the record (see 22 NYCRR 100.3[F]). Second, without participation by the judge, all the parties who have appeared and not defaulted, and their lawyers, must agree that the judge should not be disqualified (id.). Then, if the judge believes he/she will be impartial and is willing to participate, the judge may accept remittal of disqualification and preside in the matter. The agreement must ‘be incorporated in the record of the proceeding’ (id.).”
  • “Although the inquiring judge here has made a disclosure, the parties that have appeared in the case do not ‘all agree’ that the judge should not be disqualified (22 NYCRR 100.3[F]). The judge is therefore disqualified.”

“Solar Co. Ex-CEO Attys Say DQ Request ‘Untethered To Facts‘” —

  • “Lawyers representing the former CEO of a now-defunct solar energy company against fraud and racketeering claims have told a Michigan federal judge that their previous in-house work for the company is not grounds to disqualify them from the suit, calling the plaintiffs’ attempt to have them removed ‘untethered to facts’ and improperly delayed.”
  • “In a response filed Wednesday, DarrowEverett LLP told U.S. District Judge F. Kay Behm of the Eastern District of Michigan that there was no conflict of interest and no precedent for removing it from representing William Jayson Waller against claims that he and the company, Power Home Solar LLC, now called Pink Energy, took part in a scam to sell vastly overpriced solar energy systems to Michigan residents.”
  • “The suit names the solar company, Waller and Florida-based private equity firm Trivest Partners LP and its investment company, TGIF Power Home Investor, as defendants. The company filed for bankruptcy in October 2022, weeks before the proposed class action was filed.”
  • “The plaintiffs’ arguments for having New York-based DarrowEverett removed hinge on ‘a nonexistent legal theory based on equally nonexistent facts,’ the firm argued. Though the firm provided ‘successive representation,’ first to the company and then to Waller, no conflict has arisen, it told the court.”
  • “‘Moreover, even if the facts asserted by [the] plaintiffs could for some reason support disqualification of opposing counsel, [the] plaintiffs sat on that knowledge for over a year before acting,’ the firm added, ‘and their failure to raise the issue until now waives any arguable claim they could possibly have had.'”
  • “DarrowEverett’s response follows a motion filed by the proposed class of Michigan residents claiming that they fell victim to the alleged fraud conspiracy, led by named plaintiffs Aaron Hall, Katherine Glod and Jeffrey Binder, who asked Judge Behm to remove the firm in a Nov. 6 motion citing ‘multiple conflicts of interest.'”
  • “The plaintiffs accused DarrowEverett of ‘stonewalling’ discovery, a move they said could be attributed to numerous conflicts, including that firm chair Zachary Darrow, with assistance from other firm lawyers, worked as a C-suite officer and chief counsel for the solar panel company.”
  • “The firm’s inside involvement means its attorneys are witnesses in the action, the motion claimed, with Darrow potentially an ‘unnamed member of the RICO organization.'”
  • “Plaintiffs further argued that since the firm has a fiduciary obligation to Power Home Solar’s bankruptcy trustee, its representation of Waller, whose ‘interests in this case are materially adverse to those of PHS,’ represents a conflict.”
  • “But DarrowEverett told Judge Behm that Power Home Solar is not a party to the suit, and that ‘no entity with which DarrowEverett has or has had an attorney-client relationship is seeking the firm’s disqualification.'”