Risk Update

Conflicts Continue: Hidden Conflicts, Appearances, Relationship Tests, a Sheriff, and a Fire

Posted Dan Bressler

“Cooley Hid Conflict While Helping Launch Company, Suit Says” —

  • “Attorneys for Cooley LLP failed to tell a New Jersey chemist that the firm had previously worked with his partner, then represented the partner’s interests at the expense of the chemist’s while they launched a new company, according to a lawsuit filed Monday in Massachusetts state court.”
  • “But when Sun directed the Cooley attorneys to help him and Jernigan execute a Series A financing deal for Chengwei Capital to invest in the new company, Silicon Therapeutics, the lawyers allegedly didn’t tell Jernigan they were conflicted. Jernigan said it became clear in time that Sun ‘was issuing directions at the behest of [Chengwei] rather than for the benefit of [Silicon Therapeutics].'”
  • “The complaint cites emails between Sun and the Cooley attorneys in 2016 to suggest they were hashing out terms that benefited Chengwei Capital and left Jernigan behind. Sun told Cooley attorney… that Chengwei, not Silicon Therapeutics, would pay the legal costs associated with the deal, according to the suit. And [the attorney] told Sun he would add a provision so that all other potential investors would need Chengwei’s consent before buying into Silicon.”
  • “‘Although Jernigan was copied on some of these emails, he did not understand the legal conflict of interest presented by these discussions, and he believed that agreeing to all of [Chengwei’s] terms, as dictated by Lanny Sun and the Cooley attorneys, was necessary to secure the financing and to achieve the success of [Silicon Therapeutics],’ the complaint says.”
  • “‘Instead of owning 10% of [Silicon], as he was told by Lanny Sun and Cooley, Jernigan was forced from the company he envisioned and co-founded with almost nothing,’ the suit says. Representatives for Cooley did not return requests for comment Tuesday.”

“State Appeals Court OKs Disqualification of Lawyer Over Conflict of Interest” —

  • “A New Jersey appeals court has ruled that a lawyer who represents criminal defendants in Sussex County is disqualified from representing the sheriff in a civil suit against the county’s freeholder board.”
  • “The appeals court affirmed a trial judge’s ruling disqualifying attorney George Daggett from representing Sussex County Sheriff Michael Strada. The panel rejected Daggett’s reasoning that the Supreme Court’s elimination of the appearance of impropriety standard in 2003 should alter the application of R. 1:15, which sets limitations on the practices of attorneys.”
  • “The appearance of impropriety standard held that, even in the absence of actual conflict of interest, an attorney may be precluded from representing a particular client if the representation creates an appearance of impropriety.”
  • “Ballard disqualified Daggett based on R. 1:15-3(a), which says that an attorney who is a sheriff or county prosecutor, or an attorney who is in the employ or service of such an official, ‘shall not practice on behalf of any defendant in any criminal, quasi-criminal or penal matter, whether judicial or administrative in nature,’ and ‘an attorney who is a sheriff of any county or in the sheriff’s employ” shall not practice in any court in that county.”
  • “Daggett said he would seek state Supreme Court review of the decision. ‘I think the Supreme Court should have the final say. Since we don’t have the appearance of impropriety rule anymore, I think you have to go into the facts’ of the case.”

“California Court Disqualifies Law Firm in Woolsey Fire Cases” —

  • “Douglas W. Richardson, et al. v. Southern California Edison Co., et al., Case No. JCCP 5000/19STCV10357 (Superior Ct. L.A. County May 31, 2019)”
  • “Upon motion by the defendant, Southern California Edison (‘defendant’), law firm Quinn Emmanuel Urquhart & Sullivan LLP (the ‘Firm’), was disqualified from representing victims (plaintiffs) of a deadly fire in California last fall (the ‘Woolsey Fire’). While defendant had not been represented by the Firm with respect to the fires, it had consulted with the Firm on related issues almost a year before the Woolsey Fire.”
  • The court concluded that under the ‘substantial relationship test,’ the issues that would have reasonably been discussed and the material confidential information provided during that consultation were ‘substantially related’ to the Firm’s current representation of victims of the Woolsey Fire. Consequently, disqualification was required. The Firm has filed a notice of appeal.”