“Troutman Pepper Locke Navigates Sticky Conflict After Merger” —

• “Troutman Pepper Locke is using an ‘ethical wall’ within the firm so its lawyers can represent clients on opposing sides of a bankruptcy proceeding, a firm partner told a Texas court.”
• “The firm’s lawyers are seeking to collect legal fees from a bankrupt client while simultaneously representing some of that client’s creditors. The client and creditors had been represented by separate firms, Troutman Pepper and Locke Lord, until those two operations merged Jan. 1.”
• “‘The firm has created an ethical wall completely separating legacy Locke Lord lawyers working on matters for the debtors from legacy Troutman Pepper lawyers working on matters involving the debtors,’ partner Thomas Yoxall told a Texas bankruptcy court in a Jan. 8 filing in a case involving Steward Health Care System. Yoxall and the firm didn’t respond to requests for comment on the filing.”
• “Lingering conflicts are an increasing problem for law firms that choose to balloon in size through mergers. They pose a risk to the new firms that lawyers will need to quit to resolve the situations or that clients will file malpractice suits over the representation issues.”
• “The merger between Troutman Pepper and Locke Lord created one of the 50 largest US legal operations, manifesting a trend in which firms merge to achieve scale and remain competitive. The predecessor operations reported more than $1.5 billion in combined revenue in 2023, and leaders of the two firms touted that post-merger they’d have 1,600 lawyers and 35 offices in the US and Europe.”
• “Resolving potential conflicts led to a delay in finalizing Troutman Pepper Locke’s merger, with Locke Lord ultimately showing the door to some lawyers with conflicting clients, according to two sources familiar with the deal.”
• “‘It’s axiomatic in these big law firms that as they get bigger, they get more conflicts of interest,’ said Ashley London, director of bar studies and assistant professor of law at Duquesne University.”
• “Bankruptcy law requires professionals seeking payment from an estate to disclose potential conflicts. Merging firms resolve such situations by asking clients to sign conflict waivers or by creating an ‘ethical wall’ that prevents attorneys from representing clients with adverse interests to other clients.”
• “If firms don’t get a client’s consent regarding conflicts, they may have to drop out, said Laura Saklad, former chief operating officer of Orrick Herrington & Sutcliffe, who now leads the legal division for software provider Intapp. ‘Conflicts are one of the most challenging parts for getting a merger through, especially with bigger firms,’ Saklad said. ‘If they can’t clear the conflict, they have to make difficult choices sometimes.'”
• “Clients are sometimes unimpressed with ‘ethical walls’ and firms risk malpractice claims. In the last year, Cooley was sued with such claims, and Gibson Dunn & Crutcher was accused by a former client of dropping them to represent an adversary with deeper pockets.”
• “Troutman Pepper is another of several Big Law firms facing malpractice claims from former clients over alleged conflicts of interest. Judlau Contracting is suing the firm for $59 million.”

“Prosecutors Ask Judge to Question Charlie Javice Lawyer Over Alleged Conflict” —

• “Federal prosecutors are asking a judge to investigate whether or not an attorney for Charlie Javice, the founder of the student loan fintech start-up Frank, may have a conflict of interest, given that he represented her in a prior investigation unrelated to her pending fraud case.”
• “David Siegal of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo is not accused of wrongdoing, according to the U.S. Attorney’s Office for the Southern District of New York. But prosecutors do want the judge to bar Siegal from cross-examining witnesses or making arguments relating to matters in which he was personally involved.”
• “The case is before U.S. District Court Judge Alvin Hellerstein of the Southern District of New York. Prosecutors claim Javice willfully misled JPMorganChase into acquiring her start-up for $175 million. She has pleaded not guilty.”
• “Prior to starting Frank—a student financial aid start-up—Javice was employed by JPMorganChase, where multiple colleagues accused her of misconduct unrelated to her federal indictment. Javice was twice interviewed by investigators at Morgan, and Siegal represented her in connection with that investigation and questioning.”
• “The alleged misconduct included misuse of corporate credit cards for personal use, and use of personal emails and devices for business purposes. While Siegal at that point turned over some of Javice’s texts to Morgan investigators, prosecutors say they now know her messages contained significantly more responsive communications—including about the alleged fraud on J.P. Morgan.”
• “Siegal has agreed not to cross examine one of the investigators from Morgan, but has not agreed to ‘refrain from arguing to the jury regarding matters to which he was a witness,’ the letter reads.”
• “Though they do not seek to disqualify him, prosecutors ask Hellerstein to hold a Curcio hearing, to address any potential conflicts that may arise as a sworn or unsworn witness at trial.”
• “Meanwhile, Javice is seeking to sever her case from her co-defendant and former colleague Olivier Amar, claiming they have antagonistic defenses and that he will turn on her.”
• “Prosecutors oppose the motion, saying the request identifies no prejudice and is unsupported to warrant such a request so soon before trial.”