Risk Update

Conflicts News — Gaming Conflict Fight Continues, Evergrande Conflicts Coming

Posted Dan Bressler

“Eckert Can’t Dodge Conflict-Of-Interest Suit, Game Maker Says” —

  • “A Georgia-based game machine maker has urged a Pennsylvania federal court to deny a partial motion to dismiss its amended complaint against its onetime law firm, Eckert Seamans Cherin & Mellott LLC, which it accuses of breaching a fiduciary duty by working both for and against the company in different jurisdictions.”
  • “Pace-o-Matic Inc., which refers to itself as an amusement machine supplier, on Friday accused the Pittsburgh-based law firm of knowingly engaging in a conflict of interest by representing Greenwood Gaming & Entertainment Inc. — which does business as Parx Casino — in litigation against the game maker. It further alleges that Eckert falsely denied involvement in the litigation and ‘surreptitiously’ worked through Hawke McKeon & Sniscak LLP ‘to conceal its breaches of fiduciary duty.'”
  • “Pace-o-Matic had hired Eckert Seamans to represent it in a lawsuit in Virginia in 2016, where the firm argued that Pace-o-Matic’s game machines required the use of skill and therefore weren’t illegal gambling machines. But in 2018, when Pace-o-Matic filed two lawsuits in Pennsylvania over the removal of its games, Eckert Seamans took the opposite position and argued in an amicus brief for the casino operator that Pace-o-Matic’s products were gambling machines and should be barred, the game maker says.”
  • “In April, the court denied the law firm’s argument against Pace-o-Matic’s motion for a preliminary injunction as moot, saying that Eckert Seamans’ declarations that it had withdrawn from representing Parx Casino weren’t enough to guarantee that it wouldn’t resume that representation, likening it to ‘pinky promises.'”
  • “Regarding Eckert’s motion to dismiss, Pace-o-Matic said the firm echoed arguments made in its failed motion for a preliminary injunction, specifically that declaratory relief was unavailable because the issue occurred in the past.”
  • “Further, Pace-o-Matic asked the court to dismiss Eckert’s argument that punitive damages were not available because the amended complaint did not allege ‘outrageous’ conduct. The game maker argued that federal and Pennsylvania courts have consistently held that intentional misrepresentations and knowing breaches of fiduciary duty are sufficient to support a demand for punitive damages.”

“Kirkland, KWM on Evergrande Group’s ‘Lehman Scale’ Crisis” —

  • “Top global law firms are already involved in the debt crisis surrounding China Evergrande Group, the real estate company whose unwieldy debt has prompted concern around the globe about China’s financial system.”
  • “King & Wood Mallesons has been appointed by the Chinese government to investigate the financial indebtedness of the company, according to a Bloomberg report. Kirkland & Ellis has been engaged to represent a group of bondholders to advise it on the potential restructuring of Evergrande.”
  • “According to Eversheds Sutherland debt restructuring partner Kingsley Ong, Evergrande now faces a myriad of legal issues, including how much time will creditors indulge in the company, claims from employees, applications for insolvency protection of on- and offshore assets, for starters. The long list of creditors will also need strong legal representation for claims.”
  • “Many top law firms have previously acted for Evergrande. As recently as this past May, Baker McKenzie advised Evergrande on its US$1.36 billion sale of shares. Last December, Sidley Austin represented Evergrande subsidiary, Evergrande Property Services Group Ltd., on its US$1.4 billion Hong Kong initial public offering. Last August, Sidley also advised Evergrande on a US$3 billion strategic investment from 14 investors.”
  • “The potential conflicts, given the long list of Evergrande creditors, most of whom are based in Asia, are far-reaching. Firms such as Clifford Chance and Linklaters have also declined to comment. Akin Gump Strauss Hauer & Feld, Latham & Watkins, Fangda Partners and Zhong Lun Law Firm all did not respond to requests for comment.”

“McGuireWoods Faces DQ Bid In BofA Foreclosure Bias Fight” —

  • “Keith Thomas told the court on Friday that McGuireWoods is violating the state’s legal ethics rules by representing itself, Bank of America NA and mortgage database company Mortgage Electronic Registration Systems Inc. in the case. Thomas, who is representing himself, cited a 1987 Georgia Supreme Court case known as Cherry v. Coast House that found that attorneys who are parties to a case should not represent co-parties in a matter, according to Friday’s motion.”