Risk Update

Conflicts News — Judicial Stock Ownership (Round Two), Alleged Conflict + Negligence + Breach of Fiduciary Duty

Posted Dan Bressler

“You Got Our Judge Recused? Fine, We’ll Get Your Judge Recused” —

  • “Paul Andre and Centripetal Networks Inc. got some payback last week at the Patent Trial and Appeal Board. Last year Andre and his Silicon Valley colleagues at Kramer Levin Naftalis & Frankel saw a $2.75 billion patent infringement judgment they’d won against Cisco Systems Inc. wiped out at the U.S. Court of Appeals for the Federal Circuit. U.S. District Judge Henry Morgan was disqualified because his wife held $4,687.99 worth of stock in Cisco. The case has been assigned to U.S. District Judge Elizabeth Hanes for a retrial.”
  • “Now Andre and Centripetal have forced an administrative judge on the PTAB to recuse himself from a case involving Cisco and one of the same cybersecurity patents at issue in the retrial. The reason: The judge has held Cisco stock worth $1,000 to $15,000.”
  • “McNamara noted that the U.S. Office of Government Ethics’ threshold for recusal is $15,000, which his holdings remain below. But ‘in order to reduce the number of issues and simplify the briefing, I withdraw from the panel effective immediately and will not further participate in this proceeding,’ the judge wrote in a four-page order.”
  • “Andre argued that McNamara has reported to the Office of Government Ethics that he holds Cisco stock and receives income as a retired partner from Foley & Lardner, which counts Cisco as a client, all while presiding over Palo Alto Networks’ challenges to patents that Centripetal has asserted against Cisco.”
  • “‘These conflicts cannot be reconciled with Federal Circuit precedent,’ Andre wrote, citing the 2021 decision that went against him. ‘It simply cannot be correct that an Article III judge’s wife’s holding of Cisco stock can nullify his validity determination while an administrative judge can knowingly hold the same Cisco stock and decide a collateral attack on that very judgment.'”

“Brown Fox and Dallas Lawyer Sued for Alleged Negligence, Breach of Fiduciary Duty” —

  • “A security industry company in Houston sued its defense attorneys for alleged negligence involving a representation conflict and not utilizing an insurance policy that could have covered its legal fees and the judgment.”
  • “The client, GG Security Group LLC, sued Dallas attorney Brandi J. McKay and the law firm Brown Fox after losing a trade secrets dispute case in Harris County state court.”
  • “Brown Fox represented GG Security and Zumwalt without advising GG Security of the pros and cons of the joint representation, the suit alleges.”
  • “‘Indeed, Zumwalt was the culpable party, not GG Security. Yet, the lawyers failed to obtain informed consent to the joint representation,’ the lawsuit said. ‘Because of the conflicted representation, the lawyers failed to assert cross claims against Zumwalt on behalf of GG Security or asset legal positions which would distance GG Security from Zumwalt.'”
  • “The complaint further alleges its law firm failed to designate an expert on trade secret matters and failed to recognize that GG Security had a $3 million insurance policy that would have covered the claims made against it. As a result, GG Security had to absorb the cost of defense, hundreds of thousands of dollars, including fees incurred by Zumwalt, and a judgment in excess of $1 million, it states.”
  • “Eventually, the company could not afford the legal costs and its attorneys moved to withdraw as counsel. The 189th District Court granted the motion May 10, 2022.”
  • “Ten days later, Brown Fox sued GG Security for breach of contract, seeking more than $85,279 in alleged unpaid attorney fees, the complaint said, and further alleges Zumwalt conspired with the attorneys, without notice to GG Security CEO Mark Mabile to agree to a judgment against GG Security for the $85,279, plus pre- and post-judgment interest.”