Risk Update

Disqualification Motions — Law DQ Sought (Nazi-plundered Art Suit), Firm DQ Sought (Earplug Bankruptcy Fight)

Posted Dan Bressler

“Nixon Peabody Atty Faces DQ Bid In Nazi-Plundered Art Suit” —

  • “The heirs of a Jewish art collector claim a Nixon Peabody lawyer representing the Museum of Fine Arts, Houston, should be disqualified because he is filling the roles of both witness and advocate.”
  • “Heirs of Max Emden, who allegedly was forced to sell paintings to an art buyer for Adolf Hitler in 1938, asked a federal judge in the Southern District of Texas to kick Thaddeus Stauber of Nixon Peabody LLP off the case, in a motion filed on Thursday. They claim that Stauber is acting as both attorney and witness and that if allowed to argue before a jury, it could muddy jurors’ understanding of what is fact and what is opinion.”
  • “At a hearing in March before U.S. District Judge Keith P. Ellison to address a motion to dismiss the heirs’ original complaint, Stauber argued for the defense and reportedly referred to his role in investigating the history of the ownership of ‘The Marketplace at Pirna.’ Stauber traveled to Berlin and Munich with museum representatives, including Peter Marzio, who is now deceased, and wrote letters that the heirs claim are central to the defense’s case.”
  • “The heirs argue that procedural rules support Stauber’s disqualification. The heirs say that they will be prejudiced by juror confusion if Stauber is allowed to act in ‘dual roles.’ They also note that as a defense lawyer Stauber will be allowed to remain in the courtroom throughout the trial while other witnesses are excluded so that their testimony is not influenced by the proceedings.”

“U.S. Watchdog Wants Kirkland Out of 3M Earplug Unit Bankruptcy” —

  • “The Justice Department’s bankruptcy watchdog wants Kirkland & Ellis LLP removed as counsel to 3M Co.’s bankrupt earplug manufacturing unit, saying the law firm has a conflict because it also defends the parent company in mass earplug lawsuits.”
  • “Kirkland & Ellis doesn’t possess ‘undivided loyalty’ to its client, 3M subsidiary Aearo Technologies LLC, according to court papers filed by the Office of the U.S. Trustee on Thursday objecting to the firm’s retention. The U.S. Trustee said that Kirkland can’t be loyal to Aearo because its bankruptcy process is being financed by 3M, which the firm also represents in roughly 230,000 personal injury lawsuits pending against the company in federal court in Pensacola, Fla.”
  • “3M placed Aearo under chapter 11 protection in July in the U.S. Bankruptcy Court in Indianapolis, hoping to move the earplug lawsuits against the subsidiary and its solvent parent out of the tort system. Aearo’s chief restructuring officer said in court papers in August that Kirkland is well qualified and uniquely able to represent Aearo in chapter 11 because of its familiarity with the company’s business and potential legal issues that might arise in bankruptcy.”
  • “The bankruptcy depends on 3M’s commitment to provide unlimited funding toward resolving the earplug litigation in return for a full release from liability. As counsel to Aearo, Kirkland has a fiduciary duty to maximize 3M’s contribution—and by implication to maximize 3M’s share of their combined tort liability, the U.S. Trustee said Thursday.”
  • “‘Yet this presents a conflict with Kirkland’s duty, in its capacity as litigation counsel to 3M, to minimize those same liabilities as to 3M,’ government lawyers wrote.”