Risk Update

Law Firm Conflicts Calls — Boies Busted? Walmart Wins Slipping Playbook Conflict Contention, Standing Scopes Conflicts-driven Malpractice Matter

Boies Schiller tripped up in apparent conflict in FirstEnergy derivative suit” —

  • “The weirdest shareholder litigation saga I’ve ever encountered has snagged Boies Schiller Flexner in what appears to be a conflicts kerfuffle.”
  • “On July 26, David Boies filed an application before U.S. District Judge John Adams of Akron, asking Adams to appoint Boies Schiller to represent shareholders pursuing derivative claims against directors of the Ohio utility FirstEnergy Corp, which has admitted to paying millions of dollars in bribes to Ohio lawmakers in exchange for favorable legislation. In the application, Boies emphasized his firm’s stellar record in complex litigation and pledged that Boies Schiller would expend whatever time and money is needed to hold the company’s officers and board members to account.”
  • “What Boies did not mention in the July 26 filing with Adams is that Boies Schiller is actually defending a former FirstEnergy vice president, Eileen Mikkelsen, in parallel derivative litigation before a different Ohio federal judge, U.S. District Judge Algenon Marbley of Columbus.”
  • “Boies Schiller, in other words, sought appointment to launch a big new discovery push for shareholders in a case it had already settled on behalf of a defendant.”
  • “That is, um, not something you see every day.”
  • “Adams said in the Aug. 15 order that one applicant had withdrawn its bid ‘following the discovery of a possible conflict of interest.’ He did not name the possibly conflicted firm, but it was presumably Boies Schiller.”
  • “It would have been interesting to see how Bernstein Litowitz, Saxena and Cohen Milstein would have reacted if Boies had been appointed. As veterans of countless lead counsel battles, shareholder firms like these are great at impugning competitors. I can only imagine the sputtering indignation that would have greeted Boies’ appointment as shareholder counsel after the firm signed a global settlement releasing the very claims being investigated.”

Walmart Gets Plaintiff’s Lawyer Disqualified in Negligence Suit” —

  • “Walmart Inc. convinced a federal judge in Wisconsin to disqualify the law firm of a plaintiff suing over a slip and fall at a Walmart store, due to a conflict of interest.”
  • “Jennifer Gnaciski sued Walmart and subsidiaries in January, saying their negligence caused the plaintiff to slip and fall at a store in Fond du Lac, Wisconsin. The suit was removed to federal court, and the defendants moved to disqualify Eric L. Andrews of Dunk Law Firm due to his previous employment with MHW Law Group LLP, which represents Walmart in that action.”
  • “Judge Pamela Pepper of the US District Court for the Eastern District of Wisconsin granted that disqualification bid on Tuesday, noting that Andrews had been employed with MWH Law Group as recently as December 2021.”
  • “The court highlighted the fact that Andrews regularly represented Walmart in slip-and-fall cases, many of them with similar fact patterns as this one.”
  • “‘There is a substantial risk that Andrews obtained information about the defendants’ confidential litigation strategies obtained through his representation of the defendants that would materially advance the plaintiff’s position in this case,’ Pepper wrote in the court’s opinion. ‘He has had access to the defendants’ settlement pay ranges, payment thresholds, internal interests and motives and nonpublic information about store operations.'”

District Court Must Reconsider Legal Mal Suit Against Cozen O’Connor Over $20M Deal, Third Circuit Says” —

  • “A Pennsylvania appeals court improperly dismissed a legal malpractice suit against Cozen O’Connor, the U.S. Court of Appeals for the Third Circuit has ruled in a precedential decision that sheds new light on standing principles in shareholder litigation.”
  • “Wading into an open question of law, the appellate court ruled Wednesday in Potter v. Cozen O’Connor that the U.S. District Court for the Eastern District of Pennsylvania improperly analyzed and dismissed the case on jurisdictional grounds, when in fact it should have viewed the defendants’ challenge as a merits-related standing issue.”
  • “In remanding the case for further review, Judge Cheryl Ann Krause, who wrote the court’s 18-page opinion, drew a distinction between ‘Article III standing and ‘prudential’ standing for shareholders.”
  • “The dispute stems from allegations that an alleged conflict of interest by Cozen O’Connor attorneys during a $20 million deal led to significant losses for shareholders of the company that was sold. Specifically, the plaintiff Adam Potter alleged that attorneys Anne Blume and Anne Madonia were involved in the sale, and that, unbeknownst to him and the only other shareholder, Moxie HC LLC, Cozen O’Connor had represented the company called The Institutes LLC, which ended up making the purchase.”
  • “Potter further alleged that, when he asked Blume directly if there was a conflict, the lawyer ‘brushed aside the question and continued to provide legal advice.'”
  • “However, after the close, the shareholders allegedly learned their company had been sold substantially below market value, and that confidential information Blume learned while working with Potter had been used to aid the purchaser.”
  • “Focusing on that discrepancy, Cozen O’Connor sought to dismiss the case, arguing that under the “shareholder standing rule” the shareholders did not have the legal right to bring the corporate entity’s claims in their own names. Potter, however, countered, arguing that Cozen O’Connor was attacking their Article II standing to be in federal court.”
  • “Krause said the district court took elements of both arguments, and ultimately determined that, because only the corporate entity suffered the harm, the shareholders lacked Article III standing. On appeal, Krause, who was joined by Judges Kent Jordan and David Porter, looked to whether the shareholder standing rule can actually deprive a party of Article III jurisdiction.”