Risk Update

Law Firm Conflicts — “Tokenized” Conflict Allegation, Canadian Class Conflict Choice

Alberta Court of Queen’s Bench Finds Conflict of Interest for Class Counsel Also Representing Individual” —

  • “In Smith v Lafarge Canada Inc, 2022 ABQB 289 [Smith], the Court of Queen’s Bench considered a preliminary application arising out of a proposed class action which involved claims advanced on behalf of the proposed class as well as individual claims specific to the proposed representative plaintiff.”
  • “The Court found that the individual claims should be stayed pending certification and found an inherent conflict in counsel for the proposed class also representing the proposed representative plaintiff with his individual claims. The case demonstrates a strong presumption that class counsel should not act for plaintiffs in pursuing individual claims related to the class action before or after certification.”
  • “Smith, a former employee of Lafarge Canada, brought an action on behalf of all current and former Lafarge employees, alleging that Lafarge underpaid amounts due to employees under employment standards and purposely omitted information from pay statements, depriving employees of the information required to ascertain whether their pay was properly calculated.”
  • “The plaintiff also advanced an individual claim that he had been terminated on the basis of his age, constituting discrimination on grounds prohibited under the Alberta Human Rights Act.”
  • “Justice Eamon found that the inherent nature of a class action creates sufficient risk of a conflict to bar counsel from joint representation of both the proposed class and individual claims.”
  • ” Since the class included employees of various ages, age discrimination was not a common fact among all class members. As for issues of law, Justice Eamon found that a claim for age discrimination could only give rise to discrete damages under the Alberta Human Rights Act, which lack any obvious link to the common issues of systematic underpayment or mental distress arising from wrongful termination. The age discrimination claim bore only superficial connection to the class claims, and as such was discrete and severable.”
  • “On the basis of this potential for conflict, Justice Eamon ordered that the plaintiff’s counsel of record be removed from either the class action or the discrimination claim, at the plaintiff’s choice.”

Fox Rothschild Faces New DQ Bid In Athlete Startup Case” —

  • “A startup seeking to ‘tokenize’ and sell shares of professional athletes said Fox Rothschild LLP should be disqualified from representing investors in a $1 million fraud lawsuit against the company, claiming the firm was ‘preparing to file the current complaint’ while simultaneously representing those now being sued.”
  • “Cypress Holdings sued startup SportBLX, parent company GlassBridge Enterprises and the startup’s founders George Hall and Joseph DePerio in February, claiming investors were duped into pouring $1 million into the venture in 2019 based on misrepresentations of a business plan that never materialized.”
  • “In a letter Friday to U.S. District Judge Lorna G. Schofield, Hall and DePerio said Fox Rothschild attorneys repeatedly reassured them in emails throughout 2019 that the firm and attorney Marc Gross were not also representing Cypress.”
  • “DePerio said he alerted Fox Rothschild partner Pamela Thein to a letter from Gross about ‘certain potential claims of Cypress in connection with its investment,’ prompting Thein to respond that the firm was withdrawing from representing the investor group.”
  • “DePerio wrote to Fox Rothschild again several times over the coming months asking why Gross was still being copied on emails from Cypress.”
  • “GlassBridge said it paid Fox Rothschild almost $850,000 in legal fees before the firm ended representation in early November 2021, two months before Cypress sued. ‘Essentially, GlassBridge spent nearly a million dollars on Fox Rothschild’s services during the same time the firm was apparently preparing to file the current complaint. GlassBridge was also a significant owner of Sport-BLX,’ Friday’s letter said.”
  • “Gross said he was not concerned about the latest letter or the emails. ‘I know what occurred,’ he said. ‘So I suspect that if a motion is filed, the defendants are going to lose and usually defendants do this when they think that changing counsel will impact the way the case is going to develop.'”