Risk Update

Law Firm Ethical Screens — Ethical Walls Policies, Processes and Practices Under Increasing Scrutiny

Posted Dan Bressler


“Recent Federal Cases Signal Increased Scrutiny of Ethical Wall Procedures” —

  • “In this article, we discuss best practices for effective implementation of ethical walls in light of two recent developments—the decision by the U.S. Attorney’s Office for the Southern District of New York (S.D.N.Y.) to proactively seek a special master to review materials seized from Rudy Giuliani’s home, and the Department of Justice Antitrust Division’s recent request for a federal court to probe the adequacy of an ethical wall at the law firm of Morgan, Lewis & Bockius related to their representation of co-defendants Glenmark and Teva in a price-fixing prosecution pending in the Eastern District of Pennsylvania, which led to Morgan Lewis’s withdrawal from the matter.”
  • “The other recent prominent proceeding involving ethical walls stems from a DOJ Antitrust price-fixing prosecution against Glenmark and Teva pending in the Eastern District of Pennsylvania. In that case, in connection with a conflict of interest hearing, the DOJ asked the court to assess the adequacy of ethical walls that the law firm of Morgan, Lewis & Bockius put in place as a result of its current representation of Glenmark and prior representation of Teva in the criminal matter, as well as its current representation of both companies in parallel civil cases.”
  • “The DOJ requested that the court ask Morgan Lewis to submit written answers to over 40 questions about the details of its internal ethical wall procedures, including how it is staffing and managing its ethical walls in light of Pennsylvania ethical rules and how it is handling the issue of fee-sharing between attorneys working on both matters.”
  • “The government also requested that Glenmark and Teva answer similar sets of questions regarding their understanding of these procedures, including whether each company had consulted with independent counsel. See id. at 3-6. Glenmark initially opposed the government’s request, noting that it was prepared to waive any conflict of interest and calling the government’s proposed requests unprecedented, ‘overbroad, intrusive, and entirely unnecessary.’ Glenmark further argued that the government ‘seems to be attempting to impose broad restrictions on Glenmark’s trial preparation and use of its chosen legal team.'”
  • “This extensive inquiry, especially the questions directed to Morgan Lewis concerning its own internal procedures for implementing ethical walls, went beyond the typical Curcio hearing procedure and signals that firms may have to implement stricter procedures in certain cases to assure the government and courts of their ability to follow ethical rules and guidelines.”
  • “Second, the Morgan Lewis matter provides guidance for firms looking to construct ethical walls that will withstand heightened scrutiny. In addition to taking standard precautions such as limiting information-sharing and personnel overlap, firms should consider segregating fees where circumstances may justify taking such steps, and should consider formulating specific procedures to educate and advise clients about the procedures being followed to ensure that no conflicts arise. In such cases, firms may also evaluate whether it is appropriate for clients to consult with independent counsel (as the government suggested was appropriate for Glenmark and Teva to do), and if so, how best to effectuate that process.”