“Big Law Firms, Clients Battle Over Advance Conflict Waivers” —

• “The tug-of-war between Big Law firms and their most profitable corporate clients has shifted in favor of firms as they increasingly use advance conflict-of-interest waivers seeking to govern whether, and when, they can represent competing corporations at the same time.”
• “Courts increasingly are finding that firms devising advance waivers are taking care to be more specific so they can avoid being targeted by their own clients over conflicts—or at least can beat them in court when they get sued.”
• “Federal judges over the last 18 months have refused to disqualify leading law firms like Kirkland & Ellis, Sullivan & Cromwell, and Paul Hastings in lawsuits involving companies like Coca-Cola Co. and IBM Corp. This wasn’t the case as little as six years ago, when judges regularly took a harsh view of such waivers.”
• “‘Over time, firms have started drafting better waivers, so that clients feel like their interests are being better protected,’ said Doug Richmond, who advises law firms as a senior vice president with Lockton Companies LLC. As a result, ‘courts are tending to view these waivers with much less hostility than they used to.'”
• “Courts historically have been suspect of ‘very broad blanket’ advance waivers, said Cornell Law School Professor W. Bradley Wendel. But ‘I do think courts are willing to enforce the well drafted ones, and I suspect that law firm in-house counsel have gotten better at drafting them,’ he said.”
• “Legal ethics rules generally prohibit law firms from representing parties adverse to existing clients unless they receive a waiver that allows them to do so. Advance conflict waivers in retainer agreements say clients will waive those conflicts if the situation arises. They provide firms with a ready-made way to ask clients to agree—ahead of time—to allow the firm to represent others in ethically sticky situations.”
• “Determining the boundaries of advance conflict waivers have been key parts of SuperCooler Technologies Inc. v. The Coca Cola Co., IBM Corp. v. Micro Focus Inc., and US v. Tournant. In each, a federal judge granted a firm the right to continue despite alleged conflicts of interest.”
• “A federal court rejected Micro Focus’s motion to disqualify Kirkland from representing IBM in a copyright and breach of contract case, concluding that the law firm’s concurrent representations of IBM and Micro Focus were a ‘consentable conflict to which Micro Focus, a sophisticated user of legal services,’ had provided advance and informed consent.”
• “Micro Focus agreed in writing via the prospective waiver that Kirkland ‘may represent, or may already represent,’ parties in litigation directly adverse to Micro Focus, so long as the matters aren’t ‘substantially related’ to Kirkland’s representation of the company, said Judge Vincent L. Briccetti, of the US District Court for the Southern District of New York.”
• “Another federal judge denied Coca-Cola’s bid to bar Paul Hastings from suing Coke for more than $100 million on behalf of SuperCooler. When the soda giant agreed to the waiver, ‘Coca-Cola knew what Paul Hastings is, what Paul Hastings does, and the types of clients Paul Hastings represents,’ Magistrate Judge Robert M. Norway wrote. Paul Hastings’ engagement letter is ‘unambiguous,’ Norway said. Coke ‘understood and consented’ to the firm serving as counsel to an opposing party in future litigation.”
• “In another case, Sullivan & Cromwell’s failure to advise hedge fund manager Gregoire Tournant of a potential conflict of interest didn’t negate the confidentiality waiver that was part of the engagement letter, said Judge Laura Taylor Swain.”
• “The agreement ‘made a thorough disclosure of the risks and benefits that were posed by the joint representation,’ Swain wrote, and Tournant was represented by independent counsel when he signed it.”
• “‘IBM and SuperCooler are bellwether cases,’ said Matthew Henderson, a legal ethics and professional responsibility partner with Hinshaw & Culbertson. ‘I think this does reflect a trend.'”
• “Waivers feed the confirmation bias myth of the large-firm lawyer as the only advocate ‘who can grasp complex, large corporate transactional matters,’ she wrote in an Oct. 24 paper. ‘That is, until a client reaches a breaking point and files for disqualification.'”
• “Advance waivers have helped Big Law attorneys simply shelve fundamental legal ethics precepts, London said in an interview, like loyalty and fiduciary duty. ‘It may be old-fashioned to say, but clients hire lawyers to be on their side.'”

“We Don’t Need More Disclosure Rules for Litigation Funding” —

• “More litigants are obtaining financing from third-party litigation funders due to rising legal costs, the complexity of litigation, and the need to balance financial disparities between parties. Proponents argue that third-party litigation funding empowers plaintiffs to pursue cases against wealthier defendants.”
  “The necessity of disclosing litigation funding remains contentious. Several US courts—in states such as New Jersey, Texas, and California—have begun requiring parties to disclose funding arrangements. But the rules vary. The US Supreme Court’s Advisory Committee on Civil Rules created a subcommittee to consider the issue of funding disclosure, but the committee’s work will likely be a years-long process.”
  “There are concerns that third-party litigation funding may encourage plaintiffs to seek higher settlements and could improperly sway case strategies, potentially compromising legal integrity. Critics worry lawyers might prioritize funders’ interests over their clients’.”
  “Defense counsel say funding agreement disclosure is essential to clarify the funder’s influence on the case, and courts are cautious about external parties with financial interests but without the ethical obligations attorneys have. The interests of the plaintiffs’ counsel may diverge from their client, especially if a settlement doesn’t adequately cover or exceed the client’s recovery and the third-party litigation funder’s claim.”
  “The ethical rules governing an attorney’s duty to consult with and keep their clients informed are primarily outlined in Rule 1.4 of the American Bar Association’s Model Rules of Professional Conduct. These rules are intended to ensure that clients are well-informed and can make educated decisions about their legal representation.”
  “The justification for third-party litigation funding disclosure hinges on the assumption that attorneys may prioritize their personal interests or the funder’s interests over their clients.’ But existing attorney ethics rules, such as Rule 1.7 and New York Rule of Professional Conduct 1.8(i), already address potential conflicts. These rules aim to ensure attorneys remain loyal to their clients, making additional disclosure requirements redundant.”
  “The question is whether special rules are needed to ensure compliance with existing ethical rules.”
  “Judges are vigilant about ethical violations, including conduct they suspect may result from third-party litigation funding. They recognize unreasonable behavior through various courtroom interactions, including motions and mediations. Inevitably, irrational and unreasonable behavior becomes apparent and judges know how to deal with it.”
  “Attorneys are the face of a case to the court. They—not the third-party litigation funder—risk sanctions when they cede control over litigation. Attorneys had better know that risk when they sign up for the litigation funding that includes giving control to the third-party litigation funder.”
  “Law firms may use other forms of financing to fund litigation such as a firm line of credit, which may be used for day-to-day operating expenses as well as to fund litigation. And the firm’s overall financial health can affect litigation strategies. Disclosure of third-party litigation funding may lead to revealing other potential direct and indirect financial influences on case strategy to the defendant’s advantage.”
  “Disclosure of litigation funding gives an advantage to the defense counsel in knowing how long it can run the meter of its adversary before bringing the adversary to its knees.”
  “Courts should decide cases with third-party litigation funding the same way as those without: on the law and the facts. The existing ethics rules and careful judicial oversight are sufficient safeguards against misconduct.”