Risk Update

Law Firm Verein & DQ News — Russian Bank Case Consultation DQ, Dentons Verein Pain Persists on Malpractice Appeal

Baker McKenzie DQ’d From Russian Bank Case” —

  • “A Georgia federal judge has disqualified Baker McKenzie from representing a Russian bank in its loan fraud fight against an agricultural supply business that the law firm had advised on restructuring, affirming a magistrate judge’s decision in July.”
  • “Discovery for the bank fraud case will be placed on hold until VUZ-Bank JSC finds new counsel, as Baker McKenzie has a conflict of interest with the defendant in the case, Dubai, United Arab Emirates-based Hakan Agro DMCC, U.S. District Judge Victoria Marie Calvert found on Wednesday.”
  • “The bank filed the suit in Atlanta to get discovery from Anderson in its bid to bolster criminal proceedings against Hakan Agro and affiliates in Dubai. But its chosen law firm Baker McKenzie had met with Hakan Agro’s agent in June 2021 to discuss the company’s insolvency and possible liquidation following Bahceci’s death in May 2020.”
  • “The firm received ‘at least some confidential information’ from the agent during the consultation, Judge Calvert said, at a time when its client VUZ-Bank had interests ‘materially adverse’ to Hakan Agro.”
  • “‘It is also undisputed that neither VUZ Bank nor Hakan Agro gave informed consent in writing to the conflict, particularly given that Baker McKenzie lawyers had represented that there were no conflicts with the representation of Hakan Agro,’ the judge said.”
  • “Baker McKenzie said it had not officially represented Hakan Agro and had not shared or misused any of the company’s information.”
  • “The firm had represented VUZ against the Hakan entities since September 2020, case filings show. Baker McKenzie provided insolvency advice to Hakan Agro several months later, claiming that it had no conflicts. However, by the time the firm was giving advice to Hakan Agro on its liquidation, it had already won judgments against Hakan Holdings on that very issue.”

Top Ohio Court Rejects Dentons Appeal Testing Big Law Model” —

  • “Dentons on Tuesday lost a bid to have the Ohio Supreme Court review a $32.3 million malpractice verdict in a case with implications for law firms that use a Swiss verein model.”
  • “The decision means Dentons remains on the hook for a malpractice award given to the plaintiff in the case, RevoLaze Inc., an Ohio company that uses lasers for denim products.”
  • “RevoLaze argued that Dentons shouldn’t have taken on the company’s patent case in 2015 because one of the firm’s Swiss verein affiliates in Canada had represented Gap Inc., which RevoLaze sued for patent infringement.”
  • “The verein structure lets law operations affiliate to market services under one brand while avoiding a full-on merger. Affiliates limit liability between offices and keep separate on matters such as profits, pay and taxes.”
  • “The RevoLaze case tests whether firms using the Swiss verein model must do conflicts checks with all affiliates in their networks before deciding to take on a client.”
  • “Verein firms risk losing business if they’re required to disclose conflicts related to affiliates’ work. Existing clients may balk at other representations, and potential clients could decide to go elsewhere.”
  • “At least six major U.S. law firms adopted the Swiss verein model, including DLA Piper, Squire Patton Boggs, Baker McKenzie, Norton Rose Fulbright and Littler Mendelson. Clients of the six firms may raise new questions about the process to ferret out possible conflicts, said Cassandra Burke Robertson, director of the center for professional ethics at Case Western Reserve University School of Law. The clients may find new firms if they don’t like the answers, she said.”
  • “‘What’s more important is that these law firms be more proactive with their clients’ about conflicts, Robertson said.”
  • “Dentons said in a statement that the case isn’t about its structure but whether a firm can rely on a client’s consent regarding a future conflict of interest.”