Risk Update

Law Firms + Whisteblower Matters — Conflict Alleged, Client Educational Practices Argued

Clark Partington Facing DQ Bid In Fla. Whistleblower Case” —

  • “A former client of Clark Partington Hart Larry Bond & Stackhouse PA has asked a federal judge to disqualify the firm from representing a commercial pilot in a whistleblower case against him over his alleged illegal monopoly control of a northwest Florida airport.”
  • “Clark Partington currently represents commercial pilot Robert Smith in a False Claims Act suit accusing businessman Jay Odom of using a strawman scheme to take full control of the Destin Executive Airport in violation of laws prohibiting monopolies at airports that receive state and federal funds.”
  • “But Odom argued in a brief Wednesday that Clark Partington’s work on his behalf in 2011 in the negotiation of a loan and the creation of entities to hold assets at issue in Smith’s suit meant the firm should be barred from handling the case.”
  • “‘Given the law firm’s prior role as counsel in facilitating one of the schemes cited in the amended complaint as evidence of the fraud alleged as to the Destin airport, disqualification is proper,’ Odom said.”
  • “The request to disqualify Clark Patington in the federal False Claim Acts suit notes that a judge in a related state court case in the First Judicial Circuit Court of Okaloosa County granted a motion to disqualify on Sept. 23 based on the same arguments about the firm’s prior representation of Odom and his companies.”
  • “In reaching that decision, Circuit Judge John T. Brown found that Odom and Clark Partington had an attorney-client relationship and that the law firm’s prior work for Odom was ‘substantially related’ to Smith’s claims of wrongdoing in the current case.”
  • “‘The court finds plaintiff’s counsel violated the duty of loyalty to a former client … given the evidence that Clark Partington law firm previously provided legal representation … in a transaction related to the purchase of a Hammock Bay loan, and the scope of that same representation and transaction are now an issue in this case,’ Judge Brown’s order said.”

In Order to Fairly Represent Whistleblowers, Defense Firms Must Take Conflicts Seriously” —

  • “It is now public knowledge that large corporate defense firms are representing whistleblowers under the Dodd-Frank Act.”
  • “The exact number of corporate defense firms cannot be known, given the confidentiality surrounding SEC investigations. WNN uncovered that out of 64 different law firms that had represented whistleblowers who obtained awards under the SEC Whistleblower Program through 2021, 6 were primarily corporate defense firms.”
  • “No matter the specific number of firms, this marks a major shift in the legal field. The “iron curtain” that historically separated law firms that represent corporate criminals from those that represent whistleblowers has fallen. Whether or not this is a good or bad thing, the shift unquestionably comes with serious ethical, policy and legal implications, and is not without risk for whistleblowers.”
  • “Clearly, there are inherent potential conflicts when a firm which primarily defends corporations accused of fraud takes on a whistleblower who is alleging fraud as a client. Although such representations may be permitted under the attorney’s rules of ethics, local Bar rules, and SEC policy they can still pose a number of issues.”
  • “Corporate fraud cases can progress in unexpected ways and begin to involve new entities as they progress. Thus significant conflicts of interest may exist that are not evident at the commencement of a case.”
  • “Furthermore, the SEC whistleblower law is still relatively new and precedent-setting issues consistently arise. It could be a major conflict of interest if a firm that primarily represents corporations is involved in a precedential case that could expand whistleblower rights and hurt corporations.”
  • “In order to best navigate these obvious conflicts, traditional defense firms should institute a number of procedures and guardrails to minimize risks to whistleblower clients. These procedures and rules should include:
    • Defense firms who represent whistleblowers should identify this on their websites.
    • Defense firms should fully disclose to any potential whistleblower clients how the firm’s primary practice will influence their handling of a whistleblower case.
    • Defense firms should have a plan of how to handle whistleblower cases where whistleblowers engaged in tactics, such as removing documents, which would be unpalatable for their corporate clients.
    • Defense firms need to be prepared for the possibility that their case involves expanding the means by which an employee can gather information about potential wrongdoing by an employer.
    • Before taking on a whistleblower case, defense firms need to fully explore the potential for conflicts of interests in “related actions.” Under the SEC Whistleblower Program, whistleblowers can qualify for awards based on enforcement actions taken by other federal agencies. Firms need to fully explore how potential “related actions” could expand the potential for conflicts among relevant witnesses, parties, and issues.
    • Defense firms should establish protocols to refer whistleblowers to law firms and attorneys who primarily represent whistleblowers. Thus in instances where conflicts exist for defense firms a whistleblower still has access to quality representation.”