Bressler Risk Blog

“Troutman Pepper Locke Navigates Sticky Conflict After Merger” —

• “Troutman Pepper Locke is using an ‘ethical wall’ within the firm so its lawyers can represent clients on opposing sides of a bankruptcy proceeding, a firm partner told a Texas court.”
• “The firm’s lawyers are seeking to collect legal fees from a bankrupt client while simultaneously representing some of that client’s creditors. The client and creditors had been represented by separate firms, Troutman Pepper and Locke Lord, until those two operations merged Jan. 1.”
• “‘The firm has created an ethical wall completely separating legacy Locke Lord lawyers working on matters for the debtors from legacy Troutman Pepper lawyers working on matters involving the debtors,’ partner Thomas Yoxall told a Texas bankruptcy court in a Jan. 8 filing in a case involving Steward Health Care System. Yoxall and the firm didn’t respond to requests for comment on the filing.”
• “Lingering conflicts are an increasing problem for law firms that choose to balloon in size through mergers. They pose a risk to the new firms that lawyers will need to quit to resolve the situations or that clients will file malpractice suits over the representation issues.”
• “The merger between Troutman Pepper and Locke Lord created one of the 50 largest US legal operations, manifesting a trend in which firms merge to achieve scale and remain competitive. The predecessor operations reported more than $1.5 billion in combined revenue in 2023, and leaders of the two firms touted that post-merger they’d have 1,600 lawyers and 35 offices in the US and Europe.”
• “Resolving potential conflicts led to a delay in finalizing Troutman Pepper Locke’s merger, with Locke Lord ultimately showing the door to some lawyers with conflicting clients, according to two sources familiar with the deal.”
• “‘It’s axiomatic in these big law firms that as they get bigger, they get more conflicts of interest,’ said Ashley London, director of bar studies and assistant professor of law at Duquesne University.”
• “Bankruptcy law requires professionals seeking payment from an estate to disclose potential conflicts. Merging firms resolve such situations by asking clients to sign conflict waivers or by creating an ‘ethical wall’ that prevents attorneys from representing clients with adverse interests to other clients.”
• “If firms don’t get a client’s consent regarding conflicts, they may have to drop out, said Laura Saklad, former chief operating officer of Orrick Herrington & Sutcliffe, who now leads the legal division for software provider Intapp. ‘Conflicts are one of the most challenging parts for getting a merger through, especially with bigger firms,’ Saklad said. ‘If they can’t clear the conflict, they have to make difficult choices sometimes.'”
• “Clients are sometimes unimpressed with ‘ethical walls’ and firms risk malpractice claims. In the last year, Cooley was sued with such claims, and Gibson Dunn & Crutcher was accused by a former client of dropping them to represent an adversary with deeper pockets.”
• “Troutman Pepper is another of several Big Law firms facing malpractice claims from former clients over alleged conflicts of interest. Judlau Contracting is suing the firm for $59 million.”

“Prosecutors Ask Judge to Question Charlie Javice Lawyer Over Alleged Conflict” —

• “Federal prosecutors are asking a judge to investigate whether or not an attorney for Charlie Javice, the founder of the student loan fintech start-up Frank, may have a conflict of interest, given that he represented her in a prior investigation unrelated to her pending fraud case.”
• “David Siegal of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo is not accused of wrongdoing, according to the U.S. Attorney’s Office for the Southern District of New York. But prosecutors do want the judge to bar Siegal from cross-examining witnesses or making arguments relating to matters in which he was personally involved.”
• “The case is before U.S. District Court Judge Alvin Hellerstein of the Southern District of New York. Prosecutors claim Javice willfully misled JPMorganChase into acquiring her start-up for $175 million. She has pleaded not guilty.”
• “Prior to starting Frank—a student financial aid start-up—Javice was employed by JPMorganChase, where multiple colleagues accused her of misconduct unrelated to her federal indictment. Javice was twice interviewed by investigators at Morgan, and Siegal represented her in connection with that investigation and questioning.”
• “The alleged misconduct included misuse of corporate credit cards for personal use, and use of personal emails and devices for business purposes. While Siegal at that point turned over some of Javice’s texts to Morgan investigators, prosecutors say they now know her messages contained significantly more responsive communications—including about the alleged fraud on J.P. Morgan.”
• “Siegal has agreed not to cross examine one of the investigators from Morgan, but has not agreed to ‘refrain from arguing to the jury regarding matters to which he was a witness,’ the letter reads.”
• “Though they do not seek to disqualify him, prosecutors ask Hellerstein to hold a Curcio hearing, to address any potential conflicts that may arise as a sworn or unsworn witness at trial.”
• “Meanwhile, Javice is seeking to sever her case from her co-defendant and former colleague Olivier Amar, claiming they have antagonistic defenses and that he will turn on her.”
• “Prosecutors oppose the motion, saying the request identifies no prejudice and is unsupported to warrant such a request so soon before trial.”

“Cleveland fires law firm after it agrees to assist Brook Park on Browns stadium” —

• “Mayor Justin Bibb is firing a law firm that was helping Cleveland raise funds for waterfront development as well as ballpark and arena repairs — since that law firm is now representing Brook Park as it tries to attract the Cleveland Browns.”
• “Cleveland’s Law Director Mark Griffin sent a letter to Bricker Graydon LLP on Wednesday saying he ‘was extremely disappointed’ with the law firm’s decision to represent Brook Park on the Browns’ stadium issues. Griffin said Bricker Graydon can’t represent both cities without a conflict of interest.”
• “‘Bricker’s access to Cleveland’s confidential information renders it impossible to now represent Brook Park in such an adversarial posture,’ Griffin wrote.”
• “The Browns are looking at building a $2.4 billion domed stadium in Brook Park that would be part of a much larger entertainment district on a 176-acre plot. Cleveland, meanwhile, wants the Browns to stay on the lakefront and has invoked the ‘Modell Law’ to try to stop the football team’s move to the suburbs.”
• “Bricker Graydon said in a statement that many legal issues it will help Brook Park with — including zoning, permitting and real estate — don’t present a conflict of interest.”
• “‘We see no scenario where the City of Cleveland will be on the other side of those issues,’ the statement from Bricker Graydon said. The law firm added that it values its relationship with Cleveland and plans to work with the city on these concerns in the coming days.”
• “Griffin said in his letter that keeping the Browns in downtown Cleveland was an important element of these plans. Bricker was privy to Cleveland’s strategy when it comes to both funding sports stadiums and retaining teams, Griffin said.”
• “Bricker Graydon didn’t tell Cleveland it was considering working with Brook Park, according to Griffin’s letter. Cleveland is now ending three contracts with the law firm and asking it to address the potential conflict of interests.”
• “‘The interests of Cleveland and Brook Park are direct and indirectly adverse with respect to providing a stadium for the Browns,’ Griffin wrote. ‘The team can only play in one city.'”
• “Bricker Graydon said it was never retained by Cleveland for work related to the Browns, the Haslams, the Modell lawsuit or the ongoing stadium issue. The firm said it also has not been hired by the Browns or Haslam family, and only took the Brook Park job months after the team announced its intention to move.”

“US law firm accused of ethics breach in Blue Cross antitrust lawsuit” —

• “A prominent U.S. law firm has been accused of misusing confidential information it obtained in antitrust litigation against insurance giant Blue Cross Blue Shield to woo new health care provider clients to sue the company.”
• “The accusations against Zuckerman Spaeder were made on Friday in a U.S. court filing in Alabama by a group of lawyers representing hospitals and other providers in a proposed $2.8 billion settlement with Blue Cross.”
• “The attorneys said Zuckerman Spaeder was disparaging the class action settlement while urging hospitals to bring their own lawsuits. The attorneys asked a U.S. judge to bar the Washington, D.C.-based law firm from representing providers.”
• ‘This motion is completely without basis,’ Zuckerman partner Cyril Smith said in a statement. ‘Neither I nor my firm has violated any ethical rule or standard.'”
• “Smith was named to the five-person plaintiffs’ steering committee that helped direct the litigation in federal court in Alabama. Blue Cross agreed to a $2.7 billion settlement with the subscribers in 2020, and the U.S. Supreme Court last year upheld the accord. Blue Cross has denied any wrongdoing. In October, Blue Cross said it would pay another $2.8 billion and implement a series of reforms to resolve claims from health providers that they were underpaid for reimbursements. That deal won preliminary approval in December.”
• “The providers’ lawyers told Chief U.S. District Judge R. David Proctor in Birmingham on Friday that Smith was ‘affirmatively advertising’ his prior access to confidential litigation information to drive new business to his firm, in violation of prior obligations as a class counsel for the subscriber settlement.”
• “‘Mr. Smith has already been well paid for his work for the subscribers; he should not be allowed to monetize his violations of his ethical obligations,’ the attorneys told the court.”
• “The case is In re: Blue Cross Blue Shield Antitrust Litigation, U.S. District Court for the Northern District of Alabama, No. 2:13-cv-20000-RDP.”

“Trump’s company taps ex-Bannon lawyer as outside ethics advisor” —

• “U.S. President-elect Donald Trump’s company said Friday it has retained William Burck, a managing partner of U.S. trial firm Quinn Emanuel Urquhart & Sullivan and longtime Republican insider, as its outside ethics advisor.”
• “Burck will help the Trump Organization develop and maintain internal ethics policies to ward against conflicts of interest, the company said in a press release posted on X by Trump’s son Eric, who is an executive vice president of the company.”
• “The Trump Organization consists of hundreds of companies that are ultimately owned by the Republican president-elect, including his golf and resort business. Reuters has estimated the company was on track to generate over $600 million in revenue last year.”
• “Eric Trump told Reuters last month there will be a ‘very large wall’ separating the Trump Organization’s business activity from the U.S. government.”
• “Burck said in an email that the Trump Organization assignment would have no effect on his role at Quinn Emanuel. The 1,000-lawyer firm’s other clients include billionaire Tesla CEO and Trump ally Elon Musk.”
• “Burck previously defended Trump’s former political strategist Steve Bannon on charges of defrauding donors in a border-wall scheme, which were dismissed when Bannon was pardoned by Trump. Burck also represented Bannon before a U.S. Senate committee investigating the Trump campaign’s links to Russia, and he represented ex-Trump officials including U.S. Secretary of State Mike Pompeo and former White House Counsel Don McGahn.”
• “Earlier Burck was a federal prosecutor in Manhattan and served as deputy White House counsel in the George W. Bush administration.”
• “China-based drone maker DJI last month hired Quinn Emanuel in a lawsuit challenging DJI’s inclusion on a U.S. Defense Department list of entities allegedly working with Beijing’s military.”
• “Asked if Quinn Emanuel’s work for DJI could raise conflict concerns when the incoming Trump administration inherits responsibility to defend against the case, Burck said the firm is ‘governed by bar ethics and conflicts rules and will abide by them as we always do.'”

See also: “President-Elect Trump’s New White Paper on Conflicts of Interest”

“What to Know About the HHS HIPAA Security Standards Proposal” —

• “At the close of 2024, the Office for Civil Rights (OCR) at the U.S. Department of Health and Human Services (HHS) issued a Notice of Proposed Rulemaking (the Proposed Rule) to amend the Security Rule regulations established for protecting electronic health information under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The updated regulations would increase cybersecurity protection requirements for electronic protected health information (ePHI) maintained by covered entities and their business associates to combat rising cyber threats in the health care industry.”
• “The Proposed Rule seeks to strengthen the HIPAA Security Rule requirements in various ways, including:”
  • “Removing the ‘addressable’ standard for security safeguard implementation specifications and making all implementation specifications ‘required.’ This, in turn, will require written documentation of all Security Rule policies and encryption of all ePHI, except in narrow circumstances.”
  • “Requiring the development or revision of technology asset inventories and network maps to illustrate the movement of ePHI throughout electronic information system(s) on an ongoing basis, to be addressed not less than annually and in response to updates to an entity’s environment or operations potentially affecting ePHI.”
  • “Setting forth specific requirements for conducting a risk analysis, including identifying all reasonably anticipated threats to the confidentiality, integrity, and availability of ePHI, identifying potential vulnerabilities, and assigning a risk level for each threat and vulnerability identified.”
  • “Requiring prompt notification (within 24 hours) to other healthcare providers or business associates with access to an entity’s systems of a change or termination of a workforce member’s access to ePHI; in other words, entities will now be obligated to immediately communicate changes if an employee’s or contractor’s access to patient data is altered or revoked to mitigate the risk of unauthorized access to ePHI.”
  • “Establishing written procedures on how the entity will restore the loss of relevant electronic information systems and data within 72 hours.”
  • “Requiring encryption of ePHI at rest and in transit.”
  • “Requiring specific security safeguards on workstations with access to ePHI and/or storage of ePHI, including anti-malware software, removal of extraneous software from ePHI systems, and disabling network ports pursuant to the entity’s risk analysis.”
  • “Requiring vulnerability scanning at least every six (6) months and penetration testing at least once every year.”
  • “Requiring network segmentation.”
• “The Proposed Rule notably includes some requirements specific to business associates only. These include a proposed new requirement for business associates to notify covered entities (and subcontractors to notify business associates) within 24 hours of activating their contingency plans. Business associates would also be required to verify, at least once a year, to their covered entity customers that the business associate has deployed the required technical safeguards to protect ePHI. This must be conducted by a subject matter expert who provides a written analysis of the business associate’s relevant electronic information systems and a written certification that the analysis has been performed and is accurate.”
• “The Proposed Rule’s changes are also a tacit acknowledgment that current Security Rule standards have not kept up with threats or operational changes.”

“Paralegal disqualified for attendance notes of calls he didn’t make” —

• “A paralegal who did not make the dozens of phone calls he recorded in attendance notes has been disqualified from working in the profession.”
• “Connor Johnson also reallocated his files to colleagues without telling them.”
• “The Solicitors Regulation Authority (SRA) made Mr Johnson subject to a disqualification order under section 99 of the Legal Services Act 2007 because the firm where he worked, Cardiff-based NewLaw Legal, is an alternative business structure (ABS).”
• “An SRA notice said Mr Johnson was a case manager at NewLaw from May 2018 to October 2022, with a caseload of claimant personal injury files.”
• “An audit identified that calls he recorded on its case management system did not match the firm’s call logs.”
• “According to the attendance notes generated in August 2022, he made 111 outbound calls; the call logs only found nine.”
• “Meanwhile, one file contained a witness statement prepared by another employee and filed at court in support of an application to come off the record due to lack of instructions from the client. This listed 76 actions to contact the client, including 36 unanswered calls from Mr Johnson over five months in 2022.”
• “However, the call logs only showed one and the firm filed a corrective witness statement stating that it believed the 36 calls were not made.”
• “‘Mr Johnson made the conscious and deliberate decision to generate false attendance notes, across a number of files, over a prolonged period of time,’ the SRA said.”
• “Meanwhile, in two months in summer 2022, Mr Johnson rapidly re-allocated 16 files to other case managers in his team without their knowledge – he did this within four minutes of one being allocated to him.”
• “The SRA said the evidence indicated that Mr Johnson ‘may have taken steps to try and conceal his conduct by postponing allocation tasks, to make it appear that he had not re-allocated the file’.”
• “Mr Johnson admitted what he had done and that he should be made subject to the orders.”
• “The SRA said: ‘The dishonest nature of his conduct means that it would be undesirable for Mr Johnson to work at a licensed body [an ABS] or an authorised body [a traditional law firm]…”

“Blank Rome Atty Accused Of Malpractice At Former Firm” —

• “Supply chain finance company Orbian Corp. filed a federal suit in Massachusetts Friday [12/20] against defunct law firm Burns & Levinson LLP and a former partner accusing the firm of helping swindle payments from Orbian to its now-former general counsel.”
• “Burns & Levinson, which was based in Boston until its closure last month, and current Blank Rome LLP partner Josef B. Volman allegedly conspired to push through a one-sided restated participation agreement that would entitle James Houston, Orbian’s general counsel from 2007 until his termination for cause last year, to a payout equal to roughly 4% of the company’s value.”
• “The restated participation agreement, or RPA, was intended to compensate Houston for his contributions to the Orbian Companies in the event of a qualifying transaction, generally defined as a monetization of the company.”
• “The agreement was further used by Houston to secure an $800,000 loan from the company, according to Friday’s complaint, which the London-based Orbian is simultaneously attempting to redress in California federal court. The company maintains a North American office in Carlsbad, California.”
• “‘In a series of covert and severely unethical negotiations, B&L and Volman helped Houston push through a one-sided restated participation agreement at the expense of their own client, Orbian,’ Friday’s filing said, going on to accuse the defendants of strategizing behind the back of the company’s chairman, submitting fraudulent timesheets for the conspiratorial meetings and failing to disclose to Orbian that they followed ‘biased, secret instructions from Houston when rendering legal advice regarding the RPA.'”
• “The complaint includes accusations of legal malpractice, breach of fiduciary duty and breach of contract. Orbian requested a judgment against the firm and Volman for damages.”
• “The company describes an allegedly ‘close relationship’ between Houston and Volman dating back to the early 1990s before Houston joined Orbian as general counsel in 2007 and began retaining Burns & Levinson — ‘always at Houston’s urging’ — to assist with diligence review, drafting agreements and other projects. The two frequently exchanged emails on both personal and work-related matters, according to Orbian.”
• “Around April 2020, Orbian, through Houston, formally retained Burns & Levinson and Volman to review the RPA as company counsel and determine whether the terms were fair and appropriate.”
• “‘Defendants did not disclose to Mr. Dunn or anyone else at Orbian that just one month earlier, Houston had asked Volman to review an iteration of the RPA with Houston’s financial interests in mind, or that Houston was a longtime personal friend of Volman’s,’ the complaint said.”
• “Orbian cited text correspondence between Volman and Houston regarding details of the RPA, arguments made with the company’s chairman and potential payouts under the signed agreement. The discussions were sometimes billed as ‘legal document review’ or ‘general corporate advice,’ according to the company.”
• “‘He knew the obvious — that his request for personal advice adverse to Orbian was neither above board nor appropriate,’ the complaint said of the former general counsel. ‘And yet, defendants did not turn Houston away. They did not apprise Houston that it would be a breach of their duties to their client, Orbian, to assist him personally in a conflict situation. Instead, defendants proceeded to give Houston advice adverse to Orbian’s interest.'”

“Accountants Owning Law Firms?” —

• “In a novel move, Big 4 accounting firm KPMG has taken the first step in seeking to own and operate a law firm in the United States. Although permitted in other countries, the United States generally prohibits non-lawyers from owning a law firm. In 2020, however, Arizona became the first state to relax that standard thereby opening the possibility of what is apparently on the horizon. “
• “There are about 1.3 million attorneys in the United States. Competition is considerable, and attorneys strive to develop a brand, a client base, and some way to set ourselves apart from the rest of the pack. Traditionally that ‘pack’ has exclusively consisted of other members of the bar who have met specific requirements necessary to practice law due to the Rules of Professional Conduct governing attorneys. Those rules prohibit non-lawyers from owning U.S. law firms due to ethical concerns governing conflict of interest principles. (See, e.g. ABA Model Rule 5.4.) However, jurisdictions including Arizona and others have recently enacted reforms which would permit non-lawyer ownership under specific conditions. “
• “Critics may worry that allowing non-lawyers to own law firms could lead to conflicts of interest and compromise the quality of legal advice. On the other hand, those in favor of the change may argue that ownership by non-attorneys could improve access to justice through novel, innovative business structures which potentially could reduce costs. This development is certainly worth monitoring.”

Law.com editor Dan Packel writes: “The Law Firm Disrupted: With KPMG’s Proposed Entry, Arizona’s Liberalized Legal Market is Getting Interesting” —

• “In late 2018, I dug into the idea that the Big Four firms, which had already building up their capabilities in legal services outside the U.S., posed a threat to American law firms that few were taking seriously. And in early 2020, my former colleague Dylan Jackson and I took a close look at how a push to reform the way the U.S. legal system is regulated, particularly for the sake of improving how average Americans can access legal services, could impact Big Law.”
• “Now that KPMG appears poised to take advantage of perhaps the most significant reform effort to date, it’s a good time to go back to previous reporting and see what’s actually transpired since then.”
• “Needless to say, some of the most dire predictions—at least from the perspective of Big Law—have yet to manifest themselves. Take the Big Four. One young fund formation partner at a global law firm shared his fears that, by 2024, the accounting firms would have muscled into his territory with ease.”
• “‘What I’m now doing, I won’t be doing. The classic fund formation group of a firm with 10 people won’t exist,’ he said in 2018. ‘I am fully prepared that they will be a competitor, and they will crush me if they wish.’ But Big Law funds formation work remains healthy—the Big Four has not vacuumed up this work. (To reinforce this point, I just flipped over to my email to find a press release with a global law firm announcing the hire of a new funds formation partner.)”
• “One big takeaway from my reporting in 2018 was that if they wanted to muscle in on some of the more sophisticated work that U.S. law firms do—not just funds work, but M&A advisory services—they could potentially pull it off, regardless of what state bar rules had to say about their ownership structure and the unauthorized provision of legal services.”
• “That’s because the definition of ‘legal services’ gives way to a gray area, I learned from former Arnold & Porter managing partner James Jones, who I was sad to hear died recently. Jones said that these Big Four firms could make a credible case that the work they aspired to do didn’t qualify as the practice of law, and he and others also emphasized that these firms’ deep pockets could give them the resources to win a legal fight, if it came to that.”
• “Until now, these firms have been content with indirect strategies for accessing the U.S. legal market, like formal alliances with U.S. law firms. And while the proposed move by EY to spin off its global audit business could have created a standalone advisory shop that would no longer have been constrained by ethical boundaries precluding that firm from providing legal services to audit clients, a revolt by U.S. leaders stopped that plan in its tracks. Over $100 million spent on the proposed split went down the drain, according to the Wall Street Journal. The firms have also faced a global scandal over employees cheating on ethics exams.”
• “Arizona’s move to abolish Rule 5.4, which barred non-lawyer ownership of law firms, and the state’s move to create ABS licenses has had a clear impact, allowing local firms to shake up how they’re organized and attracting some of the more cutting-edge legal businesses to the state.”
• “‘Lawyers also argue that the global dominance of the accounting profession by a very small number of accounting firms is an anticompetitive model that should not be replicated in the legal profession,’ the firms, including Morrison & Foerster, Pillsbury Winthrop Shaw Pittman and Baker McKenzie, wrote.”
• “But now that the Arizona program has established its viability, with over 100 licensees, at least one Big Four firm sees an open door to offering its technological capabilities and scale to help U.S. clients serve some of their legal challenges. It’s only fair to assume the others will follow.”

“UK Funder Joins With Law Firm, Insurer to Form Legal Behemoth” —

• “A litigation funder is forming a novel company designed to oversee cases from inception to resolution.”
• “UK-based Asertis is now the funding arm of newly formed Legatus Holdings Limited, which includes other subsidiaries KP Law, an insurance managing general agent, and a mass tort and group action claim acquisition company.”
• “The new venture aims to put under one roof two mainstays of the litigation funding ecosystem: investments in mass torts claims and insurance offerings for parties in lawsuits. It highlights the opportunities for funders in the UK and other places where restrictions on law firm ownership have been relaxed.”
• “‘There’s nothing in the UK that mirrors this, that has those four subsidiaries vertically integrated into legal assets,’ said Legatus chief executive officer Philip Holden. ‘We have created a unique and compelling vertically integrated group, where each operating business is led by market-leading professionals with established pedigrees in their respective fields,’ said Holden, who formerly served as Asertis general counsel, in a statement.”
• “The new venture streamlines litigation finance, according to Holden. Instead of outsourcing for claim aggregation or insurance to cover adverse costs, it will all happen in one place. The companies are not required to only work within Legatus and can work with the rest of the market.”
• “The law firm subsidiary KP Law is the result of a 2024 merger between the UK divisions of two massive US mass tort firms: Keller Postman and Lanier, Logstaff, Hedar & Roberts. Asertis bought Keller Postman UK in 2023 and acquired Lanier Longstaff the following year. Lanier’s docket includes both the UK and European claims in the talcum powder litigation against Johnson & Johnson. It cut ties with both Keller Postman and Lanier in the US after the purchase.”
• “These kinds of arrangements—often referred to as ‘alternative business structures’—are far less common in the US, where most states ban nonlawyers from having ownership interests in law firms. Arizona, Utah, and Washington, DC are among the jurisdictions that have loosened the restrictions to varying degrees.”
• “Stephen Mayson, a professor of law at University College London and a chair of an ABS in the UK, says a structure like this has been a long time coming and the original intention of the ABS provision was to encourage multidisciplinary businesses. But combining businesses that are all regulated differently could present difficulties.”
• “‘Putting this together under one umbrella looks great from a multidisciplinary perspective,’ said Mayson. ‘This will be enormously complex from a regulatory perspective.'”
• “He added that this could influence how the US looks at nonlawyer ownership, ‘If this sort of thing happens in a crossborder situation there might be more pressure on US regulators to look closely to how they do this.'”

“M&A Service Providers, M&A” —

• “Private equity has discovered the accounting space— and it can’t get enough. ‘There’s an M&A frenzy right now,’ says Allan Koltin, CEO of Koltin Consulting Group. If all goes according to plan, private equity firms may soon own a third of the 30 biggest accounting firms in the United States, according to projections from The Financial Times.”
• “TowerBrook Capital Partners’ 2021 investment in accounting firm EisnerAmper was the first private equity deal in the indus- try. Since then, there’s been a flurry of activity in the space— with private equity investing in firms like Citrin Cooperman,
• “Grant Thornton, Cherry Bekaert and Baker Tilly, as well as mergers of firms such as BKD and Dixon Hughes Goodman.”
  Private equity is attracted to these firms for straightforward reasons. Accounting firms are sticky businesses, with loyal client bases and stable recurring revenue streams. They’re low-risk and largely recession-proof. ‘People don’t switch their tax provider. And in a good or bad economy, you still need to file taxes and get audits done,’ says Andre Moura, managing director at New Mountain Capital, which invested in Citrin Cooperman in 2022 and Grant Thornton in 2024.”
• “Furthermore, the industry is still highly fragmented. There are over 80,000 accounting firms in the United States, according to IBISWorld data, and as of 2020, nearly three-quarters of the CPA workforce had met the retirement age, according to the American Institute of Certified Public Accountants (AICPA).”
• “Confronting Conflicts of Interest. Independence is one of the main pillars of the accounting industry, meaning an auditor must have no ties to or conflicts of interest with the company it is auditing.”
• Regulations also stipulate that CPAs must hold a majority ownership stake in audit practices. To comply, accounting firms taking on private equity investment must adopt an alternative practice structure, splitting the practice into two parts: an audit and attestation unit, owned by CPAs, and a non-attest unit (e.g., tax and consulting), which can be partially owned by outside investors.”
• The concept of independence still applies. But many worry the presence of an outside investor inevitably introduces complications. ‘The private equity firm that owns part of the business already has its own other portfolio companies. The accounting firm now must be independent not only of its own clients but also of the private equity firm and quite possibly of all the portfolio companies of the private equity partner. The private equity firm needs to share in this responsibility as well,’ says Jey Purushotham, practice group leader of compliance solutions at Intapp.”
• Regulators like the AICPA and the Public Company Accounting Oversight Board (PCAOB) have taken note of the shift in the industry and are keeping a close eye on this dynamic.”
• Accounting firms can stay compliant by communicating frequently with the investor to stay updated on its portfolio companies and ensure no conflicts of interest or independence impairments arise. But some find it hard to believe that an accounting firm’s audit practice can truly maintain professional independence within such”
  a structure. “
• Furthermore, some fear private equity doesn’t understand the gravity of the professional independence standards. ‘The ramifications are very black and white. You cannot have even one potential independence impairment that you have failed to eliminate when required, or that you have not safeguarded or reduced to an acceptable level when allowed—and if you do have an independence impairment with a publicly traded company, the consequences can be very high,’ says Purushotham.”

“Ont. Superior Court orders estate’s lawyer to withdraw over conflict of interest in fraud case” —

• “In a dispute over alleged fraudulent conveyance, the Ontario Superior Court of Justice ordered the estate’s lawyer to step down due to a potential conflict of interest.”
• “The case stemmed from a 2010 incident in which a married couple allegedly attempted to commit fraud in a loan application to the Royal Bank of Canada. Authorities laid criminal charges but later stayed them. In 2012, one of the applicants filed a lawsuit seeking damages for negligence, malicious prosecution, and related claims.”
• “After years of litigation delays, the court dismissed the original claim in 2023 and awarded significant costs against the estate of one of the original plaintiffs, who had passed away in 2021. During this period, the estate transferred property to its sole beneficiary, prompting the bank to file a new legal action alleging the transfer was fraudulent and aimed at avoiding payment of the outstanding cost awards.”
• “The estate and its representative filed a counterclaim alleging defamation and discrimination by the financial institution and its legal counsel.”
• “The Superior Court ordered the estate’s lawyer, Peter Callahan, removed as counsel, citing his potential role as a necessary witness. Key evidence in the case revolved around whether Callahan communicated court orders regarding cost payments to the estate’s representative before the disputed property transfer.”
• “The court determined that Callahan’s involvement in these communications created a conflict of interest. It also noted that his continued representation could compromise the fairness of the proceedings, as he might be required to cross-examine witnesses or address matters in which he had direct knowledge.”
• “In its decision, the court noted that the threshold for removing counsel is exceptionally high, and it should grant such motions only in rare circumstances. While the court acknowledged the inconvenience and expense its decision may cause, it concluded that removing Callahan was essential to ensure the proper administration of justice.”

Massachusetts: “Evidence – Peer review privilege – Bias” —

• “Where the peer review privilege was found to apply to the termination of a plaintiff’s privileges in 2021, the plaintiff’s motion for reconsideration should be denied because he has not presented evidence of an actual conflict of interest.”
• “‘As explained in my prior ruling, there is a ‘single, narrow exception to the peer review privilege,’ which applies when ‘a member of a peer review committee did not act ‘in good faith and in the reasonable belief that based on all of the facts the action or inaction on his part was warranted’ during the peer review process.’ …”
• “‘I previously concluded the privilege properly applied to the termination of Holick’s privileges in 2021 (2020-2021 Proceedings). In the instant motion, Holick asserts that discovery has revealed that Dr. Pierre Cremieux (Cremieux), the President of Analysis Group, who chaired the Ad Hoc Committee (AHC) of the Board of Trustees, was biased against Holick. The AHC reversed the Medical Executive Committee’s (MEC) decision and recommended that the Board terminate Holick’s privileges, which recommendation the Board adopted…”
• “‘Holick argues that the evidence shows ‘that Dr. Cremieux was chosen to chair the Board ad hoc committee precisely because of his view against Dr. Holick, and in discharging his role, did not bother with even a pretense of objectivity or fidelity to the rules.’ I am not persuaded.”
• “‘The 2020-2021 Proceedings were initiated because Holick agreed to certain restrictions and failed to comply with them. Although it is mildly disturbing that Cremieux was not able to describe the AHC’s standard of review, and it would have been preferable for the AHC to have been chaired by someone who had not previously expressed concern about Holick (albeit more than two years before), this evidence, alone or in combination with other evidence, is not sufficient to demonstrate the requisite bad faith. This is particularly true given that: (1) Cremieux’s views in 2018 were expressed in connection with the negative press coverage Holick was receiving at the time and the reputational harm BMC could suffer as a result; (2) Cremieux testified that ‘none of the emails’ he sent in summer 2018 suggested that he had concluded that BMC should fire or cease association with Holick at that time but were about ‘strategizing’ actions in response to the bad press; and (3) Cremieux’s deposition statements were not entirely inconsistent with the standard of review the Board AHC was required to apply. Put elsewise, Holick has not presented evidence of an actual conflict of interest that interfered with the actual operation of the AHC.”
• “‘The evidence is not irrelevant to the issues in the case. It simply does not rise to the level necessary to invade the medical peer review privilege.'”
• See: full text of the opinion.

“Ethics Disclosure Fail Sinks Firm’s Coverage, NJ Panel Says” —

• “A law firm that failed to reveal an attorney’s ethics case when applying for malpractice insurance coverage effectively secured the policy using misrepresentations, the New Jersey state appeals court ruled, declining to revive the firm’s suit over the rescission of its policy.”
• “The two-judge appellate panel upheld on Friday the 2022 ruling of Superior Court Judge Owen C. McCarthy that Allied World Insurance Co. was right to rescind policies issued to Schibell & Mennie LLC because firm partner Richard D. Schibell made a ‘material misrepresentation’ on coverage applications when he failed to disclose an ethics case against him.”
• “‘An insurer may consider a policy void as of its inception when it discovers the insured has made material misrepresentation, upon which it reasonably relied in issuing the policy,’ the appellate panel said.”
• “In 2013, the state’s Office of Attorney Ethics filed a disciplinary complaint against Schibell. Nearly four years later, the state Supreme Court accepted the Disciplinary Review Board’s recommendation for a censure.”
• “The review board found Schibell had commingled personal funds with client funds and had provided falsified documents to the Office of Attorney Ethics.”
• “In 2016, Schibell & Mennie did not reveal the OAE complaint when it filled out the Allied World application, according to court documents.”
• “For one question — ‘Has any attorney been the subject of any bar complaint, investigation or disciplinary proceeding within the past five years?’ — the firm answered no, court documents said. The firm answered no to similar questions on applications over the next three years.”
• “In 2017, the estate of deceased firm partner Mark D. Kentos launched a complaint against the firm and Schibell over life insurance policy proceeds. After a legal malpractice claim was added to that case in August 2019, Allied World conditionally agreed to cover the matter, according to court documents.”
• “About two months later, however, Allied World rescinded the policies after the company said it determined that the firm made misrepresentations in its applications by not disclosing the disciplinary action against Schibell.”
• “In fighting the insurer’s summary judgment bid, the firm argued that its responses to the application questions were accurate, since Schibell’s ethics case did not meet the definition of a ‘disciplinary proceeding’ under the policies, which refers to a proceeding ‘alleging professional misconduct in the performance of or failure to perform legal services,’ court documents state.”
  “But Judge McCarthy rejected that argument, saying, ‘This strained and overly narrow construction is an attempt to find and/or create coverage where none exists.'”

“Prominent Bay Area lawyer skewers Mark Zuckerberg, fires Meta as a client” —

• “For most people angry at Meta or Mark Zuckerberg, the options for recourse are limited. You could delete your Facebook account or complain about the billionaire with like-minded friends. But Bay Area lawyer Mark Lemley has taken a far more noticeable approach: He fired the company as a client.”
• “Lemley, a prominent intellectual property attorney and professor at Stanford Law School, was one of a gaggle of lawyers representing Meta in a legal battle over the tech giant’s alleged use of copyright texts for training artificial intelligence. It’s a high-profile case, pitting Sarah Silverman, Ta-Nehisi Coates and other authors against one of the world’s largest companies, and has the potential to create formative case law. But Lemley was too displeased with his client to continue.”
• “On Monday, the lawyer withdrew from the case and Meta’s roster, according to a docket entry. Lemley explained his reasoning with a thread on Bluesky, writing that he has ‘struggled with how to respond to Mark Zuckerberg and Facebook’s descent into toxic masculinity and Neo-Nazi madness.’ (More context on those roasts in a moment.)”
• “Then came the hammer. ‘I have fired Meta as a client,’ Lemley wrote. ‘While I think they are on the right side in the generative AI copyright dispute in which I represented them, and I hope they win, I cannot in good conscience serve as their lawyer any longer.'”
• “SFGATE reached Lemley over email and asked what specifically prompted his decision to sever most of his Meta strings. The lawyer referenced changes to the company’s content moderation system — as of last week, Meta specifically allows ‘allegations of mental illness or abnormality when based on gender or sexual orientation’ in posts. Axios also reported Friday that Meta was ending major diversity, equity and inclusion programs. The overhauls appear aimed in part at currying the favor of President-elect Donald Trump in the run-up to his inauguration; Zuckerberg is also scheduled to co-host a reception before the inaugural ball, Puck News reported.”
• “Meta’s CEO provoked more ire still with comments on a new episode of Joe Rogan’s podcast released Friday, complaining that corporate culture is getting away from ‘masculine energy.’ Lemley referenced that statement in a Sunday post, writing ‘Oh yeah, that’s the problem with tech companies — not enough testosterone,’ alongside an eye-roll emoji. (In 2023, Meta’s workforce was 64.2% male and 35.8% female, the company reported.)”
• “‘I decided that I could not in good conscience be associated with a company that made those decisions, so I decided to withdraw,’ he wrote. ‘Meta remains represented by outstanding counsel in this case, and I believe they should and will prevail in the case. But they will have to do it without me.'”
• “Lemley had been working on the copyright case since 2023, via the firm Lex Lumina, and his name appears in more than 100 docket entries. The tech giant still has legal firms Cooley and Cleary Gottlieb Steen & Hamilton on the case.”

“Western NY Justice Agrees to Public Admonishment Over ‘Obvious’ Conflict of Interest” —

• “A part-time justice in western New York agreed that he should be admonished for trying to have a small-claims matter against him delayed, to give him time to convince his former legal client to withdraw the pleading, the state’s judicial watchdog said on Wednesday.”
• “Alden Town and Village Courts Justice Michael W. Cole had been hired as an attorney in 2018 and paid a $1,500 retainer by a client with a family law matter, but the following year, she became dissatisfied with his representation and made several requests for return of the money, the New York State Commission on Judicial Conduct said in a statement.”
• “In 2021, the ex-client filed a small-claims case against Cole, in his own court. Rather than have the case transferred to another court, the commission said Cole asked his clerk to delay processing the claim as he tried to get her to withdraw it—an ‘obvious’ conflict of interest.”
• “The matter was later transferred, and Cole returned her money in full, the commission said.”
• “‘Instead of promptly disqualifying himself from the action filed against him in the court where he presides,’ the commission’s 11-0 determination read, Cole ‘improperly influenced court staff and delayed the processing of the claim. In this way, respondent violated well-established ethical standards and used his judicial status for his personal benefit.'”
• “Commission Administrator Robert H. Tembeckjian said: ‘Public confidence in the integrity of the legal system is undermined when a judge who is sued exerts the influence of judicial office to delay processing of the claim. To his credit, Judge Cole accepted responsibility for his conduct, resolved the lawsuit and cooperated with the Commission.'”

“Kirkland Partner Said Romance ‘Tarnishes’ Ex-Judge’s Cases” —

• “A top restructuring attorney for powerhouse law firm Kirkland & Ellis LLP told government attorneys that a relationship between an ex-judge and a former bankruptcy partner for Jackson Walker LLP should have been disclosed.”
• “Kirkland’s Joshua Sussberg also said during a September deposition, the transcript of which was obtained by Bloomberg Law, that he thought former Houston bankruptcy judge David R. Jones experienced a ‘lapse in judgment’ related to his previously undisclosed relationship with Jackson Walker attorney Elizabeth Freeman.”
• “Kirkland often teamed up with Jackson Walker as local counsel to bring large, complex Chapter 11 cases to the Southern District of Texas bankruptcy court, which became a favored venue for Kirkland during Jones’ tenure.”
• “The deposition was taken as part of a lawsuit in which the government has accused Jackson Walker of breaching its ethical duties, a charge the firm rejects. Government attorneys, noting that Jones and Freeman owned a home together, argue the relationship should’ve been disclosed.”
• “‘To the extent that we were aware of an actual financial relationship, I can’t tell you exactly what it was we would have done, but we absolutely would’ve made certain that that was out in the open for fear of disrupting an existing case or go forward cases,’ Sussberg said.”
• “Comments by Sussberg, one of the most high-profile attorneys in the US for large corporate bankruptcies at the world’s largest firm by revenue, could become salient in efforts by the Justice Department’s bankruptcy watchdog to disgorge as much as $23 million in fees Jackson Walker collected in cases involving Jones while it employed Freeman.”
• “A trial set for April will determine whether orders awarding fees to Jackson Walker should be vacated and whether the firm can be sanctioned.”
• “Jones resigned soon after the relationship became public in late 2023 but the scandal has spurred several legal actions. Freeman left Jackson Walker in December 2022.”
• “During his deposition, Sussberg said if Kirkland knew of the relationship, it likely would have taken action to ensure it was ‘public,’ noting that Kirkland has a ‘reputation and a brand that it’s protecting.'”
• “Sussberg was asked by a government attorney whether he understood that due to the potential conflicts, orders issued by Jones may be voidable, and that it posed harm to clients.”
• “‘There’s all sorts of different legal rules, regulations, and ability to challenge, and remedies and the like, but I would absolutely say that I do believe it tarnishes all these cases,’ Sussberg responded. ‘And that’s a great concern from our perspective.'”
  “While bankruptcy rules may not technically require the disclosure of relationships with judges, Kirkland errs on the side of caution, Sussberg said. If there’s a question about whether something should be disclosed, it does so, he added.”
• “To the extent Jackson Walker was aware of a romantic relationship, Sussberg said its attorneys were duty-bound to disclose it to Kirkland so it wouldn’t ‘infect and absolutely disrupt a pending case where we had no knowledge otherwise.'”
• “Kirkland has previously said it abided by its ethical responsibilities and made accurate representations to the court, including all required disclosures.”

“Fox Rothschild Atty Beats Trade Secret Theft Allegations” —

• “A federal judge in New Jersey says a company trying to develop cancer drugs had waited too long to sue its former patent lawyer after he allegedly ‘confessed’ over five years ago to helping a Chinese rival file a patent application that allegedly misappropriated trade secrets.”
• “U.S. District Judge Edward Kiel had bad news for Princeton-based Beta Pharma, which filed suit in late 2023 against Fox Rothschild patent lawyer Wansheng Jerry Liu, who is currently chair of the firm’s China practice, according to his LinkedIn page. Beta says it retained Liu and his firm in 2012 to file a patent application, but that Liu ended up disclosing ‘highly confidential details’ to a rival drug developer in China, InventisBio.”
• “Both companies are clinical drug developers in the cancer research space and have yet to put any major drugs on the marketplace. Nevertheless, Beta was too late to sue over any of that now, even if these allegations were true, wrote Judge Kiel on Tuesday.”
• “Liu allegedly ‘confessed’ to this back in 2019. ‘Beta Pharma should ‘have been on notice of the alleged misappropriation’ before October 11, 2020,’ wrote Judge Kiel.”
• “According to the complaint, Liu had lunch with Beta Pharma founder Don Zhang in 2019 and ‘admitted … both that he had a connection with InventisBio, saying in a conversation, ‘I know [InventisBio co-founder Zhiqin Jiang],’ ‘He’s my friend’ and ‘I helped him file the application.””
• “‘Liu’s confession to Dr. Zhang was on January 15, 2019, which is 20 months and 27 days before the latest accrual date of the statute of limitations of October 11, 2020,’ wrote Judge Kiel. The ruling did not weigh in on the merit of Beta’s case against Liu.”
• “Lawyers for Fox Rothschild and InventisBio declined to comment on the ruling. Representatives for Beta Pharma did not return a request for comment.”
• “In the filings, lawyers for Liu and his firm say that their former client ‘pleads no motive for Mr. Liu to undertake this career-ending conduct’ and call his alleged confession both ‘highly suspect’ and ‘uncorroborated.'”
• “‘Liu has now been sued on the same claims in three separate lawsuits in two different venues since 2020. The prior two cases, of course, ended when Beta Pharma — faced with an obligation to put up or shut up — chose the latter course,’ according to Liu and the firm in the filings.”
• “InventisBio, represented by a different legal team, says Beta Pharma had been on notice in the case as far back as 2016, ‘because that is when it alleges a copy of its alleged crown-jewel trade secret was published by its direct competitor.'”