Bressler Risk Blog

“Clifford Chance Acted for Three Clients on a Single Deal Process—Is it a Problem?” —

• “On the face of it, the €14 billion transaction was a sizable if unexceptional European mega-deal. Last week, Deutsche Bahn sold off its logistical arm DB Schenker to another well-established European transport group, Danish company DSV, in an effort to reduce debts, which have reportedly climbed to as high as €34 billion.”
• “The matter reignites the long-running conversation around the risks of conflict of interest when multiple teams are deployed on the same deal, as well as questions around the information barriers law firms have in place to prevent conflicts from arising.”
• “Earlier in September, it emerged, unannounced, that Clifford Chance was advising bidding parties Saudi logistics firm Bahri—with a team including corporate partners Christian Vogel in Düsseldorf and Guy Norman in Riyadh—as well as another bidder, Abu Dhabi sovereign wealth fund ADQ.”
• “Then, a few days later, Clifford Chance announced that it had successfully advised the lenders backing the company that became the final buyer, DSV, led by partner Jim MacHale in London.”
• “It meant that, throughout the deal, including the bidding process, the firm deployed three separate teams in the bidding process. One person with knowledge of the situation pointed out that the firm had client consent and that it acted in accordance with regulations. They added such things were not uncommon.”
• “Yet while not unheard of in high stakes M&A with multiple bidding parties, several people that commented for this article said it was ‘unusual’ to have three separate teams, with some even positing that it teetered on the edge of what is ethical and what is not.”
• “Although this has become commonplace in private equity transactions in recent years, one London partner explained the nature of public M&A makes it far more complicated.’
• “‘It is becoming quite a problem in PE because [clients] all seem to want to use the one or two sponsor shops, and have persuaded themselves its all fine, and to an extent because of the private nature of the sector, it can work.”
• “‘But ‘Chinese walls’ and ethical screens can’t really work in the context of a public deal. They would have to be really creative and have gone through a number of loops to get comfortable doing this.'”
• “But, in the same way that PE houses have consolidated relationships with various ‘favourited’ firms, if you build up a strong enough relationship with banks and bluechip companies, then your clients can also essentially become open to this approach.”
• “‘If your client knows you can do the job, and that you will succeed, they will likely be willing to accept that your firm might be acting for another party on the same matter,’ another London partner said.”
• “But others argue that, so long as potential conflict is well managed, then there are ways of circumventing risk, ‘as I’m sure will have been the case at Clifford Chance,’ as one partner at a rival put it.”
• “One partner also noted that, within one firm, allocating a major transaction to a specific partner or team can also lead to competition within the partnership. ‘If you tell one partner they can’t take on the deal because someone else is already on it, then obviously you open the door to potential arguments between partners at the firm. You need a firm with a good culture to be able to navigate these issues.'”

“Lawyer Wields Blank Rome Atty Voicemail To Bolster DQ Bid” —

• “An attorney who is suing three lawyers from Blank Rome LLP and has asked a federal court to disqualify the firm’s other attorneys from representing their colleagues — alleging they contacted one of her witnesses — told the court Friday she accessed a phone message that strengthens her arguments.”
• “In a brief filed in Pennsylvania federal court, attorney Veronica Turner said she secured an audio recording and a transcript of a voicemail left by Jeffrey Rosenthal of Blank Rome, who is representing his three colleagues at the firm. Turner accused Rosenthal of improperly contacting Dr. Richard S. Goldberg, an expert witness for Turner and her husband.”
• “‘The voice mail was left on September 23, 2024, acknowledged that attorney Rosenthal was aware Dr. Goldberg was serving as an expert witness for plaintiffs, asked if there was an intention to supply Mr. Rosenthal with documents and if so when that would occur, provided Dr. Goldberg with attorney Rosenthal’s direct dial telephone number, and stated ‘feel free to call me back,” according to the filing.”
• “Earlier this week, Turner filed a motion for disqualification and sanctions that sought to have Rosenthal, Blank Rome attorney Brian Paszamant and the firm tossed from her lawsuit. Rosenthal and Paszamant are representing Blank Rome attorneys James T. Smith, Rebecca Ward and Heidi G. Crikelair.”
• “Turner, along with her husband, Kevin Turner, sued the three lawyers, as well as aircraft motor manufacturer Avco Corp. and its parent company, Textron Inc., for retaliation after she switched from corporate defense to the plaintiffs bar. She previously represented Avco’s Lycoming Engines division in “major aircraft crash litigation” from 2005 through November 2017.”

“DoorDash Seeks More Information About NLJ 500 Firm’s Connections With Chicago” —

• “In a service fees dispute between DoorDash and Chicago, the online delivery service’s counsel with Gibson, Dunn & Crutcher have asked for more evidence that may shed light on the working relationship between the city and its NLJ Top 500 firm.”
• “DoorDash claims it is seeking more evidence from the city that could be relevant in its due process defense in the pending suit, Chicago v. DoorDash, in the U.S. District Court for the Northern District of Illinois. DoorDash asked for documents that may be related to the city’s oversight of its counsel with Cohen Milstein Sellers & Toll, claiming the firm ‘is improperly acting as a city official or employee exercising the city’s prosecutorial powers,’ according to an opinion filed in the case last week.”
• “On behalf of DoorDash, Gibson Dunn relied on a March 2015 decision in Chicago v. Purdue Pharma from the Illinois federal court to argue that it has the right to a ‘financially disinterested prosecutor.’ The court previously denied Cohen Milstein’s motion to strike DoorDash’s defense, and in the city’s renewed attempt, DoorDash asked the court to deny the city’s motion or defer a ruling on it until after the close of fact discovery.”
• “On Friday, U.S. District Judge Jeremy C. Daniel agreed with DoorDash, finding that the additional discovery Gibson Dunn is pursuing through a pending motion to compel could be relevant to its defense, even if the information is privileged. Gibson Dunn is seeking documents related to the city’s oversight and control of Cohen Milstein, its compliance with the city’s outside counsel guidelines, and admissions regarding Cohen Milstein’s contributions to Chicago political campaigns and candidates.”
• “‘The question of whether retained counsel is financially interested in the outcome of the litigation may involve a wider range of materials than the retention agreement alone,’ Daniel said. ‘For example, even if the agreement contains adequate safeguards, the arrangement may still violate DoorDash’s due process rights if DoorDash presents evidence the city failed to exercise ‘absolute and total control over all critical decision-making.'”

“PwC Lead Advisory team advises Stowe Family Law on its sale to Investcorp” —

• “The PwC Lead Advisory team is pleased to announce the sale of Stowe Family Law, the largest specialist family law firm in the United Kingdom, to Investcorp, a leading global alternative investment firm. The transaction represents a successful exit for Livingbridge, which has backed Stowe Family Law in its growth journey since 2017.”
• “[The firm] operates from 90 locations across the United Kingdom, with nearly 400 staff supporting 5,000 clients a year.”
• “PwC acted as lead financial adviser to the shareholders of Stowe Family Law, providing Corporate Finance, Debt & Capital Advisory, Vendor Commercial Due Diligence, and Data Insights & Analytics advice. This landmark transaction highlights PwC’s position as one of the leading financial advisors in the professional and legal advisory sector.”

Herbert Smith Freehills published: “Modernising Australia’s AML/CTF regime” —

• “On 11 September 2024, amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) were introduced into Parliament through the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth). The Bill includes significant proposals to expand the application of the AML/CTF Act to additional sectors of the Australian economy, including lawyers, real estate agents, accountants and others.”
• “In this paper we look at the amendments to the AML/CTF Act that we expect to be of most importance to existing reporting entities. These include:
  • updates to requirements around AML/CTF Programs including a new definition capturing risk assessments, policies, procedures and controls;
  • reform to governance requirements including a new “lead entity” concept;
  • a new approach to regulating offshore operations;
  • modified customer due diligence obligations including legislating customer risk assessment requirements;
  • reformed virtual asset service provider requirements;
  • significant changes through the introduction of obligations connected to the “transfer of value”;
  • updates to the regime when assisting an investigation of serious offences; and
  • new AUSTRAC investigation and enforcement powers.”

“Sullivan & Cromwell Didn’t Ignore FTX Red Flags, Second Examiner Report Concludes” —

• “After an initial inquiry cleared Sullivan & Cromwell of allegations that the firm knew—or should have known—of the fraud at FTX prior to representing the company as debtors counsel, a second report from a bankruptcy court-appointed examiner cleared the law firm of a disqualifying conflict of interest in the case.”
• “Wednesday’s report from independent examiner Robert J. Cleary of Patterson Belknap Webb & Tyler found no disqualifying conflict of interest in Sullivan & Cromwell’s pre-petition work helping FTX founder Sam Bankman-Fried acquire the shares of the Robinhood trading platform, which Cleary described as regulatory in nature.”
• “Cleary also found that the April 2022 matter did not make Sullivan & Cromwell aware of the fraud and that the firm didn’t ignore any ‘red flags.'”
• “After creditors, academics and U.S. senators criticized Sullivan & Cromwell’s representation of FTX as debtors counsel, alleging a potential conflict of interest due to the law firm’s 20 pre-petition matters for FTX, Judge Luis Felipe Restrepo of the Third Circuit said the prepetition work was among several reasons why an independent examiner was warranted.”
• “An initial report from Cleary in May found that Sullivan & Cromwell was unaware of the fraud during its pre-petition work for FTX, but Cleary called for an additional investigation into whether Sullivan & Cromwell had a conflict of interest (or knew of the fraud, or should have known of it) during its work for Bankman-Fried personally as he sought to acquire shares of Robinhood.”
• “The second report came after a review of more than 700 documents, mostly email exchanges between FTX Group in-house counsel and Sullivan & Cromwell partners, as well as interviews with partners Andrew Dietderich, Mitch Eitel, Joseph Hearn and Eric Queen.”

“Attorney Can Take Business Without Compensating Former Firm” —

• “A [Colorado] state supreme court recently rejected an attempt by a law firm to charge a departing associate attorney for lost “marketing expenses” when the associate took clients to a new firm.”
• “In Johnson Family Law, P.C. v. Bursek, the court refused to enforce a ‘reimbursement agreement’ when a resigning associate took clients with him, concluding the agreement unreasonably restricted the attorney’s ability to practice law.”
• “The court reasoned that charging undifferentiated fees to departing attorneys substantially disincentivized lawyers from continuing their representation of clients. ABA Litigation Section leaders agree with the decision but note law firms may still be permitted to recover fees in limited circumstances. Litigation Section leaders further note that law firms can seek to retain associates—and thus clients—in other ways that do not run afoul of ethics rules.”
• “When an associate left his former family law firm in Denver, 18 clients followed. But the firm claimed the attorney owed $18,936 for the privilege of taking clients. The firm argued it should be repaid $1,052 per client for ‘marketing expenses’ under the reimbursement agreement. These expenses, the firm asserted, represented ‘historic costs’ for promotion.”
• “The associate challenged the agreement, claiming it violated Colorado Rule of Professional Conduct 5.6, which prohibits a lawyer from entering into an agreement ‘that restricts the right of a lawyer to practice after termination of the [employment] relationship.'”

“Cooley Sued for Malpractice After Representing Carbon IQ” —

• “Cooley LLP and several of its attorneys are being accused of committing legal malpractice and fraud in a suit filed in federal court Thursday.”
• “Jason Gould and Gould Ventures LLC are suing Cooley and its attorneys after investing in Carbon IQ Inc. and after Gould became a board member of the startup—both based on information Gould received from Cooley’s attorneys, who represented Carbon IQ at the time.”
• “Gould alleges that the attorneys knew that Carbon IQ and its chief executive officer, Benjamin Cantey, were being sued for fraud in Texas and didn’t reveal that information. “
• “The defendants ‘deliberately and/or recklessly concealed from Plaintiffs critical information regarding fraud allegations being asserted against Cantey,’ the complaint says. ‘These included both Cantey’s fraudulent activities related to Carbon IQ and an active investigation by the Texas State Securities Board into securities fraud violations tied to Cantey’s previous involvement with another company in Texas.'”
• “Because the defendants didn’t disclose the fraud allegation against Cantey, the plaintiffs invested another $140,000 in Carbon IQ, the complaint says.”
• “Gould further alleges that he asked the defendants if Carbon IQ had directors and officers insurance. ‘Although Cooley Defendants knew Mr. Gould’s acceptance of a Board position was contingent upon the existence’ of adequate insurance, they failed to disclose to Gould that they ‘never actually received any evidence confirming the existence of such insurance,’ the complaint says.”
• “Cooley eventually withdrew from representing Carbon IQ, according to the complaint. The plaintiffs allege securities fraud; common law fraud; legal malpractice; aiding and abetting fraud; negligent misrepresentation; and breach of fiduciary duty.”

Hat tip to Simon Chester at Gowlings for noting: “An ‘Utterly Bonkers’ Miscarriage of Justice in Texas” —

• “There are individual court cases that are perfect symbols of larger injustices, and this month a Black woman named Erma Wilson lost a Court of Appeals decision that highlighted decades of judicial distortion of American civil rights law.”
• “In 2001 a Texas jury convicted Wilson of cocaine possession. It was a nonviolent drug offense, and she was sentenced to eight years of community supervision. She appealed her conviction, but she lost. She never served jail time, but her conviction still had profound consequences on her life. Wilson was never able to achieve her dream of becoming a nurse.”
• “Then, 20 years after her trial, she learned that she had been subject to a monstrous injustice. To quote a Fifth Circuit panel that reviewed her case, something happened at her trial that was ‘utterly bonkers.’ A judge in the case called it a ‘DEFCON 1 legal scandal.’ A prosecutor in the case, Weldon ‘Ralph’ Petty Jr., was also working as a clerk for the judge during her trial — and hundreds of others.”
• “As Jessica Priest reported in USA Today in 2021, Petty ‘performed legal work for at least nine judges involving the convictions of at least 355 defendants whom he prosecuted.’ The defendants’ sentences in those cases ‘range from probation to the death penalty.’
• “The violation of Wilson’s rights was so egregious that no one believes she received a fair trial. The prosecutor lost his law license. The truth is that it’s hard to imagine a more obvious violation of her rights.”
• “In plain English, [42 USC Section 1983] means that government officials who violate your rights are liable for damages. There are very limited exceptions to this rule, but none of them apply to Wilson’s case.”
• “Petty violated Wilson’s rights. He destroyed her career dreams. She lost financial opportunities because of his brazen misconduct. So this is open and shut — she wins, and he loses, right?”
• “Wrong. She lost. After an en banc hearing (when all the judges on the court hear the case), the court ruled against Wilson. Twelve judges ruled against her, and six dissented.”
• “The reason was simple. The court held that she can’t receive damages for the constitutional violation until her conviction ‘has been set aside, expunged or otherwise favorably terminated.’ That requirement isn’t in the statute. It’s a judge-made rule that places a roadblock on the path to justice.”
• “The outcome is absurd, but it’s not entirely the Fifth Circuit’s fault. The real fault lies with the Supreme Court, whose long decades of jurisprudence have gutted Section 1983 to the point where it no longer means what it clearly says. Rather than granting citizens a right to compensation when state officials violate their rights, it’s astonishingly difficult to hold public officials accountable for constitutional violations, and this lack of accountability perpetuates injustice and undermines confidence in American criminal justice.”

“Judge Aileen Cannon Failed to Disclose a Right-Wing Junket” —

• “Federal Judge Aileen M. Cannon, the controversial jurist who tossed out the classified documents criminal case against Donald Trump in July, failed to disclose her attendance at a May 2023 banquet funded by a conservative law school.”
• “Cannon went to an event in Arlington, Virginia, honoring the late Supreme Court Justice Antonin Scalia, according to documents obtained from the Law and Economics Center at George Mason University. At a lecture and private dinner, she sat among members of Scalia’s family, fellow Federalist Society members and more than 30 conservative federal judges. Organizers billed the event as ‘an excellent opportunity to connect with judicial colleagues.'”
• “A 2006 rule, intended to shine a light on judges’ attendance at paid seminars that could pose conflicts or influence decisions, requires them to file disclosure forms for such trips within 30 days and make them public on the court’s website.”
• “It’s not the first time she has failed to fully comply with the rule.”
• “In 2021 and 2022, Cannon took weeklong trips to the luxurious Sage Lodge in Pray, Montana, for legal colloquiums sponsored by George Mason, which named its law school for Scalia thanks to $30 million in gifts that conservative judicial kingmaker Leonard Leo helped organize.”
• “The rule for paid seminars is among the policies set by the Judicial Conference. Federal judges are also required by law to file annual financial disclosures, listing items such as assets, outside income and gifts. Cannon’s annual disclosure form for 2023, which was due in May and offers another chance to report gifts and reimbursements from outside parties, has yet to be posted.”

Hat tip to David Monteiro at Goulston & Storrs for flagging this interesting staff model development: “Adding a New C-Suite Role, Fish & Richardson Hires Chief Legal Risk Officer” —

• “Among one of the latest Big Law leadership hires in Washington, D.C., Fish & Richardson has brought on Elham Dehbozorgi as its chief legal risk officer, a newly created position.”
• “‘The chief legal risk officer is a new role at Fish that reflects the evolving landscape of legal operations and our commitment to effective systems, processes, and technology in conflicts and risk management,’ Chief Operating Officer Kristine McKinney said in a news release.”
• “McKinney also noted that the firm is undergoing ‘significant technological advances.’ In an interview, Dehbozorgi said Fish is investing in a new database and intake system.”
• “As chief legal risk officer, Dehbozorgi will focus on ‘improving process and technology alignment across firm operations,’ Fish said. She will run the complex and risk management departments, overseeing a team of around 50 people, including analysts and some attorneys.”
• ”There’s a lot of things that are comprised within those departments [conflicts and risk management departments]. Obviously conflicts is conflicts, but under risk management, there’s legal compliance, there’s records retention, there’s a sort of miscellaneous variety of risk management components there,’ said Dehbozorgi.”
  Outside of the firm, Dehbozorgi was also recently appointed to the legal ethics committee of the D.C. bar.”

A form GC opines: “One-Stop Shopping With Mega-Firms Can Cost More Than It Saves” —

• “Big Law mega-mergers have been accelerating, and just last week the wave continued, as large firms announced three more. They say expanding will allow them to scale operations, add practice areas, compete for talent, reach more markets, and of course, bolster revenue.”
• “These objectives might sound good on paper for clients, but I’m not convinced the trend is in the best interests of in-house legal teams that are looking for high-quality legal work at good prices. Working with mega-firms can present significant tradeoffs.”
• “But in-house legal teams aren’t always well served in a world dominated by mega-firms. I like to shop at Costco, but legal services aren’t as fungible as toilet paper and rotisserie chicken. When I was a general counsel, I really treasured my relationship with terrific outside counsel. They did more than redline documents and file papers; they gave me thoughtful, nuanced, and practical advice that saved me from making critical mistakes. Those are savings that don’t show up on any balance sheet.”
• “Running a conflicts check with a small firm used to be a routine email to the other 30 partners, but with a mega-firm it practically requires artificial intelligence. You might negotiate a 15% discount off the shelf hourly rate by reducing the number of firms you do business with, but then hit a conflicts problem that leads you back to the same firms you left.”
• “And are you really saving money by consolidating work with a few big firms? In my experience, big firms aren’t terribly efficient, and their rates are often higher to begin with.”
• “Don’t get me wrong—big firms can be excellent partners and provide great value to your in-house legal team. Depending on your legal needs and the capabilities of the lawyers involved, one-stop shopping might work. You might find that reducing the number of outside firms you work with does bring efficiencies.”

Solo/Small-firm focused, but fascinating for those interested in the malpractice insurance landscape: “A Primer on Prior Acts Coverage for the Solo and Small Firm Attorney” —

• “Prior acts coverage (PAC) is a feature of claims-made malpractice insurance policies. Its purpose is to provide protection for claims that arise from missteps that occurred before your current malpractice policy’s effective date, as long as the claim is made and reported during your current policy period. PAC is particularly important for attorneys because an alleged error or omission may not come to light until years after the legal services were rendered. Without PAC, there would be no coverage for any claim involving an alleged misstep that occurred before the effective date of your current policy, potentially leaving you personally liable for substantial legal costs and damages.”
• “A lateral move can also unintentionally create a coverage gap if you ignore the issue of PAC. Some law firms purchase a special endorsement that provides retroactive coverage for lateral hires. However, many more refuse to provide PAC because they want to avoid assuming any liability for your prior acts.”
• “The good news is you often have two options if PAC will not be available at your new firm. If the firm you are about to depart will remain a viable entity for the foreseeable future and will continue to be insured, you will continue to have coverage for work done while at your prior firm under former attorney language in that firm’s policy. The decision would then be to rely on that coverage. If this isn’t the case, the other option would be to purchase an individual ERP from your current carrier if available. Of course, if the firm you are leaving is in the process of closing, most of the time the firm will decide to purchase an ERP, which would take care of any coverage concerns.”

“Jackson Walker Fights DOJ’s Discovery Pursuit of Ethics Counsel” —

• “Jackson Walker LLP is fighting to protect communications with its ethics lawyers from a motion to turn over documents filed by the Justice Department’s bankruptcy watchdog, citing attorney-client privilege.”
• “The discovery dispute is part of an effort by the US Trustee to challenge Jackson Walker’s fees in 33 bankruptcy cases involving former bankruptcy judge David R. Jones, who resigned from the US Bankruptcy Court for the Southern District of Texas last year after admitting to a relationship with a onetime Jackson Walker partner.”
• “The Texas law firm previously provided the US Trustee with memos written by Holland & Knight LLP attorney Peter Jarvis about the romance between Jones and Elizabeth Freeman, who worked for Jackson Walker until late 2022. Jackson Walker hired Jarvis as ethics counsel when in 2021 it learned of the relationship.”
• “Jackson Walker gave those memos to the US Trustee because they weren’t protected by attorney-client privilege, but other communications with Jarvis and another Portland-based Holland & Knight lawyer, Jacqueline Harvey, are protected, Jackson Walker said.”
• “The US Trustee is pursuing depositions of Harvey and Jarvis and document discovery of communications between Jackson Walker and Holland & Knight about the Jones-Freeman romance.”
• “Attorney-client privilege didn’t apply to the memos that the firm previously provided because Jackson Walker waived that privilege when it sent the memos to Freeman’s attorney, the firm said.”
• “‘To put it simply—JW produced the Memos because it was obligated to under the Federal Rules,’ it said. ‘JW would have preferred not to have produced those documents.'”

“No Conflict Where Adverse Witness Paid Defendant’s Legal Fees” —

• “The New Jersey Appellate Division affirmed the denial of post-conviction relief to a defendant convicted of murder who claimed a conflict of interest.”
  • “In this opinion we afford substantial discussion as to one of those claims: whether defendant’s representation was compromised because his coparent and girlfriend, who was called at trial as a fact witness for the State, paid for the legal fees of his private criminal defense attorney. Defendant alleges the fee arrangement created an untenable conflict of interest.”
  • “For the reasons that follow, we affirm the PCR court’s determination that defendant was not deprived of effective representation of his counsel, who represented him zealously at trial. In particular, defense counsel vigorously cross examined the witness, who had paid his fees, about certain incriminating statements she made regarding defendant to police detectives.”
  • “Under New Jersey’s Rules of Professional Conduct (the “RPCs”), “lawyer[s] shall not accept compensation for representing a client from one other than the client unless: (1) the client gives informed consent; (2) there is no interference with the lawyer’s independence of professional judgment or with the lawyer-client relationship; and (3) information relating to representation of a client is protected.” RPC 1.8(f).”
  • “As the PCR court found, Boone did not direct or interfere with defendant’s counsel’s representation of his client. Nor is there evidence she communicated with his counsel concerning the substance of the case. As described by Boone in her testimony, she had three meetings with counsel at the outset of his work to discuss and arrange payment, and that was essentially the end of their contact. No billing disputes or payment problems were identified. And defendant’s counsel had no attorney-client relationship with Boone. To the contrary, as the PCR court found, defendant’s counsel recommended Boone secure her own attorney to represent her interests—which she did.”
  • “As to the first condition concerning defendant’s informed consent, we acknowledge the record contains no documentation of such express consent. Defendant alleges in his petition that counsel “never advised him or sought a waiver” of a potential conflict. Because defendant’s counsel is now deceased, the veracity of that claim cannot realistically be disproved. But we decline to hinge a finding of a per se conflict and constitutional violation upon such a ‘bald assertion.'”
  • ‘We take judicial notice it is not unusual that a defendant’s family and friends will pay a private defense lawyer’s fees to represent a loved one or close acquaintance who is accused of a crime. Such private defense counsel perform a vital institutional role in supplementing the services provided by the Office of the Public Defender to clients who personally cannot afford counsel. In a few instances, as here, that payer may also be a potential fact witness for the State at the ensuing criminal trial. We discern no per se constitutional prohibition on such fee arrangements if they are disclosed and with the assent of the defendant and where the counsel’s vigorous representation of the client is not being materially limited by the payer.’

“Firm Can’t Enforce Unexplained Arbitration Clause In Illinois” —

• “A Missouri attorney accused of botching an injury lawsuit he helped pursue for a couple whose dry-cleaning business used allegedly toxic chemicals cannot arbitrate those allegations because he never explained the contractual arbitration provision in those clients’ contract to them, an Illinois state appellate panel has found.”
• “In a published opinion Friday, a three-judge panel said Humphrey Farrington & McClain PC and shareholder Andrew Smith’s failure to fully inform former Wisconsin clients Bryan and Karen Dick-Ipsen about the meaning and consequences of the firm’s arbitration provision is ‘critical’ to its finding that a trial court correctly found the clause procedurally unconscionable.”
• “‘Based on the evidence … it is clear that plaintiff was neither apprised of the advantages and disadvantages of arbitration nor was given sufficient information by defendants to permit him to make an informed decision about whether to agree to the arbitration provision,’ the panel said. ‘Defendants submitted no evidence to the contrary.'”
• “Smith and his firm argued that the arbitration provision was enforceable because the Federal Arbitration Act preempts conflicting state law ethical rules, including Illinois’ Rules of Professional Conduct. The panel said the rules of professional conduct do not make the arbitration provision procedurally unconscionable themselves, but rather provide guidance on existing attorney conduct standards ‘and serve as a lens through which we can review the circumstances of the contract formation to decide whether enforcing an arbitration provision would be unconscionable.'”
• “The defendants drafted the arbitration provision at issue but didn’t discuss it with Bryan Dick-Ipsen, who has Parkinson’s disease and sought their help pursuing claims against those who injured him, though they discussed other contractual terms including their fee and scope of work, the panel said. Smith and the firm ‘made no effort’ to discuss the arbitration provision’s terms and implications, or all of the rights and benefits Dick-Ipsen would be waiving by agreeing to it, the panel said.”
• “Dick-Ipsen was only a prospective client at the time, but Smith and his firm were still in a position of trust under which they owed him certain ethical duties, the panel said.”
• “‘The totality of the circumstances shows that plaintiff cannot fairly be said to have been aware that he was agreeing to waive several rights by agreeing to arbitrate any potential claim for legal malpractice.'”
• “The defendants argued Dick-Ipsen’s affidavit proves that he had several days to read and review his contract terms, but he also submitted uncontradicted evidence that he didn’t understand the arbitration provision enough to agree to it, the panel said. That wouldn’t be enough to render the provision unenforceable in a standard contract case, but Dick-Ipsen cannot be held to the same standard given his specific circumstances, the parties’ sophistication gap ‘and the unique aspects of the attorney-client relationship,’ the panel said.”

“Gibson Dunn Takes US Gymnast Chiles’ Medal Fight to Swiss Court” —

• “Gibson Dunn & Crutcher is representing US Olympic gymnast Jordan Chiles as she tries to win back a bronze medal from the 2024 Paris games.”
• “Chiles was stripped of her medal by a Court of Arbitration for Sport ruling last month after a challenge by the Romanian Gymnastics Federation. Gibson Dunn and Zurich-headquartered firm Homburger AG on Monday filed an appeal in the Federal Supreme Court of Switzerland, seeking to overturn that decision.”
• “The appeal also argues the ruling suffered from a conflict of interest. Hamid Gharavi, the president of the arbitration panel that revoked the medal and awarded it to a Romanian, was actively representing Romania at the time of the case, according to the lawyers.”
• “Chiles’ legal team also plans to file an additional petition seeking alternative relief from the Swiss Federal Supreme Court. The appeals could result in a retrial allowing Chiles to prepare a defense and present evidence, the statement said.”
• See also: “New documentary footage may provide crucial video evidence for Jordan Chiles to reclaim Olympic bronze medal“

Here’s the latest from Bill Freivogel, ever vigilant in his reading and research:

• Turnbow v. Hiegel Bldg. Solut., LLC, 2024 Ark. App. 438 (Ark. App. Sept. 18, 2024).
  • “Hiegel is suing the Turnbows to collect amounts owing from construction of Turnbows’ house. Because the Turnbows’ lawyer (‘Lawyer’) had represented other companies in which Hiegel’s owner (‘Owner’) had an interest, Hiegel moved to disqualify Lawyer in this case. The trial court granted the motion.”
  • “In this opinion the appellate court reversed. The court applied Rule 1.13 according to its terms and said because Lawyer never represented Owner individually on any matters related to this one, no conflict. Very fact-specific. The court mentioned Arkansas’ strange adherence to an appearance-of-impropriety test, but found no such violation here.”
• Drake Univ. v. Des Moines Area Cmty. Coll. Found., No. 4:24-cv-00227-SMR-SBJ (S.D. Ia. Sept. 9, 2024).
  • “Drake sues Foundation for trademark infringement and related causes. Lawyer, now at Firm 2, represents Foundation. Lawyer was at Firm 1 from 2000 to 2020. Firm 1 has done Drake’s IP work for many years, including work on the trademarks in question. Drake has moved to disqualify Lawyer on both current-client and former-client principles.”
  • “In this opinion the court denied the motion. As to current client, the court relied on USPTO representation arcana (read the opinion). As to former client, the court found that Drake had not shown that Lawyer, at Firm 1, had learned anything relevant to this case.”
• Naylor v. BAE Sys. Inc., 2024 WL 4112322 (E.D. Va. Sept. 5, 2024).
  • “Plaintiff is an employee of Defendant. Defendant administers Defendant’s benefit plan for employees. Plaintiff brought this case claiming Defendant has mismanaged the plan. Law Firm is representing Defendant regarding Defendant’s administration of the plan and in this case.”
  • “Plaintiff moved to disqualify Law Firm in this case because in its plan advisory role, Law Firm also represents Plaintiff. In this opinion the court denied the motion to disqualify, holding that, usually, the lawyer for a plan and its administrator does not represent a plan’s beneficiary — here, Plaintiff.”
• Nova Oculus Canada Mfg. ULC v. Sather, 2024 ABKB 517 (CanLII) (Ct. K.B. Alb. Aug. 27, 2024).
  • “Order denying a motion to disqualify Law Firm. The opinion has no apparent precedential value, so no extended discussion here. It is a workmanlike treatment of: (1) Was there a lawyer-client relationship?; (2) Was it a near client relationship?; and (3) Did a Law Firm owe a duty of confidentiality to a non-client?”
  • “The case is a dispute between two companies over their past dealings. During some of those past dealings Law Firm lawyer was the only lawyer involved. Only the responding company had an engagement agreement with Law Firm, and paid Law Firm. Very fact-intensive.””
• Gill v. JUS Broad. Corp., 2024 WL 4107251 (E.D.N.Y. Sept. 6, 2024).
  • Plaintiff listed Expert Witness on the valuation of a company. Defendants moved to preclude Expert’s testimony on a number of grounds. One ground was that Expert had a conflict because ‘he and Plaintiff’s counsel refer business to and perform services for each other.'”
  • “While that may be grist for cross-examination, it is not grounds for exclusion. For exclusion, the conflict must be “extraordinary.” See, El Ansari v. Graham, 2019 WL 3526714 (S.D.N.Y. Aug. 2, 2019).”

“[New York] Ethics Opinion 1274: Conflicts of interest, former clients, government lawyers”

• “A lawyer employed in the counsel’s office of a state agency would not have a conflict in representing the agency in an enforcement action against a client the lawyer had formerly represented in private practice unless the lawyer would normally be expected to have acquired confidential information in the course of the lawyer’s prior representation that was material to the enforcement action. If there were a conflict, the conflict would be imputed to the counsel’s office, and screening would not suffice to avoid imputation, absent consent of the former client.”

Ethical issues for lawyers related to the transition to the State Public Defender system: “IDAHO STATE BAR FORMAL ETHICS OPINION NO. 137 September 18, 2024” —

• “Can a reduction in a lawyer’s compensation create a financial issue for the lawyer that may result in a potential conflict of interest? Yes.”
• “Must a lawyer seek withdrawal from a pending case if there is a significant risk that the lawyer’s representation of a client will be materially limited due to a financial personal interest conflict of interest? Yes.”
• “Lawyers whose financial compensation will decrease from their current county pay rate face a potential concurrent conflict of interest. The lawyer must assess whether there is a significant risk that their representation of clients will be materially limited due to their own personal financial interests, i.e., a reduction in pay rate to perform the same legal services. If the lawyer determines that there is a significant risk that their representation of one or more clients will be materially limited because of their own personal interests, then the lawyer has a concurrent conflict of interest under I.R.P.C. 1.7(a)(2).”
• “Some conflicts may be consentable under I.R.P.C. 1.7(b). However, each subpart of I.R.P.C. 1.7(b) must be met for a lawyer with a concurrent conflict of interest to continue the representation. I.R.P.C. 1.7(b)(1) requires the lawyer to reasonably believe that the lawyer will be able to provide competent and diligent representation to each affected client notwithstanding the concurrent conflict of interest.”
• “This may be difficult for a lawyer to “reasonably believe” when the conflict of interest involves the lawyer’s personal financial interest. If the lawyer does not reasonably believe that they can provide competent and diligent representation due to their own personal financial circumstances, informed consent from each affected client in writing under I.R.P.C. 1.7(b)(4) will be ineffective to allow the representation to continue because I.R.P.C. 1.7(b)(1) cannot be met in that instance.”
• “Courts have broad discretion in whether to grant a motion to withdraw. If a court denies the lawyer’s motion to withdraw from the case, even if the lawyer’s request to withdraw is due to a clear conflict of interest, the lawyer must continue to represent the client. ‘When ordered to do so by a tribunal, a lawyer shall continue representation notwithstanding good cause for terminating
• the representation.’ I.R.P.C. 1.16(c).”