Bressler Risk Blog

Reminder, The 2024 IG Staffing Compensation Survey will close at the end of the month.

If you missed the original announcement, you can read more about this survey here.

This survey looks to capture data on the broad range of law firm IG roles. So if you’re an individual contributor looking to understand how your comp compares to your peers, or you’re an IG manager looking to benchmark yourself + to keep your team (and potential new hires) on par with changing market standards, you don’t want to miss out.

(If you’re not on the IG side of your firm’s house, I encourage you to pass along details to those who are, as I suspect they’ll regret missing the chance to participate and see the results when they become available!)

For those who are wondering, yes we’ll be running the risk (e.g. intake/conflicts/terms) staffing compensation survey again this year. (In fact, I hope to have that exercise kicked off quite soon…)

And if anyone has questions, or would like a reasonable deadline extension, please feel free to reach out to me directly. (Email readers can do that by just replying to this message in their inbox — it’ll reach me. Others can use the contact form.)

“Sidestepping Conflicts and Other Ethical Pitfalls in Employee Depositions” —

• “Quite often corporate employers want outside counsel to represent both the corporation and potential employee-witnesses during pretrial discovery depositions. Conflicts of interest are obviously lurking in these scenarios, although, in the case of current employees — particularly current management employees — the likelihood of an ethical misstep is small. In fact, a lawyer’s representation of current, highly placed corporate employees will have the effect of protecting with attorney-client privilege information they provide to the corporation’s attorney.”
• “The real problems arise when a corporation’s attorney seeks to represent both the corporation and former employees who may possess information adverse to the corporation and may even be facing personal liability themselves.”
• “The recipe for ethically representing a nonparty witness at a deposition in a case in which the lawyer also represents a party (usually a corporate employer) has four ingredients:
  • Limited Scope Representation. Representing the witness during a deposition could be a “limited scope representation,” meaning that the lawyer would provide some, but not all, of the legal services that attend a traditional lawyer-client relationship. “Limited representation” could include no more than a pre-deposition preparation session and legal advice on whether the witness’s testimony could subject him or her to criminal or civil liability. Any limitations on the usual attorney-client relationship would have to be reasonable under the circumstances.
  • Is There a Conflict? Can It Be Waived? The lawyer should next consider if representing the witness creates a conflict of interest with the corporate client. If so, and if the conflict can be waived, the lawyer must obtain signed, written conflict waivers from both the witness and the corporate client. The lawyer’s ethical obligation to inform both clients about the possibility that conflicts of interest may arise, to independently monitor the case for conflicts of interest, and to address these conflicts continues throughout the litigation.”
• “Even though it is not necessarily an ethical violation for a corporation’s lawyer to also represent an employee witness at a deposition, in reality, most witnesses likely possess information that is unfavorable to the corporation’s case, thus creating a strong potential for a conflict of interest. It can be very difficult for the lawyer to determine the witness’s full knowledge before the deposition.”
• “Finally, if a conflict arises, it can be waived only if the witness gives informed consent to representation despite the conflict. Informed consent means that the witness must be advised of all of the negative consequences that could occur as a result of his or her testimony.”

“CapRadio audit details ‘possible conflicts of interest’ for 5 ex-board members. Here’s who they are.” —

• “An audit released this week into financial practices at Capital Public Radio flagged five contracts involving possible conflicts of interest on the part of five different former board members — three more than previously known to the public.”
• “The forensic analysis released Monday of finances at CapRadio, an auxiliary of Sacramento State, found that those three board members were “either a founder or a partner” at businesses that entered into contracts with the station totaling tens of thousands of dollars.”
• “‘As such, the contracts with CPR may have provided a financial benefit to the Board members associated with each vendor,’ part of the audit reads.”
• “Two of the three board members are partners at two different law firms with offices in Sacramento, according to the audit. The third is the founder of a management consulting firm. All three were among the 14 board members who resigned last October, days after a separate audit revealing vast financial mismanagement was released by the California State University system.”
• “The [Sacramento] Bee determined the identities of two other board members, both attorneys, based on the descriptions of their law firms and their roles described in the audit. “
• “A person knowledgeable of CapRadio’s finances, who wished to remain anonymous because the person was not authorized to speak about the matter, confirmed the identities of those two, as well as the board member who runs a consulting firm.”
• “From January 2019 until May 2023, Downey Brand was paid more than $42,000 for legal services related to ‘lease negotiations,’ the audit said.”
• “However, CLA did not determine whether Clark recused herself from the discussion and votes pertaining to the contract, the audit said.”
• “The audit noted the payments ‘appear reasonable based on the stated services rendered’ for this contract.”
• “‘There may be another contract with (Downey Brand) in addition to the contract CLA reviewed,’ the audit states. ‘However, Sacramento State has been unable to locate any other contracts and no further outreach was made to (Downey Brand).'”
• “Another law firm, Stoel Rives, was paid more than $11,000 for two years while a CapRadio board member was employed at the firm.”
• “Stoel Rives, through a Portland-based attorney, helped CapRadio file a trademark application in 2021, according to the U.S. Patent and Trademark Office.”
• “The station entered into a contract with Stoel Rives in October 2020 for “legal services” related to trademark matters, the audit said.”
• “The audit noted that the ‘payments and contract appear reasonable for the stated services.'”
• “The discussions surrounding the contract were not noted in the minutes from the Board of Directors meeting, executive or the finance committees, the audit said.”
• “Though [General Manager] Eytcheson said the contracts were properly vetted, the 2023 financial audit by the CSU said annual documents that were supposed to track board members’ conflicts of interest could not be located.”
• “‘Conflict‐of‐interest (COI) statements for board members were not retained,’ a portion of last year’s audit reads, in part.”
• “‘The COI policy states that members of the board should complete an annual COI statement. However, CPR could not locate signed statements during the audit period because the staff member responsible for maintaining the statements was on sabbatical leave.'”

For more, see: “‘Absolutely unacceptable’: Forensic examination finds misuse of funds, possible conflicts of interest and $700,000 in mysterious reimbursements at CapRadio”

“Micron, Dell, HP win appeal over conflict claims tied to US patent official” —

• “A U.S. appeals court on Friday upheld U.S. Patent and Trademark Office rulings for Micron, Dell, and HP, finding that the decisions could stand even though the attorney who represented the tech companies later became the office’s director.”
• “The U.S. Court of Appeals for the Federal Circuit said the companies’ adversary in the USPTO case, patent owner Unification Technologies, had not shown that Kathi Vidal’s previous participation in the case influenced the administrative judges who invalidated its patents.”
• “Unification sued Micron, Dell and HP for infringing the patents, which relate to managing and deleting data in memory chips, in Texas federal court in 2020. The HP and Dell cases have since been dismissed, while the Micron case is ongoing.”
• “The tech companies — represented by Vidal, then a partner at Winston & Strawn — asked the USPTO’s Patent Trial and Appeal Board (PTAB) to invalidate the patents later that year. President Joe Biden nominated Vidal to head the office in 2021 and she was confirmed in 2022, after which she recused herself from the case.”
• “The board invalidated Unification’s patents later that year. Unification argued at the Federal Circuit that the case improperly required PTAB judges to ‘evaluat[e] the arguments of their boss’ and said they were ‘monetarily disincentivized’ from ruling against Vidal because she reviews their performance.”
• “U.S. Circuit Judge Raymond Chen wrote for a three-judge panel on Friday that Unification ‘provided no evidence that the Director controls [PTAB judge] bonuses or performance reviews,’ and that a PTAB judge would have no reason to think that their decision ‘could affect their bonus determination because of the way that the Director might react.'”

“How Kirkland Uses Court Shopping to Get an Edge in Bankruptcy” —

• “In this system, Kirkland & Ellis LLP—the biggest player in giant corporate bankruptcies, and the largest law firm in the world by revenue—stands out.”
• “Kirkland didn’t invent forum or judge shopping, and it’s not the only firm that scouts judges and districts in its quest to help its clients quickly get in and out of Chapter 11. But an analysis of its forum shopping playbook, part of Bloomberg Law’s examination of the inner workings of US bankruptcy courts, shows how one firm can give—and take away.”
• “When rulings don’t go in its favor or controversy erupts in courts where Kirkland has been a steady presence, it often stops taking its business there and brings new cases elsewhere, a Bloomberg Law analysis of its court filings shows.”
• “In at least three instances, the shift from one district to others came after questions surfaced in cases in which Kirkland was involved, a review of court filings compiled by BankruptcyData.com found. Its actions in Houston, Delaware, and Richmond reveal the pattern. In Houston, the newest example, a romance scandal involving a judge and local lawyer cast a spotlight on cases in which Kirkland was lead counsel. After the controversy broke, the firm went from filing multiple Houston cases annually to filing none, Bloomberg Law found.”
• “‘If a court doesn’t come through for Kirkland in one case, Kirkland won’t take them another one,’ bankruptcy expert Lynn LoPucki, a professor at the University of Florida Levin College of Law, said in an interview.”
• “Chicago-based Kirkland is a driving force in the bankruptcy system. From 2011 to 2020, it represented the debtor in more than 20% of large public company bankruptcies, more than double its nearest competitor. Kirkland bills heartily for its services, with top partners charging more than $2,000 an hour to help distressed companies navigate their financial trouble.”
• “In a system in which law firms have great discretion on where they file cases, Kirkland is noteworthy for its ability to shift its cache of major bankruptcies to favored courts. Those filings deliver a financial jolt to the local legal community and help transform sleepy bankruptcy districts.”
• “‘Unlike any other firm around, Kirkland exercises market power over bankruptcy courts,’ Georgetown University law professor Adam J. Levitin wrote in a 2023 law review article about venue shopping, a practice ingrained in the US bankruptcy system.”
• “For decades Kirkland regularly filed large Chapter 11 bankruptcies in Delaware, a favored spot for law firms. Then in 2015, a judge raised sharp questions in the bankruptcy of Samson Resources Corp., in which Kirkland was the debtor’s counsel, suggesting senior lenders would ‘kill’ the oil and gas company if they didn’t get what they wanted… Then Kirkland stopped bringing cases in Delaware.”
• “‘Coming from a firm that handles a fifth of all megacase filings, it is a weighty threat, especially to a judicial district like Delaware that is able to justify its seven temporary bankruptcy judgeships based solely on its flow of large chapter 11 filings,’ he [Levitin] added.”

Regular blog readers know that I like experiments. Last week, I was catching up with an old risk friend (who taught me and one of my favorite CEOs the ins and outs of ethical walls, nearly two decades ago).

As we reached the end of our call, he said: “Well, I actually have more to say.” To which I said: “Why don’t you write it all down for me?” And, just to show me, he went and did just that.

So in today’s update, I’m pleased to spotlight a guest article from industry veteran and legal risk management expert Mike Guernon: “A Blueprint for Better Conflicts Management: Balancing Precision, Process, and Professionalism.”

It’s a bit longer than our typical posts, so you can read the entire linked article as a pdf. In his essay:

• Mike share his thoughts and advice on building a better law firm conflicts and intake function, taking into account the “realities” of people, process, data and technology.
• He advocates for the use of advanced technology and data-driven approaches to streamline processes, particularly in ways that allow lawyers and risk staff to focus on higher-level analysis and resolution strategies.
• He also emphasizes human factors, noting the importance of building checks and balances to address (inevitable?) errors, and to understand the important of supporting work-life balance in building, training, and growing risk teams.
• Finally, he highlights the value of risk leaders and staff building strong professional networks, including participating in formal industry forums and informal peer discussions, as a way to stay on top of emerging trends, navigate new ethical dilemmas, and make “good practices” even better.

Intrigued? See the entire article here.

“Vinson & Elkins Pursues Narrower Role in Enviva’s Bankruptcy” —

• “Vinson & Elkins LLP is seeking a new role in Enviva Inc.’s bankruptcy weeks after a judge rejected its bid to serve as debtors’ counsel.”
• “The request comes after Judge Brian F. Kenney of the US Bankruptcy Court for the Eastern District of Virginia in May ruled that Vinson & Elkins couldn’t represent Enviva in its bankruptcy because it has a longstanding relationship with Riverstone Investment Group LLC, a private equity firm that held 43% of Enviva’s publicly traded shares. Kenney declined Enviva’s request for reconsideration in July.”
• “When Kenney rejected Vinson & Elkins’ initial employment application, he left open the possibility that the firm could represent Enviva in a different capacity under a section of the bankruptcy code that is less restrictive on conflicts of interest.”
• “‘The Court explained in the Reconsideration Order that there may nevertheless be an important role for V&E in these chapter 11 cases as special counsel under section 327(e) of the Bankruptcy Code due to its deep institutional knowledge of the Debtors,’ Enviva said in a Tuesday filing.”
• “Under 327(e), Vinson & Elkins can work on the case as long as the matters it works on don’t involve its other clients.”
• “Under the Tuesday proposal, Vinson & Elkins will continue to work as Enviva’s company counsel, handling governance issues, regulatory filings, tax matters and other issues, according to filings.”
• “Vinson & Elkins said it conducted ‘a thorough conflicts analysis’ and determined none of its lawyers working in the Enviva bankruptcy has an adverse interest to Enviva on the matters they will be working on.”
• “Vinson & Elkins narrowed the scope of its representation after talking to the US Trustee, the Justice Department’s bankruptcy watchdog, it said. Enviva and the two firms will coordinate to ‘avoid unnecessary duplication,’ Enviva said in a filing.”

“Attorneys – Disqualification – Conflict of interest [Massachusetts]” —

• Koch, et al. v. Curley, et al. (Lawyers Weekly No. 09-092-24) (14 pages) (Squires-Lee, J.) (Suffolk Superior Court) (Civil Action No. 2384CV02766-BLS2) (July 16, 2024).
  • “William Koch (Koch) owns and manages a number of businesses including Renegade Management, Inc. (Renegade), a family office management company, and Nauticus Marina, Inc. (Nauticus Marina) (together with Koch and Renegade, Plaintiffs), which holds a commercial marina in Osterville, Massachusetts. Mark Curley (Curley) was employed by Koch and his entities from 1994 until December 2018. His duties included managing aspects of the family business and overseeing Nauticus Marina.”
  • “This case arises, in part, from a sale-leaseback transaction involving one of Nauticus Marina’s assets, 138 Bridge Street (Property), a marina with numerous docks. Plaintiffs allege that although the Property was worth at least nine million dollars, Koch received only a $500,000 promissory note and Curley’s promise to continue to work for Koch and his entities for twenty years without his annual six figure bonuses. Plaintiffs maintain that Curley’s promise to remain employed turned out to be ‘a gross and intentional misrepresentation… regarding the most material term of th[e] agreement.’ … Plaintiffs bring claims against Curley and Bridge Street Marina, LLC (Bridge Street) (together with Curley, Defendants), the entity to which the Property was transferred, of Fraudulent Inducement (Count I), Breach of Contract (Count II), Unjust Enrichment (Count III), and Breach of Fiduciary Duty (Count IV).”
  • “Plaintiffs have filed a Motion to Disqualify Defendants’ counsel, Albert J. Schulz (Schulz). Because I conclude that, at a minimum, Shulz represented both parties to the transaction — Plaintiffs and Defendants — the Motion must be allowed.”
  • “Plaintiffs seek to disqualify Shulz as Defendants’ counsel. They argue that he has a current conflict of interest prohibited by the Mass. R. Prof. C. 1.9(a). Alternatively, they argue that Shulz is prohibited from representing Defendants pursuant to Mass. R. Prof. C. 3.7(a) because Shulz is a necessary witness at trial. As explained below, I conclude that disqualification is required under Mass. R. Prof. C. 1.9(a).”
  • “I conclude that Shulz represented Plaintiffs in the transaction in addition to Curley. It does not matter that there was no engagement letter. … Here, there is sufficient evidence to conclude that there was an implied attorney client relationship in connection with the 2015 transaction.”
  • “Having determined that Shulz represented Plaintiffs in the very transaction Plaintiffs now claim was fraudulently induced, it would be an affront to the legal system and denigrate the high ethical standards required of attorneys in the Commonwealth to permit Shulz to represent Curley against Plaintiffs.”

“City fends off bid by county to have its law firm tossed” —

• “The city of Tulsa can keep the private law firm it has hired to sue Tulsa County over a new jail agreement, a judge ruled Tuesday.”
• “The county had filed a motion seeking to have the firm of Norman, Wohlgemuth, Chandler and Dowdell disqualified from the case, claiming that the law firm has a conflict of interest because it also is representing the Tulsa County Retirement Board.”
• “The county called two witnesses and presented several exhibits showing that the county had paid the law firm for services related to a Retirement Board case.”
• “But an attorney for the law firm, Jo Lynn Jeter, told Tulsa County District Judge Jefferson Sellers that the county had failed to meet the legal standard for disqualification.”
• “Jeter said the county did not show that the law firm’s involvement in the Retirement Board case would likely hinder proceedings in the jail lawsuit or that the law firm has possession of some kind of information that would be harmful or prejudicial to the county.”
• “Sellers said that for him to disqualify the city’s law firm, he needed evidence of a conflict of interest or improper possession of confidential information.”

“Decision of the Day: Attorney’s Familial Relationship With Client Found Not to Warrant Disqualification” —

• “Based on alleged misrepresentations, plaintiff Francesco Zanghi and his company Zanghi LLC made investments in pizzerias in Italy and the United States between June and November 2018. On Jan. 30, 2024, the court learned of a familial relationship between Zanghi and his counsel Andrea Natale.”
• “Zanghi’s deposition testimony and emails from Natale in 2018 and 2019 raised concerns over Natale’s direct involvement in contested issues in the instant case. To ensure that Natale’s participation did not violate New York State Rule of Professional Conduct 3.7(a), the “attorney-witness rule,” U.S. District Judge Naomi Reince Buchwald of the Southern District of New York ordered Natale to show cause why he should not be disqualified.”
• “The court later sought clarification as to Natale’s familial relationship with plaintiff Zanghi. Based on his responses, the court was satisfied that Natale need not be disqualified. Natale’s involvement occurred after the complained-of investments. Nor was there any indication that his familial relationship with client Zanghi would mean that he was a possible witness on any significant factual issue that would require his disqualification under the attorney-witness rule.”

“Ex-Irwin Mitchell Solicitor Rebuked Over Unsent Email” —

• “A former Irwin Mitchell solicitor has been rebuked by the Solicitors Regulation Authority after an error in correspondence with the court.”
• “Charles Westwood failed to successfully submit an appeal on behalf of a client to the Court of Appeal, according to a report by the U.K. industry watchdog published on July 26. Westwood believed he had submitted the appeal by the court’s deadline by email, but did not check receipt of his email with the court nor did he check Irwin Mitchell’s case management system.”
• “The solicitor told interested parties that he had successfully submitted the appeal. The time window for his client, who had been sentenced to prison, to make an appeal then ran out.”

“Rhode Island Supreme Court Ethics Advisory Panel Op. 2024-05” —

• “Where an attorney representing a client in a slip-and-fall case has learned that a material witness for the defendants is another current client in an unrelated workers’ compensation matter, the attorney must withdraw from representing both of the clients under the Rules of Professional Conduct.”
• Full text of opinion.
  • “The inquiring attorney represents a client (the ‘Client’) in a third-party, work-related slip-and-fall case against the worksite general contractor and other entities. The defendants have disclaimed liability on the ground that they are not responsible for the Client’s injuries and/or the Client is responsible for his or her own injuries. In support of their position, the defendants have identified as one of their witnesses a safety coordinator who investigated the Client’s allegations on behalf of the defendants (the ‘Witness’).
  • “The inquiring attorney intends to depose the Witness. However, the inquiring attorney has learned that the Witness is in fact his or her current client with an unrelated workers’ compensation matter dating from 2016 with an open claim for medical benefits but no recent claim activity. Based on this revelation, the inquiring attorney has postponed the deposition and asks whether a conflict of interest exists such that he or she must withdraw from representing the Client and/or the Witness.”
  • “It is the Panel’s opinion that a conflict of interest does exist, such that the inquiring attorney must withdraw from representing both the Client and the Witness under the Rules of Professional Conduct.”
  • “Here, the inquiring attorney represents both the Client and the Witness in unrelated matters. However, the interests of the Client and the Witness are nonetheless directly adverse because the Witness is a material witness for the defendants in the Client’s slip-and-fall case, obligating the inquiring attorney to depose him or her on the Client’s behalf. This is a classic conflict-of-interest scenario under Rule 1.7(a)(1).”
  • “In this case, the Panel finds that the conflict is nonconsentable because the inquiring attorney’s coincident duties to zealously represent both the Client and the Witness are incompatible… On the one hand, the inquiring attorney’s duty to the Client obligates him or her to depose the Witness in an adversarial manner because the Witness is acting on behalf of the defendants who stand in opposition to the Client. This obligation extends throughout the litigation, as the inquiring attorney may be required to cross-examine the Witness at trial, impeach the Witness’ credibility, challenge the content of the Witness’ testimony, present contrary evidence, or otherwise confront the Witness in furtherance of his or her representation of the Client.”
  • “However, owing to the inquiring attorney’s simultaneous representation of the Witness, the Client may justifiably fear ‘that the [inquiring attorney] will pursue [the Client’s case less effectively out of deference to the [Witness], i.e., that the representation may be materially limited by the [inquiring attorney’s] interest in retaining the [Witness as his or her] client.’ … Such fear could impair the Client’s attorney-client relationship with the inquiring attorney and undermine the representation.”
  • “On the other hand, the inquiring attorney also owes the Witness the same duty of zealous representation in the Witness’ workers’ compensation matter. His or her actions when representing of the Client could irretrievably sunder this relationship due to the fundamentally adversarial nature of such advocacy as described above… As such, there is no way for the inquiring attorney to reconcile his duties to both the Client and Witness without prejudicing them… As such, it is functionally impossible for the inquiring attorney to adequately represent either the Client or the Witness under these limitations.”

“Lawyers among professional services to be affected by proposed reforms to anti-money laundering regime” —

• “The [Australian] government has conducted two rounds of consultation on its plans to modernise Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime.”
• “The aim of the reforms is to make sure that the laws continue to deter, detect and disrupt money laundering and terrorism financing activities and to satisfy the international standards set by the Financial Action Task Force (FATF). Significantly, a major component of the reform is the expansion of the AML/CTF regime to ‘tranche two’ entities which includes lawyers, accountants, real estate professionals and other professional services. These entities presently do not fall under the AML/CTF regime.”
• “Attorney General Mark Dreyfus recently told the National Press Club that Australia was ‘one of a handful of countries remaining in the world who have not legislated to bring in these kinds of entities.'”
• “Speaking at the same National Press Club address, AUSTRAC CEO Brendan Thomas said the regime currently applies mainly to financial institutions.”
• “Law firms will be required to understand their clients, the risk posed to their business and they will be required to adopt risk mitigation strategies. ‘It’s really about putting controls around risk and not turning a blind eye to crime that might be in front of you,’ said Thomas.”
• “The Law Council of Australia is supportive of monitoring the risks that may support money laundering into Australia however the ‘legislation needs to be balanced and proportionate to the real risk, targeted and carefully drafted to ensure vital foundations of our legal system, including access to justice and client legal privilege, are not weakened,’ said Law Council of Australia President-Elect Juliana Warner.”
• “Justin Wong, principal lawyer at Streeton Lawyers says ‘I think it’s wrong to suggest that law practices are largely unregulated and therefore susceptible to money laundering risks… [M]ore than any other industry, law practice trust accounts are highly regulated.'”
• “As Wong points out, in NSW, law firms are subject to annual external audits and must comply with ongoing reporting and notification obligations in relation to each transaction.”
• “The Law Council has released detailed Guidance Notes including the ‘National Legal Profession Anti-Money Laundering & Counter-Terrorism Financing Guidance‘ [June 2024] to assist the profession in understanding and navigating their professional obligations.”

“Judge refuses to disqualify leading opponents of J&J’s talc bankruptcy plan” —

• “A New Jersey judge on Friday rebuffed Johnson & Johnson’s bid to disqualify the law firm Beasley Allen from representing plaintiffs claiming they got cancer from the company’s talc, a setback for the company as it tries to resolve more than 60,000 such claims for $6.48 billion through a pre-packaged bankruptcy plan.”
• “Judge John Porto of the New Jersey Superior Court ruled that J&J had not presented ‘any credible basis’ for its claims that Beasley Allen partner Andy Birchfield formed an unethical alliance with one of the company’s former lawyers.”
• “Also on Friday, U.S. Magistrate Judge Rukhsanah Singh, who is overseeing talc cases pending in New Jersey federal court, ordered J&J to show cause why she should not adopt Porto’s findings as well as she considers a parallel motion to disqualify the firm from the federal cases.”
• “Erik Haas, J&J’s worldwide vice president of litigation, in a statement said that the company ‘will appeal the trial court’s ruling that it is not an ethical violation for plaintiffs’ counsel to knowingly and surreptitiously collaborate with defendants’ former counsel on the same matter, same claims and same issues that the former counsel represented the defendants.'”
• “In its December motions to disqualify Beasley Allen, J&J claimed that Birchfield acted unethically by working with former Faegre Drinker Biddle & Reath partner James Conlan, who worked on the talc litigation for the company for about two years before leaving legal practice in 2022, to propose an out-of-bankruptcy settlement. The company said Conlan must have disclosed confidential information, but Porto said there was no evidence for that.”
• “J&J has denied plaintiffs’ claims that its talc is tainted with cancer-causing asbestos, saying the product is safe.”

“After controversy, judge in Musk pay case allows Delaware prof to file disputed brief” —

• “It cost him a lucrative law firm consulting gig, but a retired Delaware law professor won the right on Monday to argue against Tesla’s attempt to bypass a court decision invalidating CEO Elon Musk’s $56 billion pay package.”
• “Charles Elson, a longtime corporate governance expert from the University of Delaware, will be allowed to participate as an amicus, Chancellor Kathaleen McCormick of Delaware Chancery Court ruled. The judge is weighing the impact of Tesla’s shareholder vote last month to approve a pay package that the judge invalidated in January.”
• “Tesla, as you may recall, went to unusual lengths to try to block Elson from filing the brief back in May, before its shareholders voted on Musk’s pay.”
• “After Elson’s lawyer sent Tesla a draft of the brief, the company contacted the law firm Holland & Knight, where Elson was a longtime corporate governance consultant. Holland & Knight represents Tesla in at least two major employment cases. Tesla, according to Holland & Knight, alerted the law firm that Elson’s brief created a conflict because its consultant was taking a position contrary to Tesla’s.”
• “Holland & Knight, in turn, sent Elson an email that said Tesla had threatened to fire the firm if Elson filed the amicus brief.”
• “Elson opted to resign from his consulting job at Holland & Knight. He and his lawyer, Joel Fleming of Equity Litigation Group, subsequently told McCormick in court filings that Tesla had tried to “bully” Elson into abandoning the amicus brief by improperly pressuring Holland & Knight.”
• “Holland & Knight told me in May that Tesla did not try to pressure the firm but simply alerted partners about a potential conflict. The firm said its email to Elson describing Tesla’s threat to fire Holland & Knight was ‘incorrect’ and that it independently determined that Elson’s proposed brief ‘would be inconsistent with our obligations to our client.'”
• “Tesla also filed a formal opposition to Elson’s brief in the Chancery Court docket, denying that it leveraged its client relationship with Holland & Knight to squelch the filing.”
• “In Monday’s order, McCormick described Elson as ‘a leading authority on Delaware law’ whose previous amicus brief in the Musk pay case was cited in her January opinion. The judge also refuted Tesla’s argument that Elson’s brief was premature, pointing out that Tesla had already argued in an April 17 letter to the court that the upcoming shareholder vote was likely to impact the case.”
• “McCormick did not address the Holland & Knight controversy, though she brushed aside Tesla’s assertion that Elson had an improper motive for filing the proposed brief in May.”

More analysis and commentary on the Enviva matter, noted previously: “Private equity lawyers wince after bankruptcy court ruling” —

• “It is the assignment Vinson & Elkins never hoped would arise but the one where its client needed the powerhouse law firm the most. For a federal judge, however, just figuring out who the ‘client’ is has proved no simple task.”
• “Enviva, a once highly touted clean energy company, filed for bankruptcy in March citing nearly $2bn of debts to be restructured. Enviva selected V&E as its debtor counsel to take it through the court case. By the time of the bankruptcy petition, the company had struck a settlement with a majority of creditors.”
• “[Judge] Kenney said V&E could not meet the ‘disinterestedness’ standard of the bankruptcy code. His hang-up: V&E also happened to be a long-standing adviser to Riverstone, the key private equity backer of Enviva. Riverstone was responsible for $14mn or around 1 per cent of the law firm’s 2023 gross revenue, though it is using a separate firm in the Enviva chapter 11.”
• “His ruling has shocked restructuring practitioners. Bankruptcy judges have for years waved through law firms that had tight bonds with both private equity firms and debtors, afraid to rock the boat. American companies can essentially select the bankruptcy court in which they wish to appear, and judges who are not user-friendly to the major debtor law firms can get blackballed. But future judges facing a law firm retention issue are likely to take notice of this ruling.”
• “Kenney, earlier in the case, had broached the idea of creating an ‘ethical wall’ at V&E. The firm immediately dismissed that as impractical and unnecessary. After an initial ruling, rejecting V&E’s retention, the firm came back with a convoluted proposal. It offered to segregate lawyers as exclusively dedicated either to Enviva or to Riverstone. Respective lawyers would not get allocated profit sharing at year’s end from the other client. A new board committee would supervise the Enviva reorganisation negotiations.”
• “After tartly pointing out that V&E’s original position was that no compromise was necessary, the judge rejected the ethical wall terms as inadequate to repair the underlying conflict. The US Trustee, a government group that represents the public interest in bankruptcy cases, had voiced its concerns about V&E. But interestingly, two major law firms, Davis Polk and Akin Gump, representing creditors urged the judge to keep the law firm, citing V&E’s deep familiarity with Enviva as well as the disruption from bringing in a newcomer.”
• “Law firms like Kirkland & Ellis, Weil, Gotshal and Paul, Weiss have built incredibly profitable businesses where their private equity practices simultaneously touch mergers and acquisitions, financings and restructurings. In messy cases, the risk is the firms could prioritise a long-term private equity relationship over cutting a fair deal for all parties. “
• “For years, debtors have tried to mitigate perceived conflicts through various procedural structures including the hiring of multiple law firms, independent directors and independent investigations. But practitioners in candid moments will admit that these protections often prove weak in bankruptcy cases where aggressive debtors’ counsel can ram through their preferred outcome.”
• “Sometimes the consequence is a restructuring where the private equity firm gets to keep a disproportionate stake in the reorganised company. Other times it is a deal where the private equity firm escapes liability for pre-petition wrongdoing. V&E told the judge, in court papers, that rejecting its retention application would upset a tacit understanding whereby debtors get wide berth to pick their advisers. Law firms may now decide to become pickier in selecting their clients.”

“NY lawyers can passively invest in ABSs, says city bar association” —

• “A New York lawyer may hold a financial interest in an alternative business structure (ABS) operating legally elsewhere, the city bar association has said.”
• “It is the latest in a series of ethics opinions from both New York and the American Bar Association on US lawyers’ involvement with ABSs.”
• “Non-lawyer ownership of law firms is prohibited in most of the US, except in Arizona (where there are currently 70 ABSs licensed), Utah and, to an extent, the District of Columbia – and opposition to them remains fierce.”
• “At the same time, several prominent US law firms have set up their London offices as separate businesses that are ABSs, even if they have not used it to take external investment.”
• “New York rules prohibit a lawyer from practising law in New York through an ABS, such as being the resident New York partner of an English ABS.”
• “But an opinion issued last week by the New York City Bar Association’s professional ethics committee said its rules did not prevent a member’s passive investment in an ABS, because they would not actually be practising law.