Bressler Risk Blog

“What are ‘reasonable measures’ to prevent law firm conflicts? New ABA ethics opinion explores” —

• “An ethics opinion released Wednesday by the ABA’s Standing Committee on Ethics and Professional Responsibility addresses what constitutes ‘reasonable measures’ personally disqualified lawyers can take to ensure that the conflicts of interest are not imputed to their law firms.”
• “Formal Opinion 510 focuses on when a lawyer considers a matter from ‘a prospective client’ but is “not retained.” The crux of the ethics opinion addresses limiting exposure to obtaining more ‘disqualifying information’ than ‘reasonably necessary.'”
• “For example, one should ‘warn the prospective client that the lawyer has not yet agreed to take on the matter and that information should be limited only to what is necessary for the lawyer and client to determine whether to move forward with an engagement,’ according to the opinion.”
• “If the lawyer does not take such reasonable measures to minimize the risk of receiving additional disqualifying information, then the lawyer’s conflict will be imputed to the entire firm, according to the opinion.”
• “It centers on Model Rule 1.18 of the ABA Model Rules of Professional Conduct, which covers lawyers’ duties to prospective clients. A lawyer is disqualified from representing a prospective client in the same or substantially related matter against them only if the lawyer receives disqualifying information that could be harmful, according to the rule.”
• “But even if a lawyer possesses disqualifying information, when is the lawyer’s conflict imputed to the entire firm?”
• “Under the rule, the conflict of interest of the individual lawyer is not imputed to the person’s firm in two situations: when the prospective and impacted clients provide informed consent or the disqualified lawyer takes reasonable measures to avoid hearing details that are not necessary for client intake determinations.”
• “‘Once a lawyer has sufficient information to decide whether to represent the prospective client, further inquiry may be permissible, but it will no longer be ‘necessary.’ That means once a lawyer has decided there is any basis on which the lawyer would or must decline the representation, stopping inquiry on all subjects would place the lawyer in the best position to avoid potential imputation of a conflict to other lawyers in their firm,’ according to the opinion.”
• “If the lawyer is disqualified, then the firm must timely screen the disqualified lawyer, according to the opinion. Such screening is ‘timely when it takes place once a law firm becomes aware there is a potential conflict in representing someone adverse to the former potential client.'”

PDF of the full opinion: “Formal Opinion 501: Avoiding the Imputation of a Conflict of Interest When a Law Firm is Adverse to One of its Lawyer’s Prospective Clients”

“Mass tort attorneys must ensure compliance with new ABA guidance” —

• “True to their name, mass torts involve thousands, sometimes hundreds of thousands, of claims, myriad data points, and numerous steps from intake to resolution. The management of such legal endeavors requires nonlawyer staff and solutions capable of organizing, analyzing, and securely maintaining vast amounts of client information.”
• “In mass torts and class actions, it is common to delegate initial client intake to nonlawyers, whether that is support staff or technology platforms. When delegating tasks in that way, it is imperative that mass tort attorneys comply with all relevant ethical rules, opinions and laws, including the recent guidance from the American Bar Association (ABA).”
• “The ABA’s recently released Formal Opinion 506, opens new tab addresses a lawyer’s ethical obligations when delegating specific prospective client intake tasks to a nonlawyer… For mass tort attorneys seeking to retain clients and avoid potential legal pitfalls, a comprehensive understanding of Formal Opinion 506 is crucial. In order to remain in compliance with this guidance, there are a few crucial steps mass torts attorneys must take.”
• “Delegating prospective client intake tasks to nonlawyer assistants, whether that is staff or technology, requires establishing clear and comprehensive policies within a law firm. These policies should outline the specific tasks that can be delegated, emphasizing the importance of following ethical standards.”
• “Training should be designed to instruct nonlawyer staff on the ethical aspects of their responsibilities and ensure they have a comprehensive understanding of the limitations imposed by ABA Model Rule 5.3 and Formal Opinion 506.”
• “For example, Formal Opinion 506 states, “trained intake personnel may check for conflicts of interest, collect basic information from prospective plaintiffs or class members for lawyers to ascertain their eligibility to make a claim, and explain how fees and costs are charged in such cases.” But as detailed below, there are certain questions to which only a lawyer can respond.”
• “Continuous supervision is important to monitor the performance of nonlawyer assistants and address any issues promptly, maintaining the integrity of client interactions.”
• “At intake, always provide the option for a potential client to speak with the attorney handling their case. Confirming that prospective clients have the opportunity to communicate directly with the attorney who will be handling the case is fundamental to adhering to Formal Opinion 506. Lawyers must take steps to guarantee that prospective clients have the opportunity to discuss fee agreements and the scope of representation with the specific lawyer that would be representing them, prior to signing an engagement letter — not just an attorney employed by an intake center or marketing firm.”
• “Additionally, the Opinion discusses the application of Model Rule 5.5, opens new tab, which determines whether nonlawyers can answer specific legal questions based on jurisdictional definitions. As the Opinion states, ‘If the prospective client asks about what legal services the client should obtain from the lawyer, wants to negotiate the fees or expenses, or asks for interpretation of the engagement agreement, the lawyer is required to respond to ensure that the non-lawyer does not engage in the unauthorized practice of law…'”
• “Therefore, the intake process should be designed to facilitate attorney-client communication, allowing clients to discuss their matters, ask questions, and seek clarification on legal aspects, fees, the scope of representation, and objectives. In offering this option, attorneys not only comply with this new guidance but also create transparency and trust in the attorney-client relationship.”
• “Nonlawyers can perform an initial screening of prospective clients by checking for conflicts of interest, utilizing website intake questions, and employing conflict-checking algorithms. By checking for conflicts at the outset, law firms can ethically represent the prospective client without fear of conflicting with existing clients or other obligations.”
• “Ensuring compliance with ABA guidelines at every stage of client intake is crucial, especially for mass tort attorneys who are often representing thousands of plaintiffs. By performing the necessary work at the beginning of a client relationship, firms can avoid ethical pitfalls and focus on their important work seeking justice for their clients.”

“SRA tells employers what they cannot ask in-house lawyers to do” —

• “Draft guidance for employers of in-house solicitors, which aims to establish a mutual understanding of what lawyers can and cannot do, has been published by the Solicitors Regulation Authority (SRA).”
• “Among other things, it says employers should not put in place personal objectives, performance rewards and incentives that create an ‘inherent risk of conflict’ between the regulatory and legal objectives of the role.”
• “An example of this would be a bonus focused solely on completing a deal rather than completing it ‘in a way that aligns to your agreed legal and regulatory risk appetite.'”
• “The regulator has issued three other pieces of draft guidance to support in-house solicitors, covering identifying the client when working in-house, handling internal investigations, and reporting wrongdoing by an employer.”
• “The SRA is seeking views on the drafts before it formally adopts them.”
• “They are a response to an SRA review which found last year that in-house lawyers were generally able to withstand pressures on their independence but a minority reported demands to act unethically.”
• “The draft guidance for employers stresses that in-house lawyers ‘should be empowered and supported to raise concerns,’ and not disciplined or punished for doing so.”
• “Employers should ‘provide systems and processes to allow solicitors to meet their obligations to provide independent and impartial advice, avoid conflicts of interest and act in the best interest of their client.'”
• “This included allowing the legal function to be able to participate in leadership and operational roles/decisions across the business, and helping the board and executive to set their legal and regulatory risk appetite and deliver against this.”
• “‘However, solicitors should not be penalised for declining to participate in an activity or role where there a real likelihood of conflict of roles or of infringing regulatory obligations would arise from this participation. For example, acting as the director of a subsidiary or leading a sales initiative.'”
• “In-house lawyers are told that, where wrongdoing persists despite their reporting concerns, ‘you should carefully consider whether you can meet your regulatory obligations and continue working for your organisation.'”

For more, see the SRA guidance: “Working in-house” —

• “Following on from our thematic review, and our wider programme of activity directly engaging with in-house solicitors, we have developed a range of draft resources and guidance materials, specifically tailored to the in-house sector.”
• “We are publishing these materials in draft form to give the wider in-house community an opportunity to consider the content, and provide us with any feedback ahead of them being finalised. Please provide any feedback, via our online form, by 19 April 2024.”
• “The materials include:
  • Guidance for employers on a solicitor’s professional obligations
  • Key points for governing boards and chief executives
  • Guidance and case studies on identifying your client when working in-house
  • Guidance and cases studies on reporting concerns about wrongdoing when working in-house
  • Guidance on running internal investigations”

“Banker’s Lawyer Accused of Being Too Polite to Vet His Funds” —

• “A top law firm faced allegations that it broke UK money-laundering rules by being too polite to ask a politically connected banker from a former Soviet republic how he got his cash.”
• “Dentons overrode an internal warning urging ‘extreme caution’ in dealing with him as a client and failed to ask the banker where his wealth came from in case it might be ‘impertinent or impolite,’ legal regulators had alleged at a London court. While the tribunal dismissed the case Monday, finding no breach of the industry watchdog’s principles, it did find proof of shortcomings regarding money-laundering rules.”
• “The banker, who can’t be identified due to a court order, had spent tens of millions of pounds on London property and a family member is now the subject of a separate police probe. Dentons fought the case at the tribunal, arguing that it took ‘adequate measures’ to establish the banker’s source of funds. Lawyers for the firm said it knew that the client held a ‘substantial shareholding’ in a state-controlled bank. “
• “The regulator’s lawsuit is one of just a small number of cases scrutinizing the role of professional services in enabling the flow of illicit finance into Britain. Few cases go to trial in the UK despite the police estimating that hundreds of billions of pounds are laundered through the UK annually.”
• “The banker became a client of Dentons in 2013 after an acquisition of a smaller firm, and was immediately identified as a ‘politically exposed person’ — a term used to ascribe a higher level of risk and one that puts the onus on the firm to scrutinize transactions. But Dentons never asked the banker for his salary or the the size of his shareholding in the bank.”
• “Dentons lawyer Francois Chateau, now based in New York, told the Solicitors Regulation Authority in an interview that he never asked the banker how much he earned. ‘In Europe, in my culture, we don’t do that. You don’t ask err, how much do you make?’ according to Chateau. He said he’d never asked anybody to show him their bank account and to give evidence of what they own that would be ‘visible for everybody to see.'”
• “The regulator called Chateau’s answers ‘astonishing,’ saying that he adopted an ‘extraordinarily credulous attitude towards individuals of apparently spectacular wealth.'”
• “Dentons persisted with keeping the banker as a client even after the firm’s general counsel said in 2014 that it shouldn’t continue working for him.”
• “Dentons’ lawyers said even if the firm had breached money-laundering rules then its conduct wasn’t sufficiently serious to merit any kind of penalty.”

“SDT dismisses case against Dentons as SRA left with massive costs bill” —

• “The solicitors’ regulator has suffered a major setback after its prosecution of the world’s biggest firm by headcount effectively failed.”
• “Following a six-day hearing at the Solicitors Disciplinary Tribunal, the panel dismissed all allegations against Dentons and directed the Solicitors Regulation Authority to shoulder its own costs. The SRA has since revealed its costs came to £189,000 inclusive of disbursements and VAT.”
• “In its prosecution, the SRA alleged that the firm had breached money laundering regulations through its retention of a client from 2013 to 2017. The client, who by an order of the tribunal cannot be identified, had been chairman of a bank owned by a former Soviet state with a poor record for corruption and transparency.”
• “The SRA sought to argue that Dentons made insufficient checks on the client’s source of wealth and funds, while the firm insisted that the regulator was not basing its prosecution on money laundering regulations that were in place at the time.”
• “The tribunal deliberated at the end of the week and returned on Monday morning to say that one allegation relating to checks on the client’s source of wealth had been found proved, while the rest were not proved. After an intervention from Dentons to say that this allegation was dependent on the others and there was no jurisdiction to find it proved, the tribunal came back an hour later and dismissed the one remaining allegation.”
• “The SRA then sought to argue that Dentons should be ordered to pay a contribution towards its costs, saying that the case was properly brought and an ‘important yardstick’ for the regulator and the profession.”
• “Dentons submitted that the SRA had not taken into account its own guidance from the time of the alleged misconduct and had made no criticism of the firm’s systems and controls.”
• “Despite both sides being asked to make submissions on costs, at no point during the hearing was it explained what the SRA’s costs were. The tribunal made no order, meaning the SRA has to pay its costs in full. A full judgment with the SDT’s reasoning will be published in around seven weeks.”

SRA (updated March 5): “Sectoral Risk Assessment – Anti-money laundering and terrorist financing” —

• “We are responsible for the supervision of authorised firms for their anti-money laundering (AML) compliance, and we take our responsibilities very seriously. We owe a duty to society at large, and to protect the integrity of the legal sector through tackling intentional and unintentional enablers of money laundering.”
• “This document sets out information on money laundering, terrorist financing and proliferation financing risk that we consider most relevant for firms we supervise.”
• “We will continue to refresh this sectoral risk assessment on a regular basis to keep up to date with emerging risks and trends.”
• “We have seen increasing numbers of firms facilitating vendor frauds. This involves properties, usually residential, being targeted by fraudsters and being sold without the consent or knowledge of the genuine owners, with fraudsters often impersonating the owners. The conveyancing process is attractive to fraudsters because it provides both the method of committing the fraud and the means of laundering.”
• “Amendments to the Regulations in 2022 mean that all firms must now carry out an assessment of their exposure to the risk of proliferation financing. Simply put, this means the risk of the firm being involved with the global proliferation of nuclear, chemical, biological or radiological weapons by groups and countries which are not permitted to have them under international treaty. This includes both materials for weapons, and also ‘dual-use goods’. These are goods which are not manufactured as weapons but could be used in weapons or to produce them, for example fertiliser.”
• “There are similar risks in the use of new types of financial technology, for example, fund transfer systems and crowdfunding platforms. Any use of new technologies should be preceded by an assessment of the risks they may introduce and effective mitigation of these risks where possible.”
• “A separate issue which is of growing importance is the issue of sufficient resourcing of AML work. As economic conditions have continued to deteriorate, firms are likely to be under pressure to reduce costs, and elements of businesses that are not directly revenue generating may see their budgets reduced.”
• “Whatever decisions are made about resourcing, firms need to understand that economic conditions do not change the requirement to comply with the Regulations. In fact, the economic conditions are more likely to increase a firm’s exposure to would-be money launderers, emboldened by a perception that they are in a position of relative strength in dealing with firms. Potential clients may seek to emphasise the amount of revenue they can bring to a firm as a bargaining tactic.”

“Motley Rice Cites ABA Ethics Opinion in Opioid Disqualification Duel” —

• “Motley Rice, facing possible disqualification from dozens of opioid lawsuits, has turned to the latest formal opinion about the American Bar Association’s professional conduct rule governing ethics guidance for government lawyers.”
• “OptumRx Inc., a pharmacy benefit manager and defendant in the opioid lawsuits, is attempting to disqualify Motley Rice, which it says previously obtained confidential information from the company while serving as outside counsel to Hawaii, the District of Columbia and Chicago. Motley Rice has insisted there is no conflict, but a federal judge in the opioid multidistrict litigation wanted more information about the firm’s representations.”
• “Now, Motley Rice has turned to the ABA Standing Committee on Ethics and Professional Responsibility’s Feb. 28 formal opinion to the Model Rule of Professional Conduct 1.11, which prohibits a lawyer with confidential government information about a person from representing a private client ‘whose interests are adverse to that person.'”
• “In a March 1 supplemental brief, the plaintiffs’ executive committee, which includes Motley Rice member Joe Rice, in Mount Pleasant, South Carolina, said the cities and counties the firm now represents in the opioid cases are public entities, not ‘private clients,’ as defined in the ABA rule opinion.”
• “‘This conclusion supports plaintiffs’ arguments that the government entity bellwether plaintiffs are not covered as private clients,’ the committee wrote, ‘where plaintiffs have the right through discovery to obtain and use the investigation documents at issue, and in fact already have obtained and used many of these documents.'”
• “Also, the brief said, the information Motley Rice obtained in the prior government cases was not confidential because it could be accessed through routine discovery.”
• “‘Motley Rice wielded government power when it investigated OptumRx. It obtained confidential information about OptumRx through those investigations,’ Alston & Bird partner Brian Boone, in Charlotte, North Carolina, wrote for OptumRx, which is owned by United HealthCare. ‘Now it is litigating against OptumRx in private civil litigation when it can use that confidential information to OptumRx’s material disadvantage.'”
• “Rule 1.11 addresses a long-standing ethical debate about when private plaintiffs firms serve as outside counsel to government entities, particularly state attorneys general. The representation is particularly common in mass torts, where states and local governments sue companies for public nuisance.”
• “Last month’s ABA opinion addressed two areas of ambiguity, one involving the definition of a ‘private client,’ which is relevant to the Motley Rice matter, said Dru Stevenson, a professor at South Texas College of Law in Houston. He called the disqualification debate in the opioid lawsuits a ‘close case.'”
• “OptumRx is insisting that Motley Rice had subpoena powers while representing Hawaii, D.C. and Chicago, which it used to obtain confidential documents. And the ABA rule opinion confirms that lawyers qualify as public officials when accepting ‘special’ government appointments, as Motley Rice did, according to its court filing. Two lawyers who represented OptumRx in the prior government cases—Michelle Grant, of Dorsey & Whitney in Minneapolis, and Hogan Lovells partner Allison Caplis, in Baltimore, Maryland—filed declarations about Motley Rice’s subpoenas.”
• “The rule opinion also confirms that Motley Rice’s public entity clients in the opioid cases qualify as ‘private clients,” Boone wrote. He called Motley Rice’s interpretation of the ABA opinion “dangerous.’ ‘If accepted,” he wrote, “it would give free rein to private lawyers to seek out special appointments so they can use government power for their own private profit.'”

“WilmerHale Work for Harvard Scrutinized in Ethics Complaint” —

• “An anonymous ethics complaint targeting prominent WilmerHale attorney William Lee is calling on the Massachusetts attorney general’s office to investigate the firm’s relationship with Harvard University, where Lee served on its governing board for over a decade.”
• “Lee and Wilmer Hale represented the elite school in its attempt to defend its race-based admission policy from legal attacks by conservative groups, a battle it lost at the Supreme Court last summer. The firm also coached ex-Harvard president Claudine Gay for what turned into a highly damaging congressional hearing on antisemitism that helped lead to Gay’s ouster.”
• “Although the complaint represents another instance that spotlights WilmerHale’s ties to Harvard, the fact that one of the firm’s top lawyers served on the university’s board as it paid millions of dollars to the firm does not on its face represent any wrongdoing, said Stephen Gillers, a New York University legal ethics professor.”
• “Lee, a lead trial lawyer for Harvard in the high-profile litigation that led to the end of affirmative action at colleges, is the target of the complaint filed with the Massachusetts attorney general’s office over an alleged conflict of interest, a spokesman for the AG confirmed Friday. “
• “The anonymous complaint, the New York Post reported, claims the WilmerHale partner and Harvard alumnus Lee may have violated conflict of interest rules for public institutions.”
• “‘There was nothing improper about the firm’s legal representations of Harvard,’ WilmerHale said in a Monday statement, noting Lee recused himself from all of the school’s decisions concerning the case.”
• “The university told the Harvard Crimson, a student-run newspaper, in 2018 that Lee did not bill the school for his work on the affirmative action case, ‘nor does he receive any payment for revenue based on the firm’s billing to Harvard as part of the case.'”
• “There’s no evidence suggesting ‘Lee, on behalf of Harvard, personally participated in any decision for the school in which his law firm had an interest,’ said Gillers. ‘The fact that Lee was on the Harvard board while his firm and he represented the school violates no rule.'”
• “WilmerHale ensuring that no compensation went to Lee from the case appears to show the firm was ‘bending over backwards to ensure there is no issue at all,’ said Scott Cummings, a UCLA School of Law professor.”
• “The only problem would be if WilmerHale, a firm with deep trial and appellate benches, got ‘more work than it normally would,’ Cummings said. ‘As long as there aren’t any allegations of unfairness, then I don’t see the problem.'”
• “Lee stepped down from Harvard Corp. in June 2022. In December, he worked with the WilmerHale team that coached Gay before the congressional hearing on antisemitism on campus following the Oct. 7 Hamas attack on Israel, according to the Harvard Crimson.”

“ABA Requests Public Comment on Possible Regulatory Implications of Exploring Possible Amendments to Model Rule of Professional Conduct 5.5 to Increase Permissible Cross-Border Practice” —

• “The ABA Center for Professional Responsibility Working Group on ABA Model Rule of Professional Conduct 5.5 (MRPC 5.5) is requesting public comment on an Issues Paper it developed regarding possible regulatory implications associated with exploring possible amendments to MRPC 5.5 to increase permissible cross-border practice.”
• “‘Since the last large-scale review of ABA MRPC 5.5 (Unauthorized Practice of Law; Multijurisdictional Practice of Law), technology, globalized legal practice, and client expectations regarding the delivery of legal services have continued to evolve.'”
• “‘In light of these developments, as described further below [in the Issues Paper], questions have arisen as to whether Model Rule 5.5 remains fit for purpose, or whether the reality of 21st-century legal practice and delivery of legal services merits changes to the current manner in which multijurisdictional practice is permitted.'”

“New Guidelines on Conflicts of Interest in International Arbitration”

• “The Arbitration Committee of the International Bar Association has published revised Guidelines on Conflicts of Interest in International Arbitration (“IBA Guidelines“). The new text modernizes the previous version of the Guidelines (2014) without fundamentally amending them and will continue to be widely applied in all types of arbitrations (commercial, investment, sports, maritime, etc.).”
• “First published in 2004, the IBA Guidelines have become a widely accepted instrument reflecting international standards of impartiality and independence of arbitrators.”
• “Some of the most relevant amendments to the general standards in Part One of the Guidelines:
  • Arbitrator’s disclosure impeded by secrecy rules: the new General Standard 3(e) calls on arbitrators not to accept an appointment or resign if the arbitrator considers that he or she should make a disclosure, but that professional secrecy rules or other rules of practice or professional conduct prevent such disclosure.
  • Failure to disclose: the new General Standard 3(g) expressly recognizes that a failure to disclose certain circumstances does not necessarily mean that a conflict of interest exists;
  • Parties’ due diligence obligation: General Standard 4(a) includes a presumption that a party shall have learned of any fact or circumstance which a reasonable enquiry would have yielded if conducted at the outset of or during the proceedings and waived the right to raise an objection based on that fact or circumstances if not raised within 30 days.
  • Relationship between the arbitrator and the arbitrator’s law firm or employer: the text of General Standard 6 – in particular the concept of “law firm” – has been modernized to reflect the evolution in the structure and mode of international legal practice.”
• “The following additions to the orange list are the amendments which are most relevant in practice.
  • Experts: arbitrator currently serves, or has acted within the past three years, as an expert for one of the parties or an affiliate of one of the parties in an unrelated matter (Item 3.1.6), or has, within the past three years, been appointed as an expert on more than three occasions by the same counsel, or the same law firm (Item 3.2.9). At the same time, it is clarified that the arbitrator, when acting as arbitrator in another matter, heard testimony from an expert in the current proceedings constitutes a Green List Item (Item 4.5.1).
  • Co-arbitrators: arbitrator and counsel for one of the parties currently serve together as arbitrators in another arbitration (Item 3.2.12), or an arbitrator and their fellow arbitrator(s) currently serve together as arbitrators in another arbitration (Item 3.2.13).
  • Relationship between arbitrator and expert: arbitrator is instructing an expert appearing in the arbitration proceedings for another matter where the arbitrator acts as counsel (Item 3.4.3).
  • Mock trials: arbitrator appointed by one of the parties to assist in mock-trials or hearing preparations on two or more occasions within the past three years (Item 3.2.10).
  • Publicly advocating an opinion on the case: the 2024 version of the Guidelines clarifies that this orange list situation includes advocating an opinion through social media or on-line professional networking platforms (Item 3.4.2).”

For more, here’s a redlined version:“IBA GUIDELINES ON CONFLICTS OF INTEREST IN INTERNATIONAL ARBITRATION
(COMPARE 2014 AND 2024 VERSIONS)”

“Sublime’s Ex-Lawyers Hit Back at Malpractice Lawsuit, Calling It a ‘Pathetic’ Attempt to Avoid Legal Bills” —

• “Top music law firm King Holmes Paterno & Soriano is firing back at a legal malpractice lawsuit filed by the band Sublime, arguing that the group has “falsely and maliciously” sued to get out of paying their hefty legal bills.”
• “‘While Sublime had the right to terminate its lawyers at any time, it has no right to sidestep its responsibility to pay fees it incurred,’ the firm wrote. ‘Yet, in an obvious and pathetic attempt to do exactly that, plaintiffs, presumably at the prodding of reputationally challenged new advisors, have cynically elected to file a trumped-up preemptive malpractice suit falsely and maliciously accusing the law firm of conflicts of interest they claim caused them unspecified damages.'”
• “The filing from King Holmes aimed to rebut many of Sublime’s specific allegations, including the band’s accusation that the firm steered it into a merchandise deal without disclosing that the company was another one of the firm’s clients — a move Sublime claimed cost the band millions.”
• “In Monday’s filing, the firm said it had disclosed that potential conflict of interest to the band members and that they had consented to the arrangement. King Holmes said it even invited the band members’ personal attorneys to be involved in the negotiations to avoid any doubt.”
• “‘At the request of Sublime and its partners, KHPS helped secure a state-of-the-art merchandising agreement with one of the world’s few most preeminent music merchandisers, which also was Sublime’s merchandiser of choice,’the firm wrote. ‘That merchandiser paid and continues to pay Sublime higher royalties on a much broader range of products and with other more favorable terms than its main competitor offered.'”
• “The firm went even further, suggesting that Sublime had perhaps been motivated by ‘predatory new advisors’ to file baseless allegations in court.”
• “‘A cursory investigation done in good faith, had plaintiffs or their advisors cared to make the minimal effort needed to conduct one before pulling the litigation trigger, would have demonstrated what plaintiffs and their advisors already knew or should have known — that nothing could be further from the truth,’ the firm wrote.”
• “In technical terms, Monday’s filing accused Sublime and its surviving members of breach of contract and other related violations, saying they had violated their agreement by failing to pay the firm $108,852 in past-due legal bills. The case will be litigated alongside the original allegations filed in January.”

For those following the Corporate Transparency Act: “Court Challenge to Corporate Transparency Act Prevails – For Now” —

• “On March 1, 2024, U.S. District Judge Liles C. Burke for the Northern District of Alabama, Northeastern Division, issued a Final Judgment ruling in favor of the Plaintiffs’ (National Small Business United, et al. ‘NSBU’) motion for summary judgment, and against the U.S. Treasury (Defendants).”
• “This judgment held that the Corporate Transparency Act (CTA) is unconstitutional because it exceeds the Constitution’s limits on Congress’ power.”
• “Further, FinCEN is permanently enjoined from enforcing the CTA against the Plaintiffs in that case (but only the Plaintiffs in that case).”
• “It is currently unclear as to the implications of this ruling for the business community at large. This ruling may be persuasive in similar cases brought against Treasury outside of the Northern District of Alabama, but is not precedential, meaning that other judicial forums may rule differently on the issues presented in this case.”
• “In reaching its conclusions, the court reviewed all of the arguments made by Treasury and the Plaintiffs. First, the court dispensed with Treasury’s standing argument finding that the Plaintiffs had a redressable injury and the NSBU had associational standing in order to bring the suit in federal court. Next, the court discussed the various constitutional arguments the Plaintiffs made, determining the CTA did not pass muster under the Necessary and Proper Clause (referring to foreign affairs and national security), the Commerce Clause, nor Congress’s taxing power under the Necessary and Proper Clause. The court extensively discussed Supreme Court precedent to reach the result that the CTA cannot be justified as a constitutional exercise of Congress’s powers. The Court indicated that its conclusion made it unnecessary to decide whether the CTA violates the First, Fourth, or Fifth Amendments of the Constitution, as also asserted by the Plaintiffs.”
• “Because this case only included questions of law, and was decided on summary judgment based solely on dispositive motions by the parties, the appeals court will have de novo review of this case. That is, the appeals court will decide all issues in the case, as if the case was being heard for the first time.”

State Bar of Michigan: “Ethics opinion details the judicial ethical obligations when invited to attend firm-sponsored events” —

• “Judicial officers should decline to attend law firm-sponsored events with limited exceptions, according to a new ethics opinion from the State Bar of Michigan’s Standing Committee on Judicial Ethics.”
• “‘It may be permissible for a judicial officer to attend an event if the judicial officer has a personal connection to the firm and has weighed the ethical limitations to ensure that there is no appearance of impropriety, it does not detract from the dignity of the office, and it does not interfere with the performance of judicial duties,’ the opinion states.”
• “The opinion analyzes Canon 2, which deals with the appearance of impropriety, and Canon 4, which outlines allowable extrajudicial activities, as to why judges should not attend events at law firms.”
• “The opinion concludes by saying that judicial officers play a crucial role in maintaining public trust in the judiciary, necessitating careful consideration of their participation in law firm-sponsored events. The opinion advises that judicial officers should therefore decline invitations unless they have personal connections to the firm and that, when considering attendance, they should conduct thorough analyses to ensure they are in compliance with the Code of Judicial Conduct.”
• “Factors to consider include being aware of the event’s public visibility, avoiding ex parte communications, and refraining from discussions regarding pending cases. These factors should be considered for the judicial officer to ensure that they continue to uphold the dignity of their office and to ensure activities align with ‘ordinary social hospitality.'”
• Text of full opinion here.

“Virginia senator who does legal work for skill game industry will help write skill game bill” —

• “A state senator whose law firm has helped the skill game industry fight Virginia’s ban on the slots-like gambling machines is among the handful of senators picked to write legislation behind closed doors that could determine whether the industry remains profitable or ceases to exist in the state.”
• “Many members of the Virginia General Assembly are lawyers, and it’s not uncommon for them to vote on legislation that could conceivably impact a client.”
• “Glancing associations aren’t usually enough to trigger Virginia’s conflict of interest laws, which are meant to prevent elected officials from taking public actions that benefit their private interests.”
• “But the professional connection Sen. Bill Stanley, R-Franklin, has to Georgia-based skill game company Pace-O-Matic is unusually direct, touching on his work as a private attorney, his interest in car racing and the political punditry he offers in podcast form. Pace-O-Matic has lobbied heavily for the bill Stanley will now help finalize in the last week of the session.”
• “In an interview Thursday, Stanley said the Virginia Conflict of Interest and Ethics Advisory Council determined his ties to Pace-O-Matic don’t amount to a legal conflict.”
• “‘They found that there was no conflict because I don’t own Pace-O-Matic,’ Stanley said. ‘I don’t own one of these skill games. And I don’t own a convenience store that has a skill game in it.'”
• “Stanley and his firm worked with Pace-O-Matic on a lawsuit seeking to overturn the previous ban passed by his General Assembly colleagues, a legal challenge that bought skill game companies nearly two years of revenue with no taxation and regulation before the ban was reinstated last year.”
• “Pace-O-Matic also sponsors a racing team partnership between Stanley and former NASCAR driver Hermie Sadler, who has hosted skill games at his Southside Virginia truck stop and served as a plaintiff in the lawsuit trying to keep them legal. The company also sponsors the ‘Leaning Right and Turning Left’ podcast Stanley hosts with Sadler. Fliers promoting that podcast are laid out on the reception desk outside Stanley’s General Assembly Building office and include the phrase ‘Powered by Pace-O-Matic.'”
• “Asked if he remains retained by Pace-O-Matic and Sadler today, Stanley said, ‘Of course.'”
• “Getting the bill passed is critical to Pace-O-Matic’s continued business in Virginia. Its failure would mean the company would have to pack up thousands of skill machines that are currently deactivated due to their illegal status. Its passage would allow the machines to be turned back on and start making money again, but the bill’s specifics could determine exactly how profitable they could be.”
• “The law also says a conflict doesn’t exist if a legislator’s interest in a matter considered by the General Assembly isn’t ‘substantially different’ from that of “the general public” or a broader ‘class or group’ of businesses that could potentially be impacted. In other words, if Stanley only works with one of several skill game companies operating in Virginia, that could be enough to clear him under the “substantially different” rule.”
• “Though the skill game legalization bill affects multiple companies and the public, roughly half the skill machines in Virginia are believed to be Pace-O-Matic machines, according to the limited state data available.”
• “Stanley said he had previously abstained from gambling votes and opposes gambling generally, but was ‘surprised’ to learn that the Ethics Council found he could act freely on skill game legislation because there was no conflict.”