Risk Update

Ethics Edition — Non-lawyer Lawyering… Advertising SEO… and a Bit of AI

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Courts, Lawyers Must Address AI Ethics, ABA Proposal Says” —

  • “Courts and lawyers should address emerging ethical and legal issues related to the use of Artificial Intelligence, a resolution up for a vote at the American Bar Association’s annual meeting proposes.”
  • “The legal profession is known to be resistant to change, and it’s been slower than other industries to embrace modernization through legal technologies. But tech experts say lawyers’ lack of fundamental understanding of them will soon put them at a disadvantage if they don’t change their ways.”
  • “If it’s adopted, the science and technology law section hopes to establish a working group to define guidelines for legal and ethical AI usage and to develop a model standard it would submit for adoption at a future ABA House of Delegate’s meeting.”
  • “AI tools, for example, can be used by law firms to assist in legal research, trim document review time, and help revise contracts.”
  • “Another point the resolution raises is that legal AI should be “audited and auditable,’ which speaks to its transparency and trustworthiness, Economou said. Nelson concurred that lawyers need to know more about the AI they’re using. Every AI is different, so we should be asking what data was used to develop it and by whom, she said.”

(I for one welcome our AI overlords, and meeting and besting the inevitable risk blogging bot in a fair Turing Tussle. I hear word the conflicts-clearing singularity may be nigh for that matter… Daisy, daisy…)

But before the we all start learning the three laws, we may first encounter rules about humans doing more in the legal profession: “Bloomberg Law: California reportedly “inundated” with negative comments regarding proposed new rules on who can practice law, while getting support at a public hearing for those that allow sharing fees with non lawyers” —

  • “…according to a report in Bloomberg Law, ‘[t]he State Bar of California has been inundated with more than 400 comments in response to a series of sweeping proposed rule changes that include allowing nonlawyers to share in law firm profits and provide legal advice.’ More than 100 comments were filed to the bar in the first 24 hours after the group issued notice that the comment period had begun.”
  • “Again, according to the story, the individual rule change that has received the most comments is the one that would authorize nonlawyers, with appropriate regulations in place, to provide certain types of legal advice and services. The new approach, suggested in order to provide access to legal services in areas of “critical need,” including evictions, and domestic violence and immigration cases, would provide an exemption to the rules banning unauthorized practice of law. As of Aug. 5, the state bar had received 12 comments in support of the proposal, but more than ten times that number against it.”

Of course some are enthusiastic: “Changing Ethics Rules Is Key To Law Firm Innovation” —

  • “Innovation requires a clear vision, access to capital and world-class technology talent. These three ingredients are readily available around the U.S., but are largely inaccessible to law firms due to outdated, protectionist policies that prevent nonlawyers from being firm members, and from investing in law firms.”
  • “Additionally, these policies are based on unproven, outdated concerns that restricting investment in and ownership of legal services to lawyers is necessary for client protection. There is not now, nor has there ever been, any data to support these policies. Indeed, the experience of law firms in the District of Columbia, where a change in the ethics rules in 1990 permitted nonlawyers to work and invest in law firms — including having ownership interests — demonstrates that the restrictions are not necessary.”
  • “Technology is coming to the legal industry in a big way, and it is coming whether some in the legal community like it or not. The California bar task force recognizes that entrepreneurial lawyers should be the ones leading innovation. This can only occur when law firms have access to capital and access to talent.”
  • “For some reason, lawyers like to think we’re different. That we’re above it all. We’re not, and if we don’t have the resources necessary to build technology — access to capital being number one — our industry will be changed by nonlawyers and/or foreign law firms in ways that we cannot control.”
  • “In order to attract top technology talent into the legal space, law firms will have to offer them the same thing that Amazon, Uber, Netflix and Airbnb did: an equity stake.”

And on the ethics front, this one also caught my eye, for those interested in the professional rules about advertising and marketing: “N.J. Legal Ethics Panel Tackles What’s Off Limits for Search Engine Marketing” —

  • “The Supreme Court’s Advisory Committee on Professional Ethics said in an opinion made public Tuesday that a lawyer may purchase a sponsored search keyword on a competing lawyer’s name. That would show the purchaser’s own law firm website in the results when a person types the competitor’s name in a search engine.”
  • “However, the committee drew the line at another form of sponsored search marketing in which the lawyer pays to insert a hyperlink to his own website on the name of a competing lawyer. That would mean someone who clicked on the competitor’s name in a search result would be diverted to the purchaser’s website instead.”
  • “The first practice is not fraudulent, deceptive or dishonest and is not prejudicial to the administration of justice, the committee said. But the second practice is ‘purposeful conduct intended to deceive the searcher for the other lawyer’s website,’ the committee said.”
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Risk Update

Disqualification Daring & Drama (or Just Delay)

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REV Group Can’t DQ Fund, Attys For Strategic Litigating” —

  • “A federal judge has denied REV Group Inc.’s attempt to disqualify a pension fund and its counsel for allegedly colluding with counsel in a related state court stock-drop case against the specialty vehicle manufacturer, saying that dropping certain securities claims was a reasonable strategic move.”
  • “U.S. District Judge Lynn Adelman ruled Wednesday that the Houston Municipal Employees Pension System and its lead counsel, Bernstein Liebhard LLP, can’t be disqualified for amending their consolidated investorsuit to drop Securities Act of 1933 violation claims so they could play out in a parallel state court action.”
  • “‘Plaintiff’s amendment of the complaint can quite reasonably be characterized as a strategic choice undertaken in the best interest of the class, with the risk that some class members might pay litigation expenses in two separate actions outweighed, to plaintiff’s mind, by the increased likelihood of recovery,’ Judge Adelman wrote.”
  • “The pension fund’s attorneys told Judge Adelman in April that their litigation strategy is ‘absolutely in the best interest of the Securities Act plaintiffs” and only strengthens the complaint. While the tactic may be a blow to REV’s defense strategy, it is nonetheless the fund’s right to voluntarily dismiss a claim with no explanation so long as it will benefit the Securities Act plaintiffs and doesn’t waste any court resources, the pension fund said.”

And via Bill Freivogel:

  • “City of Fresno v. United States, 2019 WL 2536106 (Fed. Ct. Cl. June 19, 2019). This is a suit by a group of water users (“Group 1”) against the U.S. over Group 1’s entitlement to water. Another group of users (“Group 2″) moved to intervene to take positions adverse to Group 1. Law Firm represents Group 2. Group 1 moved to disqualify Law Firm because Law Firm currently represents a member of Group 1 on matters unrelated to this case, and because Law Firm formerly represented members of Group 1 on water allocation issues.”
  • “In this opinion the court denied the motion because of Group 1’s delay in making the motion. This suit started in October 2016. Law Firm filed Group 2’s motion to intervene in May 2017. Group 1 began demanding that Law Firm withdraw in August 2018 and filed the motion to disqualify that month. Law Firm started appearing for Group 2 adverse to Group 1 on water allocation matters as early as 2014. Given all this, the court ruled that Group 1 simply waited too long to bring their motion. The court did discuss the current client and alleged former client conflicts, presumably to establish that no harm resulted from them. The court also discussed Law Firm’s long-time (and expensive) representation of Group 2, including the expertise on water allocation matters Law Firm developed during that representation.”
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Risk Update

Rethinking Conflicts — Combining Software + Staffing Insight for Greater Success

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Recently published by ILTA, conflicts insights from risk consultants InOutsource: “Rethinking Conflicts — Leveraging Risk Management Insights Within the Firm” —

  • “Over the past four years, we’ve seen a seismic shift in conflicts management, as firms migrate from legacy systems. The 2018 ILTA Technology Survey found that adoption of modern conflicts management solutions had grown by 50% year over year and by 650% over the previous three years.”
  • “Even as firms embrace advanced conflicts software, they have been much slower to adapt their staffing approach and processes to a more centralized conflicts clearance model, exposing them to unnecessary risks and inefficiencies. There are many reasons for this organizational stasis, including challenges in making the business case to lawyers who may be reluctant to change the way the firm clears conflicts.”
  • In this article, we’ll explore several ways that firms can advance their transition to a more robust, more efficient, centralized model for intake and conflicts.”

And for those looking for more insight from them on the laterals front, see also this article they published via the ABA: “Leveraging Technical and Process Solutions to Bring Order to Lateral Attorney Vetting


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Risk Update

Confidentiality Concerns — Same-side Mediations Gone Sour, eDiscovery Ethics & More

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Lawyer suspended for disclosing client info in ‘vindictive’ bid to collect fees” —

  • “The Ohio Supreme Court has suspended a lawyer for threatening to disclose confidential information in a bid to collect a fee and then carrying out the threat.”
  • “The nature of Shimko’s conduct was ‘unreasonable and vindictive,’ said the court, which rejected a recommendation for a lesser, two-year suspension.”
  • “The court found that Shimko violated a disciplinary rule that generally bars lawyers from using information relating to the representation of a former client to the disadvantage of the former client.”
  • “…he anticipated his total bill for reviewing the policies, preparing the engineer and representing him at the examination would be somewhere in the range of $2,300. After Shimko completed the work, he sent the engineer a bill for $4,350. The engineer informed Shimko he would pay only $3,300 in $500 monthly installments, then did as he said. Shimko sued for the rest of the fees.”
  • “When the engineer’s new lawyer asked Shimko to drop the complaint, Shimko responded that the engineer had made false statements under oath that he had not worked or conducted business on the premises before they were destroyed by fire.”
  • “Shimko had told the engineer he wouldn’t be charged for an initial telephone conference, yet he billed him $154 for the call. At his disciplinary hearing, Shimko testified, ‘My word is my bond until I change it, I guess.'”

Does Mediation Confidentiality Protect Communications Between Two Parties on the Same Side of the Table?” —

  • “The Ninth Circuit held last week that mediation-related communications between two parties on the same side of the table are inadmissible under California’s mediation confidentiality statute in subsequent litigation between those two parties. Apollo Education Group, Inc. v. National Union Fire Ins. Co., 2019 WL 3822322 (9th Cir. Aug. 15, 2019).”
  • “Before trial, citing California’s mediation confidentiality statute, the defendant law firm sought to exclude all evidence of their discussions with the plaintiff immediately preceding, and during, the mediation concerning mediation settlement strategies, and defendants’ efforts to persuade the plaintiff to reach a settlement in the mediation. The trial court granted the motion, but the Court of Appeal vacated the trial court’s order on the ground that California’s mediation confidentiality statute is intended to prevent the damaging use against a mediation party of positions taken during the mediation, but not to protect attorneys participating in the mediation from the malpractice claims of their own clients.”
  • “On further appeal, the California Supreme Court reversed, holding that while it understood the policy concerns of the appellate court with compromising the plaintiff’s ability to prove his legal malpractice claim, the plain language of the mediation confidentiality statute — rendering inadmissible “evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation” — was not confined to communications between mediation disputants, but also protected communications between the plaintiff and his attorneys, even if these did not occur in the presence of the mediator or the other parties.”

Ethics Violations and the Rise of eDiscovery Technology” —

  • “Given the readily available technology that greatly increases security of client data, eDiscovery review technology that substantially reduces overall review time and costs by surfacing up more relevant data faster, and the general availability of free eDiscovery education and resources, the question becomes whether a lawyer may be brought up on ethics violations or potentially face malpractice charges for intentionally or negligently (by virtue of her ignorance) failing to employ the appropriate technology?”
  • “In other words, irrespective of the expertise that may be required in a matter, if the lawyer is not keeping up with the “benefits and risks” associated with ‘relevant technology’ in eDiscovery, then she may not be considered competent in that particular matter. The addition of these highly probative phrases were added in 2012. Interestingly enough, since 2012, 36 states in the country have modified their own state’s ethics rules to include the same or substantially same verbiage.”
  • “Given the advancements in technology as a result of the sheer volume of data that is being created today, it is imperative that every lawyer either understand the basics of cybsersecurity and eDiscovery technology or work with another lawyer to ensure compliance within the Federal Rules of Civil Procedure (FRCP) and the Federal Rules of Evidence (FRE) (or her particular states’ analogous laws).”
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Risk Update

Contentious Conflicts — Allegations, Aggression, Accusations & Acrimony

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Morgan & Morgan Accuses Carlton Fields of Putting ‘Cash Ahead of Duties’ in Malpractice Case” —

  • “Morgan & Morgan’s Florida Business Trial Group has hit Tampa-based Am Law 200 firm Carlton Fields and four of its attorneys with a legal malpractice lawsuit claiming Carlton Fields betrayed a client by representing a company on the opposite side of a transaction.”
  • “The complaint claims that after years of representing Orlando title insurance trust Attorneys’ Title Insurance Fund, defendants Nathaniel L. Doliner, Marty J. Solomon, William G. Giltinan and Christopher W. Smart began simultaneously representing its business partner Old Republic National Title Holding Co. in a deal that worked against the plaintiff’s interests.”
  • “‘Sadly, Carlton Fields made the conscious decision to put cash ahead of the duties it owed to ATIF,’ the complaint said.”
  • “Carlton Fields represented Attorneys’ Title Insurance Fund in this deal among others and billed at least $1.4 million in fees in four years, according to the lawsuit. The agreement went through various amendments until it become a master agreement—which Carlton Fields allegedly worked with Old Republic to draft without getting a conflict waiver from their client first. They did eventually get a conflict waiver, but the lawsuit claims that was invalid because it wasn’t approved by the plaintiff’s board or shareholders and waived only ‘potential’ conflicts and not ‘actual conflicts.'”
  • “‘We have acted in accordance with our ethical and fiduciary duties. We believe that the claims are baseless and will vigorously defend ourselves,’ Carlton Fields spokesperson Kate Barth said in an emailed statement.”

Allegations Fly Against Lawyers on Both Sides of 3M’s Bair Hugger Lawsuits” —

  • “Three lead plaintiffs attorneys accused in a sanctions motion of disclosing sealed documents in lawsuits over Bair Hugger surgical blankets have brought their own motion for sanctions, claiming 3M’s lawyers ‘resorted to fabricating facts.'”
  • “Last month, 3M Corp. filed a motion for contempt and sanctions against the plaintiffs lawyers, who are leading more than 5,000 lawsuits alleging its Bair Hugger warming blankets, used in surgeries, increased the risk of infection. The three attorneys, 3M’s lawyers wrote, disclosed sealed documents, most recently in a publicly filed motion to compel, submitted for a separate state court case in Texas, according to 3M’s motion.”
  • “‘Contempt and the imposition of sanctions are warranted where, as here, an attorney repeatedly violates court orders governing the confidentiality of documents,’ wrote 3M attorney Benjamin Hulse. ‘MDL counsel have repeatedly expressed their disagreement with this court’s sealing orders and have repeatedly shown they have no qualms about violating them when it suits their purpose. Nothing short of a sanction order from this court will curb their misconduct.'”
  • “According to 3M’s sanctions motion, filed June 6, plaintiffs lawyers in the multidistrict litigation disclosed a sealed 2015 opinion by a federal judge in the Southern District of Texas in a Bair Hugger case called Walton v. 3M as part of a motion to compel filed earlier this year in a separate lawsuit in Hiladgo County District Court. They also disclosed sealed documents about a 3M product called ‘Bair Paws’ that addressed why some practitioners do not use the Bair Hugger system, the sanctions motion says.”
  • “Plaintiffs lawyers wrote back that 3M’s injunction argument ‘defies common sense, equity and fairness, and principles of federalism, not to mention the overwhelming weight of binding Supreme Court authority.’ The three plaintiffs attorneys targeted in the sanctions motion also denied that they disclosed sealed documents, stating that the information was publicly available.”
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Risk Update

Conflicts Alleged and in Contention — Potential Lawyer Witnesses & Opioid Matters

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Judge Rules Exec Can Cite Alleged Weil Conflicts To Seek New Opioids Trial” —

  • “The former national sales director of opioid medicine manufacturer Insys Therapeutics, seeking a new trial, has accused his ex-defense lawyers at Weil, Gotshal & Manges of hiding a conflict from him because their firm is also working on Insys’ bankruptcy.”
  • “On Monday, however, Simon went further, saying it had become apparent that his lawyers at Weil had a conflict they didn’t tell him about. While supposedly defending him, Simon said, Weil advised Insys with its pending bankruptcy as the company helped the government investigate its former executives, including Simon.”
  • “U.S. District Judge Allison Burroughs of the District of Massachusetts on Tuesday partly granted his motion to submit supplement arguments seeking a new trial. She gave Simon through Sept. 9 to file a brief with more details.”
  • “In a statement, a Weil representative said at no point was the firm representing adverse interests and said Simon was aware of its work for Insys ‘at the outset…In addition, Weil did not provide any advice to Insys or communicate with its other legal counsel with respect to whatever cooperation Insys provided to the Department of Justice in connection with the deferred prosecution agreement,’ the statement continued.”

DQ Order Nixed In Wyndham Suit Against Timeshare Exit Cos.” —

  • “A Tennessee federal judge has vacated a magistrate judge’s recommendation to disqualify two attorneys representing a timeshare exit company in a false advertising suit brought by Wyndham Vacation Ownership Inc., saying there’s not enough evidence to support ruling out the lawyers as possible witnesses.”
  • “U.S. District Chief Judge Waverly D. Crenshaw Jr. on Monday returned Wyndham’s attempt to disqualify attorneys Aubrey Givens and Kristin Fecteau Mosher to Magistrate Judge Jeffery S. Frensley. Judge Crenshaw ordered him to develop a record of evidence that would determine whether the lawyers could serve as essential witnesses in the case accusing Legal Timeshare Aid and owner Charles Simerka of running a scheme in which they falsely claimed they could help Wyndham timeshare owners terminate their purchase contracts.”
  • “‘Particular care must be taken in the context of motions to disqualify because the ability to deny one’s opponent the services of capable counsel is a potent weapon that can be misused as a technique of harassment,’ Judge Crenshaw wrote in his order.”
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Risk Update

Information Risk — Time for “Data Breach Privilege”?

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Back with more to blog about. Today it’s an interesting article from Karen Rubin and Tom Zych at Thompson Hine: “Do we need a new ‘data-breach privilege’? Thoughts on the Sedona Conference proposal

  • “The outlines of the attorney-client privilege and work-product doctrine are well-established. But how should they apply when an organizational client suffers a cybersecurity event or other intrusion that results in a data breach? Should information about the company’s security policies pre-breach and its post-breach response be given any enhanced protection? Under what circumstances?”
  • “The questions are burning ones, given recent data-security catastrophes that have exposed financial, health and other data of millions of people. After each event, claimants quickly line up to file suit, and discovery demands for information inevitably follow.”
  • “The Sedona Conference, a non-profit, non-partisan institute whose working groups have been influential in e-discovery and other cutting-edge issues, recently published draft commentary recommending adoption of a qualified stand-alone protection for information prepared in a cybersecurity context, even when not involving communication with an organization’s lawyer.”
  • “Based on evaluating and balancing the competing interests, the Working Group proposed what it calls a ‘stand-alone cybersecurity privilege modeled on the work-product doctrine’ that would extend to all documents and tangible things reflecting “mental impressions, conclusions, opinions, assessments, evaluations or theories’ regarding a cyberattack, as well as ‘actual or potential actions in anticipation or response to a cyberattack.'”
  • “Caution can be called for here, because creating a new privilege might come back and bite in unintended ways.”

Read on for their analysis and thoughts.

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Risk Update

Quandaries and Quagmires — Trending Legal Ethics and Risk Management Issues

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Chuck Lundberg recently shared his latest thinking in Minnesota Lawyer: “Quandaries and Quagmires: Trending: legal ethics and risk management,” covering key developing stories including Varsity Blues and  The Epstein case:

  • “To be sure, dealing with alleged conflict situations like this is a recurring issue for lawyers. Significantly, conflict allegations are all too common in legal malpractice cases. And all too dangerous — a conflict allegation can turn a simple, vanilla malpractice case into a serious matter, aggravating compensatory damage exposure and potentially implicating punitive damages. So I imagine that the esteemed BigLaw defense counsel in the Varsity Blues cases at a minimum (1) had outside ethics counsel check the potential conflicts every which way before undertaking the representation and (2) retained independent outside counsel to advise each client about the risks and benefits of waiving the conflict.”
  • “In my view, however, an even more important law firm risk issue was raised at the very outset of the Varsity Blues case. At 6:30 am on Tuesday March 12th, the day the scandal broke, Gordon Caplan, the co-chairman of megafirm Willkie Farr & Gallagher, was arrested and charged with criminal conspiracy to bribe college admissions officials to gain college admission for his daughter… On the same day, Law360 also ran a critical story, quoting several ethics experts and crisis management and PR strategy consultants, all saying that the firm’s response was too little, too late. One said the law firm’s first misstep was the fact it took a whole day to respond publicly to news that was generating enormous media attention. Others said the law firm’s statement did not go far enough in condemning the alleged behavior. Some even went so far as to say placing Caplan on leave was not a strong enough response from the firm in light of the allegations, and that a resignation would be better when it comes to preserving the firm’s brand. “From a spin control standpoint, the sooner he is referred to as a former co-chairman and attorney at the firm, the better,” said one of the consultants.”


  • “Another recent blockbuster news story, the Jeffrey Epstein prosecution for child sex trafficking, presents a very different kind of risk management issue: Can a lawyer be criticized for negotiating too good a deal for the client? Put differently, would a legal malpractice claim alleging that one’s lawyer got the client ‘too good a deal’ state a claim for relief?”
  • “In any event, the 33-page written record of the long negotiations in the Order vacating the non- prosecution agreement is fascinating to read and should be an instructive story for many lawyers.8 One imagines that at least one of Epstein’s Dream Team of lawyers had the presence of mind to tell him, ‘Jeff, I just want you to know that there’s a possibility that the whole settlement could be vacated years from now because we got the feds to agree to too much, including not to tell the victims about the agreement. Are you sure you want to take that risk?'”
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Risk Update

Outside Counsel Guidelines (OCG) — Looking a Gift Horse in the Mouth?

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I’m a sucker for a creative headline, we all know. And an effort in story form. And this topic is always of interesting. So from Dentons partners Shari L. Klevens and Alanna Clair we have: “Looking a Gift Horse in the Mouth: Negotiating Terms for Outside Counsel Guidelines” —

  • “You receive a call about a new client with a very large potential matter. The client is a corporation whose regular outside counsel has a conflict, and this new matter creates an opportunity to establish a good relationship with a potentially lucrative client. But there’s a catch… Although your firm routinely begins new client representations by means of a standard engagement letter, this client sends you ‘outside counsel guidelines’ to which it requires agreement. The guidelines cover a host of issues, from billing protocols to technology requirements to the scope of the representation. Is there a risk to accepting the client’s guidelines? Can you negotiate the terms?”
  • “Agreeing to comply with a client’s outside counsel guidelines can help law firms obtain work in a competitive marketplace. However, the guidelines also can create risks for law firms that do not take the time to fully consider or vet the requirements’ guidelines.”
  • “Engagement letters from a law firm are often drawn to define the relationship and, at times and where permissible, to shape a law firm’s potential exposure to the client. If the attorney-client relationship is governed solely by the client’s outside counsel guidelines, however, those same protections may not be in place.”
  • “For example, the definition of who the ‘client’ is in a set of outside counsel guidelines could be expansive, including not only the direct corporate client but also related entities. Such a scenario could create complications for a law firm’s exposure or in future conflicts analysis. Indeed, the law firm could be found to owe duties to an entity that the law firm did not expect—but might have been able to consider or negotiate if the risk had been identified.”
  • “The competition for high-profile or other legal work can be significant: law firms may be tempted to agree to terms without giving proper consideration to whether the law firm has the ability to comply with the terms.”
  • “For example, many outside counsel guidelines will have specific requirements regarding billing (frequency of invoices, rates, compliance with an electronic system). It can create issues for a law firm to agree to a required electronic billing process if it then lacks the staff or resources to comply, as required.”
  • “If a law firm agrees to incorporate certain cybersecurity protections or protocols but then is unable to do so, the client may argue that the law firm is liable to the client for any future breaches or issues. The law firm could then be in the difficult position of having to explain why it agreed to protocols that were beyond what was realistic.”
  • “After the law firm reviews and approves of outside counsel guidelines, a next step is for the law firm to educate the team members working on a particular matter about the specifics of the guidelines. By agreeing to the guidelines but then failing to implement the guidelines among the team, a law firm could create an uncomfortable situation with the client…As such, many firms in this situation will discuss the terms with the team working on a matter to reduce the administrative overhead of compliance.”


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Risk Update

Anti Money Laundering (AML) — New Guidance for Lawyers, ABA Pushback & More

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Kevin Shepherd, partner at Venable, writes: “Inside The New Anti-Money Laundering Guidance For Attys” —

  • “Over a decade ago at its plenary meeting in October 2008, the Paris-based Financial Action Task Force [FATF] issued a guidance paper for the global legal profession on how to detect and prevent money laundering and terrorist financing. “
  • “At its June 2019 plenary meeting, FATF adopted an updated ‘Guidance for a Risk-Based Approach — Legal Professionals.’ The 2019 guidance bears structural similarities to the 2008 guidance, but contains several significant changes. This article will provide an overview of the 2019 guidance and highlight several of these changes that may be of most interest to U.S. lawyers.”
  • “In addition to identifying broadly the specified activities covered by the 2019 guidance, the 2019 guidance lists 15 areas that may — or may not — fall within the category of a specified activity.”
  • “Unlike the 2008 guidance, the 2019 guidance devotes six paragraphs[16] to legal professional privilege and professional secrecy, and recognizes that these concepts present challenges in implementing a risk-based approach.”
  • “The analogous concept of legal professional privilege is known in the United States as the attorney-client privilege, and the 2019 guidance notes that the United States recognizes a ‘crime-fraud’ exception to the attorney-client privilege.”
  • “Supervision of Risk-Based Approach in the U.S. Recommendation 28 of the FATF standards requires that legal professionals be subject to adequate AML/CFT regulation and supervision. Section IV of the 2019 guidance provides detailed guidance to supervisors, much of which is inapplicable to the U.S. given its ‘alternative supervisory system.’ In recognition of this different system, the FATF included a text box in Annex 4 focused on the U.S., which the FATF recognizes as the country with the largest number of lawyers subject to such a system. The lengthy text box describes the fit and proper requirements in the U.S., including the entry and ongoing requirements for lawyer licensing.”

In the US, see: “The American Bar Association is fighting Washington’s efforts to tackle money laundering” —

  • “The body representing America’s lawyers has staked out an eye-opening position in recent years—lobbying against efforts in Congress to close a loophole that enables terrorism, human trafficking, money laundering, and a host of other crimes.”
  • “Unlike banks, law firms don’t legally have to do due diligence before taking on clients—the closest thing they have to regulation is ABA guidelines.”
  • “When the Financial Action Task Force (FATF), an international anti-money laundering organization, analyzed 106 global cases of the owners of illicit money hiding their identities, it found that most schemes used either lawyers, trust or corporate service providers, or accountants. Lawyers were the most likely of those three to be used in the real estate schemes outlined in the Global Witness sting, FATF found.”

And for those looking for some training, I found a consult’s webinar recording on law firm compliance: “Anti Money Laundering – Ask me anything! Join me for this AML update webinar, where you can ask me anything you’ve always wanted to know about AML.”

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