Bressler Risk Blog

“Dentons to Face UK Disciplinary Tribunal Over AML Regulation ‘Breaches’” —

• “International law firm Dentons has been referred to the U.K.’s Solicitors Disciplinary Tribunal (SDT) and accused of breaching money laundering regulations.”
• “The Solicitors Regulation Authority published a decision to prosecute the firm before the SDT, after it accused Dentons of failing ‘to take adequate measures to establish [a] client’s source of wealth and/or funds’ while acting for a ‘politically exposed person or his associated entities between approximately May 2013 and June 2017.'”
• “The client in question has not been named, but Dentons will face a SDT hearing on the matter later this week.”
• “The regulations in question state that a relevant person who proposes to have a business relationship, or carry out an occasional transaction with a politically exposed person, must ‘take adequate measures to establish the source of wealth and source of funds which are involved in the proposed business relationship or occasional transaction.'”
• “They also state that ‘where the business relationship is entered into, [the person must] conduct enhanced ongoing monitoring of the relationship.'”
• “The SRA goes on to accuse Dentons of having ‘failed to comply with its legal and regulatory obligations,’ and ‘run the business effectively in accordance with proper governance and sound financial and risk management principles.'”

Just published by SRA, an excellent and extensive update on the subject: “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 inadvertent enablers of money laundering.”
• “What is the purpose of this document? A risk-based approach is embedded in UK legislation and AML best practice. It means that firms should assess their risks and target their resources to the areas or products that are most likely to be used to launder money. Similarly, we take a risk-based approach to directing our resources, focusing effort most on supervising the firms that are most likely to be used to launder money.”
• “We ask to see firms’ written risk assessments and policies, procedures and controls as part of our proactive supervision programme, or in response to specific information we have received. Your firm’s risk assessment should not be disclosed to customers, or third parties, because it may be useful to those who are seeking to launder money. This document sets out information on money laundering and terrorist financing risk that we consider most relevant for firms we supervise.”
• “All firms that are within scope of the regulations must comply with the all the requirements of regulations. This includes taking appropriate steps to identify, assess and maintain a written record of their risk of being used for money laundering or terrorist financing.”
• “The sanctions regime has expanded recently, mainly due to the Russian invasion of Ukraine in 2022. The long-standing involvement of Russian interests and beneficial owners in British business, and vice versa, has meant that many firms have been exposed to the sanctions regime for the first time.”
• “It is important to remember, however, that there are a large number of thematic and geographic sanctions regimes beyond Russia and Belarus. Firms cannot assume that sanctions are not relevant to them. There are a significant number of British nationals subject to sanctions.”
• “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, however, some sectors which have heightened exposure to proliferation financing, and where we would expect a firm to undertake a more thorough risk assessment, either as part of the AML firm-wide risk assessment or as a standalone document.”
• “There are similar risks in the use of new types of financial technology, eg 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.”
• “This greater use of technology in all respects also heightens the importance of cyber security. Cyber security breaches could allow criminals to gain total access to both client’s sensitive data and the firm’s systems, allowing them to be used for laundering money.”
• “We have also observed that while larger firms may have greater resources to protect them from money laundering risks, risk-based information is often kept by a separate team or systems and is unavailable to others within that firm. This can mean that those working on a file may:
  • lack ready access to the underlying risk assessment and due diligence documentation and information and
  • be prevented from conducting effective ongoing monitoring of risk.”
• “Firms should remain vigilant and make sure their policies, controls and procedures adequately protect the firm against the risk of money laundering and terrorist financing.”
• “The risk posed by your client also extends to the risk posed by the beneficial owner, if applicable. You need to be confident you know who your client is and why they are asking for your services, and any risk that you do not should be duly considered.”
• “You should also not assume that existing clients are necessarily lower risk. Clients might seek to onboarded with you for low-risk work, and then transition to higher risk work in order to bypass more stringent checks at the point of onboarding.”

“Due Diligence Missteps Are Costly, and Smaller Firms Are Often Less Prepared” —

• “Skimping on due diligence when it comes to working with new clients can bear heavy consequences for law firms, such as Eckert Seamans Cherin & Mellot, which is in the midst of negotiating a $45 million settlement to make up for a former attorney’s alleged role in helping a merchant cash loan business and an investment services firm defraud investors of nearly $500 million.”
• “The law firm and former partner John Pauciulo are in hot water for their representation of an investment firm that solicited investors for Par Funding, a Philadelphia lending outfit whose owners are now subject to a raft of criminal charges. In the process of going after Par and investment firm A Better Financial Plan, the Securities and Exchange Commission censured Pauciulo for omitting details of risks in materials he prepared for potential investors.”
• “Meanwhile, the owner of the investment firm says in a malpractice suit that Eckert Seamans was negligent in its oversight of Pauciulo, who himself was allegedly negligent in either knowing and not disclosing or else not knowing about the criminal history and shady business practices of the owner of Par.”
• “However, not every firm has the same resources available to conduct proper and thorough due diligence when it comes to clients or affiliated businesses; according to law firm leaders and consultants, smaller firms have fewer resources to dedicate to diligence efforts, often resulting in added risk for the firm. Eckert Seamans, ranked No. 187 in the most recent Am Law 200 rankings, declined to comment on its own due diligence approach for this report.”
• “The firm is also fighting a long-running breach-of-fiduciary-duties lawsuit brought by a former gaming client in Pennsylvania federal court, which alleges it also represented a competitor in matters where the two had adverse commercial interests.”
• “Conversations with consultants and law firm leaders indicated that there is no set industry standard when it comes to law firms conducting due diligence.”
• “Even with fewer resources, there are several warning signs early on in an interaction with a client that might flag future problems for the firm, including one’s ‘Spidey sense’ about a client and its legal needs.”
• “Eileen Garczynski, senior vice president and equity partner at business insurance and risk management firm Ames & Gough, added that she felt ‘firms should be using checklists’ to make sure they address all concerns with a client.”
• “Her checklist of red flags included lack of information about an organization or client, a client having inexplicable revenue growth, a client’s refusal to provide information, stalling tactics, including rescheduling meetings early on, and having an advisory board full of people who don’t actually play a real role in the business.”
• “Garczynski also said that a client having frequent changes in professional relationships, such as switching counsel on a regular basis, might be an indicator of an issue.”
• “Even when attorneys are well-versed in spotting these red flags, however, things might still be missed when firms conduct due diligence. Garczynski pointed to a desire for speed as a possible reason behind neglecting or skipping thorough intake procedures.”
• “‘[There’s] a lot of motivated reasoning that can prevent the lawyer from seeing the warning signs,’ she said. But even larger firms are subject to missteps too. Levin pointed to the stress of the ‘eat-what-you-kill model,’ flagging it as a reason why attorneys may look the other way when red flags pop up.”
• “‘The problem with intake is it’s always so early… there may be a rush to it, so you might not get as much information as you really need,’ [University of Connecticut School of Law professor Leslie] Levin said. ‘Every firm in this country, big, little, no exceptions, has been unpleasantly surprised by a client engaging in fraudulent activity.'”

With a hat tip, as always, to the “Godfather of Conflicts,” here are the latest sightings of interest from Bill Freivogel:

• Medtronic, Inc. v. Becton, Dickinson & Co., 2023 WL 4370686 (D. Kan. July 6, 2023).
  • “Medtronic made a motion to compel Becton to produce certain materials. Becton defended the motion to compel, in part, by claiming Medtronic’s lawyers had a Rule 1.7 conflict of interest.”
  • “In this opinion the magistrate judge rejected that defense, saying Becton could have made a motion to disqualify those lawyers. Because Becton did not, the court said it was ‘unnecessary’ to resolve the conflict issue. The court went on to grant in part, and deny in part, Medtronic’s motion to compel on other bases.”
• Boozer v. Fischer, No. 22-0050 (Tex. June 30, 2023).
  • “This opinion is a mini-treatise on escrow agreements. We will focus on the one conflicts-related issue: Whether a lawyer for one party may act as an escrow agent for both parties.”
  • “Party A put $1 million in escrow for later payment to Party B if Party B prevailed in court. A’s lawyer (‘Lawyer’) was the escrow agent. Lawyer stole the money.”
  • “In this opinion the court ruled that the risk of loss fell on Party A. In the course of the opinion the court ruled that one party’s lawyer can be the agent in an enforceable escrow arrangement, provided, in part, that the agent’s interests do not conflict with those of the principal (in this case, Party A).”
• In re Valentino, 2023 IL App (1st) 221155-U (Ill. App. 1st Dist. July 14, 2023).
  • “Son petitioned for guardianship for Son’s 90-year-old father (‘Father’), against Father’s wishes. Lawyer represented Father. The case settled, and Lawyer petitioned for fees. Son objected.”
  • “The trial court granted the fee request, and Son appealed. Son claimed that Lawyer had a conflict because Lawyer had done some things at Father’s request that benefitted Father’s lady-friend (‘Ms. G’). An issue in the case is whether Ms. G had wrongfully taken money from Father.”
  • “In this opinion the appellate court affirmed the fee order, holding that there was no evidence of a lawyer-client relationship between Lawyer and Ms. G, and that Lawyer’s doing things at Father’s request that benefitted Ms. G did not make Ms. G Lawyer’s client.”
• Wheatley v. County of Orange, 2023 WL 4443011 (Cal. App. Unpub. July 10, 2023).
  • “The Wheatley law firm (‘Wheatley’) had a contract with Orange County to defend workers’ compensation cases. The county terminated the contract, and, in this case against the county, Wheatley is claiming the contract termination was wrongful.” The Lynberg law firm (‘Lynberg’) is defending the county.”
  • “As a result of the county’s termination, Wheatley let go one of its lawyers. That lawyer sued Wheatley for wrongful employment termination. Wheatley hired Lynberg to defend that case before this case went to court.”
  • “For a time, Lynberg was representing the county in anticipation of this case against Wheatley and representing Wheatley in the employment case. The opinion does not reveal how Lynberg missed the conflict. In any event, Wheatley moved to disqualify Lynberg in this case. The trial court granted the motion to disqualify. In this unpublished opinion the appellate court affirmed. Because this case involves a current client conflict, the court said rules relating to successive representation or screening are not applicable.”

“It’s the ‘Golden Age’ for Lawyers Seeking Corporate Board Seats” —

• “Public companies are increasingly looking for lawyers to become corporate directors, bringing legal expertise to the boardroom and prestige to attorneys who can navigate potential conflicts.”
• “Lawyers have long served on the boards of privately held companies and nonprofits. US public companies are coming to see the value of having more legal know-how in the boardroom as the web of compliance and regulatory requirements grows, said Susan Hackett, a former top lawyer for the Association of Corporate Counsel.”
• “Jeh Johnson, the former Homeland Security Department chief, is a prominent example. He serves as director at three companies—United States Steel Corp., MetLife Inc., and Lockheed Martin Corp.—while also working as a partner at Paul, Weiss, Rifkind, Wharton & Garrison. Robert Kimmitt, another former government official, serves on the board of Facebook parent Meta Platforms Inc. while working as senior international counsel for Wilmer Cutler Pickering Hale and Dorr.”
• “Roughly 1,500 board seats become available each year, many of them with annual cash-and-stock compensation packages averaging $300,000, said Wendeen Eolis, a veteran legal recruiter.”
• “Law firms have become more open to the potential business opportunity that comes with putting their lawyers on corporate boards, and less worried about conflicts that could impact current business.”
• “‘You’re going to be in the presence of a significantly credentialed, capable, and highly respected group of fellow board members, many of whom are CEOs of other companies,’ Eolis said.”
• “Williams and Eolis said the conventionally understood threshold for maximum number of directorships a lawyer can hold is likely three for public companies. While many firms appear to have loosened their restrictions, Williams said lawyers still ‘have to be very cautious on the conflicts side.'”
• “Increased exposure fueled by merger mania in Big Law and an uptick in lateral hiring has compelled firms to address and resolve all kinds of conflicts, including those that arise from board service, Eolis and Hackett said.”
• “Some companies require that lawyer-directors wall off or recuse themselves from legal matters involving their firm to ensure independence. But partners are compensated from the shared revenue of the firm where they work, said Goldstein. They could also supervise or oversee other lawyers that could be doing work for a company on whose board they serve, he said.”
• “ISS recommends that companies avoid choosing directors from firms that are also their outside counsel. Providing legal services requires ‘close collaboration with senior management,’ Goldstein said.”
• “Lawyers who retire from a firm can be considered for a board seat with a firm client, Goldstein said. This workaround allows some former Big Law partners to take on board roles and retain of counsel, senior counsel, or other roles with their firm that doesn’t include a share of the firm’s revenue and does not receive any form of compensation from the firm in excess of $10,000 a year.”

Rhode Island Supreme Court Ethics Advisory Panel Op. 2023-4 (Lawyers Weekly No. 75-016-23) (2 pages) (July 17, 2023): “Attorneys – Conflict of interest – Simultaneous representation” —

• “Where (1) an attorney’s law firm was recently appointed as the town solicitor for a municipality and (2) the law firm is also legal counsel to a management agency that makes consistency determinations for certain development projects, the law firm’s simultaneous representation of the municipality and the agency does not present a conflict of interest despite the Town Council’s approval of a resolution in opposition to the certain type of development project that the agency is tasked with reviewing.”
  • ‘The inquiring attorney’s law firm was recently appointed as the Town Solicitor for a municipality (‘Town’). The law firm is also legal counsel to a management agency with regulatory functions (‘Agency’). As part of its regulatory functions, the Agency reviews and makes consistency determinations for certain development projects. It has recently conducted one such review and anticipates it will be conducting another such review in the future.’
  • ‘At a recent Town Council meeting, the Town Council approved a resolution in opposition to the certain type of development project that the Agency is tasked with reviewing. The inquiring attorney was present at this meeting, along with an associate from his/her law firm and both submitted a recusal form to the clerk and recused from the matter. The inquiring attorney advises that the resolution did not mention the Agency and was not forwarded to the Agency. Rather, it was forwarded to other municipalities and certain elected officials.’
  • ‘The inquiring attorney asks whether his/her law firm’s simultaneous representation of the Town and the Agency presents a conflict of interest.’
  • ‘It is the Panel’s opinion that there is no conflict of interest because, on the facts presented, the Agency and Town do not have adverse interests.’
  • ‘The inquiring attorney’s law firm has a lawyer-client relationship with the Town. Therefore, under Rule 1.7, he/she may not represent clients with interests adverse to the municipality. However, based on the facts described by the inquiring attorney, it is the Panel’s opinion that the Agency’s interest is not adverse to the Town or its Town Council. The Town Council simply took a position on the type of development project that the Agency is tasked with reviewing. In the absence of competing interests, there is no concurrent conflict of interest.’
  • ‘The Panel emphasizes, as it has done in the past, that whether a conflict of interest exists is determined on a case by case basis. While the Panel sees no conflict of interest based on the facts presented, it does caution the inquiring attorney to be mindful of the possibility of such a conflict arising in the future.’
• PDF of the full opinion here.

Fascinating find and analysis from Baker McKenzie partners Jacob M. Kaplan and David Zaslowsky: “Arbitration. Vacatur of Award. District court vacates arbitration award due to evident partiality because one of the arbitrators failed to disclose that he was a former client of the attorneys for one of the parties to the arbitration” —

• Equicare Health Inc. v. Varian Med. Sys., Inc., 5:21-mc-80183-EJD, (N.D. Cal. April 19, 2023) [click for opinion]
• “When sales of Equicare’s software plummeted, Equicare claimed that Varian breached this duty and alleged that Varian instead promoted its own competing product. Equicare therefore initiated arbitration proceedings against Varian through the American Arbitration Association (the ‘AAA’).”
• “The AAA appointed a three-member panel to adjudicate the dispute, including Mark Dosker. As per its rules, the AAA required each arbitrator to respond to a series of conflict-of-interest questions. Mr. Dosker responded ‘NO’ to all thirty-one conflicts questions, including ‘Do you have, or have you had any attorney-client relationship with a party or lawyer for a party?'”
• “However, this statement was not true. Counsel for Varian, Ms. Quyen Ta, had served as counsel to Mr. Dosker and his law firm, Squire Sanders, five years prior, in a 2013 legal malpractice suit. Ms. Ta immediately disclosed this potential conflict of interest to the AAA. Despite Ms. Ta’s disclosure, the AAA did not share this information with Equicare or its counsel. Neither party objected to Mr. Dosker’s appointment to the panel.”
• “The arbitration proceeded to a hearing, after which the panel issued a final award in favor of Varian. The panel found that, while Varian breached the ‘commercial best efforts’ clause in the contract, there was insufficient evidence of damages. In so ruling, the panel chose not to accept an independent auditor’s findings that Varian owed about $1.9 million to Equicare.”
• “After receiving this decision, Equicare began an investigation into the background of the panel and independently discovered the former attorney-client relationship between Mr. Dosker and Ms. Ta. Equicare therefore filed a petition in the United States District Court for the Northern District of California to vacate or correct the arbitration award based on evident partiality arising out of the former attorney-client relationship.”
• “The court granted the petition and vacated the arbitration award. The court applied the legal standard found in Section 10(a)(2) of the Federal Arbitration Act (the ‘FAA”), which permits a district court to vacate an arbitration award where, inter alia, “there was evident partiality or corruption in the arbitrators.” 9 U.S.C. § 10(a)(2).”
• “The court also noted that Mr. Dosker’s failure to conduct an adequate investigation in the first instance breached the independent duty on arbitrators to investigate for potential conflicts, a violation that ‘may result in a failure to disclose that creates a reasonable impression of partiality.'”

“Sexual relationship between judge and prosecutor entitles murder defendant to new trial, court rules” —

• “The top criminal court in Oklahoma has ruled that a defendant convicted of murder in 2021 is entitled to a new trial because the judge and one of the prosecutors had a prior sexual relationship.”
• “The judge, Judge Timothy R. Henderson, had admitted to consensual ‘sexual conduct’ with the prosecutor that ended before the trial but said the relationship didn’t affect his rulings. The prosecutor was identified only as ‘K.C.’ in the Oklahoma Court of Criminal Appeals’ decision.”
• “Because of the undisclosed relationship, Hashagen was deprived of the right to a fundamentally fair trial that created a potential for bias, the appeals court said.”
• “Henderson resigned his judgeship in spring 2021—after the prosecutor and two other lawyers accused him of sexual misconduct, according to Law & Crime.”
• “Henderson acknowledged a sexual relationship with two prosecutors, but he said it was consensual, according to past coverage by the Associated Press. A special prosecutor declined to bring charges in connection with the allegations.”

Amy G.McClurg, Assistant Counsel at Thomson Hine writes: “Rule 1.8(h): Permissibly limiting your malpractice liability or unwittingly violating ethics rules?” —

• “Rule 1.8 addresses conflicts that can arise between a lawyer and client (as opposed conflicts between clients). Prior to the adoption of Model Rule 1.8 in 1983, the ABA Model Code flatly prohibited agreements limiting liability.”
• “This rule was in stark contrast to the rules governing many others, including large accounting firms and lawyers in Europe, who often had agreements limiting their liability to clients for their work on deals alongside American lawyers who could not limit their liability (which raised numerous problems with potential disproportionate liability for deals gone bad).”
• “In 2002, the ABA again amended Model Rule 1.8(h)… Model Rule 1.8(h)(1) now states that ‘A lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement.'”
• “Approximately 28 states have adopted the language in Model Rule 1.8(h)(1) entirely. Seven states have similar language to that of the Model Rule but have added the requirement that such agreement must also be “permitted by law”. Nine states still outright prohibit such prospective agreement. The seven remaining states have language that does not squarely fit into any of the aforementioned categories.”
• “The reasons for wanting to limit your liability in any given situation are likely obvious, but whether or how you should pursue such endeavor is far less clear.”
• “Choose your language wisely . Attorneys licensed in multiple jurisdictions and law firms spanning across multiple states must be keenly aware of any differences in the applicable rules… Using the wrong language could subject the lawyer to additional rule violations.”
• “Merely refraining from plugging in prospective agreements into your engagement letters will not ensure Rule 1.8 compliance. Lawyers barred in jurisdictions like DC, where such agreements are forbidden, must still examine less obvious conduct that may constitute a Rule 1.8 violation.”
• “While New York similarly prohibits lawyers from prospectively limiting malpractice liability, one New York opinion found that 1.8(h) is not violated simply due to a lawyer advising a client to accept a plea deal that includes waiving an ineffective assistance of counsel claim on appeal.”
• “Prospectively limiting malpractice liability is a conflict of interest and compliance requires satisfaction of the Rule 1.8 conditions. Lawyers must be careful in choosing which words should or shouldn’t be used in the agreement.”

“A Steak Dinner Keeps Ethics Questions Sizzling in J&J’s Talc Bankruptcy” —

• “On the second day of a hearing on whether to dismiss Johnson & Johnson’s talc bankruptcy, lawyers supporting the Chapter 11 case headed off to Ruth’s Chris Steak House for dinner in Princeton, New Jersey. They weren’t alone.”
• “Someone took a photograph of them dining with Randi Ellis, appointed to represent future claimants in the bankruptcy filed by Johnson & Johnson subsidiary LTL Management LLC. And Clay Thompson, of Maune Raichle Hartley French & Mudd in New York, who questioned some of the attorneys on the stand earlier that day, then attached the photo to his July 12 motion to disqualify Ellis as the future claims representative. The dinner, he argued, showed a ‘significant appearance of impropriety and collusion.'”
• “‘Appearances matter,’ Thompson wrote. ‘Dining out with the half-trillionaire tortfeasor’s lawyer —as that tortfeasor is attempting to capture future victims and cram down current ones—is too much to stomach.'”
• “On Monday, lawyers for Ellis sent a letter asking U.S. Chief Bankruptcy Judge Michael Kaplan to consider sanctioning Thompson, who unsuccessfully moved to disqualify Ellis months earlier on separate collusion allegations.”
• “‘The motion is nothing more than a continuation of Mr. Thompson’s campaign to smear, threaten and intimidate the FCR and erode the public’s confidence in this court and the integrity of the bankruptcy process,’ wrote Mark Falk, of Walsh Pizzi O’Reilly Falanga in Newark, New Jersey. ‘Mr. Thompson has repeatedly and baselessly harassed the FCR and invoked rhetoric that risks eliciting continued threats directed at this court and the FCR. His behavior has repeatedly crossed the boundaries of advocacy.'”
• “Such ‘outrageous antics appear intended to create sensational headlines,’ Falk added, noting that Thompson had not taken photos of Ellis in meetings with lawyers for the official talc claimants committee.”
• “In a statement, Liza Walsh, of Walsh Pizzi O’Reilly Falanga, said Ellis meets with all parties in the case. ‘The motion itself is not worthy of comment as the motion is frivolous, malicious, unprofessional,’ she wrote.”
• “The disqualification motion is the latest example of the vitriol that prompted Kaplan to caution lawyers to tone down the rhetoric earlier this year. But it is also emblematic of a sharp divide within the plaintiffs’ bar now brewing over whether to approve the Chapter 11 plan.”

“Pot Co. Wants Rival’s Atty DQ’ed Over Alleged Conflict” —

• “Two cannabis businesses accused of backing out of a deal to sell Bob Marley-branded products are seeking to disqualify the general counsel of the company suing them in Washington federal court, saying the attorney was once ‘intimately involved’ with the defendant entities when they were all under the same corporate umbrella.”
• “Tilray Inc. and its subsidiary High Park Holdings Ltd. accused Patrick Moen on Thursday of violating ethics rules by aiding Docklight Brands Inc.’s breach-of-contract litigation against the pair of companies, alleging that he drafted the licensing agreement in dispute when all three companies belonged to Privateer Holdings.”
• “Though Moen has not filed for appearance to represent Docklight in the case, he has signed several declarations submitted by Docklight.”
• “Tilray, a global group of brands that sells cannabis and hemp consumer goods, said in the motion that its relatively new management did not understand until discovery the scope of Moen’s past work for Tilray and High Park.”
• “‘But defendants’ privilege review of documents in April 2023 revealed that Mr. Moen was deeply involved in negotiating the license on behalf of High Park and Tilray, in structuring High Park and Tilray, including through Tilray’s IPO, and in preparing and approving Tilray’s public filings that are subject to Docklight’s claims of breach of confidentiality,’ Tilray and High Park said in the Thursday motion.”
• “Upon discovering the conflict of interest, Tilray and High Park claim they asked that Moen recuse himself and Docklight amend a protective order to prevent him from accessing confidential information produced during litigation. But Moen and Docklight allegedly refused.”
• “‘Defendants’ further investigation revealed that this is not the case of a general counsel of a parent company that occasionally weighed in on legal matters of the subsidiaries,’ Tilray and High Park said. ‘Rather, Mr. Moen had his own Tilray email account, provided advice and privileged materials to Tilray’s board using that email address, and had significant involvement in Tilray’s legal affairs.'”
• “Moen, now senior vice president for corporate development and legal affairs at Docklight, was general counsel for Privateer from November 2013 through March 2021, according to Tilray’s motion. During that time, as Moen advised the parent company on all legal and compliance affairs, Docklight and Tilray were formed as subsidiaries of Privateer.”

“Biglaw Attorney Learns Hard Lesson About When *Not* To Recruit New Lawyers” —

• “Maybe Perkins Coie attorneys think they *always* need to be recruiting potential lateral lawyer talent, but they’re learning there is a time and a place for everything.”
• “An unnamed Perkins Coie attorney was benchslapped by Northern District of California Judge Yvonne Gonzalez Rogers for trying to recruit one of her clerks mid-trial.”
• “Yeah, even if you’re uniquely impressed by the legal acumen of a law clerk, it seems like discretion would warrant at least waiting until the end of trial to try to recruit them to your firm.”
• “And Judge Gonzalez Rogers made it abundantly clear that nonsense would not fly in her courtroom or in her district:
  • ‘No Lawyer should ever reach out to a law clerk of a judge during trial and suggest that at some point [the clerk] should contact him if he wants a job. It is so inappropriate that it’s shocking to me that I have to say anything about this.”
  • ‘In the Northern District of California, it is inappropriate, and it should never happen,’ she said. ‘So I don’t know what people think is okay, but it is not.'”

“Law Firm Hack Affects Victims of an Earlier Breach Again” —

• “Orrick, Herrington & Sutcliffe on July 20 reported the data breach to several state regulators, including the attorneys general of Maine and California, as well as a HIPAA breach to the U.S. Department of Health and Human Services.”
• “Among the affected individuals was an Orrick client tied to a vision benefits plan that had suffered its own health data breach several years ago. Orrick said it had provided legal counsel for a 2020 security event involving the manager of the vision benefits plan.”
• “Law firms such, as Orrick, that receive PHI from clients to provide legal services, including to assist in health data breach response, are clearly business associates subject to compliance with HIPAA rules, said regulatory attorney Paul Hales.”
• “‘This is every law firm’s worst HIPAA nightmare, even more so for one with the well-regarded reputation like Orrick, Herrington & Sutcliffe,’ Hales said. ‘Government investigations and private lawsuit discovery will examine Orrick’s HIPAA compliance program in minute detail. Those proceedings will be painful and unpleasant for Orrick and its client. And likely will pit legal counsel against its client,’ he said.”
• “The San Francisco-based law firm, which has 25 offices worldwide, told regulators that information contained in the compromised file of the vision benefits plan included individuals’ name, address, date of birth and Social Security number. Social Security and financial information were not among the member information contained in the compromised Delta Dental of California file, Orrick told regulators.”

“SEC Wins Access to Some Covington & Burling Clients’ Names” —

• “Covington & Burling LLP must turn over the names of seven clients whose data was compromised in a cyberattack to the US Securities and Exchange Commission, despite objections by the firm and others that to do so would weaken attorney-client privilege.”
• “The SEC had asked in March for the names of almost 300 ‘public company ‘ of the law firm, saying it needed them to determine if the hackers had used the information they stole to engage in illicit trading.”
• “US District Court Judge Amit Mehta in Washington ruled that request was ‘too broad’ and he ordered the law firm to reveal the names only of clients whose material, nonpublic information may have been accessed by hackers during the 2020 breach of the law firm’s computer files.”
• “Such a request by the SEC ‘does not exceed its statutory authority or cross any constitutional lines,’ the judge wrote.”

“PwC admits to another conflict of interest breach” —

• “Embattled consultancy firm PwC has admitted to another serious conflict of interest breach, but has clarified that it did not involve the misuse of government information.”
• “The breach occurred in 2018 and is separate to the misuse of confidential tax policy information that has triggered a reputation crisis for the firm and seen the divestment of its government services division for just $1.”
• “This breach involved a PwC staff member entering into an exclusivity agreement with a client without proper authorisation from the firm’s conflict of interests team.”
• “Details about the 2018 matter were not addressed during previous parliamentary inquiries and are likely to prompt more scrutiny and criticism of the firm, which initially sought to downplay the seriousness of the scandal.”

“Judge Denies Bid to DQ Pietragallo From Repping Par Funding Company in Criminal Actions Following Attorney Assault” —

• “A Pennsylvania federal judge determined attorney Douglas Rosenblum and the Pietragallo Gordon Alfano Bosick & Raspanti firm should not be disqualified from criminal proceedings against the company doing business as the now-defunct Par Funding, despite one of the firm’s attorneys having been assaulted by the brother of the company’s former CEO.”
• “The company’s officers, who are co-defendants with CBSG, had argued that Rosenblum and Pietragallo Gordon should be off the criminal case due to their relationship with Gaetan Alfano, a partner at the Pietragallo Gordon who was allegedly assaulted by the brother of Par Funding CEO Joseph LaForte. But Kearney concluded that there was no conflict of interest, and deferred on whether Rosenblum would be a necessary witness for the criminal trial.”
• “The midday attack occurred on Feb. 28 on 19th St. between Chestnut and Ludlow Sts. in Philadelphia while Alfano, who has been serving as counsel for a court-appointed receiver for CBSG and related entities, was leaving a virtual hearing in which he advocated for evicting Joseph LaForte from his Haverford, Pennsylvania, residence.”
• “The defendants had argued that as Alfano is a partner of the firm and serves on the firm’s executive committee, the criminal charges ‘present trial counsel with a potential conflict between trial counsel’s fiduciary obligations to G.A. — a colleague of the same law firm — and his obligations to CBSG.'”
• “CBSG argued that it could ‘think of no circumstance under which it would call Rosenblum as a witness in its case-in-chief, either to authenticate evidence or to provide substantive testimony,’ and therefore it didn’t appear ‘that Rosenblum’s continued representation of CBSG runs afoul of Rule 3.7,” which holds that a lawyer “shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness,” with the exception of “certain delineated circumstances.'”
• “In Kearney’s July 12 memorandum, the court said in a footnote that it disagreed with the defendants’ argument that Rosenblum couldn’t represent CBSG and have Alfano be a witness for the prosecution on the charges against the LaFortes.”
• “‘The charged assault of G.A. did not change or create new conflicts for attorney Rosenblum. Attorney Rosenblum represents to us his law partner G.A. will not be testifying against Complete Business Solutions because Complete Business Solutions is not charged with crimes against G.A.,’ Kearney said. ‘We find no conflict of interest arising from G.A. identified as an alleged assault victim in charges not brought against Complete Business Solutions.'”
• “The court further noted that Rosenblum had satisfied the requirements of Pennsylvania Rule of Professional Conduct 1.7(b) ‘by obtaining informed consent and a waiver from Complete Business Solutions to continue representing it in this matter,’ therefore, removing any potential or actual conflict of interest that could have existed.”

“Taft Stettinius Missed Conflicts In Rush To Merge, MGM Says” —

• “MGM Resorts International is suing its ‘loyal legal advisers’ Taft Stettinius & Hollister LLP in Michigan state court, alleging the firm violated professional conduct rules by merging with another firm that was representing MGM’s opponent in an arbitration without telling the company about it.”
• “MGM sued in Wayne County Circuit Court on Tuesday, asking for Taft Stettinius to be disqualified from representing its adversary in an arbitration over alleged diversion of internet gaming revenue and for the court to declare that the firm violated the Michigan Rules of Professional Conduct by simultaneously representing both sides of the dispute.”
• “MGM alleges that Taft Stettinius, ‘in its rush to merge with another law firm,’ cast aside its obligations to existing client MGM and started representing a claimant in the pending arbitration against MGM.”
• “‘When MGM confronted Taft with its disloyalty, Taft purported to fire MGM as a client to ‘cure’ the conflict — a tactic forbidden by Michigan law,’ MGM wrote.”
• “Taft Stettinius has represented MGM since 2009 in credit and bond financing transactions, with regulatory advice on gaming issues across numerous jurisdictions, in property tax and liquor licensing issues and during the sale of multiple MGM entities, according to the complaint. MGM has paid more than $3 million to the firm in legal fees since 2014, MGM says. In September, Taft Stettinius merged with Jaffe Raitt Heuer & Weiss PC, which was representing Partners Detroit, a claimant in a ‘contentious arbitration’ opposite MGM, according to the complaint.”
• “MGM didn’t know about the merger, and Taft Stettinius didn’t notify MGM that it was taking on a conflicting party, the company says. MGM discovered the conflict when a demand in the arbitration case came in the same letterhead Taft Stettinius had used to give MGM legal advice, according to the complaint.”
• “‘Either Taft’s pre-merger conflict screening was seriously deficient, or Taft perceived its conflict yet chose not to alert MGM,’ MGM said.”
• “The conflict would result in MGM’s in-house counsel being cross-examined by Taft Stettinius attorneys in the arbitration while MGM was receiving legal advice on other matters from other Taft Stettinius attorneys, the complaint says.”

“Ethics Committee Advice for Justices whose Staff Attorneys Had Prior Involvement in a Matter” —

• “The Supreme Court Committee on Judicial Ethics Opinions (CJEO) has issued an expedited opinion about the obligations of an appellate justice whose staff attorney previously practiced as counsel in civil cases challenging conditions of criminal confinement.”
• “In CJEO Expedited Opinion 2023-050, the committee concludes appellate justices have an obligation under the California Code of Judicial Ethics and the Code of Ethics for the Court Employees of California to disqualify a staff attorney from working on any part of an appellate matter in which the staff attorney’s prior service as a lawyer in the proceeding would have been disqualifying for the justice had the justice served in such a capacity.”
• “The committee advises that under canon provision 3E(5)(a), a justice’s staff attorney would be precluded from working on any criminal defendant’s appeal assigned to the justice, if, at any time:
  • The staff attorney represented the criminal defendant in the criminal appeal now before the justice;
  • The staff attorney represented the criminal defendant in another matter related to the same contested facts and law as that defendant’s criminal appeal; or
  • The staff attorney gave advice to the criminal defendant on any issue in the criminal appeal.”
• “Finally, the committee advises that under canon provision 3E(5)(b), a justice would have the same duty to preclude a staff attorney from working on any criminal defendant’s appeal if, within the two years prior to the justice’s assignment of the criminal appeal:
  • The criminal defendant was a named class member and client of the staff attorney while in private practice;
  • The criminal defendant was a named class member and client of an associate of the staff attorney while in private practice; or
  • A private practice associate of the staff attorney appears in the matter assigned to the justice.”
• “Responding to the inquiring justice’s specific question about a staff attorney’s prior service in private practice as a class action attorney, the committee advises the justice would have no duty to identify and effectively disqualify the staff attorney for any unnamed class members who remained unnamed as clients or class members of either the staff attorney or the attorney’s law associates during the two years prior to the justice’s assignment of an appeal.”

“Reebok Pushes Again For Hogan Lovells DQ In TM Suit” —

• “Reebok renewed its bid to disqualify Hogan Lovells from representing a rival in a sneaker design trademark dispute, calling the firm’s assertion that its past work for Reebok involved foreign trademarks unrelated to the present suit ‘a distinction without a point.'”
• “Reebok responded to Hogan Lovells’ arguments seeking to remain as counsel for Autry, saying in a filing in Massachusetts federal court Wednesday that its trademark registrations in different countries do not create jurisdictional limits on the potential confidences the firm could use to benefit its current client.”
• “‘Reebok’s Stripecheck Mark in Europe is the same as the mark it uses and has registered in the United States,’ Reebok said. ‘In fact, it is a well-known feature of trademark law that a single application can be used to apply for the same mark worldwide, underscoring the global nature of trademark registration and enforcement strategy.'”
• “Reebok sued Autry in May, accusing the company of employing an ‘unlawful business strategy’ that centers on using well-known intellectual property by shoemakers to sell high-priced knockoff sneakers to U.S. consumers, who are often aware of the alleged infringement. The complaint alleges that Autry is selling ‘blatant knockoff versions of Reebok’s shoes.'”
• “In opposing Reebok’s disqualification motion last month, Hogan Lovells argued that the present case is distinct from the firm’s prior representation of Reebok, which involved registrations of trademarks and not litigation related to infringement allegations. Reebok responded that Hogan Lovells did more than just help register its trademarks and said the company had to share confidential information with the firm, even if the registrations were in other countries.”
• “Reebok said it doesn’t have to show the court what confidences Hogan Lovells could use for Autry’s benefit, which the firm had argued, because Massachusetts rules don’t mandate it.”

“Calls for big consultant firms to be broken up” —

• “The former head of the consumer watchdog has called for big consultancy firms to be broken up, in a bid to reduce the risk of conflict of interest. Allan Fels, who previously oversaw the Australian Competition and Consumer Commission, told a Senate inquiry the big firms should only focus on auditing, rather than consultancy work.”
• “The inquiry was set up in the wake of the PwC tax advice scandal, where a former partner passed on confidential government information to clients.”
• “Professor Fels said the government needed to introduce legislation to break up large consultancy firms. ‘Self-regulation can’t be relied upon, nor can government regulation. We therefore need legislation to break up the big four,’ he told the inquiry on Monday.”
• “‘The big four argued that there are benefits from combining consulting and advisory work in a business that does audit. This is a rather dangerous argument for them to run.’ Prof Fels said a similar approach could be taken to the consulting sector to what happened with the country’s banks in the wake of royal commission findings. ‘There is a severe conflict of interest of an actual institution and the interests of customers’ he said.”
• “Consultancy firm Deloitte will appear at the inquiry later on Monday, where senior executives will be forced to explain conflicts of interest. The firm said in a submission to the inquiry it was aware of two incidents of conflicts of interest.”
• “In August 2022, it was identified Deloitte had breached its own independent and conflict management policy when it did not seek pre-approval from the auditor-general to audit an unnamed government entity, while it was also auditing other data held by the same entity.”
• “Deloitte said the firm took its obligations about the use of confidential information seriously. ‘Any matters in relation to the misuse of confidential government information would be investigated in line with our normal processes.'”
• “Finance Minister Katy Gallagher said while she was aware of an over-reliance on consultancy firms being used for government projects, the scale became apparent after she won office. ‘It is a problem – it is worse than I thought,’ she told ABC radio.”

“Miami Mayor Takes Break From Quinn Emanuel for President Run” —

• “Miami Mayor Francis Suarez is taking unpaid leave from his other job at law firm Quinn Emanuel as he makes a long-shot run for the White House.”
• “The firm and Francis agreed that he should focus on his presidential campaign,’ the [firm’s] spokesperson said via email. ‘His unpaid leave was motivated by no other consideration.’”
• “Suarez, who has held a handful of outside jobs while serving as mayor, is under fire over conflicts of interest. His work for a local developer—said to have paid Suarez $170,000 to help cut through red tape—has prompted multiple investigations.”
• “Quinn Emanuel hired Suarez when the firm launched its Miami office in 2021. The firm’s lengthy client roster includes hedge fund giant Citadel, whose founder Ken Griffin donated $1 million to Suarez’s state campaign earlier this year.”
• “He makes about $126,000 a year in his role as the city’s top elected official and converts it into cryptocurrency, according to regulatory filings.”