Bressler Risk Blog

“Disciplinary Commission issues advisory opinion on navigating conflicts of interests for government workers” —

• “The Indiana Supreme Court Disciplinary Commission issued a nonbinding advisory opinion Thursday discussing when a lawyer who is a current or former government worker should decline to accept a legal matter due to a conflict of interest. The advisory opinion is focused on Rules of Professional Conduct 1.9, 1.10 and 1.11.”
• “In short, the commission said a lawyer should not participate in a legal matter if the lawyer was ‘personally and substantially’ involved in the matter as part of their government role; if the lawyer learned “damaging confidential information” about a person involved in the matter; and if the representation would involve revealing information that all attorneys are prohibited from disclosing under rules regarding duties to former clients.”
• “The commission noted in its advisory opinion that the duty of loyalty in an attorney-client relationship requires the protection of information related to the representation. ‘However,’ the commission wrote, ‘because the conduct of government employees implicates public interest in a way that private practice usually does not, there are nuances to the conflict analysis.'”
• “For lawyers who are former government employees and are deciding whether a conflict exists, the commission said they should first examine whether the matters at issue are the same.”
• “The lawyer should next examine whether they learned confidential information about a person through their role as a government employee that could be used to damage the person in the new matter.”
• “If the answers to those questions are ‘no,’ the commission said the lawyer “likely is free” to represent the client, assuming other factors under the customary Rule 1.9 analysis don’t apply.”
• “The commission also recommended a screening process for partners at law firms who want to avoid ‘having imputed to them’ the conflicts of a colleague who is a former government employee.”

“Colorado Supreme Court approves licensing of paraprofessionals to perform limited legal services” —

• “The rules become effective on July 1, 2023. The new rules will permit the licensed paraprofessionals to complete and file standard pleadings, represent clients in mediation, accompany clients to court proceedings, and respond to a court’s factual questions. The rules will prohibit paraprofessionals from presenting oral arguments and examining witnesses in a hearing.”
• “According to the press release, the goal of the new rules is to make legal representation more widely available and more affordable in certain domestic relations matter.”
• “To obtain a license, the paraprofessional will be required to pass a written licensed legal paraprofessionals exam, submit to a character and fitness review, pass an ethics class, and pass a professional conduct exam. They will also have to complete 1,500 hours of law-related practical experience, including 500 hours of experience in Colorado family law. The rules provide for a disciplinary process which is similar to the process for Colorado lawyers.”
• “Bottom line: Colorado joins Arizona, Minnesota, Oregon, and Utah in authorizing paraprofessionals to provide limited legal services.”

“This ‘No extensions’ Policy Won’t Last Long” —

• “…the announcement (though it was more a leak of an internal email memo) that Morgan and Morgan will not be letting its lawyers grant any extensions or courtesies to insurance defense lawyers as a reaction to the latest tort reform initiative down in Florida. Here if you haven’t seen it is the screenshot of the internal email that Above the Law first publicized.”
• “The reaction within the defense bar, at least online in places like Twitter, was pretty heated. In addition to folks decrying this as contrary to tenets of civility and professionalism, some folks started tossing around assertions that this kind of policy was inherently unethical.”
• “I think this is not a smart policy. If it isn’t dropped before it starts, it will make many, many judges upset when they have to adjudicate motions for routine extensions. It also might lead to an influx of new clients for a while who think they want this kind of hard-nosed lawyering, but it will likely come back to bite a few clients when they find themselves in need of additional time and salty defense lawyers end up declining to grant a courtesy if only on a ‘tit for tat’ basis.”
• “Also, in any jurisdiction where some sort of ‘guidelines’ involving civility or professionalism or courtesy are adopted by reference as part of ethical rules for a particular court, then the ethical analysis is entirely different from what I offer below.”
• “When you talk about the role of lawyers in agreeing to things that delay litigation, most of the ethics rules are drafted with an eye towards trying to address whether lawyers have any latitude to be courteous and agree to extensions over any objections of their own clients. Not surprisingly, none of those rules are violated when a lawyer refuses to agree to proposed delays.”
• “Model Rule 3.2 for example actually makes it the ethical duty of lawyers to ‘make reasonable efforts to expedite litigation.’ Model Rule 1.3 requires lawyers to ‘act with reasonable diligence and promptness in representing a client.'”
• “That leaves us with Model Rule 4.4(a). This rule ‘might’ be the one that an opposing party or counsel could seize upon for arguing that implementation of this policy would be unethical. That rule prohibits a lawyer from using ‘means that have no substantial purpose other than to embarrass, delay, or burden a third person.'”

“‘No extensions’ – Part 2” —

• “Unlike opposing counsel, a lawyer within the firm attempting to live under this policy will at all times have to live with two ethics rules that can create real problems. The first is one that is rarely talked about: Model Rule 2.1. The first sentence of that rule reads: ‘In representing a client, a lawyer shall exercise independent professional judgment and render candid advice.'”
• “The duty to exercise independent professional judgment means that every time a situation comes up in which the lawyer is being asked by the other side for the extension of a deadline that the lawyer is supposed to use their own independent professional judgment, in consultation with the client, about what should be done.”
• “Slavishly applying the firm policy as the basis for action would always run the risk of technically violating Model Rule 2.1, but firms have lots of less publicized and less controversial policies that also arguably encroach on the independent professional judgment of lawyer employees.”
• “Now, of course, almost all of the above is largely academic because (a) one would hope the first time this comes up in reality that the firm will reexamine the situation and refine its stance to let their lawyers practice law as appropriate to each situation; and (b) even if they do not, lawyers who are not fans of the policy will more likely find other pastures rather than ever go down a path of filing a grievance against the powers-that-be in their own firm.”
• “Ironically, I think that the powers-that-be at M&M would be able to understand immediately that an insurance company could not demand through counsel guidelines that the lawyers it hires must refuse all extensions to opposing counsel because Model Rule 1.8 and 5.4 make certain that a lawyer can only accept payment of fees from someone other than their client if that third-party does not interfere with the lawyer’s independent professional judgment.”

“Judge Dismisses Legal Mal Suit Against Cozen O’Connor for Second Time” —

• “A federal judge has again dismissed a legal malpractice suit against Cozen O’Connor after an appeals court determined the district court improperly analyzed the plaintiff’s complaint the first time around.”
• “This time examining Cozen O’Connor’s motion to dismiss as a merits-related standing issue, U.S. District Judge Nitza Quiñones Alejandro of the Eastern District of Pennsylvania determined Thursday that the plaintiff’s amended complaint failed to state a claim.”
• “The plaintiffs, Adam Potter and Moxie HC, filed suit against Cozen O’Connor in 2020 over an alleged conflict of interest in selling several companies in which the plaintiffs owned 100% membership interest.”
• “According to the Thursday opinion, then-Cozen O’Connor attorney Anne Blume advised Potter on the sale of his companies to another firm client. Potter claimed that Blume denied the existence of a conflict of interest surrounding the firm’s representation of both the buying and selling entities in the transactions.”
• “After the deal’s close, however, the shareholders allegedly learned their company had been sold substantially below market value, and that confidential information Blume learned while working with Potter had been used to aid the purchaser.”
• “But Alejandro ruled that because the terms of the asset purchase agreement stated the companies were to receive the purchase price, an allegedly unfair sale would harm the companies themselves. As shareholders, Alejandro held, the plaintiffs did not suffer direct harm and therefore did hot have standing to sue.”

“FTX’s Law Firm Hit With Queries on Work Before Crypto Collapse” —

• “FTX’s legal troubles are reaching its law firm, Fenwick & West, which faces federal law enforcement subpoenas and a class-action lawsuit tied to the failed crypto exchange.”
• “Bankruptcy counsel for FTX has discussed ‘federal law enforcement subpoenas to Fenwick’ with the law firm’s general counsel, Kathryn Fritz, according to a court document filed in March.”
• “Fenwick is also among a number of companies targeted with a class-action lawsuit alleging the firm helped aid a massive fraud led by Sam Bankman-Fried, the FTX founder now facing 13 criminal charges. Services Fenwick provided were ‘central to SBF’s fraud,’ according to a February suit filed in Miami federal court on behalf of a proposed class of investors.”
• “It’s awkward for any law firm to answer questions about actions for a client but particularly for Silicon Valley-founded Fenwick, which cemented its reputation as a go-to operation for the world’s top tech companies after it helped Steve Jobs incorporate Apple Inc. in 1976. The firm, whose clients have included Amazon.com Inc., Tesla Inc. and Meta Platforms Inc., nearly doubled its revenue in the five years leading up to 2021.”
• “‘Any time you have even the hint of regulatory impropriety in the practice of law, you and the firm take a hit,’ said James Cox, a Duke University law professor. ‘It’s hard to say how long it lasts and how deep it is. But it’s certainly not a feather in your cap.'”
• “Fenwick advised FTX and its sister trading shop, Alameda Research, on areas including trademarks, tax and litigation before the crypto exchange’s implosion into bankruptcy in November. It also helped set up US-based companies affiliated with FTX and Alameda.”
• “Daniel Friedberg, once the Seattle-based chair of Fenwick’s payments practice, joined FTX in 2020 and would later become its chief regulatory officer. Former FTX general counsel Can Sun was a past Fenwick associate.”
• “Fenwick has axed references to FTX on its website. The firm trimmed FTX from a list of prominent clients on its homepage.”
• “‘Fenwick & West helped FTX to develop ‘compliance’ procedures designed to skirt FTX’s regulatory obligations or conceal its noncompliance,’ the class action suit, which seeks unspecified monetary damages from Fenwick, alleges. The complaint besides Fenwick targets 20 other third parties with an alleged FTX connection, including auditors and venture capital firms.”
• “Finding a third-party such as a law firm liable for any underlying fraud is a steep hurdle, said Patrick Coughlin, a Scott & Scott lawyer who represented shareholders of Enron following its collapse.”

A reader sent word of: “Clarence Thomas Secretly Accepted Luxury Trips From Major GOP Donor” —

• “In late June 2019, right after the U.S. Supreme Court released its final opinion of the term, Justice Clarence Thomas boarded a large private jet headed to Indonesia. He and his wife were going on vacation: nine days of island-hopping in a volcanic archipelago on a superyacht staffed by a coterie of attendants and a private chef.”
• “If Thomas had chartered the plane and the 162-foot yacht himself, the total cost of the trip could have exceeded $500,000. Fortunately for him, that wasn’t necessary: He was on vacation with real estate magnate and Republican megadonor Harlan Crow, who owned the jet — and the yacht, too.”
• “For more than two decades, Thomas has accepted luxury trips virtually every year from the Dallas businessman without disclosing them, documents and interviews show. A public servant who has a salary of $285,000, he has vacationed on Crow’s superyacht around the globe.”
• “These trips appeared nowhere on Thomas’ financial disclosures. His failure to report the flights appears to violate a law passed after Watergate that requires justices, judges, members of Congress and federal officials to disclose most gifts, two ethics law experts said. He also should have disclosed his trips on the yacht, these experts said.”
• “Through his largesse, Crow has gained a unique form of access, spending days in private with one of the most powerful people in the country. By accepting the trips, Thomas has broken long-standing norms for judges’ conduct, ethics experts and four current or retired federal judges said.”
• “‘It’s incomprehensible to me that someone would do this,’ said Nancy Gertner, a retired federal judge appointed by President Bill Clinton. When she was on the bench, Gertner said, she was so cautious about appearances that she wouldn’t mention her title when making dinner reservations: ‘It was a question of not wanting to use the office for anything other than what it was intended.'”
• “Virginia Canter, a former government ethics lawyer who served in administrations of both parties, said Thomas ‘seems to have completely disregarded his higher ethical obligations.'”
• “‘When a justice’s lifestyle is being subsidized by the rich and famous, it absolutely corrodes public trust,’ said Canter, now at the watchdog group CREW. ‘Quite frankly, it makes my heart sink.'”
• “Federal judges sit in a unique position of public trust. They have lifetime tenure, a privilege intended to insulate them from the pressures and potential corruption of politics. A code of conduct for federal judges below the Supreme Court requires them to avoid even the ‘appearance of impropriety.’ Members of the high court, Chief Justice John Roberts has written, ‘consult’ that code for guidance. The Supreme Court is left almost entirely to police itself.”
• “Thomas’ approach to ethics has already attracted public attention. Last year, Thomas didn’t recuse himself from cases that touched on the involvement of his wife, Ginni, in efforts to overturn the 2020 presidential election. While his decision generated outcry, it could not be appealed.”
• “Crow said that he and his wife have funded a number of projects that celebrate Thomas. ‘We believe it is important to make sure as many people as possible learn about him, remember him and understand the ideals for which he stands,’ he said.”

“Clarence Thomas says trips paid for by billionaire were ‘personal hospitality,’ not business” —

• “Thomas said in a statement that Crow and his wife, Kathy, are ‘dearest friends’ and that he and his wife have joined them on family trips for years.”
• “‘Early in my tenure at the Court, I sought guidance from my colleagues and others in the judiciary, and was advised that this sort of personal hospitality from close personal friends, who did not have business before the Court, was not reportable,’ Thomas said.”
• “‘I have endeavored to follow that counsel throughout my tenure, and have always sought to comply with the disclosure guidelines,’ he added.”

“Supreme Court justices under new ethics disclosures on trips, other gifts” —

• “Supreme Court justices and all federal judges must provide a fuller public accounting of free trips, meals and other gifts they accept from corporations or other organizations, according to revised regulations quietly adopted this month.”
• “The new requirements mark a technical but significant change that lawmakers and court transparency advocates hope will lead to more disclosure by judges and justices and also make it easier for parties in specific cases to request that judges remove themselves from cases when potential conflicts arise.”
• “Gifts such as an overnight stay at a personal vacation home owned by a friend remain exempt from reporting requirements. But the revised rules require disclosure when judges are treated to stays at commercial properties, such as hotels, ski resorts or corporate hunting lodges. The changes also clarify that judges must report travel by private jet.”
• “The revisions come after years of pressure from members of Congress, who say the judiciary should follow ethics guidelines closer to those that apply to the executive and legislative branches.”
• “Rules around subsidized trips are not the only questions of ethics at the Supreme Court recently. Separately, the court has been under pressure to adopt a code of conduct specific to the nine justices. The high court has failed to reach consensus on a policy despite discussion that dates to at least 2019. Last month, leaders of the American Bar Association joined those calling on the court to act, saying that ‘the absence of a clearly articulated, binding code of ethics for the justices of the Court imperils the legitimacy of the Court.'”
• “The justices are not bound by the code of conduct that covers other U.S. judges. They say they voluntarily comply with the same ethics standards. But scrutiny of the justices has increased with the court’s heightened profile as a new conservative majority has moved quickly to rule on polarizing cases.”
• “The new disclosure rules clarifying what constitutes personal hospitality apply to more than 3,000 judges nationwide, a group that includes senior judges, magistrate judges and Supreme Court justices.”
• “That change would not have been needed at all had the judiciary been following the law the way Congress and the executive branch claimed to be following it, according to Kedric Payne, senior director for ethics at the Campaign Legal Center, an advocacy group. ‘We don’t know if the Supreme Court justices are, on their own, interpreting this rule to allow them to hide these gifts,’ he said of the exemption.”

CNA reminds us: “A Bad Economy Increases Risks for Lawyers” —

• “Experts may disagree as to whether we are in a recession, but there is no question that our economy has been in a weakened state for a lengthy time period, which may impact professional liability claims for lawyers. For example, virtually all areas of practice for lawyers showed an increase in claims as a result of the 2008-09 recession. As a result, lawyers should be keenly aware of liability exposure as professional liability claims tend to increase during bad economies.”
• “Avoid the Risky Client. Financial pressures may force some law firms to consider potential clients that they would probably decline in better economic times. Such law firms need to balance the need for increased revenue against the liability risks of accepting a marginal client. Client intake represents a critical component in endeavoring to avoid legal malpractice claims.”
• “Decline to Dabble. During tough economic times, some lawyers may be tempted to dabble in practice areas in which they have no experience in order to earn more law firm revenues. However, the risks may outweigh the rewards for lawyers who deviate from their traditional areas of practice.”
• “Think Twice Before Suing a Client for Fees. Another tactic firms often employ to boost their accounts receivable is to bring collection actions against clients who have not paid their invoices for legal fees and expenses. Notably, such collection lawsuits often result in counterclaims for legal malpractice.”
• “Guard Against Conflicts of Interest. Financial concerns may lead law firms to slash expenses related to their risk control protocols, such as the personnel and resources devoted to conflict of interest checking systems… But saving a little money upfront in exchange for a weaker conflict of interest system and later expending money, time, and resources due to a professional liability claim arising from a missed conflict of interest issue becomes penny wise and pound foolish.”
• “Communicate Regularly with Clients and Discuss the Impact of a Bad Economy on Their Matters. Documenting your client file strengthens client communications and may protect lawyers against professional liability claims. A well drafted engagement letter with a narrowly tailored “Scope of Representation” provision will help set expectations at the outset of the attorney-client relationship. Throughout the course of the representation, lawyers should have a paper (or electronic) trail of correspondence with the client referencing any legal advice provided, summaries of discussions on the benefits and risks of a particular litigation or transaction strategy, and client decisions regarding settlement negotiations, among other issues. Memorializ- ing these interactions is critical in the event that the client decides to act contrary to your advice, sets time or financial constraints upon your representation, or tells you not to pursue certain causes of actions, defenses, or other important issues.”
• “Address Errors Promptly. Lawyers may commit errors at any point in their careers, but as noted earlier, claims typically rise in a bad economy and financial pressures may increase the likelihood of an error that leads to a professional liability claim. Errors can run the gamut from minor and correctible to substantial and damaging.”

“City of Atlanta Reaches $3.3M Settlement as Outside Counsel Hit With $584K Sanction” —

• “More than a decade after an improperly working traffic signal contributed to a deadly crash, the city of Atlanta has settled a nuisance complaint for $3.35 million.”
• “Plaintiff counsel credits the settlement as “the largest amount the city has ever paid to settle a personal injury [or] nuisance case,” but alleged the improper conduct of the defendant’s initial trial counsel has resulted in an additional $584,000 sanction for attorney fees and expenses.”
• “Rogers said plaintiff counsel learned of multiple occasions leading to the date of their client’s January 2012 death ‘where employees had reported this signal, and others, not working.'”
• “But it’s what the city’s outside defense counsel with Scrudder, Bass, Quillian, Horlock, Lazarus & Adele allegedly did after the jury had been selected that led the trial judge to later award a $584,000 sanction against it.”
• “‘We spent two days picking a jury, only at the last minute to have counsel for the city stand up and announce they had just discovered a conflict and needed to withdraw from the case,’ Rogers said. Led by Matthew Lazarus, Scrudder Bass counsel allegedly refused to divulge to the court and opposing counsel the specifics of the conflict, according to plaintiff counsel.”
• “When the city’s continued refusal resulted in Jacobs declaring a mistrial, plaintiff counsel said the trial judge issued its own sua sponte motion for sanctions against the city of Atlanta Law Department and Scrudder Bass. The court also allowed the Dietch + Rogers attorneys to conduct discovery to determine the conflict.”
• “The conflict turned out to be time records that revealed a city employee had not worked on the dates relevant to two service requests that’d been submitted bearing her credentials.”
• “But in his motion for sanctions, Jacobs determined ‘a review by Scrudder Bass and the City of Atlanta Law Department of the documents produced by their clients would have revealed the conflict years ago.'”
• “‘These records were not obscured, as they had been the subject of pretrial motions and relied upon in eliciting deposition testimony,’ Jacobs’ sanctions order read. ‘The prospect that [the employee] might not have authored the Service Requests was specifically raised during her deposition almost four years prior to trial.'”
• “Jacobs wrote that, because ‘the documents would and should have been in the possession of the City of Atlanta Law Department’ and ‘Scrudder Bass after their early 2018 entry of appearance,’ the firm’s discovery of the conflict ‘after the jury had been selected on March 2, 2022, rather than any point prior to trial cannot be the result of proper conduct.'”
• “‘Of course, to be clear, the disclosure of the conflict itself is not what the Court finds improper,’ Jacobs wrote. ‘The Court finds improper the overall conduct surrounding the disclosure, i.e., the failure to timely disclose an apparent conflict to the point that a mistrial resulted when the necessary disclosure was made after a jury had been selected. There was ample opportunity for counsel to satisfy their real professional duties and obligations without necessitating a mistrial.'”

“CNN anchor appears stunned as one Trump attorney throws another under the bus” —

• “There was an odd moment of apparent legal one-up-manship on CNN during an interview regarding the representation of Donald Trump following his indictment.”
• “Asked by CNN anchor Kaitlan Collins if Mr Tacopina was the ‘right person’ to defend the former president against the more than 30 charges purportedly in the sealed New York indictment, Mr Parlatore [one attorney for the former president] brought up a significant conflict of interest.”
• “‘As to who’s going to try the case? I know that Joe has certain potential conflict issues, given his prior contacts, with Stormy Daniels. So, who’s the right attorney, to take it to trial, is something that the client will have to decide.'”
• “Mr Parlatore walked back his reply when Collins pressed him on it and said he would not comment on Mr Tacopina, despite having just done so.”
• “Mr Tacopina had exchanges with Ms Daniels in 2018 regarding potential representation and these were handed over to the Manhattan District Attorney’s office by her current lawyer Clark Brewster who sees them as a conflict of interest.”
• “Mr Tacopina has denied any conflict of interest or that confidential information was shared with him or his office. He has also denied ever meeting or speaking with Ms Daniels.”
• “In addition, in a 2018 appearance on CNN, Mr Tacopina seemed to criticise Mr Trump’s payments to Ms Daniels as potentially ‘illegal’ and a ‘fraud.'”

“He already rocked MAGA world — twice. Now he’s Trump’s judge.” —

• “Donald Trump fumed last week that the judge conducting his arraignment Tuesday — and likely overseeing his criminal trial — ‘HATES ME.'”]
• “The basis for Trump’s assessment, made on Truth Social Friday, is that the judge, Juan Merchan, presided over two unrelated criminal tax fraud cases involving Trump’s real estate firm and his former CFO, both of which resulted in outcomes unfavorable to the defense. In the case of former CFO Allen Weisselberg, Merchan, citing corporate greed, said he would have imposed a ‘stiffer sentence’ than the five months jail time the ex-executive got from a plea deal.”
• “Given that history, some New York lawyers suggested it would be bad optics for Merchan to preside over the new case against Trump. The court’s chief judge could intervene and handle the trial herself or replace Merchan with a different judge, according to a former court official.”
• “But experts said there’s no legal basis to bar Merchan from presiding.”
• “‘If there were some facts showing that the judge had become irrational or infuriated then there might be an argument, but simply having sat in these other cases is not grounds for disqualification,’ said Steven Lubert, co-author of ‘Judicial Conduct and Ethics.'”

“New York Law Firm Pays $200,000 to State AG to Resolve HIPAA Violations” —

• “A New York law firm that suffered a LockBit ransomware attack has agreed to pay a financial penalty of $200,000 to the New York Attorney General to resolve alleged violations of New York General Business Law and the Privacy and Security Rules of the Health Insurance Portability and Accountability Act (HIPAA).”
• “On or around Christmas Day 2021, the LockBit ransomware gang gained access to its network and encrypted files. The investigation confirmed that files were exfiltrated in the attack, including legal documents, patient lists, and medical records. The patient information included names, birthdates, medical histories, treatment information, Social Security numbers, and health insurance information.”
• “The investigation confirmed the LockBit gang gained access to its network in November 2021 by exploiting unpatched Microsoft Exchange vulnerabilities.”
• “The incident was investigated by the Office of the New York Attorney General to determine whether the law firm had violated state laws and the HIPAA Rules. The NY AG determined the vulnerabilities exploited by the LockBit gang had been identified by Microsoft in April and May 2021 and patches had been released shortly thereafter to fix those vulnerabilities. Despite the vulnerabilities being well known, they remained unpatched for more than 6 months, which left firm’s email server vulnerable to attack.”
• “The NY AG determined 17 provisions of the HIPAA Privacy and Security Rules had been violated and there were also violations of New York General Business law by failing to implement reasonable security practices to protect private information and the failure to issue timely notifications to 61,438 New York residents.”

“ABA Outlines Choice-of-Law Issues for Multijurisdictional Ethics” —

• “A lawyer won’t be disciplined if their conduct complies with the rules of a jurisdiction where the attorney reasonably believes their conduct will have the most predominant effect, the American Bar Association clarified on Wednesday.”
• “The ABA clarification, issued as a formal opinion on Wednesday, highlights that litigation and non-litigation matters are treated separately for the purposes of determining which disciplinary authorities govern certain alleged misconduct, and which rules are applicable.”
• “Model Rule 8.5 in the ABA Model Rules of Professional Conduct dictates that, when there is a choice-of-law question in a case before a tribunal and a lawyer practices law in multiple jurisdictions, the lawyer must comply with the rules associated with the location of the tribunal. Conduct before a tribunal is considered under the disciplinary authority of the jurisdiction in which the tribunal sits, the association said.”
• “In matters for which there is no litigation in effect, a lawyer’s conduct is determined by the location in which the predominant effect is felt, regardless of where the attorney practices law, the opinion says.”
• “The rule stands firm when applied to fee agreements, law firm ownership, reporting professional misconduct, confidential duties, and screening attorneys making lateral firm moves, according to the ABA’s Standing Committee on Ethics and Professional Responsibility.”

[Succession spoiler alert, for those not caught up on the latest greggs and tomlettes.] “When emotions run high: representing a warring family in a commercial deal” —

• “This week on Charles Russell Speechlys Succession Watch, we look at what trustees should do to get the best possible outcome for their beneficiaries (and protect themselves) in commercial deals involving competing beneficial interests and non-commercial considerations.”
• “Episode 1 of Succession Series 4 saw a bidding war ensue between Logan Roy and his outcast children, Kendall, Shiv and Roman, for the acquisition of family-controlled media group Pierce. It also saw Nan Pierce, majority shareholder and family representative of Pierce, hold her nerve in negotiations with the Roy family to try to achieve the best possible deal on the sale of her beloved family company.”
• “As family representative, Nan was responsible not only for herself in these negotiations, but the wider family and shareholders; people with different financial positions, outlooks and views about the future of the company itself. And, as Episode 1 portrayed so clearly, where families and family businesses are involved, there’s also emotion. In Succession they call it the ’emotional premium’ that takes the value of the company beyond its usual price tag and can mean negotiations spiral out of control and at times appear to lose all commercial sense.”
• “To prioritise the interests of the beneficiaries when trying to achieve the best possible deal. Trustees should take comfort that the ‘best possible deal’ does not necessarily mean the best deal from a commercial perspective, though trustees are likely to avoid criticism where their decisions make business sense and they have taken advice (see below).”
• “Identify conflicts early. Competing and conflicting interests will inevitably exist where there are family shareholdings and a group of beneficiaries. Where a trustee is also a beneficiary, or has their own personal shareholdings, then the potential for conflict is even greater. Under Jones v Firkin Flood a conflict of interests can vitiate a trustee’s otherwise reasonable decision.”
• “It may be that conflicts can be managed simply by acting on professional advice or it may be that an independent trustee can be brought in to effectively neutralise them. Where conflicts look to be insurmountable it can be possible to get prior approval from the Court to proceed on the company sale despite the conflict (see below). Episode 1 threw up a further conflict in that Shiv and Tom, while married, were or were working for rival bidders. In such a situation it might be possible as trustee to limit the information disclosed to either of them and ensure suitable confidentiality agreements are in place.”
• “Especially in circumstances where the trustees lack relevant expertise. In Episode 1, we saw the Roy and Pierce families supported by a team of advisors. Trustees should consider what advice is going to be needed: this could include corporate finance advice, valuations, tax advice, legal advice and, where you are dealing with a HNW family like the Roys, reputational advice. Trustees should also take into account and seek possible advice on what happens if the company sale falls through: are they faced with a depreciating asset and further family conflict? What price should they put on that?”

“Pembroke mayor’s law firm colleague is paid to represent the city. Some residents say that’s not OK” —

• “A Pembroke, Ont., homeowner says a road plowing dispute with the city snowballed into what she calls a ‘threatening’ letter from the law firm where both the city solicitor and mayor work — a situation she believes is both a conflict of interest and an ‘abuse of power.'”
• “Arianna Nolet said she was outraged after learning taxpayers are paying Mayor Ron Gervais’s law firm colleague Robert Sheppard for legal services, and questions the implications of the city’s top elected official continuing to work at the same firm — Sheppard & Gervais — as its solicitor.”
• “‘There is a large conflict,’ said Nolet. ‘How does the city’s interests align with Mayor Gervais’s interests, and then [how do] his interests further align with his law firm? It raises a lot of eyebrows.'”
• “The dispute began in December when Nolet contacted the city over what she described as city plows repeatedly ‘dumping the entire street of snow’ on her property, which sits at the end of her street.”
• “In February, Nolet received a letter in the mail from the law firm Sheppard & Gervais… ‘This is to advise that should you engage in conduct that is contrary to the By-law that you risk being prosecuted by the City of Pembroke for such activity,’ Sheppard wrote.”
• “The letterhead includes both Sheppard’s and Gervais’s credentials, and their full names are printed at the bottom.”
• “One 2012 agreement with the Town of Deep River describes the firm’s ‘extensive history’ of expertise in the municipal sector and touts it as “one of the oldest law firms in the county. According to the firm’s proposal, Gervais was billing $226/hour and Sheppard $288.15/hour for legal services at the time.”
• “Under the act [Ontario’s Municipal Conflict of Interest Act], conflict of interest relates only to pecuniary (financial) interests. An official has an indirect pecuniary interest if they are a shareholder, director or senior officer with a private company that has a direct financial interest in the matter, or ‘if they are a partner of a person or is in the employment of a person or body that has a pecuniary interest in the matter.'”
• “According to the city, Gervais twice declared a pecuniary interest regarding his offer to purchase the city land adjacent to his property, on March 7 this year and Sept. 6, 2022. There were no declarations regarding the matter with Nolet.”
• “Despite his law firm’s name, Gervais is not a partner there but an employee, the city’s CAO David Unrau pointed out in an email to CBC.”
• “John Mascarin, a lawyer with Aird & Berlis and the integrity commissioner for dozens of Ontario municipalities, said the situation in Pembroke ‘may very well give rise’ to an indirect pecuniary interest, and said ‘it doesn’t really matter’ whether Gervais is a partner at the firm… However, even the perception of conflict of interest can be problematic, Mascarin said.”

“Does Trump’s lawyer have a conflict of interest?” —

• “The other day I saw a story with the title: ‘Trump lawyer’s ethics issue: He initially was approached by Daniels.’ In it, the author recalls the fact that the lawyer currently representing Trump in the case related to the hush money payment made to Stormy Daniels had been consulted by Ms. Daniels before he agreed to represent Trump. The article suggests that this means that Trump’s lawyer (Joe Tacopina) has a conflict of interest. However, I don’t think we have enough information to reach that conclusion… yet.”
• “What we know is that Stormy Daniels approached Tacopina about representing her but he declined. It appears that that ‘approach’ included at least one conversation between Daniels and the lawyer, but that does not necessarily mean that ‘an attorney-client relationship was established at the point of that consultation’ as the article states.”
• “When a person approaches an attorney to discuss whether the attorney will take on their representation what is formed is a relationship between the attorney and a prospective client, and the duties owed to a prospective client are different than those owed to a client.”
• “Whether the prospective client actually establishes an attorney-client representation depends on what transpires during the conversation(s) leading to the decision by the lawyer not to take on the representation. And that is the information we don’t have in this case.”
• “Having said that, assuming there was no attorney-client relationship formed, is there ‘an ethics issue’ as the article says? Assuming the rules that apply are the ones from New York, a lawyer shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter although a different lawyer from the same firm could if certain conditions are met.”
• “Assuming all that as true, it could be argued that the lawyer violated a duty toward Stormy Daniels and could be subject to discipline for it.”

“Catonsville lawyer disciplined for conflict of interest in commercial lease deal” —

• “A Catonsville attorney who provided legal advice to a prospective commercial tenant without disclosing his ownership stake in the property where the tenant wished to move received a fully stayed 60-day suspension from Maryland’s Supreme Court this week.”
• “Ali M. Kalarestaghi will instead serve a 6-month probationary period, during which he can continue practicing law, in lieu of the suspension.”
• “The 62-page majority opinion, authored by Justice Michele D. Hotten, concludes that Kalarestaghi had an attorney-client relationship with the prospective tenant, an optometry practice called Catonsville Eye Associates LLC.”
• “Catonsville Eye wished to explore moving to a new location at 6567 Baltimore National Pike, which Kalarestaghi owned with his father and brother through an entity called MAH Mountain LLC, according to the opinion.”
• “First, however, Catonsville Eye needed help getting out of its existing lease for a commercial space on Rolling Road in Catonsville. Dr. Erick Gray, who handled the administrative aspects of the optometry business, wished to avoid paying double rent if he moved the business into the Baltimore National Pike location.”
• “Kalarestaghi introduced himself to Gray as the attorney for his father but did not mention that he had a 30% interest in MAH Mountain, according to the opinion.”
• “He agreed to review Catonsville Eye’s existing lease to determine if the business could terminate it early and offered his opinion in an email that the business was obligated to stay at the Rolling Road location through August 2017.”
• “‘This is legal advice, it is subject to attorney-client privilege, I cannot even share this review with my father, although you can,’ Kalarestaghi wrote in the email.”
• “Kalarestaghi then proposed a deal in which he would help negotiate an agreement to end Catonsville Eye’s current lease early. The business’s lease at the new location would include ‘up to $5,000 in free legal services’ to work out that agreement.”
• “Catonsville Eye had Kalarestaghi disqualified from serving as MAH Mountain’s lawyer because of a conflict of interest and ultimately countersued, according to the opinion.”
• “Hotten concluded that a stayed suspension was appropriate because the court did not find evidence that Kalarestaghi was intentionally dishonest or deceitful. He also has no prior history of discipline since his entrance to the bar in 2007. Epstein, the hearing judge, also found that Kalarestaghi offered sincere testimony and did not believe there was a conflict of interest.”

“Former Cozen O’Connor Attorney’s Practice Suspended 1 Year in Pa.” —

• “Former Cozen O’Connor conflicts attorney William Gericke has been barred from practicing law for one year in the state of Pennsylvania.”
• “Gericke was charged with violating U.S. Securities and Exchange Commission rules on insider trading in 2021, having misappropriated information he gained as a conflicts attorney at Cozen O’Connor to help him profit on the stock market.”
• “Gericke has since settled those charges and was barred from practicing in front of the SEC following an inquiry and investigation conducted by the Financial Industry Regulatory Authority and the SEC. He was also fined just over $20,000, double the amount of profit he earned from his trading activities.”
• “The charges stem from an incident in 2019 in which Gericke received a request for a conflicts check from Liberty Property Trust regarding another real estate firm, Prologis. Liberty Property Trust, at the time a client of Cozen O’Connor, was considering a merger with Prologis. Upon getting the request for a conflicts check and learning of the possibility of a merger, Gericke bought 1,000 shares in Liberty Property Trust, which he then sold at a $10-per-share profit once the merger went through.”

“The split between Johnny Doc and his former lawyers is getting messy. He hopes it’s enough to overturn his conviction.” —

• “The falling-out between John J. Dougherty and the law firm that represented him at his 2021 bribery trial is getting messier.”
• “And the former labor leader now hopes the dispute could help him overturn his conviction and spare him from a second trial next month on charges he and others embezzled more than $600,000 from their union.”
• “In recent court filings, Dougherty’s new attorneys argue that the legal defense provided to him by the Center City law firm Ballard Spahr was compromised due to conflicts of interests involving the firm’s other clients, including the cable giant Comcast and Local 98 of the International Brotherhood of Electrical Workers, the union Dougherty led for nearly three decades before resigning as its business manager in 2021.”
• “They have asked a federal judge to postpone his April 24 embezzlement trial until a hearing can be held to determine whether the law firm’s past representation of both Comcast and Local 98 may have negatively affected the legal strategy deployed by his former defense team led by attorney Henry E. Hockeimer Jr.”
• “But to overturn his bribery conviction and trigger the dismissal of the remaining charges, Dougherty would have to prove not only that conflicts of interest existed but that he did not waive them and that they so negatively affected his defense that it violated his rights to a fair trial.”
• “It’s unlikely that Dougherty was completely unaware at the time he chose Hockeimer to be his defense lawyer of the conflicts he is now citing.”
• “Dougherty’s argument centers on two main points — the most significant, Cinquanto and cocounsel Alan J. Tauber say, being that Ballard Spahr counts Comcast among its biggest clients. Witnesses from the company played a central role in Dougherty’s 2021 bribery trial alongside Philadelphia City Councilmember Bobby Henon.”
• “Several factors could work against Dougherty’s argument that a conflict of interest existed or harmed his defense.”
• “It is not uncommon for large law firms like Ballard Spahr to design internal controls when representing clients whose interests diverge. For instance, firms often wall off teams of attorneys representing opposing clients, to avoid even accidental discussion of legal strategies that could give one an unfair advantage over another.”
• “What’s more, Dougherty and Henon were not charged with defrauding Comcast, so the company is not legally considered a victim in the case. Instead, Comcast executives served as witnesses to bolster prosecutors’ claims that the bribes the labor leader paid Henon defrauded Philadelphia’s citizens of his honest services as an elected official.”
• “And Ballard Spahr’s ties to Comcast were hardly a secret — especially to Dougherty. David L. Cohen, Comcast’s then-senior executive vice president and the public face of the company in Philadelphia, had previously served as managing partner at Ballard Spahr from 1997 to 2002.”

“‘Onslaught’ of extra AML burdens likely to increase – SRA chief” —

• “There will be no let-up in the requirements made of law firms to prevent money laundering, the chief executive of the Solicitors Regulation Authority warned today.”
• “Paul Philip told the Law Society’s Risk and Compliance Annual Conference that the regulator has found itself as ‘piggy in the middle’ between the profession and the government. The regulator would help in any way it can, he said, insisting that firms should not be scared of their obligations – but he suggested that pressure from the government is behind the current push.”
• “Firms are already required to produce risk assessments to prevent money laundering, and more than a dozen firms have been fined in the past year for failing to carry these out properly. The SRA has also prosecuted firms that wrongly declared they had a compliant risk assessment. “
• “Philip said the most common request from firms when asked how the SRA could help was to stop adding to the AML regulatory burden – but that is not going to be possible for now.”
• “‘There is nothing we can do to stop the onslaught of regulatory requirements coming from direct legislation which we are forced to implement. Arguably we are playing catch-up as we should have been doing this sort of thing a long time ago.'”
• “The Economic Crime Bill, currently going through parliament, will place extra reliance on the SRA to prevent money laundering and Philip said the level of bureaucracy and regulation is likely to increase. The legislation would also give the SRA unlimited fining powers for firms that have facilitated economic crime.”
• “‘Government pressure to drive through the economic agenda is just colossal,’ added Philip. ‘If we get those powers we would expect and would wish to use them. The level of fines for economic crime, particularly in the financial sanctions era, will increase radically.'”

“The Anti-Money Laundering Whistleblower Improvement Act Adds Critical Teeth to the Anti-Money Laundering Program, But There Is Still More To Do” —

• “On December 23, 2022, Congress included the Anti-Money Laundering Whistleblower Improvement Act in the omnibus budget presented to President Biden. The Improvement Act contained several key amendments to the Anti-Money Laundering Act that bring the program more closely into alignment with other highly successful federal whistleblower programs.”
• “But for all its strength, the AMLA of 2020 had holes. Corporate auditors and compliance professionals could not qualify as whistleblowers under the original law, despite their unique access to BSA/AML-related information. And as its critics noted from its inception, the AMLA’s missing floor on awards for successful tips severely undercut the program’s power to encourage whistleblowers. Those with information could risk their livelihood and financial stability to bring forward critical information that resulted in massive monetary sanctions, only to see minimal or nonexistent compensation for their courage. Additionally, awards were funded through Congressional appropriations bills, so even for those whistleblowers who did receive an award, FinCEN could not pay them until Congress allocated the money.”
• “The Improvement Act patched these holes with several long-sought changes. Based on the highly successful Dodd-Frank Act (15 U.S.C. § 78u-6), the Improvement Act demonstrates clear intent by Congress to solicit increased whistleblower tips by expanding incentives and protections for those who report. First, the Act set a 10% minimum award for whistleblowers whose information leads to financial sanctions over $1 million. Second, the Act established the Financial Integrity Fund to support these awards, drawing on criminal forfeitures, fines, and victim restitution from sanctioned entities instead of relying on appropriated tax payer dollars. Third, the Act lifted restrictions on potential whistleblowers who learned of violations through their roles as compliance or audit professionals. Each of these changes further encourages potential whistleblowers to report violations within their organizations to the federal government.”
• “In ameliorating these gaps, Congress took the extra step of expanding the AMLA to cover information uncovering violations of American sanctions laws. In addition to recognizing whistleblowers with BSA/AML violation information, the amended AML program protects and rewards whistleblowers with information relating to the International Emergency Economic Powers Act, the Trading with the Enemy Act, and the Foreign Narcotics Kingpin Designation Act. Relevant information under the AML program includes any possible violation of these laws and their regulations that has happened, is about to occur, or is ongoing.”
• “While the 2022 amendments made critical expansions to the AMLA, the Act still has at least one glaring hole. For the whistleblowers it protects, the AMLA creates a strong shield against retaliation for engaging in protected activity. Covered whistleblowers may report violations not only to the government, but also within their organization to those with authority to “investigate, discover, [] terminate, . . . [or] take any other action to address the misconduct.” 31 U.S. Code § 5323(g)(1). However, reporting internally can and frequently does result in whistleblowers experiencing adverse retaliatory actions by their employers, including termination. The AMLA provides generous remedies for successful retaliation claims, including reinstatement, double back-pay, and attorneys’ fees. 31 U.S. Code § 5323(g)(3).”

“The LPAC Strikes Back . . . When The Contract Says It Can” —

• “Many private equity partnerships utilize a limited partner advisory committee (“LPAC”) as a mechanism to approve certain transactions, particularly those where a potential conflict of interest could exist. While Delaware corporate law provides well defined rules for how a self-interested transaction can be cleansed by disinterested directors or shareholders in the context of a corporation, the rules are less well defined when it comes to conflicts of interest for partnerships including private equity funds established as limited partnerships. The decision from In re SunEdison, Inc. demonstrates that the LPAC’s role in approving conflicted transactions remains a case-by-case, contract specific analysis.”
• “The LPAC often acts as a decision-making body with respect to conflicts that may arise between the interests of the limited partners and the interests of the general partner. The role of an LPAC, however, can vary significantly; sometimes LPACs play a mere advisory role while others operate as a required review authority.”
• “In re SunEdison, Inc. involved the elimination of a limited partner’s partnership interest for failure to comply with a capital call required by the limited partnership agreement. The removed limited partner filed a lawsuit alleging breach of fiduciary duty. The limited partner argued that the general partner violated the partnership agreement by extinguishing the LP interest without first obtaining approval from the LPAC. The plaintiff alleged that LPAC approval was necessary because the elimination of a partnership interest resulted in an increase to the value of each remaining partnership interest including the general partners, and was therefore a conflict of interest transaction. The general partner defended the claim by arguing that the partnership agreement’s exculpation provision eliminated otherwise applicable fiduciary duties to the extent they were not specifically incorporated in the agreement. The court considered the arguments under the motion to dismiss standard.”
• “In determining there was no material breach, the court considered whether the agreement required LPAC approval before a partnership interest could be extinguished. The SunEdison partnership agreement contained an enumerated list that detailed what ‘conflict’ transactions required advisory committee approval. This list included transactions with fund-affiliated companies. The court determined that eliminating a limited partnership interest did not match any of the enumerated conflicts and therefore LPAC approval was not necessary. As LPAC approval was not required, the court held there was no breach of the partnership agreement, and thus no material breach (‘it is a stretch to assert even that there has been a contractual breach.’) Therefore, the court concluded the general partner had not breached its fiduciary duty.”