Bressler Risk Blog

Some recent, relevant spots from Bill Freivogel:

Woroch v. Northfield Trim & Door Inc., 2023 ONSC 218 (CanLII) (Super. Ct. Ont. Jan. 9, 2023).

• “Company is owned by Family Members. In 2012 Family Members entered into a shareholders’ agreement prepared by Lawyer while representing Company. The agreement included an employment agreement for Plaintiff (also a Family Member) to be President. The shareholders’ agreement also contained a buy/sell provision.”
• “In 2021 a transaction occurred under the buy/sell provision. A dispute arose between Plaintiff and Company and other Family members as to the meaning and enforcement of the shareholders’ agreement. Lawyer withdrew as counsel to Company and immediately took Plaintiff’s side in the dispute.”
• “The dispute ripened into this proceeding, in which Lawyer is adverse to Company and Family Members. Defendants moved to disqualify Lawyer.”
• ” In this opinion the court granted the motion. The court held that Lawyer’s earlier representation of Company, including preparation of the shareholders’ agreement, was sufficiently related to this case, which is about the interpretation and enforcement of the agreement. Moreover, there was no showing that Lawyer had not learned relevant Company confidences while representing Company. The court seemed influenced by the rather shady (not dishonest) way Lawyer went about the business of firing Company with no advance notice and commencing to do battle for Plaintiff. Among other things, the case has a strong whiff of hot potato.”

Joint Representation (posted January 16, 2023) N.Y. Op. 1249 (Jan. 5, 2023).

• “Lawyer currently represents H and W simultaneously in estate planning. It is always a good idea to provide in an engagement document that Lawyer will keep no secrets of one joint client from the other. Authorities (including the Committee’s opinion) suggest that even absent a written provision, there is normally an expectation that Lawyer will share the information. Suppose, however, Lawyer learned something from, or about, H during an earlier single representation of H. This opinion says that the usual duty to reveal does not apply in the current joint representation.”

Changing Firms (posted January 9, 2023) Cole-Palmer Instrument Co. v. Prof’l Labs., Inc., No. 0:21-cv-61756-GOODMAN[CONSENT] (S.D. Fla. Jan. 6, 2023).

• “Florida Rule 1.10(c)((1)&(2) appears to be identical to Model Rule 1.10(b)(1)&(2). This is a rare reported decision applying that rule.”
• “Lawyer was at Firm 1 for about one year. Firm 1 represents Plaintiff. Defendant is claiming that Lawyer briefly represented Defendant on a matter related to this case and moved to disqualify Firm 1. In this opinion the magistrate judge denied the motion. The analysis is so fact-dependent, we will spare readers with a recitation of those facts.”
• “First, the judge held that Lawyer and Firm 1 never represented Defendant. Last, the judge held that, in any event, the matters were not substantially related and that any information received by Lawyer and Firm 1 from, or about, Defendant was now public.”

“Recreation Of Billing Records Led To Overbilling” —

• “The Ohio Disciplinary Counsel and Respondent have reached a consent agreement for public reprimand in a case of overbilling by a court-appointed counsel for indigent defendants” —
  • “Between at least 2019 and 2021, when it was time to submit a fee application form, respondent would recreate the time he had spent on a case by reviewing the case docket and his incomplete handwritten notes, and he would estimate both the time he had spent on a particular task, as well as the date on which he had performed the task.”
  • “Respondent’s failure to maintain accurate and contemporaneous time records led to him filing numerous incorrect fee application forms with the Hamilton County Court of Common Pleas and the Hamilton County Municipal Court that reflected excessive amounts of hours on certain days.”
  • “In early 2021, the OPD became aware that several Hamilton County attorneys were generating a significant number of hours for court-appointed work. Accordingly, the OPD conducted an audit on fee application forms submitted by those attorneys on or after January 1, 2019. (Exhibit 3.)”
  • “Respondent’s fee application forms indicate that on August 7, 2019 – the day that respondent billed for a total of 27 hours – he spent 14.1 hours ‘in court’ on behalf of his clients even though the Hamilton County courts are only open to the public for eight hours a day (8:00 a.m. to 4:00 p.m.) Monday through Friday. (Exhibits 4 and 6.)”

“US lawyer urged clients to infect opposing counsel with ‘nasty disease’” —

• “A US lawyer advised his clients to have someone with Covid or another ‘highly infectious, nasty disease’ lick and handle an envelope being sent to opposing counsel, it has emerged.”
• “The extraordinary request was revealed in a ruling that condemned the behaviour of Colorado bankruptcy lawyer Devon Barclay in acting for two debtors and banned him from operating in the US Bankruptcy Court of Colorado for three years.”
• “At the start, Mr Barclay and his firm failed to execute a written contract with the debtors. ‘In any event, Mr Barclay commenced the debtors’ Chapter 7 bankruptcy case by forging the debtors’ signatures on the petition, statement of financial affairs, and schedules.'”
• “He engaged in an ‘egregious pattern’ of misbehaviour in trying to have the case dismissed, lying ‘repeatedly’ to the trustee in bankruptcy and trying to manipulate the bankruptcy filing fee system ‘to cause the bankruptcy case to be dismissed.'”
• “The lawyer told his clients: ‘If either of you have Covid or some other highly infectious, nasty disease — or if you know someone who does — please make sure they lick the envelope and handle it as much as possible.'”
• “The US Trustee – a federal office that oversees bankruptcy cases – brought the misconduct action against Mr Barclay and his firm, although neither participated.”
• “The judge said it deserved “severe sanctions”. He suspended Mr Barclay from practising in the Colorado bankruptcy court for three years and ordered that he cease advertising bankruptcy law services during that time.”

Excellent overview and analysis from Francis G.X. Pileggi, a managing partner of the Delaware office of Lewis Brisbois Bisgaard & Smith, LLP: “Court Rejects Disqualification of Law Firm Based on Rules 1.9 and 1.10” —

• “The U.S. Court of Appeals for the Third Circuit recently addressed a motion to disqualify based on a partner who moved from a law firm representing one party in a bankruptcy proceeding to the firm representing the opposing party in the same case. The court applied Model Rules of Professional Conduct 1.9 and 1.10(a)(2). The attorney who made the lateral move was described in the oDetpinion as Jessica Lauria, née Boelter. (‘Boelter’).”
• “Rule 1.10(a)(2) imputes her conflict to her new firm unless she, among other things, ‘is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.’ The new firm timely screened Boelter, but Boelter’s former client moved to disqualify her new firm, White & Case, arguing that a screen was not enough. The appeal considers the decision of the U.S. Bankruptcy Court, which denied a motion to disqualify White & Case.”
• “Boelter was a partner at Sidley and participated in Sidley’s initial pitch to represent YPF. She recorded a total of 300 hours in the representation of YPF, mostly at the beginning of the case. YPF executives regarded her as an integral part of their legal team.”
• “Thomas Lauria, a partner at White & Case, did not record any time related to the case. Boelter started dating Lauria in 2017, before Boelter pitched Sidley to YPF. In late 2019, Boelter and Lauria began living together. Sidley knew of their relationship.”
• “Boelter moved to White & Case while engaged to marry Lauria. At that time, White & Case followed the applicable Model Rules of Professional Conduct, and Boelter followed the standard conflict-screening process. White & Case implemented an ethical wall that the parties agreed qualified as a screen, beginning on Boelter’s first day. Her new firm obtained her acknowledgement that she complied with the screen and periodically certified her compliance. Her new firm did not give any portion of its fee from the YPF adversary proceeding to Boelter. White & Case gave YPF written notice of Boelter’s employment the day she began with the firm, explained the nature of White & Case’s screen, and included the statement of the firm’s and Boelter’s compliance with the Model Rules. White & Case stated that review may be available before a tribunal, and the firm agreed to respond promptly to any written inquiries or objections about the screening procedures.”
• “YPF moved to disqualify based on its view that no screen would be satisfactory. The Third Circuit accepted appellate review. The standard of review for interpretation of the Model Rules, as a question of law, was de novo. The bankruptcy court’s denial of disqualification was treated as a sanction for which the standard of appellate review is abuse of discretion.”
• “The court regarded the Model Rule (1.10) as sufficient for its analysis and declined to follow the application by the bankruptcy court of an “exceptional circumstances” exception as well as a multifactor test that was based on a decision by the District of Delaware.”
• “The court of appeals held that White & Case complied with Model Rule 1.10(a)(2) and that the bankruptcy court did not abuse its discretion in reaching the same conclusion that the firm was not disqualified from representing the Trust. The bankruptcy court found that the ethical screen implemented by White & Case was thorough and robust between Boelter and the YPF adversary proceeding. Nor does YPF dispute that Boelter did not receive any part of the fees from White & Case’s representation of YPF.”
• “The bankruptcy court also found that White & Case gave YPF prompt notice of the screening procedures, as well as repeated statements that White & Case and Boelter would comply with the screening procedures. White & Case also confirmed that it would respond promptly to any inquiries from YPF about the screen and invited YPF to provide input.”

“Mississippi Rejects Implied Attorney-Client Relationship As Basis To Disqualify” —

• “The Mississippi Supreme Court overturned an order disqualifying counsel in litigation”
  • ‘This case presents an issue of first impression: whether an attorney’s representation of a general partnership creates an implied attorney-client relationship between the attorney and the individual members of the general partnership, and, if so, whether the Mississippi Rule of Professional Conduct prohibiting communication by a lawyer with an individual represented by other legal counsel was violated.’
  • ‘James L. Pettis, III, attorney for the plaintiff, appeals an order of the chancery court disqualifying him for a violation of Mississippi Rule of Professional Conduct 4.2, which prohibits a lawyer from communicating with a person they know to be represented about the subject of the representation. After a careful review of the law, this Court reverses the chancery court’s order, renders a judgment in favor of Pettis, and remands for further proceedings.’
  • ‘Sometime in 2019, two years after Rea had disassociated from the Partnership, Rea became aware that Karsten was attempting to sell land belonging to the Corporation. At Newell’s request, Rea and Newell met with Pettis on April 8, 2019, in his office to discuss the attempted sale. On April 11, 2019, Rea spoke with Lawson via telephone and informed her that she had met with Pettis. Pettis met Rea a second time when he attended the meeting of the shareholders and board of directors of the Corporation at Rea’s home on April 15, 2019.’
  • ‘At both meetings with Rea, Pettis asked whether she was represented by Lawson or any other attorney in the underlying litigation. Rea responded on both occasions that she was not represented by anyone, nor did she wish to seek representation in connection with the underlying litigation. Both Rea and Pettis submitted affidavits stating they only discussed how to prevent the sale of the Corporation’s land by Karsten and that Rea was not represented by counsel in connection with the underlying litigation.’
• “The trial court had disqualified Pettis”
  • ‘We hold that the chancery court erred by finding an attorney-client relationship existed between Lawson and Rea. Additionally, presuming such a relationship did exist, there was no evidence of knowledge or discussion of illicit subject matter which would provide the grounds for Pettis’s disqualification.’
  • ‘The representation of a general partnership by an attorney does not automatically give rise to an attorney-client relationship between the attorney and any of the individual partners.’
  • ‘Even if an attorney-client relationship had arisen between Rea and Lawson, the chancery court erred by disqualifying Pettis because there was no evidence concerning’
  • ‘Although not explicitly argued by the parties, as Hester’s law partner, Pettis’s disqualification does not fall under Rule 1.10 of the Mississippi Rules of Professional Conduct as an imputed disqualification of a law firm due to a conflict of interest because the chancellor only made a finding that Pettis violated Mississippi Rule of Professional Conduct 4.2, not that a conflict of interest existed.’
  • ‘Hester’s disqualification was within the jurisdiction and authority of the chancery court because he was engaged in practices and proceedings before the court as Newell’s attorney in the underlying litigation. Because Rea was not a party to the underlying litigation and because Pettis did not represent Newell in the litigation, no conflict of interest existed. Therefore, this Court finds the disqualification of Pettis under the theory of an imputed disqualification as a member of Hester’s law firm to be untenable.’

“NY Attorney Escapes Fiduciary Breach Lawsuit in Texas” —

• “A New York lawyer who is accused of wrongly advising a company to sign an unfavorable contract escaped a lawsuit in Texas because an attorney-client relationship wasn’t enough for a court in that state to have jurisdiction over him.”
• “While an attorney-client relationship existed between Hinduja Global Solution, Inc. and Ali Ganjaei, there’s no evidence the lawyer sought clients or otherwise affirmatively promoted personal business in Texas, the Texas Court of Appeals, Fifth District said, affirming the trial court’s decision.”
• “HGSI specifically claims that Ganjaei, the business’s legal counsel, gave the company bad legal advice by advising it to sign the perpetuity contract. It claims Ganjaei had a conflict of interest because he also worked for another organization, HBI Group Inc., which obtained a majority stock position in Synergy.”
• “Ganjaei challenged the court’s personal jurisdiction over him, arguing that he’s a resident of New Jersey, and never lived in Texas. He also said he’s licensed to practice law in New York and has never performed legal services in Texas. The trial court granted his motion to dismiss for lack of personal jurisdiction, but HGSI appealed.”
• “Because Ganjaei was sued in his individual capacity, ‘only his contacts in that capacity are relevant’ to the jurisdictional question, the court said Jan. 13.”
• “Ganjaei didn’t purposefully avail himself of the benefits and protection of Texas law because there is no evidence Ganjaei personally targeted the state, sought Texas assets, or sought customers there, the court said. ‘The record shows HBI, not Ganjaei acquired an interest in Synergy, and there is no assertion or evidence that HBI is Ganjaei’s alter ego,’ the court added.”

“FTX seeks to reassure court on bankruptcy lawyers’ potential conflicts” —

• “A U.S. judge on Friday signed off on FTX’s choice of legal advisers to navigate its bankruptcy, after the collapsed crypto exchange told the court it had reached an agreement with the U.S. Department of Justice removing one of the biggest obstacles to the law firm’s appointment.”
• “The U.S. Trustee, the Justice Department’s bankruptcy watchdog, and two of FTX’s creditors had objected to FTX hiring Sullivan & Cromwell, arguing the New York law firm had not disclosed sufficient information about its past ties to FTX. These ties, they said, include the fact that FTX’s U.S. general counsel, Ryne Miller, is a former partner at the firm.”
• “Dorsey said the objectors had not shown that there was an active conflict of interest between FTX and the firm, and to the extent that conflicts could arise there were procedures in place to deal with that.”
• “Former top FTX attorney Daniel Friedberg had also opposed Sullivan & Cromwell’s hiring in court filings on Thursday, saying that the law firm had overbilled for legal work and had conflicts of interest stemming from its connections to Miller.”
• “FTX creditor Warren Winter asked Dorsey to delay Sullivan & Cromwell’s approval until Friedberg’s allegations were investigated. The judge denied the request, saying that Friedberg’s court filing was not properly presented to the court and ‘full of hearsay, innuendo, speculation and rumors.'”
• “Sullivan & Cromwell has told the court it should not be disqualified simply because it performed some pre-bankruptcy work for FTX. A Sullivan & Cromwell spokesperson has said the firm had a ‘limited and largely transactional’ relationship with FTX prior to the bankruptcy and never served as primary outside counsel to any FTX entity.”

“Tulare hospital board settles suit against former attorney and law firm” —

• “The Tulare Local Healthcare District now has $3 million more in its bank account after settling a lawsuit against Bruce Greene – its former attorney – and the firm he works for, Baker Hostetler.”
• “The settlement doesn’t impact charges that the Tulare County District Attorney’s office has brought against Greene centering around his time working for Tulare and the district’s former management partner, Healthcare Conglomerate Associates (HCCA), and it doesn’t impact a California State Bar complaint lodged by the district against Greene.”
• “Kevin Northcraft, the district board’s president, told the Valley Voice that the settlement amount was nearly equal to what the district had paid Greene and the Baker firm.”
• “‘We have 88,000 people in our district, and they were all harmed by this law firm,’ he said. ‘Getting back virtually everything we paid them is some justice for the people that were harmed.'”
• “The lawsuit alleged that Greene and the Baker firm breached their fiduciary duty to act in the best interest of the district by drafting a resolution that would allow HCCA to seek $22m in loans on the district’s behalf, among other claims.”
• “The lawsuit also claimed Greene and the firm were professionally negligent by allegedly failing to disclose the potential conflicts of interest in representing HCCA, its owner Benny Benzeevi, and the district at the same time.”

“Senators, States and Creditors Challenge Sullivan & Cromwell’s Lead Role in FTX Bankruptcy” —

• “U.S. Bankruptcy Judge John Dorsey of the District of Delaware rebuffed four U.S. senators in a Wednesday hearing regarding the senators’ unsolicited request that Dorsey appoint an independent examiner in the FTX bankruptcy, calling the ex parte communication ‘inappropriate’ and stating that it would not factor into his decisions.”
• “Opposing Sullivan & Cromwell’s hiring as lead bankruptcy counsel, FTX creditor Warren Winter argued in a Tuesday amended objection that the firm’s retention represented multiple conflicts of interest. Most of the facts Winter brought derived from the law firm’s own application as lead counsel, which noted the firm collected $8.5 million in pre-petition legal fees for deal work prior to FTX’s collapse, and testimony founder Sam Bankman-Fried had planned to give to Congress before his arrest.”
• “Winter, a U.S. citizen living abroad who stated he lost hundreds of thousands of dollars in his FTX account, argued that Sullivan & Cromwell’s conflicts of interests included the firm’s relationship with FTX general counsel Ryne Miller, a former partner at the firm, and Tim Wilson, an in-house lawyer and former Sullivan & Cromwell associate. He also noted that Sullivan & Cromwell has scrubbed its website of references to its work for FTX in the acquisition of Voyager Digital, another crypto firm that filed for bankruptcy in July.”
• “Finally, Winter took issue with Miller’s demand—per Bankman-Fried’s planned testimony—for $4 million to retain Sullivan & Cromwell immediately after the Nov. 2 CoinDesk article called into question the company’s balance sheet and relationship with Bankman-Fried’s trading firm Alameda Research. FTX accordingly transferred Sullivan & Cromwell $2.2 million on Nov. 3, by far the largest payment it made to the law firm in the preceding six months. Miller’s demand for the $4 million transfer ‘is far from ordinary,’ Winter wrote, considering evidence that ‘untold’ assets were already stolen from the same asset pool.”

“Sam Bankman-Fried Says Law Firm Worked Closely With FTX Before Bankruptcy” —

• “Sam Bankman-Fried said cryptocurrency exchange FTX had a closer relationship than previously disclosed with its bankruptcy law firm Sullivan & Cromwell LLP, adding to questions about the law firm’s work for past FTX management.”
• “The founder and former chief executive of FTX, back online and in a new blog post that could suggest elements of his upcoming legal defense, said Sullivan & Cromwell was one of the main forces pushing him to resign and for the exchange to file for bankruptcy. Mr. Bankman-Fried is currently under house arrest at his parents’ California home as he faces federal fraud charges. He pleaded not guilty on Jan. 3. “
• “He added that FTX U.S.’s general counsel was a former member of the law firm without naming him. Ryne Miller previously served as a partner at Sullivan & Cromwell before joining FTX U.S. in August 2021. “
• “Law firms seeking to work on chapter 11 cases are required under bankruptcy rules to disclose any past representations that could pose a conflict of interest before they can be officially retained. A spokesman for Sullivan & Cromwell said it had no comment beyond a statement it issued on Jan. 10, in which it said the firm ‘never served as primary outside counsel to any FTX entity. The firm had a limited and largely transactional relationship with FTX and certain affiliates prior to the bankruptcy, as is common, and is disinterested as required by the bankruptcy code.'”
• “Companies commonly use existing law firms to handle bankruptcy filings. But the arrests of Mr. Bankman-Fried and other former FTX executives have drawn lawmakers’ attention to Sullivan & Cromwell’s prior work for the exchange.”
• “Sullivan & Cromwell charged FTX more than $8.5 million in legal fees for work it did for the firm before the bankruptcy, according to the law firm’s retention application.”

“Implementing Law Firm Data Retention Policies Is Getting Harder” —

• “In recent years, firms’ ability to securely store data has turned into a multi-front battle. As many firms now face tighter budgets, coupled with bigger threats of breaches, proliferating data privacy laws and growing regulators’ scrutiny, putting in place thorough data retention policies is becoming vital.”
• “But while more firms are dedicating the resources needed to draft these policies, the road to actual implementation is still long way away, with experts noting that many are just beginning to embark on it.”
• “‘A lot of very complicated things are going on within a law firm, just by the nature of the client base that they have and the nature of litigation being between a day or two to five or six years of potential information,’ said Dave Ruel, head of product at Hanzo. He added, ‘I think it’s just difficult for them to put any kind of retention policy in place and try to adhere to that because it would almost be matter by matter.'”
• “In fact, the road to implementation can be long and bumpy for many reasons. For many firms, getting the buy-in from an organization’s stakeholders, as well as the budget and resources to undertake the data mapping process, is often intimidating.”
• “Of course, the burden of setting up thorough retention policies isn’t falling evenly on all the firms or organizations. ‘A smaller to a midsized law firm that retains data in maybe a client communication portal, a secure cloud archive and a complex system is going to have a much easier time creating a data map and data retention policy than, say, a corporation that has order histories, credit card processing, customer service reports, their internal files, their HR files,’ Miller noted.”
• “And those firms and organizations that span across countries—and their respective, sometimes conflicting, data privacy laws—face additional headaches.”
• “‘When you’re a multinational, you also have to deal with different retention policies,’ Ruel noted, adding ‘you can’t do a one-size-fits-all retention policy for many companies. It just doesn’t work.'”

“Streamlining your firm’s handling of matter mobility” —

• “But how do you ensure that offboarding and onboarding are performed as efficiently and compliantly as possible? The answer is that firms should develop policies, systems, processes and procedures for both.”
• “The first rule of offboarding, which should be enshrined in policy, is that the firm does not take action until it receives proper notification from the client of its intention to move.”
• “Thereafter, the first process is to make sure the client does not owe the firm money. You must then gather all the client’s records and data, which might be held in a number of places and formats. Senior members of the firm must then review the materials for transfer.”
• “The key tasks are removing anything commercially sensitive, as well as anything that might embarrass the firm – like derogatory remarks and bad language. You will also need to copy anything that could be needed to defend a potential future action against the firm by the departing client.”
• “The firm needs rules and processes around who, at what level, makes these decisions and enacts them. And records must be kept of all the decisions and actions taken.”
• “Thereafter, firms receiving data have an equal need of policies and processes. They should ensure that anything received is held in an interim location before ingestion into the firm’s systems, so that conflict and regulatory checks can happen.”
• “To optimise the efficiency of all this activity, firms should institute the right governance measures, procedures and controls, and embrace all the available opportunities for automation.”

“The SEC’s subpoena fight with Covington — a ‘perilous new course’?” —

• “Every law firm in the United States ought to be paying attention to the U.S. Securities and Exchange Commission’s lawsuit to force Covington & Burling to cough up the names of about 300 clients whose confidential information was exposed to hackers in a 2020 cyberattack.”
• “Today it’s Covington that is stuck in what the firm portrays as an ethical conundrum. Tomorrow, if you have clients and a computer network, it might well be your firm that gets hit with an SEC subpoena for information that can be used against clients victimized by a hack of your files.”
• “The SEC, as my colleague Andrew Goudsward reported on Wednesday, sued Covington in federal court in Washington, D.C., to enforce compliance with a subpoena the agency issued to the law firm last March, after SEC investigators learned that hackers from the Hafnium cyber-espionage group, which allegedly has ties to the Chinese government, exploited a vulnerability in Microsoft software to tap into Covington’s computer network.”
• “The FBI, according to Covington, did not ask the firm to reveal the identity of the clients whose files were exposed. But in March 2022, the SEC informed Covington that it was also investigating the hack.”
• “The commission, according to Wednesday’s lawsuit, said it needed to know more about Covington’s affected clients in order to ascertain whether anyone used hacked information to engage in insider trading and whether Covington’s SEC-regulated clients adequately disclosed the cyberattack to their investors.”
• “The SEC demanded that Covington disclose the identity of affected SEC-regulated clients; the information from clients’ files that Covington believed to have been illegally accessed; and the firm’s communications notifying clients of the attack.”
• “In an emailed statement on Thursday, SEC enforcement director Gurbir Grewal said the Covington subpoena is narrowly tailored and does not seek information shielded by attorney-client privilege.”
• “Covington, however, told the SEC in June that its duty of confidentiality precludes the firm from disclosing the identity of affected clients. During negotiations with the SEC, the firm asked affected clients if they would voluntarily reveal their identity to the agency. Only two — of nearly 300 — agreed.”
• “Covington didn’t mention this consideration in the June letter, but there are potential financial consequences for a law firm that breaches its fiduciary duties to clients. What if Covington tells the SEC about a client it is not publicly known to represent and the SEC ends up bringing an enforcement action accusing the client of inadequate disclosures? The client might well try to blame Covington for prompting the SEC to investigate.”
• “Covington counsel from Gibson Dunn have not yet formally responded to the SEC’s lawsuit, but based on the June letter, the firm will argue that there’s no precedent for the SEC to demand confidential information from a law firm unless either the firm or its client is already suspected of wrongdoing.”

(I’m curious if and when the SEC will pursue other parties to see if they are in the know, such as an insurance provider or IT/security forensics consultant… And, depending on how this plays out, if we’ll see implications in engagement letter and/or outside counsel guidelines language covering these types of situations…)

“SEC fines ex-Blackrock manager for conflict of interest” —

• “The Securities and Exchange Commission (SEC) has handed former Blackrock portfolio manager Randy Robertson a $250,000 (£208,650) penalty for failing to disclose a conflict of interest over his relationship with film distribution firm Aviron Group.”
• “The commission found that the Blackrock Multi-Sector Income Trust (BIT), co-managed by Robertson, invested up to $75m in Aviron between 2015 and 2019. The US watchdog said Robertson played “a significant role” in recommending loans to the firm’s subsidiaries, while at the same time seeking help from Aviron in advancing his daughter’s acting career.”
• “Andrew Dean, co-chief of the SEC enforcement division’s asset management unit, said: ‘Investment professionals must be forthcoming about any conflicts of interest they may have with the companies in which they invest client funds, including situations involving favours or assistance to family members… Investors must be able to know that the advice they receive is free of undisclosed conflicts, regardless of whether the conflict is financial in nature.'”

And for those like me who can’t quite take their eyes off this one, here the latest: “Third NYC lawyer booted from MSG by James Dolan’s facial recognition technology” —

• “A Brooklyn lawyer says he was barred from entering a Rangers game at Madison Square after being flagged by facial recognition technology — the same system the firm used to boot at least two other attorneys from its venues.”
• “Benjamin Pinczewski, a 61-year-old personal injury and civil rights lawyer, had just passed through a metal detector at the arena and was headed to plum lower-level seats with friends on Jan. 10 when he was stopped by two officials and kicked out, he told The Post.”
• “‘It was a slap in the face,” he said. “I’m at the main entrance with thousands of people — and they’re looking at me like I’m some sort of terrorist or criminal.'”
• “The guards informed him he’d been “denied entry” due to the policy implemented by MSG CEO James Dolan banning all lawyers involved in active lawsuits against the firm.”
• “‘It’s simply for harassment for the purposes of putting a chilling effect on anyone who wants to sue [them],’ he said. ‘I’m pissed, pardon my language.'”
• “Madison Square Garden Entertainment defended its policy Friday, sending The Post the same stock statement it has distributed for weeks following the facial recognition controversy. ‘MSG instituted a straightforward policy that precludes attorneys from firms pursuing active litigation against the Company from attending events at our venues until that litigation has been resolved,’ the statement said.”

“Retired solicitor agrees to quit roll over conflict of interest in defending bishop” —

• “A solicitor and former registrar to the Diocese of Gloucester has agreed to remove his name from the roll after he represented the then-bishop of Gloucester against indecent assault allegations.”
• “Christopher Peak can never apply to be readmitted to the roll after his role in helping the former Anglican bishop Peter Ball fight allegations of sexual abuse while also acting as register for the diocese.”
• “Peak was the registrar to the Diocese of Gloucester between January 1985 and November 2012. As part of that role, he was required to be the legal adviser of both the Bishop of Gloucester and the diocese.”
• “The SRA investigation found: ‘Under that retainer, [Peak] was obliged to advise Mr Ball in respect of potential criminal allegations and act in his best interests. This put Mr Peak in conflict with his duties towards the diocese, which were broadly to protect its interests and that of its congregation. If the allegations against Mr Ball were true then he presented a real risk to the congregation and it was in the diocese’s best interests for him to be removed from the church altogether, whereas it was in Mr Ball’s best interests to receive as lenient an outcome as possible and return to his ministry.'”
• “Peak admitted that in being the registrar for the diocese and agreeing to represent Ball in a personal capacity, he acted where there was a ‘conflict or significant risk of a conflict between the interests of those two clients.'”
• “Independent reviews commissioned to investigate why Ball was not convicted sooner discuss Peak’s involvement in ‘some detail’ including ‘pressing’ the CPS for a caution when the allegations were first investigated.”
• “The SRA said: ‘This will have had a significant detrimental impact on the standing of the profession. Mr Peak had direct control and responsibility for his own behaviour. It was his choice to agree to act for Mr Ball in a personal capacity in his criminal case, where the conflict (or risk of conflict) should have been apparent to him.'”

“Federal prosecutor reviewing classified documents found at former Biden office” —

• “A number of government documents marked classified were found this fall by lawyers for President Joe Biden in a closet in a Washington, D.C., office used by Biden when he was a private citizen.”
• “The Department of Justice and the National Archives and Records Administration are reviewing the circumstances surrounding the documents, according to Biden’s special counsel Richard Sauber.”
• “A source familiar with the situation told NBC News that Attorney General Merrick Garland asked the U.S. attorney for the Northern District of Illinois, John Lausch, to review how classified material ended up at the Penn Biden Center.”
• “That task was intentionally assigned to Lausch, who was appointed to the prosecutor’s office by Trump, to avoid any conflict of interest, the source told NBC.”

“Elon Musk says Twitter’s decision to hire a law firm that he’d previously criticized and boycotted was the result of an employee ‘error’” —

• “Twitter hired a law firm that CEO Elon Musk publicly criticized last month and said ‘thrives on corruption.’ Musk told Reuters on Friday that hiring law firm Perkins Coie was ‘an error on the part of a member of the Twitter team.’ He added that the firm ‘will not be representing Twitter on future cases.'”
• “Perkins Coie is listed as counsel for Twitter in at least six other lawsuits that predate Musk’s purchase of the social media site, according to Reuters. Musk didn’t immediately respond when asked if Perkins Coie would continue to represent Twitter in those cases, Reuters said.”

“You Got Our Judge Recused? Fine, We’ll Get Your Judge Recused” —

• “Paul Andre and Centripetal Networks Inc. got some payback last week at the Patent Trial and Appeal Board. Last year Andre and his Silicon Valley colleagues at Kramer Levin Naftalis & Frankel saw a $2.75 billion patent infringement judgment they’d won against Cisco Systems Inc. wiped out at the U.S. Court of Appeals for the Federal Circuit. U.S. District Judge Henry Morgan was disqualified because his wife held $4,687.99 worth of stock in Cisco. The case has been assigned to U.S. District Judge Elizabeth Hanes for a retrial.”
• “Now Andre and Centripetal have forced an administrative judge on the PTAB to recuse himself from a case involving Cisco and one of the same cybersecurity patents at issue in the retrial. The reason: The judge has held Cisco stock worth $1,000 to $15,000.”
• “McNamara noted that the U.S. Office of Government Ethics’ threshold for recusal is $15,000, which his holdings remain below. But ‘in order to reduce the number of issues and simplify the briefing, I withdraw from the panel effective immediately and will not further participate in this proceeding,’ the judge wrote in a four-page order.”
• “Andre argued that McNamara has reported to the Office of Government Ethics that he holds Cisco stock and receives income as a retired partner from Foley & Lardner, which counts Cisco as a client, all while presiding over Palo Alto Networks’ challenges to patents that Centripetal has asserted against Cisco.”
• “‘These conflicts cannot be reconciled with Federal Circuit precedent,’ Andre wrote, citing the 2021 decision that went against him. ‘It simply cannot be correct that an Article III judge’s wife’s holding of Cisco stock can nullify his validity determination while an administrative judge can knowingly hold the same Cisco stock and decide a collateral attack on that very judgment.'”

“Brown Fox and Dallas Lawyer Sued for Alleged Negligence, Breach of Fiduciary Duty” —

• “A security industry company in Houston sued its defense attorneys for alleged negligence involving a representation conflict and not utilizing an insurance policy that could have covered its legal fees and the judgment.”
• “The client, GG Security Group LLC, sued Dallas attorney Brandi J. McKay and the law firm Brown Fox after losing a trade secrets dispute case in Harris County state court.”
• “Brown Fox represented GG Security and Zumwalt without advising GG Security of the pros and cons of the joint representation, the suit alleges.”
• “‘Indeed, Zumwalt was the culpable party, not GG Security. Yet, the lawyers failed to obtain informed consent to the joint representation,’ the lawsuit said. ‘Because of the conflicted representation, the lawyers failed to assert cross claims against Zumwalt on behalf of GG Security or asset legal positions which would distance GG Security from Zumwalt.'”
• “The complaint further alleges its law firm failed to designate an expert on trade secret matters and failed to recognize that GG Security had a $3 million insurance policy that would have covered the claims made against it. As a result, GG Security had to absorb the cost of defense, hundreds of thousands of dollars, including fees incurred by Zumwalt, and a judgment in excess of $1 million, it states.”
• “Eventually, the company could not afford the legal costs and its attorneys moved to withdraw as counsel. The 189th District Court granted the motion May 10, 2022.”
• “Ten days later, Brown Fox sued GG Security for breach of contract, seeking more than $85,279 in alleged unpaid attorney fees, the complaint said, and further alleges Zumwalt conspired with the attorneys, without notice to GG Security CEO Mark Mabile to agree to a judgment against GG Security for the $85,279, plus pre- and post-judgment interest.”