Risk Update

Mega Mergers, Mega Firms — Mega Risk? Mega Conflicts? Mega Opportunity?

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The Rise of the Mega Firm: Legal Departments Face Difficult Questions Amid Law Firm Mergers” —

  • “Cameron Findlay, general counsel of global food processing and commodities trading company Archer Daniels Midland Co., says it seems like a near-weekly occurrence that one of his outside law firms calls to announce a forthcoming merger with another firm or to say that they’re considering a merger.”
  • “Law firm mergers have double-edged consequences for legal departments. Mega firms have deeper benches and a broader geographic reach. But consolidation can breed conflict, lead to billing rate hikes and shrink the pool of firms for legal departments to choose from when considering outside counsel.”
  • “‘In terms of the benefits to in-house counsel, for a big multinational company like ADM, I have to admit that it’s nice to know that our principal firms can handle a broader array of matters in a broad array of geographies,’ Findlay says. ‘It is kind of nice to call up if you have an investigation that crosses national boundaries, and say, ‘Can you handle it without hiring other firms in other countries?’'”
  • “But, he adds, ‘I’ve had at least a couple questions that have arisen … because law firms have merged with firms with which we’ve had disputes in the past. And so we’ve had to work through those sorts of things.'”
  • “Another more common type of conflict arises when firms that represent competitors merge, notes Jason Winmill, managing partner at Boston-based legal department consulting firm Argopoint.”
  • “‘It’s not just that they were mean to us or nasty to us in another matter,’ Winmill says. ‘Law firms often work on one side of the street or the other. In-house counsel are looking for the merged firm to demonstrate that the side of the street they want to be on in the future is their side of the street.’
  • “…Faegre Drinker co-chair, Andrew Kassner, notes that the two firms and their clients were ‘incredibly compatible,’ which resulted in “few real conflicts.’ He adds that the clients were ‘impressed with the overwhelming business case’ for the merger.”
  • “For legal departments that are unhappy with a firm in the wake of a merger, the choice of staying or leaving can be difficult. Especially if the legal department and firm are in the middle of litigation or a project. In that common scenario, companies grapple with the tough decision of remaining in an unsatisfactory relationship or dealing with a service disruption.”
Risk Update

(The) Facebook Comes at King (& Spalding) — Conflicts Allegations, Privacy, Hacking, Human Rights & FBI Eyes

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Facebook claims NSO Group’s lawyers have conflict of interest in WhatsApp case” —

  • “In a court filing made public this week, Facebook asked a federal judge to disqualify law firm King & Spalding from representing NSO Group because the firm previously represented Facebook-owned WhatsApp in a different, sealed case that is ‘substantially related’ to the NSO Group one. King & Spalding, an Atlanta-based firm with a range of big corporate clients, has denied there is a conflict of interest, according to the filing.”
  • “It is the latest twist in a legal tussle that began in October, when Facebook sued NSO Group, alleging that the Israeli company violated a federal anti-hacking law when its malware was used to infect some 1,400 mobile devices, including those of human rights advocates. NSO Group denies the charges.”
  • “Facebook alleged that King & Spalding’s past work gave NSO Group’s legal defense an unfair advantage. ‘Any attorney defending this suit would love to have insight into how WhatsApp’s platform and systems work,’ the court filing states. ‘And King & Spalding has that insight—because it was once WhatsApp’s counsel.'”
  • “The lawsuit— seen as a key front in rights’ groups efforts to rein in the operations of spyware firms — has gotten increasingly contentious in recent weeks, with Facebook and NSO Group trading barbs in legal filings.”

For more interesting, related details see also: “FBI Head Helped Facebook Defend Encryption He’s Now Fighting” —

  • “Christopher Wray, prior to becoming FBI director, argued on behalf of Facebook Inc in defense of encrypted communications as the company was being pressured by the U.S. Justice Department over the issue, according to a court filing and a person familiar with the case.”
  • “Only last month, Wray told a cybersecurity conference that internet companies were ‘increasingly shielding indispensable information about those threats from any form of lawful access -through warrant-proof encryption.'”
  • “Wray’s work for Facebook, which occurred when he was employed as a lawyer for law firm King & Spalding, has not been previously reported.”
  • “The FBI said Wray could not comment on the case. ‘When he was an attorney in private practice, however, the Director represented his clients’ interests and advocated on their behalf,’ the agency said in a statement.”
  • “Alan Rozenshtein, a former U.S. Department of Justice lawyer who now teaches at the University of Minnesota, agreed with that assessment. ‘I don’t think it’s anything untoward,” he said in a telephone interview. “There are plenty of attorneys who go from industry to government and argue against the very industry they were representing.'”
  • “In a statement, WhatsApp did not comment specifically on Wray’s past position on encryption but said that King & Spalding’s past work for WhatsApp poses ‘serious ethical concerns for their representation of NSO today.'”
Risk Update

The Hand that Rocks the Legal Cradle — Supreme Court on Copyrighting the Law (The Law Won)

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First noted a year ago, now updated: “Georgia Copyright Loss at High Court Could Jolt Many States” —

  • “Georgia lost a close U.S. Supreme Court case over the state’s ability to copyright its annotated legal code, in a ruling heralded by public access advocates over dissent that lamented its disruptive impact on states’ existing business arrangements.”
  • “The high court clarified the scope of the ‘government edits doctrine,’ which had previously barred copyright in materials created by judges. The doctrine’s logic also applies to materials created by legislatures, Roberts wrote. Because Georgia’s annotations are authored by an arm of the legislature in the course of its official duties, the doctrine bars copyright here, too.”
  • “Public.Resource.Org, the pro-access organization that won the dispute, is pleased that the court ‘rejected the possibility that a full understanding of the law could be made available only to those who can afford to pay for ‘first-class’ access,’ said Goldstein & Russell’s Eric Citron, who represented the group. He said they’re looking forward to helping states expand access to their legal codes and they hope this leads to greater public engagement with the law.”
  • “It’s an important ruling not just for copyright law but for civil liberties, said Ropes and Gray’s Marta Belcher. She was lead counsel on a brief supporting the access group, filed on behalf of the Center for Democracy and Technology and the Cato Institute.”
  • “The state warned at oral argument in December that a ruling against it would ‘blow up’ not only Georgia’s copyright regime but ones in about a third of the states with similar setups.”
  • “Indeed, the ruling ‘will likely come as a shock to the 25 other jurisdictions—22 States, 2 Territories, and the District of Columbia—that rely on arrangements similar to Georgia’s to produce annotated codes,’ Justice Clarence Thomas wrote in a dissent joined by Justice Samuel Alito and partially by Justice Stephen Breyer. Justice Ruth Bader Ginsburg wrote her own dissent, joined by Breyer.”
Risk Update

AML in the time of Covid19 — Legal Sector Affinity Group (LSAG) Issues Advisory Note

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Preventing money laundering during Covid-19: LSAG Advisory Note” —

  • “Graham Mackenzie, Head of AML at the Law Society of Scotland, said: ‘This is an extremely difficult time for all of us, bringing unprecedented and untold challenge and damage to our society both at a human and economic level. Unfortunately, some will choose to exploit any weaknesses or vulnerabilities we may have and will see opportunity in other people’s misfortune. As some money laundering routes close due to the crisis, criminals will explore alternative means to launder their proceeds of crime, potentially including increased targeting of the legitimate services provided by the legal profession. Above all, solicitors should continue to ask questions, to know their clients and the markets in which they operate – and to understand their sources of wealth. For example, would it make sense that a business client in an industry forced to close, is still generating revenue or has money to invest? Taking time to pause and ask these questions is vital, perhaps even more so in times such as these.'”

Text of full note available here — 

  • “Legal practices and practitioners should be aware that criminals will continue to operate throughout, and look to take advantage of, the COVID-19 outbreak. This includes laundering the proceeds of crime and terrorist financing, so it is important that everyone is aware of the changing risks.”
  • “As well as changes to how we live our lives, COVID-19 is also changing the economy. An economic downturn may make legal practices more susceptible to financial difficulties or other pressures, which creates risk and potential weaknesses for criminals to exploit.”
  • “An inability to conduct in person ID&V does not mean you cannot complete CDD, but you may need to consider using other methods that give you the necessary assurance that the person is who they say they are.”
  • “No matter what ID&V service or procedure is used, the responsibility to make sure the ID&V is undertaken correctly, is with the relevant practitioner and practice. If you are placing reliance on others to conduct CDD under Regulation 39, e.g. an instructing solicitor or accountant, you
    should ensure that you understand how they have adapted their CDD procedures to the different circumstances.”
  • Make sure that you keep a record and evidence of the processes you follow; for example, of any video calls you make.”
  • These methods alone may not be appropriate or sufficient where the money laundering and terrorist financing risks inherent in the particular client or matter are greater. In higher risk situations, further verification (including verification of source of funds/wealth) will likely be required.”
  • “It is not for your supervisor to provide specific legal advice and/or confirmation on the application of the MLRs. You are required to satisfy yourself on your legal/regulatory obligations under the MLRs and that you have complied with them.”


Risk Update

Risk Management in the time of Covid19 — One Expert’s Take on the “New Normal” Ahead of Us…

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I’m conscious that plenty is being written about navigating Covid19 these days. So I’m taking care to filter out articles and updates that cover what we’ve already pointed to once or twice already.

But this update from Karen Rubin at Thompson Hine summarizes and analyzes things quite nicely. (And having scheduled my own wedding around a major annual legal conference years ago, I empathized with the stress of dealing with an unpredictable crisis affecting such a momentous occasion, as it did her case.) Read more in: “Ethics and risk management: What will the “new normal” look like?” —

  • “The public health crisis has of course created potentially ruinous economic hardship for numerous clients, both businesses and individuals. As the Great Recession taught us, the economic situation will result in many different kinds of litigation, and when deals go south or when underlying litigation does not turn out well, clients very often blame their lawyers, whether it’s justified or not.”
  • “Here are five things you can do to try to reduce your risk of being on the wrong end of an ethics grievance or a malpractice complaint as we tiptoe toward the ‘new normal:'”
  • “Stay in your lane: We’ve noted before that when times get lean — as they are going to become for practitioners in many areas…”
  • “Keep the calendar: Year after year, missed deadlines are the most common source of legal malpractice claims…”
  • “Document, document, document: Put more in writing. Your clients will continue to be in fast-moving situations, calling on you to move quickly, too. Speed can be an enemy from a risk-management point of view, however. At least memorialize in an e-mail what the client has asked you to do — aka the scope of the engagement. This can be particularly important if you have been directed not to do some aspect that would ordinarily be within the scope of the legal work. Also be clear about who you do and don’t represent, and communicate that in writing.”
Risk Update

OCGs Webinar Highlights — Have Outside Counsel Guidelines Become Too Much?

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Nice write up on the recent ABA webinar on OCGs: “Do Strict Outside Counsel Guidelines Hurt The Profession?” —

  • “An American Bar Association presentation on Monday offered two opposing perspectives on a debate that’s raging over whether outside counsel guidelines place too many restrictions on attorneys, with one speaker saying a ‘total disparity of bargaining power’ has led to ‘frighteningly’ onerous provisions.”
  • “Clyde & Co. LLP of counsel Anthony Davis highlighted instances in which he believes outside counsel guidelines, which corporate legal departments often require their law firms to agree to before beginning representation, go ‘too far’ by restricting the outside attorneys when it comes to conflicts of interest and confidentiality beyond what the rules of professional conduct prohibit.”
  • “Some of the provisions that Davis pointed to that he believes are problematic include those that expand the definition of ‘client’ to include a vast array of subsidiaries or joint ventures, those that restrict lawyers from providing services to the client’s competitors, those that do not allow attorneys to take on clients that argue for positions on important legal issues that are contrary to the existing client, and those that require disclosure of confidential information of other clients.”
  • “[Bruce Green, director of the Stein Center for Law and Ethics at the Fordham University School of Law.] took a less alarmed view on the matter than Davis. He said that while he believes law firms should not agree to some of the most outrageous provisions, it is something that should and can be negotiated between the client and outside counsel on an individual basis without the need for an ethics rule.”
  • “But Davis said that he believes the idea that outside counsel are in a position to negotiate with clients freely when it comes to legal engagements is flawed. After the last recession, he explained, law transitioned to become a buyer’s market, and as a result of that, corporate clients now wield substantially more bargaining power than law firms do.”
Risk Update

Little Brother? Acceptable Risk? — Does Amazon “Alexa” and its Ilk Compromise Privilege or OCGs?

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We’ve covered several updates about Zoom and general conferencing risks. New technologies always bring new potential and often new risks. Here’s more on the question of these convenient listening devices in many homes. It looks like sensitivity levels, concerns and mitigation practices are starting to rise, if the quoted firm representatives are any indication, in: “Digital Ears Everywhere: Lawyers’ Home IoT Devices Stoke Privacy Concerns” —

  • “Can a confidentiality agreement or attorney-client privilege be compromised by your smart refrigerator or smart speaker? It’s a question that’s becoming all the more pertinent these days.”
  • “Lawyers say internet of things (IoT) devices can pose a security and privacy threat as more legal professionals work and discuss sensitive client matters from home and hackers adjust their attacks.”
  • “But Dickinson Wright member Sara H. Jodka said lawyers owe it to their clients to protect their privacy. ‘Because I don’t know and I can’t guarantee that privacy to my clients, I will not have that technology on when I am having sensitive client phone conversations,’ she said.”
  • “To be sure, IoT devices have been known to listen in. Last summer, it was revealed various Facebook, Apple and Google products leverage contractors to manually review recordings directed to their software. The IoT devices are also not impenetrable. Earlier this year, Amazon.com Inc. was hit with a class action suit over hacks of its internet-connected home surveillance product Ring.”
  • “Uncertainty aside, Giftos said her firm [Husch Blackwell] has internally and externally shared articles highlighting the potential cybersecurity and privacy pitfalls of IoT devices. She also noted she turns off her personal IoT electronics and Siri when making client calls.”
  • “Unplugging IoT devices when making client calls isn’t irrational, but practical for mitigating risk, agreed Stroock & Stroock & Lavan chief information officer Neeraj Rajpal.”

And even more recent commentary and action: “Lawyers urged to switch off Alexa when working from home” —

  • “Toni Vitale, head of data protection at JMW Solicitors, said that hackers could access sensitive details through the speakers. ‘We’ve told staff to check the default settings on the speaker and to the extent that you can, switch them off during the working day,’ Mr Vitale said.”
  • “‘Obviously we advise clients and their view is going to be that if you didn’t change the setting you’re liable. You’re liable for any breach of security that happens and not just in the sense that you might by fined by the ICO but that you might be liable to those clients personally.'”
  • “Mishcon de Reya, the law firm which advised Princess Diana on her divorce from Prince Charles, is understood to have also issued similar advice to staff.”
Risk Update

Covid, Remote Work + Professional Ethics — Pennsylvania Bar Issues “First of Its Kind” Opinion

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Hat tip to Max Welsh, risk consultant at InOutsource and member of the State Bar of Wisconsin’s Standing Committee on Professional Ethics for noting: “Pennsylvania Bar Issues First Opinion on Remote Work Amid Crisis” —

  • “Client data confidentiality is paramount while lawyers and law office staffers work remotely during the coronavirus pandemic, the Pennsylvania Bar Association said in an opinion written to address ethical concerns voiced by lawyers ordered to close their offices.”
  • “The opinion is the first of its kind to be released by a state bar, although others including Michigan and Oregon have issued ethical guidelines for attorneys.”
  • “‘The COVID-19 pandemic has caused unprecedented disruption for attorneys and law firms, and has renewed the focus on what constitutes competent legal representation during a time when attorneys do not have access to their physical offices,’ the bar’s legal ethics committee said April 10.”
  • “The committee pointed out that while the issue of remote work isn’t new, and past ethics opinions have addressed related topics like technological competence, many attorneys and staff weren’t prepared to work from a home office once the state’s stay-at-home order went into effect, prompting the opinion.”
  • “Some ‘reasonable precautions’ for lawyers and staff to take to protect confidentiality under professional ethics rules include:
    • Requiring the encryption or use of other security to assure that information sent by electronic mail are protected from unauthorized disclosure;
    • Using firewalls, anti-virus and anti-malware software to prevent the loss or corruption of data;
    • Requiring the use of a Virtual Private Network or similar connection to access a firm’s data; and
    • Requiring the use of two-factor authentication or similar safeguards.”

On the topic of encryption and security, Max referenced several stories we’ve noted on the potential perils of Zoom conferencing. (I’ve stopped covering each update, but in the past weeks: India, Siemens, Standard Chartered Bank, Google, the German government and US Senate have joined the growing ranks of banners.)

We’re both wondering how law firms are responding… and the extent to which client OCGs may apply as well… If anyone has personal or anecdotal updates on this front to share (with or without attribution), I’m all ears…

And I note the irony that the Pennsylvania Bar appears to be using Zoom for today’s presentation: “The COVID-19 Crisis: A Conversation with the PBA President and Leadership” and the virtual social hour scheduled to follow…

Risk Update

Covid Conflict Navigation — Political Pressure Alleged

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Holland & Knight Drops Miami Herald Records Suit After Call From DeSantis’ Office” —

  • “Shortly after receiving a call from the counsel to Florida Gov. Ron DeSantis, Holland & Knight declined to go forward with a lawsuit on behalf of the Miami Herald that seeks to dislodge the names of elder-care facilities where people have tested positive for the novel coronavirus.”
  • “After the call between DeSantis’ general counsel, Joe Jacquot, and Holland & Knight partner George Meros, the firm told partner Sanford Bohrer—who was directly representing the company—to abandon the lawsuit, according to the Herald and Bohrer. But the Am Law 100 firm says the decision was made to avoid conflicts and delays in the case.”
  • “Holland & Knight said the firm ‘acted appropriately in declining the representation of the Miami Herald. After assessing the possibility of a conflict of interest, the confidentiality of client communications, and the risk of an adverse impact or delay on the Miami Herald’s records request, the firm concluded that it was best for another law firm to take over the matter. Those were the only factors the firm considered. The records request will continue unimpeded with new counsel.'”
  • “University of Miami School of Law professor Jan Jacobowitz said Holland & Knight’s decision to drop the lawsuit could have happened for multiple reasons ranging from conflict rules to simple business considerations… Or, Holland & Knight may have decided that the firm should keep the state’s business rather than the Herald’s, Jacobowitz added.”
  • Said publisher and executive director of the Miami Herald in a published statement: “We are disappointed that the governor’s office would go so far as to apply pressure on our legal counsel to prevent the release of public records that are critical to the health and safety of Florida’s most vulnerable citizens. We shouldn’t have had to resort to legal action in the first place. Anyone with a relative in an elder-care facility has a right to know if their loved ones are at risk so they can make an informed decision about their care.”

Florida Officials Deny Pressuring Law Firm to Drop Coronavirus Records Case” —

  • “Denying the claim, the governor’s office said by phone Monday that Jacquot’s contact with Holland & Knight was limited to a routine conversation about a presuit notice he had received from the Herald.”
    “When asked if he exerted any pressure on the firm to withdraw from the litigation, Jacquot said, ‘Not at all. My only purpose for calling was that [there was] a five-day window to see if we could figure out some resolution, which we are still working on.'”
  • “Helen Ferre, a spokesperson for Republican Governor Ron DeSantis’ office, added: ‘We’re undergoing [a] global pandemic. This public records request was made March 23. We only have essential workers who are physically in the building, so it’s taking a little bit longer to fulfill all the public records requests. Two and a half weeks, especially under these circumstances, is not an unreasonable time.”'”
Risk Update

International Conflicts Cleared — Swiss (Tinker, Tailor, Soldier, Spy) + Ukrainian (Watchdog)

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Credit Suisse Loses Bid to Kick Lead Investigator Off Spy Probe” —

  • “Credit Suisse Group AG lost a bid to remove the lawyer leading a Swiss regulatory probe into a spy scandal because of a potential conflict of interest, according to a person familiar with the situation.”
  • “Thomas Werlen is independent despite the fact his law firm has opposed Credit Suisse in some cases, Switzerland’s Federal Administrative Court said in a ruling released late Tuesday. Werlen, a partner at Quinn Emanuel Urquhart & Sullivan, had been appointed to lead financial regulator Finma’s probe in March.”
  • “The decision didn’t identify the bank or the law firm, as is typical in Switzerland, but it related to Credit Suisse and Werlen, according to the person, who asked not to be named because of the confidential nature of the ruling.”
  • “Credit Suisse continues to be dogged by the scandal that erupted after it spied on star banker Iqbal Khan who was leaving for rival UBS Group AG. Before the end of 2019, the bank acknowledged that human resources chief Peter Goerke had also been monitored, and a former U.S. executive also alleged she had been followed.”

Anti-graft agency lets Yanukovych’s ex-lawyer work at bureau investigating him” —

  • “The National Agency for Preventing Corruption (NAPC) believes that Oleksandr Babikov, the former lawyer of ex-President Viktor Yanukovych, has a legal right to work at the State Investigation Bureau and currently has no conflict of interest, according to documents released by the agency. Meanwhile, the bureau is pursuing cases against Babikov’s former client Yanukovych.”
  • “But the NAPC, which is legally entitled to identify conflicts of interest, concluded that Babikov, the first deputy head of the bureau, would only have a conflict of interest were he to become the acting head of the State Investigation Bureau.”
  • “Babikov previously denied having represented Yanukovych. However, this claim contradicts the official court cases register. The NAPC has also refuted Babikov’s claim.”
  • “Yanukovych is charged with the murder of protesters during the EuroMaidan Revolution, which ultimately drove the former president from power in February 2014, as well as with corruption during his presidency.”
  • “But the bureau’s second department, which is directly subordinate to Babikov, is investigating a usurpation of power case against Yanukovych. Babikov was a defense lawyer in this case, Sergii Gorbatuk, the former top investigator for EuroMaidan cases, and Vitaly Tytych, a lawyer for the families of the EuroMaidan protesters, told the Kyiv Post. Gorbatuk argued that this constitutes a conflict of interest for Babikov.”
  • “Tytych also said that Babikov is legally banned from holding his job at the State Investigation Bureau by Ukraine’s law on defense lawyers. The law states that lawyers cannot switch sides in a criminal case because that would constitute a conflict of interest. The law also says that everything possible must be done to prevent defense lawyers from violating attorney-client prvilege and revealing their clients’ secrets, which can happen when they switch sides.”