Bressler Risk Blog

“Facebook Gets Law Firm Leading Major Antitrust Case Disqualified” —

• “Facebook Inc. succeeded in disqualifying one of the firms leading antitrust litigation over its alleged scheme to squash rival startups, when a federal judge in California ruled that Keller Lenkner LLC was compromised when it hired a lawyer who had worked on the tech giant’s antitrust defense.”
• “Judge Lucy H. Koh removed Keller Lenkner from the proposed consumer class action in the U.S. District Court for the Northern District of California, where it’s one of several parallel lawsuits accusing Facebook of exploiting its troves of data to target competing apps that posed a potential threat.”
• The judge noted: “The court notes, nonetheless, that the record does not reflect that there has been any disclosure of Facebook confidential information. However, such a disclosure is not required for disqualification… The purpose of a disqualification order is prophylactic, not punitive.”
• For more history on this one

“NYSBA Ethics Opinion Gives Green Light To Lawyers’ Involvement With Marijuana Businesses” —

• “Earlier this week, the Committee issued Ethics Opinion 1225, which addresses lawyers’ ethical obligations when engaged in activities regulated by New York’s Recreational Marijuana Law. The Opinion answered three questions:
• “May an attorney ethically provide legal services to assist a client to comply with New York’s Recreational Marijuana Law?:”
  • “the Committee previously concluded that a New York lawyer could assist a client to comply with the Compassionate Care act, which regulated medicinal marijuana.”
• “May an attorney ethically use marijuana recreationally and grow it at home for personal use?”
  • “The Opinion reasoned that “the scope of federal forbearance provides inquirer with a ‘reasonablegood-faith belief that no valid obligation exists” to comply with federal narcotics laws that would otherwise prohibit her ownership of an interest in a cannabis business, her home cultivation of marijuana plants for personal use, and her recreational use of marijuana, where and when such activities are authorized by New York State law.'”
• May an attorney accept an equity interest in a client’s cannabis business in exchange for providing legal services?”
  • “…the Opinion concluded that a lawyer may accept an equity interest in a client’s cannabis business provided the lawyer follows the appropriate conflict of interest rules.”
  • “The Opinion also reasoned that the lawyer should determine whether her equity interest in the client’s business would give rise to a personal interest conflict under RPC 1.7(a)(2). If so, the lawyer may still proceed with the representation provided “(i) the lawyer reasonably believes she can provide competent and diligent representation despite the conflict and (ii) the lawyer obtains the client’s informed consent, confirmed in writing” as required by RPC 1.7(b).”

“Britney Spears’ conservatorship hearing could create change in the system as a whole” —

• “Allowing Spears to choose her own counsel could create systemic change since ABC10 has found this is a rarity in probate courts statewide.”
  “It wasn’t until an army of Britney Spears fans caught wind of the legal system controlling the pop icon’s life as well as her $60 million estate. Today they’ve become known as the Free Britney movement, formed from passionate, emblazed fans across the world, determined to use their voice to help an idol they grew up influenced by, listened to and watched.”
• “The sentiment advocates shared throughout the course of our investigation is that Spears has brought attention to the problem with conservatorships, and therefore the possibility of change. Many of the advocates told ABC10 that ‘the elderly aren’t sexy,’ and that ‘no one cares about grandma,’ which is why they believe change has not happened yet.”
• “Spears was permitted to select attorney Mathew Rosengart, a prominent Los Angeles attorney and former federal prosecutor, after her court-appointed attorney, Sam Ingham, resigned following her explosive testimony calling the conservatorship “abusive” in a June 23 hearing. Ingham had been appointed to represent Spears in 2008.”
• “In our year-long investigation, nearly every conservatorship we reviewed had a court-appointed attorney assigned to represent the conservatee. Court-appointed attorneys are supposed to serve as an unbiased party and represent the best interest of their client.”
• “Our investigation found a pattern in Sacramento County of court-appointed attorneys representing proposed conservators, then conservatees with the same proposed conservator in other cases, posing the question of conflict of interest.”
• “For Spears’ case, MacCarley believes Ingham did not serve in Spears’ best interest because in her June 23 hearing she alleged the conservatorship allowed control over her life, even controlling her cell phone and isolating her.”

“Workers’ Counsel Slams Seafood Joint’s DQ Bid In Wage Suit” —

• ” A proposed class of restaurant servers has urged a New York federal court to deny a seafood eatery’s motion to disqualify its counsel on claims they improperly solicited employees to join a wage suit, saying the DQ bid is an attempt to infringe on their attorney-client relationship.”
• “Lead plaintiff Joseph Pagan and his lawyer at the Ottinger Firm PC asked the court Thursday to instead sanction C.I. Lobster Corp., which runs City Island Lobster House in New York, and its attorney at Milman Labuda Law Group PLLC for bringing a ‘frivolous’ motion to disqualify the former server’s law firm from his Fair Labor Standards Act suit.”
• “C.I. Lobster asked the court in June to disqualify the Ottinger Firm, claiming it made prohibited solicitations in person or by telephone as it represented Pagan in his proposed FLSA class and collective action against the restaurant and its family owners. The seafood restaurant additionally sought other sanctions such as a monetary penalty and an order finding that Ottinger may not collect any fees for work performed in soliciting any opt-in plaintiffs.”
• “In addition, the eatery said, Ottinger has a conflict of interest with Pagan because it has been unwilling to discuss a settlement without certification of a class or collective action, which goes ‘inherently against’ Pagan’s interests due to the time delays involved in litigation, the restaurant said.”
• “However, Pagan in his Thursday opposition to C.I. Lobster’s DQ motion alleged that the only settlement offer to take place was when the parties engaged in a mediation with a qualified and neutral third-party mediator, who conveyed the restaurant’s settlement offer and proposal to both Pagan and his counsel simultaneously over a Zoom call, which Pagan rejected.”
• “Further, he said, C.I. Lobster has provided no solid evidence of any supposed solicitation of employees to join the suit. Ottinger never spoke to any individuals on the phone or indicated via text message that he was soliciting their participation in the litigation, he said.”

“Ransomware-hit law firm gets court order asking crooks not to publish the data they stole” —

• “A barristers’ chambers hit by a ransomware attack has responded by getting a court order demanding the criminals do not share stolen data.”
  “4 New Square chambers, which counts IT dispute experts among its ranks, obtained a privacy injunction from the High Court at the end of June against “person or persons unknown” who were ‘blackmailing’ the firm.”
• “Handed down by Mrs Justice Steyn, the injunction orders the ransomware criminals not to “use, publish or communicate or disclose to any other person” any of the (unspecified) data they stole in June. No data from 4 New Square appears to have been published on the known ransomware gangs’ Tor-hosted leak blogs, though the injunction return date is this Friday (9 July).”
• “We have asked 4 New Square’s CEO about the firm’s reasoning for getting the order and will update this article if we hear back from her. It seems odd to get a piece of paper asking foreign criminals not to ‘publish data stolen from us’ when that is how they do their business.”
• “It is very difficult to see what effect, if any, a civil non-disclosure order will have on a ransomware gang potentially based in a hostile foreign country – especially when such criminals attack multiple countries’ critical national infrastructure with apparent impunity.”

We previously noted this “pinky promise” conflict fight. Here’s the latest: “Alleging ‘Ongoing Breaches,’ Gaming Company Seeks to Expand Lawsuit Against Eckert Seamans” —

• “However, the amended complaint disputes those arguments and seeks to allege that Stewart and Skjoldal further ‘arranged’ for the Harrisburg firm Hawke McKeon & Sniscak to act as conflict counsel for Parx Casino so the attorneys could continue ‘surreptitiously directing the representation of Parx Casino’ against Pace-O-Matic’s interests.”
• “Specifically, the gaming company alleged the lawyers drafted court filings, encouraged participation of the casino gaming regulatory agency and advocated for legal theories and strategies for Parx Casino.”
• “‘In addition to covertly advocating against POM in relation to the Commonwealth Court litigation, Eckert, Mr. Stewart and Mr. Skjoldal actively encouraged criminal, administrative, regulatory and legislative actions against POM and POM games, both while Eckert was representing POM and after that representation ended,’ the amended complaint said.”
• “Along with raising a breach of duty claim, the amended complaint also seeks to add a fraud claim against the firm.”

“Robbins Geller DQ Doesn’t Muddy Investor Law, 2nd Circ. Told” —

• “A Mexican media company urged the Second Circuit on Wednesday to uphold an order disqualifying Robbins Geller Rudman & Dowd LLP from securities litigation stemming from the FIFA corruption scandal, saying the firm’s ‘sky-is-falling’ arguments are just an attempt to distract from its alleged ethical violations.”
• “Grupo Televisa SAB said Robbins Geller has exaggerated the precedential effects of a New York federal judge’s finding that the firm committed ‘fraud’ on the court by failing to disclose short positions held by Colleges of Applied Arts and Technology Pension Plan, the former lead plaintiff in a certified securities class action over bribes Grupo Televisa allegedly paid to FIFA officials.”
• “Robbins Geller warned in its June appeal that requiring institutional investors to disclose all their third-party investments would throw securities litigation into disarray. But Grupo Televisa said these arguments conveniently skirt around the real reason for the firm’s disqualification: that it allegedly lied to the court for more than a year about CAAT’s investment portfolio.”
• “U.S. District Judge Louis L. Stanton removed CAAT as class representative in June 2020 after it came to light that the investment fund, which claimed to have lost $986,000 in Grupo Televisa’s alleged stock drop, in fact gained $11 million from shares it held in a Canadian hedge fund that had shorted the stock.”
• “Judge Stanton then disqualified Robbins Geller in May after finding that the firm had been aware of CAAT’s short positions all along without telling the court. The firm appealed, arguing with the help of legal titans like David Boies and a group of pension funds that filed an amicus brief that the ruling would ‘cripple’ the ability of institutional investors to serve as lead plaintiffs in securities cases.”
• “But Grupo Televisa said Thursday that the facts belie those arguments. In the year since Judge Stanton’s initial order booting CAAT, the media company said, no issues or uncertainties tied to third-party investments have arisen in other lead plaintiff battles.”

Hat tip to my IP expert colleague Chris Kave for flagging this one (make sure to read until the end): “Carpmaels & Ransford sued for missed appeal deadline” —

• “One of the UK’s leading patent attorney firms is facing a claim brought by their client, chemical company BASF. BASF is suing Carpmaels for a reported €1.05 billion, because of a missed EPO appeal deadline.”
• “The EPO has stringent criteria for allowing requests for re-establishment. Re-establishment requires a party to show that they used ‘all due care’ to meet the relevant deadline (Article 122(1) EPC) (IPKat). The requirement for ‘all due care’ to have been shown applies to the applicant/patentee, their representative, and even none European patent agents (IPKat). For the ‘all due care’ requirement to be fulfilled, patent attorney firms must show that the failure to meet a deadline was as a result of an isolated mistake in an otherwise well-functioning system (Case Law of the Boards of Appeal, III-E-5.4).”
• “The request for re-establishment was submitted by the Carpmaels patent attorney responsible for the case. The patent attorney had been a partner at Carpmaels for over quarter of a century, during which it was submitted, he “had never missed a due date for filing a Notice of Appeal or any other critical deadline before the EPO”. Shortly before the incident with the appeal deadline, the patent attorney had retired. To manage the hand-over of work, the attorney continued to take some responsibility for a certain number of cases as a consultant and only visited the office occasionally.”
• “Carpmaels argued that the missing of the appeal deadline was an isolated error in an otherwise ‘extremely reliable system.’The EPO sent the minutes of oral proceedings and the revocation decision relating to the case stapled together, with the minutes of oral proceedings in front. Importantly, it is the revocation decision that sets the appeal deadline, not the minutes of oral proceedings. The Carpmaels records department did not notice the revocation decision and thus no appeal deadline was docketed. The responsible attorneys did not notice the mistake, and it was BASF who themselves contacted Carpmaels about the appeal deadline after noticing the decision on the EP register. Carpmaels were then instructed by BASF to work on a statement of grounds of appeal. Still, however, the appeal deadline was not docketed.”
• “Importantly at the time Carpmaels was still reliant on paper files. The retired partner ultimately responsible for the case was predominantly working away from the office and relied on documents that had been emailed to him by BASF and not the physical file. The attorney therefore failed to spot that the documents received by Carpmaels from the EPO had not been processed correctly by the records department. The retired partner was also travelling at the time the appeal deadline came due and only noticed that it had been missed on his return.”
• “The Board noted the failure of the record department to cross-check the incoming mail, the failure of the attorney responsible for signing the delivery receipt to properly review the documents, and the failure of the responsible retired partner to double-check the appeal deadline whilst he was working on the statement of grounds.”
• “Carpmaels’ admit to missing the appeal deadline. Their argument in defence to BASF’s claims is that the patent was clearly invalid anyway, and that the decision of the opposition division to revoke the patent would have been upheld by the Board of Appeal. Carpmaels have therefore placed themselves in the rather unusual position of arguing against the validity of a patent they once defended.”

“Florida Supreme Court holds that an insurer may pursue malpractice claims against lawyer retained to defend the insured” —

• “Under the terms of the professional liability insurance policy, Arch Insurance Company (Arch) had a duty to defend Spear Safer in the accounting malpractice lawsuit and the insured had the right to retain legal counsel with Arch’s approval. The policy also included a subrogation provision, which stated that Arch was subrogated to all of Spear Safer rights of recovery against any person, organization, or entity, and that Spear Safer was required do whatever necessary to secure such rights.”
• “Arch retained the Kubicki Draper law firm to defend Spear Safer in the accounting malpractice action. That litigation was settled within Spear Safer’s policy limits for $3.5 million before trial. Arch then filed a legal malpractice lawsuit against Kubicki Draper, alleging that the law firm breached its duty of care by failing to timely raise a statute of limitations defense in the underlying litigation.”
• “The Florida Supreme Court agreed with the trial court and 4th DCA that defendant was in privity with Spear Safer and not Arch; however, Arch had standing to maintain a legal malpractice action against the defense counsel retained to defend its insured where Arch was contractually subrogated to the insured’s rights under the insurance policy.”
• “The opinion found that Arch’s right to contractual subrogation was expressly provided for in the insurance policy, which included claims for legal malpractice against counsel retained to defend the insured. The opinion found that where an insurer has a duty to defend and counsel breaches the duty owed to the insured, contractual subrogation permits the insurer to pursue the same claim the insured could have pursued and, since the insured was in privity with defendant, Arch could step into the insured’s shoes and pursue the malpractice claim.”
• “Bottom line: In this case, the Florida Supreme Court adopted the reasoning that a malpractice lawsuit alleging breach of care can be brought against a lawyer not only by the former client, but also by the former client’s insurer, if a duty to defend and subrogation rights are included in the policy.”

“AT&T Wants Ex-BigLaw Attys DQ’d From $450M Patent Case” —

• “AT&T on Tuesday asked a New York federal court to disqualify a former Baker Botts attorney and two former Akin Gump attorneys from representing a company that hit the telecom giant with a $450 million patent infringement suit, arguing that the lawyers previously provided extensive legal services for AT&T.”
• “According to the motion to disqualify opposing counsel, attorneys Kevin Cadwell, David Clonts and Michael Reeder worked with AT&T for more than a decade, billing nearly 25,000 hours. Cadwell alone billed nearly 13,000 hours, ‘the equivalent of working full-time for six and a half years,” AT&T said in the filing, which was heavily redacted.'”
• “‘In addition, beyond the overwhelming volume of counsel’s work for AT&T, there is substantial direct factual overlap between this case and prior cases with respect to the AT&T network systems, technology and witnesses,’ the company said.”
• “The lawyers represented AT&T in more than 100 patent infringement cases over the years, the telecom said. Reeder provided legal services for AT&T as recently as late 2019, per the motion. And Cadwell defended AT&T in patent cases as recently as 2017, it said.”
• “And the attorneys had access to AT&T’s employees, files and confidential information that makes them conflicted in the case, it added. They were also actively representing AT&T when Network Apps brought an earlier, “strikingly similar” case against AT&T in 2016, according to the motion.”
• “Cadwell, Clonts and Reeder and counsel for AT&T didn’t immediately return requests for comment Wednesday.”

“Jay-Z’s Lawyer and Damon Dash Clash Over Truth, NFTs and Conflict of Interest” —

• “On June 22, a judge sided with Roc-A-Fella Records in the label’s lawsuit against co-founder Damon Dash, filing a temporary restraining order prohibiting Dash from his alleged attempt to sell a portion of the copyright to Jay-Z’s 1996 debut album Reasonable Doubt as an NFT. The case continues to stir up drama, as Dash is now trying to disqualify Roc-A-Fella’s legal counsel.”
• “Roc-A-Fella is represented in the lawsuit by Alex Spiro, a partner at the New York office of law firm Quinn Emanuel Urquhart & Sullivan. Spiro is also Jay-Z’s personal lawyer. In court documents filed on June 25, Dash claims that Spiro is currently representing Jay-Z in shareholder governance hearings taking place at Roc-A-Fella (referred to in court documents as RAF), and that Spiro’s representation of Roc-A-Fella itself in this case therefore represents a conflict of interest.”
• “Spiro — who has also represented Meek Mill, 21 Savage and Bobby Shmurda — fired back in court documents filed on June 28, claiming that no conflict of interest exists since Jay-Z’s and Roc-A-Fella’s interests are directly aligned. A conflict of interest would only arise, he argues, if he had previously represented the opposition (meaning Dash himself).”
• “‘Dash was trying to steal RAF, Inc.’s property — to the detriment of the company and its other shareholders. Jay-Z and RAF, Inc.’s interests are therefore directly aligned,’ he writes. ‘Nor does Quinn Emanuel have ‘privileged information concerning the other side through prior representation.’ The firm has never represented Dash, and it has not represented RAF, Inc. in any matters through which it acquired any of Dash’s privileged information.'”

“Attys DQ’d For Using ‘Twisted Logic’ In Calif. Pot Co. Dispute” —

• “A California appeals court on Monday upheld a decision to disqualify a law firm involved in a multipronged dispute involving control of a cannabis cultivator, saying the lawyers used ‘twisted logic’ to justify representing multiple parties in the matter.”
• “Specifically, the appeal focused on Catanzarite’s work as counsel for shareholders in a derivative action against CTI, as well as its representation — purportedly on behalf of the same company — in another lawsuit with a lender.”
• “As described in the decision, a schism in CTI leadership led to one group of shareholders, called the Probst Faction, asserting power within the company. Attorneys from Catanzarite filed multiple lawsuits on behalf of the other group of CTI investors, called the O’Connor Faction, as well as other shareholders between 2018 and 2019.”
• “Catanzarite, which was at the time representing various disgruntled CTI investors against the company and its principals, filed counterclaims against FinCanna, purporting to represent CTI itself. According to the decision, Catanzarite attorneys apparently copy-and-pasted material from one of their derivative shareholder actions into their cross-complaint against FinCanna.”
• “‘Catanzarite appears to be arguing concurrent representation was possible because after the O’Connor Faction asserted control of the corporation, these shareholders effectively became insiders of the corporation,’ the court said. ‘This is twisted logic.'”
• “The appellate panel found that Catanzarite’s representation of investors in a derivative shareholder action against CTI was untenable while the law firm also purported to represent the company in its dispute with FinCanna.”

Hat tip to diligent reader Simon Chester (Counsel, Head – Client and Matter Acceptance Team at Gowling WLG) for sending in: “Boom Times for Lawyers as Washington Pursues Big Tech” —

• “The mounting legal and regulatory scrutiny facing Big Tech has led to a wave of lawsuits, investigations and proposed legislation aimed at ending the dominance of Amazon, Apple, Facebook and Google. Whether those efforts succeed may take years to sort out, but there is already one clear winner: the nation’s legal industry.”
• “The cost is minimal for the giant tech companies. But it has widened the divide in resources between regulators and the companies they police, making it harder for the government to recruit and keep talent to take on the industry. It has also raised fresh concerns about Washington’s revolving door, since many of the lawyers used by the tech companies recently worked for the government.”
• “In 2019, when the Justice Department searched for a lead investigator into Google and other tech giants, officials came up with a list of candidates from about 10 law firms, according to two people with knowledge of the search. But one by one, they said, potential candidates had to be crossed off the list because they already worked for Big Tech clients, leaving few options.”
• “More recently, conflicts of interest have complicated the Biden administration’s search for the head of the Justice Department’s antitrust division. Several times, critics of the industry have criticized a potential candidate because of the person’s ties to Big Tech.”
• “‘What’s striking is the number of people going to work directly for tech companies from the agencies,’ said William Kovacic, a former chairman of the F.T.C. ‘That reflects a real change.'”
• “Jonathan Kanter, a longtime antitrust lawyer who has been rumored as a possible nominee to lead the Justice Department’s antitrust division, built his career largely around working for the rivals of Google, Facebook, Amazon and Apple. His client list included both big companies like Microsoft and News Corporation and smaller firms like Yelp and Spotify.”
• “In 2016, he moved to Paul, Weiss, Rifkind, Wharton & Garrison, a prominent corporate litigation firm. But last year, Mr. Kanter’s work criticizing Big Tech started to present conflicts with other parts of the firm’s sprawling portfolio, said two people with knowledge of the matter. Specifically, his practice was at odds with work being done by Bill Isaacson and Karen Dunn, two lawyers the firm had just hired who are known to represent Apple and Amazon, said another person with knowledge of the situation.”
• “Mr. Kanter faced a choice: Drop some of his clients or leave the firm. He left. ‘Jonathan made this decision due to a complicated legal conflict that would have required him to discontinue important and longstanding client representations and relationships,’ the firm said in a note circulated at the time.”

“Recent Federal Cases Signal Increased Scrutiny of Ethical Wall Procedures” —

• “In this article, we discuss best practices for effective implementation of ethical walls in light of two recent developments—the decision by the U.S. Attorney’s Office for the Southern District of New York (S.D.N.Y.) to proactively seek a special master to review materials seized from Rudy Giuliani’s home, and the Department of Justice Antitrust Division’s recent request for a federal court to probe the adequacy of an ethical wall at the law firm of Morgan, Lewis & Bockius related to their representation of co-defendants Glenmark and Teva in a price-fixing prosecution pending in the Eastern District of Pennsylvania, which led to Morgan Lewis’s withdrawal from the matter.”
• “The other recent prominent proceeding involving ethical walls stems from a DOJ Antitrust price-fixing prosecution against Glenmark and Teva pending in the Eastern District of Pennsylvania. In that case, in connection with a conflict of interest hearing, the DOJ asked the court to assess the adequacy of ethical walls that the law firm of Morgan, Lewis & Bockius put in place as a result of its current representation of Glenmark and prior representation of Teva in the criminal matter, as well as its current representation of both companies in parallel civil cases.”
• “The DOJ requested that the court ask Morgan Lewis to submit written answers to over 40 questions about the details of its internal ethical wall procedures, including how it is staffing and managing its ethical walls in light of Pennsylvania ethical rules and how it is handling the issue of fee-sharing between attorneys working on both matters.”
• “The government also requested that Glenmark and Teva answer similar sets of questions regarding their understanding of these procedures, including whether each company had consulted with independent counsel. See id. at 3-6. Glenmark initially opposed the government’s request, noting that it was prepared to waive any conflict of interest and calling the government’s proposed requests unprecedented, ‘overbroad, intrusive, and entirely unnecessary.’ Glenmark further argued that the government ‘seems to be attempting to impose broad restrictions on Glenmark’s trial preparation and use of its chosen legal team.'”
• “This extensive inquiry, especially the questions directed to Morgan Lewis concerning its own internal procedures for implementing ethical walls, went beyond the typical Curcio hearing procedure and signals that firms may have to implement stricter procedures in certain cases to assure the government and courts of their ability to follow ethical rules and guidelines.”
• “Second, the Morgan Lewis matter provides guidance for firms looking to construct ethical walls that will withstand heightened scrutiny. In addition to taking standard precautions such as limiting information-sharing and personnel overlap, firms should consider segregating fees where circumstances may justify taking such steps, and should consider formulating specific procedures to educate and advise clients about the procedures being followed to ensure that no conflicts arise. In such cases, firms may also evaluate whether it is appropriate for clients to consult with independent counsel (as the government suggested was appropriate for Glenmark and Teva to do), and if so, how best to effectuate that process.”