Risk Update

Conflicts Response — King & Spalding Answer WhatsApp Side-switching Accusations

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King & Spalding Resists WhatsApp’s ‘Drastic’ Disqualification Bid in Cyber Case”

  • “A team from King & Spalding, including former partner and now FBI Director Christopher Wray, provided legal services to WhatsApp in a sealed matter four years ago. WhatsApp’s counsel at Cooley says the firm acquired confidential information relevant to a pending case where King & Spalding represents a WhatsApp adversary.”
  • “WhatsApp’s lawyers contend King & Spalding’s work for the company in a sealed matter four years ago has given the firm an unfair advantage in the pending case in Oakland’s federal trial court. The Cooley lawyers argued in their disqualification papers that the lawsuit against NSO is substantially related to the earlier sealed matter and that King & Spalding acquired confidential information material to the pending litigation.”
  • “On Friday, King & Spalding’s lawyers at Long & Levit disputed that the two cases are related, and they argued that three of the four King & Spalding lawyers who worked on the earlier sealed matter are no longer at the law firm. One of those attorneys, Christopher Wray, a former white-collar partner, was confirmed in 2017 as the FBI director.”
  • “‘Disqualification is a drastic, disfavored and disruptive remedy that is unwarranted here,’ San Francisco lawyer Jessica MacGregor of Long & Levit said in the new court filing. MacGregor argued that ‘depriving NSO of highly skilled counsel of its choice will impose significant hardship and prejudice.'”
  • “Cooley lawyers representing WhatsApp assert that King & Spalding acquired information about confidential aspects of the messaging service’s platforms when the firm provided legal advice to the company in 2015 and 2016. The current case ‘involves the very technology that WhatsApp previously hired King & Spalding to analyze and protect,’ the Cooley lawyers said.”
  • “‘King & Spalding is violating a bedrock requirement of attorney loyalty: the duty to avoid switching sides and opposing a client that it once represented,’ Cooley partner Michael Rhodes said in a filing in April.”
  • “Rhodes said in the filing: ‘Put simply, no client would ever expect to reveal the proprietary and nonpublic details of its product to its lawyers, only to find those lawyers acting adversely to it a few years later on a case involving the same technology and on behalf of a client that marketed and sold the ability to attack and exploit its network.'”
Risk Update

Covid Risk Management — On “Post-pandemic” Malpractice Mitigation

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5 Ways To Reduce Post-Pandemic Legal Malpractice Exposure” —

  • Stay in your lane. The current pandemic has upended the legal industry in ways never before seen. Many firms have been forced to cut salaries, defer or withdraw partner compensation, and/or lay off attorneys and staff, all of which puts pressure, either real or perceived, on firm attorneys to generate new business. This can lead to attorneys accepting work that falls outside their area of expertise simply in an effort to keep themselves or others in the firm busy. Lawyers must resist the temptation to take on cases they are not qualified to handle or that fall outside their sphere of expertise.”
  • Define the scope of the representation of your engagement letter. While most states require engagement letters under their rules of professional conduct, reducing malpractice exposure is an important driver of this risk management tool. Clear and concise engagement letters define the parameters of the relationship and representation and remove any doubt or confusion about such things as who the client is and who the client is not, clearly establishing to whom the lawyer owes a duty… Engagement letters should also discuss and explain the conflict of interest checks run by the firm and potential conflicts that could arise during the representation, as well as the attorney’s right to withdraw from the representation for nonpayment.”
  • “Communicate frequently with clients and properly manage expectations. Lawyers should not create a situation where they can easily be second-guessed, and therefore should communicate early and often to set forth all the information available at the time and create a paper trail. Responsiveness to a client’s needs and demands in a timely fashion will keep clients happy and informed. When clients are not kept in the loop, they are more likely to bring an action against their lawyer if they don’t get the results they expected. Making a contemporaneous record protects against one person’s word being pitted against the other later on.”
  • Institute a comprehensive docketing system that assures the proper calendaring of events and deadlines. Courts nationwide have instituted COVID-19 scheduling changes, which effectively delay proceedings, stay deadlines, and in some cases prohibit new filings. In many courts, statutes of limitations have been tolled and filing deadlines extended. With each court and jurisdiction instituting different and distinct orders regarding filings and deadlines, it becomes more incumbent upon the attorney to stay abreast of all new filing deadlines.”
Risk Update

Former Client Conflicts Allegations — One Successful DQ, One Not

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Latham & Watkins Disqualified From Defense Logistics Protest” —

  • “Latham & Watkins LLP can’t represent Quantico Tactical Inc. in a pre-award protest of a defense logistics procurement because the law firm previously represented another bidder, Atlantic Diving Supply Inc., the U.S. Court of Federal Claims ruled.”
  • “If allowed to continue in this case, Latham, which previously prepared an SEC form for Atlantic Diving, would be seeking to hurt Atlantic Diving’s position based on information it learned about the company’s corporate structure, Judge Eric G. Bruggink said in a decision released Tuesday.”
  • “‘The same attorneys who once had unfettered access to ADS’ proprietary information should not be sitting across the table at deposition inquiring into the same issues,’ the court said.”

Keller Rohrback May Represent Homeowner Against Former Client” —

  • “Seattle-based law firm Keller Rohrback LLP may continue to represent homeowners suing USAA Casualty Insurance Co. over its alleged bad-faith refusal to pay for expenses after a house fire, the Washington Supreme Court said in a matter of first impression.”
  • “The case is factually distinct from Keller’s previous defense of USAA in a bad-faith insurance suit involving a house fire, the high court said Thursday. Its decision interpreting changes to professional conduct rules reverses a state appeals court ruling disqualifying Keller and reinstates the trial court’s order.”
  • “The court looked to other states’ interpretations of the American Bar Association’s version of the rule on conflicts of interest and its comments, which Washington ‘effectively adopted’ in 2006, it said. The rule bars a lawyer from representing someone ‘in the same or a substantially related matter in which that person’s interests are materially adverse’ to a former client’s interests, without the former client’s consent.”
  • “The resolution here ‘depends on just how related the former and current representation must be,’ the high court said in an opinion by Justice Sheryl Gordon McCloud.”
Risk Update

Family Conflicts of Interest — Multiple Representations, Trusts & Beneficiaries & More

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In $100M Suit, a Moody Alleges Galveston Firm Used ‘Parasitic Relationship’ to Get Rich at His Family’s Expense” —

  • “A member of Galveston’s prominent Moody family has sued Greer, Herz & Adams, alleging that the boutique law firm represented the Moodys in too many different interests, making so much money off his family that it wouldn’t exist in its current form without that work.”
  • “Moody Jr.’s allegations raise questions about conflicts of interest that may arise when a firm or lawyer represents numerous related business entities and family members at the same time. He is seeking more than $100 million in damages, and he is represented by Houston trial lawyer Anthony Buzbee.”
  • “‘This is an egregious case of a trustee and lawyer taking advantage of his position to exponentially enrich himself, his law firm and his family,’ Moody Jr. alleged in a petition filed May 21 in state district court in Harris County. In a footnote, the suit referred to the ties between the firm and the family as a ‘parasitic relationship’ that existed for more than 35 years.”
  • “But, Moody Jr. alleged, after his father stepped down from numerous business and charitable boards that control billions of dollars worth of Moody family interests, Herz and Ross Moody used that power of attorney as an opportunity to enrich themselves and their law firm.”
  • “In a 35-page petition, Moody Jr. alleged that Greer Herz “simply would not exist” in its present form without Moody Sr. and the ‘sprawling’ Moody interests as clients. He alleged that members of the firm are routinely appointed to boards that manage Moody business interests, and most of the legal work is provided without a formal fee agreement that would include a waiver to the ‘innumerable conflicts of interest inherent in the multiple representations.'”
  • “According to the petition, Herz simultaneously is legal counsel to the testator of the Moody trust; legal counsel to multiple beneficiaries of the trust; general counsel to two major competing publicly traded corporate entities controlled directly or indirectly by the trust; and legal counsel to every corporate entity within the trust, among other Moody-related representations.”

Pa. Justices Ask If Trust Conflicts Warrant Separate Attys” —

  • “When conflicts arise between the people running a trust and its beneficiaries, Pennsylvania’s Supreme Court justices wondered Wednesday why the parties wouldn’t all retain and pay for their own lawyers rather than fight over whether the beneficiaries get to see legal bills paid for by the trust or if they’re protected by attorney-client privilege.”
  • “In arguments held via videoconference, members of Pennsylvania’s highest court probed what made trust attorneys special in a conflict where a deceased Allegheny County man’s two stepsons accused the trustee of his estate — the man’s biological son and a co-beneficiary of the trust — of overspending the trust’s money on attorney fees to resolve their other disputes.”
  • “The trustee claimed that much of the legal billing his stepbrothers demanded was protected by attorney-client privilege, but two of the justices asked why the trustee and the beneficiaries hadn’t all retained new, separate attorneys. Justice Sallie Mundy compared it to a criminal case, where the same attorney could represent more than one defendant up until the point that some conflict arises.”
  • “Del Sole replied that trustees need to be able to consult their attorneys on matters of running the trust without worrying about disclosures to beneficiaries or other parties, so there is an attorney-client relationship and privilege between them. He urged the court not to create a so-called fiduciary exception that would require otherwise-protected information to be turned over to beneficiaries when a client was acting in a fiduciary capacity.”
Risk Update

Conflicts Allegation — Lateral Lawyer, Engagement Letter & Malpractice Claim

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Atty Says Suit Over VidAngel’s $62M Trial Loss Is Barred” —

  • “David Quinto, who co-founded Quinn Emanuel Urquhart & Sullivan LLP in 1986 and began working with VidAngel in 2014, the same year he left the law firm, wants the court to dismiss trustee George Hofmann’s legal malpractice suit against him, saying the suit is barred by an arbitration provision in his VidAngel contract.”
  • “Hofmann claims that an opinion letter provided by Quinto in 2015 played a key role in how the company operated. But Quinto, who left Quinn Emanuel to form new firm Kupferstein Manuel Quinto LLP and later became VidAngel’s general counsel, said Tuesday that his 2014 engagement letter with VidAngel clearly said disputes would be resolved by arbitration under California law, he told the court.”
  • “‘It is for good reason that [the trustee] chose not to attach a copy of the 2014 engagement letter to his complaint, or even allege its terms. The 2014 engagement letter prohibited him from bringing this action,’ Quinto wrote.”
  • “The letter ‘addressed the possibility that disputes might later arise between the parties and provided that ‘any claim for breach of contract, professional negligence or breach of a fiduciary duty,’ or any other claim arising out of KMQ’s representation of VidAngel or provision of legal services to VidAngel, would be resolved confidentially and exclusively under JAMS arbitration rules,’ Quinto said.”
  • “Quinto left KMQ in August 2015 to go to Davis Wright Tremaine LLP, he said. When that firm had a conflict, Quinto had to drop VidAngel as a client, he said. But when VidAngel was sued by the studios, it asked Quinto to become its general counsel, and he joined in July 2016, he said.”
Risk Update

Today’s a Good Day for Risk — Ice Cube v Quinn Conflicts Accusations & Spy Allegations

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Ice Cube’s Big3 Sues Quinn Emanuel Over Alleged Qatar Conflicts; Firm Says Client Just Doesn’t Want to Pay” —

  • “The Big3, a three-on-three basketball league featuring former NBA stars and co-owned by rapper and actor Ice Cube, is suing Quinn Emanuel Urquhart & Sullivan for allegedly putting its lucrative relationship with the Republic of Qatar ahead of its far-less remunerative arrangement with the fledgling sports project.”
  • “In a state court complaint filed in Manhattan on Thursday, Big3 contends that Quinn Emanuel inserted itself into litigation between the league and former commissioner Roger Mason, whom the league believed had aligned himself with Qatari agents seeking to gain control of the asset.”
  • “Attorneys with Beys Liston & Mobargha in New York and Freedman + Taitelman in Los Angeles wrote that the law firm ignored “inescapable” conflicts of interest when offering to represent the league in a lawsuit brought by Mason, and used its involvement to shift the defense strategy away from a focus on Qatar’s conduct.”
  • “‘Any rational person would question why a law firm would undertake the representation of a fledgling basketball league that might generate a few hundred thousand dollars in fees when the league was adverse to its existing Qatari clients who generate tens of millions of dollars in fees annually,’ the league said in its complaint. ‘The only logical answer is that Qatar wanted Quinn to undertake the representation… In effect, Quinn would become a spy for Qatar, a nation known for supporting terrorism and aligned with Iran,’ the complaint asserts.”
  • “Quinn Emanuel aimed to recast the matter as a simple fee dispute. ‘No firm fights harder for its clients than Quinn Emanuel, and we fought hard for Big3. Unfortunately, Big3 doesn’t want to pay us for the work we did,’ the firm said in a statement. ‘After the firm pursued them to collect fees, Big3 waited until a week before the collection arbitration to file this fantasy-laden lawsuit. Big3 was fully advised about the firm’s other various representations and is simply trying to avoid paying its bills.’

More also via Above the Law: “Quinn Emanuel Law Firm Accused Of Serving As A Spy For Qatar

Risk Update

Risk… You Can’t Make This Stuff Up…. Just… Out of Title Ideas For These Updates…

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Firm Accused of Advising One Client to Hide Cameras in Another Client’s Closet” —

  • “Did a name partner at an AmLaw 200 firm advise one client—who is serving as the trustee of his late brother’s estate—to hide recording devices in a master bedroom closet of another client—the late brother’s widow? And did the cameras capture her undressing? Or prove she was trying to steal from the estate?”
  • “Right after Joe’s death but before Elizabeth returned from Bermuda, Aaron in court papers said he learned that ‘Elizabeth’s friends were entering [Joe and Elizabeth’s] house for hours at a time and had removed art from the walls.'”
  • “Aaron also said he knew that his brother kept large amounts of cash in the house, and that there was a wall safe in his brother’s master bedroom closet. (Elizabeth has her own separate closet.) ‘On advice of counsel, the trustee had motion-activated cameras installed inside Joe’s closet to ensure the preservation of the trust’s valuables contained therein,’ wrote Aaron’s current lawyers Howard Weitzman of Kinsella Weitzman Iser Kump & Aldisert and Jeryll Cohen of Freeman, Freeman & Smiley.”
  • “Elizabeth in her complaint says the lawyer was Jeffer Mangels name partner Burton Mitchell, and that in conversations with her probate counsel, Mitchell ‘acknowledged telling Aaron he could install these recording devices in Elizabeth’s home.'”
  • “A Jeffer Mangels spokeswoman said, ‘The attorney-client privilege prevents the firm from disclosing what, if anything, was discussed with the client Aaron Kaplan.'”
  • “‘It is despicable—and unlawful—for an attorney or a law firm to advise anyone to invade another individual’s legally protected privacy and to break various California penal laws and civil laws in doing so. It’s even worse when the victim is a client, as Elizabeth was a client of Mitchell and [Jeffer Mangels Butler & Mitchell],’ Cohen wrote.”
  • “When asked whether representing both Aaron and Elizabeth presented a conflict, a Jeffer Mangels spokeswoman responded, ‘There were signed explicit conflict waiver letters signed 10 years ago when Elizabeth was a client and the attempt to pretend that she did not sign one is as meritless as the rest of her claims.'”

We covered disqualification news tied to the Pierce Brainbridge saga a few months ago. More news on the latest developments relating to that firms advancing journey here: “Accusation of Fraud on the Court Against Attorney David Hecht of Hecht Partners and ex-Pierce Bainbridge Partner“.

 

Risk Update

Insurance Update (Part 3) — Industry Data on $20m+ Law Firm Settlements/Verdicts

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Short update today, mostly to share an interesting statistic I just heard. And to highlight that when risk readers connect, good things happen.

In this instance, hat tip to Bill Freivogel for connecting me with Douglas Richmond, Managing Director at AON, for some of the latest industry data he keeps tally of. Doug shares:

  • “Over the years, there have been 76 publicly-reported settlements by, or verdicts against law firms of $20 million or more.  Fifty of them are attributable in whole or part to the firm’s representation of an unworthy client. Other leading causes include what we label ‘mistakes,’ i.e., some sort of professional negligence on a lawyer’s part, and conflicts of interest.”
Risk Update

Playbook Conflicts — Tales of Three Reversals (Both Ways)

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At a recent public risk forum, I found myself graciously name-checked by a longtime reader and friend. Gracious indeed to be included in the same breath with risk hawk Bill Frievogel, who notes several recent playbook matters:

  • Former Client; Playbook (Rejected) (posted May 22, 2020) Plein v. USAA Cas. Ins. Co., No. 97563-9 (Wash. May 21, 2020.)
    • “…USAA balked at providing coverage for additional work, and the Pleins sued USAA for bad faith. Law Firm joined in the representation of the Pleins. The problem was that Law Firm had just recently terminated its representation of USAA.”
    • “That representation spanned some ten years and involved ‘at least 165 cases,’ some of which involved bad faith claims by homeowners. One case involved a bad faith claim arising out of defective remediation of smoke damage. USAA moved to disqualify Law Firm in this case.”
    • “The trial court denied the motion. The appellate court reversed. That court pretty clearly adopted the playbook approach to the substantial relationship test under Rule 1.9. The court noted the ‘legal strategies and defenses developed between USAA’ and Law Firm. The court concluded that Law Firm’s knowledge goes beyond the ‘general knowledge of the client’s policies and practices’ as discussed in Comment 3 to Rule 1.9.”
    • “In this opinion the Washington Supreme Court reversed the appellate court, holding that Law Firm’s knowledge of USAA’s attitudes and procedures in matters similar to this one do not rise to the level of ‘substantial relationship.’ The court focused largely on Comment 3 to Rule 1.9 (Evidently, Comment 3 in the Model Rules is quite similar to that in the Washington Rules.)”
  • Persichette v. Owners Ins. Co., No. 19SA188 (Col. May 4, 2020).
    • “Plaintiff is suing InsCo over an uninsured motorist matter, including claims of bad faith. Law Firm appeared for Plaintiff. Law Firm previously represented InsCo in 455 bad faith cases between 2004 and 2017. Twenty-three cases ‘mirror’ Plaintiff’s claim. Law Firm had put in place several of InsCo’s procedures and trained the adjuster handling this case. InsCo moved to disqualify Law Firm. The trial court denied the motion. In this opinion the Colorado Supreme Court reversed (made ‘the rule to show cause absolute’).”

Atty’s Internal Work For Insurer Spells DQ In Coverage Row” —

  • “In an en banc decision, the court said Englewood, Colorado, litigator Marc Levy carried a former client conflict of interest into a case he joined against Owners Insurance Co. and should not have been allowed to stay in the litigation by a lower court.”
  • “The seven-member panel said it was particularly troubled by the prospect of Levy being in position to ‘attack’ his own internal advisory and training-related work at Owners on behalf of an insured, even if he didn’t have specific factual information about his client’s case from his time working for the other side.”
  • “Overturning a district court decision not to disqualify Levy, the court said the district court judge misinterpreted the ‘substantially related’ standard of former client conflicts to mean a conflict was created by a lawyer working both sides of the same matter.”
  • “The court then incorrectly concluded that information Levy’s firm likely has from its prior work for Owners ‘is neither confidential nor advantageous to plaintiff,’ the decision states.”
  • “After initially hiring an Aurora-based firm, Persichette later hired Levy as co-counsel for the case. According to the decision, Levy Law PC was intimately familiar with the people and practices of Owners, having represented the insurer in more than 450 cases over a 13-year period ending in 2017 and collecting more than $5 million in fees in the last five years of that relationship.”
Risk Update

When Client Identities are Confidential — Latest Guidance on Attorney-Client Client ID Privilege

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This one caught my eye as I considered the potential implications for information sharing typically conducted during lateral lawyer moves… If you’re in a specialized practice looking to make a lateral move, and the hiring firm asks for a list of clients… what then? Ask all clients for permission?

Fifth Circuit Reaffirms That Client Identity Is Privileged Only in Narrow Circumstances” —

  • “As a general proposition, a client’s identity is not protected by the attorney-client privilege and is therefore subject to subpoena. However, in cases where the disclosure of the client’s identity necessarily discloses the substance of the legal advice provided to the client by the attorney, the privilege may apply.”
  • “The U.S. Court of Appeals for the Fifth Circuit recently addressed how specific the link between client identity and advice given must be in order to constitute a disclosure of the substance of the legal advice provided to clients by their attorneys in Taylor Lohmeyer Law Firm P.L.L.C. v. United States, in which the IRS used a ‘John Doe’ summons that sought the identity of clients for whom the law firm had performed certain work.”
  • “Lawyers who receive subpoenas requiring the disclosure of client identities should carefully consider whether the clients’ identities and the substance of the legal services are inextricably connected, and they should be prepared to document this position in camera.”

And on the topic of what’s “public” (like client identity?) see: “New Jersey Supreme Court reiterates generally accepted notion that even if information is available to the public it is confidential if it is not generally known” —

  • “For this reason, the generally accepted definition of confidential information does not use the adjective “public.” According to this definition, confidential information is information related to the representation that is not generally known. (A couple of years ago, the ABA issued an ethics opinion clarifying the notion of generally known information.)”
  • “Thus, information can be public (in the sense that it is available to the public) but not generally known, in which case, the fact that the information is public does not change the fact that it is still confidential.”
  • “… recent decision by the New Jersey Supreme Court, again reiterates that this distinction is important and can result in problems for lawyers, often when the lawyers discuss information about former clients. The case is called In the Matter of Calpin, and the facts are similar to many other cases that have raised this issues in recent years. A client (or former client at the time) wrote a negative review about the lawyer in Yelp! and the lawyer decided to reply by, among other things, disclosing some information about the client. The information was “public” in the sense that it was available in public records, but is was not generally known and for that reason the court held that the lawyer violated the duty of confidentiality.”
  • For more, see: text of opinion