Risk Update

Quandaries and Quagmires — Trending Legal Ethics and Risk Management Issues

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Chuck Lundberg recently shared his latest thinking in Minnesota Lawyer: “Quandaries and Quagmires: Trending: legal ethics and risk management,” covering key developing stories including Varsity Blues and  The Epstein case:

  • “To be sure, dealing with alleged conflict situations like this is a recurring issue for lawyers. Significantly, conflict allegations are all too common in legal malpractice cases. And all too dangerous — a conflict allegation can turn a simple, vanilla malpractice case into a serious matter, aggravating compensatory damage exposure and potentially implicating punitive damages. So I imagine that the esteemed BigLaw defense counsel in the Varsity Blues cases at a minimum (1) had outside ethics counsel check the potential conflicts every which way before undertaking the representation and (2) retained independent outside counsel to advise each client about the risks and benefits of waiving the conflict.”
  • “In my view, however, an even more important law firm risk issue was raised at the very outset of the Varsity Blues case. At 6:30 am on Tuesday March 12th, the day the scandal broke, Gordon Caplan, the co-chairman of megafirm Willkie Farr & Gallagher, was arrested and charged with criminal conspiracy to bribe college admissions officials to gain college admission for his daughter… On the same day, Law360 also ran a critical story, quoting several ethics experts and crisis management and PR strategy consultants, all saying that the firm’s response was too little, too late. One said the law firm’s first misstep was the fact it took a whole day to respond publicly to news that was generating enormous media attention. Others said the law firm’s statement did not go far enough in condemning the alleged behavior. Some even went so far as to say placing Caplan on leave was not a strong enough response from the firm in light of the allegations, and that a resignation would be better when it comes to preserving the firm’s brand. “From a spin control standpoint, the sooner he is referred to as a former co-chairman and attorney at the firm, the better,” said one of the consultants.”


  • “Another recent blockbuster news story, the Jeffrey Epstein prosecution for child sex trafficking, presents a very different kind of risk management issue: Can a lawyer be criticized for negotiating too good a deal for the client? Put differently, would a legal malpractice claim alleging that one’s lawyer got the client ‘too good a deal’ state a claim for relief?”
  • “In any event, the 33-page written record of the long negotiations in the Order vacating the non- prosecution agreement is fascinating to read and should be an instructive story for many lawyers.8 One imagines that at least one of Epstein’s Dream Team of lawyers had the presence of mind to tell him, ‘Jeff, I just want you to know that there’s a possibility that the whole settlement could be vacated years from now because we got the feds to agree to too much, including not to tell the victims about the agreement. Are you sure you want to take that risk?'”
Risk Update

Outside Counsel Guidelines (OCG) — Looking a Gift Horse in the Mouth?

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I’m a sucker for a creative headline, we all know. And an effort in story form. And this topic is always of interesting. So from Dentons partners Shari L. Klevens and Alanna Clair we have: “Looking a Gift Horse in the Mouth: Negotiating Terms for Outside Counsel Guidelines” —

  • “You receive a call about a new client with a very large potential matter. The client is a corporation whose regular outside counsel has a conflict, and this new matter creates an opportunity to establish a good relationship with a potentially lucrative client. But there’s a catch… Although your firm routinely begins new client representations by means of a standard engagement letter, this client sends you ‘outside counsel guidelines’ to which it requires agreement. The guidelines cover a host of issues, from billing protocols to technology requirements to the scope of the representation. Is there a risk to accepting the client’s guidelines? Can you negotiate the terms?”
  • “Agreeing to comply with a client’s outside counsel guidelines can help law firms obtain work in a competitive marketplace. However, the guidelines also can create risks for law firms that do not take the time to fully consider or vet the requirements’ guidelines.”
  • “Engagement letters from a law firm are often drawn to define the relationship and, at times and where permissible, to shape a law firm’s potential exposure to the client. If the attorney-client relationship is governed solely by the client’s outside counsel guidelines, however, those same protections may not be in place.”
  • “For example, the definition of who the ‘client’ is in a set of outside counsel guidelines could be expansive, including not only the direct corporate client but also related entities. Such a scenario could create complications for a law firm’s exposure or in future conflicts analysis. Indeed, the law firm could be found to owe duties to an entity that the law firm did not expect—but might have been able to consider or negotiate if the risk had been identified.”
  • “The competition for high-profile or other legal work can be significant: law firms may be tempted to agree to terms without giving proper consideration to whether the law firm has the ability to comply with the terms.”
  • “For example, many outside counsel guidelines will have specific requirements regarding billing (frequency of invoices, rates, compliance with an electronic system). It can create issues for a law firm to agree to a required electronic billing process if it then lacks the staff or resources to comply, as required.”
  • “If a law firm agrees to incorporate certain cybersecurity protections or protocols but then is unable to do so, the client may argue that the law firm is liable to the client for any future breaches or issues. The law firm could then be in the difficult position of having to explain why it agreed to protocols that were beyond what was realistic.”
  • “After the law firm reviews and approves of outside counsel guidelines, a next step is for the law firm to educate the team members working on a particular matter about the specifics of the guidelines. By agreeing to the guidelines but then failing to implement the guidelines among the team, a law firm could create an uncomfortable situation with the client…As such, many firms in this situation will discuss the terms with the team working on a matter to reduce the administrative overhead of compliance.”


Risk Update

Anti Money Laundering (AML) — New Guidance for Lawyers, ABA Pushback & More

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Kevin Shepherd, partner at Venable, writes: “Inside The New Anti-Money Laundering Guidance For Attys” —

  • “Over a decade ago at its plenary meeting in October 2008, the Paris-based Financial Action Task Force [FATF] issued a guidance paper for the global legal profession on how to detect and prevent money laundering and terrorist financing. “
  • “At its June 2019 plenary meeting, FATF adopted an updated ‘Guidance for a Risk-Based Approach — Legal Professionals.’ The 2019 guidance bears structural similarities to the 2008 guidance, but contains several significant changes. This article will provide an overview of the 2019 guidance and highlight several of these changes that may be of most interest to U.S. lawyers.”
  • “In addition to identifying broadly the specified activities covered by the 2019 guidance, the 2019 guidance lists 15 areas that may — or may not — fall within the category of a specified activity.”
  • “Unlike the 2008 guidance, the 2019 guidance devotes six paragraphs[16] to legal professional privilege and professional secrecy, and recognizes that these concepts present challenges in implementing a risk-based approach.”
  • “The analogous concept of legal professional privilege is known in the United States as the attorney-client privilege, and the 2019 guidance notes that the United States recognizes a ‘crime-fraud’ exception to the attorney-client privilege.”
  • “Supervision of Risk-Based Approach in the U.S. Recommendation 28 of the FATF standards requires that legal professionals be subject to adequate AML/CFT regulation and supervision. Section IV of the 2019 guidance provides detailed guidance to supervisors, much of which is inapplicable to the U.S. given its ‘alternative supervisory system.’ In recognition of this different system, the FATF included a text box in Annex 4 focused on the U.S., which the FATF recognizes as the country with the largest number of lawyers subject to such a system. The lengthy text box describes the fit and proper requirements in the U.S., including the entry and ongoing requirements for lawyer licensing.”

In the US, see: “The American Bar Association is fighting Washington’s efforts to tackle money laundering” —

  • “The body representing America’s lawyers has staked out an eye-opening position in recent years—lobbying against efforts in Congress to close a loophole that enables terrorism, human trafficking, money laundering, and a host of other crimes.”
  • “Unlike banks, law firms don’t legally have to do due diligence before taking on clients—the closest thing they have to regulation is ABA guidelines.”
  • “When the Financial Action Task Force (FATF), an international anti-money laundering organization, analyzed 106 global cases of the owners of illicit money hiding their identities, it found that most schemes used either lawyers, trust or corporate service providers, or accountants. Lawyers were the most likely of those three to be used in the real estate schemes outlined in the Global Witness sting, FATF found.”

And for those looking for some training, I found a consult’s webinar recording on law firm compliance: “Anti Money Laundering – Ask me anything! Join me for this AML update webinar, where you can ask me anything you’ve always wanted to know about AML.”

Risk Update

Professional Rules Under Revision: Marketing Restriction + Non-lawyer Financial Interest Coming in California?

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Hat tip to Karen Rubin at Thomson Hine: “No marketing using client’s info without express consent, says S.C. supreme court, even if ‘generally known‘” —

  • “As we’ve noted before (here and here), the ethical duty of confidentiality is broad, and can even cover publically-available information. Now comes a reminder that based on the confidentiality rule you should obtain consent before using your client’s name in marketing materials — and that some jurisdictions go even farther. For instance, South Carolina last month added a comment to its version of Model Rule 1.6 that expressly requires permission before using client information for advertising purposes, even including “generally-known” client information.”
  • “The South Carolina bar had filed a petition last year seeking to amend Rule 1.6 to allow lawyers to reveal citations to published judicial opinions without getting consent from clients involved in the case. But the law of unintended consequences kicked in.”
  • “Instead of approving the petition, the state supreme court tightened the confidentiality rule, saying in its order, ‘We decline to amend the rule as proposed by the Bar. Instead, we … add a new comment to the rule reminding lawyers that Rule 1.6 requires lawyers obtain informed consent from clients before revealing information about the representation to advertise their services. The comment further clarifies [that] this obligation applies regardless of whether any information revealed is contained in court filings or has become generally known.'”
  • “This goes farther than other state versions of Model Rule 1.6, and may be a burdensome slippery slope when it comes to ‘generally-known’ information.”
  • “On the other hand, clients value confidentiality and many want complete control over whether a firm publicizes its relationship with that client. For instance, as a condition of the representation, many large organizations expressly prohibit their outside counsel from mentioning the fact of the representation in their marketing materials without express consent.”

And to Joseph Corsmeier: “California Bar examines proposal that non-lawyers be permitted to provide legal advice and have a financial interest in law firms” —

  • “… the recent proposals of a State Bar of California task force which would, inter alia, permit legal technicians to offer legal advice and also permit non-lawyers to have a financial interest in law firms. The proposals were approved by the State Bar Board of Trustees on July 11, 2019.”
  • “The proposals were developed by the California Bar’s Task Force on Access Through Innovation of Legal Services. The task force’s proposals would make sweeping changes by modifying the restrictions on the unauthorized practice of law and ethics rules that prohibit fee sharing with nonlawyers and would also permit legal technicians to provide legal advice and practice law. The California Bar press release announcing the proposals is here. The California Bar agenda item with the proposals is here.”
  • “The proposals also would also permit state-approved businesses to use legal technology to deliver legal services. Regulatory standards governing the provider and the technology would be established and client communications with such entities would be covered by attorney-client privilege/confidentiality.”
  • “Bottom line: These California Bar proposals have a long way to go before being potentially implemented; however, if they are eventually implemented, California will be another one of the few states which would permit legal technicians to offer legal advice and the only jurisdiction (other than the District of Columbia) to permit nonlawyers to hold a financial interest in law firms. Stay tuned…”


Risk Update

HIPAA & PHI: Law Firm Disclosure Risk and Compliance Requirements

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A Warning to Law Firms and Litigants: Unlawful Disclosure of PHI in Litigation Can Lead to Trouble” —

  • “The handling of sensitive data with appropriate care in litigation is a critical aspect of legal practice. Recent ABA Formal Opinions 477 and 483 discuss requirements for securing protected client information and lawyers’ obligations after a cyberattack. Conduct during litigation is no different. Unless stated otherwise by statute, the context of litigation does not effect a person’s legal duties when handling sensitive data. In Menorah Park Ctr. for Senior Living v. Rolston, 2019 Ohio App. LEXIS 2175 (May 30, 2019 Ohio Ct. App.), a plaintiff of a small-claims matter is learning this lesson the hard way.”
  • “Menorah Park attached to its complaint non-redacted copies of several account billing statements that included descriptions of medical services provided, dates the services were rendered, medical procedure codes, charges, credits, and balances.”
  • “Rolston opposed the motion, arguing that her claim was not preempted and that, in any event, Menorah Park’s disclosure was unlawful under HIPAA because, by filing non-redacted copies of the statements, Menorah Park had not undertaken ‘reasonable efforts’ to limit the disclosure of the protected health information (PHI) to the ‘minimum necessary’ for the purpose of collecting payment.”
  • “The Court of Appeals appeared to reject the contention that the disclosure of Rolston’s medical information was authorized under HIPAA, noting that Menorah Park had used non-redacted copies of the account statements.”
  • “There are several implications that arise from this decision, the first being that law firms and litigants must undertake care when handling personal information, even an adversary’s in litigation… The clear lesson here is to take care when handling sensitive data.”

And for those looking for a refresher, Thomson Reuters recently published: “Understanding HIPAA compliance for law firms” —

  • “The definition of business associate under HIPAA’s regulations expressly includes attorneys who perform legal services for a HIPAA-covered entity (for example, a health plan), if the attorneys are not members of the covered entity’s workforce. For purposes of HIPAA’s privacy and security requirements, the definition applies if the legal services provided involve disclosure of PHI from the covered entity (or from another business associate) to the attorney.”
  • “An attorney who is a business associate must comply with HIPAA’s requirements as applicable to business associates (for example, by providing satisfactory assurances to the covered entity that it will safeguard PHI).”
  • “HIPAA non-compliance may result in severe penalties and correction requirements. HHS has taken an aggressive approach to enforcing HIPAA’s requirements in recent years. HHS’s enforcement actions have resulted in numerous highly publicized settlement agreements with noncompliant covered entities, and typically require significant monetary payments and stringent corrective actions.”
Risk Update

Lawyer Insider Trading Risk In Detail (Controls, Confidentiality, Conflicts & Compliance Concerns)

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In a six page PDF well worth the read, Arnold & Porter partner and former head of the Market Abuse Unit of the SEC’s Division of Enforcement notes: “The SEC Is Cracking Down On Insider Trading By Lawyers” —

  • “A recent series of insider trading actions charging senior lawyers in legal departments of prominent public companies suggests that insider trading by lawyers may be on the rise.”
  • “Over the past several months, the U.S. Securities and Exchange Commission has brought enforcement actions charging insider trading in advance of earnings announcements by senior lawyers at Apple and SeaWorld. In a third action, filed in early May 2019, the general counsel of Cintas Corporation was an unwitting victim of a house guest, a lifelong friend, who, the SEC alleges, surreptitiously pilfered merger related information from a folder in the lawyer’s home office.”
  • “These actions are noteworthy not only for the brazenness of the conduct involved,
    but because they suggest that insider trading by lawyers remains a ‘profound problem.'[1] And, as the case of the Cintas general counsel demonstrates, innocent lawyers may also fall prey to others, such as close friends and family, looking to exploit their access to material nonpublic information, or MNPI.”
  • “In recent years, however, a new wave of enforcement actions, coupled with the SEC’s development of new technology, and its adoption of the trader-based approach[3] to insider trading investigations, has rekindled the question of whether companies and law firms should be doing more to protect against the misuse of MNPI by lawyers and legal personnel. Increasingly, the SEC has touted its use of data analysis to identify patterns of suspicious trading and relationships… Because legal departments and law
    firms are repositories of large amounts of MNPI, they are among the first places that regulators look to determine whether a lawyer is the source of prohibited information.”
  • Improved Controls Over MNPI: “Law firms and legal departments should revisit their insider trading policies and procedures and consider whether improvements can be made for how they handle MNPI. The use of project code words for transactional matters is generally effective at protecting against
    disclosure of the identities of the parties to the transaction. The risk of disclosure, however, increases if members of the deal team are inconsistent in their use of code words.[18]”
  • Similarly, where law firm attorneys and legal personnel share information in connection with running conflict of interest checks, there is an increased risk of such information being misused. Adopting procedures to shield incoming public company transactional matters from firmwide disclosure can reduce the number of attorneys and employees exposed to MNPI.”
  • File Access on a Need-to-Know Basis: “When new project files or client file directories are established, law firms and legal departments should
    consider restricting access to persons on a need-to-know basis. Establishing a permissions process will
    prevent employees who are outside the deal team or earnings process from being able to access file
    folders concerning MNPI.”
Risk Update

Conflicts News: Criminal Conflicts + Side Switching Accusations

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5th Circuit Tosses Conflict-of-Interest Claim Over Dallas Lawyer’s Source of Payment” —

  • “The U.S. Court of Appeals for the Fifth Circuit has denied a criminal defendant’s arguments that her defense attorney had a conflict of interest from who paid him to represent her. The Monday opinion in United States v. Palacios explained that defendant Gloria Ann Palacios pleaded guilty to conspiracy to possess with the intent to distribute methamphetamine. She argued that her attorney, Dallas criminal defense solo practitioner Mark Fernandez, gave ineffective assistance of counsel because of an alleged conflict of interest.”
  • “In October 2015, Palacios pleaded guilty in her case and said under oath that she was satisfied and had no complaints with Fernandez’s representation…Later, Palacios filed a motion that asserted ineffective assistance based on the alleged conflict, among other grounds. For example, she claimed Fernandez prohibited her from cooperating with the government by giving information about her cousin.”
  • “The U.S. District Court for the Northern District of Texas in Fort Worth denied all of the grounds for relief. The Fifth Circuit granted a certificate of appealability on her conflict-of-interest claim. The Fifth Circuit’s July 1 ruling denied her arguments. It said that when Palacios pleaded guilty in her case, she waived her conflict-of-interest claim. She had many opportunities to speak up about it before, and never did so.”

Carlton Fields Switched Sides In Transaction, Suit Says” —

  • “The trustee of a bankrupt title insurance company has filed a suit in Florida state court against Carlton Fields accusing the law firm of sending the company into insolvency by setting up a joint venture then jumping ship to represent the company’s partner.”
  • “…liquidating trustee Daniel Stermer accused Carlton Fields of breaching its fiduciary duty to ATIF Inc. by advising it to enter into a joint venture that ultimately resulted in Old Republic National Title Holding Company taking control of nearly all of its assets, then taking on Old Republic as a client without dropping ATIF.”
  • “‘Incredibly, after representing ATIF for the amended JV agreement, Carlton Fields switched sides and decided to represent Old Republic in connection with the master agreement while still concurrently representing ATIF,’ he said.”
    “Carlton Fields spokeswoman Kate Barth said the firm has acted within its ethical and fiduciary duties in a statement.”
Risk Update

Disqualification News: Unwaivable Cannabis Conflicts + Conflicts Appealed

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Cozen O’Connor DQ’d Over Client Conflict In Cannabis Deal” —

  • “An Illinois state judge has disqualified Cozen O’Connor from representing a woman who is seeking to block several individuals from selling their majority stake in a medical marijuana dispensary to an outside company, as the firm has previously advised a parent company in Pennsylvania.”
  • “Because Cozen O’Connor PC has represented Jushi Inc. in connection to proposed transactions involving medical marijuana dispensaries in Pennsylvania, the firm cannot also represent Tanya Griffin, who is seeking to block the sale of the majority stake in TGS Illinois Holdings LLC to Frond Holdings LLC, according to an order on Monday by Judge Raymond W. Mitchell.”
  • “Griffin pointed to a conflict of interest waiver provision included in the engagement letter involving Cozen O’Connor and Jushi, arguing that the firm could represent her in the present case. She also asserted that Frond and Jushi are separate entities, and that the firm has never represented Frond, according to the order.”
  • “But Judge Mitchell noted that Jushi’s CEO is also Frond’s manager, and that Frond was created by Jushi to finalize the transaction involving TGS. The judge also emphasized that the language in the provision is insufficient to establish that Jushi had signed off on the firm potentially initiating litigation against it, according to Monday’s order.”

And Bill Freivogel notes a few disqualifications reverse on appeal:

  • “Sarkis v. Angels Gun Club, 2019 WL 2754767 (Cal. App. Unpub. July 2, 2019). Gun Club is a “nonprofit mutual benefit corporation” with 17 directors. Gun Club expelled Sarkis as a member. Sarkis, in turn, sued Gun Club and Director No. 1 directly for unlawful expulsion (“Direct Action”). Law Firm appeared for both defendants in the Direct Action. Sarkis then filed a derivative action against Gun Club and most of the board members, including Director No. 1 (“Derivative Action”). In the Derivative Action Law Firm appeared for Gun Club only, and another firm appeared for the director defendants (including Director No. 1). Sarkis moved to disqualify Law Firm in both actions. The trial court granted both motions. In this opinion the appellate court reversed as to the Direct Action, holding that Sarkis had no standing to bring the motion. As to the Derivative Action, the appellate court affirmed the trial court, holding that Law Firm should be disqualified. Put simply – perhaps too simply – the court could not see how Law Firm could look out for the interests of Gun Club in the Derivative Action when it was representing Director No. 1 as a defendant in the Direct Action. [Our note: This opinion contains an extensive discussion of conflicts in derivative actions. And, while we do not know enough to know whether the discussion is correct on all points, we are puzzled why it was deemed “Not to Be Published.”]”
  • “Goff v. Goff, 2019 WL 2607258 (Fla. App. June 26, 2019). Post-dissolution proceeding. W moved to disqualify H’s lawyer (“Lawyer”). Lawyer has known H since H was a child. Lawyer also became a friend to W after H and W married. Lawyer represented W once, in a dispute with W’s sister. The trial court granted the motion to disqualify. In this opinion the appellate court reversed. First, the court held that W’s dispute with her sister was not related to this post-dissolution proceeding. Second, the court noted that W’s financial affairs were fully disclosed in the dissolution proceedings, so nothing W might have disclosed to Lawyer earlier remained confidential.”
Risk Update

Conflicts Allegation & Discipline Execution: Sanctions & Disbarment

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CSX Can’t DQ Atty Who Didn’t Disclose Past Sanctions” —

  • “A Tennessee federal judge has refused to disqualify an attorney from representing a couple in a personal injury suit against CSX Transportation, finding that the lawyer’s undisclosed record of sanctions does not amount to an ethical concern.”
  • “U.S. Magistrate Judge Joe B. Brown on Tuesday rejected CSX’s bid to disqualify Robert L. Pottroff because the lawyer had failed to disclose he had been sanctioned in one case and disqualified from serving in another, determining that the attorney’s actions in the prior cases did not arise to professional misconduct mandating disqualification, according to the order entered in the Middle District of Tennessee.”
  • “The District of Kansas sanctioned Pottroff in February 2018 in a case involving the derailment of a passenger train after the attorney engaged in ‘aggressive/abusive discovery tactics’ while representing several injured passengers who sought to intervene in the case, according to CSX’s memorandum. The Kansas court ordered Pottroff’s clients to pay attorney fees and costs related to the delays, according to the February 2018 order by U.S. Magistrate Judge Teresa J. James.”

And while not conflicts-related, some lawyers behaving badly, creating PR and search engine challenges for their firms, no doubt:

Ex-Skadden Associate Loses Law License for Lying in Mueller Probe” —

  • “The former Skadden, Arps, Slate, Meagher & Flom associate who was jailed last year for lying during a probe into the 2016 presidential election has had his license to practice law taken away by the U.K.’s Solicitors Disciplinary Tribunal (SDT) and was ordered to pay costs of $3,878.”
  • “In the U.S. in February 2018, Van der Zwaan pleaded guilty to a single charge brought by U.S. special counsel Robert Mueller. He was jailed for 30 days after he lied about his communications with former Trump campaign deputy Rick Gates and an unnamed Ukrainian associate of Paul Manafort, the former Trump campaign chairman, during the Federal Bureau of Investigation’s investigation into Russian collusion during the 2016 U.S. presidential election.”

BigLaw partner leaves firm after reprimand for DWI and alleged nose punch” —

  • “A partner at Husch Blackwell in Madison, Wisconsin, has left the law firm after receiving a reprimand for allegedly punching a bar manager and driving while intoxicated.”
  • “The law firm issued this statement Tuesday: ‘We were surprised and disappointed to learn of Jeff’s misconduct and the resulting Supreme Court reprimand. Obviously, our firm does not condone or tolerate his behavior. Jeff has withdrawn from the firm, and as of today, he is no longer affiliated with Husch Blackwell.'”
  • “McIntyre pleaded guilty to a misdemeanor battery charge in May 2018 under a deferred prosecution agreement that would erase the charge in nine months.”
  • “McIntyre pleaded guilty to a misdemeanor charge of operating a vehicle while intoxicated in October 2018. He was sentenced to 60 days in jail, with privileges that allow inmates to leave jail for work. He had two prior convictions for the same offense—in March 2003 and in August 2014.”
Risk Update

Conflicts Continue: Hidden Conflicts, Appearances, Relationship Tests, a Sheriff, and a Fire

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Cooley Hid Conflict While Helping Launch Company, Suit Says” —

  • “Attorneys for Cooley LLP failed to tell a New Jersey chemist that the firm had previously worked with his partner, then represented the partner’s interests at the expense of the chemist’s while they launched a new company, according to a lawsuit filed Monday in Massachusetts state court.”
  • “But when Sun directed the Cooley attorneys to help him and Jernigan execute a Series A financing deal for Chengwei Capital to invest in the new company, Silicon Therapeutics, the lawyers allegedly didn’t tell Jernigan they were conflicted. Jernigan said it became clear in time that Sun ‘was issuing directions at the behest of [Chengwei] rather than for the benefit of [Silicon Therapeutics].'”
  • “The complaint cites emails between Sun and the Cooley attorneys in 2016 to suggest they were hashing out terms that benefited Chengwei Capital and left Jernigan behind. Sun told Cooley attorney Jacob Slesnick that Chengwei, not Silicon Therapeutics, would pay the legal costs associated with the deal, according to the suit. And Slesnick told Sun he would add a provision so that all other potential investors would need Chengwei’s consent before buying into Silicon.”
  • “‘Although Jernigan was copied on some of these emails, he did not understand the legal conflict of interest presented by these discussions, and he believed that agreeing to all of [Chengwei’s] terms, as dictated by Lanny Sun and the Cooley attorneys, was necessary to secure the financing and to achieve the success of [Silicon Therapeutics],’ the complaint says.”
  • “‘Instead of owning 10% of [Silicon], as he was told by Lanny Sun and Cooley, Jernigan was forced from the company he envisioned and co-founded with almost nothing,’ the suit says. Representatives for Cooley did not return requests for comment Tuesday.”

State Appeals Court OKs Disqualification of Lawyer Over Conflict of Interest” —

  • “A New Jersey appeals court has ruled that a lawyer who represents criminal defendants in Sussex County is disqualified from representing the sheriff in a civil suit against the county’s freeholder board.”
  • “The appeals court affirmed a trial judge’s ruling disqualifying attorney George Daggett from representing Sussex County Sheriff Michael Strada. The panel rejected Daggett’s reasoning that the Supreme Court’s elimination of the appearance of impropriety standard in 2003 should alter the application of R. 1:15, which sets limitations on the practices of attorneys.”
  • “The appearance of impropriety standard held that, even in the absence of actual conflict of interest, an attorney may be precluded from representing a particular client if the representation creates an appearance of impropriety.”
  • “Ballard disqualified Daggett based on R. 1:15-3(a), which says that an attorney who is a sheriff or county prosecutor, or an attorney who is in the employ or service of such an official, ‘shall not practice on behalf of any defendant in any criminal, quasi-criminal or penal matter, whether judicial or administrative in nature,’ and ‘an attorney who is a sheriff of any county or in the sheriff’s employ” shall not practice in any court in that county.”
  • “Daggett said he would seek state Supreme Court review of the decision. ‘I think the Supreme Court should have the final say. Since we don’t have the appearance of impropriety rule anymore, I think you have to go into the facts’ of the case.”

California Court Disqualifies Law Firm in Woolsey Fire Cases” —

  • “Douglas W. Richardson, et al. v. Southern California Edison Co., et al., Case No. JCCP 5000/19STCV10357 (Superior Ct. L.A. County May 31, 2019)”
  • “Upon motion by the defendant, Southern California Edison (‘defendant’), law firm Quinn Emmanuel Urquhart & Sullivan LLP (the ‘Firm’), was disqualified from representing victims (plaintiffs) of a deadly fire in California last fall (the ‘Woolsey Fire’). While defendant had not been represented by the Firm with respect to the fires, it had consulted with the Firm on related issues almost a year before the Woolsey Fire.”
  • The court concluded that under the ‘substantial relationship test,’ the issues that would have reasonably been discussed and the material confidential information provided during that consultation were ‘substantially related’ to the Firm’s current representation of victims of the Woolsey Fire. Consequently, disqualification was required. The Firm has filed a notice of appeal.”