Bressler Risk Blog

“Lawmaker Says He Told Netanyahu Before Asking to Nix Judge in His Case” —

• “Shlomo Karhi admitted he notified the prime minister before he demanded one of the judges in Netanyahu’s corruption trial be disqualified for a conflict of interest, after saying he hadn’t.”
• “Karhi claimed that the son of Jerusalem District Court Judge Rivka Friedman-Feldman once worked in a law firm where one of the senior partners will be called to testify for the prosecution in Netanyahu’s case, disqualifying Friedman-Feldman from the case. In addition, Karhi claimed that this witness is a ‘harsh, blunt critic of the prime minister.'”
• “When asked whether he had coordinated his request with Netanyahu’s lawyers, he said no. Later, when asked if he had told Netanyahu of his intention to submit the disqualification request to Hayut, Karhi said he had, adding that he ‘I didn’t wait for his permission.'”

“Likud MK demands recusal of judge in PM’s trial for alleged conflict of interest” —

• “In Case 4000, the premier is accused of approving regulatory moves benefiting the controlling shareholder of the Bezeq telecommunications company in exchange for positive news coverage from the company’s Walla news site. Netanyahu, who denies wrongdoing, faces charges of bribery, fraud and breach of trust in the case.”
• “The secondary argument made by Karhi is that Hayut recently formulated the rules on recusal to specifically ensure that Friedman-Feldman would not need to step aside. He said that from the moment the judge’s son left the law firm, the two were theoretically able to discuss the case, while other cases would require a 5-year cooling-off period.”
• “According to the report, Hayut is expected to reject the request. It said the letter is an attempt by Netanyahu and his team to delegitimize the judge and delay the next stage of his trial — if successful, it could take at least a year to replace the judge presiding over such a high-profile case. The evidentiary stage of the trial is set to begin in January. “

“Steven Donziger, Who Battled Chevron in Ecuador, Has Been Disbarred” —

• “After helping indigenous Ecuadorians win a $9.8 billion verdict against Chevron for polluting the Amazon rainforest, Steven Donziger’s decades-long advocacy ended in his disbarment on Thursday.”
• “Chevron has long claimed that the multibillion-dollar verdict that Donziger obtained for his Ecuadorian clients was fraudulent, and today’s disbarment ruling relies upon the findings of a U.S. judge who ruled in the oil giant’s favor.”
• “Roughly three years after the judgment against Chevron, U.S. District Judge Lewis Kaplan blocked Donziger from collecting the proceeds on the grounds that it was ‘obtained by corrupt means,’ including bribery and witness tampering.”
• “Federal prosecutors declined to charge him with any offenses, but Judge Kaplan deputized a private law firm to criminally pursue him for contempt of court, in an extraordinarily rare and controversial for-profit prosecution.”
• See also more on “for-profit prosecution” and earlier conflicts allegations in the mix.

Comprehensive overview of issues and recommendations from three lawyers at Munger Tolles: “Safeguards Against Legal Malpractice Liability As Claims Rise” —

• “According to an annual survey by insurance broker Ames & Gough, the magnitude and number of legal malpractice claims in the U.S. had already increased significantly in 2019. Now with COVID-19 resulting in a severe economic slowdown and remote work conditions across the country, business interruption is on the rise, as are novel challenges for clients and lawyers alike.”
• “Remote Work. A shift to remote work has disrupted the day-to-day practices of firms across the country, and lawyers have been forced to change the way they communicate with clients and colleagues. These changes could result in inadvertent divulgence of confidential client information, inadequate communication with clients, missed deadlines or miscommunication among colleagues regarding assigned tasks and deadlines — all of which could lead to a malpractice claim.”
• “Tightening Client Budgets. Economic disruption often leads to shirking legal budgets. You may find clients pushing you to do more with less in terms of time spent on research or filings. This budget pressure may result in inadvertently missing legal issues or forgoing arguments that could have benefited the client in hindsight.”
• “Conflicts of Interest. Another danger of increased corporate restructuring is heightened difficulty determining whether legal representation would result in a conflict of interest. Conflicts of interest, either actual or perceived, are consistently the most commonly alleged error in malpractice claims. As companies change in shape and scope, it is not always easy to know whether one corporation may be adverse to another such that a conflict would result, which might lead to an increase in malpractice claims based on actual or perceived conflicts of interest.”
• “Expanding Client Base. The economic challenges of the pandemic may encourage lawyers and law firms to accept clients they might previously have declined. These clients may work in industries outside the scope of the lawyers’ general practice areas — and thus be more likely to encounter legal challenges unfamiliar to the lawyers — or may operate in more questionable ethical or legal territory than a lawyer’s long-standing client base.”
• “Be hyperaware of conflicts. Just because a conflict does not exist at the outset of representation does not mean that a conflict will not arise down the road, especially if the client undergoes corporate restructuring. Someone on the team should be in charge of monitoring for changes in clients’ ownership or corporate structure. Anytime there is a change, this person should map the new structure to identify any new entities — such as subsidiaries and parent companies. Circulating this information through the entire conflicts process will help flag conflicts that arise out of a complex corporate structure that may not be otherwise apparent.”

Latest of note from Bill Freivogel.

(Chuck Lundberg dropped me a note, noting “Freivogel on Conflicts, the online Bible of conflict of interest, is 20 years old this month.” Congrats, Bill!):

• Warner v. Google LLC, 2020 BCSC 1108 (CanLII) (S. Ct. B.C. July 29, 2020).The claim is that Google improperly gathered data from certain Canadians using Android phones. As a settlement was being negotiated, before class certification, Plaintiff and his law firm (“Law Firm”) got into a disagreement about where cy-pres funds should be distributed. Plaintiff wanted those funds to go to Free Software Foundation, an American not-for-profit.
  • Other parties wanted the funds to go to Canadian bar-related foundations. In this opinion the court was faced with whether Plaintiff should be replaced, and, if so, whether Law Firm should be replaced.
  • First, the court determined that Plaintiff should go because of Plaintiff’s possibly advantageous relationship with the Free Software Foundation and its leader(s), and Plaintiff’s difficult conduct during the cy-pres dispute. As to Law Firm, the court ruled it could stay.
  • The court noted the “bright line” Canadian conflicts rule might otherwise mean that Law Firm could not continue because of its disagreement with Plaintiff. However, the court looked at prior Canadian decisions suggesting that class actions can be different in this respect. Thus, even though no class has yet been certified, with the only relationship being Law Firm’s representation of Plaintiff, keeping Law Firm in the case would be in the best interests of the future class.
• In re Vascular Access Centers, L.P., Bankruptcy No. 19-17117-AMC (E.D. Pa. April 6, 2020).Debtor sought to have Law Firm approved as Debtor’s counsel. The U.S. Trustee objected because Law Firm had a conflict under Section 327(a) of the Bankruptcy Act and because Law Firm violated Bankruptcy Rule 2014(a) by failing to disclose all Law Firm’s relationships to Debtor’s principal owner.
  • The court approved the retention, finding that the conflict really existed only three days and was inconsequential. The court was very troubled by the disclosure failure and ruled that Law Firm would receive no compensation for work prior to when Law Firm finally did make the disclosures.

“Lumber Exec Wants Rival Firm In IP Suit DQ’d For Estate Work” —

• “In a motion filed Thursday in Arkansas federal court, FiberPro LLC Founder Joshua Krauss said his legal relationship with Friday Eldredge & Clark LLP has given the firm access to his private information, making it unethical for the firm to represent Timber Automation LLC in its suit alleging Krauss and his associates stole confidential information and used it to start their own rival lumber company.”
• “To back up the claim he is still a client of the firm, Krauss noted that he has remained in touch with Duke to share updates on the estate through email exchanges in 2017 and 2018. Duke specifically asked to be informed of any changes to the estate so he could keep the couple’s documents up to date in the case of changes to the tax code, according to the brief.”
• “But even if Friday Eldredge can show he is no longer its client, Krauss said, disqualification is still in order because the parties’ previous relationship has given the firm access to information that would provide Timber Automation with an unfair advantage in litigation.”
• “Timber Automation originally sued Krauss, FiberPro and two other former employees in Arkansas state court on July 15. Timber Automation alleged that Krauss, a former vice president of sales for one of its subsidiaries, convinced project engineer Jeremy Hutson and designer Henry Meyers to join him in starting a competing business. Before jumping ship, the complaint alleges, the three conspired to download thousands of files from Timber Automation’s servers — including equipment designs, vendor catalogs and proprietary spreadsheets — for use in creating their rival company.”

“Leading firm rebuked over client account misuse” —

• “Leading transatlantic law firm Womble Bond Dickinson (WBD) has been rebuked for providing a banking facility to a client by receiving and paying out more than £2m that did not relate to any legal work it was doing.”
• “The firm blamed the actions of a single partner for the misconduct.”
• “A regulatory settlement agreement published today by the Solicitors Regulation Authority (SRA) said that WBD acted for a ‘Client A’ in relation to a commercial scheme under which the firm held funds at Client A’s instruction. The money was deposited by three individual clients of Client A who were not WBD clients.”
• “Over a five-year period, the firm ‘allowed payments to be made, on the instruction of Client A and the clients of Client A,’ from this money – in all, around £2.3m.”

“ABA Adopts Best Practices for Third-Party Litigation Finance” —

• “In its first guidance on the booming tool since 2012, the group urged lawyers working with outside funders to be exacting and detail all arrangements in writing. But they stopped short of saying the arrangements should be disclosed to the court.”
• “The American Bar Association’s House of Delegates overwhelmingly voted to approve a new set of best practices for litigation funding arrangements Monday, updating their guidance on the increasingly popular tool for the first time since 2012.”
• “The report, which outlines a list of issues lawyers should consider before entering into agreements with outside funders, cleared the body by a vote of 366 to 10.”
• The report notes:
  • “The litigation should be managed and controlled by the party and the party’s counsel. Limitations on a third-party funder’s involvement in, or direct or indirect control of or input into (or receipt of notice of), either day-to-day or broader litigation management and on all key issues (such as strategy and settlement) should be addressed in the funding agreement.”
  • “Positions on fee splitting, however, are far from unanimous; the New York City Bar Opinion is not the ‘law of the land’ outside of its reach, nor are opinions or approaches that contradict the New York City Bar Opinion,”
  • “A careful lawyer will assure that the written undertakings accurately reflect that the client retains control of the litigation, that disclosures to the funder are limited so as not to create risks of waiver of attorney-client privilege or work product, and that the attorney retains and protects his or her ability to exercise independent professional judgment.”

For other opinion from the funding side of the equation see: “ABA’s new guidance on litigation funding misses the mark” —

• “Unfortunately, the ABA’s new best practices were drafted without a similar opportunity for comment and with the glaring omission of commercial legal finance providers. Not surprisingly, the resulting best practices do not reflect how legal finance actually works and could create confusion among lawyers considering it—the opposite of what was intended.”
• “The ABA attempts to provide a single set of best practices for the funding of disputes between commercial entities and consumer litigation funding, in which funding companies provide individual lawsuit loans to people with personal injury or other individual claims. These are entirely different practices.”
• “Commercial legal finance companies provide multimillion-dollar nonrecourse investments to companies and law firms represented by world-class counsel. Consumer litigation funders make small-dollar cash provisions to individuals in economic distress who may not be experienced in or savvy about negotiating legal transactions. It is as illogical to treat them in the same document as it would be to offer a single set of best practices to cover both investment banking and payday lending.”

“Lawyers withdraw from representing Larry Householder in bribery case” —

• “The exact nature of the conflict of interest, but defined the reasoning the to court as there being ‘a substantial risk that the lawyer’s ability to consider, recommend, or carry out an appropriate course of action for that client will be materially limited by the lawyer’s responsibilities to another client, a former client, or a third person or by the lawyer’s own personal interests.'”
• “Householder was indicted last Thursday for his part in what the U.S. Department of Justice is calling the largest bribery case in Ohio history. After the indictment he was voted out of his House leadership role.”

According to the filed brief, Householder was being represented by Taft Stettinius & Hollister. For more on the broader matter, see: “Not guilty pleas for 4 indicted in $60M Ohio bribery probe.”

“Third lawyer joins Netanyahu defense team in his corruption trial” —

• “Boaz Ben Tzur, a well known litigator, has also represented two other people tied to one of the prime minister’s cases, one of whom is a witness for the prosecution.”
• “A renowned defense lawyer, Ben Tzur, has previously represented billionaire movie mogul Arnon Milchan, a central figure in Case 1000, one of the trio of cases against the prime minister. There were conflicting reports in Hebrew media as to whether or not Ben Tzur still represents Milchan’s personal assistant Hadas Klein, who will be a key prosecution witness in Case 1000.”
• “Before taking on the job, Ben Tzur asked the State Prosecution if there were any legal issues with him representing Netanyahu but no objections were raised, Channel 12 news reported.”
• “Klein has said the approach constituted a conflict of interest and violated her rights, the report said.”

We’ve seen a few high profile stories about troublesome hacking/phishing and other fraud causing losses and embarrassment for firms. Here’s a podcast (with convenient transcript) from ALPS, covering the basics, how to manage these risks, and the growing threat of fake/deepfake attacks entering the mix: “ALPS In Brief — Episode 49: Would You Send All Your Money to a Scammer? Maybe You Just Did.” —

• “A lawyer was waiting on a fax with all the information she needed to complete a wire transfer. Fax received, money sent. What she didn’t know? Her email had been hacked. Cybercriminals had intercepted the fax and edited the wire transfer details before sending it. The money was gone. The worst part? This new cybersecurity scam is really easy to execute and happening everywhere. ALPS Risk Manager Mark Bassingthwaighte lays out the details and how to spot the breadcrumbs so you and your firm’s employees won’t be caught off guard.”
• “We have had a number of lawyers impacted by this with literally millions of dollars, in total together, stolen. And certainly, this problem is not limited to lawyers, but there is one very easy way to avoid falling victim to these types of attacks. And I’d really like to explore that a little bit.”
• “And unbeknownst to anyone at the firm, the firm’s email accounts, all of them, were breached and someone was monitoring what was going on. And this is not uncommon in terms of having someone monitor your email and those kinds of things. It often will go easily, maybe a couple of weeks to several months. And what they are doing is, as their monitoring offices, they’re looking for opportunity, of course, but they are also learning who talks, who the players are, how they communicate in writing and just understand sort of the business model, what’s going on.”
• “The bad guy, if you will, was monitoring and very interested in the eFax account because these lawyers happen to do real estate. And there were a lot of instructions coming through via fax. If a fax had… Was of no interest it would kind of be forwarded along really quickly so no one was aware that these emails were being intercepted and looked at. At one point, a fax came through authorizing… Wiring instructions or whatnot, for a significant amount of money on the sale of a home. And all the hacker had to do was just take that fax and change the routing number, the wiring instructions here on this document. Made that change, set it on.”
• “At the beginning of representation, you verify with all the parties, what is the trusted contact information? What is your real email? What is your phone number? What is your address? And then, you go back and you look that up so that you know you’re using the correct phone number. You don’t want to look at a phone number that’s in an email coming to you and use that, because the scammer will give you a fake…”
• “So, that should also catch your attention as to the value of implementing a firm wide policy, with a little training here, that says, no one, I don’t care if it’s the most senior attorney down to the new bookkeeper, is authorized to move any money under any circumstances unless an out-of-band communication has occurred, so that we know we are sending the money to the correct legitimate recipient.”

“Biglaw Leaders Reassure Firm That Representation Of Kanye West And Donald Trump Is Not A Conflict Of Interest. Nothing unethical to see here!” —

• “Husch Blackwell has heard your concerns and wants to assure you everything is just fine. As you may recall, earlier this week news broke that an attorney at Husch Blackwell, Lane Ruhland, was spotted delivering to Wisconsin officials signatures to put Kanye West on the presidential ballot.”
• “Apparently working for multiple presidential candidates raised some questions among the rank and file at Husch. According to an email circulated internally, firm leadership made clear that a conflicts check was run for the representation of Kanye West and/or his 2020 presidential campaign.”
• “They make no mention of how, exactly, this squares with representing another 2020 presidential candidate — and not just representing him on a firm level, the same attorney is apparently working for multiple candidates — for example if conflicts were disclosed and waived or if there’s a limited scope to the representation. Just trust that the conflict has been cleared.”
• “But the firmwide email also makes clear that the ‘controversial’ aspect of the representation (though it isn’t clear if they’re talking about the Kanye campaign or the Trump campaign) isn’t something they particularly care about. And ‘representation of clients is not an endorsement of said clients’ cultural or political viewpoints.'”

“Bar Complaint Claims Kanye West’s Campaign Lawyer is Violating the Rules by Simultaneously Working For Trump” —

• “A government watchdog group on Friday filed a complaint against Lane Ruhland with the Wisconsin Office of Lawyer Regulation (OLR) alleging the attorney has been violating ethics and conflict of interest obligations by working for both the presidential campaigns of both Kanye West and Donald Trump. Ruhland – the former general counsel for the state Republican party and senior counsel at law firm Husch Blackwell…”
• “And because West and Trump would be running against each other and vying to win the same potential voters, such dual-representation presents a clear conflict of interest that violates the Wisconsin Bar’s rules, the complaint says.”
• “‘Simultaneous legal representation of two candidates competing for the same office is a paradigmatic example of a conflict of interest,’ CfA Executive Director Michelle Kuppersmith wrote in the complaint…’“As an attorney for the Trump campaign, she simply cannot show the ‘loyalty and independent judgment’ representing the West campaign that are an “essential element” in a lawyer’s relationship to a client.'”
• “West recently told Forbes that his campaign is intended to hurt Joe Biden, not Trump. The Forbes report says ‘GOP operatives’ were working ‘to get [West] on state ballots.'”

While I don’t have hard data, I’m finding myself coming across more instances of aggrieved parties issuing formal press releases specifically focusing on lawyer/law firm conflicts allegations.

Like many have said about disqualification motions in general, the use of such communication tactics may be strategic. Clearly, exposure via reprint on Yahoo News (see below) and similar sites, and associated search engine implications are a bit different from coverage of these matters by the legal press.

And excerpting these here gives me pause as they understandably lack the “we asked the other side for a response [and they either did or did not response]” portion.

Still, this may be a trend that grows as we watch. And, regardless, it’s an interesting data point. Here’s a recent example that caught my eye: “Ebony Magazine Files Grievance With State Bar of Texas Against Attorney David Abner for Conflict and Ethics Violation” —

• “ATLANTA, July 31, 2020 /PRNewswire/ — Immediately after Ebony ownership filed a complaint with the SEC against Jacob Walthour and Blueprint Capital LLC (“BPC”) alleging insider trading; they filed another SEC complaint against John Robinson and Consequent Capital (“CC”) CRD # 285262 for violating the very same privacy policy and fiduciary responsibilities they list on CC’s website by providing Parkview Capital Credit’s (“PCC”) confidential information to media outlets for financial gain. Today Ebony Magazine filed a third SEC complaint and legal Grievance with the Texas Bar against David Abner.”
• “Ebony accused Abner, a licensed attorney, of conspiring with Walthour and Robinson to force Ebony into Bankruptcy invalidly. David Abner and Associates is on record as PCC’s General Counsel but also a creditor for Ebony. ‘This is an absolute conflict between a lender and their lawyer to conspire to do an illegal takeover,’ says Ebony spokesperson Michael Wilcox.”
• “David Abner has an Ethical responsibility not to create legal conflicts, especially when it can be detrimental. Also, by joining as a creditor when the lender hired him is borderline illegal. Lawyers should be a cut above. Consequent allowed their manager, Jacob Walthour, to provide confidential information to the media, and Parkview had their Lawyer lose his Ethics, says Ebony spokesman.”

“MoFo Accused of ‘Skullduggery’ in Divorce of Google Search Engine Programmer” —

• “The wife of Scott Hassan, robotics entrepreneur and principal programmer of the Google search engine, is suing Morrison & Foerster for being a ‘willing architect and facilitator’ of Hassan’s scheme to ‘cheat’ her out of millions of dollars after she filed for divorce in 2015.”
• “In a suit filed Tuesday in Santa Clara County Superior Court, Allison Huynh alleges that Morrison & Foerster violated its ethical and fiduciary duties when the firm picked sides after representing the couple individually in separate business matters.”
• “The complaint alleges that Paul ‘Chip’ Lion, a Palo Alto MoFo partner, and the firm continued to represent Hassan and some of the couple’s jointly owned businesses even after a family court judge disqualified them from advising him on the dissolution of their marriage.”
• “Huynh says the firm ‘orchestrated a fire-sale’ of the assets of robotics company Suitable Technologies, which she has a half interest in, according to the complaint. She alleges the deal was an effort to score a personal tax benefit of more than $90 million for Hassan.”
• “‘We deny all the allegations made by the Plaintiff against the Firm and its representatives and we will address them in the proper forum,’ a firm spokesperson said via email.”

“Conflict arises in synagogue shooting defense” —

• “More than a year into the prosecution of the man accused of firing on a Poway synagogue — killing one person and injuring three others — a conflict of interest has arisen on his defense team.”
• “Attorneys Kathryn Nester, who is executive director of the federal public defender office, and Kimberly Trimble conferred with three experts, all of whom have vast experience in trying death-penalty cases, and all came to the conclusion that this was not a conflict that can be waived by Earnest, they said in a court filing. They declined to give more details on the conflict.”
• “‘The nature of the conflict is protected by attorney-client privilege,’ they wrote.”
• “Attorney and judge conflicts of interest are carefully vetted at the beginning of each case. For one to arise this late is unusual.”

“Now MP targets Herbert Smith over Post Office work” —

• “An MP has urged both the justice and business select committees to investigate the role of law firms – and in particular Herbert Smith Freehills (HSF) – in helping client companies accused of wrongdoing set up compensation schemes.”
• “As we reported earlier this month, that complaint concerns in part HSF’s work on the Griggs review, which dealt with compensating victims of the fraud but was ultimately deemed flawed and is now being re-run.”
• “Mr Hollinrake said he was “astonished” that the firm was also advising the Post Office on its recently announced compensation scheme for subpostmasters who suffered a “shortfall” in using the flawed Horizon computer system that led to many being wrongly accused and convicted of theft.”
• “HSF acted for the Post Office last year in settling group litigation brought by some of the subpostmasters. The firm denies any conflict of interest.”
• “In his letter to justice select committee chair Sir Bob Neill MP, Mr Hollinrake said: ‘The mere fact that HSF acted on behalf of the Post Office in the legal action with the responsibility to minimise losses should prohibit them from taking any role in a compensation scheme.'”
• “An HSF spokeswoman said: ‘There is no conflict with the firm acting for the Post Office on this matter.'”

“Florida Bar UPL Committee issues proposed opinion stating that out-of-state lawyer may practice federal law remotely from Florida home” —

• Florida Bar’s Standing Committee on the Unlicensed Practice of Law: Proposed UPL Advisory Opinion FAO #201904
• “The proposed advisory opinion states that an out-of-state licensed attorney who is working remotely on federal intellectual property rights matters (and not Florida law) from his or her Florida home for an out-of-state law firm and no public presence or profile in Florida as an attorney would not be engaging in the unlicensed practice of law. The advisory opinion will be filed with the Florida Supreme Court on August 17, 2020.”
• “It is the opinion of the Standing Committee that the Petitioner who simply establishes a residence in Florida and continues to provide legal work to out-of-state clients from his private Florida residence under the circumstances described in this request does not establish a regular presence in Florida for the practice of law.”
• “Consequently, it is the opinion of the Standing Committee that it would not be the unlicensed practice of law for Petitioner, a Florida domiciliary employed by a New Jersey law firm (having no place of business or office in Florida), to work remotely from his Florida home solely on matters that concern federal intellectual property rights (and not Florida law) and without having or creating a public presence or profile in Florida as an attorney.”