Risk Update

Firms Fighting (Part 2) — Ex-partners Lob Accusations of “Client Theft”

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Ex-Pond Lehocky Partner Wants Court To Stop ‘Client Theft’” —

“The ousted co-founder of Pond Lehocky Stern Giordano LLP on Thursday asked a Philadelphia state court to stop his former partners from allegedly poaching his clients and using the firm’s resources to fight his efforts to break up the partnership, and sought to appoint a receiver or special master to run the firm during the dispute.”
“David Stern, who helped co-found the prominent Philadelphia-based employment firm in 2010, said his former partners were sending ‘client selection’ letters to his clients that allegedly misrepresented his separation from the firm, pressured them into staying with the firm instead of with Stern, and failed to give them his contact information, he said in a brief accompanying his motion.”
“‘The client selection notices are vague and wholly insufficient. The Pond defendants have made it appear that Stern’s whereabouts are ‘unknown,’ causing some clients to believe Stern has been physically harmed and others to believe he stopped practicing law and otherwise causing extreme confusion and upsetment amongst his clients,’ the brief said. ‘At least one of Stern’s clients, and likely others, inadvertently selected to remain with Pond Lehocky believing that he had no other choice but to do so, given the lack of information provided about Stern in the notice.'”
“‘The Pond defendants are using a new ‘Pond Lehocky’ logo and operating the revamped website that has been scrubbed of any mention of Stern, one of its founders,’ the brief said. ‘The Pond defendants are using the partnership’s assets, including its off

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Risk Update

Firms Fighting (Part 1) — Attorney Non-competes Not Enforceable

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In-House Attorneys Cannot Be Bound By Non-Competes In Ohio” —

  • “If you’re an Ohio in-house attorney and you value your freedom to make career moves, then you’re in luck. On Feb. 7, the Ohio Board of Professional Conduct issued an opinion letter stating that in-house counsel cannot be bound by non-compete agreements.”
  • “Ohio Rule of Professional Conduct 5.6(a) states that a lawyer may not participate in an ‘agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.’ There is a strong public policy allowing parties to be represented by the counsel of their choice, and any agreement that restricts an attorney’s ability to practice would undermine that public policy.”
  • “The board clarified that if an in-house attorney has both business and legal job functions, the attorney may still agree to a non-compete that covers their business services, so long as it does not prevent them from practicing law after their separation of employment.”


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Risk Update

Tales of Two Disqualification Motions — One Chat with a Rival, One “Slam Dunk” Conflict

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SD Supreme Court suspends Avon attorney for violating conflict of interest rules

  • “https://www.mitchellrepublic.com/news/crime-and-courts/4961338-SD-Supreme-Court-suspends-Avon-attorney-for-violating-conflict-of-interest-rules.”
    “The court found that Scott Swier violated three professional conduct rules by taking cases in conflict with the interests of former clients and failing to properly ensure the attorneys he employed didn’t also participate in misconduct.”
  • “The decision rendered by the court and written by Chief Justice David Gilbertson is blistering regarding Swier’s behavior and management of his law firm, which was described as ‘haphazard,’ and described his oral arguments to the court as resembling an infomercial for his law firm and his time before the court as ‘lacking in sincerity and remorse.'”
  • “One of the complaints regarding Swier was over a Chamberlain woman’s contested will, brought forward by Mitchell attorneys Jack Theeler and Richard Rylance. A judge in the case had ordered that Swier’s firm stop representing Shirley Hickey’s daughter, Kristina Lippert, in the case, because Hickey herself had been a former client of Swier’s firm. Theeler had previously provided legal services to the Hickey family and was contacted in 2017 to review Hickey’s estate plan.”
  • “The judge in that case said the actions of the Swier Law Firm were a ‘slam dunk’ conflict of interest and disqualified the Swier firm from the case. After Theeler was appointed as Hickey’s counsel by court order, Swier’s firm did not withdraw from representing Lippert and later billed the estate of Shirley Hickey and her living trust more than $144,000 in legal fees over an 18-month span in 2017 and 2018. Two associates of the firm were also disciplined by the State Bar’s Disciplinary Board.”
  • “‘Our review of the record left the Court with the impression that Swier ignored what he knew were conflicts, was too slow to take corrective measures, and showed no true remorse,’ Gilbertson wrote.”
  • “The court decision said Swier admitted the allegations in the formal accusation and does not dispute the facts.”

Atty’s Chat With Rival Not Enough For DQ Bid In Cabinet Row” —

  • “A Washington federal judge has denied a bid to disqualify a law firm after one of its attorneys inadvertently spoke with a lawyer who represented a cabinetmaker involved in a trademark dispute with the firm’s client, determining that the shared information was not shown to be ‘significantly harmful.'”
  • “AAA Cabinets & Millwork Inc. failed to show that the information that Lee & Hayes PC learned about the dispute involving its client, the Kitchen Cabinet Manufacturers Association, amounted to more than “de minimus harm” and crossed the threshold of ‘significantly harmful,’ according to Wednesday’s order by U.S. District Judge Salvador Mendoza Jr.”
  • “AAA alleged in November that Matthew Ries, its outside counsel, called Chris Lynch, the Lee & Hayes attorney, in May; Ries had once been a student of Lynch. Ries ‘divulged detailed confidential information’ after Lynch assured him that a conflict check was not necessary before they spoke, as he purportedly was personally aware of all trademark matters at the firm, according to AAA’s motion to disqualify.”
  • “When Lynch began to speak with another Lee & Hayes attorney about his conversation with Ries, he quickly realized Ries’ client was likely involved in a trademark dispute with the KCMA, so he screened himself from further participation in the matter, according to the opposition brief.”
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Risk Update

Conflicts Allegations in the News — 401(k)s and Medical Docs Driving Disputes

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Defendants in DST Systems Lawsuit Say Plaintiffs’ Attorneys Have a Conflict” —

  • “A Memorandum of Law in Support of the DST Defendants’ Motion to Disqualify Conflicted Counsel says the plaintiffs’ counsel concurrently represent approximately 420 participants in the DST Systems Inc. 401(k) Profit Sharing Plan together with three plan fiduciaries whom they allege in these and other actions committed a series of Employee Retirement Income Security Act (ERISA) violations that caused losses to the plan accounts of their other clients.”
  • “‘In other words, plaintiffs’ counsel represent three individuals that they accuse of wrongdoing at the same time as they represent the supposed victims of that very alleged wrongdoing,’ the memo states.”
  • “The memorandum in support of the motion to dismiss plaintiffs’ counsel says they represent three former members of the DST Advisory Committee—the named fiduciary of the plan. And its members owed fiduciary duties to plan participants, including the plaintiffs’ counsel’s other clients, to oversee the plan in the best interests of the participants. The memo points out that all the alleged conduct occurred during the period between 2010 and 2013 when the plaintiffs’ counsel’s clients served on the Advisory Committee.”
  • “However, the plaintiffs’ counsel now assert that their claims are supposedly limited to ‘breaches occurring in or after 2014’ — three months after the last of their three clients ended their service on the Advisory Committee. Yet, the memo says, the complaint obviously alleges ‘misconduct that began and continued prior to 2014 — whether the selection and retention of Ruane, supposedly excessive fees, the investment strategy employed by Ruane or the Valeant investment itself—during the time when plaintiffs’ counsel’s clients were plan fiduciaries.'”

Ex-United Worker Seeks To DQ Reed Smith Over Medical Docs” —

  • “A former United Airlines flight attendant who contends the company wrongfully terminated him has asked a California federal court to disqualify Reed Smith LLP from the litigation after its attorneys purportedly viewed his confidential medical records without permission.”
  • “Chagas contends that attorneys for both sides had agreed that his lawyer would get the first look at certain medical records before Reed Smith saw them, according to the motion. Yet a process server forwarded the documents to United’s attorneys in early February before Chagas’ lawyer had a chance to redact them, according to the motion.”
  • “Chagas’ attorney, Martin I. Aarons, asked that Reed Smith either destroy or sequester the documents, but United’s attorneys contended that Aarons had missed an agreed-to deadline for performing the redaction work, according to emails attached to Thursday’s motion.”
  • “Chagas contends that Reed Smith violated California’s conduct rules for attorneys, as the firm was aware that the documents had been inadvertently produced and had received a request that it not review them, yet went ahead and purportedly reviewed them anyway, according to the disqualification motion.”
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Risk Update

When PR Headlines Might Hurt and Heat up the Risk Waters

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Biglaw Partner’s (Alleged) Butt Shaking Gets Him In Hot Water“–

  • “Dennis Duffy, a partner in the Houston office of BakerHostetler, represents Chevron in an employment discrimination case… during the August mediation session Duffy’s alleged behavior included ‘shaking his behind’ in front of Kennard. Additionally, the filing alleges that Duffy mocked Kennard’s ponytail and intimated that because of the hairstyle Kennard would want to have sex with Duffy.”
  • “Because of this alleged display of unprofessional behavior, Kennard is asking the judge to remove Duffy from the case.”
  • “For their part, BakerHostetler is denying the allegations made in the filing: ‘While we are unable to comment on anything discussed in a confidential mediation, we strenuously deny the assertions made in Mr. Kennard’s filing,’ BakerHostetler said in a statement.”

Shortly after news of this motion for sanctions and disqualification came to pub light, the story developed: “Atty Accused Of Shaking Butt At Adversary Replaced” —

  • “The petrochemical company, a joint venture between Chevron Corp. and Phillips 66… is now represented by Norton Rose Fullbright. [It writes]: ‘CP Chem deeply regrets and apologizes that the encounter which is the basis of plaintiff’s motion now burdens the court… CP Chem intends that its counsel represent it zealously and professionally.'”
  • “CP Chem said the allegations advanced by White’s attorney Alfonso Kennard Jr. are ‘not substantiated’ and suggested Kennard waited until the eve of an upcoming deposition to file the motion in a bid for ‘leverage in this case through press attention unrelated to its merits.'”
  • “At any rate, CP Chem said, the fact the incident took place during mediation meant that under the Texas Alternative Dispute Resolution Act and the court’s local rules the whole matter is confidential and shouldn’t be before the court in the first place. Litigating the issue would mean introducing more inadmissible evidence, the company said.”
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Risk Update

Varsity Blues Conflicts Back in the Public Light

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Full conflicts disclosure, I was raised UCLA-ish. So the “Daily Trojan” isn’t exactly on my regular risk reading list. But one goes where the facts lead, taking us to: “Former USC law firm can defend Varsity Blues parent” —

  • “Las Vegas casino executive Gamal Abdelaziz, who is accused of paying for his daughter to be admitted to USC as a false athletic recruit through the admissions scandal, submitted a request to the federal court in June to use Nixon Peabody as his defense, despite a potential conflict of interest due to the firm’s prior work for USC and for a Stanford University coach named in the admissions case.”
  • “In an order filed in June, Abdelaziz’s defense contended that no conflict existed between Nixon Peabody representing Abdelaziz and USC because of the differences in the subject matter of each case and stated the University had not shared information about the admissions case with the law firm.”
  • “Nixon Peabody’s prior relationship with USC and Vandemoer had previously raised questions about whether defending Abdelaziz would present a conflict of interest. However, Brian Kelly, a Nixon Peabody attorney representing Abdelaziz, stated that Vandemoer was not a cooperating witness in the admissions case and that the government likely will not call Vandemoer to testify against Abdelaziz.”
  • “‘There is no ‘direct adversity’ because there is no conflict between the legal rights and duties of USC and the legal rights and duties of Mr. Abdelaziz,’ the order read. ‘Nor is there any material limitation on Nixon Peabody’s ability to represent Mr. Abdelaziz stemming from, for instance, USC sharing confidences with Nixon about the subject matter of this case (which it has not done).'”
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Risk Update

IP Risk Week (Part 5) — Patent Trial and Appeal Board Conflicts Allegations

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DOJ Brief to CAFC Slamming Apple Highlights PTAB Code of Conduct Problem” —

  • “This particular mess relates to the Patent Trial and Appeal Board (PTAB) and the astonishing reality that the Administrative Patent Judges (APJs) on the PTAB are not bound by any Code of Judicial Conduct, as is applicable to Article III federal judges. Instead, PTAB Judges are only bound by the same ethics standard that applies to all other employees, which requires them to recuse themselves from any decisions relating to former employers for one year. That is how several PTAB Judges have been able to adjudicate inter partes review (IPR) and covered business method (CBM) challenges filed by a former litigation client – Apple, Inc.”
  • “It makes absolutely no sense for PTAB Judges to be allowed to adjudicate matters dealing with former clients. How the USPTO has allowed for this to happen is a mystery, and why they continue to allow it to happen is nothing short of a startling display of indifference.”
  • “The content of the Dr. Sawyer letters included a series of allegations of various criminal activities and other ethical infractions. For example, in a letter dated June 21, 2017, Dr. Sawyer complained about the cancellation rates for IPRs and suggested potential ethical violations posed by conflicts of interest with administrative patent judges (APJs) which went unreported by Apple. In the final letter, Dr. Sawyer suggested that the PTAB engaged in potential criminal violation of the Racketeering Influenced and Corrupt Organizations (RICO) Act and that IPR proceedings operated as a ‘killing field’ for small inventors.”
  • “Clearly, these types of ex parte communications are not the appropriate way to handle the grievance; sanctions followed, but the USPTO did remove the PTAB panel, which Apple did not appreciate. Although no explanation as to why the panel was removed was forthcoming, Dr. Sawyer’s allegations were not the made-up rantings of a lunatic. APJ Stacy Beth Margolies had previously represented Apple in several patent litigation matters, so at a minimum there was an appearance of impropriety.”
  • “It is unconscionable for the USPTO to continue to allow the PTAB to operate without a separate, distinct and legitimate Code of Conduct that at a minimum mandates recusal when an APJ cannot objectively preside over both parties in the proceeding.”

For more detail on this one, see: “More PTAB Conflicts: APJ Margolies Once Again Assigned to Apple Petitions.

And going even deeper, a fascinating analytics-driven review of the PTAB trial outcomes (charts and commentary galore) involving a judge who served as lawyer that represented Apple in patent infringement matters while working for a prominent firm (2006-2013), then became an administrative patent judge at APJ (2013-2019), and was subsequently hired as Sr. Legal Counsel, IP Litigation by Apple: “By the Numbers: APJ Matt Clements and Potential Pro-Apple Bias at the PTAB.”

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Risk Update

IP Risk Week (Part 4) — Fight Over $540m Oil Refining Tech Precipitates Conflicts Allegation

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Sills Cummis Faces Disqualification Bid in Battle Over Oil Refining Technology” —

  • “The disqualification motion says that Sills Cummis is conflicted out of representing plaintiff Pristec Refining Technologies, a closely held entity, because of the law firm’s concurrent duties to defendants who are constituent members of that company. In particular, Sills Cummis has duties to defendant Pristec America, which holds a 75% interest in Pristec Refining Technologies and owns the license to the technology that is at the center of the case, according to the motion.”
  • “The suit stems from a dispute over the operating and licensing agreements for a proprietary process for refining crude oil that promises to reduce waste and carbon emissions. That process, known as the Pristec Technology, has an estimated value of approximately $540 million, according to a court document.”
  • “In seeking to have Sills Cummis taken off the case, the defendants cite a 2014 Appellate Division ruling, Comando v. Nugiel. In that case, the Bridgewater, New Jersey, firm of Norris, McLaughlin & Marcus was held to have a disqualifying conflict of interest in representing one co-owner of a limited liability company in a dispute with the other co-owner after it represented the LLC in connection with its formation.”
  • “In Comando, the court held that Norris McLaughlin had represented the LLC at a time when it was owned by the two members, and, essentially, later sought to choose sides in the inter-company dispute, something that was prohibited under the Rules for Professional Conduct, O’Connor wrote.”
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IP Risk Week (Part 3) — Corporate Trees in Greater Detail, Conflicts, and IP Trials

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Here’s a great analysis of an always popular issue, which I missed during my blogging hiatus. (Speaking of which, we’re approaching the one year anniversary of the Bressler Risk Blog… I’d better come up with something interesting for that milestone… In the meantime, please do encourage your colleagues to join our readership rolls.)

All In The Family: The Tricky Ethics Of Corporate Affiliate Conflicts” —

  • “If you represent a corporation, do you represent all entities in the corporate family? For example, if you represent a parent company, does that mean you also represent the parent’s subsidiaries? Does it matter if a subsidiary is wholly-owned vs. partially owned? How about if you represent a subsidiary–does that mean you also represent its parent or grandparent entity in the corporate tree?”
  • “Many corporate entities are parts of families that can include parents, subsidiaries, and other affiliated or related entities. Some corporate families can be complex and include scores, or even hundreds, of related entities under the same ‘family tree.’ This arrangement can present challenges for attorneys who are asked to undertake a representation adverse to an entity that the lawyer does not consider to be her client yet is part of the same corporate family as the lawyer’s organizational client.”
  • “In a recent decision, the Federal Circuit disqualified a law firm from representing a client in a patent appeal because the adverse parties in the patent matter were corporate affiliates of one of the firm’s clients. The Court’s decision in Dr. Falk Pharma GMBH v. Generico, LLC, is instructive on how corporate affiliates can morph into unintentional clients that create a conflict of interest for a lawyer who wants to take a position adverse to a different entity within the same corporate family as the lawyer’s client.”
  • “Bausch & Lomb is both an indirect subsidiary of Valeant-CA and an affiliate of Salix. The Firm’s engagement agreement for the trademark litigation on behalf of Bausch & Lomb was executed by Valeant-CA. As is common especially when representing large entities, the client had outside counsel guidelines (OCGs), which the engagement agreement incorporated by reference. Valeant-CA’s OCGs stated in relevant part that Katten would not represent any party in matters conflicting with any Valeant entity.”
  • “In addition to that representation, Mukerjee and Soderstrom, while at Alston & Bird, represented Mylan against Salix in related, parallel proceedings before the PTAB and the district court. The Salix matter wound up in a related appeal filed in the Federal Circuit, which appeal was pending when Mukerjee and Soderstrom joined Katten. Thereafter, Salix moved to disqualify Katten from that appeal. That motion was consolidated for decision with the Valeant-CA disqualification motion.”
  • “[Applying the regional law of the Third and Fourth Circuit] The court noted that under the comments to Rule 1.7 pertaining to organizational clients ‘a lawyer for the organization is not barred from accepting representation adverse to an affiliate in an unrelated matter, unless the circumstances are such that the affiliate should also be considered a client of the lawyer…’ The court concluded that the “circumstances” were such that affiliates should be considered clients of Katten.”

See the full article for more of the story, more analysis, and Michael McCabe’s key take-aways.

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IP Risk Week (Part 2) — Patent Conflict, Corporate Affiliates Results in Disqualification

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Federal Circuit Disqualifies Litigation Counsel Who Prosecutes Patents for Subsidiary Company” —

  • “In an unusual decision, the Federal Circuit has disqualified PerDiem’s appellate counsel – the firm of Davidson Berquist Jackson & Gowdey, LLP – based upon a current client conflict.”
  • “The particular problem here stems from Davidson’s simultaneous performance of patent prosecution work for Trimble Transportation Enterprise Solutions, Inc.. Trimble Transport is a wholly owned subsidiary of appellant Trimble Inc (TRMB).”
  • “Although Davidson has now withdrawn its representation of Trimble, the court judges current-client conflicts as of the filing of the motion to disqualify. At that time Davidson was representing both Trimble Transportation and PerDiem. Also, because the district court case was litigated in California, California professional responsibility rules control conflict situations.”
  • “Software Engineering, LLC (who is also a party to the lawsuit). Trimble (TRMB) has a valuation of $10 billion, 8,000+ employees, and more than a dozen major subsidiary companies. The formal corporate structure was specifically and particularly designed to take advantage of various laws — creating protections against a variety of potential liabilities and allowing differentiation between the various companies. Now, however, when it is advantageous to the company, it argues that the corporate walls are illusory.”
  • “…the biggest factor in this case is Aaron Brodsky — in-house patent counsel at Trimble Inc. Although Brodsky works for the parent, he advises on patent prosecution work for a number of the subsidiaries that do not have their own patent counsel — including Trimble Transport. In particular, Broadsky advised the Davidson firm on its prosecution work and, at the same time, manages the present litigation. That intermingling of relevant legal matters starts to make the concurrent representation look bad.”
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