Bressler Risk Blog

Yesterday we highlighted recent writing from the professional responsibility practice at Clyde & Co. Today, sauce for the gander (as my favorite first officer would say) — Here’s the latest from Karen Rubin at Thomson Hine:

“Citing “endless risk,” district court DQ’s firm from 401(k) case” —

• “A New York district court judge earlier this month disqualified a firm representing hundreds of 401(k) plan participants based on a conflict of interest. The judge called the risks posed “endless,” and requested additional briefing on whether the firm would be allowed to remain as counsel in related arbitration proceedings in Missouri. The ruling spotlights the sometimes-thorny conflict issues that can arise in ERISA litigation.”
• “In two of the actions, The Klamann Law Firm represented profit-sharing plan participants who alleged ERISA violations based on several breaches of fiduciary duty against the participants’ employer, the trust investment manager and the plan advisory committee along with the advisory committee’s individual members.”
• “At the same time, in Missouri, The Klamann Law Firm was representing a number of claimants, including three individual former members of the plan advisory committee, in arbitration proceedings against the employer and the trust investment manager. Claimants’ claims in the arbitration were nearly identical to the litigation claims asserted in the two New York district court cases.”
• “Citing its broad discretion to invoke the ‘drastic remedy’ of disqualification whenever a lawyer’s conduct ‘tends to taint the underlying trial,’ the district court noted that the Second Circuit considers adverse representation of current clients improper per se. The burden is on the lawyer to show that there will be no actual or apparent conflict in loyalty or ‘diminution in the vigor of [the lawyer’s] representation.'”
• “The court noted that claims in the New York District court complaints made it ‘evident’ that plaintiffs intended to sue both the employer and the plan advisory committee for fiduciary breaches committed while two and possibly all three of the individual members were on the committee — the same members The Klamann Firm was representing as claimants in the Missouri arbitration.”
• “Under many circumstances, a current-client conflict is waivable if each client gives informed consent. Timing is everything, however. Here, the firm said it had obtained consent of its clients — but only too late, wrote the court. Consent ‘needed to be obtained prior to… undertaking representation of adverse interests, not in response to a motion to disqualify.'”

Clyde & Co have launched a new risk newsletter: “Lawyers’ Risk Management Newsletter, July 2020” —

• “Mr. Wetterman cheated the firm out of USD 361,646.47 by submitting and obtaining reimbursement for 382 separate sham travel expense requests between 2015 and 2019. Unfortunately, this story is not unique or even particularly uncommon.”
• “This story, and other incidents of similar ilk, demonstrate the importance of the adage ‘trust – but verify.’ The story exemplifies the fact that law firms often repose trust in their lawyers – and even in non-lawyer employees with roles involving access to the firm’s finances – without having in place the appropriate controls to fulfill the firms’ ethical and fiduciary obligations to “verify.” The ethical duties relating to managing client funds are found in Rule of Professional Conduct (“RPC”) 1.15, and the duty not to “engage in conduct involving dishonesty, fraud, deceit or misrepresentation” is found in RPC 8.4 (c). In addition, lawyers owe their firms, and their firms’ clients, fiduciary duties to the same effect. Also important are RPC 5.1 and 5.3 – the duty of supervision.”
• “It is not sufficient for a firm to place trust in its attorneys and staff, and thereby possibly enable them to steal or embezzle the firm’s or its clients’ funds, without having appropriate oversight policies and procedures in place. Here, the scheme was possible because the firm permitted its lawyers to submit travel expense claims for reimbursement without requiring any appropriate proof of the validity of the claims.”
• “Regrettably, Thomas Wettermann’s case is not unusual. A strong internal control environment is not just a best practice but a way to protect the law firm, its clients and its employees. Although no set of policies and procedures can prevent fraud completely, putting in place appropriate financial controls will significantly reduce the opportunities for wrongdoing and will help to protect the assets of the firm, not least its good name. The policies and procedures described above are not a comprehensive list. Rather, firms should consult with their outside accountants and advisors on the policies, procedures and controls best suited to their own particular needs.”

“N.Y. Lawyer Can’t Also Provide Wealth Management Services” —

• “A non-practicing New York lawyer who’s been working in wealth management for 20 years and now wants to open a law office and provide investment advisory services to law clients can’t ethically do so, the state bar said.”
• “‘The conflict between the legal and non-legal services is so severe that informed consent cannot cure it,’ the bar’s ethics committee said in an opinion.”
• “A state professional conduct rule ‘expressly allows’ lawyers to provide legal and non-legal services to the same client, like lawyer-accounting services, the opinion said. But some ‘dual practice conflicts’ can’t be remedied with informed client consent because of the conflict, it said. The opinion cited the example of lawyers acting as real estate brokers for the same transaction.”
• “The lawyer could, however, provide wealth management services to non-legal clients if a disclaimer is provided that no lawyer-client relationship is being formed, the opinion said.”

“Does a Judge have to recuse if a conflicted party files an amicus brief? Or should the brief be struck?” —

• “As a general matter, federal judges will recuse if they have some sort of relationship with one of the named parties. Indeed, most clerks will screen cases, to avoid assigning a matter to a judge that would create a potential recusal. Occasionally, conflicted cases slip through the cracks–even at the Supreme Court. Sometimes the identity of all parties isn’t obvious, and a conflict only becomes clear after the case is assigned. But what happens when the conflict arises based on an amicus brief? Friends of the court may file briefs long after the panels are assigned. And these filings may give rise to conflicts of interest. What should a court do in such a case?”
• “In 2018, the Federal Rules of Appellate Procedure were amended to address this situation. Rule 29(a)(2) provides:
  • ‘Any other amicus curiae may file a brief only by leave of court or if the brief states that all parties have consented to its filing, but a court of appeals may prohibit the filing of or may strike an amicus brief that would result in a judge’s disqualification.'”
• “In short, if an amicus brief would create a recusal, the court can strike it.”
• “Judge Andrew Brasher, a new member of the Eleventh Circuit chose a different approach. Today he recused from en banc consideration of Florida’s felon disenfranchise case. There was no conflict with any of the parties. Rather, he identified a conflict because the Alabama Attorney General, his former employer, filed an amicus brief.”
• “As an ethical matter, I think it better for the judge to step down than to strike the unwitting amicus brief. FRAP 29(a)(2) permits that resolution, but it is eminently unfair to the parties. Put yourselves in the shoes of the attorney who spent time and money writing a brief, only for it to be invalidated. However, this practice sends a clear signal to the market: clients who agree with Judge Ho’s general jurisprudence may be hesitant to hire Gibson Dunn to file an amicus brief for the Fifth Circuit, lest their brief force a recusal.”

“Panel: Judges may attend demonstrations, must monitor participation” —

• “Judges are not required to remain silent on turbulent issues, such as racial justice and police killings. But a California judicial ethics panel had some advice Wednesday for any judges who may be considering attending a protest demonstration or a similar political event: Don’t go, unless you’re sure it won’t raise questions about your impartiality.”
• “Judges and judicial candidates ‘are not required to surrender their rights or opinions as citizens,’ the state Supreme Court’s Committee on Judicial Ethics Opinions said, quoting from California’s ethical standards for judges. ‘They shall, however, not engage in political activity that may create the appearance of political bias or impropriety.'”
• “And in an era of social media, the committee said, ‘judges should always assume that their attendance will be known and that their conduct may be subject to comment and reporting.'”
• “That development may help to explain past ethical advisory opinions that allowed some California judges to attend the massive Women’s March held in numerous cities on the day after President Trump’s inauguration in January 2017. Organizers described the event in advance as peaceful and nonpartisan, and, according to the ethical opinions, participants in the march could maintain their public impartiality as long as they did not identify themselves as judges.”

I’m very pleased to welcome a new sponsor of the Bressler Risk Blog: Accuity.

They reached out some time ago as they look to expand their support of the legal market, particularly in the US, and it became clear that exposure here would be a nice fit for them. (My readers are just the folks they want to reach.)

What this means (and what it doesn’t)
I started this site and newsletter as an experiment, supplementing my “day job” as a consultant with a bit of risk blogging, after a near-decade long risk blogging run in a past life. Coupled with wonderful notes of encouragement from the community, sponsor support will help me keep the machine humming.

Those notes from readers really are indeed motivating and appreciated. For those looking to support the blog, sharing it with your friends and colleagues and encouraging them to join the mailing list is another great way to aid the cause.

• For anyone curious about editorial implications (this is a risk and compliance blog so the irony of the topic isn’t lost on me), please rest assured that I take that seriously.
• I generally cover what I personally find interesting. Sometimes that involves a vendor, but most of the time it doesn’t.
• What you will see moving forward is a new monthly “thank you” post to our sponsors, which will include an explicitly commercial message promoting (hopefully interesting and relevant) content that may be commercial. Email readers will also see a discrete newsletter footer with brief commercial messages.
• This is well in line with practices other blogs and publishers follow.
• Fundamentally, the core spirit and focus of the blog remains unchanged.

Oh, and I would note that other sponsors are welcome… So tell your vendors and partners (several of whom are longtime readers as well — hello there) to help themselves reach the risk audience and support BRB.

And, if you’re inclined to lend a bit of attention and consideration to the domain of my new sponsor, I’d certainly be grateful. Here’s the gist of their story and offering:

ACCUITY IN BRIEF

• US firms are facing growing expectations for Anti-money Laundering (AML), Know Your Client (KYC), and Financial Crime / Counter-terrorism Financing (CTF) compliance — increasingly mirroring the strict standards enforced in international jurisdictions.
• Accuity supports the demanding challenges facing law firms with the industry’s largest, most up-to-date database of high-risk entities — including Sanctions, Politically Exposed Persons, Adverse Media, Enforcement and State-Owned Enterprise data. The information we make available covers millions of entities in 250 countries and territories, from 1,300 enforcement agencies and 30,000 Media Sources and all global sanctions lists.
• And this information can be integrated directly into your existing business intake and conflicts software (including purpose built specialist solutions and practice management system modules), or accessed through intuitive, online search and reporting tools.

If this is of interest, please do take a moment to check out some of their more detailed materials at this link, and even fill out their form to get it touch.

If you do get in touch, and tell them you’re doing it because Dan put in a good word, an angel will get her wings, I’m told… >smile<

(Having spent some time on the phone with their account manager, Teddy Peck. I can say that he seems to be a reasonably stand up kind of chap, for a salesperson. And I tend to be pretty hard on those folks… But I’ll leave firms to do their own due diligence on the specifics of their service.)

Now, back to the risk blogging.

Following yesterday’s post on recruiting, training and developing law firm risk staff, this article  caught my eye. While not focused on the legal profession, this piece in the Wall Street Journal on evolving perspectives on remote work was fascinating, resonated in several respects. It’s well worth a read for anyone navigating these shifting streams: “Companies start to think remote work isn’t so great after all” —

• “Four months ago, employees at many U.S. companies went home and did something incredible: They got their work done, seemingly without missing a beat. Executives were amazed at how well their workers performed remotely, even while juggling child care and the distractions of home. Twitter Inc. and Facebook Inc., among others, quickly said they would embrace remote work long term. Some companies even vowed to give up their physical office spaces entirely.”
• “Now, as the work-from-home experiment stretches on, some cracks are starting to emerge. Projects take longer. Training is tougher. Hiring and integrating new employees, more complicated. Some employers say their workers appear less connected and bosses fear that younger professionals aren’t developing at the same rate as they would in offices, sitting next to colleagues and absorbing how they do their jobs.”
• “Months into a pandemic that rapidly reshaped how companies operate, an increasing number of executives now say that remote work, while necessary for safety much of this year, is not their preferred long-term solution once the coronavirus crisis passes.”
• “‘There’s sort of an emerging sense behind the scenes of executives saying, ‘This is not going to be sustainable,’’ said Laszlo Bock, chief executive of human-resources startup Humu and the former HR chief at Google. No CEO should be surprised that the early productivity gains companies witnessed as remote work took hold have peaked and leveled off, he adds, because workers left offices in March armed with laptops and a sense of doom.”
• “Few companies expect remote work to go away in the near term, though the evolving thinking among many CEOs reflects a significant shift from the early days of the pandemic.”
• “One benefit of working together in person, many executives said, is the potential for spontaneous interactions. Mary Bilbrey, global chief human resources officer at real-estate giant Jones Lang LaSalle Inc., returned to her Chicago office in early June, as the company reopened its spaces. She noticed that she was soon having conversations with peers that wouldn’t have happened in a remote set up—a discussion sparked by a passing question in the hall, for instance. ‘They weren’t going to think about scheduling a 30 minute call to do it,’ she said.”
• “The toll of extended work-from-home arrangements is likely to affect career development, particularly for younger workers, several executives said… And then there’s the challenge of training employees who began work after the pandemic began and have had to work remotely from the start… They don’t have the same casual day-to-day opportunities to ask more experienced workers for help or advice that they would if they were working in the same office, even as the company has tried to connect people virtually. New employees in marketing and analytics roles haven’t been able to quickly pick up company jargon and shorthand in meetings, leaving some of them lost.”
• “More companies now envision a hybrid future, with more time spent working remote, yet with opportunities to regularly convene teams.”

Today’s post is a bit of a self-referencing inception loop, but hopefully will be of interest. I wrote and posted an article on LinkedIn. A brief excerpt below, with the full report accessible via the link. I’d welcome readers (good), the click of the magic “like” button (better) and any comments (best) in the response to: “On Recruiting, Retaining and Developing Law Firm Risk Staff in the Age of Covid-19” —

• “Last week, I attended another engaging virtual risk round table event hosted by my friends at InOutsource. The session focused on recruiting, retaining and developing risk staff — with an emphasis on navigating the challenges of today’s remote workplace. Participants included risk leaders and managers from large- and mid-sized firms, responsible for conflicts, intake and related compliance responsibilities. Discussion was quite open and illuminating — some highlights and points of interest:”
• The Retention & Growth Challenge
  • A small conflicts department reported that present circumstances have bolstered their arguments for additional resources to grow the department. Given the strategic importance of client intake and risk management, and lawyer expectations for service, making the business case for increased investment has become easier in some respects.
• The Recruitment Challenge Meets Remote Opportunities & Challenges
  • At the same time, several participants pointed out that today’s default remote working model is opening up new opportunities and a broader talent pool, as their firms are no longer strictly limited by geography of their home or satellite offices.
  • But others share concerns about opposite side of that equation — that as more firms become more open to broader geographic hiring, competition for talent will increase as well.
• The Advancement Challenge
  • Another prominent firm raised the question of “advancement,” sharing that conflicts staff would like to stay in place, but also want to see a path for their own careers to develop. Discussion explored how positions, roles and responsibilities can be structured to provide new opportunities for individuals to progress in their careers without having to make lateral moves.
• Training Tribulations
  • The community commiserated on the true breadth and scope of risk training. It’s not just policy and process, but also technology and other general skills. Those include effective communication — most critically the ability to interact with lawyers in both written and verbal forms — and critical thinking.
  • Others shared Yoda-like challenges trying to teach new resources to “unlearn that which they have learned” — as experienced resources new to their firms struggle to adopt the different policies and practices of their new employers, reverting to legacy approaches instead. In those instances, managers suggested that hiring “fresh” resources with a general law firm background and teaching them conflicts may be more effective.
  • Finally, discussion turned to third-party training resources and learning management. There was active interest in the availability of third-party resources to help firms develop team skills.

Please do see the full article for more detail, including results of an event survey. And do offer up any comments. If this is a hit, perhaps will invite more active dialogue…

“Former Penn State General Counsel Reprimanded Over Sandusky Grand Jury Representation” —

• “The former general counsel of Pennsylvania State University, Cynthia Baldwin, was publicly reprimanded in a live YouTube stream Wednesday over how she represented three former university employees during the Jerry Sandusky child abuse investigation.”
• “‘Your concurrent representation of these clients created a significant risk that your ability to consider, recommend or carry out an appropriate course of action for each client would be materially limited by your representation of Penn State,’ James Haggerty, chair of the disciplinary board of the Supreme Court of Pennsylvania, said during the reprimand.”
• “Following the hearing, Baldwin, who served as a justice on the Supreme Court of Pennsylvania from 2006 to 2008, told Corporate Counsel the investigation against her was biased and referred to the process as ‘aberrant.'”
• “Baldwin was accused of disclosing privileged information while testifying before a statewide grand jury and failing to disclose a conflict of interest to former Penn State vice president Gary Schultz, former Penn State president Graham Spanier and athletic coach Tim Curley.”
• “In 2018, a panel appointed by the disciplinary board of the Supreme Court of Pennsylvania recommended that Baldwin be cleared of ethics violations. Baldwin said the high court should have followed their recommendation.”
• “[Chief Justice] Saylor allegedly told Feudale that a lawyer’s disciplinary complaint against Baldwin was forthcoming and that Feudale should ‘assist in every way with providing information in support of the disciplinary investigation.’ Saylor also allegedly said that assistance and discipline was necessary because Baldwin ’caused us a lot of trouble when she was on the Supreme Court with her minority agenda.'”

“Judge Exits Suit Against Disney Because Of Her Park Pass” —

• “A Florida federal judge has recused herself from a proposed class action against a Walt Disney Company subsidiary because the judge has an annual pass to a Disney theme park, making her a potential class member in the suit alleging pass holders were overcharged.”
• “According to the pass holders behind the suit, Disney suspended the monthly charges for the annual pass in April when it closed its parks in response to the pandemic. However, when the parks began reopening in July, the company charged pass holders for several months of payments at once.”
• “The suit seeks to represent a class of Florida residents who were allegedly overcharged, a separate class of all overcharged pass holders in the United States, and a class for those who continue to be charged for the passes without having the promised access to the parks.”

“Lawyer Not Disqualified in Subway Platform Safety Litigation Over Town Hall Question to Transit Official, Judge Rules” —

• “New York County Supreme Court Justice Lisa Sokoloff has denied a motion for disqualification of counsel, finding that personal injury attorney David Roth didn’t compromise his role in a subway safety case by questioning a transit official at a 2018 town hall meeting.”
• “Attorneys for the Metropolitan Transit Authority and New York City Transit Authority argued that Roth, who represented clients in cases related to the subway, failed to identify himself as an attorney and asked then-NYCTA President Andy Byford questions without transit counsel present.”
• “But Sokoloff found there was “no factual support” for the claim that Roth acted deviously or improperly.”
• “If Roth’s question was not connected to his representation of a client, he did not have to identify himself as an attorney, Sokoloff found in a decision dated June 26.”

“Biglaw Firm Wants Associates Off TikTok, Or At Least TikTok Off Their Phones” —

• “Associates at Ropes & Gray recently received a mandate from firm leadership telling them to delete TikTok. It doesn’t matter if it is firm issued or their personal electronics — any device that has access to their firm email has to be rid of the social media app.”
• “In an email to associates, the firm said this mandate came after at least one client request.”
• “Last month, it was revealed that TikTok, along with a host of other apps, was snooping on anything on your device’s clipboard — which could include sensitive client information. TikTok, as well as some of the other apps, promised to do away with the practice. However, according to an Ars Technica report, at least TikTok was caught snooping even after they said they’d do away with the practice. So, now Ropes associates can’t have TikTok on their phones.”

Interestingly, another service caught up in this “monitored clipboard” issue is LinkedIn. Which begs the question if that’s to remain on the approved list: “LinkedIn sued over allegation it secretly reads Apple users’ clipboard content” —

• “According to Apple’s website, Universal Clipboard allows users to copy text, images, photos, and videos on one Apple device and then paste the content onto another Apple device. According to the lawsuit filed in San Francisco federal court by Adam Bauer, LinkedIn reads the Clipboard information without notifying the user.”
• “A LinkedIn executive had said on Twitter last week that the company released a new version of its app to end this practice.”

“Seven ‘no log’ VPN providers accused of leaking – yup, you guessed it – 1.2TB of user logs onto the internet” —

• “A string of “zero logging” VPN providers have some explaining to do after more than a terabyte of user logs were found on their servers unprotected and facing the public internet.”
• “This data, we are told, included in at least some cases clear-text passwords, personal information, and lists of websites visited, all for anyone to stumble upon.”
• “UFO stated in bold in its privacy policy: “We do not track user activities outside of our site, nor do we track the website browsing or connection activities of users who are using our Services.” Yet it appears it was at least logging connections to its service – and in a system anyone could access if they could find it.”

Bill Freivogel has been quite busy in July. Keeping an eye on his voluminous site of cites, I note several interesting updates:

• Current Client (posted July 15, 2020) Canfield v. SSI&C Techs. Holdings, Inc., No. 1:18-cv-08913(ALC) (S.D.N.Y. July 10, 2020).
  • “This is one of four proceedings involving claims by current and former employees of SS&C for mismanagement of an SS&C ERISA plan. Thirty percent of the plan was invested in Valeant Pharmaceuticals, a huge failure to diversify. Moreover, Valeant had been suspected of dodgy accounting. The defendants include SS&C and “The Advisory Committee of the [SS&C ERISA] Plan.” The Klamann Law Firm (“Klamann”) represents the plaintiffs.”
  • “The problem is that in the Western District of Missouri Klamann represents three former members of the Advisory Committee in a suit against an investment manager of part of the ERISA plan. Although ‘former members’ of the Advisory Committee, they are, nevertheless, defendants in these cases. Several defendants in this case, and in related cases, moved to disqualify Klamann. In this opinion the court granted the motion. [Our note: We had difficulty following the court’s reasoning, possibly because we have had little experience in ERISA litigation. ERISA litigators may want to take a look at the opinion.]”
• Corporate Families (posted July 10, 2020) Franklin Capital Funding v. AKF, Inc., No. 19-cv-13562 (E.D. Mich. July 2, 2020).
  • “In this opinion the court denied plaintiff Franklin Capital Funding’s motion to disqualify defendant’s law firm, Varnum. Plaintiff Franklin Capital Funding is ‘closely related’ to Franklin Capital Management. (The opinion does not reflect the exact nature of the relationship.)”
  • “Avrohom Baum worked for the Franklin Capital entities and had a meeting with Varnum about representation. Baum provided the name ‘Franklin Capital Management,’ so Varnum could do a conflicts check. They signed a ‘master’ engagement agreement in Which Franklin Capital Management was the designated client. The agreement provided that Varnum would not be representing any of the client’s ‘affiliates.’ Later, Varnum showed up as defendants’ lawyers in this case. Thus, the motion to disqualify. Baum claimed that he always assumed that Varnum was agreeing to represent all the related entities. Basically, the court put the onus on Baum to question the provision about no representation of ‘affiliates’ in the engagement agreement, which Baum did not do.”
• Waiver; Passage of Time (posted July 6, 2020) Bucolo v. Van Dyke, No. 3408 (Md. Spec. App. Unpub. July 2, 2020).
  • “Brother and Sister inherited from Father. In this litigation, commenced in 2016, Brother and Sister are fighting over various aspects of estate administration. In December 2016 Brother moved to disqualify Sister’s lawyer (‘Lawyer’) because Lawyer had given Brother a bit of advice about Brother’s inheritance. The opinion is not clear whether the trial court ruled on that motion. This appellate opinion refers to the trial court’s ‘declining to rule.'”
  • “In any event, in this opinion the appellate court ruled against disqualification because, after filing the motion in 2016, Brother did nothing to pursue it. Thus, Brother’s conflict claim was ‘unpreserved.’ In a lame discussion of the merits the appellate court noted that although Lawyer might have given Brother advice, Brother did not follow it, but instead went to another lawyer.”