Bressler Risk Blog

“Miami-Dade Judge Removed From 3 Cases After Sanctioning Bilzin Sumberg” —

• “The Third District Court of Appeal has agreed to remove Miami-Dade Circuit Judge Beatrice Butchko from three cases over concerns from Miami firm Bilzin Sumberg Baena Price & Axelrod. Bilzin Sumberg raised concerns that some of the parties wouldn’t receive a fair trial, in light of a sanctions order against the firm in an unrelated case.”
• “But in a separate case, Butchko wrote a 51-page order in September, sanctioning Bilzin Sumberg attorney Jose M. Ferrer and his firm for allegedly using confidential information obtained via secret phone recordings without their opponents’ knowledge. Bilzin Sumberg has denied any wrongdoing.”
• “But according to the order, Ferrer and his team used the recordings to launch false and derogatory allegations against opposing counsel, Gunster shareholders Jonathan Kaskel and Angel Cortiñas. The ruling also implicated the firm’s general counsel, who is a witness in one of the cases at issue, according to Wednesday’s opinion.”
• “That, Bilzin Sumberg argued, meant Butchko wouldn’t be an impartial arbiter in the other three cases in which the firm was involved… On appeal, the Third DCA had to decide whether those fears about an unfair trial were well-founded. And they were, according to the opinion, which consolidated all three cases.”
• “The panel was careful to note that its ruling didn’t mean Butchko was biased, pointing to case law that said, ‘Such a fear rests in the mind of the litigant and if the attested facts supporting the suggestion are reasonably sufficient to create such a fear, it is not for the trial judge to say that it is not there.'”

“All Minn. Federal Judges DQ’d From Whirlpool Defect Suit” —

• “Minnesota’s chief federal judge on Monday recused himself and all other district and magistrate judges in the state from hearing a proposed class action over allegedly defective Whirlpool cooktops because a retired Minnesota federal judge filed the suit.”
• “Rosenbaum filed suit Nov. 20, claiming that Whirlpool is well aware that its cooktops, sold under a number of its brands, pose a fire hazard… After the recall, Whirlpool told consumers to turn the cooktops off at the circuit breaker when not in use and to contact the company for replacements, Rosenbaum said… The retired judge said he has contacted Whirlpool multiple times since Sept. 6 to request a replacement, but the company has failed to provide a safe comparable cooktop.”
• “His suit claims Whirlpool violated the state’s Unlawful Trade Practices Act. Rosenbaum seeks to represent a nationwide class of consumers who bought the glass cooking surface, radiant and downdraft radiant models sold under the Whirlpool, KitchenAid and JennAir brands for household use, according to the suit.”

“VW Declined to Hire Louis Freeh for $15M. Now He’s on the Other Side—and VW Is Crying Foul” —

• “Four years ago, former FBI Director Louis Freeh was on the verge of being hired by Volkswagen to run its diesel emissions litigation—work for which he wanted a guaranteed $15 million over three years, plus 10% of the “savings the company and its subsidiaries yield and/or the costs saved by settlements,” according to a draft engagement letter. In the end, he didn’t get the job—nor did VW bite a year later when he suggested that the automaker ‘keep me in mind for any future role, such as a monitor.'”
• “Now, Freeh—founder and chairman of consulting firm Freeh Group International Solutions and senior managing partner of affiliated law firm Freeh Sporkin & Sullivan—has turned up on the other side. He’s serving as an expert witness for plaintiffs who opted out of VW’s overarching civil settlement in 2016 and are suing the company instead.”
• “In a motion to disqualify filed on Monday in San Francisco federal court, the VW team led by Robert Giuffra Jr., Sharon Nelles, William Monahan, John McCarthy and Michael Steinberg argue that ‘Mr. Freeh’s conflict of interest and receipt of confidential information disqualify him from serving as an expert adverse to defendants.'”
• “Freeh ‘engaged in extensive privileged and confidential discussions with Volkswagen’s senior-most executives and counsel about the same diesel matters underlying this lawsuit, including discussing key documents and legal strategy,’ they continued. ‘Mr. Freeh’s contemplated mandate would have included a role overseeing both this case and the exact same criminal matter that is the subject of his expert opinion.'”
• “‘The circumstances here go far beyond what other courts have found to be disqualifying,’ the Sullivan & Cromwell team wrote. ‘Here, the topics that Volkswagen discussed with Mr. Freeh are not only privileged, but squarely implicated by his proposed testimony. For instance, one of Mr. Freeh’s main conclusions—that there was executive-level wrongdoing that Volkswagen concealed from the court and the prosecutors—is primarily based on a document that Volkswagen’s counsel shared with Mr. Freeh to seek his legal advice on its implications.'”

“Miles & Stockbridge Hit With DQ Bid In Army Contract Case” —

• “Advanced Training Group Worldwide Inc., which has accused ProActive Technologies Inc. of illegally nixing it from a joint venture the pair formed to bid on the Special Operations Forces training contract deal, said Friday that Miles & Stockbridge should be disqualified from the case because the firm previously represented the joint venture.”
• “According to ATG, Miles & Stockbridge breached its obligations to the Ohio company by prioritizing ProActive’s interests over ATG’s, even though both parties owned shares of the joint venture. The firm also failed to obtain a conflicts waiver from ATG, the company said.”
• “ATG argued the case is related to the firm representing the joint venture because the company claims ProActive breached the deal that created the joint venture. In addition, ATG said that in representing the joint venture, the firm knew about confidential information from both companies that could be exploited in the case. Some of the documents the firm drafted are currently main pieces of evidence, ATG noted.”

“Harvey Weinstein’s legal team tries to get judge, attorney Gloria Allred removed from proceedings” —

• “Harvey Weinstein is trying to distance people from his trial before it even begins. Wednesday marked the third day of jury selection in the disgraced movie executive’s rape trial, and it’s already proving hard to keep anyone in the room. In addition to the dozens of potential jurors who’ve been disqualified from the case, Weinstein’s legal team has also tried to get well-known attorney Gloria Allred and the judge who’s overseeing it all barred from the courtroom altogether.”
• “Weinstein’s issue with New York Supreme Court Judge James Burke began Tuesday morning when he called out the defendant for using his phone in the courtroom ahead of the proceedings… Burke came out for the proceedings and asked Weinstein ‘Is this really the way you want to end up in jail for the rest of your life, by texting in violation of an order?’ ‘These comments reflect the court’s animus towards the defendant,’ Weinstein’s legal team argued in a letter calling for Burke’s removal from the case.”

These were rejected in the case of Allred:

• “Weinstein attorney Damon Cheronis expressed concern that her presence could potentially allow her to coach or influence witness testimony and that Allred herself may be called as an impeachment witness. “It’s not because I’m trying to attack Ms. Allred. I’m trying to protect Mr. Weinstein’s right to not have witnesses in this courtroom,” Cheronis said.”
• “On Wednesday, Justice James Burke denied the defense’s motion to eject her during the proceedings. ‘There would be no actual harm as to impeaching her simply for having observed the trial,” Burke said. “She may remain and she should certainly be on the witness list.'”

And in the case of the judge:

• “‘All I meant to do was scare him enough for him to discontinue use of his phones,’ Judge James Burke said in denying the defense’s motion for relief and recusal on Thursday. ‘I never actually meant that I was going to put your client in jail for life.'”
• “Burke said that Weinstein ‘was noncompliant and defiant and challenging to the court officers when asked to put away his phones.’ The judge reiterated multiple times that he has not made up his mind on the sexual abuse charges against Weinstein, despite the defense’s accusation of bias against the Hollywood producer.”

Tis the season for New Year’s risk resolutions and advice. Karen Rubin offers a nice summary of this ilk with: “Five ways to stay out of ethics trouble in 2020” —

• “Bill carefully. Billing was big news at the end of last year, with reports about the lawyer who failed to keep contemporaneous time records and was suspended for overcharging clients based on her reconstructions of the work. In addition, there was the federal suit filed early in the year, with the allegation that a firm’s “block billing” obscured overcharges. (The plaintiff voluntarily dismissed the case two weeks after filing it.) There are lots of ethics issues relating to legal fees in general — dividing them with other lawyers; whether you must deposit them in an IOLTA or IOTA; what to do in case of a fee dispute with a client — but everything depends on the core notions of charging a reasonable fee, communicating the basis of that fee to the client, and keeping the client informed about the bill as you go.
• “Watch for conflicts. Getting disqualified is never a good thing, but conflicts of interest led to just that result in a couple cases providing some important take-aways. For instance, in the government context, the DQ of an entire prosecutor’s office based on the chief prosecutor’s previous representation of the defendant while in private practice underscored the role that imputation plays under Model Rule 1.10 and 1.11 in spreading the “taint” of a disqualifying conflict. And a lawyer who represented a massage parlor in the sale of the business was DQ’d in a suit over the deal because his previous representation of the buyer was “substantially related” to his work for the seller under the state’s version of Model Rule 1.9.”
• “Keep it confidential. Technology played a role in two situations last year that spotlighted confidentiality concerns. In January, lawyers for President Trump’s former campaign chairman Paul Manafort failed to redact a document properly, leading to disclosure of the hidden contents when it was filed with the court. And a lawyer’s Facebook posts that disclosed enough information about a client that she recognized herself resulted in a public reprimand for violating the duty of confidentiality. The place where social media, technology and our confidentiality obligations intersect is a place to be cautious.”

The folks at Intapp were first to put this new risk issue on my radar, which goes into effect later this year, as it carries implications for law firm data capture on the intake/conflicts and compliance when working with clients on relevant matters in affected geographies: “What firm leaders need to know about DAC6” —

• “DAC6, the European Union directive on administrative cooperation — formally known as Council Directive 2018/822/EU of 25 May 2018 — sets down new regulations for certain cross-border arrangements, and mandates transparent reporting requirements for companies doing business in E.U. member states. Tax advisors, professional services firms, and taxpaying companies alike are grappling with new disclosure rules, which will be fully implemented my mid-2020.”
• “Under DAC6, companies entering into — or advising on — cross-border arrangements will need to report these arrangements to local authorities, regardless of whether or not the relevant transactions were primarily motivated by tax benefits. As a result, many relatively mundane financial transactions — leasing, reinsurance, corporate funding, and acquisition finance — are now subject to E.U. reporting mandates. And, in some cases, multinational entities with headquarters outside of the E.U. are also subject to DAC6 requirements.”
• “Notably for professional and financial services firms, DAC6 obligations apply equally to business intermediaries as to the taxpayer. DAC6 requirements are also shared by all intermediaries, so a single business event could trigger reporting requirements for a number of firms — lawyers, accountants, service providers, and private equity managers — in addition to entities that are party to the transaction.”

For those interesting in going deep, Allen & Overy offers quite the excellent analysis on the details and nuances: “DAC6 – Mandatory disclosure tax reporting what does it mean for you?”

• “All intermediaries involved in a transaction individually have an obligation to file. However, an intermediary is exempt from disclosing if it has proof, in accordance with national law, that the same information has been filed in another Member State.”
• “It will be important to ascertain this information in respect of a transaction at an early stage. In the case of doubt it may be safer for all intermediaries to make a disclosure.”

And this article in LegalFutures does a nice job of connect the dots more explicitly for law firm: “DAC6 compliance – seven timely recommendations” —

• “1. Review your engagement letter. You need to let clients know about the new requirements and the potential reporting obligation. One way to do this is to include the DAC6 reporting requirements in your client engagement letter. Some firms may decide to rely on legal professional privilege asserting that confidential client information does not need to be divulged to tax authorities. Firms using professional privilege will need to advise clients of their responsibility to report to another intermediary.”
• “2. Modify matter inception process. Flagging potential transactions that might be caught by DAC6 will help you track details when the reporting requirements are in force. Some firms have added a question on client/matter intake forms to determine whether DAC6 is likely to apply.”
• “4. Keep a register of all potentially reportable transactions. Not every transaction will be reportable, so tracking those that might be will help firms to decide which arrangements ultimately require reporting. DAC6 compliance requires firms to capture all the details of relevant transactions and later analyse whether they warrant further investigation. An online register will track and record transactions when hallmarks are present, flag those transactions and alert the appropriate staff.”

Happy 2020. Thought I’d kick off the year by catching up on several stories that were sitting in my virtual clipping pile that didn’t quite make it into December.

“Pa. Judge Says Old Bill To Firm’s Partner Doesn’t Create Bias” —

• “A Pennsylvania state court judge overseeing class action cases in Allegheny County said Thursday that a decades-old legal bill from his days as an attorney didn’t bias him against his former client’s law firm of Carlson Lynch, which has brought numerous class actions in state and federal courts.”
• “…when he was a lawyer in the early 1990s, he had represented Carlson Lynch partner Bruce Carlson, whose firm was now representing the proposed class of thousands of UPMC employees. Judge Ignelzi also told them that to the best of his recollection, Carlson had not paid his bill for that representation, but he emphasized in a special hearing Thursday that he did not believe that old obligation biased him against Carlson Lynch in the cases he had heard or would hear in the future involving the firm.”
• “Judge Ignelzi had asked his former partner, Michael Murphy of Ogg Murphy & Perkosky PC, to search the firm’s records for any information about its representation of Carlson. Under questioning from the judge Thursday, Murphy said it appeared that the file had been either thrown out or irreparably damaged when floods in the 1990s soaked old records that were stored in the basement of the building along Downtown Pittsburgh’s Monongahela riverfront.”
• “Judge Ignelzi said he had made the disclosure prior to an October hearing on UPMC’s preliminary objections because the Pennsylvania rules of professional conduct required him to disclose any potential conflicts, even if he felt they did not rise to a level that would disqualify him.”

“Both sides file motions in Powers lawsuit” —

• “In his complaint, Powers asked the court for a temporary and permanent injunction against the Board of Selectmen, alleging the board did not, on a number of occasions, follow Robert’s Rules of Order for making a motion and thus 37 motions made by the board in 2019 must be vacated and future motions must follow Robert’s Rules and other provisions of town policy.”
• “In his Oct. 30 motion, Powers requests Berchem Moses P.C., of Milford, the law firm representing the defendant, be dismissed because of a likely conflict of interest. Powers claims Ira Bloom, the town attorney for Wilton, and a partner with Berchem Moses, is a necessary witness in the suit regarding information Bloom provided to the Board of Selectmen about requirements about receiving/responding to Freedom of Information Act (FOIA) requests.”
• “In their Nov. 27 objection, the defendants say there is no conflict of interest with Berchem Moses, based on the Connecticut Practice Book’s rules of professional conduct which delineates what constitutes a conflict (primarily conflict an attorney has with another client).”
• “They claim the defendants’ interests are “aligned” and Berchem Moses’ representation of the defendants is not adverse ‘to any other client or a significant risk that representation will be limited by responsibilities to another client.'”

“3 Places Overbilling May Be Lurking” —

• “Over the last two decades or so, sophisticated buyers of legal services have tightened up billing standards, poured money and time into auditing, and routinely questioned what they’re getting for all those “0.2 hour” line items.”
• “At the same time, courts and the bar have also become far more strict about what constitutes a “good” — and ethical — legal bill and helped cure the profession of at least some of its worst timekeeping habits.”
• “The practice of block billing, in which lawyers include a long series of billable tasks in a single time entry, is widely understood to lead to client “upcharging” and has been rightly disparaged by many judges and bar ethics committees.”
• “Still, practice group leaders and supervising partners should double-check that block entries are used consistently and moderately. That’s particularly true in the last months of the year, as associates, and many partners, feel pressure to bill every hour possible.”
• “Kay Holmen, a senior auditor at KPC Legal Audit Services in Glendale, California, cautions against grouping more than three tasks in one block, or block billing a client for more than a single hour per entry. Lawyers can also avoid pushback by taking some extra care to describe each step covered by a block entry.”

Okay, like overly-retained records, IG Week turned out to run a little longer than planned. But this final update I wanted to share from the ILTA IG White Paper touches concepts near and dear to my heart (with lessons applicable well beyond IG).

From Lauren Doerries (Information Governance Business Process Manager at Morgan Lewis) comes: “Using Marketing Principles to Effectively Communicate Your Information Governance Program.” For specific details and recommendations, do check out the complete article. Here are some thematic highlights —

• “The act of ‘marketing’ can be described as the process of communicating value to your customers… In this article, we’ll explore how traditional marketing strategies and techniques can help you to elevate the visibility and communicate the value of information governance within your firm.”
• “A key element of any successful marketing strategy is deciding on how to best position your product to appeal to your target market. It’s no secret that buy-in and support from sponsors and high-level stakeholders is critical for an IG program to become established and continue to thrive. Still, many of us struggle with how to attract the attention of the busiest, most important (and often most elusive) people at your firm while at the same time convincing them of your value.”
• “Framing your IG initiatives through the lens of how they align with existing internal compliance efforts allows you to go where the attention of leadership already is, instead of competing for it with larger, more established and often better funded groups.”
• “Developing an effective internal communication strategy to market your IG program, and IG itself, is an important first step towards planning how you’ll engage with your audience… Creating a communication plan doesn’t have to be complicated, and chances are you’ve already informally mapped out some of the components. A basic plan can be as simple as documenting the ‘Who’, ‘What’ and ‘How’ of what it is you’re trying to say.”
• “Once you’ve identified your audience and crafted your message, it’s time to start developing ideas for how to get and keep your audience actively engaged.”
• “In order to keep your IG program relevant to your organizational culture, and to sustained employee engagement levels, you must be willing to continually reimagine your role as an IG professional. One way to do this is by continuing to embrace new stakeholders and tools.”
• “Successfully adapting and applying marketing strategies to your IG program will help you to build and strengthen relationships with your stakeholders by creating and sharing a compelling story about the true value of information governance to your firm.”

Next up on IG, something from the NYC chapter of ARMA, recently published in its “Exchange” magazine:  “Making Mountains Into Molehills — Managing Information Assets in a Complex IG World (Part 1)” —

• “The regulatory environment for how businesses manage information continues to grow in complexity and uncertainty. Information and records management professionals are now tasked with understanding the implications of laws and regulations such as GDPR, CCPA, HIPAA, SOX, FCPA and AML, and evolving standards such as the Generally Accepted Recordkeeping Principles, the Information Governance Body of Knowledge (IGBOK) and international standards from ISO and other regulatory bodies.”
• “In addition to defining their own IG policies to comply with standards, many organizations face cybersecurity, data privacy and records retention requirements from clients, business partners and vendors that enact strict guidelines and frequent privacy and cybersecurity audits. In this environment, companies may no longer be able to accept the risks associated with an approach to IG which is tantamount to: Keep it forever because computer storage is cheap, and so is offsite hard-copy storage.”

Next up from the recent ILTA IG white paper comes: “The Elephant in the Room: The Hidden Costs and Risks of Electronic Records Retention” —

• “As of August 2019, NetDocuments was managing over 9.1 billion files across more than 2,500 organizations globally, while iManage was serving more than 2,000 law firms. And that’s just one piece of the puzzle. A typical law firm may have client matter information stored in as many as 30 different types of repositories, and the volume of data continues to grow every day.”
• “Given the industry trend to embrace more “paper- lite” approaches, it’s understandable that most records management and information governance teams have focused on reducing the volume of physical records in offsite storage, rather than worrying about the impact of cumulative growth in electronic records over time.”
• “However, the reality is that most law firms today are now storing virtual mountains of digital records they no longer need—including matter files from ex-clients which have been inactive for more than a decade. The costs and risks of this “keep everything just in case” approach are significant and pose looming threats for law firms that fail to act.”
• “Identifying which electronic records to dispose of can be a mammoth task initially, particularly if your firm has not disposed of electronic records previously. Technology can help. An advanced records management system will be able to provide you with an integrated view of all repositories across your firm—indexing all items within the DMS, file shares, e-discovery archives and even your physical archives. Legal holds related to specific client matters should be applied consistently regardless of where the information resides.”
• “Just inches from the finish line, some firms find that the biggest challenge for them is getting final sign-off on destroying the massive backlog of aging electronic records that should be destroyed… Lawyers are also trained to be cautious, and in a culture where “having a memory like an elephant” is prized, it can be difficult to let go of the “keep everything” mindset, even if they accept that the status quo is untenable.”
• “One thing is certain: Left unchecked, the information elephant will continue to grow. For most firms, the volume of digital information received and produced on a daily basis is staggering. Data growth is likely
  to continue at an accelerated pace, and the strain on firm resources could soon reach the breaking point for many.”
• “Taking a more proactive approach to electronic disposition is a critical step toward more effective information governance, risk management and client service delivery and more cost-efficient use of your digital infrastructure. By eliminating the backlog of electronic records that are no longer needed and automating retention and disposition moving forward, firms can take control and finally start to realize the full rewards of transitioning to “paperless” and ‘paper-lite’ environments.”

Another interesting ILTA article of note comes from Leigh Isaacs (Director, Information Governance & Records Management at Proskauer Rose) and Doug Smith (Records Manager at Crowell & Moring) present a fascinating take on: “Politics of Information Governance” —

• “How do you identify the dominant culture in your firm? Does your firm encourage innovation and free market success to find creative solutions? Do they prefer to take a more methodical approach and identify a best way to move forward which, while not as innovative, yields a more predictable result? Perhaps your firm lies somewhere between, allowing innovation in some areas while requiring standardization in others.”
• “Once you have identified your firm culture, we will present some steps to establish a successful information governance initiative. These steps will serve as a starting place for you to lead the evolution of information management for your organization.”
• “In short, starting your journey with a firm grasp of your firm’s culture can go a long way to securing the endorsement and support you need. IG is not a “one size fits all” in any organization but this investment in time and resources will help you navigate the political landscape to achieve success.”

“Conservative” Firms:

• “Conservative firms might encourage users to operate within a traditional model using a standard taxonomy, very secure systems and traditional tools. These firms want to encourage safe innovation modeling to others, breeding success while taking fewer risks. Their risk tolerance is very low and while not yielding huge, quick benefits, ensures a predictable, stable return. These firms are sometimes referred to those that like to ‘be first at being second.'”
• “So you have identified your firm as being generally conservative in nature. What information governance elements should you push first? Which key processes will yield the quickest wins allowing you to build momentum for more funding and support?”
• “Principles which might yield quick return in this report at a more conservative culture would include addressing retention/disposition practices, legal holds, information security, and monitoring of key processes.”
• “What implications may result from being a conservative firm? Your organization will likely not benefit from new technologies before some of your competitors. You will need to guard against staying with existing, functional technology past it its optimal usefulness.”

“Progressive” Firms:

• “Progressive firms typically utilize newer technologies, a more open information sharing system and are willing to risk small failures hoping to yield much larger results. They embrace change with all the inherent unpredictable results.
• “They understand there is value to failing, failing quickly and resisiting the pressure of perfection…This firm will have less competing ideas and will likely coalesce around a strategy faster than other firms. The organization can identify, engage and deploy new technologies and processes quickly.”
• “Information governance awareness and education will be paramount to inform, train and monitor users to ensure they are in compliance with stricter controls. A progressive firm will have a variety of projects at various different levels. It’s important to stay in tune with those to find opportunities to infuse good IG practices from the outset.”
• “You will need a strong audit and remediation effort to monitor compliance with and to fix instances of breach of policies… You will need to have a meticulous process to monitor user behavior. The process needs to be flexible to account for different technologies and systems. You will find issues where users have compromised your policies. If you do not find them, you will need to evaluate the effectiveness of your monitoring. How you address these variances of behavior will be a better indicator of strength of your program than the program itself. Users will stray. It is your job to identify the variance, assess and fix the damage.”
• “Progressive firms seemingly enjoy several advantages. The propensity for quick change and early adoption of new tech increases risk as well as the need for vigilance in developing concurrent governance strategies and tools.”