Risk Update

Risk, Conflicts, Ethics & More — Choice of Law Rules, Arbitration Abuses Alleged

U.S. Chamber blames judges, arbitrators and lawyers for mass arbitration ‘abuses’” —

  • “In more than a decade of litigation to entrench corporations’ power to impose arbitration on consumers and employees, the U.S. Chamber of Commerce has steadfastly championed arbitration as a fair and efficient alternative to class actions.”
  • “But when thousands of workers and consumers actually file demands against a company to have their nearly identical claims arbitrated? That’s not fair or efficient. It’s “blackmail,” the Chamber’s Institute for Legal Reform said in an extremely provocative new report.”
  • “The 80-page paper, entitled “Mass Arbitration Shakedown: Coercing Unjustified Settlements,” argued that mass arbitration, in which plaintiffs’ lawyers file hundreds or even thousands of nearly identical demands against a defendant, is the ’21st century equivalent of the abusive class actions that characterized the last part of the 20th century.'”
  • “The business model, according to the report, has nothing to do with the validity of claimants’ demands. Instead, the Chamber asserted, plaintiffs’ firms rely on the leverage of hefty arbitration fees – which can quickly escalate to tens of millions of dollars when thousands of people file demands — to force corporations into settlements that are ‘wholly unrelated to the claims’ merits.'”
  • “The report, written by Mayer Brown lawyers Andrew Pincus, Archis Parasharami, Kevin Ranlett and Carmen Longoria-Green, asserted that plaintiffs’ firms may be skirting an array of ethical rules in their mass arbitration campaigns.”
    “Among other potential pitfalls, the Chamber cited conflicts of interest among clients who diverge on accepting settlement offers; restrictions on client solicitation; and prohibitions on representing out-of-state clients.”

Choice-of-law questions for state ethics rules examined in new ABA opinion” —

  • “Lawyers admitted to multiple jurisdictions may be subject to different ethical requirements in the different states in which they are licensed to practice law, according to a new ABA ethics opinion.”
  • “A March 1 ethics opinion from the ABA’s Standing Committee on Ethics and Professional Responsibility provides a comprehensive analysis of which jurisdiction generally controls in these instances.”
  • “The governing rule noted in Formal Opinion 504 is ABA Model Rule of Professional Conduct 8.5, which provides in subsection (a) that: ‘A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer’s conduct occurs.'”
  • “A March 1 press release from the ABA is here.”
  • “Thus, for litigation matters, a lawyer is subject to the rules of the jurisdiction of the court before which they are litigating a case. For other matters, the rule generally provides that the rules apply in which the lawyer’s conduct happened unless ‘the predominant effect of the conduct is in a different jurisdiction.’ A difficult part of this rule determines when the predominant effect of the lawyer’s conduct is in a different jurisdiction.”
  • “For example, the opinion addressed a scenario in which a lawyer-client relationship is formed in State X, and the fee agreement is signed there. The client resides in State X, and the lawyer will work from their office in State X, but the litigation will happen in State Y, another state where the lawyer is licensed.”
  • “According to the opinion, while a lawyer is generally subject to the ethics rules of the jurisdiction when appearing before a tribunal, Comment 4 to Model Rule 8.5 explains that “conduct in anticipation of a proceeding not yet pending before a tribunal” is covered by Model Rule 8.5(b)(2), not Model Rule 8.5(b)(1).”
  • “In other words, drafting a fee agreement is conduct not yet pending before a tribunal, rather than litigation before a tribunal. This means that Model Rule 8.5(b)(2) would govern, and the question becomes where is the predominant effect of the lawyer’s conduct. The opinion noted that the lawyer and the client would reasonably regard that as State X, rather than State Y.”
  • “The opinion provides similar detailed analysis of the other four scenarios.”