Risk Update

Risk News & Reading — Insider Trading Conflict Waived, Sophisticated Client Risk Management, Data Breach Lawsuit #2

Dentons partners Shari L. Klevens and Alanna Clair always present worthwhile content: “How to Handle Disputes With Sophisticated Clients” —

  • “Representing clients who have more familiarity with the law and complex business issues is often a different experience than that of representing a client who is wholly unfamiliar with the law… This difference raises a question—does a lawyer’s duty or the standard of care change in any way when representing a so-called sophisticated client? There are areas where courts will make this inquiry, such as in looking at conflict waivers and other parts of the lawyer-client engagement process. In addition, some courts also take into account a client’s sophistication when addressing disputes between the client and their lawyer.”
  • “Another example of courts taking a client’s sophistication into consideration arises in the context of future-conflict waivers, in which, as part of an engagement, a client agrees to waive certain types of conflicts of interest if they arise in the future. In a recent case in Florida, a major national brand filed a motion to disqualify its former law firm (a large national firm) from representing an adverse party.”
  • “When the law firm noted that the brand had signed a waiver regarding future conflicts, the court agreed in upholding the waiver. Among other things, the court focused on the sophistication of the client, the size of their in-house legal team, their use of dozens of outside law firms and the fact that the client was represented by independent counsel in executing the waiver. As a “sophisticated consumer of legal services,” the brand’s waiver was enforceable.”
  • “A legal-malpractice case sometimes involves an evidentiary review of the client’s understanding of the law or of the selected strategy, especially for more sophisticated clients. Thus, if there is a later dispute over what the client understood or consented to, having evidence in hand showing the client’s understanding, acquiescence or sophistication can go a long way.”
  • “Documenting the level of the client’s involvement in close to real time can also be a reminder to the client of the decisions they made and why. Although the absence of such documentation in a subsequent legal malpractice case does not confirm a breach of the standard of care, lacking this evidence could make it harder for the lawyer to explain what really happened.”
  • “Even if the evidence does not extinguish liability altogether, it might help to mitigate potential damages. For example, in a recent New York case, the court reviewed a communication by lawyers to their client with a marked-up version of a key lease amendment.”
  • “The court concluded that this communication was not sufficient to show that the lawyers adequately advised the client of the significance of their edits, but the court did conclude that the client’s level of sophistication and understanding in reviewing the amendment could be evidence to support mitigation of damages.”

Ex-Mylan CIO Waives Atty Conflict For Insider Trading Case” —

  • “A former Mylan executive told a Pennsylvania federal judge that he could still be defended on charges of insider trading by an attorney who also represented other Mylan higher-ups in a pair of civil lawsuits, waiving any potential conflict of interest in court Tuesday.”
  • “Ramkumar Rayapureddy, 55, of Upper St. Clair, Pennsylvania, said he understood that one of his defense attorneys, John A. Schwab, had represented or was actively representing Mylan NV, its successor, Viatris, and several of its current and former executives in a proposed investor class action and in an antitrust lawsuit.”
  • “After questioning from U.S. District Judge W. Scott Hardy, Rayapureddy agreed to waive any potential conflict of interest that might arise if some of those executives were called as witnesses in the criminal case against him for allegedly helping a former colleague make millions from stock trades based on insider information he had when he was chief information officer for the company.”
  • “After Rayapureddy indicated he was aware of the potential conflict and was still willing to waive it, Judge Hardy had him and his attorneys sign a waiver form at the conclusion of Tuesday’s hearing.”
  • “Judge Hardy said that at a hearing in July, he became aware of the potential conflict that Schwab’s representation could raise, and ordered that the defense and the government file sealed briefs on their positions regarding that conflict. Though the briefs remain under seal, Judge Hardy said Tuesday’s hearing on the matter would be public.”
  • “Rayapureddy said he had not discussed with Schwab exactly which executives he had previously represented — Schwab said the individual defendants had been dropped from the shareholder suit — but Judge Hardy reminded him that the names were public record and not subject to attorney-client privilege.”
  • “After a brief break to review the list — including former CEO Heather Bresch, who left the company when it combined with Upjohn to form Viatris; President and Executive Director Rajiv Malik; Viatris President of Developed Markets Anthony Mauro; and former Chief Financial Officer Kenneth Parks — Rayapureddy again consented to waive that potential conflict.”

Orrick Herrington Hit with Another Lawsuit from Hacker Attack” —

  • “Orrick, Herrington & Sutcliffe LLP was sued Monday for a second time arising from a springtime data breach that allegedly allowed personal information including Social Security numbers of nearly 153,000 individuals to be accessed.”
  • “The filing alleges Orrick failed to create and implement reasonable data security practices, including training employees and others who accessed the information. It also alleges that the firm didn’t tell individuals their data had been compromised for four months after the incursion.”
  • “Accusing the firm of negligence, breaches of fiduciary duty, confidence, and implied contract, and invasion of privacy, the plaintiff Robert Jensen seeks certification of a class of those who received letters notifying them of the breach.”