Risk Update

Risk Reading — ALM on Client Due Diligence, Anti-money Laundering & Professional Responsibility (ABA Rule Changes), Amber Heard Attorney DQ’ed

Posted Dan Bressler

The ALM/Law Journey Editorial Board writes: “In Support of ABA Proposal on Lawyer Due Diligence” —

  • “At its mid-year meeting in February, the American Bar Association passed a resolution that brought ABA policy current in light of the enactment of the Corporate Transparency Act (CTA) in 2021, which addressed anti-money laundering. At the heart of the law, and efforts to fight not just money laundering, but terrorist financing, human trafficking and other such crimes, is disclosure of beneficial ownership. Beneficial owners are those who are the actual, behind the scenes owners of business entities.”
  • “The filing obligations under the CTA will start to become effective Jan. 1, 2024. Subject to certain exemptions, domestic business entities and foreign entities registered to do business in the United States that meet certain employee and revenue thresholds are required to report certain information relating to beneficial ownership.”
  • “Nonetheless, the issue of whether lawyers have responsibility to ask appropriate questions and otherwise be obligated to engage in a certain level of due diligence remains a matter of public concern, as well as a legitimate concern to the profession as to how lawyers are perceived.”
  • “Those who remember the Sixty Minutes program some years ago, where lawyers appeared to have been caught on film discussing potential representation of a fraudster seeking to park illicit money in the U.S., will recall the negative reaction of the public to lawyers seen as aiding and abetting money laundering.”
  • “The ABA proposal would add the prefatory language to the overall rule regarding representation to state that “a lawyer shall assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation.” It also adds to the mandatory conditions for refusal to represent or to withdraw the provision that ‘the client or prospective client insists on using the lawyer’s services to commit or further a crime or fraud.'”
  • “Nonetheless, the proposal is a necessary addition to address not only the appearance of lawyers to the public, but the substantive obligations of lawyers. If lawyers do not regulate themselves, other measures loom on the horizon, such as the ENABLBERS Act, passed last year by the U.S. House of Representatives but killed by the Senate, or new rulemaking by U.S. Treasury Department under the Bank Secrecy Act.”
  • “It is anticipated that the proposal to amend the Model Rules, or a proposal substantially like it, will be considered by the ABA at its annual meeting in August. The proposal has undergone substantial public comment. If adopted, then of course it does not become binding until and unless the respective jurisdictions adopt it. We add our voice to support this proposal.”

“Attorney Disqualified in Amber Heard Coverage Battle” —

  • “A California federal judge’s tentative ruling has delivered a surprising twist in the heated battle between insurers New York Marine and General Insurance Co. and Travelers. The two insurance giants are embroiled in a fierce dispute over coverage in a defamation lawsuit involving actress Amber Heard and her ex-husband, Johnny Depp. In a surprising development, the judge has granted New York Marine’s bid to disqualify Maynard Nexsen from representing Travelers, shaking up the legal landscape and heightening the drama surrounding this high-profile case.”
  • “The judge’s decision is based on the fact that one of Maynard Nexsen’s associates, Matthew A. Chipman, previously worked for McCormick Barstow Sheppard Wayte & Carruth LLP, the firm representing New York Marine in the lawsuit. This revelation creates an intriguing legal conflict, raising questions about potential conflicts of interest and adding a layer of complexity to the case.”
  • “The involvement of Amber Heard and Johnny Depp in the underlying defamation lawsuit forms the backdrop of this insurance coverage dispute. Travelers accused New York Marine of failing to fulfill its obligation to provide coverage to Heard, who was a co-insured party.”
  • “As the legal battle between New York Marine and Travelers intensifies, the disqualification of Maynard Nexsen adds a new layer of intrigue to an already captivating case. The implications of this ruling are significant for both insurers and the high-profile individuals involved. The disqualification not only disrupts Travelers’ legal representation but also underscores the complexity and intensity of the dispute surrounding Amber Heard and Johnny Depp’s defamation lawsuit.”
  • “Moving forward, the focus will shift to the actions and strategies of the parties involved. It remains to be seen how Travelers will regroup and respond to the disqualification, as well as how New York Marine will leverage this development in their pursuit of a favorable outcome. The case’s outcome could potentially reshape the landscape of insurance coverage disputes, setting precedents for future cases involving co-insured parties and complex legal conflicts.”
  • For more detail and background, see: “Amber Heard Defense Cost Drama: Insurer Fights to Disqualify Law Firm Over Conflict of Interest“