Risk Update

Risk Reading — Divorce Fight DQ Motion Fails to Convince, Law Firm Fiduciary Conflict in UK Matter, Visiting Lawyer Insider Trading Allegations

Pa. Superior Court Denies Bid to DQ Husband’s Counsel From Divorce Case Over Brief Meeting With Wife in 2014” —

  • “The Pennsylvania Superior Court has affirmed a lower court’s denial of a wife’s motion to disqualify her husband’s attorney from their divorce proceedings, determining the wife failed to prove her brief meeting with the attorney years prior had created a conflict of interest.”
  • “In an Aug. 22 opinion, authored by Judge Judith Ference Olson, the court affirmed the order denying Tracy A. Cunningham’s motion to disqualify counsel for her husband Michael Spinneweber. Cunningham had alleged that her 2014 consultation with the attorney, Jill Sinatra, about potentially divorcing Spinneweber had created a conflict of interest in the current case. But the appeals court said Cunningham failed to show Sinatra acquired any significantly harmful information during that consultation.”
  • “Cunningham sought to disqualify Sinatra and her firm, alleging that Sinatra and the firm had a conflict of interest because Spinneweber and Cunningham had allegedly met with Sinatra regarding litigation involving Spinneweber’s business in 2013. Further, Cunningham alleged that, in 2014, when Sinatra was associated with Lisa Marie Vari & Associates, she consulted with Sinatra about potentially divorcing Spinneweber. Cunningham alleged that, during the consultation, she ‘provided detailed and privileged information concerning the parties’ marriage, business assets and income,’ according to the opinion.”
  • “But Sinatra said she had no recollection of the meeting and did not retain any documents from the consultation, according to the opinion.”

High Court Rules That City Law Firm Breached Duties By Acting For Client Despite Conflict Of Interest And By Failing To Provide Adequate Costs Information Under CFA: Forster V Reynolds Porter Chamberlain [2023] EWHC 1150 (Ch)” —

  • “In its recent decision in Forster v Reynolds Porter Chamberlain LLP, the High Court found that City law firm, RPC, had breached its duty of care to its client, Ms Forster, after failing to keep her adequately informed of costs incurred under a conditional fee agreement (‘CFA’).”
    “The Court also held that RPC were conflicted in acting for Ms Forster, and that in failing to enforce the settlement agreement in accordance with Ms Forster’s wishes, it caused her to suffer loss.”
  • “The decision serves as a useful reminder that whilst a CFA governs the solicitor’s remuneration, it does not alter the duties owed to the client. Insofar as solicitors prioritise their own interests under a CFA, or the interests of one client at the expense of another, they risk incurring liability for negligence and for breach of fiduciary duty (in addition to possible regulatory exposure).”
  • “RPC acted for Ms Forster under a CFA with a 100% uplift on their fees, as did the three Counsel who represented her at trial. Ms Forster arranged ‘after the event’ insurance (the “ATE Policy”) which covered limited adverse costs, non-lawyer disbursements payable to RPC and repayment of a loan taken out by Ms Forster at a late stage of the proceedings to fund her expert witness, a forensic accountant from Deloitte (the “Loan Agreement”). Ms Forster had reluctantly agreed to instruct Deloitte, having been persuaded by RPC.”
  • “Ms Forster commenced proceedings against RPC for negligence. Her claim was essentially for loss of the opportunity to enforce the Tomlin Order by first converting the Order terms into a judgment debt and then promptly enforcing it and the costs order against the Opponents’ assets in 2010 and 2011. It was Ms Forster’s case that RPC had become conflicted in continuing to act for her given their interest in the Loan Agreement, and that they had preferred their own interests to hers in delaying enforcement action.”
  • “In response to Ms Forster’s further claims of breach of duty, the Court concluded that RPC had not adequately advised Ms Forster in relation to the Loan Agreement, and that in failing to enforce the terms of the settlement agreement, it had preferred Mr Deacon’s interests over hers. Fancourt J found that RPC had ‘a clear conflict of interests in advising Ms Forster to borrow money from Mr Deacon and … acting for Mr Deacon in preventing Ms Forster from enforcing [the settlement agreement].'”
  • “To properly advise or act for Mr Deacon and Ms Forster, RPC should have obtained both parties’ informed consent. On the matter of RPC’s failure to enforce the settlement agreement, it was irrelevant whether its strategy in delaying was well-intentioned or likely to result in a more substantial recovery, as ‘RPC were not entitled to refuse to act in accordance with [Ms Forster’s] instructions’. In doing so, RPC breached its duty and caused Ms Forster loss of opportunity to recover under the settlement agreement. Fancourt J awarded damages of £192,500, being 55% of the £350,000 settlement amount, on the basis that Ms Forster’s likelihood of full recovery would have been approximately 55% if enforcement action had been taken in 2011 and 2012.”

Ex-Attorney at Gibson Dunn Charged With Insider Trading” —

  • “A Brazilian attorney who was working at Gibson, Dunn & Crutcher has been arrested and charged with insider trading, accused of accessing internal law firm files to trade ahead of a major merger and acquisition.”
  • “Federal prosecutors in D.C. said Romero Cabral Da Costa Neto, 33, of Rio de Janeiro, Brazil, was arrested on Tuesday in Washington, D.C., by agents with the FBI’s Washington Field Office. Costa is separately facing an SEC lawsuit over similar allegations.”
  • “A spokesperson for Gibson Dunn said they are cooperating with authorities on the matter. ‘We are cooperating with authorities and have terminated our relationship with the individual, who was an international visiting attorney from another law firm,’ the spokesperson said in a statement to the National Law Journal.”
  • “According to court documents, Costa is an attorney licensed to practice in Brazil and had been working in the United States for the law firm since September 2022. During that time, Costa has executed multiple stock trades in companies represented by the firm.”
  • “During Costa’s one-year employment as a visiting attorney, he allegedly accessed confidential information about the law firm’s work on biopharmaceutical company Swedish Orphan Biovitrum AB’s acquisition of CTI BioPharma Corp (CTIC), according to the SEC complaint. According to a press release, Gibson Dunn served as legal counsel to CTIC in the transaction.”
  • “As a non-U.S. Citizen, Costa was hired as a ‘visiting attorney’ from Brazil, and the law firm sponsored his temporary work visa, allowing him to reside and work in the United States during the time period of his employment, according to court documents. His term of employment with the firm was one year.”
  • “On May 8 and 9, 2023, the SEC complaint alleges, Costa accessed the firm’s document management system and obtained nonpublic information about the CTIC impending merger with Sobi. Specifically, the SEC claims, Costa accessed and viewed draft SEC filings, board minutes, and other documents relating to the transaction. The law firm’s access logs show that Costa viewed as many as 25 unique documents relating to the Sobi transaction over 100 times in the week leading up to the public announcement.”