Risk Update

Risk Updates — Jones Day Cancer Conflict Cleared, Freivogel Findings

Posted Dan Bressler

“Jones Day Cleared to Represent J&J’s Bankrupt Talc Subsidiary” —

  • “A bankruptcy judge authorized Jones Day to continue representing Johnson & Johnson’s talc subsidiary in chapter 11, rejecting arguments that the law firm can’t be trusted to look out for the interests of cancer victims because it designed the strategy to limit J&J’s liability.”
  • “A bankruptcy judge authorized Jones Day to continue representing Johnson & Johnson’s talc subsidiary in chapter 11, rejecting arguments that the law firm can’t be trusted to look out for the interests of cancer victims because it designed the strategy to limit J&J’s liability.”
  • “Judge Michael Kaplan of the U.S. Bankruptcy Court in Trenton, N.J., said on Tuesday that Jones Day’s past work for J&J on a transaction that sent its talc-related liabilities into chapter 11 doesn’t mean the firm has a disqualifying conflict of interest, as injury lawyers allege.”
  • “Judge Kaplan said Jones Day’s work for J&J, which ended two days before the recently-formed talc subsidiary filed chapter 11 in October, doesn’t mean the law firm will favor the interests of the parent company over its bankrupt unit, LTL Management LLC.”
  • “Instead, the judge said evidence shows that LTL and J&J have a shared interest in settling the talc liability in chapter 11. That fact ensures that neither Jones Day nor LTL could give priority to a competing interest favoring J&J that could influence the bankruptcy case, Judge Kaplan said.”
  • “The committees representing talc claimants argued the restructuring that created LTL was executed for the purpose of capping J&J’s talc liability, which by extension pits Jones Day against plaintiffs seeking to recover as much money as they can from the consumer goods giant.”
  • “Judge Kaplan disputed those allegations and said the restructuring that created LTL won’t be central to the chapter 11 case. The key issue is whether talc claimants and LTL can reach an agreement that resolves LTL’s liability, he said.”

And the latest from Bill Freivogel:

  • Simmons v. Royal Newfoundland Constabulary Public Complaints Comm’n, 2022 NLSC 27 (S. Ct. Newf. & Lab. Feb. 24, 2022).
    • “Two persons filed a complaint with the Commission regarding the conduct of three police officers who had arrested them (“The Incident”). Lawyer A, a member of Firm X, appeared for one of the officers (“Simmons”). The problem was that Lawyer B, also a member of Firm X, was representing a Sergeant Cole, Simmons’ supervisor, in other proceedings arising out of The Incident.”
    • “Cole was not present at The Incident and is not a party in this proceeding. However, during The Incident they consulted by telephone about what Simmons should do. Given this relationship, the adjudicator assigned to hear this case ruled that Lawyer A had a conflict of interest and could not represent Simmons.”
    • “In this opinion the court reversed the adjudicator. The court discussed the possible ways Cole and Simmons might be adverse, but could not come up with a scenario in which either of them would likely be prejudiced by A’s involvement. Moreover, both Cole and Simmons had consented in writing to A’s involvement. Given the limitations of this site, our discussion leaves out a lot, even as to the conflicts analysis. Among other things, the court discusses at length the applicability of the Supreme Court’s decisions in Neil, MacDonald Estate, McKercher, and Strother.”
  • Mehra v. Morrison Cohen LLP, 2022 WL 618995 (N.Y. App. Div. 1st Dept. March 3, 2022).
    • “This case involves a business relationship between Plaintiffs, Mr. and Mrs. Mehra, and Jonathan Teller. In 2014 Defendant Law Firm advised the Mehras and Teller how to reorganize their relationship. In 2019 Law Firm allegedly turned on the Mehras and assisted Teller in disadvantaging the Mehras. In this case the Mehras are suing Law Firm (1) for malpractice in negligently advising the Mehras about the reorganization in 2014, and (2) for breach of fiduciary duty in 2019 (harming the Mehras being a conflict).”
    • “The trial court granted Law Firm’s motion to dismiss, holding that the malpractice claim was filed too late, and that the conflict claim failed because the Mr. Mehra had signed an advance waiver, 2020 WL 5874858 (N.Y. Cty. Oct. 2020). The Mehras appealed the second holding. In this opinion the appellate court reversed the dismissal of the fiduciary duty claim, holding, in effect, that the efficacy of the waiver was a fact issue.”
  • Federal Ins. Co. v. Pixarbio Corp., 2022 WL 623735 (S.D.N.Y. March 3, 2022).
    • “Federal brought this interpleader action against a number of parties, including Pixarbio and several of its law firms. Federal is requesting the court to determine where the proceeds of a Federal’s “securities liabilities” policy should be paid. One of the parties was a law firm (The Mintz Fraade Law Firm P.C.). Other parties in the case claimed Mintz Fraade should not receive any of the funds because it had a conflict of interest.”
    • “This whole set of circumstances began when the SEC commenced an investigation of Pixarbio and several of its principals. The SEC told Mintz Fraade that it, too, was a party of interest in the investigation. Nevertheless, Mintz Fraade represented Pixarbio and two officers in the investigation. In this opinion the court ruled that the conflict was unwaivable and that Mintz Fraade should receive no share of the Federal payment. While Mintz Fraade and the Pixarbio parties were parties to the same SEC investigation, it is unclear what Mintz Fraade’s role was in the conduct giving rise to the investigation. Thus, this is not a classic underlying work situation. Nevertheless, because of the diversity of interests among Mintz Fraade and its clients, the conflict, being unwaivable, violated N.Y. Rule 1.7.”