Wednesday, September 21, 2016

VIDEO INTERVIEW: Discussing Risk (Trends, Conflicts, OCGs & More)

VIDEO: "Law Firm Risk Discussion" -- At the recent ILTA conference, I had the pleasure of sitting down with Mike Guernon, director of new business and conflicts at Orrick, and seasoned Risk Roundtable veteran. This was part of the conference's "ILTACON TV" program.

(Alas, I don't they've quite closed the deal to secure Netflix streaming, so this is an internet-only affair... though, I did suggest jazzing up the introductory credits ala "Stranger Things" or "True Detective." Breaths will not be held on that front.)

In the video, we cover a variety of topics, including risk trends, conflicts management, risk staffing, outside counsel guidelines and more.

It's about a 20 minute episode. No commercial breaks. No snarky parenthetical comments, which are reserved for blog readers only. (We'll see if any networks decide to pick us up for season two... or series two, for our international readers. >smile<)

Tuesday, September 20, 2016

Information Security: Certification, the Cloud and Clients

Two interesting security updates to share. First, Philip N. Yannella, Partner and co-leader of Ballard Spahr’s privacy and security group, writes: "Law Firms Are Seeking Data Security Certification (Perspective)" --
  • "In the wake of a number of high-profile data breaches involving law firms — including the recent Panama Papers breach — many U.S. law firms are moving toward obtaining ISO data security certification."
  • "Law firms did not consider ISO certification necessary to the practice of law. But now, as hackers take aim at the legal profession, many law firms are obtaining ISO certification in order to reassure their clients that the firm’s data security practices are adequate. Some firms are using ISO certification for business development purposes — as a means of differentiating themselves from other law firms."
  • "Since that time, the cyber threat landscape for law firms has increased. In March 2016, The Wall Street Journal reported that the FBI was investigating a series of data breaches involving major U.S. law firms, including Weil Gotshal & Manges and Cravath Swain & Moore. Reports indicate that hackers were targeting sensitive client information concerning upcoming deals."
  • "The coup de grace occurred in April 2016, when the Panama law firm Mossack Fonseca was hacked in the infamous Panama Papers attack. It resulted in the public release of more than 11 million documents, detailing the formation of off-shore accounts and other questionable, if not illegal, financial activities of international politicians, business people, and celebrities to shield income from taxation."
  • "To improve their data security practices, and provide assurance to jittery clients, many Am Law 100 law firms are seeking ISO certification. A March 2015 ILTA survey found that 18 law firms had obtained ISO certification, and that another 30 were in the process of obtaining the certification. It is likely that these numbers have increased since then. Many law firms are using the ISO certification for marketing purposes, touting the firm’s commitment to ensuring the same level of data security as their clients."
  • "The trend toward ISO certification is not likely to abate as long as law firms continue to be targets of hackers. In the future, obtaining ISO certification may be like obtaining malpractice insurance for law firms — a cost of doing business."
Expert Discussion (video):
One area often catalyzing security discussions is the cloud — where some see risk, others see potential advantage (shifting the burden of security management to dedicated vendors). The cloud also raises questions of control and jurisdiction. Here is an interesting video discussion, delivered by Microsoft's own legal team, which explores: cloud security, privacy & control, compliance and transparency.

Monday, September 19, 2016

Conflicts News: Consistently Checked, Sides Switched

Randy Evans and Shari Klevens, Dentons US partners remind us: "Consistent Conflicts Checks Are Critical" --
  • "Most lawyers dread the process of checking, evaluating and resolving conflicts of interest. Perhaps it's because 'conflicts' issues seem to focus on why a lawyer must (or should) decline a new representation rather than how to get the business in the door. And yet unidentified or unresolved conflicts cost lawyers and their firms clients, money, and headaches."
  • "Given the demands of modern legal practice and competition for new business, it is far easier to immediately undertake a new representation when a potential client walks in the door without performing even a rudimentary conflicts check. But when it comes to conflicts, haste really does make waste."
  • "Developing a conflicts system is relatively painless, but implementing and complying with it 100 percent of the time is challenging. As luck would have it, the one representation that escapes the system could be the one that creates the most problems. Oftentimes, the reasons for pushing aside the conflicts process for that one representation (too important, too complicated, too rushed) are the same reasons the conflicts analysis was so imperative."
Next up: "Polsinelli Hires Trigger Attys' DQ In Texas Employment Suit" --
  • "A Texas federal judge blocked Polsinelli PC and Novak Druce Connolly Bove & Quigg LLC attorneys Thursday from representing two plaintiffs with a breach of contract and employment suit against Parker-Hannifin Corp., saying that lawyers switching sides have created a conflict of interest."
  • "In considering Parker’s request for the removal of opposing counsel, the judge disagreed with the company’s argument that there were substantial similarities between work Novak Druce had done for the plaintiffs in the sale of their company and transfer of assets to Parker and the intellectual property matters Novak had handled for Parker."
  • "But U.S. District Judge Gray Miller said there was a reasonable chance that information held by Novak Druce from prior patent work for Parker would be used to the company's disadvantage in the current case, which includes a claim carrying potential damages that would be pegged to the value of the patents."

Sunday, September 18, 2016

EVENT: Law Firm General Counsel Summit (Portland, Oregon)

Portland, November 3 & 4: Law Firm General Counsel Summit [brochure] [registration] -- Hosted by Holland & Knight's Legal Profession Team, this summit is designed for the general counsel, ethics counsel or managing partner of small to midsize law firms.

Attorneys from Holland & Knight's Legal Profession Team, including Chris Cwalina, David Elkanich, Peter Jarvis, Allison Martin Rhodes, Calon Russell and Dayna Underhill, together with other industry practitioners, will lead interactive discussions to provide relevant and practical insights into the unique challenges of managing risk at firms employing between 30 and 250 lawyers.
  • Sessions on Day 1, November 3, will focus on substantive training and fundamentals of the position, recognizing that many lawyers who fulfill leadership and general counsel positions in small to midsize firms lack specific experience or training in the field. We call this "The Academy."
  • Sessions on Day 2, November 4, will be a roundtable format led by our faculty to discuss the broader common issues facing both the seasoned leaders and those new to the position. Our goal is to foster collaboration and the exchange of best practice strategies for the issues common to our attendees.
See the complete agenda for more detail on content.

Event sponsors: Holland & Knight, Intapp, Oswald Law, Paragon, Proquest.

This is a third-party event and a registration fee applies. CLE credit will be available (subject to the usual caveats across jurisdictions).

Thursday, September 15, 2016

Disqualification Discussions, Part Deux

  • "A California judge rejected Friday [Aug 19] a former SpaceX welder’s bid to disqualify Orrick Herrington & Sutcliffe LLP from defending the aerospace company in her sexual harassment suit, saying there’s no evidence the firm did anything wrong in contacting the plaintiff's expert about working in another case."
  • "Before Friday's hearing began, Los Angeles Superior Court Judge Michael P. Linfield issued a written tentative ruling indicating he would deny plaintiff Zhoei M. Teasley's motion to recuse Space Exploration Technologies Corp.'s lead trial counsel, Orrick partner Lynne Hermle, because the firm had contacted Teasley's expert, Michael Robbins, about potentially working on a case in the future. Judge Linfield wrote that no case law presented by either side stands for the proposition that “any communication” between a party's expert and their opponent, in itself, is enough to warrant recusal."
  • "Parks [opposing counsel] said that Robbins was in discussions with Orrick about consulting on upcoming matters, and that even if he hadn't been formally retained in those cases yet, it still created a problematic relationship — one that Orrick had refused to divulge the details of."
  • "Judge Linfield said the fact that Orrick might have reached out to the expert previously about the potential of hiring him in the future simply wasn't enough evidence to show there was a relationship between them. The judge said that if Robbins had told Parks that he'd spoken to Orrick about the instant suit, it would be 'a totally different situation,' but that there wasn't any evidence of that, 'and that lack of evidence is telling to the court.'"
  • "Live Face on Web LLC urged a Pennsylvania federal judge Thursday to sanction and disqualify Venable LLP from representing the digital marketing company it is suing over a video software licensing agreement, saying the firm previously promised not to represent any party in the case."
  • "LFOW told U.S. District Judge J. Curtis Joyner that Venable is representing The Control Group Media Co. Inc. only because it has firsthand knowledge of LFOW’s copyright litigation practices. LFOW said Venable acknowledged a conflict of interest in a related matter in 2014 and at that time promised not to provide counsel to either side."
  • "'Venable expressly concluded a conflict existed that barred the representation of any party in this case in 2014, but has now entered this case just in time to share LFOW’s settlement strategies and privileged information with defendants at mediation.'"
  • "In its motion, LFOW said a Venable partner responded to its original letter in 2014 informing Control Group of copyright infringement. However, at the same time, Venable represented LFOW in two similar cases. Venable decided to sever ties with LFOW, Control Group and Instant Checkmate, indicating it would not represent or give legal advice to either party, LFOW said."

Wednesday, September 14, 2016

Disqualification Discussions

Via the New York Law Journal: "Big Firm/Small Firm—Size Matters for Attorney Disqualification" --
  • "When it comes to imputing conflicts of interest, size really does matter. This much is clear from two recent decisions of the U.S. District Court for the Southern District of New York. At one end of the spectrum, Judge Naomi Reice Buchwald disqualified a small firm, notwithstanding the firm's immediate creation of a substantial ethical wall when a lawyer with a conflict joined the firm. At the other extreme, Judge Jed S. Rakoff denied a motion to disqualify where a large firm concurrently represented both sides of a litigation, notwithstanding his finding that the firm had violated ethical rules and had been grossly negligent in failing to conduct an adequate conflict check."
  • "In contrast to Judge Buchwald's treatment of the small firm in Energy Intelligence Group, Judge Rakoff denied a motion to disqualify a large national firm in Victorinox v. The B & F System,4 where attorneys within the firm had represented opposing parties, albeit in different matters, without a formal screen."
  • "In November 2015, the defendant's Locke Lord lawyer in Texas received an internal email related to the New York litigation and recognized the conflict. He consulted with the firm's ethics partner, and sent a letter nearly a month later to the defendant terminating the representation, ostensibly for economic reasons, without mentioning the conflict of interest. The firm did not set up an ethical wall, and the Texas lawyer testified before Judge Rakoff that he set up his "own wall" separating himself from the New York lawyers in Locke Lord representing plaintiffs."
  • "Citing Hempstead Video, Judge Rakoff began his analysis with the observation that "[c]oncurrent representation of parties on opposing sides of a litigation is a prima facie conflict of interest." He found that Locke Lord's representation was a violation of the New York Rules of Professional Conduct, specifically Rule 1.7, and the court's Local Rule 1.5(b)(5). He went on to hold that these violations resulted from gross negligence because, when merging with the firm that originally represented plaintiffs, Locke Lord had limited its conflict check to matters on which that firm had billed $100,000 or more in one or both of the previous two years. Judge Rakoff remarked that the firm never completed a full conflict check "because the firm decided it was just not worth it to comply with its ethical obligations.""
  • "Finally, Judge Rakoff held that the letter from the Texas lawyer terminating the representation of the defendant was "misleading on its face," inasmuch as it cited economic reasons for ending the relationship when the conflict was the precipitating factor."
  • "Notwithstanding his obvious displeasure with Locke Lord's conduct on multiple scores, Judge Rakoff concluded that the Texas lawyer's conflicts should not be imputed to the New York team representing the plaintiffs and denied the disqualification motion. He found no evidence that there had been any exchange of pertinent information between the Texas lawyer and the New York lawyers representing plaintiffs, despite the presumption that the conflict should be imputed to the firm as a whole. Judge Rakoff also found, without elaboration, that the matters on which Locke Lord represented the defendant in Texas were "very substantially different" from the matter on which it represented the plaintiffs in New York. Finally, he was swayed by the fact that no present conflict existed because the concurrent representation ended in December 2015."

Tuesday, September 13, 2016

EVENT: Risk Roundtable (New York, OCG Focus)

We're pleased to announce the first of several upcoming Risk Roundtables focusing on outside counsel guideline / terms of business management. The event is taking place on Wednesday, September 21st in New York, and features:

  • Anthony Davis, Partner at Hinshaw & Culbertson LLP, who will provide an overview of how outside counsel guidelines present ethical dilemmas, as well as other risks, to law firms. He will also dive into the countless options firms have to combat these risks.
  • Eric Nerland, Risk Practice Leader for Professional Services at Intapp, who will focus on the increasing compliance pressures being imposed by clients and how a firm can deliver on key client commitments. He will also share a short update on Intapp Open terms of business management system, a solution that helps firms finally manage, centralize, classify and report on client terms, RFPs and communications in a structured fashion.
And, as always, we’ll have plenty of time for open discussion, peer exchange and networking.
Attendance is by invitation only and is limited to qualified law firms and personnel. Please contact for more details.

Monday, September 12, 2016

On Conflicts: The "It’s Just Business" Update

It's time for business. The ABA/BNA Lawyers’ Manual on Professional Conduct reports: "Market Rivalry Isn't ‘Materially Adverse' Conflict"
  • "Lawyers aren't precluded from accepting a litigation matter just because the new client and a former client have generally competing economic interests, the New York state bar's ethics committee advised July 15 (New York State Bar Ass'n Comm. on Prof'l Ethics, Op. 1103, 7/15/16)."
  • "An attorney who previously represented a corporation can handle a new client's suit against another company, even though the former client and the new client are marketplace rivals and it would be in the former client's interest for the new client to lose the suit, the committee advised."
  • "The opinion addresses a conflicts question on which there's scant authority—that is, whether it's 'materially adverse' under the rule on former-client conflicts to handle litigation against a third party when the outcome would economically help a former client's competitor. The committee said no. General economic adversity poses neither a current-client conflict nor a former-client conflict, it advised."
  • "Because a lawyer may simultaneously represent current clients who are economic competitors, it follows even more so that a lawyer may subsequently represent a client whose economic interests are contrary those of a former client, the committee said."
  • "The committee said that Rule 1.9(a) would prohibit the attorney from defending current client B in the lawsuit brought by former client A if the current representation is substantially related to the former representation of A. This is because the “materially adverse” prong of Rule 1.9 is always met when a former client is on the opposite side of a lawsuit involving a substantially related matter, it said."

Thursday, September 8, 2016

Conflict Best Practices: Centralization Rules

We've seen a general trend of firms moving to centralize conflicts teams and overall management. Here's the latest on this: "3 Ways Law Firms Can Avoid Conflicts Of Interest" --
  • "Law360 spoke with experts who shared advice on how to avoid such dilemmas. High-performing firms generally centralize the management of client intake and conflicts, according to Kent Zimmermann, a leading adviser on strategic growth planning at Zeughauser Group LLC. Although some firms pride themselves on being entrepreneurial and allowing partners to make the call on which clients to take or not, higher-performing firms realize that there are benefits to control, he said."
  • "'While many partners thinking about their individual interests are happy to bring in a client that benefits their own practice, it's in the firm's best interest before agreeing to work with a client that there's a view of the pluses and minuses of taking that client for the firm over time,' Zimmermann said."
  • "Firms often have a committee that oversees intake, and it's often to firms' benefit to keep those committees really small, Zimmermann said, since intake can be time-sensitive. He noted that firms should not only look at whether there's a present conflict with a potential client but also whether there could be future conflicts that could cause firms to lose money by having to pass up compelling relationships or other matters later on."
  • "Since certain companies, especially in the high-tech industry, don't want law firms to work for their competitors, according to Michael Rynowecer, president of BTI Consulting Group Inc., the most important thing a law firm can do to avoid a conflict of interest is to make sure they're in dialogue with their client so that there's no surprises on either side."
See the complete article for details on the other two recommendations: Be in Dialogue With Your Clients Think Institutionally.

Wednesday, September 7, 2016

Musical Conflicts: Tik Tok / Hear Me Roar

A few conflicts allegations making noise in the media. (Given the pop culture nature of the players involved, we now find ourselves linking, quite certainly for the first time, to reporting from “Teen Vogue.”)

Judge Who Tossed Out Kesha’s Dr. Luke Case May Have Had Conflict of Interest --
  • "Kesha has been going through a lengthy legal battle with Dr. Luke, in which she accused him of sexual assault. Earlier this month, it was reported that she dropped all charges against him and is choosing to focus on her music. Kesha explained to fans how she isn't going to let anything get in the way of her dreams and is happy with her decision to tour with her new band Kesha and the Creepies."
  • "However, reports are coming to light that the judge who dismissed her case in April may have had a conflict of interest. According to the New York Post, it appears New York Supreme Court Justice Shirley Werner Kornreich is married to Ed Kornreich, a partner at the Proskauer Rose law firm, whose clients include Sony/RCA Records — which own Dr. Luke's Kemosabe record label."
  • "'Judges are required under the New York state canon of judicial ethics to avoid even the appearance of impropriety,' legal expert Troy Slaten told E! News. 'This means judges are not supposed to preside over cases where they have an actual or potential financial interest in the outcome. The rules go so far as to say that even somebody in the judge's family should not have a financial interest in the outcome of litigation.' He went on to say, 'Kesha's lawyers could now be in a position to seek that every ruling of this judge be redone by a new neutral and impartial judge who does not suffer from potential or actual bias. Basically, Kesha can probably get a do-over if she wants.'"
Note: They Daily Mail observes: “Ed Kornreich does not do any sort of entertainment law and is instead head of  the Health Care Department at Proskauer Rose... What's more, it was also lawyers from Proskauer Rose who represented Kesha herself back in 2011 when she and Dr. Luke were being sued for breach of contract by her former managers.”

Next on the playlist: "Hard Candy Wants Jones Day Out Of Katy Perry Makeup Suit" --
  • "Cosmetics maker Hard Candy urged a Florida federal court Thursday to disqualify Jones Day as opposing counsel in a trademark suit over the design of Procter & Gamble's Katy Perry CoverGirl products, citing the firm's hiring of an attorney who previously handled its trademarks."
  • "In a motion to disqualify, Hard Candy LLC pointed to Jones Day's July 25 hiring of Erika Handelson two weeks after she resigned from law firm Coffey Burlington PL, which is representing the cosmetics company in the current matter. Having worked at her previous firm for five years, Handelson served as a 'key associate' for Hard Candy's trademark matters, including being listed as attorney of record with the U.S. Patent and Trademark Office for the trademarks at issue in this case, according to the motion."
  • "Handelson, who resigned from Coffey Burlington prior to the July 18 filing of the case, has not made an appearance for either side, but Hard Candy says she was involved in multiple discussions with Groisman regarding the suit, including legal theories underlying its trademark infringement claims and a review and analysis of both the allegedly infringing products and Hard Candy's products. She also had been responsible for day-to-day monitoring of Hard Candy's trademark holdings and took part in related litigation and strategic discussions on the strength of its trademarks."
  • "The lawsuit claims that beginning in spring 2016 The Procter & Gamble Co. infringed a number of Hard Candy’s design trademarks for lipstick and eyeliner products with a line of 'Katy Perry CoverGirl' products that use similar visual cues on the lipstick tubes."

Tuesday, September 6, 2016

Have Risk (Trends Report) Will Travel

A reader sent word noting the publication of the 2016: “Legal Innovation and Risk Management Report” published by Traveler’s and The Lawyer.
  • "It’s worth reflecting on why innovation is important. The first driver is external. Clients are increasingly demanding more competitive fees, greater choice when it comes to fee arrangements and of course a great service. Innovating, whether that be investing in technology, offering alternative fee arrangements or flexible working, can help address these client demands."
  • "The third driver is regulatory. Increased awareness of certain risks, including cyber-attacks, may result in increased attention by regulators. A certain amount of innovation, for example regarding management structures and internal controls, is then required to ensure compliance."
  • "Indeed 37% of surveyed UK law firms pinpointed ‘use of technology’ as their most innovative initiative in the last three years, more than double the number that stated any other area of innovation."
  • "Why are firms investing in new technology? Survey participants mentioned a huge number of reasons from improving conflicts and client management to marketing and business development."
  • "We also asked firms what the most innovative technology they have adopted is in the last three years and what benefits this has had. Some notable trends emerged. A large number of firms mentioned they had adopted technology or software to improve the efficiency and accuracy of case management, document management, billings management, conflicts management and risk management:
    • "Intapp Open. This product has transformed the way we take on new clients to create a more streamlined and effective system that is more compliant and has helped bring the firm up-to-date with technology.”
    • "Use of technology to manage file opening and deal with risk management of a matter from the outset. The benefit is seen in the reduced level of notifications."
    • "A new client inception programme (still being implemented). Benefit is a single end-to-end client take-on process which encompasses client due diligence, credit checking, billing regime, terms of business through to a letter of engagement."
    • "Conflicts Management (Intapp) - modernised and centralised conflict clearance."
    • "Use of cloud to enable remote working and collaborative work."
    • "AI for legal process management. Uniform and efficient integration of knowledge into legal delivery processes, delivering fixed fee work with greater certainty across practice streams."
The full report covers related areas including managing a remote workforce, outsourcing, innovating in management structures, and evolving business models. It also explores client attitudes and drivers  shaping firm innovation and risk management:
  • "Clients are focussing far more on efficiency and innovation in their firms, independent of whether this drives costs down for them. They want to know their strategic partners are innovative and efficient and to learn from them to improve the position of the in-house team and organisation as a whole. This is perhaps unsurprising given the expanded, strategic role of the GC in clients."

Sunday, August 28, 2016

ILTACON 16: Risk Highlights

Several risk related updates for those readers attending the annual ILTA conference in DC this week. Yours truly will also be on site, so please feel free to stop by booth #905 and proffer the secret risk blog reader handshake -- which I may have to actually invent one of these days...

It’s also a good way to score an invite to the Wednesday wine tasting event, which is always a conference highlight.

(A far from small contingent of Intapp staff will also be on hand to connect with you on matters including business intake, conflicts, information security, client terms/OCG management and much more.)
  • Monday (4:00 - 5:00 pm): Security and Information Governance: Together in Perfect Harmony. Information governance and security shouldn't be conflicting goals. You can satisfy the goals of your clients, general counsel, knowledge managers and technologists by aligning your information governance and security policies so they complement one another and advance your firm's strategic goals. Security policies can reinforce information governance imperatives, and good information governance should be part of your security assessments. Join us as we examine the benefits of harmonizing these two disciplines, best practices and how to identify opportunities within your organization.
  • Tuesday (3:30 - 4:30 pm): Reduce Risks with Effective Client Intake. An effective intake process can get clients and new matters in "the system" quicker, and it can streamline many processes and procedures and ultimately reduce risks associated with new matters. How can you reduce risks with effective client intake? Gain insight into best practices, new technologies and lessons learned from folks who have been through this complex technology and process dance.
  • Wednesday (11:00 - 12:30 pm): Risk Management Unboxed. Following up on last year's lauded "Risk Management in a Box" session, we will provide expanded information about tools for proactively managing risk at your firm while still keeping the lights on.
  • Thursday (11:00 - 12:00 pm): Respond Effectively to Your First Client Security Audit. Client audits can be stressful, time-consuming and disruptive. We'll be providing clear and relevant advice for those just starting to receive audits and who, like many firms, do not have dedicated information security staff. Learn techniques to reduce the time, effort and stress involved in security audits while simultaneously improving the relationship between your firm and your clients.

Sunday, August 21, 2016

Clients Canceled or Curtailed (Closing Can Cause Consternation)

Two partners from Dentons weigh in on the theme of closing matters and disengaging from client relationships with: "Don't Wait for the New Year to Close Old Files" --
  • "The formal termination of an attorney-client relationship through a file closing can be an important aspect of risk management for many reasons. For one thing, it has significant positive implications for the ethical, legal, and professional obligations of an attorney and the law practice. Once the attorney-client relationship ends, clients move from being existing clients of the attorney and the firm to being former clients. This is a significant distinction for conflict of interest purposes, as the ethics rules governing existing clients are different from those governing former clients."
  • "Generally, if a new matter involves an existing client, the conflict of interest rules may require the attorney to obtain informed written consent of each client before accepting representation of more than one client in a matter in which the interests of the clients potentially or actually conflict. If the client interests actually conflict, the attorney may have to decline the representation to avoid violating the duty of loyalty."
  • "On the other hand, the conflict rules for former clients are less onerous. The critical test for a new representation involving a former client—as opposed to an existing client—is whether the new matter is substantially related to the representation of the former client. If not, nothing further usually needs to be done."
  • "Generally, effective file closings involve three parts: a file closing letter; an accounting of all funds received; and an administrative closing of the matter. The combination of all three parts provides the most protection, although each firm can review to identify the best course for its practice."
  • "Regardless of the reason, when the representation ends, the attorney or law firm should consider sending a file closing letter confirming the end of the attorney-client relationship and, as a result, any ongoing duty to the client for that particular matter. This is true even for clients for whom the attorney or law practice does other work; a closing letter for a particular closed matter even if other matters are ongoing is important for risk management purposes. Indeed, effective audits of law firms randomly check closed files to see if file closing letters are in the files."
And an update highlighting the important of clear communication: "Locke Lord Atty's Cold Shoulder To Client An Ethics Breach" --
  • "A Locke Lord LLP partner likely broke ethics rules when he chose not to tell a longtime client why he was severing the relationship, experts said Monday, even though a federal judge found that a conflict revealed late in a trademark case didn't justify Locke's disqualification."
  • "While there is scant ethical guidance on specific obligations to explain to a client why a representation must end, lawyers' overarching duty to give clients all information relevant to their case calls for a complete explanation when an adversity is spotted and precipitates the breakup."
  • "In a harsh critique of Locke Lord litigator Roy Hardin and the firm’s “gross negligence” in premerger conflict checks, U.S. District Judge Jed Rakoff nevertheless concluded in a Friday order that previous ethical mishaps didn't mean Victorinox AG should lose their chosen counsel."
  • "But legal conflicts expert William Freivogel said that decision was likely based on a desire to spare the Swiss Army knife maker the disqualification rather than the firm’s handling of the conflict itself."
  • "That termination letter was “misleading on its face” because Hardin acknowledged in later testimony that the conflict was the real trigger for his December breakup with B&F, Judge Rakoff said. “The letter, however, contains nothing that would alert B&F to any conflict,” the opinion said."
  • "Legal ethics expert Geri Krauss of Krauss PLLC said that despite the seriousness of the conflict issue, the court’s decision to deny the disqualification was unsurprising at such a late stage of the litigation... A lawyer also has a duty to keep clients informed on any issue that might affect them, including a decision to cease representation due to a conflict or a mistake in the lawyer’s work, she said."

Thursday, August 18, 2016

Conflicts Complexities (or "Unknown Unknowns, Knowable Unknowns, Etc...")

From "The Bencher" magazine comes: "Court Disqualifies Firm Based on Representation of Affiliated Subsidiary" --
  • "...a recent decision by a federal district court in which a law firm was disqualified based on its representation of two adverse subsidiaries of a parent company. The court’s useful application of Rule 1.7 and Rule 1.9 should be of interest to those engaged in corporate and commercial litigation for subsidiaries of large companies, whether in Delaware or elsewhere."
  • "In the case styled Atlantic Specialty Insurance Company v. Premera Blue Cross, 2016 WL 1615430 (W.D. Wash. April 22, 2016), the court was presented with a motion to disqualify the law firm representing Premera (“Law Firm”) based on the concurrent representation by the Law Firm of an affiliate of the plaintiff, Atlantic, in a separate and unrelated matter."
  • "Atlantic’s corporate structure is key to understanding the court’s decision. Atlantic is a wholly-owned subsidiary of OneBeacon Insurance Group (“Parent”). Homeland Insurance Company of New York (“Homeland”) is also a wholly-owned subsidiary of Parent. Both Atlantic and Homeland share the same mailing address and principle place of business as Parent. Both subsidiaries also share claims-handling services that are managed by the same claims unit personnel."
  • "In-house counsel for Atlantic notified Law Firm that there was a conflict of interest because Law Firm represented Atlantic’s sister subsidiary, Homeland, in the AAM matter. Thus, Atlantic took the position that there was a conflict of interest because Atlantic and Homeland, as subsidiaries of Parent, consider themselves one client. They did not consent to the Law Firm being adverse to them in the instant case. The Law Firm refused to withdraw and a motion to disqualify was filed. Law Firm’s position was that Atlantic and Homeland are two distinct corporations and should not be considered one client for purposes of an analysis of conflicts of interest. The court disagreed with that position."
  • "The court was not persuaded by the Law Firm’s argument that it was not aware of the relationship between Atlantic and Homeland, and was previously adverse to Atlantic. The court explained that attorneys are responsible for knowing the relationship between or among related corporate clients, and the duty is imposed on the attorney—not the client—to be familiar with the affiliates and related companies of a client. Even though the Law Firm did not consider itself as having an attorney-client relationship with the other subsidiary, the court instructed that the existence of an attorney-client relationship is determined based on the reasonable understanding of the client, not the view of the attorney. Even though the Law Firm did not know that Atlantic and Homeland were both subsidiaries of the Parent, the court found that they should have known."
On matters of risk, the Hinshaw newsletter consistently delivers some of my favorite late night reading. Their most recent update touches several important topics, including: "Conflicts-Checking Systems — What Constitutes a Sufficient Conflicts Check?"
  • "New York State Bar Association Committee on Professional Ethics Opinion 1085 (2/16/2016). Risk Management Issues: What are law firms' obligations in operating conflicts checking systems? What must firms do in order to determine whether their lawyers previously represented an adverse party? What are law firms' continuing obligations to perform new conflict checks if or when new information relating to conflicts becomes available?
  • First, a law firm is required to make 'a written record of its engagements, at or near the time of each engagement.'"
  • "Second, a law firm is required to 'implement and maintain a system by which proposed engagements are checked against current and previous engagements' when any of four triggering events occurs: '(1) the firm agrees to represent a new client; (2) the firm agrees to represent an existing client in a new matter; (3) the firm hires or associates with another lawyer; or (4) an additional party is named or appears in a pending matter.' The Committee further noted that the purpose of such a system is to 'render effective assistance to lawyers in the firm in avoiding conflicts of interest,' and, thus, the conflict system 'must be adequate to detect conflicts that will or reasonably may arise.' NYRPC 1.10, Cmt. [9]."
  • "Moreover, once a firm accepts a new matter, it has a continuing conflicts-checking obligation if any of the above-mentioned four triggering events occurs. Even without a triggering event, the Committee recommends running a new conflict check when a firm acquires new information, stating that such practices help lawyers comply with their ethical duty to avoid conflicts."
Their update also covers:
  • Disqualification — Substantially Related Matters — Waiver of Conflict by Lack of Diligence in Seeking Disqualification
  • Right to Withdraw — Nonpayment of Fees
  •  In-Firm Attorney-Client Privilege Revisited Under Federal (Ninth Circuit) Law

Wednesday, August 17, 2016

Waivers Wavering?

A few stories worth reviewing in greater detail, before waving goodbye today. First: "Waivers Found Useless in Sprawling Medical Fraud Case" --
  • "A law firm had a disqualifying conflict of interest in representing both the plaintiff in civil racketeering litigation and a criminal defendant who pleaded guilty in the scheme, the U.S. District Court for the Central District of California said June 24 (State Comp. Ins. Fund v. Drobot, 2016 BL 205454, C.D. Cal., No. SACV 13-0956 AG (JCGx), 6/24/16 )."
  • "Judge Andrew J. Guilford stuck by his decision earlier this year to disqualify Hueston Hennigan LLP as counsel for State Compensation Insurance Fund (SCIF) in the sprawling civil litigation. The civil and criminal cases are one and the same for conflicts purposes, and the clients' dueling interests would mangle the firm's loyalties too severely for informed consent to fix the conflict, Guilford found."
  • "The decision casts doubt on whether lawyers can rely on waivers to legitimize concurrent representation of clients with adverse interests in overlapping criminal and civil proceedings. The court's restrictive stance on the question of waivability will be especially alarming to large firms that see conflict waivers as a key risk management tool."
  • "Guilford found it unnecessary to decide here whether a firm's representation of adversaries must be in the same ‘lawsuit,’ the same ‘litigation’ or the same ‘matter’ in order for the conflict to be deemed unwaivable."
  • "The firm pointed out that SCIF had executed four separate conflict waivers specific to the firm's concurrent representation of Randall in the criminal matter... Guilford combed through Randall's three waivers and SCIF's four waivers, and found them ineffective. The waivers at times incorrectly described the criminal and civil proceedings as ‘unrelated,’ and large portions of the waivers amounted to boilerplate without much substantive meat, Guilford said. The waivers also contradicted one another and contained questionable terms, he said."
  • "Guilford contrasted these waivers with a conflict waiver that he found sufficient in another case. See United States v. DeCinces, No. SACR 12-0269-AB, Dkt. 441 (C.D. Cal. July 21, 2015). That waiver was the “gold standard” for effective informed consent, he said."
  • "As more attorneys run conflicts before opening a new matter and take advantage of available technology, attorneys and law firms are getting better at identifying potential conflicts of interest that could impact a matter. But identifying that there could be a conflict is only the first step. Many attorneys ask themselves, 'What next?'"
  • "Likewise, it usually is not sufficient just to ask for a client's waiver of the conflict or consent to the representation. An effective disclosure typically requires more. In the context of conflicts of interest, Rule 3-310 of the California Rules of Professional Conduct defines disclosure as 'informing the client or former client of the relevant circumstances and of the actual and reasonably foreseeable adverse consequences to the client or former client.'"
  • "In general terms, the professional rules call for an attorney to disclose whatever information a reasonable person would expect and need to consider before waiving an important right, and then to confirm that consent in writing. That written consent is often referred to as a "waiver." In specific terms, there are topics that some attorneys typically include when seeking a client's consent or waiver."
  • "First, in reviewing conflicts, many attorneys identify the proposed representation and what consent is sought from the client. "General" waivers typically call for a different kind of disclosure than a "limited" waiver for a specific representation. Therefore, tailoring the requisite full disclosure often involves making clear exactly which kind of waiver the attorney seeks."
  • "In the multiple representation context, this often means advising the client that the attorney is requesting permission to jointly represent the client along with others. In the successive representations context, this generally means advising a former client that the attorney is requesting permission to represent a new client in a matter involving the former client."

Tuesday, August 16, 2016

Laterals, Conflicts, Small Screens & Disqualification

Several stories and updates to start the week off:

"Time for a Change? Lessons for Avoiding Lateral Mistakes" --
  • "As the number of moves continues to climb–reaching a post-financial crisis high of nearly 2,900 moves last year—the regrets seem to be piling up faster too. Recruiters and consultants say lawyers change their minds in about 1 in 20 lateral moves. That doesn’t include partners who arrive at a new firm only to second-guess their decision, and either suffer the consequences or plan yet another move."
  • "In most cases, such cases stem from either emotional unpreparedness, failures of due diligence, or both, according to consultants, recruiters and attorneys.  Sometimes a client conflict went undetected. Sometimes the original firm comes back with a persuasive counteroffer."
  • "A 2014 survey by Major Lindsey showed that surprisingly few lateral partner candidates look closely before they leap to another firm: Only 36.6 percent of lateral partner candidates reviewed their new firm’s financial statements, and just 40 percent met with the new firm’s chief financial officer. Financial due diligence 'remains shockingly inadequate,' the report concluded, making it more likely that potential conflicts go undiscovered until too late."

"Former Reed Smith Partner's Hire DQs New Firm From IP Suit" --
  • "In a decision highlighting a risk of lateral hiring, a federal judge has disqualified an entire law firm in copyright litigation after finding an ethical wall separating a former Reed Smith partner from the rest of his new firm was not sufficient to guard against confidence sharing. Southern District Judge Naomi Reice Buchwald in mid-July disqualified 13-attorney intellectual property boutique Powley & Gibson, just months after Keith Sharkin joined the firm from Reed Smith."
  • "In May 2016, Cowen moved to disqualify Powley & Gibson as plaintiffs counsel on the ground that Powley partner Sharkin had previously represented Cowen on a substantially related matter while at a different firm."
  • "In concluding that Powley's ethical wall was insufficient, Buchwald said Powley is a 'very small firm consisting of four partners and about 10 other attorneys in a single office, which by its nature imperils an ethical screen.'"
  • "The judge further found the ethical wall was inadequate because Sharkin did not inform Cowen before he joined Powley that he was doing so, despite the fact that he and Powley knew of both representations. Powley waited three weeks after Sharkin joined to inform Cowen."

Monday, August 15, 2016

ERROR. (Clever title repository = [blank])

"Lawyer must reveal co-counsel’s error to client if it could raise malpractice claim" --
  • "What should you do when you are co-counsel on a case or in a deal, and you become aware that the other lawyer has made an error?  A new ethics opinion from the New York State Bar Association says that if you reasonably believe that your co-counsel has committed a significant error or omission that may give rise to a malpractice claim, you must disclose the information to the client."
  • "The lawyer had been brought into a case as co-counsel on the eve of trial, and found that the other lawyer had done virtually no discovery, and had not made any document requests — despite the fact that communications and e-mails between the parties would be critical to the case."
  • "The lawyer believed that the lack of discovery was a significant error, and that it could constitute malpractice.  The outcome of the case was still pending.  The lawyer was concerned that disclosing the information to the client could undermine the lawyer’s relationship with co-counsel, but was nonetheless convinced that it was in the client’s best interest to reveal the facts as soon as possible."
  • "Respect for client autonomy and decision-making means that the lawyer must provide information about all significant developments affecting the representation.  That 'applies equally to a significant error or omission by co-counsel that may give rise to a malpractice claim,' said the Committee."
"When The Cover-Up Outweighs The Crime: Professional Discipline For Hiding Attorney Errors" --
  • "Lawyers owe an ethical and fiduciary duty to their clients to report their own “mistakes” in the course of representation.  The source of the duty can be found, for example, in ABA Model Rule 1.4 (USPTO Rule 37 CFR Section 11.104), which in relevant part requires an attorney to 'promptly inform the client of any decision or circumstance” adversely affecting the representation, as well as to “keep the client reasonably informed about the status of the matter.'"
  • "Courts have found in the IP malpractice context that a lawyer may “have an obligation to advise his client about a possible malpractice claim” against the lawyer.  See Encyclopedia Britannica, Inc. v. Dickstein Shapiro LLP, No. 10-0454 (D.D.C. Feb. 2, 2012).  Such decisions are consistent with the lawyer’s ethical duty to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”  ABA Model Rule 1.4(b); 37 CFR Section 11.104(b)."
  • "Professional liability insurer CNA recently explained that “the attorney’s management of the mistake is often more important than the mistake itself.  Moreover, failure to appropriately address an error can exacerbate the simple malpractice situation and give rise to disciplinary grievances or other claims and increased damages.  See 'To Err is Human: A Guide for Attorneys on How to Manage Errors'"

In Virginia: "Bar proposes duty to address impaired lawyers" –
  • "A Virginia State Bar committee is seeking comment on the duty of law firm leaders to take action when another firm lawyer shows signs of impairment. The VSB Standing Committee on Legal Ethics is proposing a legal ethics opinion calling for law firms to have enforceable policies requiring intervention for impaired lawyers."
  • "The proposed opinion specifically focuses on the obligations of partners and supervisory lawyers to take precautionary measures before a lawyer’s impairment has resulted in serious misconduct or a material risk to clients or the public."
  • See also: ABA Formal Ethics Opinion 03-429

Sunday, August 14, 2016

Surprise Sunday Shark Bite : One More on OCGs...

Toby Brown, Chief Practice Management Officer at Perkins Coie, touches on one of the most fascinating issues tied to OCGs in my mind – the question of client/firm relationship and trust.

(It's an angle to this issue that recently came up in as part of a stimulating conversation on OCGs I recently had with an old friend and expert. More detail on that dialogue soon...)

In the meantime, read Toby’s thoughts in: "Outside Counsel Guidelines: Navigating the Changing Landscape of Client Demands" --
  • "First, an observation: From reading many of these documents, the overall evolution of OCGs seems to reflect a growing chasm between clients and law firms. The documents go to great lengths to describe and list restrictions on what clients will not pay for, how rate increases will be handled, and even describing acceptable language for time entries. This reflects a presumed relationship of mistrust. Having to go to such lengths demonstrates that clients, on some level, feel that law firms are not being fair with them. So, in order to bring back a perception of fairness, in-house departments are creating these rules in an attempt to level this playing field again."
  • "The growing complexity of OCGs demonstrates a need for firms to better monitor the terms of each OCG. This evolution has made OCGs effectively contracts, requiring law firms to manage them that way. Firms will need defined processes and new technologies to stay on top of this need."
  • "Overall we can expect the flood of OCGs to continue. Law firms should be committing resources to capturing the content of these documents and making it accessible and actionable so that firms stay on top of their client demands. Hopefully in the long run, clients and law firms will find a more productive way to rebuild any broken trust. But in the meantime, OCGs present a growing challenge for both firms and the clients who write them."

Thursday, August 11, 2016

OCG "Shark" Week: The Final Bite (For Now...)

Mid-swim this week, a reader wrote in suggesting we retread some older waters and make sure to highlight some of the historical stories, articles and resources on OCGs we've covered over the years.

OCG Panel Webinar Recording: "Responding to Outside Counsel Guidelines" --
  • "In the past five years, outside counsel guidelines ("OCGs") have become more commonplace and more stringent. The legal services world has shifted, as corporations (and their law departments) are being held to stricter budget accountability and risk management standards. Law departments have, in turn, held their external counsel to these same higher standards. In many ways, clients have become the true regulators."
  • "In this session, panelists will explore the evolving OCG landscape and discuss how firms can negotiate and respond to outside counsel guidelines."
  • "Speakers: Gilda Russell - [now former] Ethics and Conflicts Counsel, Holland & Knight LLP, Mike Guernon - Director of New Business and Conflicts, Orrick, Herrington & Sutcliffe LLP, Paul Hurdle - Senior Counsel, McKenna Long & Aldridge LLP [now Dentons]"

Past Articles & Updates:
  • "Dealing with Client Outside Counsel Guidelines and Other Non-Standard Client Engagement Terms" -- Gilda Russell:
    • "Consequently, firms should develop effective processes for dealing with OCG and client terms. These processes should focus on monitoring the avenues by which OCG and client terms come into firms as well as requiring review and approval of OCG and client terms by designated persons well versed in the subject matter of the provisions and related compliance issues."
  • "Hidden Compliance Threats to Outside Counsel Guidelines" -- Nancy Beauchemin:
    • "The first step a law firm needs to take to comply with outside counsel guidelines is to become aware that they exist. All too often, the attorney primarily responsible for the relationship with the corporate legal department will agree to the guidelines without first vetting the language with those individuals and departments within the firm that need to establish procedures and technology to comply with them."
  • "Some Corporate Clients Are Going Too Far With ‘Guidelines' for Counsel" -- Simon Chester:
    • "Chester said that while general counsel at his former firm, he assigned his summer associates to search the firm's document management system for outside counsel guideline packages. 'There were hundreds of them,' he stated. He said he and the firm's management team 'had no idea' of the extent to which his partners had agreed to those 'bombs waiting in our files' that 'were setting the terms and conditions for our interactions with our clients.'"
See you next week... (I've heard rumor of a plane carrying snakes...)

Wednesday, August 10, 2016

OCG "Shark" Week: "Double Indemnity"

"We're going to need a bigger blog!" (Too much? Well, you hopefully knew what you were signing up for when you signed up for these updates...)

Regardless, we continue our journey this week with: "Indemnity Provisions in Outside Counsel Guidelines: A Tale of Unintended Consequences" published by the ABA (full text to members), written by Anthony E. Davis and Noah D. Fiedler, partners in the Lawyers for the Profession group at Hinshaw & Culbertson LLP.
  • "The article discuses how client outside counsel guidelines ("OCGs") are taking on increasing significance as more corporate and financial institution clients develop broad forms of OCGs and adopt policies requiring them for all outside counsel engagements. In the article, Mr. Davis and Mr. Fiedler provide an overview of the factors underlying the increase OCGs generally and then discuss how OCGs, and particularly the provisions commonly included in OCGs that require law firms to indemnify clients, actually threaten the professional independence of lawyers and the legal profession as a whole."

Another interesting front on the OCG "discussion" touches on matters related to recent news about internal privilege, see: "N.Y. Court Endorses ‘Intrafirm' Attorney-Client Privilege" --
  • "Many firms that staked out that position did so despite the fact that some of their top clients—large businesses and the in-house lawyers who manage corporate legal budgets—have adamantly opposed efforts to establish the intrafirm privilege."
  • "That new tack, Sarwal said, may involve using “outside counsel guidelines” to require firms to give up the right to shield internal communications that would be privileged under this New York ruling and a string of recent cases from courts in other states."
  • "That suggestion didn't sit well with some lawyers who are designated as their firms' general counsel or have acted in that capacity on an informal basis."
  • "'If that's really what they plan to do that will be very disappointing,' said Brian S. Faughnan, a partner in the Memphis office of Lewis Thomason. 'It's a bit wrong-headed to insist that firms, if they're going to get your business, would have to waive the privilege,' Faughnan told Bloomberg BNA."

Tuesday, August 9, 2016

OCG "Shark" Week: "Single Indemnity"

Next up from BNA: "Lessons for Law Firms on Client Intake (Perspective)" --
  • "The increasingly competitive nature of the legal services market has shifted the balance of power between lawyers and clients. A potentially damaging result of this power shift is the now-common client indemnification clause included in many outside counsel guidelines (OCG), requests for proposal (RFP), or client-drafted engagement letters."
  • "These clauses create risk for both lawyer and client. Depending upon the scope of the indemnity and size of the engagement, a law firm’s financial stability can be threatened. Because the indemnification provisions could also compromise insurance coverage, the client risks losing the financial protection presumed to be provided by its law firm’s malpractice insurance."
  • "Despite the obvious drawbacks, it appears that client indemnification clauses are here to stay, so the real question is how to deal with them. In some instances, clients will negotiate the requirement, or change the language. In order to address the concern, though, lawyers must first be aware of the client’s request for indemnification, which brings up perhaps the most troubling issue of all."
  • "Because of the significant risks posed by agreeing to indemnify a client, there are a variety of steps firms should take to identify, screen for, and collect client indemnification provisions as part of the new client intake process and ongoing practice management."
    • "To begin, it’s important that the firm take inventory of what it’s already agreed to. This effort entails a thorough review of existing RFPs, OCGs, and client-drafted engagement documents."
    • "The firm should also ensure that all new engagements receive a thorough review. Partners must be educated on the importance of identifying indemnification requirements, as should staff who work in the client intake system."
    • "Even after files are opened, and the work has commenced, your risk management work is not done. Clients will slip indemnification provisions into outside counsel guidelines or file management procedures that are delivered only after the engagement agreement is signed. If work continues on the file after receipt of the guidelines, the firm could be held to the terms contained in those documents. Accordingly, firms should require ongoing review of all client guidelines or procedures received after the file is opened."
  • "The firm can’t manage a client indemnification request unless the firm knows the request exists. The first step is to institute screening mechanisms to identify the requests, whenever they occur. Only then can the firm work with the client to obtain an outcome that benefits both."
Too much suspense and drama today... Now if there was a mechanism and resource that could help manage the intake risk and ongoing terms of business compliance...

Monday, August 8, 2016

Announcing Risk Blog "Shark Week" (aka OCGs & Terms of Business)

A long time reader sent in a link to a well-aged article, sparking the idea of a thematic focus for the week... I've observed that the annual "Shark Week" on cable, serving up spill, chills (and a bit of aquatic education) always earns high ratings. (I've never watched it. I'm more partial to the Twilight Zone Thanksgiving Day marathons of my youth... "That was a good thing you did. A real good thing." But I digress...)

The Sharks this week are OCGs. And we're starting with a look at that article, which was published nearly a decade ago by lawyer Rees W. Morrison, consultant to corporate general counsel: "Dueling Documents: Law-firm retention letters versus law department outside-counsel guidelines" --
  • "Dueling may be outlawed, but at the start of an engagement law departments and their law firms sometimes walk back 10 paces, turn and fire. In this country, law departments blast away with their outside- counsel guidelines; law firms return fire with their retention letters. Neither document will disappear, but the two sides can take a shot at improving the exchange."
  • "Law departments recognized that they need to set some of their own rules and expectations, so they began to create guide- lines for outside counsel. These guidelines covered all matters sent to external counsel, unlike law-firm retention letters which govern a single matter. Occasionally a law department has a set of guidelines specifically for litigated matters. In general, guidelines swing to the opposite side from law-firm retention letters: The buyer asserts its dominance."
  • "No metrics have come to my attention about the frequency with which law firms send engagement letters; my estimate, having consulted to law departments for 20 years, is that more than three-quarters of all U.S. law departments with more than 10 attorneys have by now promulgated some form of outside-counsel guidelines."
  • "The two documents clash in almost every important respect because they seek opposite ends. The partner wants freedom of action, financial protection, and little accountability. The general counsel wants control, cost consciousness, and disciplined representation."
  • "The efficacy of guidelines in terms of controlling outside counsel costs, however, has yet to be measured, let alone proven. Guidelines serve the purpose of putting law firms on notice that costs and performance matter, but in the end I am dubious that all the time and energy expended on them have made much difference. The problems of warring documents, confusing variations everywhere, and dissimilar enforcement could be ameliorated."
  • "What we need as an industry is something akin to the common application for college. We need a set of baseline guidelines for outside counsel that law departments can start from uniformly and incorporate by reference... The benefit for law firms from a common set of terms is that they too could spend less time on this aspect of representation, accept industry standards, and only discuss the few provisions that seem inappropriate."

Thursday, August 4, 2016

On Practically Protecting Privilege In-House

Following yesterday's update comes analysis and advice via partners from Dentons: "Exercising Attorney-Client Privilege Over In-House Counsel Communications" –
  • While the Stock decision reflects a growing trend among state courts in rejecting the fiduciary exception to the attorney-client privilege and upholding the privilege for communications between firm attorneys and in-house counsel under certain circumstances, many jurisdictions have yet to jump on the bandwagon. In those jurisdictions, attorneys must tread carefully or risk losing all benefits of the attorney-client relationship. Moreover, even in the jurisdictions where the privilege exists, the cases suggest that certain steps should be taken to protect the privilege. Thus, law firms and their attorneys may wish to consider the following recommendations."
  • "Appoint In-House Counsel. Regardless of the size of the law firm or type of practice, formally designating an attorney (or team of attorneys) to serve as in-house counsel benefits the firm and its clients. Maintaining confidentiality and avoiding conflicts of interest with clients are chief among the reasons for appointing in-house counsel."
  • "Treat In-House Counsel as Counsel to the Firm in Form and Substance. Ensuring the legitimacy and effectiveness of in-house counsel requires more than just the provision of a title. Instead, the position should be assigned responsibilities, including, but not limited to, the investigation and analysis of matters that might involve attorney exposure... Additionally, when discussing claims or rendering advice on specific matters involving firm clients, those clients should not be billed for any time devoted to consulting on such matters."
  • "Segregate Client Files and In-House Counsel Files. Because the purpose of the communication is to seek legal advice on behalf of the firm, files maintained by in-house counsel should be segregated from those maintained by attorneys during the normal course of client representations. Too often, internal communications discussing ethics inquiries or potential conflicts are maintained with other documents and materials for the case under which the issue arose."
  • "When that occurs, disclosure of those communications may be contested. The former client may insist that those documents corroborate claims of ethical violations or other attorney misconduct. Keeping communications with in-house counsel separate helps prevent their disclosure, even in jurisdictions where the client “owns” the client file. To protect communications, in-house counsel should store emails and memoranda of conversations in files created for the purpose of advising the attorney or firm, while the attorney should keep them out of client files."

Wednesday, August 3, 2016

On In-House Attorney-Client Privilege

Karen Rubin at Thomson Hine writes: "Firm counsel privilege prevails; New York joins favorable trend in recognizing doctrine" --
  • The attorney-client privilege covers ethics advice that lawyers get from their law firm’s general counsel, and the communications do not need to be disclosed to the client, said a unanimous five-judge panel of the New York Appellate Division last week, in a closely-watched case. In Stock v. Schnader Harrison Segal & Lewis LLP, the court ruled that the law firm was the “real client” in getting the advice from the GC, and held that the fiduciary exception didn’t apply.
  • In an arbitration before the Financial Industry Regulatory Authority (FINRA), the employer said that it was going to subpoena the lawyers who handled the separation agreement negotiation, and indicated that it was seeking to point the finger at the law firm as being partly responsible for any loss to the client.
  • The court put particular emphasis on two facts:  first, that the Schnader firm’s general counsel had never participated in the client’s representation; and second, that the firm did not bill the client for the lawyers’ ethics consult with the GC.  That solidified the court’s view that the firm and its lawyers were the clients, and entitled to the privilege protection available to other clients.
  • In reaching its conclusion, the Stock court cited similar recent holdings from state high courts in Georgia and Massachusetts.  The ABA has also taken the position that the fiduciary exception does not apply to confidential communications between law firm personnel and the firm’s in-house or outside counsel, even regarding the firm’s duties or potential liability to a current client.  That favorable trend continues, with the opinion of this influential court.
For more detail on this specific decision, see also: "In-House Privilege In The First Department."

Tuesday, August 2, 2016

Conflicts: Malpractice Insurance Claims Trends

From Ames and Gough comes: "Uptick in Lawyers’ Liability Claims; Business Transactions Top Claim: Study"--
  • "Law firms have seen an increase in the frequency of malpractice claims, which are becoming more costly to defend and could cause lasting reputational damage, according to a new study by insurance broker Ames & Gough. The study found that most legal malpractice insurers saw an increase in the frequency of new claims in 2015, including larger claims with costs in excess of $50 million."
  • "In its sixth annual survey of lawyers’ professional liability claims, Ames & Gough examined the trend by polling nine lawyers’ professional liability insurance companies that on a combined basis provide insurance to more than 60 percent of the AM Law 100 firms."
  • "Conflicts remain top cause of claims, the survey revealed. In each of the six years the survey has been conducted, insurers cited conflict of interest as the most common alleged legal malpractice error. This year, five of the nine insurers surveyed ranked conflicts the single biggest leading cause of legal malpractice claims; one other insurer considered it the second leading cause. Further, among the nine insurers surveyed, five reported an increase in claims resulting from lateral hires or firm mergers."
  • "'Conflicts typically come into play as law firms seek to grow either through mergers or by bringing in lateral hires,' [partner and senior vice president Eileen] Garczynski noted. 'Besides having these hires provide a complete list of their current and past clients, firms should conduct comprehensive cross-checks and validation sessions to enhance their chances of catching conflicts before there’s a claim. Too often, law firms don’t act quickly enough to address potential conflicts.'"