Wednesday, March 4, 2015

Ethics & People (Lawyers Lateraling, Staff Entitled)

 
A few interesting updates addressing the people side of the equation. First, we've had great fun messing with Texas and its ethics opinion that non-lawyer staff cannot have the word "officer" in their title. (As of yet, we have seen no CIO, CMO or COO take us up on any of our creative suggestions... The latest of which is replacing the word "officer" with "sheriff." And, to be fair, word is that Texas is reviewing this opinion. Or planning to.) Now comes the Philadelphia bar with an opinion that's a bit more on the loving side: "Ethics Panel Says Senior Nonlawyer Staffers May Be Designated as ‘Directors' or ‘Officers'" [opinion] --
  • "The committee expressed its disagreement with a controversial Texas ethics advisory that disapproved firms' use of such titles for nonlawyer employees."
  • "Echoing critics who convinced the Texas committee to reconsider its May 2014 opinion, the Philadelphia panel rejected the notion that state variants of ABA Model Rule 5.4—which disallows most forms of multidisciplinary partnerships between attorneys and other professionals—prohibit law firms from bestowing nonlawyers with titles such as Chief Information Officer, Chief Marketing Officer, Chief Financial Officer, Chief Operations Officer, Director of Human Resources, Director of Facilities or Executive Director."
  • "'It is clear that a lawyer's independent professional judgment must not be compromised by allowing non-lawyers to be partners in, principals of or have ownership interests in law firms,' the opinion states. 'The Guidance Committee does not believe, however, that any use of the word ‘officer' or ‘director' in the title of a non-lawyer employee of a law firm is improper.'"
Next, the District of Columbia offers clarity for those on the hunt for pastures (of the greener variety, either literally or metaphorically): "DC Bar to Lawyers: It’s OK to Change Firms: Business of Law" --
  • "Non-competes are generally regarded as acceptable for most professionals -- except lawyers. Now an ethics opinion from the D.C. Bar, which oversees professional responsibility for lawyers practicing in the nation’s capital, has clarified that a law firm can’t try to limit a departing lawyer’s new practice."
  • "Ethics Opinion 368, published earlier this month, found that a 'law firm may not provide for or impose liquidated damages,' set before a departure is announced, on a lawyer who later competes with the firm. The decision also suggests that the former firm may not try to collect fees for work done after the lawyer leaves, even if the matter originated with the firm."
  • "A firm also cannot restrict a lawyer’s “subsequent professional association,” the D.C. Bar said, but a departing lawyer doesn’t 'have an unlimited right to solicit firm partners or employees' before departure."

Event Reminder: San Francisco Risk Roundtable


We're seeing great response to our upcoming Risk Roundtable set for San Francisco next week (Wednesday, March 11th at the office of Orrick, Herrington & Sutcliffe LLP).
 
Measure Twice, Cut Once: Improving the ROI in your COI (conflicts of interest) / business acceptance process
 
Evaluating new business becomes more and more challenging as firms grow. Client demands are changing and regulatory pressures continue to increase. Effective acceptance processes that deliver quick results and improve management visibility and control is critical to firm operations (and financial performance).
 
This session will discuss how firms are impacted by and responding to these new changes – and how they’re leveraging people, process and technology to deliver new value to their lawyers and clients. 
  • Mike Williams, Information Services Manager at Robins Kaplan LLP, will discuss his firm’s initiative to enhance its new business acceptance process.
  • Industry expert, Meg Block, will provide an overview of trends and considerations facing firms looking to modernize their own practices, and share examples of different approaches organizations can take to execute these projects.
We’ll also have a short demonstration of Intapp Open (including some important new features).
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 info@riskroundtable.com for more details.

Tuesday, March 3, 2015

Law Firm Conflicts – When the Subject (Patently) Matters


Interesting update (and commentary) from the IPethics and INsights blog on subject matter conflicts (a topic we've seen a fair share of stories on recently): "Mass. Sup. Ct. Schedules Oral Argument on Subject Matter Conflicts in Patent Prosecution" --
  • "How close is too close?  That is a question that has perplexed patent attorneys who prepare and prosecute patent applications for multiple clients in the same, or similar, fields of technology.  At least one state appeals court has decided to take this question head on."
  • "The case is presently set for oral argument on either April 6, 7, or 8, 2015.  Amicus briefs are due within two weeks of the oral hearing... According to the court’s public docket, to date no amicus briefs have been filed in this case."
  • "...this action arises from a lawsuit for malpractice filed against IP firm Finnegan Henderson by a former client and solo inventor, Christopher Maling. The complaint alleged that two different offices of the Finnegan law firm were simultaneously prosecuting patent applications on allegedly 'similar' eyeglass inventions for two different clients – Maling and a Japanese entity. Although both clients were awarded patents, Maling sued Finnegan on the basis of an alleged conflict of interest. According to Maling, he was allegedly unable to market a commercial version of his patented invention due to 'similarities' between Maling’s patent and the other client’s patent."
  • "Whether two inventions handled simultaneously by the same law firm are 'similar' enough to raise an ethical conflict of interest, or give rise to potential malpractice liability, are issues of considerable importance to the intellectual property bar."

Friday, February 20, 2015

A Corny Conflicts Title, A Not-So-Sweet Disqualification


We covered the preliminary ruling late last year, which now has been updated: "Law firm Squire Patton Boggs removed from corn syrup lawsuit after merger" --
  • "A U.S. judge has disqualified newly-merged law firm Squire Patton Boggs from representing a group of U.S. sugar companies suing corn syrup producers for false advertising, saying it had a conflict because of work done by one of the legacy firms for two of the defendants in the case."
  • "U.S. District Judge Consuelo Marshall in Los Angeles in an order Friday wrote that "no alternative short of disqualification will suffice" over Patton Boggs' work for clients Tate & Lyle and Ingredion Inc before its 2014 merger with Squire Sanders."
  • "The judge noted the hardships the disqualification would cause for the sugar companies and their trade groups, including Sugar Association Inc, American Sugar Refining Inc, Western Sugar Cooperative and C&H Sugar Co."
  • "The ruling gives a glimpse into the types of conflicts created by law firm mergers and by lawyers moving from firm to firm and the complications that can arise."
  • "The conflict was only identified after the deal closed when Tate & Lyle brought the lawsuit and Patton Boggs' previous work for it to the merged firm's attention, according to the ruling. The ruling means the sugar companies will be without lawyers who had already put in 20,000 hours on the case and racked up $12 million in legal fees."
Update: See also detail and commentary about the use (and invalidation) of an advanced wavier in this case, via the Legal Ethics Forum: "One of the two clients had a broad conflict waiver in its retainer agreement with Patton but the court refused to enforce it. This has happened before. Comments to Rule 1.7 and the Restatement recognize broad prospective waivers by sophisticated clients. But judges - not so much. This one was too broad for the judge."

Thursday, February 19, 2015

Event: San Francisco Risk Roundtable


We're pleased to announce our upcoming Risk Roundtable set for San Francisco on Wednesday, March 11th at the office of Orrick, Herrington & Sutcliffe LLP.
 
Measure Twice, Cut Once: Improving the ROI in your COI (conflicts of interest) / business acceptance process
 
Evaluating new business becomes more and more challenging as firms grow. Client demands are changing and regulatory pressures continue to increase. Effective acceptance processes that deliver quick results and improve management visibility and control is critical to firm operations (and financial performance).
 
This session will discuss how firms are impacted by and responding to these new changes – and how they’re leveraging people, process and technology to deliver new value to their lawyers and clients. 
  • Mike Williams, Information Services Manager at Robins Kaplan LLP, will discuss his firm’s initiative to enhance its new business acceptance process.
  • Industry expert, Meg Block, SVP Risk Management Consulting at Intapp, will provide an overview of trends and considerations facing firms looking to modernize their own practices, and share examples of different approaches organizations can take to execute these projects.
We’ll also have a short demonstration of Intapp Open (including some important new features).
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 info@riskroundtable.com for more details.

Wednesday, February 18, 2015

Event: Legal Malpractice and Risk Management Conference (LMRM)

The 14th Annual Legal Malpractice & Risk Management Conference which will be held February 25–27, 2015 in Chicago. The LMRM Conference will again offer interactive panels led by leaders in their fields, who are professional liability practitioners, law firm general counsel and insurance professionals. Each panel will provide a comprehensive examination of current developments with an emphasis on recent legal decisions.

Intapp's Pat Archbold will be presenting a breakfast briefing: "Impacting the Bottom Line with an Improved Business Inception Process"
  • Is your firm taking on clients and matters that are bad for the bottom line? In today’s fast paced environment, where lawyers are eager to start work even before conflicts checks complete, the prospect of adding additional checks to the business inception process may sound quixotic.
  • But today the ability for firms to leverage new technology and automatically integrate richer, real-time business data into the process offers new promise – faster response times for lawyers, shorter conflicts reports, and greater opportunity for management to make strategic decisions before it’s too late.
  • Hinshaw and Intapp have partnered to deliver tools that help firms not only manage ethical and regulatory risk but financial risk as well. Hear how Hinshaw and various other firms are leveraging these tools to improve the bottom line.

Tuesday, February 17, 2015

Clients Eye Security "Weak Link" – Their Law Firms



The Recorder takes another look at growing client concern over law firm information security and confidentiality management: "Clients Eye Law Firms as Security Weak Link" --
  • "Law firm leaders should be bracing for some tough conversations about data security. Alarmed by a series of stunning corporate breaches, companies are getting serious about shoring up their security—and are starting to focus on the outside legal advisers privy to some of their most sensitive corporate secrets. 'I tell anyone who will listen, 'As soon as I finish talking, run—don't walk—and call your IT director and make sure that your law firms have top of the line cybersecurity,' said FireEye Inc. general counsel Alexa King."
  • "Law firms are seen as the proverbial weak link, lacking the IT infrastructure of, say, major banks and retailers yet often holding their confidential financial data along with sensitive personnel or medical records. Some of that data is sent over unsecured networks and to personal devices."
  • "Adobe Systems Inc. associate general counsel Lisa Konie said companies are slowly waking up to that risk. 'It's going to take somebody getting burned, and then everybody is going to try to get in on it.'  [S]he and her team are trying to include data protection standards within its guidelines for working with firms."
  • "Kevin Clem, managing director of the law practice consulting group at HBR Consulting LLC said he's hearing from clients concerned about outside-counsel vulnerability, and said some clients are pressing for security assurances when they seek bids for legal work."
  • "Morgan Lewis partner W. Reece Hirsch said his practice has dealt with demands for data protection for more than a year now, but that is also because he represents clients in the health care industry. As of September 2013, all business associates to HIPAA-regulated industries became subject to HIPAA regulations themselves. Part of that includes a standard data security rule about how the data is stored and kept private. 'Law firms, frankly, haven't had their feet held up to the fire,' Hirsch said. 'In most cases their clients have confidence that the law firm is handling data security appropriately.'"
  • Firms may be starting to listen, said Patrick Archbold, vice president of risk management at legal software company Intapp Inc., if only because they don't want to lose business. 'Lawyers hate change, and they think they can lawyer their way out of anything,' he said. 'The only thing that really motivates them is clients, and that's finally happening.'"

Wednesday, February 11, 2015

Risk Grab Bag (Clients, Conflicts, Currency and the Cloud in Canada Cancelled?)


Several interesting updates to share. First, on the economic risk front: "Managing the Risks of Investing in Clients" --
  • "Clients are looking for ways to pay attorneys with something other than cash. Attorneys are looking to move away from the standard billable hour toward fee arrangements that allow them to participate in the success of projects they help make happen."
  • "The most significant limitation for attorneys investing in clients is whether the transaction is fair and reasonable—from the perspective of the client. Bar associations and courts are especially sensitive to whether an attorney is unfairly trading off of the attorney's knowledge of client confidences or secrets, or otherwise leveraging the relationship to gain an unfair advantage."
  • "One failsafe protecting clients from unreasonable terms is the opportunity to consult with independent counsel. Independent counsel operating with no interest in the transaction allows the client to benefit from professional judgment free from conflict."
  • "Some investments can change the nature of the relationship of the attorney and the client to law practice. Depending on the investment, attorneys may become a client of the firm, in addition to their other role with the practice. Such changes implicate a myriad of issues including the evaluation of potential conflicts of interest for both existing and prospective clients. As a result, in order to detect and resolve these potential issues, it is important to change the law practice's client intake procedures to include any information now relevant because of the transaction."
Next, on how close a relationship must be to trigger conflicts: "Louisiana Supreme Court concludes that 'of counsel' lawyers are associated with that law firm for conflicts of interest analysis" --
  • "...the recent Louisiana Supreme Court which concluded that “of counsel” lawyers are associated with that law firm for purposes of potential conflicts of interest analysis. The case is In re Randy J. Fuerst, No. 2014-B-0647 (La. SC 12/9/14). The Court’s opinion is here: https://www.ladb.org/DR/?"
  • "Bottom line: According to this Louisiana disciplinary opinion, a lawyer who is “of counsel” to a law firm is considered to be a member of that law firm for purposes of conflict of interest analysis; therefore, a lawyer who has a conflict of interest and must withdraw from representing a client cannot refer that client to a law firm in which he has an “of counsel” relationship since this conflict is imputed to the law firm and all of its lawyers."
Finally, turning to the Great White North: "Did the LSBC Just Kill Cloud Computing for Lawyers in BC?" --
  • "...the Law Society of British Columbia (LSBC) President, Jan Lindsay, boldly pronounced that, in no uncertain terms, BC lawyers are prohibited from using US-based cloud computing providers."
  • "...from the back of the room, an attendee stood up and stated (roughly, to paraphrase): 'I am Jan Lindsay, President of the Law Society of BC. This is black and white: BC lawyers are prohibited from using non-BC-based cloud computing providers, including Google and Dropbox... It is a new ruling as of October 31st."
However, take heart, if you parse the spirited comments in that discussion, and proceed to track down the LSBC president's blog, you'll find the retraction: " I don’t believe I said that non-BC cloud computing services were not permitted, but if I did I was wrong."

Tuesday, February 10, 2015

Conflicts Round Up


Let's start with something about a law firm merger making a bit of news these days: "East meets West: Dentons-Dacheng merger raises host of questions" --
  • "The creation of the world’s largest law firm stands to smooth the path for new Chinese investments into Canadian finance and agriculture, even as it raises questions about how well China’s legal establishment can mesh with western practices."
  • "For all the potential benefits of combining forces with Chinese lawyers, western law firms have been hesitant out of fears that doing so could expose them to Foreign Corrupt Practices Act violations, potential troubles with cyber-security or vexing cultural questions. Among them can be a laxer attitude toward conflict of interest at Chinese law firms and different compensation practices. Many Chinese lawyers are paid a fixed percentage of their individual gross billings and maintain their own secretaries and support staff. 'It’s what we would call a hotel for lawyers,'"
And then move to a complex analysis of potential conflicts and a "web of relationships," getting some public attention: "Casino sitting ripe with potential conflicts" --
  • "When a Chicago law firm ended its 11/2-year relationship with a partner in the Lago Resort & Casino project last March, it had another big client waiting in the wings... Taft, Stettinius & Hollister LLP, which merged with law firm Shefsky & Froelich last year, became the state board's lead gambling consultant under a one-year, $4.9 million contract."
  • "In December, the board recommended Lago's site, in Tyre, Seneca County, for a commercial casino license. Montreign Resort Casino and Rivers Casino & Resort at Mohawk Harbor also got recommendations. Key officials involved in all three projects had previously used the Taft firm in their businesses."
  • "These potential conflicts of interest were disclosed to the Gaming Facility Location Board in applications submitted last summer, yet the board continued to use the firm as its gambling-services consultant. The board contends that the past associations between the selected bidders and Taft had no bearing on its recommendations."
  • "Of the 16 casino bids evaluated, five, including the three winning bidders, identified dealings with the Taft firm as a potential conflict of interest in their applications. Two of those five bidders — Hudson Valley Casino & Resort in Newburgh, Orange County, and Live! Hotel & Casino New York in South Blooming Grove, Orange County — were not recommended for a license. The board decided not to recommend an Orange County bidder."
Finally, see: "Even in the Ninth Circuit, courts should not intervene mid-arbitration" --
  • "In Sussex v. U.S. Dist. Ct. for D. Nevada, __ F.3d __, 2015 WL 327558 (9th Cir. Jan. 27, 2015), the underlying issue was whether the arbitrator had a disqualifying conflict of interest.  A single arbitrator was hearing three similar actions by condominium owners against the developer.  During the course of his service, the arbitrator founded a company to invest in 'high-value, high-probability legal claims.' The arbitrator did not disclose that investment activity, but the developer discovered it and moved the AAA to disqualify the arbitrator.  The AAA denied the developer’s request after the arbitrator said his investment company was 'dormant.'"
  • "On appeal, the Ninth Circuit issued a writ of mandamus, instructing the district court to vacate its disqualification of the arbitrator.  It noted that no court after Aerojet had approved of a mid-arbitration intervention and that a majority of circuit courts 'expressly preclude' such intervention."

Monday, February 9, 2015

>Seriously< Swift and Speedy Screening Seems Suitable


From the excellent Lawyer Disqualification Blog comes: "A Timely Reminder of the Importance of Timely Screening" [Signature MD, Inc. v. MDVIP, Inc. (C.D. Cal. Jan. 20, 2015).] --
  • "Duane Morris was recently reminded of the importance of erecting screens in a timely fashion.  From 2008 to 2012, Lawyers in Duane Morris’s Philadelphia office represented MDVIP, reportedly the largest medical concierge membership program."
  • "Then last year, Duane Morris, on behalf of another medical concierge service, brought suit against 'MDVIP for antitrust violations contending MDVIP has abused its dominance in the relevant markets by utilizing anti-competitive tactics and entering into anti-competitive agreements intended to unlawfully maintain and expand MDVIP’s monopolies and to preclude . . . others from competing against it.'  The court found that these two matters were 'substantially related'"
  • "Having recognized the former client conflict, the court then examined “whether the implementation of an ethical screen would be sufficient... The court was able to duck the ultimate question (namely, whether to bless the practice of screening as sufficient to avoid disqualification) because the firm had failed the “timeliness element in implementing an ethical screen..."
  • "The court concluded that the firm had instead implemented the screen 'two days after the [Duane] Morris firm was retained by' its current client.  Although the court acknowledged that a two-day lapse was 'very short,' the court nevertheless disqualified the firm."
Two days. Is your firm ready and able to meet that standard? (Some can...)

Thursday, February 5, 2015

Disqualifications Decided and Deconstructed



Two interesting stories to share. First: "Mayer Brown Tested (and Ultimately Failed) the Limits of Implied Waiver" [Decision] --
  • "Mayer Brown was disqualified from representing Defendant HSBC Finance Corporation in the District of Minnesota.  Mayer Brown had previously represented the Plaintiff Residential Funding Company (RFC), and the district court was quick to find a former client conflict:
  • "'RFC presented extensive evidence that the matters on which Mayer Brown previously represented RFC were substantially related to the instant litigation and, as a result, Mayer Brown was precluded from representing HSBC against RFC, absent its consent or waiver of its right to seek disqualification... the only basis for Mayer Brown’s opposition to the motion to disqualify is that by waiting six months to bring this motion, RFC waived its right seek disqualification.'"
  • "Here, Mayer Brown argued that RFC knew about the conflicted representation for six months before RFC moved to disqualify the firm (and to Mayer Brown’s credit, several courts have concluded that a delay of six months, or even less, forfeits the disqualification remedy).  The problem, though, is that the district court disagreed with Mayer Brown that RFC had known about the conflicted representation for six months. Mayer Brown premised the knowledge argument on a casual voicemail that its lead partner had left for RFC’s counsel."
  • 'RFC’s counsel, however, was later able to retrieve the actual voicemail for the court, and the court found the voicemail much more 'ambiguous' than the affidavit had indicated."
"Appellate Panel Rules Against Attorney Disqualification Twice" --
  • "In a case last month, a unanimous panel upheld a ruling that Kilpatrick Townsend & Stockton should not be disqualified from representing a nominal defendant in, Stilwell Value Partners v. Cavanaugh, 6530112011."
  • "And last week, another unanimous panel, interpreting what defines "substantial harm" to a prospective client when determining if an attorney should be removed, reversed a Commercial Division ruling that disqualified an attorney based on Rule 1.18, which was added to the Rules of Professional Conduct (22 NYCRR 1200.0) in 2009. That case is Mayers v. Stone Castle Partners, 650410/2013."
    "In an unsigned opinion Dec. 30, the appellate court said that a minority shareholder failed to show a conflict of interest existed in Kilpatrick representing directors who sit on the boards of a mutual holding company and the publicly traded company that owns a bank and in which the mutual holding company is the majority shareholder."
  • "Stilwell asserted that there was an inherent conflict of interest in Kilpatrick representing the defendant directors, majority shareholder MHC and NECB, a nominal defendant on behalf of which the shareholder derivative action was brought. However, Jonathan E. Polonsky, a partner at Kilpatrick, at the hearing said the motion to disqualify was a defense tactic to require two firms to staff the case and increase the pressure on the defendants to settle the shareholder derivative lawsuit because of deepening costs."
  • "At the hearing, Ramos agreed the motion was a tactical move when he learned that Neupert had engaged in settlement discussions with the supposedly conflicted Kilpatrick. 'If you’re going to take the position that the conflict crystalized when I denied the motion to dismiss, at that point, I would have a great deal of respect for a motion made to disqualify counsel,' Ramos said at the hearing last year. 'If you’re going to be consistent, you wouldn’t speak to them because they would be conflicted. You wouldn’t talk settlement. The only thing you would do is demand they obtain separate counsel.'"
  • "Ultimately, Ramos found that Stilwell waived the conflict."

Wednesday, February 4, 2015

It's the Engagement Letter (Something)!



Gracing the pages of the esteemed "The Lawyer" magazine, Eddie Reich, US General Counsel at Dentons shines the lime light on an important issue: "Engagement letters: so simple even a child could understand" --
  • "I appreciate that some of the issues discussed in these Risk Tips can be rather complicated. Take engagement letters, for example. Advice like ‘send an engagement letter’ can be difficult to comprehend. And admonitions to ‘carefully review outside counsel terms’ can really tax the brain. After all, not everyone immerses themselves in intensive study of professional responsibility esoterica."
  • "So I’ve enlisted a couple of old friends to help communicate best practice with regard to engagement letters in a simple way. Please study these carefully..."
Linked in the update is a PDF featuring two colorful cartoon buddies named Goofus and Gallant. One of whom "swipes an apple from his client's conference room; it's the only thing of value he can get from his client since it refuses to pay its bills, claiming that it never requested the legal services provided."

This brings to mind another recent update from another gentleman who has worn the law firm general counsel hat and now colorfully blogs under the banner Lawyering for Lawyers, Steve Crislip at Jackson Kelly: "Sometimes Clients Will Just Not Pay You" --
  • "Any engagement letter should address in writing the right to withdraw if not paid and the requirement for the client to make timely payments of bills.  You are urged to discuss any withdrawal procedures with them and to give proper notice, under applicable rules, before withdrawing.  Lawyers should not be reluctant to withdraw when not paid either.  It is important to do that well before any critical deadlines and to advise the client upon withdrawal of all such deadlines in writing.  Otherwise, courts may not let you out because it would amount to abandonment, or the client will claim they did not know of the deadlines.  The point is that lawyers need to be better business managers of their work done."
  • "In an extreme example, recently the firm of Morgan Lewis & Beckins was finally allowed to withdraw 30 years after it was fired by the client. The Third Circuit would not grant the motion to withdraw until the client could retain substitute counsel, which did not happen.  Finally, a three-judge panel upheld the Eastern District of Pennsylvania’s decision to let them out as counsel. It makes the point that there are some clients you do not deserve to represent."
(If only there were some new class of business acceptance software that could help automate and streamline the process of creating engagement letters and tracking internal compliance... Now that would be something...)

Tuesday, February 3, 2015

Economic Harm – An Emerging Class of Conflict?


 
Coming off our recent note about subject matter and other types of conflicts making news, the Legal Ethics Forum calls out a fascinating decision: "Economic Harm as Direct Adversity Under 1.7(a)" [Celgard, LLC v. LG Chem, Ltd., Case Nos. 14-1675, -1733, -1806 (Fed. Cir., Dec. 10, 2014) (Dyk, J.).] --
  • "Jones Day represented the plaintiff in a matter where success would be economically harmful to non-client Apple, which was a customer of defendant. Apple was a Jones Day client on unrelated matters. It intervened to disqualify Jones Day on the ground that the representation was directly adverse to Apple because success against defendant would cause Apple to lose defendant as its lithium battery supplier."
  • "The court disqualified. Jones Day argued that it would not be possible for a law firm to anticipate the economic consequences to a non-party client who happened to be in an opponent's supply chain. But the court held that here the retainer agreement with plaintiff expressly said that the firm would not be adverse to Apple, so Jones Day did in fact recognize Apple's interest."
  • "However, the implications can be disturbing if read even a bit broadly. Many litigations can have economic consequences for a non-party client, even foreseeable ones and here Apple was a client on unrelated matters. The case holds that as a client even on unrelated matters Apple had a right not to see Jones Day appear for another client in a matter in which Apple was not a party because of foreseeable economic harm to Apple."
See some interesting commentary in the comments, as well as additional detail via the National Law Review: "Intellectual Property: Firm Disqualified Because Preliminary Injunction Is “Directly Adverse” to Another Client" --
  • "In determining whether the representation of Celgard amounted to a conflict of interest requiring disqualification, the Federal Circuit applied the professional conduct rules of the forum state. These rules prohibit any representation which is 'directly adverse to another client.'  The Federal Circuit found that the representation of Celgard was 'directly adverse' to the interests of Apple, and [was] not merely adverse in an ‘economic sense.'"
  • "Specifically, the Federal Circuit focused on the effect that Celgard’s preliminary injunction would have on Apple. It noted that the injunction would not only force Apple to find a new battery supplier, but also expose Apple to 'additional targeting by Celgard in an attempt to use the injunction issue as leverage in negotiating a business relationship.'"
  • "Even though Apple was not a named defendant in the litigation, the Federal Circuit found that a conflict existed based on the 'total context' of the case. Furthermore, the Federal Circuit rejected Celgard’s argument that finding a conflict in this case would give lawyers and clients 'no reliable way of determining whether conflicts of interest exist in deciding whether to commence engagements.' Instead, the Federal Circuit held that 'the duty of loyalty protect[ed] Apple from further representation of Celgard.'"

Friday, January 23, 2015

Conflicts Waivers – "Still Waiving After All These Years"



The New York Law Journal Reports: "Judge Rejects Disqualification of Law Firm in Joint Defense" --
  • "A Commercial Division judge has rejected a motion to disqualify a law firm from representing parties in a joint defense because 'virtually all conflict waivers would be unenforceable' if the court did so."
  • "The Ridgeline parties argued that Eilender and his firm should be disqualified, even though a waiver of conflict was signed. Eilender represented Ridgeline and other parties who were once codefendants in a lawsuit challenging the sale of a company that owns a biodiesel refinery in Carthage, Mo. But now they on the opposite sides in litigation."
  • "Justice Shirley Werner Kornreich  rejected that request for disqualification in an opinion earlier this month in Gem Holdco v. Changing World Technologies, 650841/2013: 'If disqualification was warranted in this case, it would follow that virtually all conflict waivers would be unenforceable, a result which is at odds with this state's legal policy,' Kornreich said. 'Such a result would significantly impair the ability of co-defendants to mount a joint defense, leading to significant litigation inefficiencies and increased legal costs for litigants, who would unnecessarily have to hire more lawyers to perform duplicative and expensive work.'"
  • "Eilender said in an interview that the motion to disqualify his law firm was 'completely a litigation strategy' undertaken by a 'sophisticated consumer of legal services.'"
  • "While there is a school of thought that rejects advance waivers of conflicts of interest, Eilender said his firm's engagement letter was meant to deal with the uncertainty of the future and plan ahead for conflicts arising between the jointly represented parties. If his firm's letter had been rejected by the judge, there was no way the firm could ever represent multiple clients without being conflicted out, Eilender said. 'The contract actually meant what it was supposed to mean and the court backed it up,' Eilender said."

Thursday, January 22, 2015

On Subject Matter Conflicts



The IPethics and INsights blog provides another update worth noting: "Massachusetts Supreme Court To Tackle Thorny Issue Of Subject Matter Conflicts In Patent Prosecution" --
  • "This action arose from a civil malpractice lawsuit filed in April 2012 in federal court by a sole inventor and his assignee against an IP law firm and several of its attorneys. The complaint alleged that the inventor hired the IP firm to file and prosecute a patent application on an allegedly new eyeglass hinge invention. The complaint further alleged that during the same time it was representing the inventor, the law firm also was representing another client in a similar invention, albeit using different attorneys working from a different office."
  • "The complaint alleged that the invention disclosed in the other client’s patent was 'similar in many important respects' to plaintiff’s  invention.  The complaint further alleged that the law firm had a conflict of interest which 'should have been disclosed before and during” the representation and that, due to the purported conflict, the law firm was unable to “fully and without restraint represent' the inventor and his assignee. The complaint still further alleged that plaintiff was unable to market his product as a result of the 'similarities' between the other client’s invention and plaintiff’s invention."
  • "Whether two inventions handled simultaneously by the same law firm are 'similar' enough to raise an ethical conflict of interest is an issue of considerable importance to the intellectual property bar and clients of IP services. To be sure, Baker Botts recently found itself facing a malpractice award of $41 million due to a patent subject matter conflict of interest (the firm escaped liability after the court determined the claim was barred by limitations)."
For more information about subject matter conflicts and how technology can be used to identify and mitigate risks as the conflicts landscape evolves. See Intapp's risk bulletin: "Beyond Adversity — On Business, Positional and Subject Matter Conflicts" --
  • "Managing conflicts is integral to the new business intake and lateral onboarding processes at every law firm. Over the years, firms have honed procedures and adopted software to search and identify potential adversity to avoid malpractice risks by resolving conflicts or turning down matters or lateral hires. Increasingly, however, clearing conflicts requires much more than simply identifying legal conflicts."
  • "To manage these business, positional, subject matter and playbook conflicts successfully requires firms to keep abreast of industry trends, update procedures, collect and manage new information and leverage new technology to streamline compliance."

Thursday, January 8, 2015

Will Big Breaches Create More Trickle Down Impact for Law Firms?

A reader sent in world of today's report in the Wall Street Journal: "Puzzle Forms in Morgan Stanley Data Breach." (With additional detail here.) The articles dig into the details of an internal breach (and associated allegations of what did or did not happen next):
  • "... [A] financial adviser named Galen Marsh started to sift through the account records of some 350,000 of the firm’s clients. Virtually none of them were his own. In what some security experts are saying is likely the biggest data theft at a wealth-management firm..."
  • "By December, some of that account information appeared on a text-sharing website, with the offer to trade it for an obscure virtual currency." ["Speedcoin" for the cyptocurrency geeks out there.]
  • "Twelve days later, a different item provided a sample of the information that was available, giving details from 1,200 accounts that Morgan Stanley said were tied to 900 clients."
  • "Already, the episode is having ramifications within Morgan Stanley: On Tuesday, people familiar with the matter said the firm has tightened access to its client database so that individual advisers no longer have access to such wide swaths of account data."
  • "It isn’t uncommon in the wealth-management industry for advisers to squirrel away information about clients before leaving for another firm, since a stable of wealthy clients is the lifeblood of any successful advisory practice."
Two potential thoughts flow from this situation. Firstly, when Bank of America feared it was about to see internal information shared via Wikileaks in 2011, it (and others) went on an OCG and law firm audit push that sent ripples across the legal industry. (Background and refresher on our coverage of that here and here.)

Will we see even greater focus on the firms that hold and manage this sensitive data? Morgan Stanley has already hired: "an outside consulting firm to increase its capacity to take calls from clients concerned about the breach and provide credit and identity-theft protective services." Will it feel the need to similarly demonstrate its commitment to security by announcing additional 'belt tightening' that will trickle down to its outside counsel and other vendors?

Secondly, this highlights the very real impact of unfettered internal access to sensitive information.

There has been a growing legal industry shift towards adopting "members only" internal security models, where only individuals that are members of a particular matter team can access sensitive client data, or "hybrid" models where matters in specific practice groups or geographies default to closed access, while others remain open.

According to the just-published ILTA technology survey, the number of firms moving to a "pessimistic" security model grew by 50% in the past year. (Though, for context, we note that the survey reports that 6% of firms have embraced the closed or hybrid confidentiality model.)

(For more information about how technology can be used to implement closed or hybrid models, to read a white paper on OCG trends, or to access a recorded webinar on this topic, see Intapp's resources on client confidential matters.)

Wednesday, January 7, 2015

On Intra-firm Privilege

Several recent updates on questions regarding intra-firm privilege:

"Novel Privilege Issue Raised in Suit Against Law Firm" --
  • "A malpractice case against Schnader Harrison Segal & Lewis in Manhattan's Commercial Division has raised a broader issue for large firms: whether communications between a firm's general counsel and its attorneys are privileged from clients."
  • "On Dec. 5, Acting Supreme Court Justice Melvin Schweitzer in Stock v. Schnader Harrison Segal & Lewis, 651250/13, ordered Schnader to hand over to a former client internal firm communications between its general counsel and its attorneys. Schnader is appealing that decision, saying the issue of "in-house law firm attorney-client privilege" is a matter of first impression in New York state courts and deserves a second look."
  • "Howard Elman, a managing member at Matalon Shweky Elman who frequently defends law firms and who is not involved in this case, said this is a sensitive concern for firms. 'Law firms, I'm sure, will be paying attention to this case because the law is not clear in New York,' he said. 'Conflict of interest cases are coming up more and more in litigation, and I think conflict scenarios are the classic type of things that lawyers will go to their general counsel about. The notion that a general counsel's communications with an attorney can be open for discovery is not good one' for law firms, he added.
On the West Coast: "California Case Embraces Intrafirm Privilege for Consultation With Firm’s Inside Counsel" -
  • "The attorney-client privilege shields a lawyer's confidential communications with her law firm's in-house attorney about a dispute with a current client provided that a genuine attorney-client relationship exists between them, the California Court of Appeal, Second District, decided Nov. 25 (Edwards Wildman Palmer v. Superior Court (Mireskandari), 2014 BL 331662, Cal. Ct. App. 2d Dist., No. B255182, 11/25/14)."
  • "The ruling is the first published California appellate decision directly recognizing the attorney-client privilege for legal discussions within law firms about problems with a current client's representation."
And the ever watchful Bill Freivogel notes another recent decision on the topic:
  • "Moore v. Grau, 2014 N.H. Super. LEXIS 20 (N.H. Super. Ct. Dec. 15, 2014). Following recent high court rulings in Massachusetts, Georgia, and Oregon, the judge ruled that a law firm could assert privilege for internal communications during a representation. The opinion has a particularly good discussion of how smaller firms might structure things to keep the privilege."

Tuesday, January 6, 2015

2015 – New Year, Old Risks? (Conflicts + Insider Trading)


(Hope everyone had a risk-mitigated New Year's celebration. We took a few weeks off. Now, back to work.) First up: "Proskauer Cases Reflect Efforts to Put Firms on Defensive" --
  • "In recent motions, plaintiffs have either alleged malpractice or that the firm’s attorneys had conflicts of interest and should be disqualified. In a statement, a firm spokeswoman said 'these four matters are completely unrelated and, in some cases, relate to events that occurred nearly a decade ago. They either are transparently tactical maneuvers by adversaries or efforts to seek a windfall by plaintiffs who are unhappy with the consequences of their own business decisions.'"
  • "Proskauer is not the only law firm defending its practice. In recent weeks, there have been motions in professional liability cases involving Schnader Harrison Segal & Lewis, Sidley Austin and Wachtell, Lipton, Rosen & Katz."
  • "Howard Elman, a managing member at Matalon Shweky Elman said, 'big law firms are getting hit left and right these days.' He attributes a rise in claims against large firms to factors such an increase in conflict issues, clients not having the same allegiance to firms as in the past and an active malpractice plaintiffs bar."

See the full article for more detail on the specific cases. Next up, a look at how new rules may create new temptations and new risks. The author has no qualms taking a proactive position: "How to Make a Killing Trading on Insider Information - Legally" --
  • "I suspect most investors believe the use of insider information is illegal. If so, they are only partially correct. A recent decision by the U.S. Court of Appeals for the Second Circuit (United States of America v. Todd Newman, Anthony Chiasson et. al) will make it exceedingly difficult to prosecute a broad range of insider trading cases, even when insider information is used and huge profits are generated."
  • "Assuming that this opinion is not overturned by the Supreme Court and remains the governing precedent, maybe you can profit from it. If you have the good fortune to overhear a conversation at a posh restaurant between a CEO and an investment banker concerning the imminent takeover of a public company, you can trade on that information with impunity. Why? Because even if you know the information was coming from the CEO, the CEO did not disclose it in exchange for a 'personal benefit.'"
  • "Similarly, if you have a friend who is an attorney at a major law firm and he discloses confidential information about a publicly traded company that is a client of his firm, you can trade on that information as well. The lawyer presumably did not tell you where he got the information and he did not benefit from disclosing it to you. Of course, the lawyer violated both his legal obligation to his firm and his fiduciary obligation to his client."

Monday, December 22, 2014

Article: How well does your conflicts system work?

Conflicts management ranked as a key investment priority in our 2014 law firm risk surveys. Intellectual Asset Management (IAM) features an interesting article by Frank Maher is a partner in Legal Risk LLP. "How well does your conflicts system work?" --
  • "In the course of acting as a solicitor for law firms for over 30 years – both defending professional indemnity claims and advising on professional regulation – the author has encountered many issues arising from conflicts of interest; much pain has been endured by those who fell foul of the rules. When conflicts issues go wrong, they can be among the most damaging to a firm’s reputation – and reputation is the only thing we have to sell. Problems in practice fall into several categories, including:
    • the conflict checking system failing to pick up the existence of a conflict, or significant risk of one, at all;
    • acting for two or more clients, such as joint venture partners or husband and wife, and failing to spot either that their interests conflict at the outset or that they may do so further down the line;
    • failing to spot when a conflict does arise in the future, as may happen when acting for lender and borrower, in some cases because the problem has unfolded gradually;
    • taking on a small matter which precludes the firm from acting on something more substantial later;
    • allowing a large client to impose its terms of business (or ‘outside counsel guidelines’) which impose more extensive duties than would apply at law and under the conduct rules;
    • establishing systems which check for client conflicts, but fail to check at all for own interest conflicts, such as personal appointments as trustee or director;
    • failing to spot that the solicitor’s own interests may conflict – perhaps the volume of work from one client, such as an insurer, and the desire not to offend it or appear uncommercial blinds the solicitor to the risk of conflict with the insured; and
    • relying on information barriers when they are either not appropriate at all (because at most they may protect confidential information, but will not cure a conflict), or inadequate for the purpose they seek to achieve.
See the complete article for additional detail and analysis.

Thursday, December 18, 2014

Close Encounters of the Ethical and Conflicts Kind


Several stories showcasing the atypical. First up: "Leave to appeal granted in novel conflict of interest case" --
  • "A Toronto law firm has obtained leave to appeal an order of a judge who removed it from a case on the basis of conflict of interest even if the traditional test for a conflict wasn’t met. On Nov. 27, Divisional Court Justice Barbara Conway found 'there is good reason to doubt the correctness of the motion judge’s order' to remove the firm despite the fact the party affected by the conflict wasn’t a former client or 'a near client' of the firm."
  • "Superior Court Justice David Brown had removed Teplitsky Colson LLP as counsel of record for the plaintiff in a matter to do with alleged mismanagement of a hedge fund after finding it had obtained confidential information about the defendant company from an employee who was a former client of the firm."
Next, only part of the story has come to light here, so judgment reserved: "Tennessee Ethics Board Sued" --
  • "A bombshell of a lawsuit goes in front of a Nashville  judge Thursday as a pair of Nashville lawyers are suing their own ethics board for what they call ethical violations and a cover-up. That means they are suing the very people who punish lawyers for bad ethics."
  • "It all started when one lawyer saw an email about his upcoming case sent to a judge without his knowledge... It was a secret email he knew nothing about."
  • "'We discovered that the Board of Professional Responsibility was systematically engaging in unethical conduct. They, on a regular basis, were having secret conversations with judges, and now they are trying to cover it up,' Roberts said."
And showing that those of us in California should not cast stones across state lines (but please send water): "Viewpoint: State Bar Intrigue Shows Little Concern for Transparency" --
  • "It's been a pretty wild ride the last few months over at the State Bar of California. First, the state Supreme Court pulled the plug on the rules commission that had worked for over a decade on a wholesale revision of the Rules of Professional Conduct. Not a single rule of the 67 submitted by the commission to the bar board in 2010 has been approved by the Court."
  • "Then the Bar's board of trustees terminated Joe Dunn, its now-former executive director. Within a day of that news becoming public, Dunn—represented by high-profile, self-described 'criminal defense lawyer' Mark Geragos—filed a lawsuit against the Bar claiming he was a whistleblower."
  • "There's much to speculate about, but a few things seem clear... whatever happens with l'affaire Dunn, the State Bar has to learn to be more responsive to lawyers who inquire about straightforward information and, especially, the public and the public's right to know. Lack of transparency may be convenient to Bar execs and board members, but opacity serves neither the interests of the legal system or the public."

Wednesday, December 17, 2014

Risk Updates: Conflicts Edition

 
 
First up, two partners at McKenna Long & Aldridge highlight a trend we've certainly witnessed here on the risk blog: "Motions to Disqualify: Four Things to Know" --
  • "Few things are worse for an attorney than getting a new big matter, starting work, and then facing a motion to disqualify. In recent months, high-profile disqualification motions have appeared more frequently in various legal news publications and Internet news sites."
  • "Many disqualification motions are well founded. Other times, disqualification motions are used as nothing more than a litigation tactic, forcing attorneys to scramble to protect valued client relationships."
  • "More significantly, increasingly mobile lateral attorneys (with attorneys rarely spending their entire legal careers at a single law practice or firm) have triggered a host of issues that can be the basis of a motion to disqualify."
  • "The best way to deal with motions to disqualify is to prevent them. Two important pre-motion strategies are effective. First, identify and resolve potential conflicts of interests including both multiple and successive representations prior to undertaking a representation or hiring a lateral. Where a conflict exists, an effective consent is the best defense to a motion to disqualify."
  • "Second, take effective steps to mitigate, if not eliminate, risks that a former client's confidences and secrets might be accessible by attorneys working on a matter involving the former client. Increasingly, courts have recognized and accepted timely, effective ethics screens as a tool for addressing the risks inherent becoming adverse to a former client."
  • "The 2014 Guidelines, published on 28 November, do not mark a substantial departure from the Original Guidelines, and instead make refined changes to reflect and inform current debates on issues in modern arbitral practice, and 'the increased complexity in the analysis of disclosure and conflict of interest issues.' In clarifying the standards expected of arbitrators and parties, it is the aim of the 2014 Guidelines 'that arbitration proceedings are not hindered by ill-founded challenges against arbitrators' or that 'the legitimacy of the process [is] not affected by uncertainty and lack of uniformity.'"
  • "Paula Hodges QC, Global Head of Herbert Smith Freehills’ International Arbitration Practice, says of the 2014 Guidelines that: 'we hope that these new Guidelines will prove useful in providing more clarity and a level playing field to parties and arbitrators, striking the right balance between impartiality and due process on the one hand and unmeritorious challenges on the other.'"
Revisions include:
  1. Third Party Funders must disclose their identity, and share the “identity” of the party they are funding
  2. Arbitrators who are members of law firms, must also “bear the identity” of his or her law firm – this does not extend to barristers and their chambers
  3. "Advance waivers" by Arbitrators do not discharge an ongoing duty of disclosure
  4.  2014 Guidelines apply to non-lawyers sitting as arbitrators
  5. Disclosure of identity of parties’ counsel, including if the counsel is member of the same chambers as the arbitrator
  6. Duty of impartiality and independence extends to Tribunal Secretaries
  7. Arbitrator to consider making disclosure in situations falling outside of the time limits used in the Orange List
  8. Arbitrator and another arbitrator or counsel currently act or have acted together as co-counsel within the last three years
  

Tuesday, December 16, 2014

Today's Hottest Risk Update: "Swiss Cheese," The Duke, Vereins & More


Today's post has everything. It's another example of general media coverage of risk issues we frequent. (And, perhaps, a suitable subject for SNL's Stefon, were he to summarize legal battles, as this one has everything... Dukes, Vereins, Fee Splitting, Ethics Allegations, Cheese and a Platypus...) As Newsweek writes in: "Legal Swiss Cheese" --
  • "Trademark lawsuits can be a little dry, but a California case in the fall has drawn attention not only because it involved John Wayne and a whiskey named 'Duke,' but also because it highlights a growing tussle over legal ethics."
  • "In the Duke case, lawyers for John Wayne Enterprises argued in court documents last August that Norton Rose Fulbright, the verein law firm in which legacy firm Fulbright & Jaworski represented Duke University, was playing both sides of the fence—an ethical no-no."
  • "Specifically, the Wayne lawyers asserted, Norton Rose, which formed the verein with Fulbright in mid-2013, had previously represented the distillery producing the Duke-branded bourbon in unrelated matters. Fulbright lawyers denied any conflict of interest, saying in court papers that verein 'member firms do not share privileged information with other member firms unless they are retained by and working together for a client on the same matter.' The judge did not address either side’s assertion."
  • "The inner workings of vereins 'are going to be tested in courts, because someone’s going to be very unhappy,' says Edwin Reeser, a former managing partner at prominent law firm Sonnenschein Nath & Rosenthal LLP, who is now in private practice."
  • "Still, the relative financial and operational opacity of vereins is the subject of increasing debate in legal circles. Peter Kalis, the chairman and global managing partner of non-verein K&L Gates, a major law firm, tells Newsweek, 'The business model for vereins is not yet proven.' Kalis has variously compared the mega-firms to a platypus (i.e. a freak of nature), a kaleidoscope, a “grand illusion” and a Potemkin village."
  • "Law firms rushed into these network combinations because they sounded like a wonderful panacea” to the problem of expanding amid the post-2008 recession, Reeser says. 'But the U.S. law firms are going to be the losers in these structures because of conflicts of interests and ethics rules on fee splitting.'"

Wednesday, December 10, 2014

NY Law Journal on Law Firm Information Security

With a hook invoking the late, great Rod Serling, the chances of a legal article _not_ touching risk issues making it to the blog are already high. Combine both, and, submitted for your approval: "Cybersecurity: Business Imperative for Law Firms" --
  • "It is not difficult, then, as the late Rod Serling, host of the long-running television show "The Twilight Zone" asked viewers at the beginning of each episode, to 'imagine, if you will' the following scene:
  • "A law firm's managing partner answers her phone on the first ring. It is 3 p.m. on the Wednesday before Thanksgiving and her husband wants to know when she'll be home... She clicks on the first email. It's from the chief technical officer of the bank that is the firm's biggest client. He is writing to advise that, due to increased cybersecurity scrutiny from New York State's Department of Finance and the Securities and Exchange Commission (SEC), he will be auditing the information security protocols of all of the bank's law firms."
  • "He needs access to the firm's network and copies of all information security policies and procedures, along with materials used to train the attorneys and staff—current, of course—by the following Monday morning."
  • "The managing partner swallows hard: There are policies, but they haven't been updated since BlackBerrys were the only smartphone allowed for firm business, five years ago."
  • "She clicks on the second email. This one is from the chief information officer of a 100-hospital system that short-listed the firm for its national litigation counsel. His email says that the board has decided to review the information management policies of all the finalists. He apologizes but, he writes, after a recent incident in which another hospital system law firm inadvertently disclosed the information of 400 patients to Google, the board has decided not to award an engagement to any firm unless it can show that patient information will be adequately protected."
  • "The managing partner picks up the phone, tells her husband she'll be working through the night and will also be leaving for the office right after the Thanksgiving meal, and offers that maybe one of the kids could help him cook."
The article proceeds to serve up a healthy helping of analysis, covering current trends, new standards and growing scrutiny placed on law firm compliance:
  • "With developments such as the requirements upon lawyers in the HIPAA omnibus rule and Superintendent Lawsky's letter requiring financial institutions to provide information about their law firms' information safeguards, the legal, ethical and business obligations come together. The question for law firms is not whether to become cybersecurity literate, but how quickly they can do so, in-house or with the assistance of outside experts and counsel, to the satisfaction of their clients and the clients' regulators."

Tuesday, December 9, 2014

Recent Conflicts & Screening Decisions


Another post cribbing from the eagle-eyed Bill Freivogel, who notes a few interesting cases:

LADT, LLC v. Greenberg Traurig, LLP, 2014 WL 6686776 (Cal. App. Nov. 25, 2014)
  • "Law Firm represented several parties in a transaction. At some point Law Firm wrote a letter to its clients mentioning possible conflicts of interest and eliciting a waiver from the clients. The letter also contained an agreement that any dispute regarding an alleged conflict of interest be subject to binding arbitration."
  • "Later the clients sued Law Firm for malpractice (this case). The complaint made no mention of a conflict of interest. However, during discovery the clients answered 'yes' to a question whether Law Firm had had a conflict of interest. Upon receiving that response, Law Firm moved to compel arbitration."
  • "The trial court denied the motion. In this opinion the appellate court affirmed holding that because the clients chose not to sue for a conflict of interest, the arbitration agreement did not apply to this case."
 Am. Tax Funding, LLC v. City of Schenectady, 2014 WL 6804297 (N.D.N.Y. Dec. 2, 2014)
  • "Lawyer served as law clerk in this court. While a clerk, Lawyer attended a settlement conference in this case in the presence of the magistrate judge who wrote this opinion. Lawyer left the court and joined Law Firm. After that, one of the parties, because its lawyer retired, hired Law Firm to handle this case. Because of the presence of Lawyer at Law Firm, the other party moved to disqualify Law Firm."
  • "In this opinion the magistrate judge denied the motion. The court found that Law Firm erected a timely and effective screen pursuant to New York Rule 1.12. Of particular interest was the court’s discussion of New York cases considering whether smaller firms should be held to a different standard when evaluating the efficacy of screens. Here, the court held that Law Firm, which had twenty lawyers, did pass muster."

Monday, December 8, 2014

Commentary: Law Firm Cyber Risk Insurance -- Rumor vs. Reality


The folks at Paragon Brokers have submitted an interesting white paper : "Is Reputation Damage Insurable in Cyber Insurance for Law Firms?"

Evidently, there was a slide in a presentation at the ILTA conference this Summer that suggested that reputation isn't insurable under a cyber policy, and they wanted to set the record straight. (I guess that just delivered the spoiler to the question at hand... but the full paper is worth a review nevertheless.)
  • "A data breach, network security or cyber event  could render client or proprietary records unreadable, leave networks unavailable, expose sensitive data or transmit malware to others. In addition to exposing a law firm to increased costs of  doing  business,  potential  liabilities  and  regulatory  scrutiny,  a  data  breach,  network  security  or  cyber  event  could have an adverse impact on a law firm’s process,  service, reputation, results of operations and financial condition."
  • "Possibly  one  of  the  biggest  'cyber' exposures  a  law  firm  faces  is  to  its  reputation  and  there  is  a  common misunderstanding that reputational damage cannot be insured in a cyber policy. This is not entirely correct, reputation loss can be insured when framed within  the prerequisites of insurability, i.e., that loss is  a) fortuitous, b) calculable & c) definite.
Read more for Paragon's commentary on the following questions:
  • How do insurers establish an insurable value to reputation?
  • How do insurers establish reputation loss is “definite” i.e. that  takes place at a known time, in a known place, and from a known cause?
  • How is reputation loss of income adjusted?
  • How can Cyber Insurance for Law Firms help?