Thursday, August 27, 2015

Syrup, Sugar, Sanctions, "Strategic," and Such



Interesting news via the National Law Journal: "Sanctions Sought Against Ex-Squire Patton Boggs Lawyer in Sugar Case" --
  • "Two corn refining companies that booted Squire Patton Boggs from its high stakes lawsuit against the sugar industry are claiming one of the law firm’s former attorneys is still on the case—in violation of a judge’s disqualification order."
  • "In a sanctions motion filed on Aug. 20, the refiners allege that Daniel Callister, who allegedly resigned from Squire Patton Boggs after the disqualification order in February, continues to represent the sugar companies as a "strategic advisor.'"
  • "At the entreaty of Ingredion and Tate & Lyle, which had been clients of Patton Boggs prior to its merger last year with Squire Sanders, U.S. District Judge Consuelo Marshall on Feb. 13 ordered Squire Patton Boggs disqualified from the case. The judge concluded that the firm had a conflict of interest since it had continued to represent one of the corn refiners following its merger and had handled matters for the other that were related to the case."
  • "'In the context of a spontaneous discussion initiated by Briscoe about whether further settlement discussions should take place between the parties, Briscoe admitted that Callister was still advising the sugar plaintiffs in this case and that, further, Callister would participate and advise the sugar plaintiffs in potential settlement talks,' wrote Michael Proctor, name partner of Caldwell Leslie & Proctor, in the motion. 'Thus, Callister essentially left the disqualified Squire Patton Boggs to coordinate the litigation on behalf of the sugar plaintiffs.'"
    "...lead counsel for the sugar companies, called the sanctions motion 'an absolute waste of court time and lawyer time.'"

Wednesday, August 26, 2015

On Effective Law Firm Risk Management (Structures, Policies & Approaches)



Our (gracious and understanding) friends at Paragon noted that the intra-firm privilege article we highlighted a few days ago was actually published quite some time earlier. (Your human editor clicked the wrong newsletter link in his haste to bring you the latest and greatest.)

Now we bring you Paragon's latest latest article: "Reflections On a Few Common Elements of Effective Law Firm Risk Management," written by Gilda Russell, previously Holland & Knight LLP's longtime Ethics and Conflicts Counsel. The entire piece is indeed worth reviewing, here are some highlights:
  • "In terms of structure, many large firms delegate risk management responsibilities to a General Counsel’s Office, Legal Department, or some similar type of risk management “team” within the firm... Other large firms choose to follow a model where there are fewer specialized partners on the risk management team... Medium to smaller firms may follow similar models or divide risk management tasks among only a few individual partners, perhaps even a committee, and professional staff."
  • "Each of these approaches can lead to effective risk management, and there may be many reasons why a firm’s risk management program is successful.  This article does not attempt to designate the best approach or discuss all of the reasons for success.  Rather, the analysis below points out a few common elements of effective risk management and, where appropriate, notes how different approaches might fare with regard to these elements."
  • "While effective risk management may have many reasons for success, there are at least a few common elements to any approach that is taken:
    • Firms should make it very clear who the members of the risk management team are and what their respective responsibilities entail and should regularly circulate and update such information;
    • Firms should formally designate one or more members of the risk management team as in-house counsel and clearly indicate the team members acting under the authority of in-house counsel;
    • Risk management team members should communicate regularly among themselves as to matters they are handling;
    • Risk management team members should have a high degree of expertise in the specific subject areas of their responsibility; and
    • Risk management team members should operate in a way that engenders firm support through involving firm management, being available and responsive to firm lawyers, giving firm lawyers the opportunity to be heard and reheard on risk management decisions with which they disagree, assisting firm lawyers in communicating risk management decisions to their clients, and collaborating with other departments of the firm."

Tuesday, August 25, 2015

Wave Goodbye to Waivers (Says One GC)



The title in this one says it all: "Gilead Sciences’ GC Is Sick of Conflict Waivers" --
  • "For Brett Pletcher, Executive Vice President and General Counsel of biotechnology giant Gilead Sciences, advance conflict waivers are a big pet peeve. 'I’ve always pushed back on these with the firms, saying, ‘Look, how can you ask me to waive something? I don’t even know what the conflict is.'”
  • "He estimated that 95 percent of law firms require conflict waivers, and his negotiations with firms usually occur 'around the edges... Firms are trying to preserve a level of optionality to either represent me or represent somebody else, or represent both at the same time,” he said. 'I have a big problem with that.'"
  • "'My biggest pet peeve right now — which pretty much every law firm I’ve worked with does — is pre-waiver of conflicts. Firms want me to sign a contract with them that says they reserve the right to take on matters adverse to Gilead, and I waive my objection to those adverse matters now, without knowing what that matter might be.'"
  • "'I’ve always pushed back on these with the firms, saying, 'Look, how can you ask me to waive something? I don’t even know what the conflict is.' I’ve been very reasonable about waiving conflicts when I know what they are, and believe that these really aren’t conflicts.'"
  • "'It drives a bit of a wedge with me, because it makes me think, “Okay, what work am I going to send to this firm? Because I’m not sure exactly what could come up adverse to me within that firm that could be a problem... All these firms that have gotten big enough that they’re fearful that if they represent me, it’s going to cut out a lot of other work for people that might want to be adverse to me, and so they ask for these waivers up front.'"

Sunday, August 23, 2015

ILTA Conference: Sessions of Note (Part 2)




Another group of ILTA sessions worth a look:

Successfully Selling an Information Governance Program
September 1 (11am – 12:30 pm. Roman Ballroom I. #ILTACON #056)
  • What is the secret to selling the idea of implementing an information governance program at your organization? A panel of experts will discuss the business drivers relevant to getting people on board, including key indicators of success.
  • Featuring:
    • Beth Chiaiese, CRM - Foley & Lardner LLP
    • Rudy Moliere - Morgan, Lewis & Bockius, L.L.P.
    • Sharon Keck - Polsinelli PC

The Client’s Perspective on Maintaining Data Security Aug 31 (1pm – 2pm. Milano Ballroom III. #ILTACON #016)
  • Confidential information faces greater security threats than ever before, and the dangers to lawyers and their firms are significant. Sophisticated attacks can come from many sources, including hackers, cybercriminals, economic spies or trusted insiders who are dishonest, bored or simply fooled by a clever malware program. What do your clients think about the way you protect their data? This program will include the voice of the client to help law firms and law departments understand and address client concerns about data security and confidentiality.


Handling Lateral Lawyers and Matter Transfers in a World of Mergers and Movement
September 3 (11:00am – 12:00 pm. Milano Ballroom III. #ILTACON #143)
  • Lawyers are moving from firm to firm to capitalize on legal practice innovations, regional relationships and professional advancement. Here we'll present a fresh view on some of the latest issues facing law firms when lawyers cut ties, including who "owns" non-traditional content (such as Web posts or calendar items), whether the firm should consider retaining copies of any materials, how to handle a departure that is less than amicable, what technologies can make the division of content more precise and timely, and more!
  • Featuring:
    • Rudy Moliere - Morgan, Lewis & Bockius, L.L.P.
    • Charlene Wacenske - Morrison & Foerster LLP
    • Julie J. Colgan - Nuix
    • Al Pica - Ropes & Gray
    • Leigh Isaacs - White & Case LLP

Thursday, August 20, 2015

Risk News: Threats & Waivers Edition



A few interesting updates to share. First, from Hinshaw: "Future Conflict Waiver Allows Firm to Representation Adverse to Former Client" [GEM Holdco, LLC v. Changing World Technologies, L.P., 46 Misc. 3d 1207(A), 7 N.Y.S.3d 242 (Sup. Ct. New York County Jan. 9, 2015), aff'd, 2015 WL 4112529 (1st Dep't 2015)] --
  • "A law firm represented two sets of codefendants who later became adversaries; the firm then continued to represent one of the sets of defendants against the former clients. The New York Supreme Court, Appellate Division, First Department, held that because the defendants had specifically waived any conflicts that might arise from the joint defense arrangement, the firm would not be disqualified from its representation of the defendants."
  • "Accordingly, Danzik signed a "retainer letter" with Schalm Stone. The letter expressly contemplated future conflicts between the CWT Defendants and the Ridgeline Defendants."
  • "New York courts have recognized that where a valid waiver exists, the traditional concerns about confidential information are inapposite. The Ridgeline Defendants argued that the confidential information shared with an attorney in a joint representation inherently gives rise to the unfair advantages that Rule 1.9 seeks to prohibit, and warranted disqualification. But the court concluded that if the transmission of confidential information vitiated the validity of a conflict waiver notwithstanding the retainer letter's disclaimers to the contrary, virtually all conflict waivers would be ineffectual."
  • "The court upheld the waiver of future conflicts of interest, and allowed the continued representation of one client against the former client, even if information obtained during the joint representation from the former client could result in an advantage for the continuing client."
And then from Karen Rubin at Thomson Hine's blog comes an update (it might be a shame not to read, if some sort of accident should happen, that is...): "Threat to file disciplinary complaint can backfire" --
  • "We’ve all been there. Opposing counsel has acted like a jerk throughout your case.  But now, counsel has crossed the line with conduct that you think is not merely uncooperative or dilatory, but also unethical."
  • "Thinking of telling your opponent that you’re going to file a complaint with disciplinary authorities about that unethical conduct?  You should probably take some deep breaths and think again about that threat.  As a recent ethics opinion from the Association of the Bar of the City of New York (ABCNY) points out, making that threat may be unethical conduct on your part, if:
    • 'you are ethically required to actually report another lawyer’s misconduct, and you instead, threaten a disciplinary complaint to gain some advantage or concession from the lawyer; or'
    • 'you lack a good faith belief that the other lawyer is engaged in conduct that has violated or will violate an ethical rule; or'
    • 'your threat of disciplinary charges has no substantial purpose other than to embarrass or harm; or'
    • 'your threat of disciplinary charges violates other substantive laws, such as criminal statutes that prohibit extortion.'

Wednesday, August 19, 2015

Risk Experts Share Expert Risk Advice


 
BNA published a wonderful summary of the recent Association of Professional Responsibility Lawyers (APRL) meeting: "Ethics Counsels Divulge Risk Management Tips." It's worth reading in its entirety, but here are some highlights --
 
On Conflicts:
  • "Many issues stem from risks and conflicts that come into the firm from potential clients, from lateral hires and from lawyers moving to another state while staying with the firm, they explained."
  • "As for exercising care in choosing whom to represent, panelist Eliza M. Rodrigues said in her firm the client intake process includes not only a report prepared by a conflicts analyst but also an analysis of the risks presented by the client. Rodrigues is associate general counsel and ethics counsel at Sedgwick LLP in San Francisco."
  • "Rodrigues said her firm's risk management committee, which she chairs, seeks out as much information as possible about potential clients, including credit checks and Internet searches. Because the committee includes partners from a number of different practice areas, she said, 'there's always someone with the right expertise.'"
On Engagement Letters:
  • "Mokriski [professional responsibility counsel at Proskauer Rose LLP] asked Rodrigues 'who is more difficult' in getting an engagement letter prepared and signed in a new representation—the clients or the firm lawyers?"
  • "Rodrigues said Sedgwick requires an engagement letter as part of its new business intake procedure unless an exemption is issued. Some partners, she said, have demurred on the ground that clients either do not want to sign an engagement letter or object to signing a new one for each new matter. 'There's pushback, because lawyers want to start doing work and billing,' she said."
  • "To address those issues, Rodrigues said she finds herself increasingly negotiating engagement terms directly with a member of the client's office of general counsel and has found it “very helpful” for her firm lawyers to tell clients that someone from the firm's general counsel office will be contacting them. 'We can talk at the same level' and work out whether terms such as an indemnification clause are needed in the engagement agreement, Rodrigues said."
  • She said firm lawyers are more 'difficult' with respect to engagement letters than firm clients, who she's found 'are willing to communicate and negotiate with you.'"
On Risk Roles:
  • "The panelists agreed that lawyers serving as their firms' ethics counsel should have the title to buttress their authority “and also so people will know who to go to,” Rodrigues added."
  • "Mokriski said a year into his duties he suggested to his firm's management that he should be given the title “Professional Responsibility Counsel.” Proskauer not only agreed but “apparently got some credit from our insurance carrier for it,” he said."
  • "Serving as firm ethics counsel, Mokriski said, requires the lawyer to know the rules, the underlying jurisprudence and case law developments, and also have “an eye for the unintuitive. Some rules seem a little strange.”"

Tuesday, August 18, 2015

ILTA Conference: Sessions of Note (Part 1)



The annual ILTA conference is nigh. (Alas, it's in the city of Las Vegas, which some, your editor included, would rather leave than arrive at. Still, it's by far one of the best educational events offered to the legal industry, across a broad range of topics.) Here are several sessions of note for risk readers attending. Mark your calendars.

Better Business Results Through Better Business Intake
Thursday September 3 (2:30 - 4:30pm. Milano Ballroom VII & VIII. ILTA Event Code: #169 )
  • Streamlining client intake and improving general business process efficiency is critical to the practice of law. Today firms face new pressures to transform how they operate. This session will discuss the role technology can play in enabling quicker, more adaptable business acceptance and workflow execution.
  • The two-part session will feature two panels, moderated by Intapp Risk Practice Group head Pat Archbold, and featuring participation by risk consulting expert Meg Block, Chad Ergun at Gibson Dunn, Paul Davis at Baker Donelson, and several others. The first will explore industry business, risk and financial drivers, along with technology considerations. The second will feature law firms discussing their specific experiences with intake and conflicts software.
Building Information Governance Like “Ocean's Eleven”
Aug 31 (1pm – 2pm. Milano Ballroom V. #ILTACON #020)
  • In the 2001 movie “Ocean’s Eleven,” George Clooney assembles the perfect team to pull off a spectacular Vegas robbery. In managing IT governance, risk and compliance (GRC), your firm also needs to assemble the perfect team.
  • How do you find and manage the key players in GRC, and how do you properly divide the varied responsibilities that must be shouldered? Together we can figure out how to build a team that prepares us for the heist (GRC program) of a lifetime.
  • Featuring:
    • Nancy Beauchemin - InOutsource
    • Beth A. H. Faircloth - Seyfarth Shaw LLP
    • Tim Schank - Vedder Price P.C.
    • Stuart Senator - Munger, Tolles & Olson LLP

Wednesday, August 12, 2015

On the Advantages of Centralizing Conflicts Management



Eric Mosca at InOutsource has published an excellent article in the latest ILTA Peer to Peer Magazine: "Centralize Your Conflicts of Interest" --
  • "Your firm’s attorneys are often kept from starting work with a new client because of dozens of pages of potential conflicts. Many law firms send that huge report to the requesting attorney and hope for the best, but there is a better way."
  • "Using internal administrative resources to support the conflicts clearance process ensures that due diligence is performed while also returning billable hours to attorneys who would otherwise lose them tracking down responses."
  • "Transitioning from a decentralized, requesting-attorney-led model of conflicts clearance can be daunting, but busy lawyers faced with ballooning conflicts reports and fewer available hours often welcome assistance even if the firm’s risk management personnel are wary."
  • "If you (or your firm’s partnership) are looking for cost justification for these additional resources, consider this: avoiding even a single conflict of interest claim, disqualification or disgorgement of fees can be a huge cost savings. Speeding the time frame needed to open new matters and ensuring that conflicts due diligence is complete before substantive work begins can also be a major benefit. Consider surveying your firm’s lawyers to quantify the non-billable hours spent on conflicts of interest analysis and review to gauge the amount of potentially billable hours that could be handed back to lawyers. Multiply this by billable rate, and the number looks very attractive."

Tuesday, August 11, 2015

Business Moves, Business Conflicts



A few interesting updates to note. First, via The Recorder devotes ink to risk management associated with lateral movement: "Four Steps to Take When Changing Firms" --
  • "Most law firms and search firms use a formal lateral questionnaire, although not all do. (Every law firm that uses a lateral questionnaire should use it every time–without exception! Inevitably, the lateral hire who did not complete the questionnaire ends up with an impermissible conflict, putting both the law firm and the attorney in a very difficult situation.)"
  • "The bottom line is that potential and actual conflicts should be addressed before the negotiation progress. This means truthfully and completely sharing the necessary information for a complete conflicts analysis."
  • "Notably, the new law firm has more flexibility than the attorney in exchanging information necessary for the conflicts analysis. The most important information for the new firm to disclose to the attorney changing law firms is the identity (for whatever reason) of clients against whom the new firm cannot (or refuses to be) adverse."
  • "Contrary to what most law firms believe, an impermissible conflict can be created prior to the moment an attorney actually joins a law firm. Commonly, it arises from the inadvertent disclosure of confidential information during an interview process."
Next, earlier this year we noted a decision concerning economic (not necessarily ethical) adversity as a potential a class of conflict. Now Celgard, LLC v. LG Chem, Ltd., Case Nos. 14-1675, -1733, -1806 (Fed. Cir., Dec. 10, 2014) (Dyk, J.) is getting a fresh round of review and analysis from Professor Ronald D. Rotunda worth revisiting, see: "The Celgard Decision and Lawyer Disqualification" --
  • "In Celgard, the Federal Circuit disqualified the international law firm of Jones Day because it was representing Celgard in a patent dispute while it continued to represent Apple (another Jones Day client) in other matters. However, Apple was not a party to the Celgard patent case. Jones Day represented Celgard seeking a preliminary injunction against LG Chem, maker of lithium batteries, for alleged patent infringement. It turns out that Apple uses LG Chem’s batteries in its products."
  • "The court said, 'Because Jones Day’s representation here is ‘directly adverse’ to the interests and legal obligations of Apple, and is not merely adverse in an ‘economic sense,’ the duty of loyalty protects Apple from further representation of Celgard.' The court concluded that Apple was 'directly adverse' to Celgard in licensing negotiations related to that patent dispute and thus Rule 1.7(a) required disqualification."
  • "What does it mean to be 'directly' adverse and 'not merely adverse in an ‘economic sense''? Apple bought a product (lithium batteries) from LG Chem, but that alone should not create a conflict. As one comment noted, '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.' It added, 'the implications can be disturbing if read even a bit broadly,' because '[m]any 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.'"
  • "The Celgard precedent does not demand nor should it invite such a broad holding. Apple was concerned not merely that it could not buy batteries from LG Chem if Celgard was successful in this lawsuit. After all, Apple could presumably switch to Celgard as a supplier. However, the court noted that Apple faced 'additional targeting by Celgard in an attempt to use the injunction issue as leverage in negotiating a business relationship' (emphasis added)."
  • "The Celgard court made clear that there is no conflict for a law firm simply because another client of the law firm is part of the supply chain. 'Jones Day’s representation here is ‘directly adverse’ to the interests and legal obligations of Apple, and is not merely adverse in an ‘economic sense,’ the duty of loyalty protects Apple from further representation of Celgard.' (Emphasis added). The Federal Circuit specifically said that there is no conflict “merely because the client is up or down the supply chain . . . .'

Monday, August 10, 2015

Business and Boards Bring Conflicts (or at Least Concerns)


Interesting story via The Legal Intelligencer: "Law Firms Have Reined in Partner Board Memberships" --
  • "Board memberships have often been touted as great ways for attorneys to give back to the community and generate business contacts, but a recent situation involving Bill Cosby's defense counsel doubling as the chairman of Temple University's board highlighted why some firms have put tighter scrutiny on board affiliations."
  • "Law firm leaders have said their firms have exercised more control over the past several years to which boards partners are joining and whether anything involving existing board memberships could prove embarrassing enough to the firm that the partner should step down from the board."
  • Anthony E. Davis, a partner at Hinshaw & Culbertson in New York, advises attorneys and law firms on legal professional and ethics issues. He said there is no 'one-size-fits-all' approach to attorney participation on boards of directors."
    • 'There are certainly some firms out there that take what we might call an entrepreneurial approach and think it's great for lawyers to be on boards," Davis said. But "many firms are shying away from it now because of the very serious conflict of interest and other risks.'"
      "There could be several reasons behind such a hesitation, he said. Lawyers may find that their different duties as a director and as an attorney create complicated situations, or they may encounter a conflict if an attorney's firm wants to do legal work for the entity he or she is serving."
  • "Eckert Seamans Cherin & Mellott CEO Tim Ryan said his firm has had a board-membership policy in place for about a decade.'Part of that is to ensure that we can track what boards our lawyers are part of for conflict purposes, but also to make sure, in appropriate cases, the lawyers are provided with insurance for their board participation,' Ryan said. The firm has to notify its insurance carrier of board participation that is not covered by the external organization's insurer. In that case, Eckert Seamans' insurer will offer coverage, Ryan said."
  • "Dechert has a policy requiring a committee's approval of any request for a partner to serve on a for-profit corporation's board. There is a similar requirement at Saul Ewing where executive committee permission is required for for-profit board service."
  • "'There are ethical considerations, potential conflicts of interest, and D&O liability coverage issues that all must be considered and discussed prior to accepting such a position,' a Saul Ewing spokeswoman said. 'We have partners who serve on for-profit boards, but we want to ensure they consider all of the potential ramifications before making that commitment.'"

Thursday, July 30, 2015

Risk News: Client Success, Conflicts & Insurance



A potpourri of posts to present:

First, today, firms increasingly understand and feel the market pull to focus specifically on client success -- not just delivering the services they've been engaged to perform, but delivering outcomes (and ensuring clients feel understood, advised and well served). This interesting update highlights the intersection of risk into this business equation: "Legal Advice Must Allude to Client's Business Risks" --
  • "Lawyers aren’t business consultants, but they are subject to malpractice liability if they fail to give a client sufficient legal advice about business-related risks to allow the client to make informed business decisions, the U.S. Court of Appeals for the Seventh Circuit held July 7."
  • "The district court did not 'identify any principle of Illinois law that sharply distinguishes between business advice and legal advice,” Easterbrook wrote. “It is hard to see how any such bright line could exist,' he added, 'since one function of a transactions lawyer is to counsel the client how different legal structures carry different levels of risk, and then to draft and negotiate contracts that protect the client's interests.'"
In conflicts news: "CMS hit with "ground breaking" court application to be removed as KPMG lawyers" --
  • "An application has been made to the High Court to have CMS Cameron McKenna removed as the lawyers for two KPMG administrators over allegations that the firm’s role represents a conflict of interest."
  • "The application, made by Hausfeld client property developer Julie Davey, has been stayed by Mr Justice Henderson pending the outcome of Davey’s legal battle with the KPMG administrators, scheduled to be heard in October."
  • "The applicant claims CMS is conflicted in its role as lawyers to the liquidators as the firm is also closely aligned with Lloyds, and that without information barriers in place, information produced by KPMG administrators could be provided to the bank. She alleges this would prejudice any potential conflict with the bank."
Adding some interesting color and commentary on insurance trends: "Law Firms See Insurance as Bulwark Against Data Breach" --
  • "In May, the New York Times obtained and published an article about an internal report at Citigroup that suggested law firms are likely vulnerable targets for hackers, but that it was difficult to tell if data breaches are on the rise or not because there is no regulatory reporting requirement for the legal industry."
  • "'“Our law firm clients report being extorted or threatened with denial of service and being held hostage,' said Mark Greenwood, managing director with Aon Risk Solutions, which sells cyberinsurance to several dozen law firms."
  • "Greenwood declined to disclose which firms had reported a breach, but said the minimum cost of hiring a consultant to identify the hole in a cybersecurity system and to then fix it is $500,000. He further estimated that the largest law firms are paying for $5 million to $40 million in coverage, mid-size firms are purchasing up to $10 million in coverage, and smaller firms are buying  up to $5 million in coverage. The insurance provides firms with a “coach” who can take the lead if a breach occurs, crisis communication and PR specialists, as well as online training and support from IT professionals, according to Greenwood. In the last year alone, his group has signed up 30 new law firms for cyber insurance, he said."

Wednesday, July 29, 2015

Law Firm Insider Trading: New Allegations and News (and Now Jail Time)



Ex-Wilson Sonsini Staffer Seeks To Avoid Jail Over Trades --
  • "A former Wilson Sonsini Goodrich & Rosati PC information technology employee told a New York federal judge Wednesday he should not be sentenced to jail for trading on inside information about client deals and apologized for any damage to the firm’s reputation."
  • "According to the government, Braverman earned more than $300,000 by trading the stocks of several technology and pharmaceutical companies, as well as children’s clothing retailer Gymboree Corp. He was arrested in September 2014."
  • "He said he got the idea to trade on inside information while driving home from work one day, when he heard on the radio about a merger involving a Wilson Sonsini client."
  • [As previously noted]: "Braverman used computerized records at the law firm to identify companies involved in possible acquisitions, including Gymboree Corp., Drugstore.com Inc., Epicor Software Corp. and Seagate Technology Plc, according to charges made public today in Manhattan federal court."
Ex-Fox Rothschild Partner Pleads Not Guilty to Insider Trading --
  • "A former Fox Rothschild lawyer who was with the firm during its handling of the 2012 Harleysville-Nationwide insurance merger pleaded not guilty in federal court to insider-trading charges."
  • "The indictment alleged that a day after Sudfeld learned the merger was going forward, he contacted his stockbroker and purchased 1,000 shares of Harleysville stock under his wife's account on the morning of Sept. 28, 2011. That afternoon, Sudfeld bought 2,000 shares of Harleysville stock from his own account. Sudfeld did not tell his broker that he was trading on inside information, the indictment said."
  • "Sudfeld did not tell his former firm about the stock purchases, the indictment alleged, and knew he was violating the firm's confidentiality rules by trading based on private information."
Update: This evening, the Wall Street Journal reports that a jail sentence has been handed down in the Wilson Sonsini matter: "A former employee at the law firm Wilson, Sonsini Goodrich & Rosati PC was sentenced to two years in prison Wednesday for insider trading, eight months after admitting to making illegal trades using data gleaned from the firm’s computer system."

Friday, July 24, 2015

Vereins: Very Interesting Conflicts Considerations (and News)


Bloomberg BNA has a fascinating update and analysis: "Dentons’ Disqualification and Legal Advertising: Stir But Don’t Shake" --
  • "The Swiss verein enables member firms operating under the Dentons brand to maintain their own finances while tapping into the global brand’s robust sales and marketing machine and technology. The structure also facilitates the firm’s rapid entry into new markets, helping it to circumnavigate potential regulatory roadblocks without seemingly breaking stride."
  • "But there are also downsides to the Swiss verein — not just for Dentons but also for the other half-dozen behemoth firms that share the structure. For example, profits cannot be shared between constituent partnerships, a constraint that removes incentives for lawyers in member firms to share clients and work with attorneys in other member participants operating under the global brand."
  • "Dentons stumbled recently when it was disqualified from representing an Ohio company in a patent suit against Gap, Inc., a current as well as long-time client. Conflicts are a serious challenge for all law firms; they are the most common basis for legal malpractice claims. The larger and more geographically dispersed a firm becomes, the more serious the potential for conflicts and the more pressing the need for uniformly applied prophylactic measures to avoid them. So what makes the Dentons disqualification so noteworthy that it could have a chilling impact upon the Swiss verein structure for law firms?"
  • "Judge Bullock ruled that Dentons should be disqualified. In so doing, he not only considered the procedural history above, but also rejected the Dentons contention that as a Swiss verein, its representation of Revolaze against Gap by its US member firm immunized it from conflict and access to Gap’s proprietary data resulting from the Dentons Canada representation of Gap."
  • "Translation: If you represent yourself to the public as Dentons, then you will be held accountable as Dentons whether you have a Swiss verein structure or not."
  • "The bottom line is there are inherent risks of conflicts and proprietary data disclosures endemic to the verein structure — risks which Judge Bullock’s decision makes clear cannot be avoided by asserting the legal separateness of member firms. This does not mean that the verein structure is necessarily doomed or inimical for law firm adaptation. It does, however, underscore the far more onerous burden on Swiss verein firms to ensure that conflicts are avoided and that maintenance and protection of proprietary client data is not subject to compromise even between and among the individual member firms within the global brand."

Thursday, July 23, 2015

Risk News: Disqualifications Denied



Several interesting updates to share on the disqualification front. First up, more on the Skadden front: "Judge Declines to Boot Skadden, Despite Alleged Conflicts" --
  • "A federal judge in Santa Ana ruled on Tuesday that Skadden Arps should not be disqualified from defending a former medical device company executive on criminal insider trading charges, despite suggesting a lawyer in the case committed 'perjury.'"
  • "In an 11-page ruling, U.S. District Judge Andrew Guilford stopped short of naming who was responsible for perjury, and concluded that regardless of the complex facts at issue, Skadden could remain in the case."
  • "'This Court has long been concerned about false statements under oath,' Guilford wrote, dropping a footnote to a law review article he authored on the subject, 'but here the right of a criminal defendant to pick his attorney requires denying the request to disqualify counsel... Despite the presence of complex conflicts issues that might serve as the basis to disqualify Skadden, none overcomes the strong right of a criminal defendant to pick his counsel.'"

Next: "Sidley Beats Patricia Cornwell's DQ Bid In Accountant Suit" --
  • "A Massachusetts federal judge on Thursday rejected best-selling author Patricia Cornwell’s argument that Sidley Austin LLP can’t represent an accounting firm she accuses of financial mismanagement because Sidley employs a former federal prosecutor who she says investigated her, and Cornwell announced she would seek immediate appeal."
  • "Cornwell had moved to disqualify Sidley from representing accounting firm Anchin Block & Anchin in a new trial ordered after U.S. District Judge George A. O’Toole Jr. last year set aside a verdict of nearly $51 million a jury had awarded the author and her wife, Staci Gruber."
  • "Cornwell argued that Sidley partner and former Deputy Attorney General James Cole had represented Anchin Block while he was a partner at Bryan Cave LLP, and that he 'continued to press Anchin’s agenda against Cornwell' at the U.S. Department of Justice while his nomination was pending. On Thursday, however, Judge O’Toole disagreed and denied the motion, according to both Cornwell and Sidley."
And from the always quotable Bill Frievogel comes:
  • "Malibu Media, LLC v. Tashiro, 2015 WL 4203328 (S.D. Ind. July 10, 2015). Plaintiff sued two defendants for copyright infringement. Lawyer appeared for both defendants. The issue in this opinion is whether Lawyer should be sanctioned because he had a conflict of interest, thus causing delay and expenses for Plaintiff. The court held that, although it was possible that the defendants could have blamed one another for the infringement, there was no conflict here because the defendants took the consistent position that there was no infringement."

Tuesday, July 14, 2015

On Containing Contractor Conflicts & Other Risks



Two good updates from the Daily Report on the topic of contractor lawyer risk management. First:
  • "For law firms that hire a contract attorney as an employee who works exclusively for the firm and its clients, conflict issues are relatively straightforward. The imputation rules apply equally to all attorneys in the law firm. The issue is more complicated for contract attorneys hired as independent contractors. One way to address this issue is to establish an ‘exclusive’ independent contractor relationship with a contract attorney so that the conflict analysis only involves one set of clients."
  • "Under this arrangement, the law firm and the contract attorney agree that the contract attorney will do work only for the one law firm. Not surprisingly, contract attorneys may expect some commitment from the law firm, whether in the form of compensation or a workload commitment. It is more complicated for firms that prefer to use contract attorneys on a purely ‘as needed’ or nonexclusive basis."
  • "To ensure that a contract attorney's conflicts are not imputed to the firm, it is important that the firm take steps to delineate the contract attorney's limited role. This typically means physical separation, such as working away from the office space or within a segregated area at the firm's office. Any access to firm databases or records should be limited to the specific project within the project attorney's assignment."
  • "Per D.C. Bar Ethics Opinion 352, if a contract attorney ‘is located in a firm's office space, works simultaneously on multiple projects for the firm, is listed on the firm's website or other directories, and has access to the firm's email systems and electronic documents,’ the attorney would likely be so associated with the firm that the attorney's conflicts are the firm's conflicts."
  • "Make no mistake: there is nothing inherently wrong, unethical or unprofessional about using contract attorneys. But the risks involved are unique and merit a different kind of attention. Here are more suggestions for addressing them."
  • Insurance Coverage: "For these reasons, it is especially important to precisely define the nature of the relationship between the law firm and the contract attorney, and confirm during the application process that the legal malpractice insurer will provide coverage should a claim arise."
  • 'Independent' Contractors: "Typically, negligence committed by contract attorneys in the furtherance of their employment is likely attributable to the law firm. Even in an "independent contractor" scenario, there is a risk of a claim for negligent supervision or hiring of an independent contractor. As a result, it is critical that attorneys from the hiring firm supervise and train contract attorneys."
  • Documentation: "One thing is certain if a legal malpractice claim arises out of work performed by a contract attorney: everyone will focus on the nature of the relationship between the contract attorney and the law firm. In the absence of documentation, such determination will be left to the general recollections of the parties involved, as well as what reasonable third parties might have believed. This creates risk."

Monday, July 13, 2015

Conflicts News: Skadden Partner Skedaddles, Some Seeing Serious Signs



We covered the underlying matter back in 2012 (see: More (Alleged) Insider Trading (Potentially) Linked to a Law Firm) and now note a substantive update: "Skadden Partner Retires Amid Questions about Conflicts" --
  • "In late May, Eric Waxman retired as a partner with Skadden, Arps, Slate, Meagher & Flom in Los Angeles — shortly after making what he described as 'deeply' regrettable corrections to earlier statements he had made in an insider trading case."
  • "Now, prosecutors are alleging Waxman made 'serial' misstatements in order to collect millions of dollars in legal fees and conceal evidence: For years, Waxman refused to give prosecutors potential evidence related to an interview he claimed was conducted at Mazzo’s behest and therefore protected by the work product rule. But earlier this year, Waxman reversed himself, and admitted the interview was also conducted at the behest of his other client AMO and not protected."
  • "Prosecutors say Skadden should be disqualified from representing Mazzo — who is awaiting criminal trial — as a result of what they describe as conflicts arising from Waxman’s dual representation and misconduct. While Waxman’s former partners insist that his mistakes were unintentional, they’re also distancing themselves from him and his conduct as they dispute prosecutors’ arguments. The imbroglio illustrates one problem that can arise when a law firm represents a corporation and an executive in the same matter."
The complete article is worth reviewing for more detail and background. Above the Law also offers its unique brand of commentary: "The Biglaw behemoth may have stepped into an ethical morass when a veteran partner withheld evidence from prosecutors for years, erroneously claiming it constituted work product... Oops. And the crux of Skadden’s defense is that they just kind of forgot who requested these interviews and if they were ever shared with AMO. And, hey, maybe that’s true. This is a complicated case. Lot of ins, lot of outs, lot of strands to keep in the ole Duder’s head. Unfortunately for Skadden, innocence doesn’t cut it for a top-tier firm."

Thursday, July 9, 2015

Canadian Conflicts Cause Cash Crunch ($45m in Damages)



Lawyer and legal expert Simon Chester sent in word of breaking news: "Judge dismisses class action by GM Canada dealers, upholds claim against law firm" --
  • "A class-action lawsuit by former General Motors of Canada Ltd. dealers against the company has been dismissed but their claim against a Toronto law firm has been upheld. The dealers, who were terminated as the auto maker successfully staved off bankruptcy protection under the Companies’ Creditors Arrangement Act in 2009, have been awarded $45-million in damages against Cassels Brock & Blackwell LLP."
  • "The retailers sued GM Canada and the law firm after their dealerships were wound up in 2009. They argued in part that the six days the company gave them to assess wind-down agreements they signed in return for compensation was insufficient and that the law firm was in conflict of interest because it represented both dealers and the federal government, which was being asked to help bail out the company."
  • Ontario Superior Court Judge McEwen wrote: "'Cassels acted irresponsibly and unprofessionally by failing to have an effective conflicts checking system in place – that is one which actually leads to lawyers discussing and resolving potential conflicts,' he wrote. 'Cassels is liable for its failure to heed the alarm bells that were audible, despite the deficiencies of its conflicts checking system.' While GM Canada stayed out of bankruptcy protection, Canadian and Ontario taxpayers contributed $10.8-billion to the bailout of its parent, which used some of that money to reduce a massive pension deficit in plans set up for salaried and hourly employees."
We covered this story when it took shape, starting in 2012. And again in 2014. See the complete text of the judgment here.

Wednesday, July 8, 2015

Ethics Updates: Threats & Trading (Insider, Outsider or In-between)

 

First, via the legal ethics forum: "Ethics Opinion: Can You Threaten Another Lawyer With Disciplinary Charges?" --
  • "A new opinion issued by the Professional Ethics Committee of the New York City Bar Association discusses whether -- and under what circumstances -- an attorney may threaten another lawyer with disciplinary charges.  From the digest:
  • "An attorney who intends to threaten disciplinary charges against another lawyer should carefully consider whether doing so violates the New York Rules of Professional Conduct (the “New York Rules” or “Rules”). Although disciplinary threats do not violate Rule 3.4(e), which applies only to threats of criminal charges, they may violate other Rules. For example, an attorney who is required by Rule 8.3(a) to report another lawyer’s misconduct may not, instead, threaten a disciplinary complaint to gain some advantage or concession from the lawyer. In addition, an attorney must not threaten disciplinary charges unless she has a good faith belief that the other lawyer is engaged in conduct that has violated or will violate an ethical rule. An attorney must not issue a threat of disciplinary charges that has no substantial purpose other than to embarrass or harm another person or that violates other substantive laws, such as criminal statutes that prohibit extortion."
(Cue vision of lawyer in mirror rehearsing: "Are you intimating that you're going to file a disciplinary charge _solely_ for tactical advantage in this matter? Because I don't see anyone else here..." Doesn't quite carry the same level of drama...)

Speaking of ethical accusations: "OSC seeking $1.5-million fine in Finkelstein insider trading case" --
  • "Ontario Securities Commission lawyers are seeking fines and other payments totalling almost $6.8-million from former Bay Street lawyer Mitchell Finkelstein and four others involved in a high-profile tipping and insider trading case."
  • "Mr. Finkelstein’s lawyer, Gordon Capern, said his client has already faced terrible consequences by losing his job as a senior partner at law firm Davies Ward Phillips & Vineberg LLP, and said an additional $1.5-million fine 'goes well beyond the line of punitive.'"
  • "Mr. Capern said Mr. Finkelstein made no profit from his tipping, and has suffered reputational harm from the publicity the case generated. He said the bans requested by OSC staff are unnecessary to protect the capital markets from further wrongdoing because Mr. Finkelstein will never 'do anything or be exposed to anything' in the future that would give him access to similar insider information."
Also in the news, on the topic of public law firms: "Slater & Gordon trading under scrutiny" --
  • "Several of Australia’s most influential fund managers have begun privately pointing fingers over the possible market ­manipulation of Slater & Gordon shares, with at least one lodging a formal complaint with the corporate regulator."
  • "Slater & Gordon has seen more than $1 billion wiped from its market capitalisation since reports emerged in The Australian Financial Review last week that ASIC was considering a probe of its relationship with audit firm Pitcher Partners."
  • "But hours later VGI partner Douglas Tynan told the Financial Review there was “more than one cockroach in the kitchen” at Slater & Gordon and called into question the entirety of the law firm’s work in progress accounting. VGI also admitted to shorting Slater & Gordon shares."
  • "'The Financial Review may have some sensational market reporters or it could be the hedge fund guys pointing it out, I know what my money’s on. Tens of millions of dollars made by the shorters, and it’s the ordinary investors that have lost out, it’s clearly market manipulation and insider trading.'"

Tuesday, July 7, 2015

Risky Business: Laterals (Legal and Otherwise), Client Files, Jiggery-pokery and Argle-bargle

 

With apologies to those reaching for a dictionary, come several updates (hopefully choate) on and related to the topic of laterals. First, from Bloomberg comes a bit of news about the business side: "Stepping Up Lateral Partner Recruiting and Analytics" --
  • "Recent surveys indicate that while lateral partner hiring remains as robust as ever, a large number of managing partners question the overall efficacy of such efforts. In particular, this year’s Citi-Hildebrandt Client Advisory reports that managing partners when asked responded that only 54 percent of laterals reach a break-even point five years after their hire. And that percentage has steadily declined over the past three years."
  • "A variety of reasons are given for such uneven results, including failure by firms to do proper due diligence with regard to lateral candidates, failure of “promised” portable business to transfer to the new firm, and inadequate lateral integration programs."
  • "This contrasts with the very sophisticated analytics other professional services’ firms use in their hiring, strategic growth and retention programs. Indeed, a recent report by Deloitte Consulting indicates that 'companies that build capabilities in people analytics outperform their peers in quality of hire, retention, and leadership capabilities, and are generally higher ranked in their employment brand.'"
When clients do move, following laterals or otherwise, the subject of files can sometimes get heated, which brings us to an opinion (not a ukase) from the ABA: "Who Gets the Notes? The ABA Sides With Firms" --
  • "Clients may come and clients may go, but until now it hasn’t been entirely clear who gets the documents, as well as the notes and drafts, when a client decides to change attorneys. To resolve the ownership question, the American Bar Association has issued an opinion clarifying that when a client severs relations with an attorney or firm, the client is entitled to completed legal documents and correspondence, along with some other materials."
  • "In Formal Opinion 471, the ABA’s Standing Committee on Ethics and Professional Responsibility said that some jurisdictions follow a so-called “entire file” approach. Under that view, a lawyer must turn over any property or papers related to representation unless specifically exempted."
And on a related note, see: "New Ethics Rule Governing Lawyer Mobility Adopted in Virginia: Virginia Joins Florida as the Second State to Adopt Departing Partner Ethics Rule Regarding Client Notification" --
  • "Virginia's recent adoption of a new ethics rule will provide guidance on a common issue to lawyers and law firms managing lawyer departures. For years, lawyers and law firms have handled difficult and sometimes contentious departures guided only by a patchwork of ethics opinions and commentator advice. However, the recent codification of Virginia's new Rule 5.8, which goes into effect on May 1, 2015, sets forth specific procedures for client notification prior to a lawyer's departure."
  • "The new rule may also signal a trend toward state bar regulators' increased attention to the rules governing lateral mobility and the need for clear guidance on how to effectively comply with the bedrock duty of client communication in the midst of a lateral transition. By passing Rule 5.8, Virginia joins Florida, which was previously the only other state that had passed such a rule."
  • "Virginia's new Rule 5.8 provides clear direction on two important issues related to lateral mobility. First, the rule states – as a matter of ethics – that neither a departing lawyer nor the law firm shall contact a client prior to engaging in a joint effort to affect notification under the rule... Where a client fails to respond to a notice given by a departing lawyer, the client remains a client of the law firm until the engagement is terminated by either the client or the law firm. In the case where the law firm is dissolving and the client fails to respond to the notification, the client is deemed to be a client of the lawyer primarily responsible for the client's legal services."
Finally, from the world outside of legal, comes a fascinating news story that initially evoked some lateral-like analogies (though any attempt to match fact patterns to the legal industry would be clearly judged as somersaulting logic best deemed pure applesauce). Still, it makes for interesting reading (particularly if you happen to have family alumni from each institution...): "UCSD sues USC, noted Alzheimer's researcher" --
  • "UC San Diego on Thursday sued the University of Southern California and a nationally recognized Alzheimer's disease researcher, saying they illegally conspired to take over a major Alzheimer's study it is running."
  • "The lawsuit, filed in San Diego Superior Court through the UC Regents, also names as defendants eight colleagues of the scientist, Dr. Paul Aisen. He left UC San Diego to head a new Alzheimer's institute founded by USC in San Diego, bringing the eight with him."
  • "While universities commonly recruit or poach faculty from each other, lawsuits arising from the recruitment are much rarer. This lawsuit says USC and the other defendants went beyond recruitment to commit a variety of illegal acts, including interference with contract, breach of duty of loyalty by employee, commission of computer crimes and civil conspiracy."
  • "In 2013, the NIA announced a 5-year grant of up to $55 million for ADCS; its total funding from government and private sources is $100 million, the lawsuit stated."
  • "Aisen and the other individual defendants also took unauthorized control of the ADCS data, the university said in the lawsuit. They placed the data on an Amazon account not under the control of UC San Diego. The defendants have not responded to the university's request to hand over all data, passwords and access credentials, the lawsuit said. A request to USC for assistance didn't produce results, according to the suit."
  • "USC has also raised eyebrows with high-octane faculty recruitment coups in Los Angeles and aggressive national fund-raising. In April, USC President C. L. Max Nikias traveled to Texas for a three-day fundraising trip, part of a "corporate-like" approach to fundraising a Los Angeles Times article said some found offputting."
For those interested, here's a PDF of the lawsuit.

Sunday, June 21, 2015

Risk News: Screening, Security (ISO 27001) and Cloud Concerns (or Not)


For those in the US, Happy post-Fourth of July. Here's a set of interesting updates to kick of the month on a variety of topics. First up: "DC Bar Revisiting Ethical Screening: Comments Sought on Move to Amend Rules 1.10, 1.15, and 7.1" --
  • "The proposed amendments were submitted to the court by the D.C. Bar Board of Governors on recommendation of the Bar’s Rules of Professional Conduct Review Committee. The proposed amendments [include]:"
  • "A. Rule 1.10 (Imputed Disqualification: General Rule)
    Amend Rule 1.10 and its comments to allow ethical screening (without client consent) of lawyers moving laterally between private employers with certain initial notice requirements to former clients. The committee further recommends the addition of a new subparagraph (f) to address situations in which a law firm cannot provide required notifications without violating confidentiality obligations to an existing client."
Jeff Brandt at Pinhawk noted a resource of interest to the security-focused: "The brain of an ISO auditor – What to expect at a certification audit" by Advisera, a consultancy --
  • "If your company is going for the ISO certification (e.g., ISO 9001, ISO 14001, OHSAS 18001, ISO 20000, ISO 22000, ISO 22301, or ISO 27001), you’re probably not very happy about it – certification auditors are usually perceived as persons who are not very open minded and who will insist on a whole bunch of unnecessary details. But the truth is, it doesn’t have to be this way – if you understand how the auditor thinks, your audit can turn out to be much more pleasant and useful. Here’s what you need to know."
We also recently noted several updates concerning law firm risk and information governance practices tied to cloud services. (Watching the industry discussion unfold on this topic conjures memories of the industry's adoption and debate about electronic mail...) Here's another bit of commentary from outside of the legal space, which raises some important points: "Enterprise financials in the cloud? Why the fog of skepticism may be lifting" --
  • "Spreadsheets and email documents are a bigger threat than the cloud, says Forrester Research’s Liz Herbert"
  • "One of the HubbleUp speakers was Liz Herbert, a vice president and analyst at Forrester Research. During her talk, she emphasized that when it comes to keeping private data inside the enterprise, the horse has already left the barn. She talked about one customer engagement, which the C-level officers brought Forrester in to begin – to begin! – a feasibility study of placing some corporate information into the cloud. However, once onsite, she learned that the company was already using Saleforce.com to manage its customer interactions. The lesson: The company was already storing sensitive information in the cloud, but didn’t even realize it."
  • "Herbert urged business to 'get real' and accept that security breaches, such as HIPAA violations, occurred from the use and misuse and abuse of locally stored data, not data in the cloud. The common scenario, she said: documents and spreadsheets being emailed around the company. It’s very, very easy to accidentally send critical information to the wrong address, or intentionally leak the information via email, or even copy it off a hard drive onto a USB key. 'Spreadsheets and email documents are a bigger threat than the cloud,' she said."

Thursday, June 18, 2015

Risk News: Conflicts (Quirky, Canadian or Common) Collide Consent & Cost



It's not every day we quote the Hollywood Reporter (and our television habits trend towards more towards episodic drama -- IP claims about who really-but-fictionally invented the infamous Coke commercial is the debate du jour in your editor's household -- rather than situation comedies). Regardless, this story does merit a viewing: "Judge Throws Out 'New Girl' Idea Theft Claims" --
  • "On Friday, a California federal judge rejected a key portion of an ongoing lawsuit brought by Stephanie Counts and Shari Gold that alleges that the Fox series New Girl was derived from their own proposals for a show about a woman who moves in with three single men."
  • "In support, the two said they had hired an attorney to pursue claims in 2011 and had gotten a $10,000 offer from Fox to settle the matter in 2012. Counts and Gold rejected the offer, but there was something a little off about the situation; their law firm at the time also represented New Girl executive producer and director Jacob Kasdan. Their lawyers advised them about the conflict and suggested that if they wished to pursue claims against Kasdan, they'd need to discuss further involvement in the dispute."
  • "According to the complaint, they 'were unaware of just how tightly aligned Defendants and their then-counsel were in the entertainment industry: The firm representing Plaintiffs also absurdly represented the director and executive producer of New Girl, the very show Plaintiffs claimed took their ideas and artistic expression. The extent to which this relationship had truly affected then-counsel’s representation of Plaintiffs only became truly evident to Plaintiffs in February 2012.'"
  • "In today's opinion, U.S. District Judge Stephen Wilson is hardly impressed with the argument. He writes that the plaintiffs admitted being informed about the potential conflict and 'apparently consented.' He adds that they might have found the $10,000 settlement offer insulting, but he doesn't believe the prior lawyer's 'failure to elicit a larger sum indicates that they were 'incapacitated' by their conflict of interest.'"
In another matter, involving substantially larger sums comes a conflict cleared: "Judge: No conflict of interest for Troy Kelley's lawyer" --
  • "Federal prosecutors said Friday they are satisfied that an attorney for indicted Washington State Auditor Troy Kelley does not have a conflict of interest that might warrant his removal from the case."
  • "The government last month said Kelley had paid more than $900,000 in stolen money as a retainer to Davis Wright Tremaine, the Seattle firm where his attorney, Mark Bartlett, works. Prosecutors said they were concerned that it could create a conflict of interest if Bartlett had provided Kelley with advice about spending that money, and they asked U.S. District Judge Ronald Leighton to consider whether a conflict might exist."
  • "They said they were concerned Bartlett might need to be called as a witness in the case or that he might have to cross-examine partners in his own law firm about how the retainer was handled. They said it could also raise issues that Bartlett previously represented Kelley's wife. Bartlett said no conflicts existed. He said he did not give Kelley advice on paying the retainer, and he noted his firm is holding Kelley's money in trust rather than spending it."

Wednesday, June 17, 2015

Cost of Changing Lawyers and Lawyers Changing (Malpractice, Billing, Conflicts and Other Allegations)



Some interesting allegations and updates making news. First: "Telstra has tripped over a legal conflict of interest issue as it fights a patent infringement claim" --
  • "Telstra has been sideswiped by conflict of interest issues after suddenly changing lawyers while defending claims that its mobile eCommerce platform has been infringing an inventor’s patents for many years."
  • "King & Wood Mallesons had been representing Telstra in the Federal Court, but last month the telco filed notice that it had changed to another top-of-town firm, Herbert Smith Freehills, with Sue Gilchrist as the representing lawyer."
  • "The Telstra account, a plump piece of business for any law firm, is potentially worth millions each year. However, Telstra’s new firm, Freehills, is known to have acted for Upaid as recently as last month when it filed a patent application in Australia. Upaid has now made an application to the Federal Court seeking to restrain Freehills from acting against the interests of Upaid. A hearing is set down for later this month."
And, as reported by Law360 (subscription or free trial) come allegations tied to a lateral departure of a lawyer (and more): "Mayer Brown 'Abandoned' Client In Trade Secrets Row: Suit" --
  • "In a legal malpractice complaint filed in Illinois court, Think Tank Software Development Corp. alleges that Mayer Brown unexpectedly withdrew as its counsel in March 2013 after the firm’s lead lawyer on the case, Thomas Durkin, accepted a federal judgeship."
  • "Adding insult to injury, according to the suit, Mayer Brown hit Think Tank with more than $1.1 million in legal fees after leaving the case. Many of the charges for the firm’s four-plus years of work “were excessive, duplicative and/or otherwise unnecessary and unreasonable,” Think Tank said."
  • "The firm’s alleged unreasonable billing practices also included 'vague and unintelligible time entries,' unauthorized rate increases and block-billed time entries, Think Tank said. The firm’s 'billing abuses,' various legal missteps and early departure from the case amount to negligence and also to breaches of the retainer agreement Think Tank had signed with the firm, according to the suit."

Tuesday, June 16, 2015

Upcoming Webinar: The State of LegalKEY – Responding to New Risks



Intapp is hosting a webinar for firms using LegalKEY for conflicts management, focused on understanding the current state of and emerging risks associated with that software product.
 
featuring three law firm case studies: The State of LegalKEY: Responding to New Risks
  • Date: Thursday, June 25th
  • Time: 9 am PST / 12 pm EST
  • Registration: Limited to select firms. Please email Jason Yu for more information.

Session Details


Effective conflicts clearance is critical to law firm risk management. The cost of missing a conflict can be significant – from loss of business, to serious reputational damage. It’s why enhancing conflicts management consistently rates as a top concern in industry surveys.

For nearly two decades, LegalKEY software has helped firms manage conflicts.  But today, years after  the last enhancements have been made to this product, and with future development concluded, the product is starting to show its age... and creating new potential risks.

For example, the pending end-of-life of Windows Server 2003 and 2008 will create significant  maintenance and support issues for firms. What’s more, growing evidence suggests that in common use data quality issues often surface in the product.
In this environment, now is the time to start thinking about the future of conflicts management at your firm.
 
This webinar will provide more detail on the state of LegalKEY, including product risk, Intapp and third-party support, and a review of response options.
 
  
Moderated by Dan Bressler, head of Intapp marketing and the Risk Roundtable Initiative, the session will feature a deep-dive presentation from conflicts and LegalKEY expert Eric Mosca, Director of Operations at InOutsource.

Eric has worked with a number of firms to improve their conflicts policies and practices, including technology optimization and migration projects. He’ll provide an overview of the LegalKEY “Health Check” his organization has developed.

They’ll be joined by Mohit Thawani who will provide guidance for making the internal business case for investing in new software to enhance, conflicts, intake and overall business acceptance practices.

Attendance is limited to select firms and partners. Please email Jason Yu for more information.

Monday, June 15, 2015

Little Fluffy Clouds: New Ethics Opinion, New Policies, New Trends



With musical accompaniment optional (but recommended), we take note of the new ethics opinion from the State Bar of Wisconsin: "Cloud Computing is the New Norm: Ethics Opinion Outlines Lawyer Obligations" --
  • "Wisconsin Formal Ethics Opinion EF-15-01 (Ethical Obligations of Attorneys Using Cloud Computing), issued by the State Bar of Wisconsin’s Professional Ethics Committee, notes that increased lawyer accessibility to cloud-based platforms and services comes with a direct loss of control over client information... Lawyers can use cloud computing services if the lawyer uses reasonable efforts to adequately address the potential risks associated with it, the opinion concludes."
  • "'To be reasonable,' the opinion states, 'the lawyer’s efforts must be commensurate with the risks presented.' The opinion acknowledges that lawyers cannot guard against every conceivable danger when using cloud-based services, but lists numerous factors to consider when assessing the risk of using cloud-based services in their practices."
Next, we turn to news of an interesting intersection of these issues driven by client and management concerns meeting lawyer expectations and the line between personal and professional activity at work: "Which Biglaw Firm Has Blocked Personal Email?" --
  • "We’ve received tips that not one, not two, but three different Biglaw behemoths have recently made moves to block all personal, web-based email, such as Gmail, AOL (is that still a thing? I think it’s a thing.), Yahoo!, Hotmail, etc. from computers on the firms’ networks."
  • As reported in the linked new story, one 1400+ lawyer firm's memo reads: "One of the repeated demands by our clients is that we prevent our users from accessing Webmail programs (Gmail, AOL, Yahoo, Comcast…) through our network. In general, there are two reasons for that insistence. First, accessing Webmail programs through our network enables client and firm data to leave the Firm without tracking. Second, Webmail programs can be the vehicle for the introduction of malware into the Firm’s network. This is not a hypothetical risk: our IT team reports that that has occurred in the Mayer Brown network."
  • The article also notes an update from a source at a 2000+ lawyer firm with similar policies, which have evolved: "[Webmail] has been disabled for all our 'normal' browsers, but we have been given a new, limited functionality “External Webmail Browser” by which we can access gmail/personal email accounts and external instant messaging services. Our reasons were also driven by client security demands."
Industry tech luminary Jeff Brandt published an open letter in response, which stops short of explicitly shoeing millennials, with their various chats and grams apps, off his law, but might be best (cheekily) summed up as "Welcome to the new age. Lol. Kthxbye."

Still, with some clients actively embracing the cloud and looking for closer collaboration with law firms in that realm, and recalling security and privilege debates about email in its infancy, it feels like there's a balance to be struck on all fronts...

Thus, we close with an excellent overview from the Legal IT Insider (aka "The Orange Rag") highlighting firms' navigating cloud adoption: "Passing Clouds: The Cloud Club – Client Consent Not Required?" --
  • "IT departments backed by their partnerships, by bringing in or looking at bringing in what they still often dare not call cloud, are – unusually for the legal sector – ahead of many of their clients, particularly those in regulated industries such as the finance and insurance sectors."
  • "Other clients say they would be prepared to give informed consent subject to certain assurances – Vodafone’s group general counsel Rosemary Martin told the Legal IT Insider: 'No-one has asked me yet but it would depend – anything very sensitive such as major litigation or major M&A we would be a bit twitchy about. More run of the mill stuff we would probably be fairly relaxed about. I’d want assurance the cloud and access to it were truly secure.'"
  • "A similar position is taken by Suzanne Wise, group GC and company secretary at Network Rail, who said: 'I would want to be informed and would ideally like confirmation that the information was as secure as it had been.'"
  • "At Keystone Law, which operates a heavily IT-reliant dispersed model and signed with NetDocuments earlier this year, IT Director Maurice Tunney said: 'Most of our clients are start-ups or small-to-medium enterprises who want to be assured that their data is secure and for our larger banks and insurance companies, we have not had any concerns raised about the fact that their data is stored in the cloud. If it was raised then we would re-assure them that it is highly secure and meets all the necessary security accreditations and requirements.' Tunney was previously at FieldFisher, which became one of the first firms to place its DMS in the cloud with Virtustream on a PaaS model."
  • "At Farrer & Co, which went through a stringent DMS tender process involving numerous partners as part of an 11-strong project committee, Davison said: 'Clients trust us to make sure their documents are secure. We are now answering the question ‘are you ISO27001 certified?’ with a ‘yes’. ‘Is your data encrypted?’ ‘Yes’. We couldn’t have done that before and most law firms can’t.'"
  • "Firms are, of course, not obliged to seek client consent by the Solicitors Regulation Authority (SRA), which acknowledges in its November 2013 Silver Linings: cloud computing, law firms and risk paper that from a client care perspective, solicitors have implied consent to confidential information being passed to external IT providers. They are also largely updating their terms and conditions to reflect the fact they have a hosted DMS."

Sunday, June 14, 2015

Implications of Unfolding Conflicts Allegations: On Engagement Letters and Waivers



As reported in the American Lawyer (and previously noted here), while the firm strongly disagrees that its representation represents any form of conflict: "Kirkland's Conflict Woes Worsen in Teva Takeover Case" --
  • "It's too early to declare the litigation for Mylan, since Tuesday's report by U.S. Magistrate Judge Lisa Pupo Lenihan could be rejected by the district judge. Lenihan blasted Kirkland for ignoring conflicts related to its past work for Mylan, finding that the firm breached its ethical duties. Kirkland immediately vowed to contest Lenihan's findings, saying in a statement that it rejected Mylan's conflict of interest claims."
  • "Still, Lenihan's unsparing, 61-page report, which heavily cites the opinions of Harvard Law School professor and former Wachtell, Lipton Rosen & Katz partner John Coates, makes Kirkland out to be the clear villain in the dispute. Her holding that Kirkland should be preliminarily enjoined from representing Teva in the takeover battle is likely to carry a great deal of weight with Chief Judge Joy Flowers Conti, who must decide whether to adopt the report. And the damage may already be done: Teva told Reuters late Tuesday that Sullivan & Cromwell will be taking over Kirkland's role on the deal front."
Bloomberg BNA offers up its own commentary on these matters: "To Dodge Conflicts, Make Waivers Specific" --
  • "Should law firms rethink their client engagement letters, and more specifically, the advance waiver clauses they include? That’s the question emerging after a federal magistrate’s lengthy report recommending that Kirkland & Ellis LLP be disqualified from representing Teva Pharmaceutical Industries Ltd. in its attempt to acquire Mylan NV because of the work Kirkland had done for Mylan."
  • "The issue is particularly fraught because of partners moving laterally and because of law firm consolidation as well as consolidation within industries."
  • "Kirkland was already representing Teva when Mylan became a client. According to the magistrate’s report, Mylan was aware of Kirkland’s work for Teva, 'including regulatory matters and products liability litigation with respect to certain drugs, some of which were matters in which Teva’s interests were directly adverse to Mylan.' In addition, Mylan had agreed to a waiver agreement that allowed Kirkland to represent others, “including in litigation, arbitration or other dispute resolution” procedures that might be adverse. Nonetheless, that agreement, known as an advance waiver, shouldn’t be read to permit Kirkland to represent Teva, the magistrate said."
The judge has yet to issue a final ruling, so the debate remains live. With that context, here is additional commentary via Reuters: "Lessons from Kirkland’s ‘unfortunate and unethical’ Mylan mess" --
  • "What the Kirkland case shows, however, is that conflict waivers may not give lawyers broad rights to represent hostile bidders for current and former clients, even if the clients have said it’s okay for the law firm to pursue adverse litigation and even if the firm has set up ethical walls."
  • "Kirkland had originally wanted Mylan to waive conflicts on cases that were not “substantially related,” according to the magistrate’s report, but “substantially” fell out in negotiations over the wording of the waiver."
  • "Mylan sued Kirkland for breaching its duty in May. Its lawyers at Wilson Sonsini Goodrich & Rosati, Peacock Keller & Ecker and Pietragallo Gordon Alfano Bosick & Raspanti argued that Mylan’s conflict waiver in no way contemplated that the firm would represent a hostile bidder trying to take over the company. Kirkland, they contended, was violating the terms of its engagement agreement with Mylan by representing a Mylan adversary in a takeover bid necessarily related to the products at issue in Kirkland’s work for Mylan."
  • "Ultimately, Judge Lenihan read the agreement only to permit Kirkland to represent Mylan in the sorts of cases in which the firm was already working for Mylan competitors."
And the Wall Street Journal weighs in with: "Dealpolitik: Mylan-Kirkland Decision Should Give Big Law Firms Shivers" --
  • "Finally, the magistrate turned the way Kirkland tried to protect Mylan’s confidential information it obtained on the drug products representation against Kirkland. Kirkland had put in place what the magistrate called an “ethical screen” to be sure Mylan’s information was accessible only to lawyers representing Mylan (which in my experience is not an unusual action). The magistrate seemed to agree with Mylan that such a screen would not be necessary if the takeover were not 'related' to the Mylan representation. I find that conclusion dubious, but I think law firms now need to write into their engagement letters that a client agrees that specified procedures for the protection of client confidential information are appropriate and not evidence of a prohibited representation."
  • "In short, large law firms view themselves as a business. If a client wants its services, the client should expect prescribed terms of engagement giving a law firm maximum freedom to act on other assignments.  Because this thinking is so different from how the default ethical rules are structured, every once in a while a case has to remind the firms how explicit they need to be to get that permission and to make it stick."