Thursday, June 30, 2016

WEBINAR: Managing External Vendor Risk (Drivers, Trends & Approaches)


Here's an upcoming webinar, on a timely topic, which may be of interest: Vendor Procurement, Risk and Relationship Management.

Jointly produced by Intapp and HBR Consulting, this event will explore the various factors causing firms to pay even closer attention to the way they select, evaluate and manager their external vendors. (Client information security mandates are just one of several drivers.)

Scott Springer and Mark Denner from HBR will review industry trends and how innovative approaches, supported by new technology, enable firms to streamline procurement, evaluate vendors and address increasingly stringent client and industry requirements.

They will also review the vendor lifecycle and demonstration of HBR Consulting's procurement management solutions, built leveraging Intapp Flow to manage the entire vendor lifecycle, including:
  •     Evaluation & on-boarding
  •     Information security review
  •     Performance monitoring
  •     Audit & compliance
  •     Off-boarding
(They've nicknamed it "NVI." V for vendor, in the same way firms have an "NBI" approach for business.)

Attendance is limited. For more detail and to request an invitation, please visit the webinar registration page.

Wednesday, June 29, 2016

UPDATE: 2016 Risk Survey Reports Published



An exciting update to share (inasmuch as risk news actually excites – though, since I'm talking to "my people" in this corner of the internet, I feel safe using the adjective): "2016 Law Firm Risk Roundtable Survey Highlights Evolving Risk Landscape Across the US, UK, Canada and Australia."

Participants should be receiving the promised copies of their report in the days ahead, so watch your inboxes. (Thank you again to everyone who took the time to contribute their insights – particularly those offering extensive color commentary, the quotes are always my personal favorite element of these.) And, if you did not participate, there's always next time...

Produced by the Law Firm Risk Roundtable initiative and sponsored by Intapp, the Law Firm Risk Roundtable Survey provides statistical information and commentary about the top priorities and concerns for law firm risk, IT and management stakeholders.

Key themes in this year's survey include information security, conflicts management and client-related risks. Some of the trends identified in the 2016 Law Firm Risk Roundtable Survey include:
  • Information security was ranked as the No. 1 risk management priority by over half of firms in the UK and Canada, and by more than one-third of respondents in the US and Australia. Data breaches, data loss and exposure of confidential client information – resulting from cyberattacks and/or internal leaks or failures – were frequently cited as key concerns. Many firms reported that information security questionnaires and audits from clients were becoming more frequent and more onerous.
  • Concern about managing conflicts of interest is growing in many countries, including the US, where 37% of respondents ranked it as their topmost risk management concern in 2016 – up from 22% in 2014. Respondents cited a range of factors that contribute to missed conflicts and inadvertent conflicts, including the volume and complexity of conflicts checks in large growing firms, particularly internationally; lack of awareness of "who is the client" (including subsidiaries and affiliates); and business and commercial conflicts.
  • A growing number of larger clients are imposing outside counsel guidelines, often introducing complex terms that many firms find challenging to track, manage and comply with. The 2016 Law Firm Risk Roundtable Survey provides an interesting overview of how firms are responding to outside counsel guidelines, and how they are viewed by lawyers and staff.
  • Survey respondents were asked to comment specifically on their risk stance toward cloud-based services and storage for the first time. Firms are generally divided on the issue. Even in the US, where 47% of firms reported that they were already using cloud services, respondents generally reported a cautious approach to the cloud, requiring service providers to meet rigorous standards. While some firms reported that they did not allow client information to be stored in the cloud, others reported that in some instances, it was the clients themselves who were requiring them to use cloud services.
Also worth noting: While these surveys were conducted well in advance of the UK referendum on EU membership, it’s interesting to note that Geopolitical risks (including terrorism and business continuity in “unsafe jurisdictions,” as well as the possibility of Brexit) did emerge as one of the top 10 risk management concerns among law firms in the UK report.

Tuesday, June 28, 2016

Brexit, Stage Risk


Brexit is making big news and big waves. Here are some of the latest stories on this significant development:

"Law Firms Face Uncertain Future As Brexit Result Hits Markets" --
  • "Clifford Chance senior partner Malcolm Sweeting said the so-called Brexit will have 'serious implications,' while K&L Gates’ European managing partner Martin Lane said it will 'create shockwaves across the globe.'"
    "Law firms are braced for a period of intense activity, with lawyers already receiving floods of inquiries from clients trying to figure out what the result means for their businesses... The longer-term impact of the unprecedented move is unknown, however."
"Brexit A Bonanza For London Law Firms ... For Now" --
  • "The U.K.’s seismic decision to be the only country to leave the 28-nation bloc will keep law firms busy helping clients cope as the U.K. unwinds four decades of legal and regulatory integration with the EU and negotiates its new relationship. The complex and potentially rancorous divorce process is likely to run for years and will provide ample opportunity for firms to rack up billable hours."
  • "The downside for London legal powerhouse firms is that, in the long term, London could lose its status as the European entry port for global legal services if the country is denied future access to the EU’s single market for financial and legal services."
"Seven ways Brexit will impact international law firms" --

  • "Most major firms are running 24-hour hotlines to deal with the massive levels of client demand. Once this initial frenzy subsides, lawyers will then play a crucial role in helping clients navigate one of the largest programmes of regulatory and legislative reform ever seen. The event has once again shown the degree to which the legal sector is insulated against wider economic and market malaise."
  • "While trade, regulatory and financial services lawyers can ‘look forward' to 80-hour weeks for the foreseeable future, transactional lawyers may be left checking to see if their phones are still working."
  • "Transactional practices are key drivers of law firm revenue generation. That engine is now likely to splutter. The sort of advisory work that firms did in the run-up to Brexit can be profitable and is a great way of strengthening relationships with clients. But it doesn't bolster the bottom line in the same way as big-ticket transactions, which can keep entire floors of lawyers across multiple practice areas busy for months."
  • "One London-based partner joked that the UK, traditionally home to some of the world's most expensive lawyers, may now become a 'low cost jurisdiction.'"
  • "One of the more esoteric effects of a Brexit is that lawyers risk losing their rights to European Union (EU) professional legal privilege. This is of particular concern to UK competition lawyers, who may also no longer have the right to plead before the European Court of Justice in Luxembourg."

"Comment: Brexit and the Legal IT sector impact" --
  • "The consensus appears to be that law firms will experience an upturn in inquiries regarding the impact of Brexit, translating into short term advisory opportunities, but that in the medium term transactional work will inevitably be adversely affected, mitigated only slightly by work undertaken as clients reposition themselves and the future shape of the UK’s trade relationships begins to be known. And then finally we will settle into a new, and as yet unknown, normal."
  • "The longer term outlook will be quite interesting and will I think be a bellwether that could inform us as to exactly how much law firm leadership has really changed in the last 10 years. Or not, as the case may be."
  • "Moving forward to the last few years however we have seen investment and innovation apparently being embraced by law firms as they seek to cope with the challenging circumstances brought about by globalisation, the 2008 ‘crisis’ fallout, Jackson reforms, sustainable cost reduction, ABAs and the new IT landscape of AI, SSaS and ‘the cloud’… plus others. In many ways Legal IT has been an enabler in this, and there have been undoubted opportunities for the sector as law firms have realised that not changing in a changing world is really not an option."

Tuesday, June 7, 2016

Outside Counsel Guidelines (Threats & Risks) are Just in the Air...



The Risk Zeitgeist of the day continues to focus on OCGs and terms of business. Nancy Beauchemin from InOutsource recently published her own analysis and insight on these issues in Corporate Counsel magazine: "Hidden Compliance Threats to Outside Counsel Guidelines" --
  • "To protect businesses and ensure compliance with internal budgets, data privacy, security requirements and other legal statutes, corporate legal departments often require outside law firms to agree to stringent outside counsel guidelines. These were originally established to control legal costs and are one of the ways in-house counsel maintain control of outside firms. However, how can corporate counsel be sure that these guidelines are adhered to within a law firm environment? This article will address some of the inherent challenges."
  • "The first step a law firm needs to take to comply with outside counsel guidelines is to become aware that they exist. All too often, the attorney primarily responsible for the relationship with the corporate legal department will agree to the guidelines without first vetting the language with those individuals and departments within the firm that need to establish procedures and technology to comply with them."
  • "Establishing a policy to ensure that all outside counsel guidelines are reviewed prior to being executed will go a long way to ensuring attorneys are not putting their law firm at risk. This review should be completed by someone who understands the implications of the terms, such as the law firm’s general counsel. The responsible attorney or practice group leader who has a vested interest in either accepting a new engagement or continuing work for an existing client cannot be given the authority to review or accept outside counsel guidelines on behalf of the firm."
  • "Much of what is required involves restricting access to client information. Law firms often implement technology to confine access to matter information only to those individuals working on the matter. Often these programs are intended to work with enterprise document management systems, which are designed to provide a single, organized collaborative repository to manage client matter content. The problem is that, by default, most document management systems are open to anyone within the firm."
  • "Outside counsel guidelines often have some aspect of loyalty to the client. But a key issue is understanding who the client is. The guidelines may stipulate that the duty of loyalty extends to all subsidiaries and affiliates of the client organization. Yet, an all-encompassing view of the client could limit a law firm’s ability to accept future business."

Monday, June 6, 2016

IP Matters, IP Conflicts, IP Insights



Michael E. McCabe, Jr. does some excellent reporting and analysis on IP matters. Here's some of his latest work worth noting:

"Mass. Court Nixes Conflict Claim Against Gillette Former In-House IP Attorney Who Provided Competitor With Infringement Opinions Regarding Ex-Client’s Patents" --
  • “On May 5, 2016, a Massachusetts state court dismissed Gillette’s claims for breach of fiduciary duty against its former in-house IP counsel who left Gillette and went to work for a competitor, where he used allegedly privileged information gained during his prior employment and helped his new employer analyze and avoid infringement of Gillette’s patents—including patents over which he oversaw prosecution.”
  • “The court held that Gillette’s amended complaint failed to state claims for breach of fiduciary duty as a matter of law.  Consequently, the court dismissed with prejudice Gillette’s claims against its former in-house attorney.   See The Gillette Co. v. Provost, No. 1584CV00149-BLS2 (Mass. Super. Ct. May 5, 2016) (order granting motion to dismiss).”
  • “The court noted at the outset that Mr. Cekala’s fiduciary duty as former counsel to Gillette is “narrower” than the broad and undivided duty of loyalty that Mr. Cekala owed to Gillette when he represented the company as its in-house patent counsel. Since Gillette was Mr. Cekala’s former client, his ethical duties were limited by Massachusetts law, in particular Mass. R. Prof. Conduct 1.9, to preserve his former client’s confidential information and secrets.”
  • “Second, the fact that Mr. Cekala “developed expertise” regarding the scope of some of Gillette’s patents while he worked for Gillette are “beside the point” since issued patents are public documents.  The court explained that, “nothing in Rule 1.9 bars a lawyer from using publicly available information” or expertise acquired while representing a former client to help a new client compete against the former client.”
"IP Conflicts of Interest, Hot Potatoes, and “The Game of [Litigation] Life”"--
  • “Plaintiffs, alleged owners of the IP rights to the “The Game of Life”, want to end up on Millionaire Estates.  Defendants, including the toy company that has been making and selling “The Game” for decades, are trying to keep themselves out of the Poor Farm.  All of them are lawyered up and “spinning the wheel” of federal district court IP litigation.  See Markham Concepts, Inc. v. Hasbro, Inc., Case No. 1:15-cv-419-S-PAS (D.R.I. Oct. 2, 2015).”
  • “Just like real life (and frankly The Game of Life itself), the litigation, which has been pending for seven months, recently spawned an unexpected turn.  No, it was not the birth of twins or an income tax bill, as might occur in the Game.  Instead, defendants have moved to disqualify plaintiff’s IP counsel, the law firm of Greenberg Traurig, for an alleged concurrent client conflict of interest.”
  • “At issue in this case is whether a law firm which knows that it is about to become adverse to a current client, and which requested and was denied a waiver of the conflict from its client, can then withdraw from representing the client and promptly represent a party adverse to its “former” client.  In ethics parlance, a “withdrawal” under these circumstances is sometimes referred to as a “hot potato drop.”  Also at issue is whether a purported advanced waiver of conflicts, which states that a client will not “unreasonably” withhold its consent to a future conflict, is enforceable, and even if it is enforceable, whether the law firm under the facts of this matter “unreasonably” withheld its consent to the waiver.”

Sunday, June 5, 2016

Panama Lessons ("On business intake" or "Be careful with those clients, Eugene...")




"Law Firms Look for Lessons—and Clients—in Panama Papers Leak" --
  • "While many firms are getting updates and looking for opportunities in the wake of the leak, at least one, Sheppard, Mullin, Richter & Hampton, has formally set up a multipractice group devoted to Panama Papers-related developments."
  • "At least 30 Am Law 100 firms, including some that no longer exist, and dozens of other law firms around the world appeared in the searchable database that was published Monday by the ICIJ. The firms and other entities listed came from the Panama Papers leak and a separate ICIJ investigation from 2013."
  • "Regardless of whether they appear in the database, law firms should view the Panama Papers as a wake-up call, said Hinshaw & Culbertson professional liability partner Janis Meyer. 'Firms would be well served to take this opportunity to review their client intake procedures,' Meyer said. While large firms typically do have systems in place to alert them if a potential client has been flagged by a law enforcement agency, every jurisdiction has its own rules regarding what kind of due diligence is mandatory."
  • "In the U.K., for example, 'there are procedures to ensure that you know your client,' said Meyer, who was general counsel at Dewey & LeBoeuf before the firm went bankrupt in 2012. 'We don’t have any mandatory procedures for that here [in the U.S.], but good lawyers do it.'"
"Panama Papers spotlight danger of failing to screen for problem clients" --
  • “But the Panama Papers also shine a light on some failures of Mossack Fonesca to screen out problematic clients — failures of due diligence that the firm itself recognized.”
  • “One case in point is Petropars Ltd., which the ICIJ described as an Iranian-government- controlled intermediary between foreign companies and Iran’s oil ministry.  Through its offices in Dubai and London, Petropars was also a player in the development of Iran’s multibillion-dollar South Pars natural gas field.”
  • “Mossack raised the alarm in an internal e-mail addressed to the firm’s “Compliance Department,” among others.  He wrote “This is dangerous! … Everybody knows that there are United Nations sanctions against Iran and we certainly want no business with regimes and individuals from such places.”
  • “He called into question how Petropars had been vetted as a firm client to begin with, and blasted the firm’s United Kingdom office:  ‘It would appear Mossfon UK are not doing their Due Diligence [sic] thoroughly (or maybe none at all), and maybe from now on we ourselves will have to do the DD on all clients that Mossfon UK have with us, present and future!’
  • “Mossack wrote that ‘Anybody having had to do anything with this company [sic], … should have realized immediately that the names associated with it were Iranian names.  A red flag should have been raised immediately.’ The firm resigned as Petropars’ registered agent in October 2010.”

Thursday, June 2, 2016

Cyberpunks, Cybermen, Cyber Risk ("Cyber" is scary...)


Plenty has been written about the unfolding Panama Papers event, and the ripples hitting risk, information security and more.

"Panama Papers Data Dump Includes BigLaw Intermediaries" --
  • “A group of international journalists that released the so-called Panama Papers, which exposed the use of shell companies by wealthy individuals to hide their money from tax authorities, released data on Monday [May 9] related to more than 200,000 such companies, including information about BigLaw firms named in a prior data leak.”
  • “The data, which can be found here, co-mingles information uncovered in both the Panama Papers, which were released in April, and a report from 2013 known as the Offshore Leaks investigation, which focused on actions by U.K. citizens and residents to set up anonymous shell companies in foreign jurisdictions.”
  • “The released papers do not necessarily reveal illegal activity or other wrongdoing by the law firms or their clients, but altogether do shine a light on the secretive and complex use of offshore shell companies to conduct business — some of which is controversial or linked to questionable persons and activities.”
  • “Edelson PC's recent putative privacy class action alleging a Chicago-based regional law firm failed to take measures to effectively safeguard sensitive client data highlights the need for firms to obtain expansive cyber liability coverage. There is a misconception among firms that adding a "network endorsement" to their lawyers' professional liability policy will cover most cyber risks, but that isn't the case, according to Eileen Garczynski, senior vice president of specialty insurance brokerage Ames & Gough... As a result, purchasing a standalone cyber policy has become a must for law firms, Garczynski said.”
  • “And because many cyber policies only cover claims resulting from the theft or inadvertent disclosure of personally identifiable information such as birth dates and Social Security numbers, it is crucial for a law firm to obtain a cyber policy with a definition of ‘confidential information’ that encompasses all materials that fall under the attorney-client privilege. ‘A law firm will have some [personally identifiable information], but perhaps the bigger concern is that someone will steal the firm's strategy, a client's intellectual property or confidential emails,’ Garczynski said.”
  • “Like other businesses, many law firms have started to store more data in the cloud rather than on computer servers located onsite. As a result, firms that use third-party cloud storage vendors to store sensitive data should make sure that a policy's definition of ‘computer network’ encompasses those cloud providers, experts say. Otherwise, any claims that ensue if confidential information is stolen from a cloud provider may not be covered.”

Wednesday, June 1, 2016

Effectively Coming to Terms with Client Terms (OCGs, Engagement Letters and Client Expectations)



   
"Intapp Transforms Terms of Business Management for Law Firms with Intapp Open" --
In April, Intapp announced the release of the Intapp Open terms of business management system. The terms management system helps law firms reduce risk by centralizing outside counsel guidelines, engagement letters and other client requirement documents, and making it easier for firms to access, view, analyze and take action on their most critical client commitments.

Orrick, Herrington & Sutcliffe LLP, a prominent global law firm with more than 1,100 lawyers across 25 offices, is implementing the complete Intapp Open business acceptance suite, including Intapp Open for terms management.
 
Said Mike Guernon, Director of New Business and Conflicts at Orrick:
  • “Law firms today are grappling with how to keep up with the growing volume and complexity of outside counsel guidelines we receive from clients. A seemingly simple question such as ‘Have we agreed to similar terms with other clients?’ could easily translate to hours of painstaking review,”
  •  “By moving to the Intapp Open terms management system, we’ve been able to centralize OCGs and provide deeper visibility into terms documents, making the review process more straightforward and efficient. The ability to send notifications to client teams and other key stakeholders and display relevant terms has tremendous potential to save time, reduce risk, and help the firm focus on closer collaboration with our clients.”
The Intapp Open terms management system brings structure and visibility to previously disorganized and siloed terms management processes. With a few keystrokes, a conflicts lawyer or staff member can find details about any specific term in place with a client, or retrieve information about a specific category of commitments across the firms’ clients. What used to take hours to research can now be done in minutes through the Intapp terms management system’s powerful search and filtering capabilities.

The terms management system provides a structured terms database to identify, capture and categorize terms information from multiple sources. Intapp also provides 65 terms templates – vetted by numerous law firms – to help firms quickly and consistently categorize clauses, while prioritizing the terms most important to the firm and to individual client teams. The system also enables users to flag exceptions to standard firm policies. Notifications can be sent to key stakeholders when terms have been updated or changed, with links to relevant sections of client documents to display terms in context.

Integration with other law firm systems helps to weave client requirements and compliance into key workflows. For example, a lawyer submitting a new matter intake request can be automatically shown relevant terms of business previously agreed with the client. When running a conflicts search, competitors identified in clients’ outside counsel guidelines can be automatically flagged as black book entries. When lawyers submit their time entries, the time recording system can enforce compliance with client billing guidelines.

Product Information

Tuesday, May 31, 2016

Inside Outside Counsel Guidelines (or “On Outside Counsel Guideline Guidelines”)



The founder of the legal consultancy Procertas, formerly in-house with Kia Motors, Casey Flaherty work with both law departments and law firms on process and technology projects that improve collaboration and service. He writes plainly and compellingly: “Outside Counsel Guidelines and Collective Conversations
  • “I hate outside counsel guidelines. Hate. It's visceral. I have never encountered a set of guidelines I liked. My antipathy includes guidelines I had a hand in writing...As an associate I worked for a client whose guidelines forbade time entries that suggested any form of communication between lawyers--meetings, conversations, conferences, correspondence. So, too, any form of research and many other essential elements of producing work that were impossible to avoid within the delivery framework within which we were operating.”
  • “While guidelines saved the client no money, they did waste considerable time. Because the client had an extensive external review process, the firm had an intensive internal review process to make sure the billing language satisfied the client's guidelines. Internally, entries were constantly being sent back for rewrite but not writedown.”
  • “For all the effort that both put sides into satisfying and enforcing the guidelines, they would have been much better served to engage in a structured dialogue about continuously improving project management (communication) and knowledge management (research), as well as other aspects of service delivery such as templates, automation, analytics, and staffing. With respect to staffing, the client should have been interested in maintaining a stable team that was familiar with their work. Which, of course, means that I just suggested a new guideline as part of a screed against guidelines. I'm a bit of a hypocrite.”
  • “And, yet, there's a problem: we don't really have a forum to debate particular policies and prohibitions. Outside counsel guidelines are presented as a fait accompli. Pushing back on them in the context of the relationship is hard. Simon Chester, the former GC of the former Heinan Blake [now at Gowling WLG], has detailed many of the problems in billing guidelines and believes that firms "have to be prepared to walk away" from the engagement. But how many firms can afford to walk away in a world of flattening demand, lateral hypermobility, and inherently fragile firm structures?”
  • Compounding the problem is that firms often provide, and clients frequently sign, engagement letters that contradict the guidelines. These, too, often go unread. In not being read, guidelines and engagement letters are like 99.9% of the executed contracts in existence. As litigators know well, most people only read the contract when something goes wrong, which, frankly, is not too often in percentage terms but is common enough in raw numbers to keep us employed.”
  • “Ironically, the law department/firm relationship is among the worst papered commercial relationships a corporation will enter into because their lawyers are otherwise so vigilant when it comes to the business units' commitments and obligations. Most of the time it's fine. Except when it isn't. And then it is bad. I didn't realize how bad until I had a recent chat with someone who audits legal bills for a living. We're talking five to seven figures and immense stress on relationships. He explained to me that violations of the billing guidelines were, by far, the lowest hanging fruit. Both law departments and law firms have a contract management problem.”
Casey goes on to admit not having a solution, but does outline a proposed path to one. The entire article is worth a read. (And perhaps a sigh, or cry.)

(And any guess what tomorrow’s post will be about?)

Monday, May 30, 2016

Conflicts Concerns Continued (or: Damned if You Do, Don’t, or Do Both?)




Here’s a development from last month that’s still worth highlighting: "Dentons DQ Order Vacated, but Verein Conflicts Issues Remain" --
  • “An order disqualifying Dentons US LLP as counsel for an Ohio corporation prosecuting patent infringement claims is no longer on the books—but the firm is now facing a malpractice suit from the company over the firm's alleged conflict of interest.”
  • “The U.S. International Trade Commission April 12 vacated as moot an administrative law judge's disqualification order after the parties settled and the commission terminated its investigation into whether retailers were violating the company's patents by importing laser-abraded jeans (In re Certain Laser Abraded Denim Garments, USITC, Inv. No. 337-TA-930, notice issued 4/12/16).”
  • “Observers had hoped the ITC's decision would clarify whether law firms operating under a “Swiss verein” affiliation model will be treated as a single firm for conflict of interest purposes. Matthew J. O'Hara, a partner in Hinshaw & Culbertson LLP's Chicago office, told Bloomberg BNA the issue of whether vereins must apply U.S. conflicts rules across their entire structure remains unresolved now that the ITC withdrew the ALJ's opinion disqualifying Dentons US.”
  • Nevertheless, Dentons US still has to deal with a malpractice suit filed by the client it stopped representing after the ALJ's decision.
  • “Dentons US got booted from representing RevoLaze in May 2015 when Chief Administrative Law Judge Charles E. Bullock found that the firm had a disqualifying conflict of interest because Dentons Canada LLP was concurrently representing one of the respondents—The Gap Inc.—in unrelated matters.”
  • “Bullock rejected the firm's argument that Dentons US and Dentons Canada are separate firms that aren't tainted by each other's conflicts of interest. As a Swiss verein, Dentons is a “firm” or “law firm” as those terms are used in ABA Model Rule of Professional Conduct 1.0(c), he ruled. Bullock said “Dentons holds itself out to the public as a single law firm, but says that it is divided into ‘Legal Practices.'”
The ABA opinion on referral fees we noted previous was issued after this news. But the question of which side of the Schrödinger's Cat vereins may turn out to be, combined with a potential argument regarding firms (or legal practices) referring clients to “itself” or its “brand twin” raises interesting questions I’ll leave to sharper legal minds to ponder...

Thursday, May 26, 2016

Conflicts, Referred



  • “A lawyer who expects to receive a fee for referring a client must confirm that the referred matter doesn't present a conflict of interest and must get the client's written consent to the fee division at the outset, the ABA's ethics committee advised April 21.”
  • “Rules on conflicts among clients apply because the referring lawyer in a fee-splitting arrangement ‘represents’ the referred client even if the lawyer doesn't provide the legal services, according to the opinion.”
  • “Accordingly, the committee said, the referring lawyer in a fee-sharing arrangement represents the referred client for purposes of the ethics rules even if the other attorney performs all legal services in the matter.”
  • “Model Rule 1.7(a) forbids concurrent representation of clients who will be directly adverse to each other. It also prohibits lawyers from representing a client when there's a significant risk that the lawyer's responsibilities to another client will materially limit the representation, or that the lawyer's duties to a former client or a third person or the lawyer's own personal interests will hamper the representation.”
See also additional analysis and commentary by former conflicts and ethics counsel at Holland & Knight, and current Preferred Service Provider for Paragon, Gilda T. Russell: “ABA Formal Opinion 474 (2016) – Referral Fees
  • “Hence, under the ABA Model Rule, a referral fee to a lawyer in a different firm is not allowed unless the division of the fee between the lawyer and the outside lawyer is proportional to the services performed by each lawyer or each lawyer assumes joint responsibility for the matter.2”
  • “2: While such is the approach of ABA Model Rule 1.5(e), there is a wide variation in jurisdictional approaches to referral fees. A number of states follow the requirements of proportionality or joint responsibility. See e.g., District of Columbia Rule Prof. Cond. 1.5(e); Florida Rule Prof. Cond. 4-­‐1.5(g); Illinois Rule Prof. Cond. 1.5(e); New York (New York Rule Prof. Cond. 1.5(g); and Texas Disc. Rule Prof. Cond. 1.04(f). Other states do not have any such proportional division or joint responsibility provisions for referral fees, but, rather, require only client consent and that the total fee is reasonable. See e.g., California Rule Prof. Cond. 2-­‐200(A);”

Wednesday, May 25, 2016

Risk News (the Less Risky Way)


This updated is basically a giant arrow to the May issue of the excellent Lawyer’s Lawyer Newsletter via Hinshaw, available in full here.

This one is definitely full of the red meat issues we typically sniff all over the web for, neatly consolidated and analyzed, including:
  • "Conflicts of Interest — Subject Matter Conflicts Can IP Attorneys Simultaneously Represent Two Clients That Are Prosecuting Patents for Similar Inventions? Risk Management Issue: What constitutes an adequate conflicts check where two clients may be pursuing intellectual property in similar inventions (sometimes referred to as a "subject matter conflict")? Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336, 42 N.E.3d 199 (2015)"
  • "Disqualification — Overly Broad Scope of Engagement Creates Concurrent Representation Conflicts. Risk Management Issue: What can counsel for a closely held corporation do to avoid disqualification in the event of shareholder disputes? M'Guinness v. Johnson et al., 243 Cal. App. 4th 602 (2015)"
  • "Existence of Attorney-Client Relationship — Negotiations Affecting Client and Indemnifying Party. Risk Management Issue: What must law firms do to avoid establishing attorney-client relationships when communicating during the course of an engagement with persons or entities that may be allied in interest to their actual clients? George Makhoul, etc. v. Watt, Tieder, Hoffar & Fitzgerald, LLP, et al., 11-CV-5108 (PKC) (E.D.N.Y. 2015)"
  • "Disqualification — Obtaining Privileged Materials Outside of Discovery — Consultation With Former Employee of Opposing Party. Risk Management Issue: What can law firms do to manage the risk of disqualification when they seek to consult with or engage a former employee of an opposing party? In re RSR Corp., No. 13-0499, 2015 WL 7792871, at *3 (Tex. Dec. 4, 2015)"

Tuesday, May 24, 2016

Insight, Intelligence, Inspiration – Inception (and Beyond)


With apologies for a bit of a blogging absence, and with great gratitude and thanks to the many risk professionals who joined us last month in San Francisco at Inception 2016, (and to the many readers who popped up and proffered the secret risk blog handshake, along kind words of encouragement), we new resume your regular, semi-regular updates – rejuvenated, renewed and risk-adverse as ever...

...But not without also apologizing to an unknown reader in Philadelphia, who made a point to corner a colleague of mine recently and ask when I’d get back on the horse over here. (Every reader matters, and those cards and letters do get read. So, your nudge has been received.)

...And also not without thanking the many industry risk experts who participated in formal panels and informal discussions and networking as part of the Tuesday Risk Roundtable track – an experience no fewer than two participants called “intimate” and “fabulous.”


Several developments and stories of note, so let’s get back into the swing of things. Giddy up.

"Caesars Bondholders Ready Lawsuit, Citing Examiner’s Report: Proposed legal claims could be worth more than $12 billion, court papers say" --
  • “Paul, Weiss, Rifkind, Wharton & Garrison represented CEOC in the asset transfers, when it also represented the Caesars parents or affiliates and counted Apollo as a client. The court-appointed investigator said although the law firm “should have recognized” the conflict of interest in representing two companies on opposite sides of a deal, no evidence indicates that its lawyers intentionally sought to hurt CEOC or its creditors.”
  • “The bondholders, however, say Paul Weiss should return the “tens of millions of dollars” in fees it received in light of the “profound” nature of its conflict of interest. They also are seeking the return of more than $1 million in fees collected by another CEOC law firm, Friedman Kaplan Seiler & Adelman, for the “obvious conflict” in its work representing both Caesars and CEOC in a lawsuit in which CEOC asked a court to declare that Caesars wasn’t liable for the asset transfers.”
"Chinese firm sues Becker & Poliakoff for malpractice after Fashion Mall bankruptcy auction" --
  • “While redevelopment plans for the Plantation Fashion Mall are moving forward under Art Falcone, a legal battle has emerged between the property’s previous owner and a law firm that claims it had nothing to do with the project.”
  • “The suit was filed by Tangshan Ganglu Steel & Iron Co., a Chinese conglomerate that hoped to redevelop the Plantation mall, but lost the property during a bankruptcy auction in March 2015.”
  • “At the center of the suit is an alleged conflict of interest from Becker & Poliakoff, according to the Daily Business Review. Tangshan said in the suit that the law firm represented both it and minority partner Weng Chen, who managed the mall’s three controlling controlling entities. Tangshan owned a 99 percent interest in the entities.”
  • “After a falling out between Du and Chen, the suit alleges Becker & Poliakoff filed a document with a forged signature from Du that gave Chen control of the project. A Broward bankruptcy judge later ruled the signature was indeed a forgery, according to the Daily Business Review.”
"Software service provider claims law firm left it high and dry amid costly patent litigation" --
  • “In court documents, Steve Proctor, CEO of Nashville, Tenn.-based Edgenet, called Foley & Lardner LLP’s motion to withdraw from the litigation, filed against EdgeAQ LLC in the U.S. District Court for the Western District of Wisconsin, and a bill for presumably hundreds of thousands of dollars in fees a ‘complete surprise.’ EdgeAQ bought Edgenet in 2014... ‘After months of representing us, our current counsel informed us on Dec. 15, 2015 that they intended to file a motion to withdraw on Dec. 18, 2015,’ Proctor wrote in a Dec. 28, 2015 filing with the federal court.”
  • “According to Proctor’s December letter to the judge, Foley & Lardner stated there was a conflict of interest between the firm and EdgeAQ. Foley & Lardner allegedly told EdgeAQ that the firm felt the company was “second-guessing” its strategy.”
  • “To compound the complexity of the matter, when our current counsel filed the motion to withdraw, they requested an expedited consideration of the motion knowing that the date of the filing left EdgeAQ three business days to find replacement counsel before the Christmas holiday.”
  • “Proctor said in his letter the company was ‘even more surprised’ when Foley & Lardner informed it -- for the first time -- on Dec. 21, 2015 that it also had a conflict due to the firm’s representation of Nate Herbst, the current CEO WTS Paradigm LLC, which is the plaintiff in the case against EdgeAQ.”
  • “Jeffrey A. Simmons, a partner in the Business Litigation and Dispute Resolution, Distribution and Franchise, and Intellectual Property Litigation practices at Foley & Lardner, and who helped represent EdgeAQ, could not be reached for comment on the firm’s decision to drop EdgeAQ or its current policy on conflicts of interest.”

Thursday, April 7, 2016

Disqualifications (Attempted), Patents (Pursued), Conflicts (Contested) & Malpractice (Alleged)



Several interesting updates to share today. First: "Skadden Hit With Malpractice Suit By Evergreen Creditors" --
  • "Lenders who are owed $90 million by bankrupt Evergreen International Aviation Inc. on Thursday made good on their vow to sue Skadden Arps Slate Meagher & Flom LLP, claiming the firm’s conflicted representation cost Evergreen $35 million in damages."
  • "The creditors accuse the law firm of having an “incestuous relationship” in which it represented multiple Evergreen entities and their late founder, Delford Smith, turning a blind eye to 'impermissibly conflicting and divided loyalties' that arose as a result of Skadden’s multiple representations."
  • "'Defendants cannot and should not be able to retain substantial legal fees drained from the debtors’ estates as Skadden disloyally and simultaneously represented other Smith-owned entities with conflicting interests,' the lenders said."
  • "U.S. Bankruptcy Judge Mary F. Walrath on March 23 granted standing and authority to the prepetition lenders to sue Skadden over its representation of the Evergreen entities, after Chapter 7 trustee Alfred Giuliano refused to pursue claims against the firm."
Next, costs avoided (hat tip to Bill Freivogel for flagging) commentary via David Hricik: "Baker Botts Dodges $42 million Verdict in Patent Conflict Case" --
  • "This is a fascinating case on several levels, Axcess International, Inc. v. Baker Botts LLP (Tex. App. Dallas March 2016).  Baker Botts was representing one client, Axcess International, Inc. (“Axcess”) in prosecuting patent applications involving certain radio frequency identification technology. After it had filed those applications, it began to represent another client, Savi Technologies, Inc. (“Savi”) in prosecuting applications on similar technology. There is a lot going on in the case, but essentially Axcess sued Baker Botts and alleged two breaches of duty."
  • "First, that, but for a conflict of interest between Savi and Axcess, Baker Botts would have broadened claims the firm had been pursuing for Axcess. The opinion is hard to follow but there seem to be two, related, claims made by Axcess."
  • "Axcess argued that had it broadened its claims, the USPTO would have declared an interference with a then-pending Savi application, and Axcess would have prevailed. Put the other way, Baker Botts “pulled its punches” – had a material limitation in terms of 37 C.F.R. 11.107, I presume — on its ability to represent Axcess – because of its representation of Savi. Had it prevailed in the interference, Axcess would have claims to subject matter that turned out to be the lucrative technology. That leads to the second basis, which is that the broadened claims would have issued to Axcess and would have covered the lucrative terrain."
  • "The case went to trial and the jury awarded $42 million dollars to Axcess. However, Baker Botts moved that judgment be entered in its favor, and raised four grounds. The trial court granted the motion without saying why."
Next, another patent matter: "Fish & Richardson Ducks DQ Bid Over Patent Judge Hire" --
  • "Fish & Richardson PC, which represents the last five among scores of retailers and travel companies Parallel Networks LLC targeted in a data processing patent case, on Thursday survived a disqualification bid over the firm's hire of a onetime federal judge who previously oversaw the litigation."
  • "In an order denying the patent-holding company's June disqualification request, U.S. District Judge Robert W. Schroeder III of the Eastern District of Texas said the firm’s notification to Parallel Networks and the court about the hire of former federal Judge Leonard Davis was timely."

Wednesday, April 6, 2016

Feeling a Little Insecure about Information Security? (Lawsuits Coming?)



It looks like the source of the 'Panama Papers' was external: "'Panama papers' came from e-mail server hack at Mossack Fonseca" --
  • "The staggering, Wikileaks-beating “Panama Papers” data exfiltration has been attributed to the breach of an e-mail server last year... Bloomberg says co-founder Ramon Fonseca told Panama's Channel 2 the leaked documents are authentic and were 'obtained illegally by hackers.'"
  • "According to The Spanish, the whistleblower (here in Spanish) accessed the vast trove of documents by breaching Mossack Fonseca's e-mail server, with the company sending a message to clients saying it's investigating how the breach happened, and explaining that it's taking 'all necessary steps to prevent it happening again.'"
This story comes on the heels of reports last week of other hacked law firms. The Recorder notes: "Law Firm Data Practices Draw New Scrutiny" --
  • "Several of the nation's largest law firms acknowledged this week that a cyberhacker seeking highly valuable details of M&A deals in the works had sought to breach their computer systems. No one was surprised. For years, law enforcement agencies, security consultants and legal experts have warned that law firms and their electronically stored records are potential treasure troves for criminals eager for an edge in the stock market or a particularly sensitive batch of data to sell or ransom."
  • "But when it comes to overseeing the information-handling practices of lawyers and law firms, regulators have largely shied away. The Federal Trade Commission and the U.S. Department of Health and Human Services police businesses' health record practices. The Federal Reserve has pages and pages of rules governing financial institutions. Securities broker-dealers and investment advisers must register with the U.S. Securities and Exchange Commission. Law firms, however, with their own corporate structures and unique ethical obligations, don't fall neatly under the jurisdiction of those regulatory agencies. And those agencies don't appear to be scrambling to add legal practices to their oversight duties."
  • "Law firms could be subject to a limited scope of data regulatory scrutiny soon. The Department of Health and Human Services' Office of Civil Rights announced in March that for the first time it will audit a small number of business associates of entities covered by the Health Insurance Portability and Accountability Act, or HIPAA. Law firms, in some instances, will qualify as those targeted associates."
  • "[Days before the Panama Papers incident,] John Reed Stark, a former SEC enforcement lawyer who now runs a consulting firm in Bethesda, Maryland... said that he could foresee a breach so catastrophic that "given the expense, and given the damage they could incur ... it may very well be the death knell of a law firm. 'I'm not sure that law firms truly appreciate that,' he said."
And then comes: "BigLaw In Crosshairs As Firm Plans Data Breach Litigation" --
  • "Following reports that Cravath Swaine & Moore LLP and Weil Gotshal & Manges LLP suffered data breaches at the hands of hackers, a plaintiffs law firm said Thursday that it plans to bring class action legal malpractice litigation against legal industry players over the exposure of client information."
  • "Law firms have a professional duty to protect the privacy of client information, but most of them are not doing a good job when it comes to protecting that information from hackers, according to Jay Edelson, founder and CEO of privacy class action law firm Edelson PC, which nearly a year ago began investigating class action litigation against as-of-yet unnamed law firms over client data breaches."
  • The planned class action litigation will involve claims for breach of contract and legal malpractice, Edelson said. 'There's no question the firms have a legal duty to take reasonable protections to protect data, and if they're not doing that they’re breaching their standard of care,' he asserted.
  • He added that, according to the firm’s research, he believes that many law firms targeted by hackers do not inform clients about resulting data breaches in a timely manner. 'We’ve heard story after story from our friends on the defense side — it’s a worst-kept secret that there are data breaches all the time at law firms, and there are a ton of state laws which require notification of data breaches, and the law firms seem to not care about those laws,' Edelson said."

Tuesday, April 5, 2016

A (Risky) Man, a (non-compliant) Plan, a (Perilous) Canal – Panama



Read any interesting articles lately about law firms, leaks and information security?

The legal community is clearly abuzz at the revelations coming out of the leak from law firm Mossack Fonseca, described as the world’s fourth-largest offshore services provider.

Upon hearing the news this weekend, my immediate thought was: Was this an external hacker? Or an internal leaker? As we've covered many instances of incidents like these (on much smaller scales) origination from within and without. Facing surprising sunlight into is operations and client roster, the firm said:

  • "We are responsible members of the global financial and business community. We conduct thorough due diligence on all new and prospective clients that often exceeds in stringency the existing rules and standards to which we and others are bound. Many of our clients come through established and reputable law firms and financial institutions across the world, including the major correspondent banks, which are also bound by international 'know your client' protocols and their own domestic regulations and laws."
We're actively reviewing several interesting stories and developments highlight the emerging facts, unfolding impact,  underlying issues, and continuing industry discussions about this shocking development. Here's one via the American Lawyer: "'Panama Papers' Put Spotlight on Law Firm Data Security" --
  • "The Panama Papers leak is reportedly the biggest ever data breach and calls into question the ability of law firms to protect clients' data. Some 11.5 million leaked documents reveal information on the offshore fortunes of public figures such as Icelandic Prime Minister Sigmundur Gunnlaugsson as well as information on individuals associated with Russian president Vladimir Putin."
  • "Benedict Hamilton, Europe, Middle East and Africa managing director of risk consultant Kroll Experts, said that although firms are already taking security measures to protect private data, much more still needs to be done. ‘I definitely think they need to up their game on data security... I don't think they are doing nearly enough,’ said Hamilton. ‘No company can totally protect itself against an employee abusing trust, but there are things you can do that make it harder for people to leak documents.’"
  • "Ropes & Gray privacy and data security partner Rohan Massey said: ‘The risk we have is incredibly real and we are now as a sector being targeted because of the sensitivity of the information we hold. As a profession we do need to ensure that our houses are safe and maybe we lag behind because we focus on clients.’"



Thursday, March 31, 2016

HACKED: Prominent Law Firms Breached




via the Wall Street Journal: "Hackers Breach Law Firms, Including Cravath and Weil Gotshal" --
  • "Investigators explore whether cybercriminals wanted information for insider trading... Hackers broke into the computer networks at some of the country’s most prestigious law firms, and federal investigators are exploring whether they stole confidential information for the purpose of insider trading, according to people familiar with the matter. The firms include Cravath Swaine & Moore LLP and Weil Gotshal & Manges LLP, which represent Wall Street banks and Fortune 500 companies in everything from lawsuits to multibillion-dollar merger negotiations. Other law firms also were breached, the people said, and hackers, in postings on the Internet, are threatening to attack more."
  • "The attacks on law firms appear to show thieves scouring the digital landscape for more sophisticated types of information. Law firms are attractive targets because they hold trade secrets and other sensitive information about corporate clients, including details about undisclosed mergers and acquisitions that could be stolen for insider trading."
  • "The potential vulnerability of law firms is raising concerns among their clients, who are conducting their own assessments of the firms they hire, according to senior lawyers at a number of firms."
  • "One of the trickiest questions for law firms is when they are required to publicly disclose a data breach. Forty-seven U.S. states have their own breach-notification laws, forcing law firms and other companies to navigate a patchwork of different rules."
with added notes and detail via the American Lawyer: "Cravath Admits Breach as Law Firm Hacks Go Public" --
  • "Law firms will go to great lengths to keep attempted and successful hacks secret, because any sign that the data they store isn’t secure can result in a “huge loss of customer confidence,” said Austin Berglas, former head of the FBI’s cyber branch in New York."
  • "'I think that the majority of the law firms don’t even know that they’re compromised,' said Berglas, who now leads the cyber investigations and incident response team at K2 Intelligence. He added that law firms are traditionally understaffed in cybersecurity, compared with large corporations and banks."
  • "Berglas said he worked with a law firm recently that faced a ransomware attack, something he said he’s seeing more and more often. The firm did not know about the attack until the hacker sent a screenshot of the stolen data and a message that the information would be made public if the firm did not pay. This firm opted to comply and handed over a seven-figure sum, according to Berglas."
  • "Daniel Silver, a former federal prosecutor who recently joined Clifford Chance, said... Firms tend to be reluctant to publicly identify themselves as victims, said Silver. And they usually don’t have to. While corporations are often required to report data breaches and hacking, law firms—which frequently possess sensitive material from the same corporations—are in a different category."
  • "Generally, there is no specific regulation directed at law firms requiring them to report data breaches, Silver said. 'More often firms will turn to the private sector to try to fix a problem rather than call the FBI,' he said. 'It’s a patchwork approach these days … and law firms fall into a black hole when it comes to these data breach issues.'"


Wednesday, March 30, 2016

Conflicts (Waived or "Egregious")




via BNA comes two interesting conflicts updates. First: "Conflict Waiver Saves Day Pitney From Ouster in Later Dispute" --
  • "A conflict waiver bars a plaintiff from claiming that defense counsel must be disqualified due to its previous concurrent representation of the plaintiff and the defendants, a federal magistrate judge decided March 2 (Radici v. ICF Mercantile, LLC, D.N.J., Civ. No. 2:14-cv-07133 (SRC) (CLW), 3/2/16)."
  • "The decision supports the enforceability of advance waivers in which a new client gives up the right to seek a firm's disqualification in subsequent disputes with another specified client of the firm."
    "Magistrate Judge Cathy L. Waldo of the U.S. District Court for the District of New Jersey enforced the conflict waiver the plaintiff signed when he retained the Day Pitney LLP law firm. Waldo rejected his argument that he didn't know enough to give informed consent."
    "The waiver letter stated that the firm would concurrently represent Radici in the visa application process while also advising Ronner in his negotiations with Radici relating to ICF. It also said that in the event of a dispute among them, Day Pitney would stop representing Radici and would represent ICF and Ronner in the dispute."
    "The magistrate judge singled out this language in the waiver letter as important: '[Radici] will not use [Day Pitney’s] representation of him in the Visa Application Matter nor this consent and waiver as a basis on which to disqualify [Day Pitney] from representing ICF or Mr. Ronner on the Member matters, including any litigation that may arise between ICF and/or Mr. Ronner, on one hand, and Mr. Radici on the other.'"
And on the flip side: "Litigation Boutique May Be Disqualified for 'Egregious' Conflict" --
  • "Citing a conflict 'so egregious that it is unwaivable,' a federal judge in Santa Ana has issued a preliminary ruling disqualifying the recently formed litigation boutique Hueston Hennigan from a multi-million dollar healthcare fraud case that’s been in the headlines for years."
  • "In the civil case in front of Guilford, Hueston Hennigan name partner John Hueston has been representing the State Compensation Insurance Fund (SCIF), a worker’s compensation insurer instituted by the California state government, on claims it was defrauded of hundreds of millions of dollars as the the result of a complex kickback and fraudulent billing scheme that dates to the 1990s. Separately, the firm’s other name partner Brian Hennigan has been representing Paul Randall, who faces federal criminal charges that he participated in the scheme to defraud the fund."
  • "The Court now faces a relatively simple question,”  U.S. District Judge Guilford wrote. 'Can a single law firm represent both the victim and the victim’s alleged perpetrator at the same time and in the same litigation? The answer is clear: No... But for some reason, the lawyers at Hueston Hennigan did not see the clarity of that answer. In doing so, they may have lost sight of a bedrock of our adversary legal system: the duty of loyalty.'"

Tuesday, March 29, 2016

Engagement Letters and Malpractice Risk (and News)



via Karen Rubin comes: "Documenting who you do — and don’t — represent is key to avoiding malpractice trap"--
  • "In Lahn, the lawyer had represented the plaintiff, her brother and another individual as lenders in a series of private loans to a California-based real estate development corporation.  In a 2004 loan-rollover, the lawyer exchanged e-mails with the plaintiff and provided her with an inter-creditor agreement for the proposed transaction."
  • "The lawyer wrote that plaintiff was encouraged 'to seek independent counsel to review these and any documents in connection with this matter. Please remember, as it is expressly stated in the Inter Creditor Agreement, we are representing [your brother] in the transaction.' The inter-creditor agreement likewise reiterated that in this transaction, the lawyer was solely representing the brother as lender."
  • "Even though the lawyer had represented the plaintiff in other matters, the court wrote, 'the uncontested fact remains that he told plaintiff, directly and in writing,' that he solely represented her brother in the transaction, and that she was encouraged to seek independent counsel to review the inter-creditor agreement.  The inter-creditor agreement reiterated the same fact."
  • "Of course, the best way to document the identity of your client is in an engagement letter that leaves no doubt about who you do and do not represent. And here, where an engagement letter was not an option, the savvy lawyer avoided malpractice liability by effectively documenting who his client was not.  Take a lesson from Lahn, and be clear on this point."
And following an earlier update on this matter comes: "Paul Weiss Flirted With Malpractice Risk In Caesars" --
  • "A ballyhooed investigation finding Paul Weiss Rifkind Wharton & Garrison LLP attorneys missed a conflict of interest while representing Caesars Entertainment and its bankrupt operating unit also reveals the firm was at an increased risk of being sued for malpractice because it never obtained a retention letter, experts say."
  • "Sources who spoke with Law360 said Davis' determination that a conflict existed raises a question over how attorneys could have neglected to get in writing the parameters of the firm's representation of CEOC, a major client. CEOC filed for bankruptcy last January carrying $18.05 billion in debt."
  • "Still, experts said the lack of a retention letter is unusual, especially for a firm as large as Paul Weiss and for a client as large as CEOC. BigLaw firms routinely have risk management processes in place requiring engagement letters that outline the scope of the legal work."
  • " A New York rule that went into effect in 2002 requires attorneys who charge clients fees of at least $3,000 to provide a written letter of engagement. Firms are also usually required by malpractice insurance carriers to obtain retention letters, experts said."

Monday, March 28, 2016

Risk News & Updates (AML, Data Privacy & Paralegal Ethics)




Legal Risk LLP's latest newsletter notes:
  • "Pressure to bring forward the implementation of the Fourth Money Laundering Directive ((EU) 2015/849) (MLD4) to the end of this year, already fuelled by terrorist attacks in Paris and no doubt Brussels too now, should focus law firm management on the need to carry out a risk assessment and review policies and procedures."
  • "While the report on the thematic review of anti-money laundering compliance by the Solicitors Regulation Authority (SRA), expected imminently, may not contain major shocks, what passed muster when the review was carried out a year ago may not be sufficient for the future. We are advising leading law firms on their UK and overseas compliance, and those in other sectors such as property professionals and trust and company service providers, on the steps they need to take."
  • "The text of the new EU General Data Protection Regulation is expected in July and will take direct effect in two years. The Information Commissioner has published guidance,
    Preparing for the General Data Protection Regulation (GDPR): 12 steps to take now."
  • "The European Commission and the United States have reached an agreement on the Privacy Shield, which replaces the defunct Safe Harbor regime and sets out a new framework for transatlantic transfers of personal data.  However, Max Schrems, who successfully challenged Safe Harbor, has been reportedas saying that the Privacy Shield does not adequately solve the problem, describing it as ‘10 layers of lipstick on a pig’. "
And via Paragon: "Recent commentary [in the] Law Firm Risk Blog regarding Conflicts concerns in the hiring of paralegals coincidentally touched on one of the subjects of our next commentary for Paragon’s Policy-Wise, a Risk Management Blog.  Gilda Russell, one of our Preferred Providers, has written: Legal Ethics Concerns for Paralegals an article on some important ethics issues for paralegals" --
  • "...important legal ethics rules with which paralegals should be familiar as a guide to their professional conduct. These are Requirements of Competence, Diligence, and Professional Integrity, Requirements of Client Confidentiality, Rules Concerning Conflicts of Interest, Supervisory Lawyers’ Responsibilities Regarding Nonlawyer Assistants, and Prohibitions Concerning the Unauthorized Practice of Law."

Sunday, March 27, 2016

A Special (New) Offer for (Select) Risk Blog Readers



We want to do everything we can to encourage the risk community to attend Inception, which is now just a month away (April 24-27). (More details on the complete event and agenda at the conference web site.)


Special Promotion (for Risk Blog Readers)
This week we have a new opportunity, in the form of an allocation five complimentary day pass badges available for qualified, partner-level law firm readers interested in attending just the Tuesday risk day of the conference (April 25).
 
That day, detailed below, will commence with an exclusive GC breakfast, followed by a series of general risk panels and discussions (and culminate with a reception at the Exploratorium museum in San Francisco). If you're interested, please get in touch directly: dan@riskroundtable.com.

 
GC Breakfast
Moderated by Pat Archbold, head of Intapp’s risk practice. The event will include a provocative discussions of our speakers on several topics. We're pleased to feature risk experts:
  • Anthony Davis, partner at Hinshaw & Culbertson
  • Martin Checov, general counsel at O’Melveny & Myers
  • Ken Landis, vice president of loss prevention at ALAS

Conference Risk Content

We also have a dedicated Risk Roundtable program track on Tuesday open to all attendees, with a great set of talks and panels featuring speakers from firms including:
  • DLA Piper
  • Greenberg Traurig
  • Kirkland & Ellis
  • Foley & Lardner
  • Pillsbury Winthrop Shaw Pittman
  • Holland & Hart
  • Miles & Stockbridge
  • Schulte Roth & Zabel
Discussing critical risk topics:
  • Risk Survey review – Over the past decade, Risk Roundtable industry surveys have provided unique insight into industry trends, priorities, challenges and response strategies. This session will unveil the 2016 report, and feature review and discussion of key findings by an expert panel, along with ample time for audience Q&A and discussion.
  • Business Acceptance Maturity Model (BAMM) – The Business Acceptance Maturity Model (BAMM) allows firms to self-assess and rate their policies and procedures against overall industry practices and standards – which can vary based on jurisdiction and conflicts clearance models. This panel will review and share real-world examples of the four distinct acceptance approaches, and explore how you can use the BAMM framework to drive the change and improvement you want at your firm.
  • Risk Staffing Approaches: Conflicts & beyond – How is your firm’s risk team organized? Is risk organized under a single individual or umbrella group? Or is it distributed? Do conflicts managers and other risk staff wield broad authority to resolve issues? Or are they directed to follow layered escalation paths as issues arise? This panel discussion will explore different approaches for staffing the risk function, the various the pros and cons of each, and approaches for evolving your own organizational approach to best achieve your specific risk and business goals.
  • Making the case for investing in risk – Whether it’s for new technology, new staff positions, or new policies and practices – it’s no secret that making the case for investing in risk management can be challenging. But it’s critical to the long term health and success of every firm, and a cause worth advocating for. This panel will explore different strategies and approaches leaders have pursued to win mindshare, budget and support for risk initiatives. What are the “slam dunk” scenarios? What are the best arguments to make? Where’s the best place to start? Come hear real-world stories and advice from your peers – and bring your own to share as well.
Again, I'm delighted to make a limited set of passes available to qualified parties. Please get in touch if interested as these will go on a first-come, first-served basis. (dan@riskroundtable.com).
 

Friday, March 18, 2016

It’s (Risky) Business Time: Gaming Conflicts




"Paul Weiss Missed Caesars Conflict, Examiner Says" --
  • “Paul Weiss Rifkind Wharton & Garrison LLP’s dual representation of Caesars Entertainment’s operating unit and its private equity owner Apollo Global Management LLC created a conflict of interest while the firm worked on a series of controversial transactions involving the casino operator, a Chapter 11 examiner said.”
  • “Although Davis said Paul Weiss should have recognized that a conflict of interest existed, any potential claims creditors could bring against the firm would be weak because evidence collected indicates that lawyers did not knowingly do anything to harm CEOC creditors, the report said.”
  • “’In sum, while a conflict existed which Paul Weiss should have recognized, any claim against Paul Weiss for damages would be weak,’ the report said. ‘Although the conflict was real, and Paul Weiss lawyers should have recognized the need for independent directors and advisors at CEOC by no later than late 2012 – early 2013, and advised its clients accordingly, the evidence does not support a conclusion that Paul Weiss lawyers knowingly acted at any time to injure or prejudice CEOC or its creditors.’”
  • “Creditors of Caesars Entertainment's bankrupt operating unit have actionable legal claims against the parent company and its private equity owners worth between $3.6 billion and $5.1 billion over a series of transactions that stripped value from the business, according to a Chapter 11 examiner.”

Thursday, March 17, 2016

It’s (Risky) Business Time: Webinar Recording on Managing Terms of Business




For those that missed the live presentation, a recording is now available of the recent webinar on managing terms of business with Intapp Open.

With clients issuing increasingly stringent guidelines, it's critical that firms take their compliance responsibilities seriously. But keeping up with every rule and condition across multiple clients and matters can create significant overhead for lawyers and staff — which translates to real risk.

Intapp Open now provides a structured approach for storing, indexing and enforcing client mandates and other firm requirements, including outside counsel guidelines, engagement letters, and other internal requirements and standards. This session covered:

Key Challenges
•    Centralization and management of client obligations
•    Visibility and cross-functional access to client terms
•    Terms enforcement

Key Product Capabilities
•    Capture and categorize client terms
•    Provide transparency and accessibility
•    Enforce requirements during matter execution
•    Integrate with key firm systems
•    Report on and analyze client commitments

Click here to access the recording (which runs about 20 minutes).

Wednesday, March 16, 2016

It’s (Risky) Business Time: Lending or Paying (and Repercussions)




"Skadden Work For Aviation Exec 'Incestuous,' Lenders Say" --
  • "Creditors for bankrupt Evergreen International Aviation Inc. accused Skadden Arps Slate Meagher & Flom LLP on Monday of having an “incestuous relationship” in which it represented both some of Evergreen's entities and their late founder, and they asked a Delaware judge to make the bankruptcy trustee hand over documents from the firm."
  • "The creditors contend Skadden has a conflict of interest in representing both Evergreen debtors and Delford Smith. They claim the law firm facilitated ‘potentially fraudulent’ transfers ahead of the bankruptcy filing that benefited Smith and Skadden but allegedly lost creditors more than $30 million."
  • "The creditors told the judge in their March 7 motion that they have taken matters into their own hands and started investigating Skadden's work with Evergreen via publicly available sources and by interviewing former Evergreen executives."
  • "Counsel for the trustee and a representative for Skadden did not reply to requests for comment on Monday, and counsel for the creditors declined to comment."
"Sheppard Mullin's Bid To Buy Waiver Emerges In Fee Row" --
  • "A payout offer from Sheppard Mullin Richter & Hampton LLP to a California utility raising a conflict objection that ultimately led to the loss of millions of dollars in fees reveals an ethically murky area of behind-the-scenes deals in which BigLaw firms seek to quell disqualification bids, experts said."
  • " Even if wheeling and dealing over conflicts is deemed within professional conduct rules and benefits clients, experts said, lawyers also realize that the optics of offering money in exchange for conflict waivers aren’t necessarily positive."
  • "'There is a real underbelly to how conflict waivers are negotiated, and it can be like making sausage,' said bar discipline specialist James Ham of Pansky Markle Ham LLP in South Pasadena, California. 'I wouldn’t call what they did unprofessional, but I do think they made a very pragmatic business decision, probably based on the belief that it wasn’t going to harm the client.'"
  • "California legal ethics expert Diane Karpman of Karpman & Associates called the Sheppard Mullin offer unsurprising, as major firms turn to 'all existing paradigms' in an effort to head off potentially expensive conflict problems. 'Although [cash for waivers deals] are not often reported, I'm certain they occur,' Karpman said."

Tuesday, March 15, 2016

It’s (Risky) Business Time: Global Firms, Terms, Laterals & Business Matters



This week we're featuring several stories on the theme of risk and business. First up, an excellent overview via Hong Kong Lawyer: "Conflicts of Interest: A Challenge for Global Law Firms" --
  • “International conflicts challenges will usually first become an issue when law firms operating in different jurisdictions/countries decide to combine/merge in order to become one global firm and service the needs of international clients. The combined firm will need to decide on the application of different conflicts of interest rules by not only taking into account the different practice areas of the firm, but also local professional conduct rules.”
  • “One approach is to apply the more stringent ABA Model Rules of Professional Conduct (the “US Conflicts Rules”) to every client/matter in every jurisdiction where the global firm operates. However, standards under these rules can be in breach of local conflicts rules, which might not permit consents to a conflict of interest.”
  • “Another approach is to apply the local conflicts rules to local clients/matters. However, cross-border transactions might be problematic if it is unclear at the outset which conflict rules prevail. If a law firm adopts a combination/layering approach of the various conflicts rules, it should be done under careful consideration. While this approach may be more difficult at the outset, it may be the only viable way to avoid breaching local conflicts rules.”
  • “On top of considering the conflicts rules for each client/matter, firms also need to navigate commercial conflicts of interest either imposed by a contractual obligation or, generally, by the client relationship.”
  • Clients want to manage and control the efficiency and cost effectiveness in the delivery of legal services provided by law firms and the way they achieve this is by trying to impose outside counsel guidelines onto the law firms (ie, their terms of business). If law firms agree to outside counsel guidelines with clients then they need to contractually comply with the terms and conditions stipulated by the clients. Most of the time, the client’s terms of business do contradict the terms of business of law firms. The following issues are the ones where the interests between clients and law firms differs the most:
    • “Everyone is the client: representation of the whole corporate family. Clients want to define the client in the matter as everyone in the corporate family, including both subsidiaries and affiliates. However, this broadens the application of the fiduciary duties owed by a solicitor to a client. Including all affiliates is much too broad and might be difficult to comply with. Hence, law firms should try to define the client as narrow as possible.”
    • “No adversity: cannot be adverse to a client without consent. Clients want to impose the duty of loyalty under the US Conflicts Rules to jurisdictions where local conflicts rules do not require it. This could put a law firm at a competitive disadvantage as waivers would need to be sought which would not be required under the local conflicts rules, slowing down matter acceptance or even rejecting matters if a waiver cannot be obtained.”
    • “Best rates: most favoured nation clause. Clients want to obtain the same low rate that a law firm offers to its long-term clients, who deserve this rate due to its relationship and volume of work it gives to the law firm. This arrangement can be unfair to the law firm and other clients. Furthermore, it might even be impossible to measure due to the different types of services law firms provide to different client.”
  • “Hence, law firms need to be careful not to contractually incorporate the US Conflicts Rules into engagement terms which would need to be considered additionally when resolving conflicts of interest issues for local matters.”
Next, via the Partner Departure Blog (see the full story for California-specific analysis) comes: “Law Firm Can’t Require Departing Partner to Forfeit Equity If Partner Takes Clients” --
  • “In an important order that impacts the field of partner departures nationwide, a district court judge in the Eastern District of Virginia held that a provision in a law firm’s operating agreement that provides that a withdrawing partner who ‘takes clients’ forfeits up to fifty percent of his equity in the firm is void and unenforceable because it places an impermissible restriction on the partner’s right to practice law. (Moskowitz v. Jacobson Holman, PLLC, (E.D. Va. Jan. 28, 2016.)”
  • “In analyzing whether or not the forfeiture provision in the Jacobson partnership agreement was valid, the Court interpreted Rule 5.6 to prohibit, ‘not only outright restrictions on practice, but also indirect restraints, such as financial disincentives.’ (Order, Page 5.)”
  • “And while this provision on its face does not impose a direct restriction on the member’s right the practice law, the Court noted that it certainly ‘attaches a financial cost to a withdrawing member’s decision to continue to represent any of his or her clients.’”