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:

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. (

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.’”

Tuesday, March 8, 2016

Deconstructing Disqualification News

A heaping update harvesting a heaping helping of disqualification discussion in the news. First: "Federal Circuit Judge Bryson Denies Motion to Disqualify Plaintiff’s Counsel"
  • “Providing a rare glimpse into a Federal Circuit judge’s views on the rules of professional conduct governing conflicts of interest, on February 26, 2016, Federal Circuit Judge William Bryson, sitting as a trial judge, denied a motion to disqualify the law firm of Fish & Richardson, P.C.Erfindergemeinschaft Uropep GbR v. Eli Lilly & Co., No. 2:15-CV-1202 (E.D. Tex. Feb. 26, 2016).”
  • “Fish represented the co-defendant in the present case, Brookshire Brothers, Inc., in a previous patent infringement suit, GeoTag, Inc. v. The Western Union Co., No. 2:10-CV-574 (E.D. Tex. 2010). Brookshire moved to disqualify Fish because it now represents Uropep against Brookshire.”
  • “Judge Bryson decided first whether Brookshire was Fish’s former, not current, client at all relevant times. When Brookshire hired Fish for the GeoTag case, Brookshire and Fish entered into an engagement agreement providing that Brookshire was retaining Fish for only the GeoTag case and that any other matter would require another agreement. The engagement agreement contained also a broad waiver by Brookshire of future conflicts, extending to Fish’s representation of parties against Brookshire in subsequent matters that were not the same as the GeoTag case. The GeoTag case against Brookshire settled on November 20, 2013, and Fish provided no further services to Brookshire except responding to a question about the settlement agreement in June 2014.”
  • “Judge Bryson found that Brookshire was a former client of Fish at all relevant times... Judge Bryson found that the GeoTag case and the present case are not substantially related... Judge Bryson considered next whether Fish received confidential information from Brookshire in theGeoTag case that might be used against Brookshire in the present case, and rejected Brookshire’s arguments that it did... Judge Bryson next considered Brookshire’s assertion that Fish’s notice of termination of the attorney-client relationship in May 2015 was improper...”
  • “Finally, in response to Brookshire’s challenging the validity of the prospective conflict waiver in the engagement letter, Judge Bryson acknowledged that ‘[s]uch sweeping advance conflict waivers are of dubious validity, at least where the precise nature of the prospective conflict is not spelled out with scrupulous care.’ But Judge Bryson found that disqualification was not required regardless of the validity of the advance waiver provision in the engagement agreement.”
Next: "Prior Work for Other Side Not Cause to Disqualify Day Pitney" --
  • A federal judge in Newark has denied a motion to disqualify Day Pitney from representing the defendants in a dispute between business partners, finding no evidence that the firm used its prior representation of the plaintiff to gain an unfair advantage in the present case.”
  • “Day Pitney attorneys Michael Dunne and Elise Berman represented Radici in 2013 in connection with a visa application as he sought to move from Brazil to the United States to form a business partnership with Ronner, according to Waldor's opinion. Meanwhile, Dunne was also representing Ronner in his formation of the partnership with Radici.”
  • “When Radici sought Day Pitney's representation on the visa application, the firm obtained signatures from both Radici and Ronner on a letter seeking their waiver of potential conflicts of interest. The letter stated, in part, that Radici would not use Day Pitney's representation of him in the visa application as a basis to disqualify the firm from representing ICF or Ronner in any litigation that may arise between ICF or Ronner and Radici, according to Waldor.”
  • “Radici and Ronner's business relationship eventually soured and the present litigation arose. Day Pitney's prior representation of Radici became an issue in the present case when defendants served multiple interrogatories and document requests on him concerning his visa applications. He argued that his visa status was irrelevant to the present case and that Day Pitney was using its prior representation of him to his detriment, according to Waldor.”
  • “Waldor said to disqualify Day Pitney, Radici would have to demonstrate that the present case and the immigration matter are "substantially related," which requires a showing that the firm received confidential information from him during the earlier representation that is relevant to the present case. Radici failed to demonstrate that his immigration status was confidential and that the firm had that information because of its prior representation of him, Waldor said.”
And, finally, for those that have made it to the very end, comes the award for story title I’m glad I didn’t come up, which goes to: “Knife Maker Takes Another Stab At Locke Lord DQ In 2nd Circ” --
  • “The maker of copycat Victorinox Swiss Army knives doubled down Friday in its effort to have Locke Lord LLP cut from an appeal of a $1.7 million infringement judgment, telling the Second Circuit the law firm has not shown that it is free of conflict in the case.”
  • “B&F System Inc. is citing Locke Lord's January 2015 merger with Edwards Wildman Palmer LLP as the reason the law firm should be disqualified as Victorinox AG’s counsel. Locke Lord potentially has access to sensitive B&F information because the firm actually represented the warring parties simultaneously, B&F contends.”
  • The company claims it was dropped by the law firm it had known as Locke Liddell & Sapp PLLC 'without explanation' shortly thereafter. The reason turned out to be that Edwards Wildman had been representing Victorinox in the district court case, which B&F argues is tantamount to concurrent representation considering the law firms' eventual merger.”
  • Victorinox has argued the merger creating Locke Lord took place years after it first accused B&F of infringing on its signature knives and the request for disqualification is purely a tactical move to boot attorneys who are 'intimately knowledgeable' about the case.”

Monday, March 7, 2016

Event: Education, Connection and Inspiration @ Inception 2016

We're seeing significant interest in the Intapp user conference, Inception, scheduled for April 24-27. More details on the complete event and agenda at the conference web site.

I wanted to take a moment to highlight a slice of the great risk content that will be featured that week (and to offer an inspirational incentive to blog readers). We have a dedicated Risk Roundtable program track on Tuesday:

Key Risk Sessions & Expert Panels
  • 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.

Special Promotion (for Risk Blog Readers)
This week we're making a limited number of $200 off discount codes available to risk blog readers. These are reserved for qualified organizations and individuals, and are first-come, first-served. Please email: Jason Yu for details. (And watch for future updates on Inception.)

Thursday, March 3, 2016

Law Firm Information Security: Making News, Changing Client Strategies

via Bloomberg BNA, come two stories highlighting information security. First, on the subject of threats facing law firms (and client concerns): "Verizon GC: Law Firms Are Prime Targets for Hackers" --
  • “Verizon General Counsel Craig Silliman said that he thinks law firms are prime targets for hackers. ‘Firms have to make sure they are not a weak link in the company’s overall cyber security profile, which at its most basic level means their standards for protecting data need to be at least equivalent to those of the companies they represent,’ Silliman said.”
  • “’Law firms hold a lot of sensitive documents about their clients. They are not just potential, but likely, targets for those looking to find sensitive information. We think it’s very important that law firms look at the threat environment and make sure their systems are up to standard. It’s something we’re in a regular conversation with our main law firms about. I think most large companies are talking to their law firms about this, so it’s important that the law firms be aware of their systems, be aware of the communications, be aware of the sensitivity of what they have, and make sure that they aren’t a vector for attack into the company’s intellectual property.’”
  • “'law firms are really most interesting, because they hold a lot of information about intellectual property, about potential mergers and acquisitions, things like that. It’s important to understand the nature of the potential threat that you face, and what it is about you as the law firm that’s most interesting to a potential bad guy...'”
Next, an interesting review of how firms are partnering with clients to address information security challenges, offering a combination of legal and technical expertise: "Latest Qualification for Cyber Security? No Law Degree" --
  • “Jeff Lolley joined Hogan Lovells in 2010 to help oversee the firm’s internal security issues. Even though he’s not a lawyer, during the past two years, Lolley gradually assumed a new role, helping the firm’s clients respond to a data breach, or with training and awareness on cyber issues. Now, he leads a unit of non-lawyers at Hogan Lovells that work alongside the firm’s partners in the Cyber Security Solutions practice group. And his title has grown from chief information security officer to also include managing principal of cyber risk services.”
  • “Lolley is not an isolated example: Across the country, law firms increasingly are turning to non-lawyers to help build their cyber security practice groups. Based on interviews with lawyers in this field, at least a half-dozen law firms including Hogan Lovells, Venable, Seyfarth Shaw, DLA Piper and others, are using non-lawyers, often professionals with deep backgrounds in technology and technical expertise, to complement the lawyers focused on data security and privacy.”

Wednesday, March 2, 2016

Event Reminder: Webinar on Terms of Business Management

This event is proving to be quite popular: Intapp is hosting a webinar for firms looking to more effectively and efficiently manage client terms of business.

This is a critical risk issue we've covered several times. (Probably most colorfully in noting a talk by a former law firm GC who described onerous client guidelines as "Bombs Waiting in Our Files")

Session Details
With clients issuing increasingly stringent guidelines, it’s critical that firms take their compliance responsibilities seriously. This simple fact is the bedrock of the client-firm relationship – and a key ingredient to delivering client success.

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.
 Webinar: Intapp Open: Terms of Business Management
  • Date: Tuesday, March 8th
  • Time: 9 am PST / 12 pm EST
  • Registration: Limited to select firms. Please email Lea Schweitzer for more information.
Intapp Innovation
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. These capabilities are available integrated with the Intapp Open for business acceptance (intake + conflicts), or as a standalone product.

Pat Archbold, head of Intapp’s risk practice, and Grace Camoglu, Senior Product Manager will provide an introduction to Intapp Open for terms of business management and discuss how firms are using the software to achieve their strategic goals.

Webinar Agenda:
Key Challenges
  • Centralization and management of client obligations
  • Visibility and cross-functional access to client terms
  • Terms enforcement
Product Features
  • 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
Benefits of Enhanced Terms Management
  • Effectively comply with client rules
  • Deliver a superior client service experience
  • Retain and expand business relationships
  • Improve profitability
  • Gain a competitive advantage
Attendance is limited to select firms. Please email Lea.Schweitzer for more information.

Tuesday, March 1, 2016

Risk News: Contractor Conflicts, ICC Conflicts Policies & More

"More Tips for Firms Hiring Contract Attorneys" --
  • “Many law firms, faced with clients who want to reduce their legal spend, utilize contract attorneys to provide legal services at a reduced rate. As previously discussed, there are risks associated with hiring contract attorneys that implicate issues like the duty to supervise, the exclusivity of contract attorneys, overtime, and documentation of the employment arrangement. Those risks materialize in various ways, from ethical challenges and undetected conflicts of interest to wage and overtime claims.”
  • “While some legal malpractice insurers specifically ask about the use of contract attorneys in writing coverage for law firms, many do not. This type of ambiguity creates one of the greatest malpractice risks for law firms using contract attorneys.”
  • “Many policies require that, for coverage to exist, the services performed must arise out of an attorney-client relationship. For those law firms who retain contract attorneys as independent contractors (subject to IRS standards), this can be especially complicated. The law firm may find itself arguing that, on one hand, an independent contractor attorney does not represent the law firm's client for conflict purposes, but, on the other hand, does represent the client enough to fall within the firm's legal malpractice insurance coverage.
  • “Because of this potential struggle, it is recommended that law firms define their relationships with any contract attorneys and to confirm during the insurance application process that the legal malpractice insurer will provide coverage should a claim arise.”
"ICC clarifies when arbitrators should disclose potential conflicts of interest" --
  • “The International Chamber of Commerce (ICC) International Court of Arbitration has detailed the circumstances in which an arbitrator should disclose a potential conflict of interest. It has adopted new guidance to help arbitrators decide whether to disclose possible conflicts of interest in cases that they work on.”
  • “It is up to each arbitrator to decide whether a disclosure should be made, the ICC said. But the guidance note describes specific situations that may call the arbitrator's impartiality into question, including if the arbitrator or his or her law firm has represented one of the parties, has a business relationship with a party, or has a professional or close personal relationship with counsel for one of the parties or its law firm.”
  • “The ICC recently announced that it will now publish the names and nationality of arbitrators sitting on ICC cases on its website, with details of whether the appointment was made by the court or by the parties, and which arbitrator is the tribunal chairperson, as well as clear information on the cost consequences of delays in submitting draft arbitration awards.”
"Gibbons Shouldn’t Be DQ’d From Pollution Suit, Rexam Says" --
  • “Rexam Beverage Can Co. on Thursday urged a New York federal judge to reject Quanta Resources Corp.’s efforts to disqualify its counsel Gibbons PC from a suit alleging Rexam contributed to contamination at a Queens refining center owned by Quanta, saying the company’s motives were purely tactical.”
  • “Rexam argued in a memorandum of opposition filed by Frankfurt Kurnit Klein & Selz PC, its special professional responsibility counsel, that Quanta waited too long to argue that Gibbons should be disqualified because the firm had advised Quanta during its bankruptcy proceedings in the 1980s.”
  • “On Thursday, Rexam said that Quanta knew in August 2012 that two attorneys representing Rexam in the matter had joined Gibbons. Quanta waited a year before filing its original motion to disqualify and waited three years before filing the instant motion, according to Rexam.”

Monday, February 29, 2016

Moving Right Along (Concerning Lateral Lawyer and Passing Paralegal Conflicts)

"Recent Opinion Clarifies Conflicts in Lateral Hires" --
  • “Players in the Texas legal job market might breathe a sigh of relief after reading a recent appellate opinion. The case answers a basic question that bothers law firms that hire laterals: What happens if the new hire is conflicted out of representing a client because his old law firm represented an adverse party? Law firms worry about disqualification.”
  • “The Thirteenth Court of Appeals in In Re National Lloyds Insurance Co. embraced a precedent from the U.S. Court of Appeals for the Fifth Circuit and ruled that it would not disqualify an attorney who previously worked at a big law firm that represented an insurance company, but later moved to a smaller firm and represented a plaintiff against the insurer. The lawyer did not have a conflict of interest because at her old firm she didn't personally represent the insurer, handle any of its matters or receive confidential information about it.”
  • “Disqualification is a severe remedy, noted the opinion by Thirteenth Court Justice Gregory T. Perkes. National Lloyds alleged a prior client conflict under the disciplinary rules. The rules give guidelines about determining disqualification. Among other things, they say a lawyer who personally represented a client before can't represent an adverse party later.”
"Be Aware of Possible Conflict of Interest When Hiring Paralegals" --
  • “According to Forbes magazine, the average person changes jobs 10 to 15 times (with an average of 12 job changes) during the course of their career. With all of this employment mobility, chances are good that a staff member may apply for a job with your firm after having been employed by opposing counsel on cases or transactions that your firm is handling. If the new hire is a paralegal (or other nonlawyer), can he or she bring with him or her a conflict of interest that may be imputed to your firm? It’s possible and it’s something that hiring partners and paralegals need to be aware of before a conflict of interest arises.”
  • “The American Bar Association’s Model Guidelines for the Utilization of Paralegal Services generally require lawyers to ‘instruct clearly and to take reasonable steps to ensure that paralegals preserve client confidences.’ Beyond this, there is an added duty placed on law firm management to establish internal policies and procedures designed to provide reasonable assurance that paralegals in the firm act in a way compatible with the relevant rules of professional conduct.”
  • “The National Federation of Paralegal Associations (NFPA) and the National Association of Legal Assistants (NALA) both have codes of professional ethics that bind member paralegals. With respect to preserving client confidences, the requirements of these codes are similar to those of the model rules. However, paralegals are not required by states or the firms themselves to belong to these professional organizations in order to work for a law firm, and therefore may not even be aware of these rules. The ethical rules only apply to certified paralegals and do not apply to secretaries, law clerks, or other legal assistants. The limited scope of application greatly diminishes the probability that using these codes as the primary method of conflict screening would suffice to screen for client conflicts.”
See the full article for detail about screening requirements and relevant caselaw.

Wednesday, February 24, 2016

Caution on Clients, Conflicts and Complexities

An excellent article from several lawyers at Dentons: “Casual Advice Can Be Binding: Whoops – Legal Malpractice Prevention
  • “The economic pressures of the modern legal practice have pushed many attorneys to accept engagements close to the line between permissible and impermissible conflicts of interest. Some law practices assume that, if the anticipated fee is large enough, the conflict must be resolvable. Unfortunately, when such representations turn sour, the law firm or its insurer typically faces a payment to the former client.”
  • Effective practice management involves clearly articulated file-opening procedures that include both client intake and the resolution of potential conflicts of interest. The most effective practice procedures begin with the important step of properly identifying the client.”
  • “Contrary to popular belief, not every attorney–client relationship begins with a prospective client who walks in the door and asks an attorney for legal services. Instead, attorney–client relationships can be implied from the facts and circumstances surrounding a pattern of communication between an attorney and someone else. In today’s Internet world, these kinds of implied representations are becoming more and more frequent. Often they begin with a legal question about a particular circumstance. Other times, they start with an actual solicitation for legal advice.”
  • “Theoretically, identifying clients prior to the rendition of legal services and strictly adhering to the law practice’s intake rules should be sufficient to avoid a conflict of interest. The tough part for some attorneys, however, is the degree to which a single representation may involve more than a single client. When that happens, the matter is a multiple representation requiring all of the associated conflict resolution procedures.”
  • “A good example of this involves representations in probate matters. One person may ask the attorney to represent the executor, estate, and beneficiary of an estate simultaneously. Or an attorney may be asked to represent both the president of a closely held corporation and the corporation itself. In each situation, it might appear that all the potential clients are, in reality, a single person. Yet, for purposes of the conflict of interest resolution procedures, each separate capacity and each separate entity is a separate client.”

Tuesday, February 23, 2016

Risky Relationships (Or the Proximity to Hemp and Hailstorms Update)

Several interesting (and potentially curious) updates touching on changing relationships (and associated conflicts concerns). First: "Sen. Leach Takes Of Counsel Position At Philadelphia Firm" --
  • "A Pennsylvania state senator who has taken a leading role in medical marijuana legislation is planning to re-enter the private practice of law at a firm that has lobbied for medical cannabis legalization."
  • "Sacks Weston is a nine-attorney firm that focuses on class actions and qui tam cases, complex litigation, election law, medical marijuana and hemp law, personal injury and insurance subrogation."
  • "In terms of potential conflicts, [Managing Partner] Sacks said, those are largely avoided by Leach's status as an of counsel attorney instead of a partner. Additionally, he said, Leach would not be assigned to an issue that he would later vote on as a senator."
  • "'If there's ever a conflict between potential work of the firm and my obligations as a state legislator, the legislator part comes first,' Leach said. 'I don't see any inherent conflicts right now.'"
(I confess to raising an eyebrow.) Next, the promised hailstorm, via Bill Freivogel: In re Nat’l Lloyds Ins. Co., 2016 WL 552112 (Tex. App. Feb. 10, 2016) --
  • "Law Firm 1 represents InsCo in hail storm litigation. Lawyer formerly worked at Law Firm 1 during that litigation. Lawyer had nothing to do with hail storm litigation while at Firm 1 and learned nothing about InsCo or that litigation. Lawyer left Firm 1 and joined Law Firm 2, which represented claimants against InsCo in hail storm litigation. Firm 2 put Lawyer to work on those cases. InsCo moved to disqualify Lawyer and Law Firm 2 in this hail storm case. The trial court denied the motion. In this opinion the appellate court affirmed (denied mandamus)."
And, also via Bill, a screen that just didn't feel right to someone: Ontario v. Chartis Ins. Co. of Can., 2016 ONSC 43 (CanLII) (Ont. Super. Ct., Div. Ct. Feb. 11, 2016) --
  • "Lawyer, while at Law Firm 1, spent considerable time on this case on behalf of Ontario. Lawyer moved to Law Firm 2, which represents InsCo. against Ontario. Law Firm 2 erected a screen, and Lawyer was not assigned this case. Lawyer is spending about half his time working with lawyers who are working on this case. Ontario moved to disqualify Law Firm 2. The Motion Judge denied the motion. In this opinion the Divisional Court granted the appeal. On the facts, the court was of the view that, notwithstanding a screen, Lawyer’s proximity to those working on this case was 'too close for comfort.'"

Monday, February 22, 2016

On Managing Malpratice Liability (and Our Last Risk Survey Reminder...)

Our friends at Paragon have recently published an update worth noting, an article from Gilda T. Russell, noted risk expert: "Risk Management and Potential Malpractice Liability to Third Parties" --
  • "A growing concern for law firm risk management is potential malpractice liability to third parties.  Historically, a firm could be potentially liable only to 'clients' for claimed malpractice.  Clients are those persons or entities with whom a firm has an express attorney‐client relationship or one that can be implied from the circumstances.  However, over the years, a number of jurisdictions have allowed claims against firms by non‐client third parties in certain limited circumstances. While it may be difficult to prevent claims in this area, some measures firms can employ in an attempt to reduce risk are briefly discussed below."
  • "A firm must be clear at the outset of a representation, as well as throughout its duration, who is and who is not the client.  The best way to demonstrate an express attorney‐client relationship is through an Engagement Letter."
  • "Consequently, one way in which a firm can insure against third party malpractice claims based on allegations of an express or implied attorney client‐relationship is through the use of a Declined Client Letter or a 'You Are Not Our Client Letter.'"
  • "At the end of a representation, a firm should send the client a Disengagement Letter.  The Disengagement Letter should state that the matter has been concluded and the firm’s representation of the client completed."
  • "Even if a third party is neither an express or implied client of a firm, certain circumstances can give rise to a firm owing a duty to the third party and potential malpractice liability depending on the jurisdiction.  It is important for firm lawyers to have an awareness of these circumstances and how to minimize the risk of liability when dealing with them."
Today, on this very theme, the never to be misunderestimated Bill Freivogel flagged: Lahn v. Vaisbort, 2016 WL 641115 (Ore. App. Feb. 18, 2016) --
  • "Lawyer represented Borrower in a loan transaction. One of loan documents provided clearly and unambiguously that Lawyer, who was preparing the loan documents, was representing only Borrower. The document went on to urge Lender to seek other counsel. When things went bad, Lender sued Lawyer for malpractice. Both the trial court and appellate court, in this opinion, found against Lender, thus showing the value of documents stating expressly who is, and who is not, a client. The courts also dealt with securities law issues probably not relevant to this audience."

Conveniently, we've included questions about engagement letters in the risk survey still underway. Looking forward to an update regarding how well practice is aligning with theory in real-world environments.

For those that missed it, the participation window for the 2016 Law Firm Risk Surveys remains open for a few short days (closing end of week). I'm informed that nearly 200 firms have participated, so there are sure to be intriguing results to review.

And, as also noted, reports will be provided only to those organizations that participate or attend the upcoming Inception user conference. (More detail on the exciting risk-focused content at the conference coming soon...)

So law firm readers, check you brimming inboxes for links to the survey, or email for help. Don't risk missing out...

Wednesday, February 17, 2016

Law Firm Conflicts with Clients (and Vice-Versa)

We've been tracking conflicts news tied to 3M since 2012. Now comes: "3M Loses Bid to Disqualify Law Firm It Accused of 'Betrayal'"--
  • "The 3M Co. has long argued that one if its former law firms, Covington & Burling, committed a 'betrayal' by filing an environmental lawsuit against it on behalf of another client. Covington got some good news on Friday, when a judge refused to disqualify it from the environmental suit, a case Covington has poured years of effort into on a contingent fee basis. 3M’s lawyers are also cheering the ruling, however, seizing on a finding by the judge that Covington did, in fact, violate an ethics rule."
  • "In a 36-page decision, Judge John McShane in Hennepin County, Minnesota, ruled that the environmental case is 'substantially similar' to earlier regulatory work Covington did for 3M. Based on that finding, the judge ruled that Covington had a conflict of interest and violated an ethics rule relating to duties owed to former clients."
  • "But the judge’s analysis didn’t stop there. After reviewing emails exchanged by 3M in-house lawyers, which were recently produced in discovery, the judge found that 3M waived its right to object to the conflict. Indeed, the judge wrote that 3M made a 'tactical decision' not to seek disqualification earlier."
  • "The emails produced in discovery bolstered Covington’s waiver argument, McShane wrote in Friday’s opinion. The internal 3M emails show that company lawyers debated whether to seek disqualification of Covington early in the environmental case. In one email, an in-house lawyer at 3M wrote that the company had '[run] the traps on Covington and will not seek to disqualify the firm.' The same lawyer later wrote that Covington’s earlier work for 3M 'was remote in time and only tangentially related.'"
And via Hinshaw comes: "Client Agreement and Failure to Terminate Representation Under the Terms of Client Agreement Results in Firm's Disqualification Under Concurrent Representation Rule" --
  • M'Guinness v. Johnson, 2015 WL 9583486 (Cal. App. Dec. 30, 2015)
  • "In 2013, three shareholders sued: (1) each other for breach of fiduciary duties; and (2) their company for involuntary dissolution. The law firm that represented one of the shareholders had been retained by the company in 2006 as corporate counsel. The Sixth District for the California Court of Appeal held that the law firm's representation of one shareholder against the company constituted concurrent representation of adverse clients, which was a conflict of interest mandating disqualification. The court also held that disqualification "is not generally disfavored," meaning that there is no presumption or policy in favor of permitting the representation to go forward."
  • "This case highlights the importance of engagement agreements as the defining structure for the representation. A lawyer's eagerness to be a "jack of all trades" for a single client may be good for business. But it can also expand the scope of duties owed to the client and thus the lawyer's malpractice exposure. Or, as in this case, it can lead to conflicts of interest and disqualification. The best practice is to be honest and clear in the engagement letter about the scope of the representation, including the method of termination, and abide by those terms."