Wednesday, December 22, 2010

Data Breach: First Test of Massachusetts Data Privacy Law

While the FTC Red Flag Rules no longer apply to law firms, the Massachusetts data privacy law, enacted earlier this year remains in effect. News broke yesterday concerning the data loss. In this case, data on 1850 MA residents was exposed:
  • "The breach, which occurred in September, was discovered by a Twin America Web programmer in October and came to light when the company's attorney wrote letters to states' attorneys general disclosing the breach."
Recall, the new rules mandate disclosure and have been called "one of the toughest in the nation," applying to any individual or organization that: "[s], collect[s] or use[s] personal information, including name, social security, driver's license number or financial information on Massachusetts residents - regardless of whether those organizations are based in or have offices in the state."

This appears to be the first published incident of a data breach subject to the Massachusetts rules. And while the party in question is not a law firm, 2010 has shown that law firms are not immune to unexpected data breaches.

Raise the White Flag: FTC Red Flag Rules Officially Eliminated for Law Firms

Eliminating what some, including the ABA, felt were onerous and inappropriate information risk management and client intake requirements for law firms, President Obama just signed the Red Flag Program Clarification Act.
  • "The revised definition of “creditor” excludes creditors “that advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.”  This exclusion addresses a widespread concern among stakeholders that the original FCRA definition improperly extended the Red Flags Rule’s scope to implicate entities not typically thought of as creditors, including law firms and health care providers."
These rules were developed to protect personal information held by creditors and would have put new confidentiality enforcement, tracking and compliance requirements on law firms, given the originally-broad definition of "creditor" and the FTC's interest in seeing them applied to organizations including law firms. With that, the court fight between the FTC and the ABA is concluded.

Tuesday, December 21, 2010

Risk Roundup: Disqualifications, Ethical Walls & More

Several interesting law firm risk developments, stories and articles to share. Several touch on recent disqualification news:
  • Fighting over toys: Mattel, Bratz and related legal wrangling -- In the high-stakes fight over the Bratz toy franchise, lawyers for Mattel (Quinn Emanuel) discovered that their opponents had hired a lateral from their own firm who worked on the matter: "...Quinn contends that MGA's latest law firm had committed "the cardinal sin" under disqualification case law by hiring a former Quinn Emanuel lawyer, Jill Basinger, who worked on Mattel matters--including the MGA case--while employed by Quinn. "No amount of spin and no ethical wall can change the fact that disqualification of Glaser Weil is required," Quinn wrote. Interesting to note that Quinn recently leveraged an ethical wall to defend another disqualification attempt last month.
  • Attempted disqualification of "avowed adversary" -- Akin Gump is working for parties allied with Tribune Company's Chapter 11 case. It's also representing a party opposing the proposed bankruptcy plan. The Tribune-friendly parties want Akin disqualified from representing an "avowed adversary." Akin argues its work does not rise the level meriting disqualification, and that it has an ethical wall in place to be safe: "Oaktree and Angelo Gordon want Akin Gump disqualified from working for Aurelius, which they label 'a notoriously litigious entity.' Akin Gump says that’s not necessary because its regulatory team and its Chapter 11 team are separated by an ethical wall, and the double-representation arrangement is one of long standing....According to Akin Gump, the firm’s work for Oaktree and Angelo Gordon on the one hand, and an occasionally hostile bondholder on the other, dates more than a year." Shortly after the motion was filed, a judge expressed hesitancy to rule on the matter: "Carey appeared reluctant at the hearing on Wednesday to approve change of counsel for Aurelius at this stage in such a 'complex Chapter 11 case.' Carey asked the warring parties to resolve their issues outside the courtroom so that Aurelius could keep Akin Gump as its counsel."
  • Corruption trial delayed due to disqualification -- In this case, the defendant's law firm was disqualified because it also represents the employer of a witness for the plaintiff. (This example is interesting as it presents what was likely non-obvious relationship between the law firm and a third party -- one that may not have even been possible to identify at the start of the representation.)
  • Derivative Claim in Dispute Between Owners May Require Independent Counsel -- A paper that looks at conflicts issues and triggers requiring engagement of new lawyers (New Jersey context): "In the closely held business the interests of the owners are more likely to be the same as the business.  Nonetheless, a derivative claim raises the thorny question of whether the entity must now engage independent counsel to represent the business itself."

Wednesday, December 8, 2010

Law Firm Insider Trading -- Alleged Violation by IT Manager at Richards, Layton & Finger

Several news sources are reporting on yet another allegation of insider trading originating at a law firm. This time the story centers on an IT manager at Richards, Layton & Finger, a firm comprising approximately 140 lawyers.

The SEC alleges that this individual worked with an external accomplice to engage in 22 trades based on inside information between June, 2009 and October, 2010, when he was terminated. The firm noted that:
  • "...all firm employees are required to acknowledge the firm’s confidentiality policy annually.  In addition, the firm requires that all stock trades by all employees be cleared before they are made.  The allegations of the complaint, if true, indicate knowing violation of these various policies."
However, it appears that in this instance policy was not sufficient to prevent the practices of this IT manager.

Interestingly, this individual was tasked with information security management, a role which "...gave him access to electronic and other files containing material non-public information." Which also raises the question of "who watches the watchers" in environments without suitable checks and balances enforcing information access restrictions and monitoring unusual activity.

Monday, December 6, 2010

2010 Law Firm Risk Survey Report Now Available

The 2010 Law Firm Risk Survey report is now available (North American edition). Survey participants and members receiving risk bulletin updates via the Risk Roundtable Initiative, can expect to receive copies shortly. Other parties interested in the report may contact for more information

The Law Firm Risk Survey focuses on firm risk management policies, practices and priorities. It examines specific issues including new business intake, attorney lateral hiring and departures, ethical walls management, confidentiality enforcement, internal education, and compliance tracking and verification. The published survey report provides quantitative summaries of overall group response data, as well as samplings of individual responses to questions seeking free-form comments.

Selection of Key Findings of the Survey Report:
  • Top law firm risk concerns include business intake, records management and confidentiality protection.
  • Clients continue to raise concerns about the steps firms take to ensure the confidentiality of sensitive business information.
  • Nearly 90% of firms have been asked by clients to restrict and track internal firm access to sensitive information via ethical walls and other confidentiality controls.
  • 70% of firms report taking on matters subject to confidentiality controls mandated by external regulations; firms identified the HITECH Act for personal health information, and state and international personal data privacy laws as regulations of greatest concern.
  • Nearly half of all firms have been audited or received requests for proof of compliance from a client or external agency.
  • In response to an expanding set of risk management challenges, organizations are increasing the number of internal stakeholders tasked with risk response and compliance.
  • Supporting this trend, more firms have designated formal budgets earmarked for risk management.
A similar exercise is underway in the UK, with a report expected early 2011.

Wednesday, December 1, 2010

ABA Committee Publishes Draft Discussion Doc on Domestic and International Outsourcing

The ABA Commission on Ethics 20/20 recently posted a draft discussion document on potential changes to Model Rules of Professional Conduct tied to domestic and international outsourcing. The document is the result of efforts undertaken by the Commission's Outsourcing Working Group.

The document is designed to frame ongoing discussions, not present final recommendations:
  • "The Draft does not constitute an endorsement or rejection of the practice of outsourcing by lawyers and law firms, but was drafted to recognize the growth of outsourcing practices and to suggest ways in which lawyers engaging in the practice can do so ethically and responsibly."
  • "...the Commission analyzed a significant volume of materials including, but not limited to, all available legal ethics opinions; news reports, scholarly articles, studies and surveys; testimony offered at the Commission’s public hearings; and comments received in response to questions that were specifically tailored to the experiences and concerns of clients, lawyers, law firms, and providers of outsourced services. "
Interested parties are encouraged to review the discussion document, background materials, and draft changes to Model Rules and submit comments are requested by January 31, 2011.

Tuesday, November 30, 2010

One Way Around Red Flag Rule for Law Firms -- Cut Down the Pole

While the ABA and FTC fight over Red Flag rules in court, those potentially affected by its provisions have opened a new plan of attack. As Hogan Lovells reports, H.R. 6420, the “Red Flag Program Clarification Act of 2010," was just introduced in Congress:
  • "H.R. 6420 seeks to narrow the scope of the Rule by exempting from the definition of 'creditor' a creditor that 'advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.'"
Taking a lesson from those that don't like to lose, it appears that some of the organizations subject to these rules are attempting to change the conditions of the test.

Tuesday, November 23, 2010

Law Firm Ethical Wall -- Proper Screening Prevents Imputation / Disqualification

[h/t to Bill Freivogel]. An interesting decision from the US District Court of Utah, Central Division, regarding a disqualification motion. In this case, lawyers representing the plaintiff in a patent suit discovered that a former associate, who had spent 500 hours reviewing documents in support of the original patent application, was now in the employ of the law firm representing the current defendant (Quinn Emanuel).

The complete decision is detailed in: Lutron Electronics Co., Inc. v. Crestron Electronics, Inc., 2010 U.S. Dist. LEXIS 120864 (D. Utah Nov. 12, 2010). Here, the plaintiff's firm notified Quinn Emanuel about the conflict and demanded the firm withdraw from the matter. The firm, protested, arguing that it erected an ethical wall as soon as it became aware of the conflict and provided proper notification regarding its screening measures. Unsatisfied, the plaintiff moved for disqualification.

In this case, the court denied the motion, noting that Utah Rules of Professional Conduct and relevant case law did not mandate disqualification. In this instance, they explicitly supported the sufficiency of an ethical wall, even when a lawyer previously represented an adverse party and did not obtain client consent:
  • Local rules supports unilateral screening -- "The Utah rule differs from the ABA Model Rule by explicitly permitting the use of ethical screens for lawyers moving between private firms who would otherwise be disqualified under Rule long as the conditions of paragraph (c) are met, the imputed disqualification is removed, and consent to the new representation is not required."
  • Imputation should be applied cautiously -- "If the concept of imputation were applied with unqualified rigor, the result would be radical curtailment of the opportunity of lawyers to move from one practice setting to another and of the opportunity of clients to change counsel." [Comment to Rule 1.9 of Utah RPC]
  • Rules and case law call for a "functional analysis" of specific situational details, rather than automatically granting blanket imputation -- Both the Utah Rules of Professional Conduct and this court's precedent reflect the trend among numerous jurisdictions that have adopted a "functional analysis" to decide issues of imputed conflicts....In adopting this approach, the court has expressly stated that 'the fact that the conduct in question has been found to constitute a violation of the Code of Professional Responsibility  [*15] does not require disqualification of counsel as a matter of course.'"
  • Screening and notification measures were sufficient -- "...they immediately established an effective ethical screen in full compliance with the rules... it did thereafter notify Lutron of the measures it had taken to screen Mr. Reisberg and to ensure that Lutron's confidential information would be protected."

Monday, November 22, 2010

Law Firm Insider Trading -- Another (Alleged) Lawyer Violation

The Globe and Mail breaks news regarding another instance of lawyer insider trading: "Ensuring secrets stay that way." Noting that while: "[m]ost big Bay Street law firms have some sort of 'information containment' provisions in place... partners usually have broad access to a range of files." And it appears that one partner at Davies Ward Phillips & Vineberg was involved in an insider trading conspiracy involving three other individuals, according to the Ontario Securities Commission. (The partner is no longer affiliated with the firm, as of a week ago.)

This is not the first insider trading scandal to hit a prominent Canadian law firm. And while some may argue that lawyer insider trading is rare (see commentary by Dewey & LeBoeuf partner via WSJ), the legal community outside of Canada is far from immune to inappropriate access and use of price-sensitive information by lawyers and staff.

This latest incident, certainly stirred up some harsh criticism for the industry. And it's not the first. In a 2003 report, market regulators "singled out...the problem of lawyers leaking the details of deals they are working on..." The report was roundly criticized by the legal community, which argued self-regulation and existing rules and standards were sufficient and effective.

But this latest incident and attention highlights the shared risk all law firms face when their peers fail to live up to their obligations. Violations, transgressions and accidents strengthen the voices of those who call for external regulation. The article brings this into sharp relief:
  • "The allegations... have also thrown open questions about whether law firms and the legal profession are doing enough to stop people tempted to use or leak confidential knowledge about upcoming corporate deals."
  • "Canada’s poor reputation for failing to bust illegal insider trading is well known, said Ilana Singer, a lawyer and the deputy director of the Toronto-based Foundation for the Advancement of Investor Rights, which advocates for reforms to improve the integrity and fairness of Canada’s capital markets. But she does see some hopeful signs."

Friday, November 19, 2010

Friday Risk Round Up...

Several risk links and updates:
  • Considering Conflicts -- An interesting story concerning the how judgment comes into play in evaluating conflicts. In the case of a lateral associate joining a new firm, a conflicts check: "identified the potential conflict, but concluded that the associate’s prior work was not the same or substantially related to the specific patents and issues involved in the Sunbeam litigation." Unfortunately, in the case of the Magic Bullet® patent infringement litigation, a judge disagreement.
  • ABA Looking at Implications of New Technology -- [via PinHawk Technology Newsletter] -- "The American Bar Association is soliciting comments from the public on the impact of technology on the practice of law. Specifically, they are investigating the ethical risks of email, cloud computing and social media. State bar associations are likely to follow the ABA's lead on these issues, so the impact will last for years." More detail at Law Technology News, and, of course, our summaries of October testimony before the committee [part 1, part 2].
  • Canadian Conflicts Concerns -- [via Legal Ethics Forum] -- A summary of "a lively well fought and provocative debate about the hottest current issue in professional ethics in Canada, the issue of Conflicts of Interest." Interesting discussion about recent history and evolving opinions on an important issue.
  • Weil Gotshal Denies Claim of Conflict Representing Blockbuster -- "Lyme Regis Partners LLC, an investor in Blockbuster’s 9 percent senior notes, objected to Blockbuster’s hiring the law firm, saying its relationships with movie studios mean it isn’t “disinterested” as the law requires. That claim is unfounded, the law firm said yesterday in a filing in U.S. Bankruptcy Court in New York." 43EV8Q5Q4KHT

Wednesday, November 17, 2010

Wisconsin Bar: Ethics Opinion on Referral Fees

At the October ABA Ethics 20/20 hearing, several speakers shared opinions lawyer advertising and emerging online referral (and "Yelp-like" networks). The evolution of these new systems creates new opportunities and potential ethical challenges or confusion for the legal industry.

Now comes a revised ethics opinion from the Wisconsin Bar on the issue of referral fees: Wisconsin Formal Ethics Opinion EF-10-02.The update clarifies a past opinion on the same matter, and is well summarized on the State Bar Web Site:
  •  "For instance, the opinion discusses a referring lawyer’s responsibility if concerns arise with respect to the receiving lawyer’s conduct. Lawyers now have more guidance with respect to their ongoing duty as a referring lawyer. But, according to Watson, lawyers should pay more attention to that duty."
  • “Caution is required when seeking a referral fee, because by accepting a fee for the referral, you have accepted joint responsibility for the outcome of the case.”

  • "Because the referral fee is justified by the underlying lawyer-client relationship, lawyers may not accept referral fees if the lawyer-client relationship cannot be established."
  • "EF-10-02 reaffirms that lawyers must inform the client that the referring lawyer maintains a lawyer-client relationship with the client, remains ethically and financially responsible, and will be available to the client. But what does that mean? Ethically, the referring lawyer must keep tabs on the status of the matter."

Tuesday, November 16, 2010

Red Flags Fluttering Again for Law Firms? Debate continues...

When last heard from this summer, the FTC Red Flag Rules were on hold. In late 2009, a court ruled they did not apply to law firms. But the FTC continued the fight and appealed the decision in 2010. This week, they squared off against the ABA before a DC federal appeals court.

The Blog of the Legal Times provides an update of the debate and discussion. In summary, issues argued include the extent to which Congress has the ability to regulate lawyers and the extent to which the Red Flag Rule language can be interpreted to extend to lawyers as "credit" providing organizations. Based on the judges questioning (see linked article), it's like that the resolution of this issue is far from concluded...

Wednesday, November 10, 2010

New Ethical Screening Decision: Size of Firm Not Important, Only Effectiveness of Screen

Bill Frievogel points out a new and interesting ethical screening decision from the US District Court in New York: SEC v. Ryan, 2010 U.S. Dist. LEXIS 112217 (N.D.N.Y. Oct. 20, 2010) / 2010 WL 4235396 (N.D.N.Y.). In this opinion, the judge responded to an accusation of a "glaring" conflict, stemming from one firm's employment of a paralegal who had previously worked for a firm representing an adverse party:
  • "...Levine's law firm now employs as a paralegal a former employee of its firm. Bosman claims that this paralegal, when employed by it, was privy to Ryan's and Prime Rate's confidences and secrets and there would be 'nothing restraining [the] paralegal ... from sharing this information with her [current] employer, therefore jeopardizing the defendants' attorney-client privilege, client confidences and secrets as well as the 5th amendment rights of the Defendants.'"
However, the judge determined the concern to be baseless, noting effective screening procedures:
  • "Levine's law firm has formed a screening procedure, commonly known as a legal wall, to prevent such a disclosure as Bosman & Associates fears. Such procedures are prudent under these circumstances and should remain in effect."
Importantly, and of interest to those tracking evolving ethical screening standards, the decision notes that even though the firm is small, an ethical wall can still be effective:
  • "There should be no alarm that such a legal wall surrounding this paralegal would be impotent because of the size of the Levine law firm. Even a small law firm can erect appropriate and adequate isolation to protect the sharing of confidential information, as long as the firm exercises special care and vigilance. See Essex Equity Holding USA, LLC, 29 Misc.3d 371, 2010 WL 2331407, at *9-10."

Tuesday, November 9, 2010

Law Firm Insider Trading: Update on Canadian Firm Investigation

Here's an update on one of several law firm insider trading stories which broke in 2010. Recall that earlier this year an information technology leader at a prominent Canadian firm was caught accessing price-sensitive client information stored by the firm electronically:
  • He "conducted transactions in the shares of 17 companies between April 2006 and November 2009 while in possession of privileged information that allowed him to obtain a profit of more than $520,000."
Now news comes that market regulators have agreed to settle charges in exchange for a  $1.3mm fine -- approximately twice the amount of his ill-gotten gains.

The regulator was quick to note that: “Ogilvy Renault collaborated completely with the investigation and the proceedings against  Dominic Côte do not involve the law firm in any way.” (Still, no organization wants to find itself having to cooperate with such an investigation in the first place.)

Monday, November 8, 2010

Law Firm Ethical Walls and Risk Management Software Product Adoption Survey

The International Legal Technology Association (ILTA) just published its annual technology survey. The report provides some interesting data about the trends and decisions law firms are making when adopting software relating to risk. The complete report, containing detailed breakouts across several categories, is available via ILTA.

Here is a slice of that, summarizing large law firm (700 or more lawyers) use of commercially-available software that supports risk management functions:

Electronic Records Management
  • Autonomy / iManage -- 64%
  • DM / DOCS (Open Text) -- 15%
  • LegalKEY (Open Text) -- 15%
  • CA Records -- 7%
  • Prolaw -- 0%
  • Worldox -- 0%

Ethical Screens / Confidentiality Management
  • Wall Builder (IntApp) -- 74%
  • iMPrivate (DocAuto) -- 17%
  • SecurityGuard (Olson Consulting) -- 9%
  • WincWall (Wertheim Global Solutions) -- 0%
  • MasterEthics (RBRO Solutions) -- 0%
  • The Wall (Younts Consulting) -- 0%
  • CompliGuard Protect (The Frayman Group) -- 0%
  • CompuLaw -- 32%
  • CPI -- 23%
  • ProLaw -- 11%
  • PATTSY -- 9%
  • Microsoft Outlook -- 9%
  • MA3000 -- 6%
  • Aderant -- 6%
  • CouAlert -- 3%

Conflicts Management
  • LegalKEY (Open Text) -- 44%
  • Elite (Thomson) -- 26%
  • Aderant -- 26%
  • CA/MDY Conflicts -- 0%
  • Prolaw -- 0%

Wednesday, November 3, 2010

December Risk Roundtable Meeting (London)

The Risk Roundtable Initiative will host a panel discussion on Friday, December 3rd in London on the topic: "Aligning Risk and IT to Address Information Risk Management Challenges." The panel comprises several risk and technology experts:
  • Heather McCallum, Head of Risk and Compliance, Allen & Overy LLP
  • Janet Day, IT Director, Berwin Leighton Paisner LLP
  • Pat Archbold, Head of Risk Practice Group, IntApp
  • Neil Araujo, CEO, Autonomy iManage
These speakers will explore topics including:
  • Communicating the implications and potential exposure tied to the expanding information risk landscape
  • Explaining the value and importance of the risk organization, its efforts across the firm and the importance of close collaboration with IT
  • Reviewing recommended areas and well-aligned projects for collaboration between risk and IT
  • Understanding the value of and making the case for several types of "investments" – including management mindshare, budget, staff resources and technology tools
This session is co-sponsored by the International Legal Technology Association (ILTA). For more information, see the Risk Roundtable web site or email

Monday, November 1, 2010

ILTA Seminar: Addressing Law Firm Confidentiality and Data Privacy Requirements

The International Legal Technology Association (ILTA) is sponsoring a seminar on: Addressing Law Firm Confidentiality and Data Privacy Requirements. The session is scheduled for November 11 and will be hosted by Phelps Dunbar in its New Orleans office. Brian Lynch from IntApp and the Risk Roundtable Compliance Consortium, who recently testified before the ABA on law firm confidentiality issues, will present and moderate group discussion. Session details:

Several developments have raised the profile of confidentiality management and data privacy at law firms. These include American Bar Association rule changes supporting broader ethical screening, increasing client interest, and expanding regulatory pressures. Additionally, as firm composition changes through attorney mobility, restructuring or use of contract lawyers, organizations are paying greater attention to access controls. In this session, we will explore how organizations can reduce risk exposure, increase the profile of risk management, and better protect themselves. Additionally, you will:
  • Receive tools to educate your organization regarding current risks tied to common firm information and data life cycle management practices
  • Learn to develop and implement policies, procedures and tools to improve risk assessment, confidentiality management and compliance
  • Apply lessons from more strictly-regulated environments (United Kingdom and Canada) to your firms
  • Leverage firm risk response for competitive advantage in business development and cost negotiations with insurance providers
For more information, and to register to attend this session, see the ILTA event web page.

Several Law Firm Risk Management Articles and White Papers

Via the CNA Pro email newsletter comes pointers to a new archive containing several industry articles and white papers on risk issues affecting law firms. All are available on the CNA Resource Page. Highlights include:

Thursday, October 28, 2010

Technology & Risk Management: Growing Hacking Risk Facing Law Firms

The much-publicized data breach at one law firm highlights the issue of external attacks against firm information systems. A reader forwarded an interesting article published in the ABA Journal: "Cyberspace Under Siege." The author explores the threat of external intrusion attacks: “Law firms are likely targets for attacks seeking to steal information off computer systems.”

A key factor raising the profile of law firms as desirable hacker targets is the concentration of sensitive business information they store:
  • “If I want to know about Boeing and I hack into Boeing, there are a billion files about Boeing,” Paller says. “But if I go to Boeing’s international law firm, they’re perfect. They’re like gold. They have exactly what I’m looking for. You reduce your effort.”
Clients are increasingly asking more specific questions about law firm IT practices to address these risks. While industry standards are presently somewhat vague, these threats create serious liability concerns, notes Stewart Baker, a partner at Steptoe & Johnson:
  • “If a security breach involves sensitive information handled by a law firm and someone finds it on a server headed to a foreign government, then the [U.S.] government will have some very awkward questions for the company that was the source of the information and the law firm that was the source of the information.”
This is another area worth the shared attention of both risk and IT stakeholders.

Chicago Risk Roundtable Meeting (November)

The Risk Roundtable Initiative will host a panel discussion on Tuesday, November 2nd in Chicago on the topic: "Making the Business Case for Investing in Risk Management." The panel comprises several risk experts:
  • Ann Ostrander, Sr. Director of Loss Prevention, Kirkland & Ellis LLP
  • Beth Chiaiese, Director of Loss Prevention, Foley & Lardner LLP
  • Pat Archbold, Head of Risk Practice Group, IntApp
  • Neil Araujo, CEO, Autonomy iManage
These speakers will explore topics including:
  • Communicating the implications and potential exposure tied to the expanding legal risk landscape
  • Explaining the value and importance of the risk organization and its efforts across the firm
  • Cultivating cross-functional advocates – framing and aligning risk efforts with other organizational goals and objectives
  • Understanding the value of and making the case for several types of "investments" – including management mindshare, budget, staff resources and technology tools
For more information, see the Risk Roundtable web site or email

Wednesday, October 27, 2010

Tennessee Adopts Changes to Rules of Professional Conduct, Including Screening

[h/t to Legal Ethics Forum, via Professional Responsibility blog]. Tennessee has adopted changes to its Rules of Professional Conduct, including updates reflecting changes to the ABA Model Rules. With regard to ethical screening of lawyers moving among firms: "...the new rule does not permit screening when a lawyer 'side-switches' while the case is pending, but it does appear to permit screening in other cases." The new rules are set to go into effect January 1, 2011. More details on the Tennessee Bar web site.

Tuesday, October 26, 2010

Another Hidden Law Firm Conflict? Wilson Sonsini on the Hot Seat...

Following word that another firm just faced a $150 million jury verdict tied to an alleged conflict, comes a story of another law firm facing conflicts allegations. This time a client alleges that Wilson Sonsini hid a conflict of interest as it represented a direct competitor. [PDF of Complaint.]

Organizations competing in the marketplace aren't necessarily adverse under the classic legal definition of "conflict." However, situations of "business conflicts," which may or may not trigger lawyer duties to recuse themselves, tend to raise client concerns nevertheless. This is particularly true in matters of intellectual property, where lawyers may be exposed or have access to sensitive confidential information from both parties.

In this case, Wilson Sonsini was representing two companies in patent prosecution matters. As The Recorder notes:
  • "Wilson Sonsini never asked Existence Genetics for a waiver to represent a direct competitor, the suit says. Wilson Sonsini also never told Existence Genetics that Navigenics had filed a competing patent, when it had informed the company about other competitors' patent filings."
  • "Before being retained though, Norviel told the company's CEO that he had checked for conflicts of interest and found none. A year later, the company claims, a junior associate at Wilson Sonsini "let slip" that the firm also represented a direct competitor, Navigenics Inc. The company then discovered that Wilson Sonsini was the agent on a Navigenics' patent published in early 2009, and now believes the firm represented other competitors as well."

Apparent Law Firm Conflict Results in $105 Million Malpractice Verdict Against Baker & McKenzie

A Mississippi jury just awarded a former Baker & McKenzie client a $105 million verdict:
  • "S. Lavon Evans Jr. had claimed in his Mississippi lawsuit that the law firm had represented him at the same time it represented his partner in an oil-rig drilling business, the Chicago Tribune  reports. The suit says Evans was unaware that his partner was insolvent and was using Evans’ assets to obtain millions of dollars in loans. MS Litigation Review and Commentary had early news of the verdict."
More detail via the Chicago Tribune:
  • "Cagle introduced Evans to his attorney, Held, whom Evans retained. And for the next several years, Cagle and Evans engaged in various business ventures, including construction of two drilling rigs while Held represented both men."
  • "When Evans tried to dissolve the business relationship, Cagle and his attorneys 'instituted a litigation strategy to bring Evans to his knees,' the suit alleged. Cagle and his various companies accused Evans of stealing the rigs out from under him and obtained a restraining order to intimidate Evans into handing his assets over to Cagle, the suit said."

Monday, October 25, 2010

Law Firm Information Risk Management: Coping with Info Overload in an Electronic (and Often Public) World

The publication last week of the 2010 International Workplace Productivity Survey highlights the extend to which law firm personnel increasingly struggle with information overload. More details are available on the survey web site, but a few key findings are worth noting in the context of risk management:
  • " professionals across the globe are struggling to cope with a flood of information which has only grown in size since the economic downturn."
  • "Two-thirds of legal professionals, 66%, wish they could spend less time organizing, and more time using, the information that comes their way."
  • "A large majority...admit to deleting or discarding work information without fully reading it."
This brings to mind a true story where information overload directly intersected with risk, first described on a Risk Roundtable Risk Bulletin. In this case, one lawyer's overload (and public flaunting of the fact), opened a firm to significant potential exposure.

The story actually highlights the risks of information overload along with the dangers of internet social media sites. Here, a lawyer at an AmLaw 100 firm posted an update on their personal MySpace blog site that was observed by unexpected eyes. Here's an excerpt of what they wrote for anyone on the internet to read:
  • “An associate just walked by my office… and she asked how it felt to have an ethical wall being built around me… I had no idea what the hell she was talking about. So she says she's referring to the firm-wide email… I responded that I guess I hadn't read it because I always immediately delete all my junk mail, and she pointed out that just because something is sent to the ‘all-attorney’ email list doesn't mean its junk mail… Whatever. DELETE!”
To read the complete back story and the complete post see the 2007 Risk Bulletin: "Ethical Walls and Attorney Screening."
Clearly, no firm would want to find itself having to explain why a lawyer publicly admitted to not reading screening memoranda while defending a disqualification motion... That's why firms often turn to technology to combat information overload.
In this case, confidentiality software is used to track affirmative acknowledgment of important policies like screening memoranda (with repeat reminders and management escalation facing those who overlook a notice or don't respond in a timely manner). There may not be an easy way to cut down on the volume information, but new approaches provide added protections for ensuring that important details aren't lost in the deluge.

Friday, October 22, 2010

SRA Code of Conduct Revision -- Final Issue Paper and Call for Comment Online

The SRA just published an issue paper that presents its final call for consultation and input as it moves to publish an updated regulatory framework which will going into effect next year: "This consultation is the last opportunity for comments on the SRA's new Handbook which will underpin the regulation of solicitors and law firms from October 2011."

The paper includes additional proposed changes to the SRA Code of Conduct and other rules. To date, the SRA has received 83 formal responses by affected and interested parties to its past calls for input.

Antony Townsend, Chief Executive of the SRA, stated: "Our programme to transform regulation remains on track for 2011. The reforms will help us identify and concentrate on the areas of highest risk, help firms focus on the quality of service to consumers, and bring greater flexibility for well-managed firms, enabling them to deliver services in ways suited to their clients and type of business."

See the SRA web site for the complete issue paper, and instructions on how to submit a formal response for consideration.

Tuesday, October 19, 2010

ABA 20/20 Commission Hearing on Client Confidentiality and Lawyers' Use of Technology (Part 2)

As mentioned previously [see part 1], the ABA Commission recently held a hearing on the issue of Client Confidentiality and Lawyers' Use of Technology. A PDF of submitted testimony and exhibits speakers testifying at the hearing, see the ABA web site. Here is a brief summary of other issues raised by participants:
  • Todd Flaming, a partner at Schopf & Weiss, discussed what form of action he thought appropriate for the Commission to take, given the changes technology has brought to information management by law firms. Mr. Flaming described the change from all paper to almost all electronic data handling practices: "In the history of the world, this change happened in the blink of an eye. And the change seems to be accelerating." He advocated for the creation of a centralized, constantly-updated online library which could provide guidance, advice and standards information regarding lawyer and law firm use of technology. In particular, he called out the need to educate lawyers about the implications of new technologies, particularly non-technical lawyers. (Or, as he concisely put it, those who do not "speak Klingon.")
  • A representative from Clio provided specific recommendations for security and confidentiality standards which should be followed by "cloud" service providers -- companies that provide web-based, hosted services that story law firm information (e.g. email or document management).
  • Representatives from Total Attorneys and the Legal Marketing Association addressed the issue of lawyer advertising and use of social media. Today new forms of advertising (like search engine-managed text ads, referral programs and testimonial sites) redefine what is and is not "advertising" according to current rules. Speakers suggested that the ABA should make rules more flexible to take into account new advertising and new communication technologies, and the corresponding growth in layperson understanding of these media: "More generally, LMA urges the Commission to propose guidelines and amendments to the Model Rules that are balanced between protecting consumers of legal services, and allowing the legal profession to communicate truthfully about the scope and availability of legal services."

Monday, October 18, 2010

ABA 20/20 Commission Hearing on Client Confidentiality and Lawyers' Use of Technology (Part 1)

Last week, the ABA Commission held a hearing on the issue of Client Confidentiality and Lawyers' Use of Technology. The Commission is charged with reviewing ABA Model Rules of Professional Conduct and other regulatory rules affecting law firms in order to develop policy recommendations in response to changes in technology and global legal practices. In a draft issue paper, the Commission set out the modern realities of information risk management:
  • “When data was strictly in hard copy form, lawyers could easily discern how to satisfy their professional obligations and did not need elaborate ethical guidance. Now that data is predominantly in electronic form, however, the necessary precautions are more difficult to identify.”
Five speakers were invited to testify at the hearing, including Brian Lynch from IntApp and the Risk Roundtable Initiative. Mr. Lynch explored how technology creates new information risk management challenges for law firms, which face an expanding and evolving set of confidentiality drivers. These drivers include ethical screens necessitated by lateral hires, more stringent client outside counsel guidelines, and regulations such as the HITECH Act, ITAR and several data privacy laws. He these issues noting:
  • "Increasingly, law firms discover that the use of electronic information management tools (for example, document management, records, electronic time entry, enterprise search) creates confidentiality challenges. Many of these technologies are designed to make internal information easily accessible within the firm in order to enable re-use and knowledge sharing. However, open access to information also presents new risks and challenges."
  • "Given the growing volume of information stored electronically, more and more firms are using search software internally, dramatically increasing the chance that sensitive information, previously thought obscured from internal eyes, will be accessed inappropriately. Importantly, confidentiality breaches typically don’t stem from malfeasance, with so much information and so many policies to keep track of, human error is usually the biggest risk to control."
  • "The ABA can play a vital role in helping the legal community understand the changing confidentiality management landscape, prudent steps they should take, and standards they should follow to best protect themselves and their clients."
For more information on the ABA Ethics 20/20 Commission and a PDF of submitted testimony and exhibits speakers testifying at the hearing, see the ABA web site.

Sunday, October 17, 2010

Canadian Decision: Disqualification Denied -- Lawyer Changing Firms, No Imputation, Ethical Screen

Hat tip to Bill Freivogel for pointing out a recent decision by the Ontario Superior Court of Justice: Basque v. Stranges, 2010 ONSC 5605 (Ont. Super. Ct. Oct. 12, 2010). A lawyer left a firm who represented a client he eventually found himself defending another party against. As Freivogel summarizes: "The court noted that there was no showing that Lawyer had any knowledge whatsoever about the plaintiff or her case."

In its analysis, the court relied heavily on the Canadian Supreme Court decision on conflicts, disqualification and ethical screening, MacDonald Estate v. Martin. The judge noted the no sharing of confidential information could be demonstrated or could otherwise likely be assumed. And found that even if the lawyer in question had in fact been exposed to confidential information, the firm's procedures for confidentiality were sufficient.
  • [46] In my opinion, Graham’s relationship with Chown Cairns during the period... was not sufficiently connected to his retainer by The Dominion of Canada General Insurance Company one year later so as to raise the inference that confidential information was imparted. During the overlap period, there would have been no reason for confidential information regarding the plaintiff’s case to have been divulged to, or obtained by, Graham. Graham had no involvement in the plaintiff’s case (or knowledge of its existence) during the overlap period and this is wholly consistent with his role at Chown Cairns during that time. And, furthermore, there is no evidence of confidential information having been imparted to Graham during the overlap period.
For one, it could not be demonstrated that the lawyer had any exposure to the plaintiff or the lawyers at his previous firm who were representing the plaintiff prior to his departure. The lawyer left the firm 35 days after the plaintiff first consulted the firm.

Secondly, in this case the plaintiff, who changed counsel during the course of the matter, argued that the confidentiality practices of her first law firm, which internally screening its own lawyers in some instances, were insufficient to prevent the imputation of knowledge to a lawyer not working on the case.

The judge disagreed: "This protocol, while not elaborate, was in place for many years and appears to have been effective (although the relevant question to be asked is whether it was effective in the circumstances of this case)." Because the original firm was small, the judge excused the lack of written policies, geographic separation or other more rigorous screening measures. Instead, he concluded that if a party were determined to explicitly seek out restricted confidential information, he would have been able to do so -- but that nothing in this case suggested the lawyer at hand had acted in this inappropriate manner, which was the applicable standard in this situation.

Thursday, October 14, 2010

Articles: Lawyer Lateral Movement, Conflicts, Ethical Screens and Advance Waivers

A reader pointed out several interesting articles published in the Boston Bar Journal:
  • In: "Lateral Movement of Lawyers in Massachusetts -- Conflicts, O’Donnell, and the Future Under Amended ABA Model Rule 1.10," several ethics and loss prevention lawyers at Holland & Knight comment on whether that state should adopt Model Rule 1.10 and broaden screening latitude. While they express some concerns with the Model Rule, they conclude: "Despite its problems, amended Model Rule 1.10 would be an improvement over the current Massachusetts Rule and the outcome in O’Donnell. The bright-line approach of amended Model Rule 1.10, which allows screens to be erected in most cases of lateral lawyer movement, is preferable to the uncertainty created by the Massachusetts 'substantial involvement' and 'substantial material information' exceptions. Massachusetts’ adoption of amended Model Rule 1.10 would likely prevent law firm disqualification in the majority of cases involving private-sector lateral lawyer movement, including in 'close' cases like O’Donnell."
  • In: "Advance Conflict Waivers: Will They Work For You?" representatives from Wilmer Hale explore how waivers can benefit firms and the clients they serve: "Given the growing number of firms providing legal services in a wide variety of practice areas, advance waivers will become an even more essential and standard practice. When properly drafted, and fully and candidly explained, they will provide important benefits to firms and their clients."
  • In response to that article, a representative from Harvard University wrote a letter to the Journal, challenging the notion that waivers benefit clients: "It may be self evident, but is worth emphasizing, that the premise of this language is that there is in fact a conflict which, absent the client’s consent, would prevent the lawyer from representing one or both of the adverse parties. In plain English, this waiver is intended to permit the lawyer to undertake work that could otherwise be prohibited.... Blanket waivers help protect firms from the consequences of missing or not recognizing conflicts. The other purpose, of course, is that advance waivers reduce an important obstacle to taking on new business."

Tuesday, October 12, 2010

Proper Ethical Screening Protects Firm from Disqualification (Lawyer Changes Sides Mid-Case)

The Legal Ethics Forum notes Bill Frievogel's excellent commentary on a decision just handed down denying a disqualification motion in: Silicon Graphics, Inc. v. ATI Technologies, Inc., 2010 U.S. Dist. LEXIS 107057 (W.D. Wis. Oct. 5, 2010). The complete decision is available online here.

The judge described the history of the suit as "long and contentious." Over 100 motions have been filed. This most recent issue concerns a disqualification attempt, calling out a lawyer who worked for a firm that represented the plaintiff in the same matter (Morgan Lewis), prior to joining the firm representing the defendant (Robins Kaplan).

The lawsuit was filed in 2006. The attorney in question left Morgan Lewis, joined Hogan Lovells and then moved to Robins Kaplan in the fall of 2009.

The defending firm noted that the attorney was screened from the matter -- he was located in a different office from the team (New York vs. Minneapolis) and proper ethical screening measures were put in place to ensure no information was communicated. These included circulating an internal memoranda to relevant personnel and restricting access to both physical as well as electronic files " a computer security protocol that prevents Leichtman from viewing or searching those records."

The plaintiff was also notified regarding the situation and the screen in the fall of 2009. Interestingly, the lawyer first asked the plaintiff for consent and a waiver. The plaintiff did not respond to the request. Upon further review of applicable rules, the ethics partner at Robins Kaplan determined that consent was not required. The firm provided notice to the plaintiff that the lateral move would take place and a screen would be erected .

The plaintiff argued that the lawyer performed significant work for its client and that a screen could not rebut the presumption of information sharing. The judge disagreed, noting, among several factors:
  •  " firms may avoid imputation through appropriate screening mechanisms regardless of the scope of the work performed for the former client by the disqualified lawyer."
  • "With respect to plaintiff’s motion for disqualification, I conclude that screening is an appropriate method to address concerns about confidentiality when a lawyer changes law firms in the middle of a case, even if the lawyer performed a substantial amount of work for the former client."
  • "Because plaintiff does not raise any serious challenges to the screening conducted in this case, plaintiff’s motion to disqualify Robins Kaplan will be denied."

Thursday, October 7, 2010

Upcoming Risk Roundtable Meeting

The Risk Roundtable Initiative will host a panel discussion on Tuesday, November 2nd in Chicago on the topic: "Making the Business Case for Investing in Risk Management." The panel comprises several risk experts:
  • Ann Ostrander, Sr. Director of Loss Prevention, Kirkland & Ellis LLP
  • Beth Chiaiese, Director of Loss Prevention, Foley & Lardner LLP
  • Pat Archbold, Head of Risk Practice Group, IntApp
  • Neil Araujo, CEO, Autonomy iManage
These speakers will explore topics including:
  • Communicating the implications and potential exposure tied to the expanding legal risk landscape
  • Explaining the value and importance of the risk organization and its efforts across the firm
  • Cultivating cross-functional advocates – framing and aligning risk efforts with other organizational goals and objectives
  • Understanding the value of and making the case for several types of "investments" – including management mindshare, budget, staff resources and technology tools
For more information, see the Risk Roundtable web site or email

Tuesday, October 5, 2010

Wednesday Risk Roundup -- Connecting Risk Management and Revenue, Lateral Hiring News & More

  • At our new partner site, the Law Firm Finance Blog, Brian Lynch considers the intersection between risk and revenue: "Is Your Law Firm Leveraging Compliance to Boost Revenue?" He writes: "Traditionally, risk management has been in the business of saying 'no.; Today, effective risk and compliance measures can enable firms to say 'yes' more frequently," in ways that can positively impact business development, client satisfaction and overall firm financial performance.
  • Another timely article following last week's discussion of lateral hiring trends and associated risk issues. This time, the Legal Intelligencer comments on firm recruitment from government sources: "Government Lawyers Sought After as Law Firm Laterals," noting the skills and experience former prosecutors bring to the firm: "A former AUSA brings a level of inside perspective and credibility to a case that can be attractive to a client, according to Nourian." And, as others note, firms clearly see value here and are willing to pay for it, see another recent online discussion: "Why Do AUSAs Make So Much Money When They Go To Private Practice?" Importantly, firms that hire former government lawyers must take care to screen those resources appropriately, both from matters in which they had involvement, or in cases where firms engage in government relations or lobbying efforts.
  • Finally, from the UK, Legal Risk LLP published it's latest risk newsletter, which comments on insurance renewal and coverage trends in that market, particularly in light of evolving industry professional responsibility (SRA outcomes-focused regulations) and impending alternative firm ownership rules.

Thursday, September 30, 2010

Law Firm Facing Government Fine for Data Breach

We've commented several times on growing data privacy and confidentiality management trends. (See recent posts on client and regulatory drivers: [1] [2] [3]). Now comes a story of a recent law firm breach and the potential impact -- The UK law firm ACS:Law may be fined as much as £500,000 by the UK Information Commissioner’s Office in response to a recent data breach.

The firm had undertaken a programme of sending out letters to those allegedly sharing copyrighted material on the internet, asking individuals for £500 per infringement or threatening potential court action. According to the BBC, their system may have been inaccurate and their tactics inappropriate:
  • A BBC investigation in August found a number of people saying they were wrongly accused by ACS:Law of illegal file-sharing. UK consumer group Which? says it has also received a number of complaints. Many contest that IP addresses can be spoofed.
  • ACS:Law is under investigation by the Solicitors Regulation Authority over its role in sending letters to alleged pirates.
Recently, a confederation of internet activists attacked the law firm and "hacked" servers, revealing personal information that was not properly secured. As UK Information Commissioner Christopher Graham stated:
  • "The question we will be asking is how secure was this information and how it was so easily accessed from outside. We'll be asking about the adequacy of encryption, the firewall, the training of staff and why that information was so public facing."
A lesson to any law firm or organisation that holds information subject to data privacy rules to review their confidentiality management controls and practices.

Wednesday, September 29, 2010

Debate Continues Over Access to ABA Ethics Opinions

Following yesterday's discussion about the accessibility of ABA ethics opinions, what John Steele at the Legal Ethics Forum dubbed a "collateral fight" continues.

Several arguments supporting the notion that opinions that shape professional standards should be open and accessible:
  • "The ABA can’t be a leader in providing that guidance if its thinking on these issues is not freely available."
  • "True, the ABA opinions are not binding, but they're considered persuasive and many states rely on them. Moreover, whether or not I pay ABA dues is irrelevant because the ABA opinions affect all lawyers whether they are members or not."
  • "No one objects to copyrighting the various books and magazines that are published under ABA auspices. Those are all commentary in a way that ethics opinions are not. The entire rule-making, rule-interpretation exercise is based on the reality that the ABA is (and wants to be) a crucial element in lawyer self-regulation...I'm not very comfortable having the ABA assert a property interest in essential guidance to the law of professional responsibility."
Others counter that the financial wherewithal to produce these opinions, guidelines and resources needs to come from somewhere, and worry about a "free rider" problem:
  • "I get the idea that monetizing the Model Rules and opinions interpreting them seems almost offensive in light of their status as public law (or the source of same). But, that kind of turns the question on its head. The jurisdictions... have to some extent had a free ride whenever they adopt rules based on ABA models. Those models did not spring up without cost or effort."
  • "A very large number of lawyers do not belong to any voluntary bar association but they surely benefit from the contributions of those who do, especially from the work of those who contribute their time and professional expertise in the area of the law of lawyering and legal ethics. Please encourage colleagues who do not belong to the ABA or to their state or local bar associations to join."
  • "The argument presented by the 'free access' advocates seems to be primarily based on the notion that the ABA's ethics opinions are so persuasive that they constitute quasi-law... Not all quasi-law is freely available. As has been pointed out, the Restatements aren't generally available without cost, although they are widely quoted and relied upon by courts... The 'state code' argument is flawed. Most, if not all, states do make their laws available online and for free, sometimes in a user-friendly format and sometimes not. On the other hand, if you want that handy-dandy version that has the case annotations, legislative history, etc, you usually have to pay a pretty penny to Michie or somebody for that... All that having been said, the ABA's approach to copyright in this area is not free from justified criticism."
The most amusing exchange to date:
  • Contributor A: "The Tea Party comes to the legal profession: I am really angry because the ABA is such a big impersonal and expensive organization that wastes its time, money, and energy on things I don't care about or disagree with. But when it comes to ME, it should provide the services I want for free because I am special, deserving, and cheap."
  • Contributor B in response: "Wait...Has Stephen Colbert hijacked out listserv?!?"

Lateral Movement Trends and Law Firm Information Risk Management

The American Lawyer reports that several indicators point to record lateral movement among law firms. They point to their own "finger in the air" test -- noting that the volume of firm-issued press releases announcing laterals has recently doubled and feedback from recruiters. (They also call out a trend long in the making, linking to quantitative analysis with data showing record significant movement in 2009 as well.)

Several factors are commonly cited for lateral movement: lawyers may act to maximize personal compensation (particularly as the end of the year nears), to find a more compatible work environment, or in response to pressures from firm management to "find a new home," in the case of poorer performers.

When lawyers leave or plan to leave firms, risk follows. One key risk is client information management and confidentiality. The Legal Ethics Forum just pointed out an interesting paper on the challenges of and common disputes tied to managing electronic client files: "Client Files and Digital Law Practices: Rethinking Old Concepts in an Era of Lawyer Mobility." Key excerpts
  • "The digitization of client files and law firm intellectual property, however, severely tests the existing framework for defining the relative rights and interests of law firms, lawyers, and clients. Digital files reduce or eliminate some recurring problems with hard copy files. For example, the digital file may be duplicated easily and inexpensively, thereby eliminating disputes over hard copy materials that arise when material is voluminous and can only be duplicated at substantial expense. The ease of digital duplication, however, renders client files and firm intellectual property highly portable, and facilitates the movement of lawyers from firm to firm. The portability of digital files poses significant challenges to firms attempting to mitigate the effects of lawyer mobility."
  • "To complicate matters, firm intellectual property may exist both within and outside client files, thereby creating three competing interests in the same collection of data (i.e., the client, the client’s lawyer, and the owner of any intellectual property). That a law firm may have intellectual property rights is without question, but in the absence of clear agreements between the affected parties, the nature of these rights is murky, and success in denying departing lawyers access to and use of information in which the firm may have proprietary rights is spotty at best."
For additional discussion on information risk management tied to lateral attorney movement, see a previous post and article linked within on law firm data leakage risks. See also a series of webinars on how firms are using technology to identify abnormal access and treatment of internal information that may flag impending lateral movement.

Tuesday, September 28, 2010

More Discussions about Accessibility of Ethics Opinions

Several months ago, the ABA Ethics 20/20 mailing list touched on the issue of challenges to accessing various state bar ethics opinions. Today, this issue arose again regarding accessibility of the ABA's own published opinions.

The debate began when the ABA circulated a new opinion (10-457) on lawyers use of web sites via PDF to the list. A member noted that they were surprised by the opinion and hadn't seen it mentioned in any other forum, including the ABA's own web site.
  • In response, one list member re-posted the opinion on his own web site. But the ABA informed this individual that the content was copyrighted and the repost was not authorized and asked that it be removed, noting that it would instead be posted on the ABA's web site tomorrow.
  • The discussion then took a heated turn, culminating in a lengthy and critical post on the blog by Carolyn Elefant: "Lawyers Want to Be Good, So Why Does the ABA Make It So Darn Hard?" -- The author charged: "By cloaking its ethics opinions in opaque copyright wrappings, the ABA is impeding lawyers from complying with our ethics obligations and stymying discourse and debate over appropriate ethics standards for our profession as we move at the speed of light through the twenty-first century."
Response to this article and argument was mixed both pro and con:
  • One contributor noted that as a non-profit organization the ABA relies on sources of financial income such as access subscriptions/paywalls to cover the costs of creating and distributing these opinions in the first place. And that other organizations follow what could be labeled even more restrictive practices: "If the ABA should publicly post, should the ALI publicly post its Restatements? Should BNA publicly post the Lawyer's Manual?"
  • Another commenter supported the free and open access position: "Of all the things to shroud in secrecy, these opinions are the last things that should be...I hope the Powers That Be listen."
  • Another voice added: "Like it or not, by voluntarily undertaking to issue ethics opinions, the ABA has placed itself in a "law-giving" role (yes, we all know that ABA opinions are not binding in any jurisdiction); as such, I believe that it has a duty to make all of its ethics opinions freely available."

Conflict Disqualifies Law Firm from $1 Billion Case

Following last week's roundup of recent law firm conflicts and ethical screening snafus in the news, Winston & Strawn has just been disqualified from defending Pfizer in a $1 billion lawsuit connected with the drug Celebrex. As reported by the National Law Journal, a Winston partner previously represented Brigham Young University, which brought a patent suit against Pfizer:
  • "The magistrate judge found that Schaerr's relationship with the school created a conflict that infected the rest of Winston & Strawn. That firm, she said, appeared to 'abandon' BYU in favor of a more lucrative matter."
Interestingly, both Winston and Strawn, and Sidley Austin, where the partner in question previously worked, both represented BYU, and both had obtained advanced waivers to clients adverse to the university. But dispute arose over the wording of the Winston waiver, which implied only parties represented by the firm at the time it was executed were covered. (The firm subsequently took on Pfizer as a client.)

Furthermore, rather than screening the conflicted lawyer in question, the partner became directly involved in the Pfizer matter, in some ways that created problems for both his previous client and the court:
  • "Schaerr offered to help broker a settlement between BYU and Pfizer by acting as a 'go between' to bring the parties to the table... Soon after the phone call, Schaerr sent an e-mail to Orme saying that he regretted 'the difficult position' his firm's 'potential involvement' in the Pfizer litigation had created for the school. 'Yet I also have a fiduciary duty to my partners, and (especially in turbulent economic times) a moral duty to our employees, not to stand in the way, unnecessarily, of new opportunities that come to other partners,' he added. Wells wrote that she found Schaerr's attitude 'troubling': 'In essence, it appears that Mr. Schaerr is willing to leave his loyalty for a current client behind if a more lucrative offer comes along.'"

Thursday, September 23, 2010

Risk News Roundup : Conflicts, Ethical Walls & More

  • Here's another story about a firm disqualified due to failing to erect a timely and effective ethical screen. Interesting, this case follows a recent Texas decision regarding the need to screen paralegals. In another Texas case, the State Supreme Court disqualified a plaintiff for not properly screening a paralegal who formerly worked for the defendant. The paralegal signed a confidentiality agreement and pledge not to work on matters related to her previous employer, yet ended up doing so regardless. The Court ruled that the firm "did not take reasonable steps to shield the assistant from working on the Leal case and that she actually worked on the case at her employer’s directive."
  • No law firm wants to find itself representing both sides in the same case. But one AmLaw 100 firm has just been disqualified for attempting to do just this: "Southern District of New York Judge William Pauley said that a 'clear conflict of interest' exists where one Sonnenschein attorney represents former BDO Seidman partner and now cooperator Adrian Dicker and another represents former BDO Seidman CEO Denis Field."
  • For a little more conflicts and disqualification intrigue, see this story: "A federal judge has refused to disqualify on conflict of interest grounds a defense attorney with deep ties to the Gambino organized crime family."
  • A federal appeals court affirmed a ruling that Blank Rome was appropriately disqualified from a matter for representing a company that was adverse to a subsidiary of another client: "In a ruling in which the 2nd Circuit addresses for the first time whether a law firm infringed on its duty of loyalty by taking on a representation adverse to a client's corporate affiliate, the circuit affirmed a decision by Southern District Judge Jed S. Rakoff, who found that Blank Rome's engagement letter had not given it broad authority to accept a case adverse to a Johnson & Johnson affiliate's interest."
  • Finally, ALI/ABA is hosting a timely audio webcast on this very topic: "Brave New World: Ethical Screens and Conflicts of Interest." The session will explore how ethical screens can be used to address conflicts scenarios and the requirements necessary for screens to be judged effective. (For past discussion of this topic, see also: Managing Information Risk with Lateral Hires and Lawyer Departures.