Tuesday, February 22, 2011

Be Careful about Calling Out Conflicts -- Unwarranted Disqualification Motion Leads to Sanctions

Several stories point out the increasing use of disqualification motions as tactical maneuvers. As illustrated in In Doe v. Fulton-DeKalb Hospital Authority, No. 08-14304, 2010 WL 5392746 (11th Cir. Dec. 30, 2010) [Decision and commentary via Jenner & Block], taking such measures is not without risks.

In this case involving alleged sexual harassment, plaintiff's counsel moved to disqualify counsel representing defendants (a hospital and individual employees), arguing "extraordinary conflict of interest." Defendants replied with a Rule 11 motion and sought sanctions.

Both the trial court and an appeals court rules that the disqualification motion was out of line, and that sanctions, including attorneys fees were warranted:
  • "The court noted that plaintiffs’ counsel had provided no legal authority in support of his motion for disqualification. The court further found that a reasonable and responsible attorney in plaintiffs’ counsel’s position would have known that defendants’ counsel had appropriately advised his clients of potential conflicts and obtained waiver letters.  On these facts, the court concluded that the district court’s ruling was 'unassailable.'"

Tuesday, February 15, 2011

WikiLeaks, Law Firms and Confidentiality Management -- New Twists, Risks and Surprises

The WikiLeaks saga continues to unfold, with significant implications for the legal community. We've pointed out several factors that provide context make this an issue worthy of continued attention for law firms:
  • Law firms frequently store and centralize the most sensitive information of their clients. And thus, represent prime targets for leaks and attacks.
  • In response, clients are taking note and asking more difficult questions. Bank of America is widely believed to be an impending target of the WikiLeaks organization. And they have been taking measures to better protect their sensitive information. As we reported last year, the company's outside counsel guidelines include stringent confidentiality mandates for their business data and include audit rights.
  • Law firms have already been the targets of external attacks, resulting in data breaches, negative media attention and potential fines.
Now comes an emerging news about one law firm's direct involvement in shaping the story. Hunton & Williams, which represents Bank of America, is alleged to have been involved in facilitating the development of programs designed to combat disclosures and discredit Wikileaks and its supporters through various means.

Recently-leaked emails from a third party involved in the project describe a partner at the firm as the "key client contact operationally." (In a twist, these communications between the firm and a third-party data security firm were also compromised -- raising additional issues about the type of information law firms share with clients and how information is treated and potentially vulnerable once it leaves the firm.)

Careful to note that all facts are not yet in evidence, the Legal Ethics Blog tackles the question of under what circumstances the professional standards of a firm acting in this manner may be questioned.

Wednesday, February 9, 2011

Conflicts Waivers - Evolving Perspectives on Delays and Disqualification

Last week, we pointed out a recent case where a court ruled that a delay in bringing a conflict-driven disqualification motion did not equate to a de-facto waiver. The judge noted that waivers must be explicit and intentional.

Now from the North Carolina Bar comes a proposed ethics opinion that revisits this topic and suggests that an appropriate line between reasonable and unreasonable delay could be drawn, in the appropriate context. See Proposed 2011 Formal Ethics Opinion 2: Former Client's Failure to Object to Conflict (thanks to Suzanne Lever, Assistant Ethics Counsel at North Carolina State Bar for forwarding a copy and hat tip to the NC Legal Ethics Blog).

The opinion sets out a possible scenario and notes that delays may be conscious and used for tactical advantage. And thus, while disqualification decisions should be made at the discretion of a judge, context and intention are important factors to consider:
  • "A lawyer must obtain the informed consent of a former client, pursuant to Rule 1.9(a), prior to representing a party who is adverse to the former client in the same or a substantially related matter. On occasion, however, a lawyer will fail to identify a former client conflict and will unintentionally represent an adverse party without obtaining the consent of the former client. If a former client delays lodging her objection to the representation of the adverse party by her former lawyer, does the former client's subsequent objection to the representation require the lawyer's withdrawal pursuant to Rule 1.9(a)?"
  • "Although delay will not be sufficient to constitute waiver in most cases, the following factors should be taken into consideration when evaluating whether a former client's failure timely to object to a new, adverse representation should constitute a de facto waiver of the right to object: (1) whether the lawyer's failure to identify the conflict of interest and bring it to the attention of the former client was unintentional; (2) whether the former client knew of the new representation and the adverse interest entailed; (3) the length of the delay in lodging an objection; (4) whether there was an opportunity to lodge an objection; (5) whether the former client was represented by counsel during the delay; (6) the reason the delay occurred; and (7) whether disqualification will result in substantial hardship for the new client. See Laws. Man. on Prof. Conduct (ABA/BNA) 51:234 (2002) (setting forth factors considered by courts when deciding whether to grant a delayed motion to disqualify).
  • "Moreover, there does not appear to be a justification for Wife's delay in lodging her objection other than to gain a tactical advantage by waiting until disqualification would work a substantial hardship on Husband."

Thursday, February 3, 2011

Conflicts & Waivers Ruling: Firms, Not Clients, Must Identify Conflicts; Waivers Must be Intentional

[Another h/t to Bill Freivogel] This recent decision highlights an attempt to argue the "silence = consent" card in the case of conflicts waivers. [Bird v. Metropolitan Cas. Ins. Co., 2011 U.S. Dist. LEXIS 6055 (W.D. Wash. Jan. 18, 2011)] Timeline of key events:
  • July 9, 2010 -- Firm representing plaintiff (on a lawsuit that commenced May 26, 2010) discloses conflict of interest by letter. It requests a waiver.
  • August 19, 2010 -- Counsel for defendant notifies firm by email that it does not consent to a waiver and demands that the firm withdraw from matter. The firm does not withdraw.
  • November 30, 2010 -- Motion to disqualify filed.
  • January 18, 2011 -- Motion heard and decided. Firm disqualified.
The firm argued that the gap in time between when the dispute arose and the disqualification motion was filed was, in effect, a waiver of the conflict (the August 19 response notwithstanding): "...Cole, Lether argues that Metropolitan has waived the conflict by its delay in bringing the motion to disqualify." It also argued that the representation at the root of the conflict was long-standing (the triggering activity commenced place in 2009), even though this activity was only recently discovered and disclosed by the firm.

A judge disagreed, citing rules of professional conduct and existing case law which states that waivers must be explicit and intentional. Furthermore, he noted that there was no evidence to support the argument for an "implicit" waiver, and that motion to disqualify was brought in a timely fashion: "At no time prior to July 12, 2010, did Metropolitan have specific and/or actual knowledge of Cole Lether's concurrent representation of Plaintiffs and Metropolitan."

Finally, he affirmed the (intuitive) standard regarding who is responsible for identifying and resolving conflicts: "The obligation to disclose a conflict rests with the attorney, not the client. Consequently, any delay is attributable to Cole, Lether, not Metropolitan."

Tuesday, February 1, 2011

Risk Roundup UK Edition: Top 2010 Trends, Pending Negligence Claims & More

Several interesting UK-focused links and resources to share:
  • 2010-in-Review: Legal Futures presents a three-part summary of key issues and trends in the UK legal market, with summaries of 2010 developments in: alternative business structures, scope of powers of the Legal Services Board, changes to Solicitors Regulation Authority handbook and outcomes-focused regulation, indemnity insurance, outsourcing risk, and other topics. Details on their web site: [Part 1], [Part 2], [Part 3]
  • A month-by-month review of general UK legal market trends is also available via The Lawyer.
  • Alternative Business Structures: A key topic of discussion and interest in 2010, a framework for non-lawyers to have ownership stakes in law firms continues to progress. The SRA is presently identifying several "trial firms" to run through its application process, before it's formally launched later this year. Even this pre-process is not without controversy: "...one partner at a City firm complained that those taking part will be ahead of the pack and have an unfair advantage.'"
  • Malpractice & Insurance Trends: LF also reports that according to one insurance broker (Lockton): "Solicitors are facing 'bumper' years of claims for professional negligence as recession-driven legal actions start to bite." But as mentioned in the article and highlighted by The Lawyer, these lawsuits carry risks for those that bring them as well.
  • Tying together the themes of negligence and alternative business structures, comes a dispute between the SRA and LSB regarding the appropriate cap for misconduct or non-compliance by alternative business structures. The LSB has proposed a cap of £150m, which the SRA disagrees with in all cases, noting: "If the intention is that the maximum figure cover all possible scenarios, then this should take into account the fact that the market could change dramatically."