Tuesday, December 20, 2011

Law Firm Insider Trading Risk Management: Webinar Recording Now Available

Content from our November webinar on managing insider trading risk at law firms is now online, for those who missed the live session:
  1. Managing Insider Trading Risk -- Thanks again to our panelists. We welcomed another large group (100+ attendees) who heard speakers from SNR Denton (Adam Hanson), Baker & McKenzie (Dan Surowiec), and Hogan Lovells (Jeff Lolley).
Those who registered but were not able to attend these events should have received a link to the video recordings via email. Others interested in these sessions can view them online: [Law Firm Risk Management Webinars].

Thursday, December 15, 2011

Report from Kansas City Risk Roundtable Session Hosted at Lathrop & Gage

We hosted a Risk Roundtable last week in Kansas City. Thanks again to Lathrop & Gage for hosting. Brian Lynch sent his customary summary of the day:
  • Dan – I'm pleased to report back from our ISO 27001 Risk Roundtable discussion in Kansas City. Lathrop & Gage hosted our session, where we had a chance to check in with KC-based firms and their respective approaches to implementing ISO-friendly security programs. It was a lively discussion, where we had a chance to evaluate the benefits and costs of pursuing ISO certification.
  • As one of our attendees put it, creating a standard information security management system - e.g. ISO - is an inevitability. It's a difficult process for clients and law firms to work through the audit process. Managing audits seems to be something clients increasingly want, and firms are getting more comfortable addressing. But many are looking for a shorthand method to show that they meet a certain level of differentiated confidentiality management. This promises a quicker path to providing clients with peace of mind and enabling firms to address their obligations as they work across jurisdictions.
  • Several attendees commented on the role IntApp Wall Builder plays at their firm in managing confidentiality enforcement as part of their security programs. They're mapping the technology to the requirements and processes ISO 27001 defines to ensure consistent compliance.
  • Many thanks again to Sean Power @ Lathrop & Gage for providing the forum for an intellectually stimulating discussion.
This session concludes the 2011 Fall/Winter Risk Roundtable series (we promise this time). Plans are underway for future events in 2012. Watch this space for more details. (And if you'd like to host a Risk Roundtable in your neck of the woods, please get in touch: dan@riskroundtable.com.)

Tuesday, December 13, 2011

With Swift Ethical Screen, Quinn Emanuel Survives Disqualification from $10 Billion Lawsuit

We first highlighted this case in October, when a Bank of America moved to disqualify Quinn Emanuel, counsel for AIG in a $10 billion lawsuit because of alleged conflicts stemming from the move of  lateral partner. [h/t to Bill Frievogel for noting the recent update.]

The lawyer worked 5.8 hours on the matter at Quinn, starting in July, 2011, before Quinn became aware of the potential conflict after opposing counsel wrote them in September. Quinn argued that the matters were unrelated, that no sharing of confidential information had taken place and that the firm erected an ethical screen immediately upon discovering the situation.

Given the stakes, in order to avoid the impression or potential of future disclosure, the lawyer voluntarily left the firm in October, 2011.

When the motion was first filed, a legal ethics expert agreed the situation would likely not warrant disqualification, but opined that “…it could prove 'problematic' if presiding judge Barbara Jones decided Becker was not screened fast enough, but that an effective screen could address this issue.”

Last week, the judge agreed that disqualification was unwarranted [see: American Int'l Group, Inc. v. Bank of Am. Corp., 11 Civ. 6212 (BSJ) (S.D.N.Y. Dec. 6, 2011)]
  • The decision noted that: “…screens erected immediately upon discovery of the conflict weigh against disqualification.”
  • However: “Quinn’s screening procedure was imperfect, without question.”
  • But she ruled that the firm successfully rebutted the presumption that confidences were shared. For one, the lawyer brought no client files to the new firm. Furthermore, three years had passed since the lawyer worked on the original matter. Quinn also conducted extensive interviews of all significantly involved members of the matter team, securing affidavits that no confidences were sought or received.
  • Physical separation (the lawyer was based in London), the size of the firm (500+ lawyers) and the firm’s long client relationship also influenced the judge’s ruling.
This is yet another recent example where IT plays a critical role in disqualification defense. In this case, IT conducted an electronic audit of firm’s document system to support the firm’s arguments. (In this case, the audit showed the lawyer accessed two documents related to the matter. But that was insufficient to warrant disqualification, given the facts and factors in play in this case.)

Wednesday, December 7, 2011

Counsel for Bank of America in Multi-Billion Dollar Lawsuit Disqualified; Judge Cites “Porous and Ineffective” Ethical Wall

Today comes a significant update in Line Trust Corp. Ltd, et al. v. David Lichtenstein, et al, heard before the Supreme Court of the State of New York.

It appears that a lawyer who represented Bank of America while a partner at Kaye Scholer LLP made a lateral move to Willkie Farr & Gallagher LLP. The client moved with her.

But Willkie was representing allegedly adverse parties in the same matter. And shortly thereafter, the existing client moved to disqualify the firm from representing BofA, asking for discovery to see if matters had been tainted. In the process, the firm shared important information:
  • In May of 2011, the firm’s IT department audited its electronic document management system and discovered that an associate had opened and printed a document they should not have in October, 2010. That associate was then removed from the matter at hand. (The court says: “perhaps negligently so.”)
  • Expanded to include time recording data, the IT audit also showed that a legal assistant cite-checked a memo and viewed five documents related to the matter in 2009.
This case highlights the critical importance of effective confidentiality, screening notification and information security controls. In his order the judge called out that:
  • “… Wilkie Farr has submitted insufficient proof that they erected adequate screening measures to prevent attorneys advising Bank of America from having access to (i) other Wilki Farr attorneys who worked for the Lichtenstein Defendants… If an ethical wall exists here at all, and it may not, it is porous and ineffective.”
The firm argued that these breaches were accidental, minor and taken out of context. But the damage was done. The judge took evidence of smoke to suggest a fire:
  • “Willkie Farr submits time records to show that breaches of the wall were minimal. The time records are inadequate, as they cannot be expected to reflect the totality of breaches of the ethical wall.”

Monday, December 5, 2011

Recent Law Firm Conflicts, Disqualifications and Penalties

In Washington, D.C., Butzel Long Tighe Patton PLLC recently found itself facing harsh words from a judge, who stripped the firm of $72,000 in fees for failing to disclose a conflict. "...the judge slammed a partner, saying it was "inexcusable" he didn't show up for a fee application hearing." [via BLT. See the written decision.]

In Washington State, a firm was disqualified for giving legal advice to both sides in the same dispute. "Grant PUD law firm disqualified in Crescent Bar case" --
  • "At the time, Aylward told Trautmann that there could be a conflict of interest, since his partner, David Sonn, occasionally did legal work for the PUD, but he added that he thought he could get a waiver."
  • "But with the waiver issue still unresolved, Aylward proceeded to correspond with Trautmann over the following month, including giving what she believed was 'specific advice regarding strategy' that the condo owners could use in their argument against the PUD."

Friday, December 2, 2011

Partner Event: Ark Group Risk Management for Law Firms (December 6-7, London)

The Ark Group is hosting its annual "Risk Management for Law Firms" conference in London next week. Organizers have assembled a rich agenda and impressive roster of speakers who will address topics including:
  • A first-hand account of how firms including Taylor Wessing, Freshfields, and Allen & Overy have tackled the challenges in operating under the new outcomes-focused regulation
  • Clarity from the SRA, Law Society and Legal Ombudsman as they share their expectations for OFR, ABS and the claim trends for the coming year
  • Tools to benchmark your firm against leading law firms' risk management strategies and ensure you stay out of trouble
  • An understanding of the key changes and trends in claims over the past year and how these will affect your professional indemnity insurance renewal
  • Learning opportunities to avoid the pointed end of regulation, with an overview of high-profile disciplinary matters and rogue partners
  • A forum to consider all risks relating to outsourcing
Kaye Sycamore, IntApp Managing Director, will also be presenting a briefing on risk news and trends relating to confidentiality management, information barriers and information security issues affecting law firms, including a summary of recent Risk Roundtable events. She has invited UK-based firms interested in exploring these issues in greater detail to contact her directly.

Thursday, December 1, 2011

Ethics Opinions: Little Fluffy Clouds, Lost Little Thumb Drives...

Today, several stories about technology-driven law firm risk issues. (And a reminder to take our five minute, reader survey.)

Cloud Computing:
  • The Pennsylvania Bar joins several jurisdictions in publishing new ethics opinions on cloud computing: "Formal Opinion 2011-200, Ethical Obligations For Attorneys Using Cloud Computing/Software As A Service While Fulfilling The Duties Of Confidentiality And Preservation Of Client Property." In keeping with conventional wisdom, they support cloud storage of client information so long as information is kept confidential and reasonable safeguards are employed.
  • Iowa has issued a similar opinion on lawyer use of cloud services: "Iowa lawyers may store client information and other data on a third-party vendor's servers rather than their own computers, so long as the lawyer has unfettered access to the data and can reasonably verify that sound methods are being used to protect the information..."
  • The Daily Record has posted an interesting opinion piece on current industry thinking on the topic: "Legal Currents: Is a cloud backlash on the horizon?" The article is written by a lawyer currently writing a book on the topic for the ABA: "My hope is that I’m wrong, and that if the ABA Committee on Ethics and Responsibility does address the issue of consent when using any form of electronic communication, it concludes that the standard applicable to unencrypted email communications should likewise apply to the use of cloud computing platforms, which are inherently more secure than email."
Managing Ever-Shrinking Physical Data Storage:
  • "Discarded laptops, flash drives create ethical obligations for lawyers" – "A recent Florida Bar opinion advising that lawyers have an ethical duty to sanitize their storage devices has put a spotlight on how attorneys handle their discarded equipment...While some had expressed concern that the opinion would set unrealistic requirements, Tarbert [Florida Bar Ethics Counsel] said the committee didn't receive any feedback at all from the state's lawyers when the opinion was made available for public comment."