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.”

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