Tuesday, May 24, 2011

Upcoming Risk Roundtable Webinar: Recent Disqualification Decisions and Lawyer Mobility Implications

Date: Monday, June 6
Time: 9 am Pacific / 12 pm Eastern

Description: Lateral movement of lawyers is a common occurrence in the modern law firm. When a lateral joins a firm, imputation of conflicts is a serious risk. The 2009 modifications to ABA Model Rule 1.10 marked an important shift in attitudes regarding ethical screening.

However, rules vary across states, and law firms must pay close attention to their screening practices to ensure they avoid disqualification. Even in states that do not allow nonconsensual screening, timely and effective screening procedures can assist firms in obtaining client waivers and responding to disqualification motions. In today’s competitive environment, firms that can demonstrate timely, effective and auditable screening measures are best protected and best able to address client concerns and differentiate themselves in the marketplace.

In this session, panelists from Reed Smith, Holland & Knight, and Haynes and Boone will explore topics including:
  • Case law and lateral hiring standards in various states
  • The emerging trend of vetting summer associates
  • Key components of lateral hire due diligence
At this session, IntApp's Brian Lynch will moderate a panel comprising members of the Risk Roundtable Compliance Consortium, a working group focused on developing risk response guidelines:

CLE Credit: Certificates will be provided to attendees upon request. (Attendees outside of California are responsible for confirming CLE reciprocity in their particular jurisdiction.)

Attendance: Attendance is by invitation only. Risk Roundtable members and qualified parties are invited to request more information by emailing: info@riskroundtable.com.

Thursday, May 19, 2011

The Importance of Intake Incites Introspection...

King & Spalding made news in April when it took on the defense of the "Defense of Marriage" act on behalf of the US House of Representatives. The move caused significant public controversy and the firm quickly extracted itself from the matter. From a risk management perspective, this situation highlights the importance of client intake process and policy.

When it announced that it was dropping the case, King & Spalding implied that it should have never taken it in the first place. It explained that the matter was "not properly vetted" by its intake processes, which would have rejected the request. This claim is backed up by media reports citing multiple sources who relayed that the:
  •  "...the DOMA matter was not fully submitted to King & Spalding”s business review committee, a firm requirement, before Clement signed a contract obligating the firm. They said the committee immediately began reviewing the case the day after the firm learned of the contract—and rejected it the next day."
  • "Any matter that is controversial in any way or where there is a discounted rate goes through the business review committee,” one of the sources told the Daily Report, noting that the DOMA engagement was both controversial and had a discounted rate."
Interestingly, the firm has a very rigorous intake process which could take several days to complete. As documented by the Blog of the Legal Times:
  • The firm vets all new clients through a centralized "Business Review Committee" that operates independently of the general counsel's office
  • A traditional conflicts check is conducted
  • The firm also evaluates "business conflicts" which don't violate professional rules, but may upset its client community (for example: "its construction practice generally represents construction companies and not contractors.")
  • In the case of matters involving public policy, the issue would also be reviewed with the firm's lobbying practice (particularly since the agreement in this matter included provisions that would forbid the firm, or any employee from any personal lobbying activity adverse to the Defense of Marriage Act.)
However, complicating that narrative, at least one member of firm management made public comments suggesting that the matter would not have been rejected, writing: "...despite the fact that our standard client/matter review process was not followed, it was reasonable for him to believe that the firm would accept the matter."

Conflicts Clarification -- Texas (and Canada) Are Not to Be Messed With

Two readers contacted us regarding the summary of the recent Texas Risk Roundtable meeting, which contained a bit of an oversimplification of situations in which firms can represent adverse parties.
  • Bill Frievogel (Freivogel on Conflicts) notes that while there is overlap between the rules of Canada, Europe and Texas, the situation is slightly more complex and fluid: “As to England and Wales, I agree, mostly. As to Canada, the Canadian Supreme Court adopted the U.S. majority rule (contrary to the Texas rule) in  R. v. Neil, [2002] 3 S.C.R. 631 (Can.).
  • Julia Holland from Torys writes: "I noticed in yesterday’s risk management blog update a reference to Texan conflicts law being similar to Canada’s and Europe’s in that firms may represent parties that are adverse to one another in unrelated matters. This is only true with client consent.  While many would like to see the rules changed in that regard, our duty of loyalty is still such that we can’t be adverse to a current client without informed consent."
We connected with Brian Lynch, who acknowledged the issue and suggested that this was indeed a "teachable moment," writing: "It's a complicated world and tracking across the myriad requirements has never been more difficult for global firms."

Wednesday, May 18, 2011

Risk Controls: CNA Confidentiality & Information Security Survey Report

Insurance provider CNA recently published a fascinating report on law firm information risk management issues tied to confidentiality management: "...the survey information was gathered to determine what law firms are currently doing to manage and identify technological risks."

The report summarizes policies and practices firms have in place to address information risk issues. Of note:
  • 59% of responding firms indicated that they had developed special it/data security policies or procedures in response to a client’s request. CNA notes: "Maintaining effective information technology and data security policies and procedures are concerns shared by corporations, clients and the general public as well as law firms. It is a good business practice to develop and implement proper policies and procedures before a client requests it."
  • 53% of responding firms cite "Rogue Employee" misuse of restricted information as an area of confidentiality/privacy information risk that concerns them the most. Lawyers fared better, with 37% citing "Rogue Attorneys" as top concern.
  • As of 2010, 78% of firms have a written policy in place for data privacy or IT security, up from 65% in 2008 and 50% in 2005.
See the complete report, which CNA has kindly furnished a direct link to, here: "Law Firms and Risk Control: Information Security and Confidentiality Survey."

Tuesday, May 17, 2011

Report from Last Week's Risk Roundtable Meeting (Texas)

Last week, a Risk Roundtable session was held in Houston, Texas. Many thanks to Baker Botts for hosting. Brian Lynch delivered a presentation updating attendees on current risk issues and trends, and moderated group discussion. He kindly sent an update summarizing some of the group discussion:
  • Dan – Here’s a brief update on our recent Roundtable meeting. We explored a variety of issues complicating the law firm risk landscape, including: new business intake requirements, lateral hire vetting, foreign office regulations, and enterprise search (and the demise of security through obscurity).
  • Texas is the only state in the Union where a firm can represent clients who are adverse to each other, but not in the matter where they are adverse. This conflicts model is consistent with Europe and Canada but not with the other 49 US states. [5/19 - ED: Clarification] This provides opportunities for clients who have much greater choice of counsel. But it does not eliminate the risk of business conflicts.
  • Ethical screening has a high bar in Texas with the Epic Holding decision of 2000 that ruled that there is an "irrebuttable presumption of imputation" when a lateral is brought into a firm with prior knowledge of a party adverse to the new firm's clients. Nonetheless, firms commonly use screens with client consent and are hopeful that the ABA changes to Model Rule 1.10 regarding screening will be adopted by the Texas Bar.
  • Our attendees included risk, technology and knowledge management stakeholders. Their greatest shared priority of the day was responding to internal and client-driven concerns about controlling leakage of confidential information. Several attendees discussed technology measures they put in place to track abnormal activities such as high-volume document downloads, targeted document deletion, or unexpectedly frequent access to deal-specific documents.
  • Challenges linked to social media, portable technology, and the newest generation of lawyers' perception of privacy were also topics of active discussion, as firms Look to cultivate a culture of risk awareness.
A Toronto Risk Roundtable session will be announced shortly. Watch this space for more details.

Thursday, May 12, 2011

Two Law Firm Risk Webinar Recordings Now Available

Content from our April webinars is now online for those who missed the live sessions:
  1. Building a Robust Risk Management Organization -- Many thanks to panelists at our recent Risk Roundtable webinar. We welcomed 100 attendees who signed on to hear speakers from Kirkland & Ellis (Ann Ostrander), Reed Smith (Ed Witt) and Katten Muchin (Patty Fitzpatrick) talk about their firms’ risk response strategies. The session was produced and moderated by Brian Lynch from IntApp.
  2. The Role of Technology in Managing Risk -- In this webinar, co-sponsored by the International Legal Technology Association (ILTA), speakers from Autonomy and IntApp discuss the role technology can play in mitigating law firm risk. Today, sensitive electronic information has proliferated across firm systems. This session explores how firms can leverage centralized confidentiality controls like ethical walls to address client mandates for sensitive matters and other professional drivers.
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].

Wednesday, May 11, 2011

Analysis: Risk Management -- "Proactive Measures, Please"

Brian Lynch, director of IntApp's risk practice group and chair of the Risk Roundtable Compliance Consortium, was invited by the UK's Legal Support Network to discuss the drivers compelling law firm investments in information risk management and the benefits such investments accrue:
  • "Effective risk management results in a more attractive firm to regulators, clients and insurers. A commitment to risk management will also drive business development, and insurers will reward less risky clients with lower premiums -- and forward-thinking firms are finding that the proper combination of technology and process help theme benefit from these advantages."
Read the complete article: "Proactive Measures, Please."

Monday, May 9, 2011

Bar Opinions on Conflicts, Screening, Outsourcing and Confidentiality

Several interesting bar opinions and commentary have been published recently:
  • Firms Should Run Conflicts Checks on (and screen) Hires Fresh out of Law School [North Carolina]: "The North Carolina State Bar Ethics Commission published a formal opinion addressing the duty to ensure that newly hired law graduates do not bring conflicts of interests from their prior law clerk experiences when they join a law firm. Law clerk conflicts are not imputed to the new firm and timely screening can resolve conflicts concerns."
  • Opinions on Outsourcing -- The National Law Journal presents an interesting overview of various (and sometimes diverse) opinions on outsourcing.
  • Ethical Legal Duties When Using Wireless (Wi-Fi) Networks [California]: "This question is particularly relevant to a common occurrence in the modern practice of law: the use of laptop computers to conduct research and email the client or others while being connected to the Internet wirelessly, either at home with a personal system or via a public wireless connection (e.g., in an airport or coffee shop). The California Bar established a six-part test for attorneys to determine whether they have met their duties of confidentiality and conduct in this context."
  • Proposed Ethics Opinion on Lawyer Use of Hosted "Software as a Service" Applications [Opinions from North Carolina and New York]: Another technology related issue as more law firms rely on software that is not hosted (or ultimately controlled) within their organization: "...the opinion requires that the attorney do a thorough job investigating the technology provider and any agreements with that providers to ensure confidentiality of the client data." See the recent update from the New York State Bar as well. Putting this all into practice, the Legal Ethics Forum raised concerns specifically about Google Docs, a hosted alternative to Microsoft Word.
  • Are law firm loss prevention communications discoverable? Conflict Bars Privilege -- "Some years ago, courts in New York and elsewhere wrestled with the question whether the attorney client privilege may be applied to in-house communications within a law firm. Now, it appears fairly settled that courts do not generally recognize internal firm communications to be privileged...[but] A recent Ohio case is one of the first to break away from this line of opinions."
And, finally, solo practitioners in Florida take note -- you are barred from referring to yourselves with plural pronouns (the royal "we," along with "us," "ours," and similar words) in advertisements. Also, take heed not to name your firm "Your Name and Associates," if your don't actually employ additional lawyers.

Thursday, May 5, 2011

Relaxed Conflicts Rules -- Are "Sophisticated" Clients on Board?

Last week came news that a group of 23 large law firms is lobbying the ABA for a separate set of professional conflicts rules applicable to large, sophisticated clients. Such clients would be identified by factors such as:
  • “…whether a firm is publicly traded, the size of its balance sheet, the number of jurisdictions in which it operates, and how much it uses legal services.”
This week comes news that the Association of Corporate Counsel (ACC), the largest professional group serving the interests of attorneys practicing in corporate law departments, is throwing its weight behind the idea.

The ACC had previously called for "more uniform bar rules governing lawyer mobility, multijurisdictional practice, and the unauthorized practice of law." Its general counsel was recently interviewed in an article published in Corporate Counsel magazine which provides additional detail:
  • "Hackett said the ACC would be sending a letter to the American Bar Association in support of the general concepts. 'And we plan to join with them in conversations to move the issue forward... What we have is a series of rules governing practice -- ABA rules, and state bar ethics rules -- designed in a model that is completely unrecognizable for what we do today. They were created back when Abraham Lincoln still rode the circuit on horseback.'

Tuesday, May 3, 2011

YALFITI: Yet Another Law Firm Insider Trading Incident

Shook Lin & Bok LLP, a Singapore-based law firm with approximately 80 lawyers, billing itself as "a one-stop Asia Practice service for investment and financial transactions in China, India and ASEAN," finds itself in the news this week due to admitted insider trading by a firm staff member.

The Monetary Authority of Singapore (MAS) has fined a firm employee S$50,000 ($40,000 USD) for trading shares based on price-sensitive information about an impending acquisition. In this jurisdiction, insider trading is a purely civil matter, so no criminal charges are pending.

The employee accessed this information "...while reviewing the translation of legal documents regarding the company's offer."

Monday, May 2, 2011

Another Brick in the Ethical Wall -- California Federal Court Upholds Ethical Screen

As noted by Hinshaw & Culbertson, The U.S. District Court for the Northern District of California just upheld an ethical screen in the case of a conflict stemming from a lawyer's lateral move. [See details re: Openwave Systems, Inc. v. Myriad France S.A.S., Slip Copy, 2011 WL 1225978 (N.D. Cal. 2011)]

The court noted that there was no reason to believe any confidential information had been shared, and that the firm had put an effective ethical wall in place. It: "(1) distributed a screening memorandum expressly prohibiting discussion of confidential matters to all involved personnel; (2) secured all papers and files; (3) labeled all paper documents with a statement regarding the ethical wall; and (4) limited access to electronic files to only the 'core group of professionals and support staff'"

In its own commentary, Hinshaw notes that this case adds momentum to the pro-screening attitudes which made news last year in Kirk v. The First American Title Insurance Company:
  • "Until 2010 it was not clear when, if ever, a conflicted lawyer could be screened in California for purposes of avoiding disqualification... The present opinion marks perhaps the first extensive foray into the issue of screening by a California federal court since Kirk. Although federal courts are not technically bound to apply state law on the issue of disqualification, the Northern District chose to apply Kirk. The opinion is also notable because it, unlike Kirk, involved a more standard former-client conflict that arose from a lawyer switching firms."
In his denial of this recent motion, the district judge essentially called "shenanigans" against counsel arguing for disqualification, writing:
  • "Too much money is being wasted these days on tactical motions to disqualify."
  • Myriad's motion—given the minute likelihood of an actual breach of confidentiality, its strategic timing, and the delay in its filing—appears to be motivated by a desire to derail an upcoming summary judgment motion. In fact, despite having knowledge of the conflict for months, Myriad filed the instant motion just two days after Openwave sought leave to file for summary judgment.