Wednesday, September 28, 2011

Law Firm Lateral Hires & Mergers: Webinar Recording Now Available

Content from our webinar on managing risk tied to lateral hire and merger integration is now online, for those who missed the live session:
  1. Managing Risk Tied to Firm Mergers and Lateral Hires -- Thanks again to our panelists. We welcomed another large group (100+ attendees) who heard speakers from Foley & Lardner (Beth Chiaiese), SNR Denton (Adam Hansen), and Drinker Biddle (Jacqueline Schimmel).
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].

Monday, September 26, 2011

Article: Ethical Screen Standards (Industry Trends, Recommended Approach, ABA vs. New York Rules)

Devika Kewalramani, partner and Co-Chair of Moses & Singer's Legal Ethics & Law Firm Practice Group, published an interesting article on ethical wall requirements, including the need for software-driven protections and logging/auditability: “Ethical Screens: Building Electronic Barriers”:
  • "There was a time when locked file cabinets provided the necessary separation of documents. But with client documents now primarily created, revised and saved electronically, client information resides primarily on computers, not in file cabinets. For this reason, there is growing concern about how to create an ethical screen that protects electronic client information."
  • "The ABA commission observed that technological advances have made client information more accessible to the entire law firm, and that screening should require more than making physical documents inaccessible. Screening should require protection of electronic information as well."
The article provides an excellent deep dive comparing and contrasting ABA Model Rules and New York State and Federal Rules and case law:
  • "New York state and federal courts have allowed the use of ethical screens to avoid imputed disqualification of a firm beyond the scope of the N.Y. Rules... In 2005, the Second Circuit, in Hempstead Video Inc. v. Valley Stream, held that preventive measures such as a formal screen or de facto separation can effectively guard against any sharing of client confidential information. The federal courts have refused disqualification in some cases where screens were instituted." [See: Third party summary of Hempstead as well as the text of the written decision.]
And it calls out important recommendations for effective technological screening measures:
  • The need for electronic restrictions: "Block and track access. Protecting electronic client information is critical. The Southern District in Papyrus concluded that the electronic screening measures adopted by the firm adequately segregated the disqualified lawyer from the case, 'thereby immunizing [the firm] from [the disqualified lawyer's] taint.' ... In addition, the firm implemented a monitoring system that could track a lawyer's access to certain electronic files."
  • Maintain logging and auditable compliance reporting: "When confronted by a disqualification motion, conduct an audit of the firm’s document management system to confirm that no prohibited documents have been accessed by the conflicted lawyer."
  • Institute proactive monitoring: "In accordance with the electronic audit measure, track the conflicted lawyer's access to relevant electronic files to verify whether the conflicted lawyer accessed relevant electronic files."
  • Extend and integration protections across other software systems lawyers use: "Exclude the conflicted lawyer from personally entering time on a client matter numbers in the firm's time and billing system unless he/she is provided access on an as need basis or unless that system does not permit one lawyer to look at the time recorded by other lawyers."

Thursday, September 22, 2011

Upcoming Risk Roundtable Meeting Set for San Francisco (Hosted by Orrick)

The third event in our Fall Roundtable series has been scheduled. It's set for October 25th in San Francisco, hosted by Orrick.

Industry developments continue to raise the profile of risk and compliance issues -- particularly with information risk management, where rising client expectations, evolving professional standards and new regulations create new challenges and dangers.

In this context, it's vitally important that risk professionals continue to take steps to understand this changing landscape and minimize firm exposure.

The Risk Roundtable provides a forum for risk, IT and related professionals to connect in a collaborative environment. Sessions will explore topics including:
  • Communicating the implications and potential exposure tied to the expanding information risk landscape
  • Review of news stories, issues, trends and developments affecting law firm risk management
  • An update on the Risk Roundtable Compliance Consortium, including an overview specific industry risk response guidelines under development
  • An open forum for peer discussion, exchange and networking
We run an informal survey of registrants prior to each meeting to identify issues the group would like to discuss. (If interest exists, we can provide a summary of the September New York Roundtable on ISO 27001 for law firms.)

Event attendance is by invitation only and is limited to qualified law firms and personnel. Please contact dan@riskroundtable.com for more details.

Wednesday, September 21, 2011

Outside Ownership of Law Firms? IBM General Counsel Weighs In

While the UK moves forward implementing “alternative business structures,” that will allow outside ownership of law firms, Robert Webber, SVP for legal and regulatory affairs and general counsel at IBM argues against the US following suit in an interesting piece published in Businessweek. "Law Firms Should Spurn Outside Investments." He doesn't pull any punches:
  • "Imagine discovering that the law firm you hired to defend your company... is partly owned by private investors... [who] have financial stakes in the company that is suing you — and perhaps even stakes in the law firm representing your adversary."
  • "It’s a troubling omen of the legal profession’s direction. Most of all, it’s worrisome for clients, whose own interests may take a backseat to the lawyers’ search for additional capital."
  • "These proposals open the door to ethical risks that will work to the detriment of corporate and private individuals and the overall way we conduct business in this country. They could compromise a lawyer’s obligation to protect confidential information and cause conflicts of interest between the lawyer and clients or outside financiers. These outside funders could influence a lawyer’s behavior or even the outcome of a case."
  • "The past few years have seen the legal profession repeatedly putting money first. Conflict-of-interest rules are weakening, making it easier for lawyers to switch firms mid-dispute."

Tuesday, September 20, 2011

Risk News Grab Bag (Conflicts, Fake Billing, Disqualifications & More)

Several interesting stories and postings of note:
  • Law firm represents both sides of LMM airport’s PPP – Controversy stemming from Mayer Brown's involvement representing the buyer and seller in a governmental transaction.
  • Time Capture Software as a Risk Control (Former AmLaw 20 Partner Jailed for Fake Billing) – "He stood accused of racking up significant charges and costing the client over one million dollars -- all for work never performed. This case highlights how time capture software might be used to identify potential "red flag" situations. Without throwing up "Big Brother" concerns by routinely auditing lawyer activity, it is possible to leverage this technology and automatically cross reference work billed vs. work tracked. In practice, firm management could say: 'If lawyers are submitting time records that exceed automatically captured time by 20-30%, we probably want to know about that and at least ask some questions...'"
  • Decision Provides Extensive Analysis of Standard for Disqualification of Law Firm Because of Prior Representation – "I’ve seen a number of recent articles pointing out that law firms seem to be on a merger binge. That, coupled with lawyers moving from firm to firm, as well as bankruptcies, securities cases and mass torts... makes last month’s opinion in Roosevelt Irrigation Dist. v Salt River Project... a good resource for deciding whether to move to disqualify a firm because of some prior involvement in a matter.
  • Using Online Service Providers – Where the Duty of Confidentiality Reigns – American Bar Association Center for Professional Responsibility weighs in on "virtual practice tools" and other hosted software storing confidential information, offering an overview of applicable rules and recommendations on best practices.

Monday, September 19, 2011

ISO 27001 For Law Firms -- Report from Risk Roundtable Seminar Featuring IntApp, Cravath & Forrester Research

We saw tremendous interest in our Roundtable session on ISO 27001, the information security standard. It's clear that this is a growing trend for law firms. (We expect that you'll start hearing more about this issue from other sources in the months to come.)

Brian Lynch, who chairs the Risk Roundtable Compliance Consortium, attended the event last Friday and sends this session summary:
  • Dan – I'm pleased to report back on last Friday’s engaging and educational Risk Roundtable seminar on ISO 27001 for law firms. We were graciously hosted in the New York offices of Cravath, Swaine & Moore and featured speakers who described their real world experiences with ISO implementations - not just theoretical speculation.
  • Andrew Rose from Forrester spoke about well-considered approaches to ISO certification, including benefits firms may not have expected and pitfalls to watch out for. He's well versed in the ISO terrain after leading certification efforts for Clifford Chance and Allen & Overy in the UK.
  • Jeff Franchetti, CIO of Cravath, also walked us through his efforts to become ISO-compliant, and, more importantly, building an intelligent structure for managing information risk and security.
  • Over three hours, CIOs and IT leaders in the room had a chance to hear about real-life implementations - selling the concept internally, securing management buy-in, executing successful projects and reaping the benefits.
Some highlights:
  • Partnering with management – ISO 27001 is a combination of well-understood policies and procedures supported by technology that can enforce them. ISO programs tend to be most successful when management and IT work together throughout the process.
  • 27001 certification v. 27002 compliance – Some firms are pursuing 27002 compliance first. 27002 is an "advisory standard," where certification is not the objective. However, a firm can organize its security processes and protocols. Once firms feel comfortable with 27002, some opt to pursue 27001 certification, which includes requirements and focuses more on repeatable processes.
  • Look to clients for the standard, not peer law firms – firms are seeing a number of trends pointing to ISO - ISO-influenced language appearing in RFPs, clients enlisting 3rd-parties to conduct law firm audits, and clients requiring ISO 27001 certification.
[Given the response to this issue, we’re looking at future sessions in other client locations. Stay tuned.]

Thursday, September 15, 2011

Important Canadian Conflicts Decision (Lateral Lawyer Movement, Ethical Wall)

A recent decision worth noting -- Dow Chemical Canada Inc. v. Nova Chemicals Corporation, 2011 ABQB 509 (CanLII): A lawyer who represented Nova Chemicals at one firm, moved to another firm. That second firm later came to represent a party adverse to Nova, which moved to disqualify it.

A vice president of Nova set out the core of their argument:
  • When I engage a lawyer to prosecute a dispute on behalf of NOVA Chemicals, I do not expect that lawyer to join our enemy’s law firm. Similarly, when a lawyer who has been deeply involved with NOVA Chemicals in the early but very formative strategic stages of a very significant lawsuit against Dow, goes to a law firm that has not been previously involved in the lawsuit, in my opinion that law firm should not be allowed to take on representation of Dow (para 15).”
The judge hearing the matter focused on what confidential information might have moved with the lawyer and how it was treated. The lawyer and firm pledged that no information was communicated or used inappropriately, but the judge remarked that:
  • “…statements under oath or affirmation are an essential part of the continuance of a retainer or acceptance of a new retainer in the circumstances of a moving lawyer with prejudicial confidential information, but that alone is not enough. Screening devices are also necessary, absent consent of the other party or parties.”
The firm had put electronic ethical screening measures in place to restrict internal access to related documents and established that no confidential information was shared. That, coupled with the larger aim to allow firms maximum latitude in choosing counsel, led the judge to deny the motion to disqualify.

University of Calgary law professor Alice Woolley presents excellent analysis and lays out the issues at hand:
  • “Chief Justice Wittmann’s judgment provides new analysis of the principles governing what is necessary for a client to consent to a conflict in advance, how imputation rules operate in national firms, lawyers transferring between law firms, and the intersection between law society rules and judicial determinations in assessing conflicts.”
See also Woolley's other conflicts-related essays: "The Practice (not theory) of Avoiding Conflicts of Interest" and "The True Bright Line Conflicts Rule."

Monday, September 12, 2011

Upcoming Risk Roundtable Meeting Set for Chicago (Hosted by Foley & Lardner)

Based on the success of our Spring Risk Roundtable series, we're pleased to kick off a series of Fall events. Our next event is scheduled for October 13th in Chicago, hosted by Foley and Lardner.

Industry developments continue to raise the profile of risk and compliance issues -- particularly with information risk management, where rising client expectations, evolving professional standards and new regulations create new challenges and dangers.

In this context, it's vitally important that risk professionals continue to take steps to understand this changing landscape and minimize firm exposure.

The Risk Roundtable provides a forum for risk, IT and related professionals to connect in a collaborative environment. Sessions will explore topics including:
  • Communicating the implications and potential exposure tied to the expanding information risk landscape
  • Review of news stories, issues, trends and developments affecting law firm risk management
  • An update on the Risk Roundtable Compliance Consortium, including an overview specific industry risk response guidelines under development
  • An open forum for peer discussion, exchange and networking
We run an informal survey of registrants prior to each meeting to identify issues the group would like to discuss. (If interest exists, we can provide a summary of the September New York Roundtable on ISO 27001 for law firms.)

Event attendance is by invitation only and is limited to qualified law firms and personnel. Please contact dan@riskroundtable.com for more details.

Friday, September 9, 2011

Conflicts Management Rule Changes Proposed by ABA Commission

The ABA Commission on Ethics 20/20 has just published proposed modifications to the Model Rules. A summary of outlined updates is available in their summary memo, along with more detailed markups of Model Rules for Admission by Motion, 5.5(d)(3), 1.6 and 1.7.

Proposed changes to Rule 1.7 would give law firms and clients more flexibility to choose specific conflicts rules they wish to operate under based on the jurisdictions in which work relating to matters will occur (even if that's outside the United States):
  • "A matter may require a lawyer to perform work in multiple jurisdictions whose conflict rules differ... the lawyer and client may agree that their relationship concerning the matter will be governed by the conflict rules of a specific United States or foreign jurisdiction..."
The language outlines requirements that the client provide written consent and be suitably advised regarding the implications of such consent (including advice to engage independent counsel), and that: "Client consent under this paragraph is more likely to be effective if the client is an experienced user of legal services," which aligns with recent calls for modifying or relaxing law firm conflicts rules for "sophisticated" clients by some in the United States and other countries.

Proposed changes to Rule 1.6 provide additional guidance regarding when and how lawyers may disclose confidential information about work for past or existing clients when changing firms, in order to support effective conflicts management during the new personnel intake process:
  • The Commission notes that: "The goal is to ensure adequate protection of client confidences while allowing a lawyer and a firm to identify potential conflicts of interest that might arise from the lawyer’s association with that firm."
  • "Paragraph (b)(7) recognizes that, before a lawyer becomes associated with a firm, it may be necessary for the lawyer to reveal limited information about the lawyer’s current and former clients to permit the lawyer and the firm to identify conflicts of interest that would arise from the lawyer’s association with the firm. A lawyer is permitted to reveal this limited information, typically no more than the client’s identity and the general nature of the work that the lawyer performed for that client, but only to the extent reasonably necessary to permit the lawyer and the firm to determine if a conflict of interest would arise from the lawyer’s association with the firm."
  • The complete update spells out several caveats and requirements, including how this information may be used and situations where client consent must be obtained before sharing sensitive information.

Thursday, September 8, 2011

Law Firm Conflicts Management: Responding to Disqualification Motions

A reader sent word of interesting article just published by the State Bar of Wisconsin: “Navigating Conflict-Interest Disqualification Motions.” It reviews criteria courts consider when facing conflicts-driven disqualification motions, including standing and other procedural elements, as well as response strategies for law firms.

The author was involved in a seminal State Supreme Court case on the topic, Foley-Ciccantelli v. Bishop’s Grove Condominium Ass’n Inc. (Decided May 2011).

While focused on Wisconsin law, the article weaves in ABA commentary and extensive advice on how to fight and appeal disqualification motions. Most importantly, it reviews prudent steps to avoid them in the first place, which include:
  • Well crafted engagement letters that call out clients and non-clients, as well as the scope of representation
  • Limiting initial interviews of potential clients 
  • Obtaining waivers (including advance waivers)
  • Erecting ethical walls that are timely and effective to screen lawyers and avoid imputed disqualification: “Proper screening includes restricting access to files, electronic databases, and correspondence and drafting written memoranda that detail restrictions, all in a timely fashion.”
For more detail, see the complete text of the article.

Tuesday, September 6, 2011

Webinar: Managing Risk Tied to High Volume Lateral Hire Activity and Firm Mergers (CLE Eligible)

Last week we commented on recent data showing high industry lateral hire activity and mentioned a webinar we've been working on focused on the same topic. We're now pleased to share more details:

Date: Wednesday, September 14
Time: 9 am Pacific / 12 pm Eastern

Description: Whether stemming from a merger or sudden influx of partners and lawyers, lateral movement 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 SNR Denton, Foley & Lardner and Drinker Biddle will explore topics including:
  • Proper due diligence
  • Managing incoming information
  • Integrating people and technology
IntApp's Brian Lynch will moderate this discussion featuring 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: dan@riskroundtable.com.