Thursday, June 28, 2012

Meditations on Cross-Border Practice, Choice of Law and Virtual Law

Last week, the ABA Ethics 20/20 Working Group on Uniformity, Choice of Law and Conflicts of Interest released a paper asking for input on potential changes to Model Rule 5.5:
  • "The Commission has learned that, since 2002, the proliferation of lawyers’ use of technology has raised new questions about the meaning of the phrase 'systematic and continuous presence' in Rule 5.5(b). In particular, technology now enables lawyers to be physically present in one jurisdiction, yet have a substantial virtual practice in another. The problem is that it is not always clear when this virtual practice in a jurisdiction is sufficiently 'systematic and continuous' to require a license in that jurisdiction."
The paper goes on to review changes the Working Group proposed and outlines several new approaches it is considering in response to community feedback.

In that regard, the Legal Ethics Forum presents analysis and additional commentary: "A Hypo on Virtual Law Practice and Rule 5.5" --
  • "Imagine that Laura Lawyer is licensed only in Massachusetts and operates a virtual law office from there. She writes wills for clients in Massachusetts and, occasionally, New Hampshire. Lately, the flow of clients from New Hampshire has increased, and Laura is writing an increasing number of wills for New Hampshire citizens. Assume that Laura never visits New Hampshire and performs all of her work in Massachusetts over the Internet. Here are a couple of questions..." [See their site for additional detail and exploration.]

Wednesday, June 27, 2012

Goodwin Procter Survives Disqualification in Patent Case

New England In-House writes: "Goodwin Procter not disqualified from patent case" --
  • "A law firm representing the plaintiffs in a patent infringement suit was not subject to disqualification based on the fact that two of its partners, while associated with a different firm in 2004, had a one-day meeting with the defendant on a related matter, a U.S. District Court judge in Boston has ruled."
  • "The defendant argued that the plaintiffs’ Boston firm, Goodwin Procter, should be disqualified because the two attorneys had received information in that meeting that was directly relevant to whether its own technology, a pregnancy test, infringed on the plaintiffs’ patent."
  • "But Judge Douglas P. Woodlock disagreed, finding that the two lawyers never obtained “substantial material information” relating to the patent at issue and thus the plaintiffs’ firm fell within the “safe harbor” provision of the Massachusetts Rules of Professional Conduct."
Goodwin argued this was a prudent decision, given the realities of lateral movement across the industry:
  • "'At any given time, many lawyers are looking to move,' [Henry C. Dinger, the partner who argued the motion] said. 'It’s in the interest of the profession and, in the long run, in the interests of clients and the public, that we not unnecessarily create ‘Typhoid Marys’ who will have difficulty finding a new place to land because they carry so much baggage. And firms need the ability to use screens to manage those risks rather than saying, ‘I’m sorry, we can’t take you on.'"

Tuesday, June 26, 2012

California Decision Challenges Ethical Screening

BNA provides an extensive summary of: Beltran v. Avon Products Inc., C.D. Cal., No. 2:12-cv-02502-CJC(ANx), 6/1/12, which it aptly summarizes: "Use of Ethics Screen Does Not Prevent Imputation of Conflict to Lawyer’s New Firm" --
  • "Key Holding: Screening measures do not prevent a firm's imputed disqualification under California law for a conflict arising from a lawyer's prior practice at another firm."
  • "Holding indicates that courts in California continue to reach varying conclusions on whether screening can prevent imputation of lateral conflicts... U.S. District Court for the Central District of California June 1 ejected a law firm--and its co-counsel--from representing the plaintiff in a putative class action because a member of the firm was privy to the defendant's confidential information in his earlier work at another firm."
  • "Applying California law, Judge Cormac J. Carney ruled that an ethics screen does not prevent a firm's imputed disqualification when a lawyer in the firm has key confidential information from work at another firm."
Conflicts expert Bill Freivogel weighs in:
  • "First, in rejecting a screen, the court ignored the recent history of screening in California, including Kirk and Openwave Systems.  Why didn't the court discuss those cases?"
  • "Second, the court disqualified co-counsel without a finding that the originally disqualified lawyer shared confidential information with co-counsel.  The majority rule requires such a finding before co-counsel is disqualified."
  • " Next, the court found that the lateral lawyer's billing a total of some 300 hours over several years on several diverse matters (not this one) created way too much playbook information to bring to his new firm."
  • "Last, the court held that the disqualified firms were too small for a screen to work.  We question the notion that a screen cannot work in a small firm while it can work in a 1,000-lawyer firm.  It seems to us that an argument could be made that a potential breach of a screen may be more easily detected (and prevented) in a smaller firm than in a huge global one."

Monday, June 25, 2012

More (Alleged) Insider Trading (Potentially) Linked to a Law Firm

[via Reuters] "Ex-Orioles player Eddie Murray is part of insider trading inquiry" --
  • "Hall of Fame baseball player Eddie Murray is one of several former professional athletes under investigation by federal authorities in a U.S. insider trading case stemming from the buyout of a medical device company, people familiar with the three-year-old probe said."
  • "Investigators have found that leaks about the Advanced Medical Optics deal may have come from a number of places, including people who worked for the medical device company; its law firm, Skadden Arps; and its merger adviser, Goldman Sachs Group Inc, according to court records and people familiar with that matter."
  • "A spokeswoman for Skadden declined to comment. A top partner at the firm is also representing one of the suspected leakers, James V. Mazzo, who was the chief executive officer of Advanced Medical at the time of the takeover."
On unrelated incidents but a related note, Reuters also reports: "A fifth of company announcements in Britain are preceded by unexplained share price moves, the Financial Services Authority (FSA) said on Tuesday, in its final report before being wound up next year."

Thursday, June 21, 2012

Risk Survey Update -- (Calling Australian and Canadian Law Firms)

Another update from our surveyors -- participation is now at 175 law firms. As a reminder, the incentive for qualified firms and stakeholders to participate is access to a copy of the final published report for their geography.

This year, separate exercises are underway for Australia, Canada, US and UK. With added geographical scope, we're still keen to collect input from risk, conflicts and IT leaders at Australian and Canadian firms.

If you or a colleague are interested in participating, please email:

Wednesday, June 20, 2012

Information Security News and Trends

A few interesting surveys shed light on trends in the corporate world, raising issues and risks that may apply in the legal realm as well.

First comes a report from "The 6th Annual 'Global Trust, Security and Passwords Survey,' a result of interviews with 820 IT managers and C-level professionals across North America and EMEA."

One analyst succinctly summarized key findings: "Employees Admit They'd Walk Out With Stolen Data If Fired" --
  • "Just under half of 820 respondents admitted if they were fired tomorrow, they'd walk out with proprietary data such as privileged password lists, company databases, R&D plans and financial reports -- even though they know they are not entitled to it."
  • "Given that admission, it's no surprise 71 percent believe the insider threat is the priority security concern and poses the most significant business risk. As such enterprise executives says they are rethinking their security strategy"
  • Other findings include
    • 45 percent said they have access to information on a system that is not relevant to their role
    • 42 percent indicated they or a colleague have used admin passwords to access information that was otherwise confidential
    • 55 percent believe competitors have received their company’s highly sensitive information or intellectual property - a significant increase from years past
Unfortunately, another survey proclaims: "Talking About Security Bores the Boss, Survey Shows"
  • "The survey also found that while CEOs tended to see the biggest threat as coming from outside the company, CISOs worried more about internal threats from negligent employees."
  • "CEOs were apparently unified in their candor about not knowing enough on the subject: 65 percent said they didn’t have enough information on the topic to really understand how security problems might threaten the overall business."

Tuesday, June 19, 2012

Law Firm Insurance News: Survey Shows Rise in Large Malpractice Claims

[via Insurance Journal] Law Firms Facing Rise in Large Malpractice Claims --
  • "A new study by insurance broker Ames & Gough finds a growing number of leading malpractice insurers have paid claims in excess of $50 million."
  • "Four of the six insurers reported their company had paid or had participated in paying a claim of $100 million or greater and another had made a payment of $50 million to $100 million. The insurers participating in the survey were: AXIS, Beazley, CNA, Fireman’s Fund, Hartford and Ironshore."
  • "In claims involving multi-million dollar payouts, multiple insurers are likely involved with the same claim given quota share coverage arrangements and excess limits,' said Eileen Garczynski, a vice president of Ames & Gough. 'Still, there’s no question the proportion of claims resulting in multi-million dollar payouts has expanded.'"
  • "Meanwhile, 'conflict of interest' continues to be the most frequent alleged malpractice error, ranked first or second by four of the six insurers. Two insurers listed 'failure to calendar or follow-up' as first or second."

Monday, June 18, 2012

Recently-Alleged Conflicts & Disqualification Attempts

"Harris County officials raise question of conflict for county law firm Bracewell & Giuliani" --
  • "Two Harris County officials have questioned whether a conflict of interest exists in the case of a Houston-based international law firm that represents the county in some areas while simultaneously representing a company the county is suing in another."
  • "'There is an issue about (Bracewell & Giuliani) representing us and being against us at the same time...They can’t be on both sides.'"
  • "Oxford [firm Chairman] also said Bracewell & Giuliani had obtained waivers from 'all the commissioners' as permission to represent Waste Management in the case while also representing the county in other matters. But O'Rourke said that 'the county did not grant a waiver and will not grant a waiver of any type.'"
"Law Firm May Represent Itself In Suit For Unpaid Fees"
  • "The New York Appellate Division for the First Judicial Department affirmed the denial a former client's motion to dismiss to suit for legal fees, other than a claim of fraudulent inducement. The court also affirmed the denial of a motion to disqualify the plaintiff law firm from representing itself in the litigation."
"Cassels Brock Wins Rare Cost Award Against Law Firm"
  • "Cassels Brock recently won a complicated motion to remove opposing counsel for conflict of interest in a wrongful dismissal matter. In doing so, Cassels Brock obtained an extremely rare cost award against the plaintiff’s law firm on a substantial indemnity basis. John McGowan and Anne-Marie Naccarato represented the defendant with the assistance of articling student Stephen Hutchison."

Thursday, June 14, 2012

Recent Ethics Opinions -- Metadata, Lawyer Identities, Jury Research

Several interesting updates:
  • Washington State Bar Ethics Opinion on Metadata -- "Ethics rules permit a lawyer to view inadvertently disclosed metadata in an 'unscrubbed' electronic document, but not to use a program that uncovers metadata the sender has tried to remove."
  • Lawyers May Use a Different Name Socially or When Writing Novels, Ethics Opinion Says -- "Lawyers may use a different name outside their law practice, despite an ethics rule barring false or misleading communications, according to the opinion by the State Bar of Arizona." (Perhaps it’s time for your risk blogger to assume an identity with a bit more flair?)
  • Juror Research via Social Media (New York) -- "Attorneys may use social media websites for juror research as long as no communication occurs between the lawyer and the juror as a result, states a formal opinion from the New York City Bar Association’s Committee on Professional Ethics (Formal Opinion 2012-2). If an attorney unknowingly or inadvertently causes a communication with a juror, such conduct may violate the Rules of Professional Conduct."

Wednesday, June 13, 2012

Client Engagement Management -- Conflicts, Waivers & Engagement Letters

Protect Yourself From the Start With Engagement Letters -- McKenna Long partners J. Randolph Evans and Shari L. Klevens write about the importance of engagement letters:
  • "When risk managers audit a law practice for the risk of legal malpractice, they look first at the files to see if every file contains an executed engagement/retainer letter or fee contract. This one document is one of the most reliable indicators of whether a law practice has in place systems that can effectively reduce the risks of malpractice claims in a modern-day law practice."
  • "Some legal malpractice insurers favor law practices that require, without exception, an executed engagement letter or fee contract before a file can be opened."
Client Withdrew Conflict Waiver, Now What? -- Dean Dietrich, former chair of the State Bar Professional Ethics Committee and presently with Rudder Ware, looks at what happens when clients revoke a conflicts waiver:
  • "A client's revocation of consent to a lawyer's concurrent representation of another client with conflicting interests does not necessarily require the lawyer to withdraw from representing the second client… If there is a significant change in the circumstances that existed when the first client waived the conflict, the lawyer may not be able to continue the representation of the second client."

Tuesday, June 12, 2012

Law Firm Conflicts News -- Disputing Partners, Rogue Partners

A few more dramatic conflicts related stories to share today:

Dispute leads to lawsuit among firm's leaders --
  • "A dispute among the three leaders of 19-lawyer Bryant Burgher Jaffe over an alleged conflict of interest has resulted in two partners suing the third, claiming he breached their partnership agreement by removing them from their positions in the firm without their votes."
  • "According to a document signed by Bryant and attached to court papers, Jaffe engaged in ‘questionable conduct,’ including holding client meetings in Bryant Burgher's office, signing three engagement letters as counsel to Cully's firm and maintaining Cully firm files in Bryant Burgher's office."
  • "A folder containing evidence of Jaffe's bankruptcy matters had been deleted from the firm's computer system, Bryant claims."
  • In New Zealand, a lawyer was "...fined $14,500 and censured by the Law Society for 'unsatisfactory conduct' after he acted for a couple in a property deal he was a party to… The Lawyers Standards Committee found that not only had there been an irreconcilable conflict of interest in this case, but said it was "surprising and reprehensible" that Mr Small had not to insisted on his clients getting independent legal advice and facilitated them getting it."

Monday, June 11, 2012

Conflicts -- Recent Disqualification News

A few disqualifications making news recently:

Locke Lord Lost Thread of Corporate Neutrality --
  • "A federal judge disqualified Locke Lord as counsel in a shareholder dispute after finding that the law firm improperly sided with the individual executive defendants over its corporate clients."
  • "Swiech's lawyer used documents produced by Locke Lord to fight criminal charges in Poland, [U.S. District Judge] Bucklo found. 'Given that Adam Swiech is charged with defrauding the very clients that Locke Lord represents, however, Locke Lord should have taken steps to prevent its work product from being used by Adam Swiech in the criminal proceedings,' she wrote."
ALJ Gildea Denies Motion To Disqualify Counsel In Certain Dynamic Random Access Memory And NAND Flash Memory Devices (337-TA-803) --
  • "Respondents Hynix… argued that the law firm presently representing IV should be disqualified because it had 'represented Hynix for nearly 18 years in ITC and other matters that … are substantially related to the subject matter of this Investigation,' including three Section 337 investigations involving DRAM and NAND Flash Memory technology. Further, Hynix alleged that the law firm had obtained privileged and confidential information regarding Hynix’s legal and business strategies, thereby substantially prejudicing Hynix."
  • "ALJ Gildea determined… Hynix failed to identify any specific prejudice because it did not establish that the technologies involved in the previous investigations were substantially related to the technology at issue in the current investigation. The ALJ also found that Hynix did not provide any facts to suggest that its practices and products from the 1990’s and 2000, when the other investigations were pending, are relevant to this investigation in 2012. Accordingly, ALJ Gildea determined that any potential prejudice to Hynix will be mitigated by the ethical screen already in place."

Wednesday, June 6, 2012

Information Security Trends (Webinar Recording Online)

For those who missed the live presentation and Q&A, we have a recording of last weeks' information security trends webinar. In this session, co-sponsored by the ILTA Server Operations & Security Technologies Peer Group, panelists discussed law firm information security trends, developments and emerging themes, including:

  • Client audits
  • ISO 27001
  • The pros and cons of "Open" vs. "Closed" DMS models
Many thanks to our speakers:

  • Tim Golden, Manager, Enterprise Architecture & IT Governance, McGuireWoods
  • Judi Flournoy, CIO, Loeb & Loeb
  • Pat Archbold, Head of IntApp's Risk Practice Group

Tuesday, June 5, 2012

Conflicts of Interest -- Staff Screening Considerations

Excellent article published by the ABA: "Screen nonlawyer employees for conflicts of interest," provides an excellent overview and analysis of ABA Model Rules, and compares/contrasts with various state case law, ethics rules and opinions:
  • "The ABA Model Rules apply to lawyers but not to their nonlawyer employees. Instead, the rules mandate that lawyers who hire nonlawyers must supervise their work and ensure that their conduct likewise conforms to the ethics rules."
  • "This rule puts the responsibility directly on the supervising lawyer to see that the nonlawyer employees comply with the Rules of Professional Conduct."
  • "The bottom line is that law firms should perform conflict checks when contemplating hiring nonlegal employees. If conflicts are found, having that information at the initial stage of employment will allow the firm to implement an appropriate screening system at the best time."
See the complete article for more background and a hefty serving of links and citations across multiple jurisdictions.

Monday, June 4, 2012

Law Firm Records Management: Properly Handling Client Information (When Firms Dissolve)

 A reader sent in an excellent article exploring the information risks clients face when law firms go under: "Dewey & LeBoeuf collapse highlights importance to clients of safeguarding records."
  • Much of Dewey’s stable of attorneys decamped to other law firms. “Unlike other professional services, such as consulting firms, when an attorney leaves a firm, they typically take their client’s files with them. The client records are transferred to the new firm.”
  • "The issue of records pertaining to clients not associated with any departed attorneys is more problematic, because the firm has an obligation to notify such clients and arrange for the proper disposition of the records."
  • "'The wind-down process should include this notification and disposition should occur as instructed by the client — which typically means a transfer to the new law firm or delivery to the client. Records for clients that do not respond to the notification — some may no longer be in business or deceased — will need to be reviewed and retained in accordance with the requirements in the jurisdictions where the law firm practices,'" said a client records management consultant.
The article goes into great detail comparing and contrasting US vs. UK approaches to records management in these scenarios and provides several recommendations to firms and clients alike.
  • "In Britain, the records that a law firm kept about its clients legally belonged to the firm itself, said Rob Moulton, a partner at law firm Ashurst. Sometimes financial services firms might have “subconsciously relied” on law firms to retain their records rather than keeping adequate documentation themselves, he said. He said that lawyers were expert at keeping records, while other firms might not be so exact."
  • "Britain’s financial industry regulator, the Financial Services Authority, has clear requirements for recordkeeping, Moulton said. Firms must have proper systems and controls in place and must organise their recordkeeping processes effectively. He said that instances where firms had sought advice from lawyers on whether or not to file suspicious transaction reports were prime examples of the types of legal records to which the FSA might need access."
  • "A 'core concern' for compliance officers should be the effect which such a collapse might have on any privileged information held by the law firm, Moulton said. 'Does it mean that the Financial Services Authority can get hold of documents in a way they couldn’t before hand? The answer is no. That privilege remains,' he said."