Monday, February 25, 2013

Risk Update: Audit Letters, Disqualification News


Mark Herrmann. Chief Counsel – Litigation and Global Chief Compliance Officer at Aon offers a modest proposal: "Stop The Audit Letter Lunacy!" --
  • "When I worked at a law firm, I knew that lawyers’ responses to audit letters — in which the firm confirms to auditors the status of litigation pending against a client — were a massive waste of time."
  • "Every once in a while, a junior associate would receive an audit letter and write a real response to it — analyzing the lawsuit, the tactics, and who would win. When the powers that be learned about that mistake, there’d be hell to pay: 'How could you write those things? Didn’t you run this past an audit letter review partner? We don’t actually provide information in those responses, you fool! Never do this again!'"
  • "But I always assumed that someone — the client, the auditors, someone — thought those ridiculous letters served a purpose. Now I’ve gone in-house, and it turns out that audit letters serve no purpose at all..."
  • "But if I’m right on this subject, can we please stop the lunacy? If no one — client, auditor, or law firm — derives any value from going through the annual audit letter drill, then let’s stop already."

And Bloomberg notes a recent disqualification: "Firm’s Contacts With Tainted In-House Counsel Require Vicarious Disqualification From Case" --
  • "The Perkins Coie law firm must be disqualified as defense counsel in major patent infringement litigation because it presumably obtained confidential information about the plaintiff through its contacts with one defendant’s “outside in-house counsel” who previously represented the plaintiff in matters involving three of the four patents at issue in the lawsuits."
  • "Judge Dean D. Pregerson conceded that Perkins did nothing wrong and that the case did not involve a typical imputed disqualification scenario. But California law mandates Perkins’s removal on these facts, he concluded."
  • "Pregerson stressed that this decision was not attributable to any unethical behavior on the law firm’s part. Instead, he pinned the problem on two entities: OpenText itself and Crowell & Moring, a law firm that counseled OpenText and allowed one of its attorneys to work as a temporary “outside in-house counsel” for the company despite that attorney’s employment history, which included a stint on a patent litigation team with a firm that represented j2 in several similar disputes."

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