Monday, November 11, 2013

When Conflicts Cost (Firm Sanctioned)

The always excellent Legal Ethics Forum highlights a recent conflicts decision "Boies Schiller's Conflict According to Judge McMahon" which concerns a $350 million antitrust suit --
  • "Judge Colleen McMahon (SDNY) has ordered Boies Schiller (“BSF”) to pay the legal fees of a former client (“Host”) that it sued. She held that the law firm had failed to detect a disqualifying conflict, causing Host to incur fees to prepare a disqualification motion. The firm withdrew before the motion was filed, following a meeting with Host’s current counsel, but not until two months after Host asserted the conflict. "
  • "The opinion is a painstaking (and for some painful) walk through the conflicts that Judge McMahon says the firm failed to discover or for a time even acknowledge. And it is quite critical not only of the firm but also of the outside ethics lawyer, Michael Ross, whom the firm hired to advise it after Host asserted the conflict. McMahon's characterizations of Ross's work should be instructive for lawyers asked to advise law firms."
  • "'A clearer conflict of interest cannot be imagined,' McMahon concluded. 'A first year law student on day one of an ethics course should be able to spot it."  Of course, first year law students don’t take ethics classes most places.'
Read the complete decision for details. For its part, Boies Schiller disagrees. See additional details and analysis via Reuters: "Scathing conflicts decision v. Boies Schiller: What’s enough checking?" --
  • "According to McMahon, ethics advisers from inside and outside Boies Schiller should have needed 'but a moment' to realize that its position in the Madison suit was untenable. It was attempting to assert on Madison’s behalf that an agreement Boies Schiller actually advised upon in 2002 was a sham, McMahon said, which meant that Host might call Boies lawyers who advised on the Marriott agreement as witnesses to defend against Madison’s claims."
  • "As McMahon’s opinion recounts, Boies Schiller acknowledged its conflict and withdrew from the case in February. She said Boies’s realization came more than two months too late and ordered the firm to reimburse all of Host’s fees and costs for investigating and litigating the conflicts question."
  • "Clearly, the investigation was insufficient or it would have revealed the irreconcilable conflict that ultimately led Boies to withdraw. But Boies contended in its brief opposing sanctions that part of the responsibility lies with its former client Host, which did not provide Boies Schiller with a precise explanation of the firm’s conflict and left Boies’s outside counsel and deputy GC to review 40 boxes of 10-year-old files without focus. Boies Schiller argued that it 'continuously made good faith efforts to understand and evaluate Host’s conflict.'"
  • "Boies Schiller put out a statement after the ruling: 'We are disappointed in the court’s ruling, which was made without an evidentiary hearing and ignored crucial, undisputed facts,' it said. 'We believe the ruling is wrong and its intemperate language, and the amount of sanctions awarded, wholly unjustified. We are confident that once the facts are fairly and properly evaluated on appeal, the ruling will be reversed.' The statement reiterated that Host refused to tell Boies Schiller why it believed the firm was conflicted and that Boies Schiller withdrew as soon as it understood the basis for Host’s demand."
With regards to conflicts review, Legal Ethics Blog contributor Milan Markovic, associate law professor at Texas A&M notes:"If the opinion is accurate, BSF and its expert not only overlooked a rather obvious conflict but misrepresented the nature of its investigation of the conflict to its former client. For example, BSF claimed to do a keyword search through its electronic files and yet missed documents that contained the keywords and would have shed light on the conflict."

With the stakes high, the landscape becoming increasingly complex, and information and process challenges growing, it's clear why many firms are pursuing more advanced conflicts management software approaches in response.

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