Wednesday, October 29, 2014

Law Firm Conflicts Cleared

"Judge Tosses Shareholder Suit, Finding No Counsel Conflict" --
  • "A federal judge in Newark has dismissed a shareholder suit claiming hotel operator Wyndham Worldwide failed to fend off breaches of its computer networks and then declined to litigate against the employees responsible for allowing the breaches based on advice from conflicted counsel."
  • "The judge rejected the plaintiff’s claim that the law firm representing Wyndham in the shareholder suit, Kirkland & Ellis, had a conflict of interest because it also represented the company in a separate suit related to the hacking incidents that was filed by the Federal Trade Commission."
  • "In an attempt to demonstrate Wyndham’s directors acted in bad faith, Palkon claimed that the company wrongly refused his litigation demand based on advice from conflicted counsel. He relied on Stepak v. Addison, an Eleventh Circuit case from 1994. In that case, a company’s outside counsel was found incapable of evaluating a shareholder demand because the same firm had represented the company in related criminal proceedings. The panel in Stepak found the law firm had divided loyalties to the client because its continuing duty to preserve the confidences of its clients in the criminal case hampered its investigation of the subsequent shareholder allegations."
  • "But Chesler said Kirkland & Ellis did not face the same conflict as the firm in the Stepak case because its obligations were to act in Wyndham’s best interest in both the FTC case and the shareholder case, Chesler said."
"Gibson Dunn Ducks Slap for 'Troubling Conduct'" --
  • "A federal judge considering conflict-of-interest claims against Gibson, Dunn & Crutcher sided Thursday with the powerful law firm. Though she said Gibson Dunn 'engaged in troubling conduct' in HLP Properties LLC v. Consolidated Edison Company of New York, U.S. District Judge Lorna Schofield found no need to disqualify its lawyers from the case."
  • "The finding comes in a lawsuit by Manhattan developer HLP Properties to make Con Edison's subsidiary pay $24 million for the cleanup of a site once known as the West 18th Street Gas Works."
  • "Though Schofield found that Gibson Dunn lawyers had met with Con Edison representatives about the environmental dispute "on at least four occasions" between those years, Con Edison's subsidiary did not cry foul about the alleged conflict until 2014."
  • "Schofield found "no indication of an actual or apparent conflict in loyalties," but said Gibson Dunn should have sought waivers from both parties to guard against the potential for one. The judge also suggested that Con Edison's lawyers may have drummed up controversy for "tactical" reasons. To avoid leaving HLP without its longtime legal team, Schofield refused to disqualify Gibson Dunn. 'Were it not for this consideration, the outcome of this motion might well have been different,' her opinion states."

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