Thursday, February 5, 2015

Disqualifications Decided and Deconstructed



Two interesting stories to share. First: "Mayer Brown Tested (and Ultimately Failed) the Limits of Implied Waiver" [Decision] --
  • "Mayer Brown was disqualified from representing Defendant HSBC Finance Corporation in the District of Minnesota.  Mayer Brown had previously represented the Plaintiff Residential Funding Company (RFC), and the district court was quick to find a former client conflict:
  • "'RFC presented extensive evidence that the matters on which Mayer Brown previously represented RFC were substantially related to the instant litigation and, as a result, Mayer Brown was precluded from representing HSBC against RFC, absent its consent or waiver of its right to seek disqualification... the only basis for Mayer Brown’s opposition to the motion to disqualify is that by waiting six months to bring this motion, RFC waived its right seek disqualification.'"
  • "Here, Mayer Brown argued that RFC knew about the conflicted representation for six months before RFC moved to disqualify the firm (and to Mayer Brown’s credit, several courts have concluded that a delay of six months, or even less, forfeits the disqualification remedy).  The problem, though, is that the district court disagreed with Mayer Brown that RFC had known about the conflicted representation for six months. Mayer Brown premised the knowledge argument on a casual voicemail that its lead partner had left for RFC’s counsel."
  • 'RFC’s counsel, however, was later able to retrieve the actual voicemail for the court, and the court found the voicemail much more 'ambiguous' than the affidavit had indicated."
"Appellate Panel Rules Against Attorney Disqualification Twice" --
  • "In a case last month, a unanimous panel upheld a ruling that Kilpatrick Townsend & Stockton should not be disqualified from representing a nominal defendant in, Stilwell Value Partners v. Cavanaugh, 6530112011."
  • "And last week, another unanimous panel, interpreting what defines "substantial harm" to a prospective client when determining if an attorney should be removed, reversed a Commercial Division ruling that disqualified an attorney based on Rule 1.18, which was added to the Rules of Professional Conduct (22 NYCRR 1200.0) in 2009. That case is Mayers v. Stone Castle Partners, 650410/2013."
    "In an unsigned opinion Dec. 30, the appellate court said that a minority shareholder failed to show a conflict of interest existed in Kilpatrick representing directors who sit on the boards of a mutual holding company and the publicly traded company that owns a bank and in which the mutual holding company is the majority shareholder."
  • "Stilwell asserted that there was an inherent conflict of interest in Kilpatrick representing the defendant directors, majority shareholder MHC and NECB, a nominal defendant on behalf of which the shareholder derivative action was brought. However, Jonathan E. Polonsky, a partner at Kilpatrick, at the hearing said the motion to disqualify was a defense tactic to require two firms to staff the case and increase the pressure on the defendants to settle the shareholder derivative lawsuit because of deepening costs."
  • "At the hearing, Ramos agreed the motion was a tactical move when he learned that Neupert had engaged in settlement discussions with the supposedly conflicted Kilpatrick. 'If you’re going to take the position that the conflict crystalized when I denied the motion to dismiss, at that point, I would have a great deal of respect for a motion made to disqualify counsel,' Ramos said at the hearing last year. 'If you’re going to be consistent, you wouldn’t speak to them because they would be conflicted. You wouldn’t talk settlement. The only thing you would do is demand they obtain separate counsel.'"
  • "Ultimately, Ramos found that Stilwell waived the conflict."

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