Friday, July 24, 2015

Vereins: Very Interesting Conflicts Considerations (and News)


Bloomberg BNA has a fascinating update and analysis: "Dentons’ Disqualification and Legal Advertising: Stir But Don’t Shake" --
  • "The Swiss verein enables member firms operating under the Dentons brand to maintain their own finances while tapping into the global brand’s robust sales and marketing machine and technology. The structure also facilitates the firm’s rapid entry into new markets, helping it to circumnavigate potential regulatory roadblocks without seemingly breaking stride."
  • "But there are also downsides to the Swiss verein — not just for Dentons but also for the other half-dozen behemoth firms that share the structure. For example, profits cannot be shared between constituent partnerships, a constraint that removes incentives for lawyers in member firms to share clients and work with attorneys in other member participants operating under the global brand."
  • "Dentons stumbled recently when it was disqualified from representing an Ohio company in a patent suit against Gap, Inc., a current as well as long-time client. Conflicts are a serious challenge for all law firms; they are the most common basis for legal malpractice claims. The larger and more geographically dispersed a firm becomes, the more serious the potential for conflicts and the more pressing the need for uniformly applied prophylactic measures to avoid them. So what makes the Dentons disqualification so noteworthy that it could have a chilling impact upon the Swiss verein structure for law firms?"
  • "Judge Bullock ruled that Dentons should be disqualified. In so doing, he not only considered the procedural history above, but also rejected the Dentons contention that as a Swiss verein, its representation of Revolaze against Gap by its US member firm immunized it from conflict and access to Gap’s proprietary data resulting from the Dentons Canada representation of Gap."
  • "Translation: If you represent yourself to the public as Dentons, then you will be held accountable as Dentons whether you have a Swiss verein structure or not."
  • "The bottom line is there are inherent risks of conflicts and proprietary data disclosures endemic to the verein structure — risks which Judge Bullock’s decision makes clear cannot be avoided by asserting the legal separateness of member firms. This does not mean that the verein structure is necessarily doomed or inimical for law firm adaptation. It does, however, underscore the far more onerous burden on Swiss verein firms to ensure that conflicts are avoided and that maintenance and protection of proprietary client data is not subject to compromise even between and among the individual member firms within the global brand."

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