Tuesday, January 26, 2016

Fox First to Guard its Own HIPAA Henhouse (Law Firm Risk, Privacy & Compliance)

With (slight) apologies for the punny title, we note the important development highlighted by the Legal Intelligencer: "Fox Rothschild Creates HIPAA Privacy Officer Role" --
  • "The firm announced health care ­regulatory partner Elizabeth G. Litten as its first privacy officer focused on ensuring the firm is protecting sensitive health information it receives from clients and employees. The news follows Fox Rothschild's naming last year of partner Mark McCreary as chief privacy officer."
  • "But for Fox Rothschild, it was important to keep separate the role of protecting health information. Litten said requirements under the Health Insurance Portability and Accountability Act are much more complex than some people might realize. She said lawyers and staff of the firm should know who they can call when they receive potentially protected health information."
  • ""We always thought that with an active health care practice, we are bound to have a certain amount of [protected health information] and we want to do everything we can to avoid a breach,' Litten said. The firm has never had a breach as far as Litten is aware, and it wants to make sure it has the policies, procedures and training in place to ensure that doesn't happen. "Shame on us if we don't take our own advice," Litten said of doing internally what the firm's health care lawyers counsel clients about."
  • "In her new role, which will be in addition to her daily practice, Litten will make sure Fox Rothschild has policies and procedures to handle protected health information, and trains attorneys on what is protected health information. Litten said it is important to know what is and what is not protected information under HIPAA because lawyers shouldn't give clients the wrong impression about the level of privacy and security surrounding their information. 'We treat all information as confidential of course, but there is an added layer of protection when it comes to HIPAA,' Litten said."
We've covered the impact of evolving HIPAA regulations on law firms for several years (including the significant 2013 Omnibus Rule changes). That history includes commissioning a survey on the topic, and noting several articles and updates. [See here and here.]

(We have also noted steps firms have taken to adopt security and confidentiality management software specifically as part of effort focused on HIPAA compliance. And now also note that the very firm that's the focus of this update for its expanded risk staffing approach, publicly highlighted a previous  investment in enhancing confidentiality management nearly six years ago.)

Monday, January 25, 2016

Conflicts Survey Shows Speed is Staggeringly Crucial

A recent conflicts survey conducted by HBR Consulting surfaces interesting details on the current state of the conflicts world: "Survey Reveals Need for Speed in Conflicts Clearing of Laterals, New Business" --
  • "A recent HBR Consulting Conflicts Clearing Survey of 12 members from a cross section of nine AMLAW 100 law firms and three Magic Circle law firms, confirmed the increasing urgency. Competition for high profile lateral attorneys and new business are primary drivers of the heightening pressure for fast and efficient conflicts clearing."
  • "Time to clear conflicts can win or lose business... According to the HBR conflicts survey, 58 percent of firms have lost business in the past 12 months due to a conflict clearing delay. In contrast, 75 percent of firms said client reporting suggests they have won work due to prompt conflicts clearance. Aside from the survey, there is anecdotal evidence from several firms indicating that delays in the conflict clearing process at least partially contributed to laterals going elsewhere. At a time when all aspects of a firm are under scrutiny, ability to check and clear conflicts at a fast pace is another indicator of a firm’s general operational effectiveness."
  • "Sluggish conflicts clearance can contribute to unhappy clients. When a firm wins new business, but has a misstep early in the process, a client may quickly develop and continue to hold a negative impression of the firm’s services. So, it should be a concern when 25 percent of survey participants said their clients have reported dissatisfaction at a conflict clearing delay. And some firms – 17 percent according to the survey – experienced both client loss and dissatisfaction due to conflict clearing delays."
  • "Firms are using a wide variety of staffing approaches. The survey showed a wide divergence in both the number and types of personnel (attorneys v. analysts v. clerks) in the conflicts groups. In fact, the standard deviation for the survey’s attorney-to-conflicts staff ratio was a surprising 23-to-1. There are too many variables to determine conclusively whether more personnel speeds up the clearing process, but in most operational improvement initiatives it takes more than adding resources to improve the end result."

Sunday, January 24, 2016

Industry Conflicts Trends & News (Secondee and Screening Edition)

BNA Bloomberg highlights a fascinating conflicts scenario and decision coming out of the U.S. District Court for the District of New Jersey: "‘Seconded' Lawyer Remained ‘Associated' With Firm Under Rule 1.10" --
  • "A law firm that includes a former in-house counsel of a medical technology company is disqualified from suing the company even though the lawyer was “seconded” to another client of the firm and in that capacity is doing no work on the firm's behalf..."
  • "That lawyer, Ritu Hasan, was 'seconded'—temporarily transferred—to another client of the firm, and in that capacity she 'shall not continue to work on behalf of the firm' during the secondment... The firm argued that Hasan's conflict cannot be imputed to Blank Rome under New Jersey Rule of Professional Conduct 1.10 because during the secondment she is not “associated” with the law firm."
  • "The court saw things differently. Arleo noted that in several ways Blank Rome continues to hold out Hasan as a Blank Rome lawyer, including references to her as such on its website. Therefore, the judge said, Hasan's personal conflict under Rule 1.9 must be imputed to the law firm under Rule 1.10. The firm did not fulfill Rule 1.10's requirements to escape imputation through effective screening, Arleo said."
  • "Blank Rome said the measures it took after Boston Scientific alerted the firm to Hasan's conflict satisfied the requirement in Rule 1.10(c)(2) to ensure that a 'personally disqualified lawyer is timely screened' from a matter. Arleo disagreed. 'To be timely, screening should have been performed at the time of Ms. Hasan's hiring,' she said. The court said it also could not credit Blank Rome's assertion 'that there was a de facto screen because Ms. Hasan was almost never at the firm and did not communicate with firm attorneys about confidential information.'"

Thursday, January 21, 2016

Risk News and Notes (or When Dentists Cause Pain for Lawyers)

Joseph A. Corsmeier flags fascinating news: "Washington State Bar suspends some ethics opinions because of antitrust concerns arising from 2015 U.S. Supreme Court opinion" --
  • "...the Washington State Bar Association has advised its ethics committee to stop issuing ethics opinions which could be interpreted as having the effect of restraining trade in the legal services market. The bar stated that it suspended the opinions so it could 'proceed very deliberately' in the wake of the U.S. Supreme Court’s February 2015 opinion in North Carolina State Board of Dental Examiners v. Federal Trade Commission."
  • "That U.S. Supreme Court decision permitted an antitrust action against the North Carolina state dentistry board for its decision prohibiting non-dentists from whitening teeth to proceed. The opinion stated that when a state board is controlled by active market participants in the market it regulates, state-action antitrust immunity cannot be applied unless the restraint of trade is affirmatively expressed by state policy and the policy is actively supervised by the state."
Karen Rubin at Thompson Hine reminds:"Dabbling in other practice areas can bring disciplinary, malpractice woes to lawyers"--
  • "Many lawyers begin to dabble when business slows down or dries up in an area they have become familiar with.  That was common during the last economic downturn.  It’s hard to measure the impact of dabbling on the incidence of malpractice complaints, but it seems to be responsible in a measurable way for disciplinary complaints against lawyers who do not prepare themselves adequately to face the challenge of doing a new kind of work."\
  • "Richard A. Dove, director of the Ohio Supreme Court’s Board of Professional Conduct (the adjudicatory arm of the state’s lawyer discipline system), said 'We see several disciplinary cases each year in which lawyers, often due to economic pressures, extend their practice beyond their areas of competence. This includes not only legal competence but competence in the use of technology prevalent in the practice of law.'"
Bloomberg BNA discussions how market trends and frim structure affects the conflicts landscape: "So Many Conflicts, So Many Contexts" --
  • "Large law firms offer many benefits, but avoiding conflict issues is not one of them. First, there is the internal politics emanating from conflicts involving existing and prospective clients. Each partner wants to have their client win the conflict battle — and the firm can generally represent just one. The winner is usually the partner with seniority (read larger book of business) or the client with larger fee potential. It’s a Darwinian struggle — and that’s just the internal side of it."
  • "Then there’s the problem of multiple offices and the structure of the firm. If the firm is “unified” in more than just the brand sense, then conflict rules can be an impediment to client development. This issue affects who comes to the firm, who stays, and who goes."
  • "Until recently, many thought the Swiss verein — a structure favored by some of the world’s largest law firms (as well as the Big Four) — provided shelter from the harshness of conflict rules. After all, each “member” firm in the verein had its own P&L and juridical independence. But that was shattered in a recent conflict case involving Dentons. Ruling on a disqualification motion brought against Dentons by Gap (a client of one firm verein member and adverse party to another)..."

Wednesday, January 20, 2016

Looking at Lateral Movement (New Developments, New Approaches, New Risks)

  • "California’s Fourth District Court of Appeal found that a partner’s status as 50% shareholder of a law firm did not give rise to a conflict of interest which would preclude the firm’s counsel from defending the firm and another partner against the departing partner’s lawsuit.  (See Coldren v. Hart, King & Coldren (2015) 239 Cal.App.4th 237.)" [Decision]
  • "The Court also found that under the facts specific to that case, the departing partner did not have standing to bring a motion to disqualify the firm’s counsel based on an alleged conflict of interest. The Court’s analysis in this matter is helpful in guiding not only attorneys who are considering whether there is a conflict with such dual representations, but for law firm’s handling the transition of departing partners and who want to avoid potential conflicts in representing the firm’s interests in such disputes."
And a reader sent a pointer to an excellent (and wonderfully detailed) article on applying new technology to streamlining lateral lawyer movement: "Solutions to Bring Order to Lateral Attorney Vetting" --
  • "While law firms often welcome lateral moves due to the influx of experienced talent and new clients, these moves create challenges and considerations for law firm administrators. Any serious dialogue between a potential lateral attorney candidate and firm involves the candidate sharing sensitive, detailed information regarding their salary, client list, work history and professional relationships."
  • "Any recently hired lateral attorney brings to their new firm a significant volume of digital and physical client material to support past and ongoing work. The potential receiving firm needs to vet the candidate for financial, business strategy, and most importantly potential client conflicts."
  • "A firm courting lateral candidates should aim to demonstrate good practices for protecting sensitive data during this lateral candidate vetting process. As discussions between a candidate and a firm progress, imagine a lateral candidate receiving an e-mail from the firm with a link that brings the attorney into a secure and well-structured online data collection tool or web portal. This interaction can guide a candidate through providing client and matter history as well as documenting influential professional relationships and key financial information."
  • "Steering a candidate towards an electronic information collection portal that sits on top of a workflow product can feed information to the appropriate downstream people and systems during and after a lateral candidate evaluation process."
  • "Financial performance data regarding past and projected billings for a lateral candidate or their clients can be passed along the lateral attorney evaluation workflow to internal financial analysts to evaluate the financial impact this lateral could have on the firm."
  • "A centralized interface that can collect and harbor the pertinent information supplied by a lateral candidate during the vetting and onboarding stage can serve as an efficient way to maintain sensitive information and then feed it out to the necessary groups in the firm for conflict searching, financial analysis, HR onboarding, IT provisioning, tracking waivers or client authorizations, and inventorying the receipt of approved supporting client files."

Tuesday, January 19, 2016

Laterals, Leaking Confidential Information (and a SLAPP)

Two interesting stories on lateral information risk. First via Law360 [subscription]: "Anti-SLAPP Law Doesn't Cover Attys' Emails, Calif. Court Says" --
  • "A California appeals court on Wednesday denied an effort by two former attorneys from law firm WHGC PLC to escape a suit accusing them of sharing confidential information with their new employer, Fish & Tsang LLP, saying emails to clients announcing the move are not protected by any anti-SLAPP statutes."
  • "A three-judge panel for California's Fourth Appellate Division found that emails sent in August 2014 by John van Loben Sels and Jennifer Shih to several current and former WHGC clients do not qualify as protected speech..."
  • Said the court: "Appellants’ emails, announcing their move from one law firm to another, have no connection with any issue under review by a judicial body...  Van Loben Sels and Shih failed to carry their burden to show that the conduct alleged in the complaint was an act in furtherance of their right of petition or of free speech in connection with a public issue."
Two Dentons partners write[via The Recorder]: "Keep Control of Your Firm's Digital Data" --
  • "Many law firms issue or subsidize laptops for their attorneys. So what happens when attorneys move between firms? Can they take their laptops with them? This very issue has arisen in lawsuits between law firms. The law firm from which the attorneys departed may have concerns that laptops contain sensitive, proprietary or client confidential data; the law firm that hired the departing attorneys may want to ensure that its new employees can transition their practice seamlessly."
  • "Today, departing attorneys can take information—a law firm’s most valuable commodity—without taking a single box of files or photocopying a single sheet of paper. Forms, client contact information, and client files can be taken with the single stroke of a computer key. Controls aimed at protecting or securing hard copies are largely meaningless in today’s electronic world."
  • "Control is essential to a law firm’s ability to fulfill its obligations to protect not only client confidences and secrets but also its business interests. In a business where time is money, control is inversely related to efficiency. In other words, the more difficult that firms make access to information, the less efficient attorneys can be. Less efficiency inevitably translates to less money."
  • "Today’s law firms must maintain a delicate balance by implementing controls sufficient to fulfill ethical and professional obligations (and to protect their most valuable asset), but not so formidable as to hinder the law firm’s ability to make money. To strike this balance, firms must shift their focus from physical possession of client information to 'virtual' control."
See the complete article for more detail (including relevant professional standards and case law) and recommendations, as well as previous blog coverage on this topic.

Some organizations are using technology tools to monitor abnormal lawyer document activity and provide early warnings by watching for unusual activity. This approach can give management early visibility so they can investigate and address any concerns before they become serious crises. (Interested readers can learn more about Intapp Activity Tracker  and read a few testimonials from firms making use of the technology as a risk mitigation strategy.)

Monday, January 18, 2016

Concerns about Commercial Conflicts Come to a Climax (IP Matters, Malpractice Allegations & More)

The one (which we last covered in September) has made several headlines over the past few weeks. The net results have been welcomed by many, while highlighting new conflicts management considerations, standards, and complexities for all.

 "Massachusetts Court Clears Patent Prosecutors of Malpractice Claims Arising From Representation of Clients in Same Technology Area" --
  • "The Massachusetts Supreme Judicial Court Wednesday affirmed a lower court’s dismissal of a legal malpractice suit finding that, 'simultaneous representation by a law firm in the prosecution of patents for two clients competing in the same technology area for similar inventions is not a per se violation,' of certain Massachusetts attorney professional conduct rules."
  • "The case was brought by Chris Maling, who hired patent prosecuting attorneys at Finnegan Henderson to prosecute a set of patent applications relating to screwless eyeglass hinges. According to Maling’s complaint, Finnegan was representing his competitor in the screwless eyeglass market, filing patent applications for that competitor. Maling claimed that he would not have hired Finnegan if he had known that the firm was representing the competitor in the same 'patent space.'"
  • "Maling further alleged that he was harmed when he asked the law firm to provide him with a legal opinion addressing similarities between Maling’s patents and the competitor’s patents, and the firm declined to do so."
Full opinion here

Additional background and the facts and history of this matter: "Law Firms Tell Mass. Supreme Court No Subject Matter Conflict In Patent Prosecution Unless Claims 'Identical' Or 'Mere Obvious Variants.'"

And additional analysis worth attention: "Finnegan's Malpractice Win Comes With Warning For IP Attys" --
  • "...welcome news for intellectual property attorneys who feared the court could bar firms from representing multiple clients in similar fields, but the ruling sends a message that all firms must be vigilant to avoid conflicts, experts say."
  • "'This is the first decision by any court in this area of the law' regarding conflicts in patent cases, Stewart said [Paul Stewart, Knobbe Martens Olson & Bear]. 'It was completely untested. Firms had been doing this consistently for years, but it was based on no law at all, just what seemed to make sense.'"
  • "While the court found that there was no conflict of interest in Finnegan's representation of the two eyeglass makers in this case, it stressed that representing competing companies with similar inventions could give rise to ethical violations in other factual scenarios. The opinion admonished firms to carefully police their cases to avoid conflicts, 'no matter how complex such a protocol might be.'"

Wednesday, January 13, 2016

Client Service, Business Advice & Engagement Letters

The latest edition of the always excellent Hinshaw Lawyers' Lawyer Newsletter contains several updates, including: Limiting the Scope of Engagements — Duty to Provide Advice on
Transactional (Business) Risks
[Peterson v. Katten Muchin Rosenman LLP, 792 F.3d 789 (7th Cir. 2015)]. --
  • "The Funds' bankruptcy trustee sued the firm, alleging that it breached its duties to the Funds by failing to advise Bell that having no direct contact with Costco, and receiving no money directly from Costco, suggested that Petters' business was fraudulent."
  • "In reversing the district court's ruling, the appellate court rejected a 'bright line'  between business advice and legal advice, recognizing that a transactional lawyer  must counsel the client on the level of risk inherent in different legal structures, and draft and negotiate contracts that protect the client's interests. In general, it is the role of the transactional attorney to provide legal advice on the best security for a transaction, to inform the client's business decision based on that legal advice. Where the lawyer fails to recognize the need for the advice, the representation is inadequate; however, where the advice is provided, but the client rejects the advice, in general, the attorney has met the standard of care and need not badger the client."
  • "Notably, the appellate court recognized that 'the scope of engagement' in the engagement letter establishes the  lawyer's role and duties. Where retained to provide advice on how to structure transactions, the attorney has a duty to advise the client on the relevant legal forms available, and the risk associated with the various forms. However, the transactional lawyer has no duty to question either the client's business objective or the client's business relationships."
  • "Risk Management Solution: This opinion emphasizes the need to include a carefully drafted and detailed scope of engagement in every written engagement letter. Where retained to provide legal advice related to business transactions, the lawyer must ensure that the client acknowledges, and is in agreement with, the scope of the engagement. Transactional attorneys are not retained to provide business advice. However, lacking an appropriately described scope of retention, a transactional lawyer will be held to the standard generally applied, including the need to recognize and counsel on the risk associated with various legal structures."
See this post for previous discussion on industry engagement letter trends, perspectives and management strategies.

Tuesday, January 12, 2016

Conflicts, Costs, Cash and Contentions (In-house to Firm, Screening, Class Actions & More)

Two interesting stories in the news, touching these themes:

"Boston Scientific Can't Get Fees From Blank Rome DQ" --
  • "Boston Scientific will not get attorney fees out of their successful bid to disqualify Blank Rome counsel from the False Claims Act suit against the company, after a New Jersey federal judge ruled Tuesday the firm did not extend the proceedings by failing to drop out."
  • "U.S. District Judge Madeline Cox Arleo wrote that although she had disqualified Blank Rome because of a conflict with one of the firm’s attorneys, Ritu Hasan, her disqualification did not extend to fees because of its unique nature. Hasan was previously employed as in-house corporate and compliance counsel for Boston Scientific and worked on internal investigations directly related to some of the issues in the case, according to court documents."
  • "Blank Rome did not screen her from communicating with the attorneys working in the instant case, the firm did not bar her from collecting any fees associated with the case and it did not give a heads-up to Boston Scientific about the issue, Judge Arleo concluded in the November decision."
  • "'The motion raised a novel conflict of issue not previously addressed by any court,' the judge’s order said. 'Accordingly, Blank Rome’s failure to withdraw did not ‘unreasonably and vexatiously’ prolong the proceedings.'"

"Class Actions, Cash and Conflicts?" -- 
  • "Potential conflicts in lawyers’ fees. A class action suit over Sony’s PlayStation 4 reveals the importance of knowing how your lawyer is being paid. Class action settlements usually attract headlines for their large numbers. But a recent class action settlement involving Sony Corporation and its PlayStation 4 deserves headlines for its small numbers."
  • "The class action litigation was settled with each purchaser to receive $20 as reimbursement for shipping charges, meaning the value of the settlement was a measly $8,000. The settlement also required Sony to pay $4,500 to the two plaintiffs who started the litigation, along with legal fees to be paid to the MLG in an amount to be determined by an Ontario court."
  • "Determining the appropriate level of fees fell to Ontario Superior Court Justice Edward Belobaba. The MLG argued it ought to receive a fee of between $120,000 and $225,000."
  • "Let’s pause here. Under what legal system could any lawyer expect to receive a fee of even $120,000 for achieving a settlement paying out $8,000 to consumers?"
  • "But Belobaba didn’t just reduce the fee sought to $30,000. He also took aim at the unwritten fee arrangement which provided that the MLG would only be paid legal fees by the defendant. No fees were to come out of the settlement or be payable by the class representatives. Belobaba viewed this fee arrangement as creating a potential conflict of interest between the members of the class action and their lawyers. He viewed the fee arrangement as one that might 'encourage premature, sub-optimal settlements negotiated by class counsel, trying to extract an almost risk-fee payment for themselves."

Monday, January 11, 2016

2016 Legal Risk Events of Note

Several upcoming risk events of note:

Is it time to replace your outdated Records Management System?”
New York, on Wednesday, February 3rd
  • InOutsource and FileTrail are hosting a Lunch and Learn. FileTrail is a modern records platform that is easy to deploy with features to enable law firms to comply with their information governance policy. FileTrail’s retention review module stands alone in the marketplace. FileTrail is browser-based, offers both a hosted and on premise solution and integrates with a variety of systems used in law firms including iManage Work and NetDocuments.
This session will likely be of particular interest to those firms looking at options to migrate from legacy LegalKEY systems, based on issues several organizations have noted and we’ve previously covered. For more information on this session, and to register, visit their event overview page.

In Chicago, running March 2-4, is the annual Legal Malpractice and Risk Management Conference. Now in its fifteenth year, this event always earns high marks. And 2016 looks to be no exception – here are a few agenda highlights:
  • Legal malpractice claims and insurance trends
  • Discussion of lawyer obligations to provide business advice (ed: an increasingly common expectation from clients are part of their growing service expectations)
  • “Phantom Clients and How to Exorcise Them”
  • • A panel on engagement letters and outside counsel guidelines
  • • A roundtable on "what's worrying law firm GCs?"
For more information and the full agenda, visit the conference web site.

Set for San Francisco April 24-27, the Intapp global user conference (Inception 2016) includes multiple risk-related content tracks, educational sessions, product information and opportunities for peer networking.
  • In addition to practical discussions focused on conflicts management, business intake, confidentiality/security, client terms of business management, engagement letters, and client evaluation, risk blog readers should take note of the all day Risk Roundtable track set for that Tuesday.
  • With topics including review of the 2016 Risk Survey (launching shortly), the Business Acceptance Maturity Model, risk staffing approaches, and more, this event offers a unique forum that’s already attracting a diverse audience of law firm general counsel/risk leaders, conflicts and intake professionals, IT leaders and IT staff.
For more information, visit the conference web site and see the complete agenda summary.

Sunday, January 10, 2016

Changing Argument Changes Conflicts Considerations (or ‘There and Back Again, a Risk Tale”)

Happy new year to our roster of regular readers. With a brief break in coverage through the end of 2015, we find several interesting developments making news, which brings to mind the paraphrased wisdom of Ferris Bueller -- Risk moves pretty fast, if you don't stop and look around for a while, you could miss it. Let's start with this story:

Three weeks ago: "BakerHostetler Tossed From $230M Russian Tax Fraud Suit" --
  • "A New York federal judge on Friday disqualified BakerHostetler and a partner from representing defendants in a civil suit over an alleged $230 million Russian tax fraud scheme after Hermitage Capital successfully argued the firm has now strategically chosen to blame the company for the fraud."
  • "U.S. District Judge Thomas Griesa had denied a previous bid by Hermitage Capital Management Ltd. to boot BakerHostetler and its partner John Moscow from the case over Moscow’s previous representation of Hermitage's co-founder William Browder, but the judge said it became “clear” during oral arguments on Friday that the firm has decided to pin 'substantial responsibility' on Hermitage for the alleged fraud."
  • Said the judge: “BakerHostetler's change in defense strategy now makes the subjects of its former and current representation ‘substantially related.' There is now a very real possibility that BakerHostetler will be in a position where it would be trying to show that its current clients (the Prevezon defendants) are not liable and showing this by attacking its former client (Hermitage) on the very subject of BakerHostetler's representation of that former client.”
However, just a week ago that bell was unrung: "Judge Rethinks Removing Baker Hostetler From Case" --
  • "Southern District Judge Thomas Griesa on Monday withdrew his opinion disqualifying Baker & Hostetler and partner John Moscow from defending real estate companies accused of laundering the proceeds of a Russian fraud scheme."
  • "But at Dec. 28 hearing, Griesa said he had reconsidered. He said he initially believed he had enough information to make the disqualification decision, but now thought it fair to have the parties brief the issue further."