Wednesday, September 14, 2016

Disqualification Discussions



Via the New York Law Journal: "Big Firm/Small Firm—Size Matters for Attorney Disqualification" --
  • "When it comes to imputing conflicts of interest, size really does matter. This much is clear from two recent decisions of the U.S. District Court for the Southern District of New York. At one end of the spectrum, Judge Naomi Reice Buchwald disqualified a small firm, notwithstanding the firm's immediate creation of a substantial ethical wall when a lawyer with a conflict joined the firm. At the other extreme, Judge Jed S. Rakoff denied a motion to disqualify where a large firm concurrently represented both sides of a litigation, notwithstanding his finding that the firm had violated ethical rules and had been grossly negligent in failing to conduct an adequate conflict check."
  • "In contrast to Judge Buchwald's treatment of the small firm in Energy Intelligence Group, Judge Rakoff denied a motion to disqualify a large national firm in Victorinox v. The B & F System,4 where attorneys within the firm had represented opposing parties, albeit in different matters, without a formal screen."
  • "In November 2015, the defendant's Locke Lord lawyer in Texas received an internal email related to the New York litigation and recognized the conflict. He consulted with the firm's ethics partner, and sent a letter nearly a month later to the defendant terminating the representation, ostensibly for economic reasons, without mentioning the conflict of interest. The firm did not set up an ethical wall, and the Texas lawyer testified before Judge Rakoff that he set up his "own wall" separating himself from the New York lawyers in Locke Lord representing plaintiffs."
  • "Citing Hempstead Video, Judge Rakoff began his analysis with the observation that "[c]oncurrent representation of parties on opposing sides of a litigation is a prima facie conflict of interest." He found that Locke Lord's representation was a violation of the New York Rules of Professional Conduct, specifically Rule 1.7, and the court's Local Rule 1.5(b)(5). He went on to hold that these violations resulted from gross negligence because, when merging with the firm that originally represented plaintiffs, Locke Lord had limited its conflict check to matters on which that firm had billed $100,000 or more in one or both of the previous two years. Judge Rakoff remarked that the firm never completed a full conflict check "because the firm decided it was just not worth it to comply with its ethical obligations.""
  • "Finally, Judge Rakoff held that the letter from the Texas lawyer terminating the representation of the defendant was "misleading on its face," inasmuch as it cited economic reasons for ending the relationship when the conflict was the precipitating factor."
  • "Notwithstanding his obvious displeasure with Locke Lord's conduct on multiple scores, Judge Rakoff concluded that the Texas lawyer's conflicts should not be imputed to the New York team representing the plaintiffs and denied the disqualification motion. He found no evidence that there had been any exchange of pertinent information between the Texas lawyer and the New York lawyers representing plaintiffs, despite the presumption that the conflict should be imputed to the firm as a whole. Judge Rakoff also found, without elaboration, that the matters on which Locke Lord represented the defendant in Texas were "very substantially different" from the matter on which it represented the plaintiffs in New York. Finally, he was swayed by the fact that no present conflict existed because the concurrent representation ended in December 2015."

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