Wednesday, November 2, 2016

Halloween Holdover: Risk Updates

Anyone who's been reading this blog for any amount of time has likely observed a slight predilection to keeping all of this risk news and commentary interesting (if not exactly edgy). So it's with delight that I highlight the creative spirit of the folks at Hinshaw for their latest newsletter. Points for creative adjectives and colorful metaphors.
  • "The editors of the Halloween edition of the Lawyers' Lawyer Newsletter invite you to enjoy frightening tales of shocking assaults by non-clients on an unsuspecting law firm; a lawyer's nail-biting escape from a disqualification motion thanks only to a less-than- diligent client; the slow motion nightmare of a lawyer's desperate and sometimes failed struggle for freedom when a client can't be contacted; and the gruesome results of an overly broad scope of engagement description. We hope these horror stories will frighten and delight just in time for All Hallows' Eve."
Disqualification — Substantially Related Matters — Waiver of Conflict by Lack of Diligence in Seeking Disqualification. State of Minnesota, et al v. 3M Company, Hennepin County (Minn.), Court File No. 27-CV-10-28862 (Feb. 5, 2016)
  • Risk Management Issue: Does a client waive its former attorney's conflict of interest by failing to promptly seek disqualification after the conflicted attorney undertakes representation of a party adverse to the former client?
  • Risk Management Solution: If there is an actual conflict on the part of an attorney who is representing a party adverse to the former client, it is imperative that the former client immediately — or at least very promptly — seek to disqualify the conflicted attorney as soon as the adverse representation becomes known. Without prompt action, the former client risks waiving the conflict and foregoing the right to seek disqualification of its former attorney — even though the attorney has knowledge of privileged information and attorney work product from a prior matter which is (or may be) substantially related to the current case. However, the law firm would nevertheless continue to be found to preserve the former client's secrets and to not to use them to the detriment of the former client.
  • Trick or Treat Editors' Note: This case is an unexpected treat for a lawyer facing a disqualification motion, if a former client fails to promptly seek disqualification after the conflicted attorney undertakes representation of a party adverse to the former client.
Disqualification — Overly Broad Scope of Engagement Creates Concurrent Representation Conflicts. M'Guinness v. Johnson et al., 243 Cal. App. 4th 602 (2015)
  • Risk Management Issue: What can counsel for a closely held corporation do to avoid disqualification in the event of shareholder disputes?
  • Risk Management Solution: This case highlights the importance of crafting engagement agreements in order to define in detail the structure and scope of the representation. A lawyer's eagerness to be a "jack of all trades" for a single client may appear to be good for business, but it could also expand the scope of duties owed to the client and thus the lawyer's malpractice exposure. Or, as in this case, it could lead to subsequent conflicts of interest and disqualification. Engagement letters need to be crystal clear about the scope of the representation, including the identity of the client and the method of termination, and abide by those terms. See also, Cal. Bus. & Prof. Code § 6147 (governing contingency fee agreements) and § 6148 (governing noncontingency fee agreements).
  • Trick or Treat Editors' Note: This case could be either a trick or a treat. For lawyers who don't specify the scope of their engagement, this case is a trick; but for lawyers who spend the time to carefully outline the scope of the engagement, it's a treat. If you've read our newsletter faithfully, we expect it will be the latter.
Like, zoinks — Several other frights in their complete update.

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