Tuesday, January 31, 2017

Conflicts Allegations in the News (Playbook, Forgotten & Cleared)

Known Knowns and Unknown Knowns: "Conflict Lateral Hire Didn’t Recall Disqualifies Alston & Bird" --
  • "Alston & Bird LLP can’t defend a doctor accused of breaching a non-compete agreement with a nanomedicine company, because a lateral partner may have previously advised the company on the non-compete but couldn’t completely recall his involvement, the U.S. District Court for the District of Maryland ruled Jan. 5 ( CytImmune Scis., Inc. v. Paciotti , 2017 BL 2356, D. Md., No. PWG-16-1010, 1/5/17 )."
  • "The conflicted lawyer, Jonathan Rose, joined Alston & Bird after a four-year stint at Katten Munchin Rosenman LLP, which served as plaintiff CytImmune Sciences Inc.'s outside counsel for several years."
  • "Judge Paul W. Grimm said Rose’s work on a CytImmune matter while working at Katten meant he had to be disqualified from this case—and that Rose’s conflict was imputable to all of his colleagues at Alston & Bird."
  • "Grimm reached that conclusion even though Rose claimed to have no “recollection whatsoever of ever working with [CytImmune] while at Katten” and wasn’t even 'aware of the existence of a company called CytImmune.'"
  • "'I am left with the impression that Rose’s inability to recall the precise details of his prior work for CytImmune placed him squarely between the Scylla of [Rule] 1.9 and the Charybdis of [Rule] 1.7,' Grimm said. 'And if Odysseus could not navigate such treacherous waters, then, respectfully, neither can Rose.'"
  • "The California federal magistrate judge overseeing Leapfrog Enterprises’ trademark infringement suit against competing educational game company Epik Learning said at a hearing Tuesday that she may disqualify Cooley LLP from representing Epik since the firm has worked on similar cases for Leapfrog for 20 years, but added she wouldn’t sanction the firm."
  • "Magistrate Judge Elizabeth D. Laporte said the case posed a 'close question.' Cooley's years representing Leapfrog Enterprises Inc., often in similar matters, might help the firm understand the company’s negotiating strategy, the judge said. But representation and communication had tapered off for months before the firm notified Leapfrog it could no longer represent the company in April, Judge Laporte said, and California’s strict laws on the subject seemed to her 'outmoded' and not in keeping with the pace of modern law firm management, but instructed her to 'err on the side of disqualification.'"
  • "Judge Laporte said Leapfrog’s strongest argument for disqualification was the possible negotiating strategy that Cooley was privy to, which meant the firm would know whether Leapfrog was “the type who starts at the top, then drops like a stone” during settlement talks."
  • "But she said she found it 'troubling' that Leapfrog hadn’t accepted Cooley’s offer to withdraw as counsel and had instead opted to pursue its motion for disqualification as well as sanctions when the matter was moot. She added that if anyone was entitled to attorneys’ fees, it might be Epik Learning, which had to continue fighting the motion even after offering to find new lawyers."
Cleared: "Cooley Defeats DQ Bid In Cardtronics ATM Commissions Suit" --
  • "A California federal judge refused on Tuesday to disqualify Cooley LLP from defending ATM processor Cardtronics Inc., its Mexican subsidiary and two of its executives in a suit alleging the companies cheated a franchiser out of commissions, saying Cooley properly disclosed potential conflicts to its clients and obtained their consent."
  • "Magistrate Judge Elizabeth D. Laporte said during a hearing in San Francisco that Cooley had the four defendants sign consent forms acknowledging potential conflicts, and that’s 'the correct way to do it.' Judge Laporte also criticized plaintiff William D. Bush’s argument that Cooley should be disqualified because the attorneys aren't licensed to represent their clients in Mexico. Judge Laporte said those 'aren’t really grounds to disqualify,' and even if they were, it wouldn’t be up to Bush to decide if the defendant’s counsel was competent."
Compounded: "Good morning your honors, you have a conflict." --
  • "Lawyers for Microsoft Corp. and Impulse Technology Ltd. spotted a problem when they arrived at the Federal Circuit for argument Nov. 4: Judge Kimberly Moore was seated on their panel. Moore routinely recuses herself from cases in which her husband’s law firm, Latham & Watkins, represents one of the parties. But in this case Latham lawyers had appeared for Microsoft at the trial court level only, and the conflict slipped through the cracks."
  • "After counsel notified the court, Moore stepped aside and Judges Pauline Newman and Alan Lourie heard the case on their own. 'Our appreciation and thanks to counsel for bringing this conflict to our attention now, rather than later,' Newman said."

Monday, January 30, 2017

Security: When Reality Mirrors Fiction

Yesterday we proposed a fictional "worst case" security breach scenario. Now comes the real-world lessons, examples and more.

"Feds bust Chinese hackers for trading on stolen law firm secrets" --
  • "Chinese hackers made more than $4 million by infiltrating the email servers of New York law firms to steal secret corporate merger plans they could trade on, according to U.S. authorities."
  • "According to the indictment, the suspects hacked inside information by infiltrating at least two unnamed law firms between April 2014 and late 2015."
  • "The hackers scoured the emails of law firm partners to discover stocks that were likely to soar because they were targeted in merger deals, including one tech company Intel would later acquire for $17 billion. The defendants then purchased shares of those companies, scoring over $4 million in illegal profits, authorities allege."
  • "Preet Bharara, the U.S. Attorney for the Southern District of New York, said the case should serve as a 'wake-up call for law firms around the world...You are and will be targets of cyber hacking, because you have information valuable to would-be criminals," Bharara said in a statement.
Next: "Data Security Not Top Concern For Firm Leaders, Report Finds" --
  • "The danger of data breaches and other technological security issues in the legal industry seems to be implicit given the rising demand for data-driven work and high-profile firm document leaks, but information security is not top of mind among firm leaders, according to a report issued on Wednesday."
  • "Through a joint effort by Novitex, a Connecticut-based provider of cloud-based document outsourcing solutions, and the Association of Legal Administrators, more than 800 legal managers were surveyed on their top concerns and challenges, and how they’re going about overcoming them. But despite a commonly perceived threat of “cybercriminals” to confidential legal work, most firm leaders put increasing profits and revenue and luring new clients well ahead of limiting any cybersecurity risks."
  • "Specifically, the survey found that nearly half of attorneys considered increasing net profits or attracting new clients as their number one concern, with increasing revenues coming in as the top concern, at about 21 percent."
  • "Just more than 8 percent of leading firm attorneys named reducing cybersecurity risk as of utmost importance, coming in just above concern for how to improve workflows, according to the report. Such a result may be surprising considering the role of Panamanian firm Mossack Fonseca in a massive document leak this past spring, which saw hundreds of thousands of shell companies aimed at avoiding taxes, their owners and their BigLaw counsel publically outed."

Sunday, January 29, 2017

2017: New Year, New (and Old) Risks

Happy 2017. Having returned from a brief break (including restful rejuvenation in my metaphorical volcano risk lair), and having now learned the risks of a New Year’s resolution to blog more (apologies for the extended absence), we now return to covering the issues of the day.
(Note: While the blogging went on hiatus, the reading and research did not, so in the coming days I’ll highlight some of the key developments and news of the past few weeks -- to mitigate the risk of readers missing something compelling, of course.)
Let’s start with security. I was recently asked by LegalTech News to provide a take on “hot issues” for 2017. So what follows is a bit of a creative writing exercise undertaken in the spirit of "Fifteen Minutes Into the Future" speculative fiction, focusing on one potential future news article:

"Is 2017 the Year a Leak Sinks Your Firm? A look into the future for the lessons learned from the 'hack' of one major firm." --
  • "It was both literally and figuratively a dark and stormy night, at least according to the FBI forensics report. That pinpointed New Year’s Eve as the moment when a vast trove of extremely sensitive data was stolen from the firm Krennic, Erso & Tarkin. While the office was quiet and closing, with most out celebrating the eagerly anticipated end of 2016, its servers were subjected to a sophisticated digital heist."
  • "This was not the first time a law firm had experienced a security breach. But what happened next was indeed unprecedented."
  • "First, came the cocky pronouncements from WikiLeaks. That they had obtained 'the crown jewels' from an extremely prestigious law firm. That they planned to make tsunami-level waves, releasing information from clients including high-profile financial services firms, high-net-worth individuals, several lobbyist and political non-government organizations, and white-collar criminal defendants."
  • "Further twisting the knife, WikiLeaks stressed that they would be releasing this data slowly, in a manner staged for 'maximum impact,' as per their stated policies. This was an unpredictable organization, but its agenda wasn’t."
  • "The media feeding frenzy that followed was expected. The chain of events that sparked, was not—the wholesale departure, first of clients, then associates, and then partners from the firm."
Read on for more details in the scary story, including why the silver lining of the security nightmare was actually due to the cloud (document management system).

[What’s that old saying? All actors want to sing and all bloggers want to screenwrite Blade Runner 2049? >smile<]