Sunday, May 14, 2017

Risk Doesn't Rest on Weekends (Lawyer Encryption, Lawyer Insider Trading and More)

With various other enterprises luring in our intrepid editor, and a pause in the action likely upon us, it felt like the right time to squeeze a week’s worth of content into a morning update. (This is a risk management blog, after all.) Here’s the latest that’s caught my eye recently:

"ABA Issues New Ethics Opinion on Encryption of Attorney-Client Email" --
  • "The ABA has released Ethics Opinion 477 (May 11, 2017) on encryption of attorney-client email."
  • "Those who do not want any rule requiring email encryption will rejoice if they skip down to the opinion's conclusion and read: 'A lawyer generally may transmit information relating to the representation of a client over the Internet without violating the Model Rules of Professional Conduct where the lawyer has undertaken reasonable efforts to prevent inadvertent or unauthorized access. However, a lawyer may be required to take special security precautions to protect against the inadvertent or unauthorized disclosure of client information when required by an agreement with the client or by law, or when the nature of the information requires a higher degree of security.'"
  • "They would be rejoicing prematurely at the absence of the words "email encryption required." The opinion notes that a hard and fast rule cannot be be crafted to apply to all situations, and therefore: 'A fact-based analysis means that particularly strong protective measures, like encryption, are warranted in some circumstances. Model Rule 1.4 may require a lawyer to discuss security safeguards with clients. Under certain circumstances, the lawyer may need to obtain informed consent from the client regarding whether to the use enhanced security measures ... In contrast, for matters of normal or low sensitivity, standard security methods with low to reasonable costs to implement, may be sufficient to meet the reasonable-efforts standard to protect client information from inadvertent and unauthorized disclosure.'"
  • "Walter "Chet" Little, who was a partner at the law firm Foley & Lardner when prosecutors said the trading took place, and Andrew Berke were charged with conspiracy and securities fraud in a criminal complaint filed in Manhattan federal court."
  • "Beginning in 2015, the complaint said, Little used Foley's document management system to access information about at least seven law firm clients including Oshkosh Corp and Harley-Davidson Inc, even though he billed no work for them."
  • "After learning about upcoming mergers, earnings and other corporate events involving those companies, prosecutors said, Little bought and sold stock and options ahead of public announcements, making more than $320,000 in profits."
  • "He also passed the inside information to Berke, prosecutors said. The SEC said Berke was an executive at a logistics company who has since 2013 lived in the same community as Little, Apollo Beach, Florida. Prosecutors said that by placing trades based on the inside information, Berke earned around $660,000."
  • "Daniel Farrell, a spokesman for Foley & Lardner, said in a statement that the 840-lawyer firm learned about the activity at issue in June 2016 and reported the matter to authorities. 'We take this matter very seriously, and we have zero tolerance for actions that violate our core values and the trust our clients place in us,' Farrell said."
Here's the full SEC complaint.

"Greenberg Traurig Accused of Trying to Invalidate the Same Patents It Prosecuted" --
  • "A former client has sued Greenberg Traurig, alleging the firm switched sides and used its knowledge of privileged intellectual property information from previous patent work to attempt to invalidate a patent for a new client’s benefit."
  • "And there’s the rub. In the past, Greenberg also performed extensive legal services for Apollo, according to the complaint. The work included two patents behind Apollo’s TrueCollect service, which gave the firm access to Apollo’s confidential, privileged information.
  • Now that Greenberg is representing Lantern, the complaint alleges that the firm advised Lantern not to pay and used the privileged information against Apollo to try to invalidate the patents so Lantern could avoid paying. According to the complaint, Greenberg has filed counterclaims seeking a declaratory judgment of invalidity and non-infringement of 'the very same patents that Greenberg helped to prosecute for Apollo.'"
  • "This lawsuit is based upon events that occurred more than 12 years ago and mischaracterizes the underlying facts,' the firm said in a statement. 'The issues raised in this lawsuit are already the subject of a pending motion in the litigation between Apollo and another party. We deny any wrongdoing and will contest this lawsuit.'"
  • "In addition, Lantern said that the sole remaining Greenberg attorney associated with Apollo’s provisional application, Bruce Neel, works in a different practice area group in an office hundreds of miles from Lantern’s attorneys, and has not conveyed any information regarding Apollo or its patents. After the firm learned of the potential conflict of interest, 'Greenberg immediately implemented an ethical screen barring any attorneys working on this lawsuit (or for Lantern in general) from access to any information or files relating to Greenberg’s prior representation of Apollo, and barring Mr. Neel from any access to or involvement with any legal work for Lantern or communication with Lantern’s litigation counsel about Apollo,' according to the court filing."
  • "'You cannot represent a new client against an old client if the work of the new client is substantially related to the work of the old client,' said [Michael] McCabe, who is the founder of McCabe Law, a firm that specializes in intellectual property ethics and disciplinary matters. “That prohibition lasts forever. … Whether it was one day ago or 20 years ago, it would still be a conflict to invalidate a patent you worked on.'"
And finally and overview of an issue I continue to find immensely fascinating: "Lawyer ethics and positional conflicts of interest" --
  • "ABA Standing Committee on Ethics and Professional Responsibility Formal Opinion 93-377- Positional Conflicts (issued in 1993) reviewed ethical issues when a lawyer represents one client in a matter in which the client’s interests regarding a substantive legal issue are directly adverse to a position the lawyer (or law firm) is advocating on behalf of another client on the same or similar issue."
  • "The opinion refers to paragraph (9) of the Comment to Rule 1.7 which stated as follows: 'A lawyer may represent parties having antagonistic positions on a legal question that has arisen in different cases, unless representation of either client would be adversely affected. Thus, it is ordinarily not improper to assert such positions in cases pending in different trial courts, but it may be improper to do so in cases pending at the same time in an appellate court.'"
  • "The opinion noted that representing two clients in different trial courts while advocating opposing sides of the same issue could also be a conflict of interest under Rule 1.7 just as if both matters were pending in the same appeals court.  A decision in a trial court could influence the outcome of a second matter in another trial court, and a decision in an appeals court could have an adverse effect on a matter pending in a trial court matter."
  • "Bottom line:  If the lawyer is considering taking a position for one client which is directly adverse to a position the lawyer (or law firm) is taking for another client on the same or similar issue, the lawyer must consider the potential conflict of interest and act accordingly."

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