Freivogel on Conflicts
Freivogel on Conflicts
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Items posted at this site during the past thirty days will also appear on this What's New page.  Items posted within the past ten days will appear In Ten Day Bulletin immediately below.  Items older than ten days but less than 30 days will be posted in the Thirty-Day Holding Area, which follows.

 

 


Ten Day Bulletin


Expert Witness (posted January 6, 2012) Allstate Ins. Co. v. Electrolux Home Products, Inc., 2012 U.S. Dist. LEXIS 846 (N.D. Ill. Jan. 4, 2012).  This case is an insurance subrogation claim arising out of a fire allegedly caused by an Electrolux clothes drier.  The insurance company's expert ("Expert") has investigated fifty incidents involving Electrolux driers.  One prior incident was subject to an arbitration agreement, which provided that discovery items would remain confidential.  Electrolux's lawyers moved to disqualify Expert because Expert's report referenced some of the confidential material.  In this opinion the magistrate judge denied the motion but ordered Expert to remove the confidential material and to opine without reference to it.  Expert testified at the hearing on the motion that he did not need the confidential material to form his opinion.

Bankruptcy; SIPA
(posted January 4, 2012) In re MF Global Inc., 2011 Bankr. LEXIS 5003 (S.D.N.Y. Dec. 27, 2011).  This is a liquidation proceeding brought under the Securities Investor Protection Act of 1970 ("SIPA").  It involves Jon Corzine's company, MF Global.  Two customers objected to the appointment of Lawyer as trustee and Law Firm as trustee's counsel.  In this opinion the court held that both were "disinterested" within the meaning of both SIPA and the Bankruptcy Act.  First, the court rejected the claim that Law Firm's earlier representation of Bank, a possible creditor, was a conflict.  Bank is no longer a client, and the earlier work was unrelated to MFG.  Accounting Firm, which was MFG's auditor, is a current client of Law Firm and is Law Firm's auditor.  The court said that if Accounting Firm becomes involved in this proceeding, Law Firm should seek engagement of conflicts counsel.

Expert Witness (posted January 4, 2012) Tyco Healthcare Group LP v. Ethicon Endo-Surgery, Inc., Civil No. 3:10cv60(JBA) (D. Conn. Dec. 30, 2011).  Expert had been employed by the plaintiff to assist in trial preparation in a case closely related to this case.  Law Firm for the defendant hired Expert to assist it in preparation for trial in this case.  The plaintiff moved to disqualify Law Firm.  In this opinion the court ordered that only those members of Law Firm involved with Expert be disqualified, but allowed Law Firm to continue.

Advance Waiver
(posted January 2, 2012) Melville Capital, LLC v. Tennessee Commerce Bank, 2011 U.S. Dist. 149384 (M.D. Tenn. Dec. 29, 2011).  Law Firm filed this case, involving an insurance policy, for the plaintiff.  Law Firm represented, as local counsel, one of the defendants in this case ("TCB") as a creditor in an unrelated bankruptcy proceeding in another state.  The bankruptcy matter has been dormant for a year.  TCB moved to disqualify Law Firm.  In this opinion the court denied the motion.  The court relied most heavily on two factors: first, TCB had signed an advance waiver in in the bankruptcy matter; second, TCB had not conveyed any confidential information to Law Firm in the bankruptcy matter, Law Firm being only local counsel for TCB.

Thirty Day Holding Area

MISCELLANEOUS ETHICS AND LIABILITY NEWS

[Note: Items that do not fit under the conflicts categories below, but which we believe will be of interest to this audience will appear here and on the This and That pages, which are noted on the Table of Contents.]

Confidentiality; Stolen E-mails

(posted December 14, 2011) Lynn v. Gateway Unified School Dist., 2011 U.S. Dist. LEXIS 143282 (E.D. Cal. Dec. 13, 2011).  This is a race discrimination case by Plaintiff against School District.  Because Plaintiff was the District's IT director, he was able, before his last day, to purloin four months of District E-mails and give them to his lawyer.  The District moved for various relief.  In this opinion the court held that Plaintiff's law firm should be disqualified but refused to dismiss the case.  The court also held that the E-mails be returned and not used.  

Failure to Report Lawyer

(posted December 14, 2011) Board of Overseers v. Warren, 2011 Me. LEXIS 122 (Me. Dec. 8, 2011).  Partner in large (for Maine) law firm took client money for himself.  The executive committee failed to notify bar authorities for three months.  A single judge found no ethics violations.  In this opinion the court reversed as to the failure to notify and remanded to the judge to enter judgment and impose a sanction.

Compensating Witness

(posted December 14, 2011) Chicago Ins. Co. v. Capwill, 2011 U.S. Dist. LEXIS 143333 (N.D. Ohio Dec. 13, 2011).  Lawyers for the plaintiff sought the deposition of a former employee of the plaintiff.  They agreed to pay the former employee $175/hour for preparation and deposition time, an amount equivalent to what the former employee was making at his new job.  In this opinion the court found that the total compensation ($2,187) was reasonable and not a violation of any law or ethics rule.

Liability-not Conflicts; Opinion Letter

(posted December 12, 2011) Fortress Credit Corp. v. Dechert LLP, 2011 N.Y. App. Div. LEXIS 8481 (N.Y. App. Div. Nov. 29, 2011).  This case involves a $50 million note issue orchestrated by the infamous Marc Dreier.  He obtained Law Firm to issue a third-party opinion letter to the purchaser on behalf of the issuer.  It turned out that the supposed issuer knew nothing about the transaction and that this was one of a series of massive frauds committed by Dreier.  The purchaser sued Law Firm, claiming it relied on Law Firm's opinion letter.  The trial court denied a motion to dismiss.  In this opinion the Appellate Division reversed, holding that the purchaser was not Law Firm's client and that the purchaser failed to make sufficient allegations that Law Firm's conduct rose to the level to justify liability to a non-client.  Evidently, the opinion letter was a typical third-party opinion that made certain assumptions, relied upon facially proper certificates, etc.  The law firm did not claim that it did an investigation into whether the note issuer was what Dreier purported it to be.  The Appellate Division likened the situation to that in Prudential Ins. Co. of Am. v. Dewey, Ballantine, Bushby, Palmer & Wood, 605 N.E.2d 318 (N.Y. 1992), which involved a drafting error in deal documents, but not in the opinion letter.

CONFLICTS - UNCATEGORIZED

[Note: These, too, will appear at the This and That pages.]

(posted December 14, 2011) Kennedy v. Eldridge, 2011 Cal. App. LEXIS 1561 (Cal. App. Dec. 13, 2011).  This is a dispute between H and W over the support and custody of their infant son.  H is being represented by his father ("Father").  W moved to disqualify Father.  The trial judge granted the motion.  In this opinion the appellate court affirmed.  First, the court noted numerous California decisions saying that in extraordinary circumstances a movant need not have been a former client of the lawyer in question (i.e. no standing needed).  Second, the court held that Father was too close to W's confidential information by virtue of his involvement in family affairs.  Third, the court held that the danger that Father would testify was great.  Last, the court was worried about the welfare of the infant in this kind of situation.

(posted December 12, 2011) Lighthouse MGA, L.L.C. v. First Premium Ins. Group, Inc., 2011 U.S. App. LEXIS 22556 (5th Cir. Nov. 7, 2011).  This case involved a court's jurisdiction and enforcement of a forum selection clause in a contract between Parties A and B.  Party B claimed that the clause should not be enforced because the General Counsel of Party A ("GC") had drafted the clause.  In this opinion the Fifth Circuit held that Party B had made no showing that GC misrepresented his relationship to Party A and had not violated Rule 1.7.  The court also held that Party B had made no showing that GC violated Rules 4.3 or 8.4(c).

APPEALABILITY OF DISQUALIFICATION (To read full article, click here.)

Nothing current.

ARBITRATION OF MALPRACTICE CLAIMS (To read the full article, click here.)

Nothing current.

BANKRUPTCY (To read full article, click here.)

SIPA

(posted January 4, 2012) In re MF Global Inc., 2011 Bankr. LEXIS 5003 (S.D.N.Y. Dec. 27, 2011).  This is a liquidation proceeding brought under the Securities Investor Protection Act of 1970 ("SIPA").  It involves Jon Corzine's company, MF Global.  Two customers objected to the appointment of Lawyer as trustee and Law Firm as trustee's counsel.  In this opinion the court held that both were "disinterested" within the meaning of both SIPA and the Bankruptcy Act.  First, the court rejected the claim that Law Firm's earlier representation of Bank, a possible creditor, was a conflict.  Bank is no longer a client, and the earlier work was unrelated to MFG.  Accounting Firm, which was MFG's auditor, is a current client of Law Firm and is Law Firm's auditor.  The court said that if Accounting Firm becomes involved in this proceeding, Law Firm should seek engagement of conflicts counsel.

(posted December 29, 2011) In re Woodcraft Studios, Inc., 2011 U.S. Dist. LEXIS 147495 (N.D. Cal. Dec. 22, 2011).  Lawyer for Debtor failed to disclose in his application for employment pre-petition work for Debtor or receipt of a $5,000 retainer.  The bankruptcy judge ruled that Lawyer should forfeit all fees and disgorge the retainer.  In this opinion the district judge affirmed.

(posted December 22, 2011) In re South Station, LLC, 2011 Bankr. LEXIS 4856 (D. Utah Dec. 13, 2011).  In this opinion the court denied Debtor's counsel's request for fees exceeding $100,000.  The denial was based upon counsel's failure to disclose prepetition payments to counsel by principals and creditors of Debtor.

(posted December 19, 2011) In re Lewis Road, LLC, 2011 Bankr. LEXIS 4827 (E.D. Va. Dec. 9, 2011).  Law Firm for the Debtor failed to disclose that it represented a creditor when it was retained to represent the Debtor.  It also made misrepresentations to the court about this relationship.  As a result, the court ordered Law Firm to disgorge fees previously awarded.  The basis for undoing the fee award was FRCP 60(b).

BANKS/TRUST DEPARTMENTS (To read full article, click here.)

Nothing current.

BOARD POSITIONS (To read full article, click here.)

Nothing current.

CHANGING FIRMS - SCREENING (To read full article, click here.)

Nothing current.

CLASS ACTIONS (To read full article, click here.)

Nothing current.

CLIENT MERGERS/ASSET SALES (To read full article, click here.)

Nothing current.

CO-COUNSEL/COMMON INTEREST (To read full article, click here.)

Nothing current.

COMMERCIAL NEGOTIATIONS (To read full article, click here.)

Nothing current.

CORPORATIONS (To read full article, click here.)

Nothing current.

CORPORATE FAMILIES (To read full article, click here.)

Nothing current.

CRIMINAL PRACTICE (To read full article, click here.)

Nothing current.

CURRENT CLIENT (To read full article, click here.)

(posted December 29, 2011) Gill v. Bischoff, 2011 Guam LEXIS 23 (Guam Dec. 20, 2011).  X entered into a contract with Lawyer, which provided in part for legal services.  X filed for bankruptcy.  Y claims he succeeded to the rights of X under the contract.  Lawyer refused to work for Y, and Y filed this case against Lawyer.  The trial court dismissed the complaint.  In this opinion the supreme court affirmed, holding that a contractual right to legal services is not assignable; both the client and the lawyer must agree for the relationship to continue.  Moreover, in this case, proceeding on behalf of Y would have put Lawyer in conflict with other clients.

(posted December 22, 2011) In re McElroy, 2011 N.Y. Misc. LEXIS 5913 (N.Y. Sup. Ct. Dec. 19, 2011).  Law Firm represented Incompetent.  Law Firm also represented Executor of the estate of Incompetent's mother and is moving for probate of the will.  Under the will Incompetent would receive less than she would have intestate.  Claiming that Law Firm had a conflict, GAL, on behalf of Incompetent, moved to disqualify Law Firm.  In this opinion the court granted the motion.

Discipline

(posted December 22, 2011) People v. Johnson, 2011 Colo. Discipl. LEXIS 83 (Col. Dec. 13, 2011).  In this one-paragraph order Lawyer was suspended for thirty days solely (apparently) for representing a corporation and suing it at the same time.

DERIVATIVE ACTIONS (To read full article, click here.)

Nothing current. 

ENJOINING CONFLICTS (AND OTHER NON-TRADITIONAL REMEDIES) (To read full article, click here.)

Nothing current.

EXPERT WITNESSES (To read full article, click here.)

(posted January 6, 2012) Allstate Ins. Co. v. Electrolux Home Products, Inc., 2012 U.S. Dist. LEXIS 846 (N.D. Ill. Jan. 4, 2012).  This case is an insurance subrogation claim arising out of a fire allegedly caused by an Electrolux clothes drier.  The insurance company's expert ("Expert") has investigated fifty incidents involving Electrolux driers.  One prior incident was subject to an arbitration agreement, which provided that discovery items would remain confidential.  Electrolux's lawyers moved to disqualify Expert because Expert's report referenced some of the confidential material.  In this opinion the magistrate judge denied the motion but ordered Expert to remove the confidential material and to opine without reference to it.  Expert testified at the hearing on the motion that he did not need the confidential material to form his opinion.

(posted January 4, 2012) Tyco Healthcare Group LP v. Ethicon Endo-Surgery, Inc., Civil No. 3:10cv60(JBA) (D. Conn. Dec. 30, 2011).  Expert had been employed by the plaintiff to assist in trial preparation in a case closely related to this case.  Law Firm for the defendant hired Expert to assist it in preparation for trial in this case.  The plaintiff moved to disqualify Law Firm.  In this opinion the court ordered that only those members of Law Firm involved with Expert be disqualified, but allowed Law Firm to continue.

FORMER CLIENT (To read full article, click here.)

Nothing current.

GOVERNMENT ENTITIES - SUING ONE PART/REPRESENTING ANOTHER PART (To read full article, click here.)

Nothing current.

HOT POTATO DOCTRINE (To read full article, click here.)

Nothing current.

INITIAL INTERVIEW - HEARING TOO MUCH (To read full article, click here.)

(posted December 29, 2011) Justinian Capital SPC v. WestLB AG, 2011 N.Y. App. Div. LEXIS 9366 (N.Y. App. Div. Dec. 27, 2011).  To understand this case, one must read Bank Hapoalim B.M. v. WestLB AG, 2011 N.Y. App. Div. LEXIS 1566 (N.Y. App. Div. March 3, 2011).  In the earlier case Law Firm was disqualified from representing the plaintiff because lawyers at Law Firm had been interviewed by a defendant but not retained.  This case involved the same defendants but a different plaintiff.  Nevertheless, in this opinion the court held that the matters both involved securities misconduct and thus were "substantially related," and that Law Firm should be disqualified in this case, as well.

INSURANCE DEFENSE (To read full article, click here.)

Nothing current.

INVESTING IN CLIENTS/STOCK FOR FEES (To read full article, click here.)

Nothing current.

ISSUE OR POSITIONAL CONFLICTS (To read full article, click here.)

Nothing current.

JOINT/MULTIPLE REPRESENTATION (To read full article, click here.)

Nothing current.

LAWYER AS EXPERT WITNESS OR CONSULTANT (To read full article, click here.)

Nothing current.

LAWYERS REPRESENTING LAWYERS (To read full article, click here.)

Nothing current.

MALPRACTICE LIABILITY/FEE FORFEITURES (To read full article, click here.)

Nothing current.

OF COUNSEL (To read full article, click here.)

Nothing current.

OPPOSING LAWYERS NEGOTIATING A LAW PRACTICE MERGER (To read full article, click here.)

Nothing current.

PARTNERSHIPS (INCLUDING LIMITED PARTNERSHIPS) (To read full article, click here.)

Nothing current.

SETTLEMENT AGREEMENTS (To read full article, click here.)

(posted December 27, 2011) In re World Trade Center Disaster Site Litig., 2011 U.S. Dist. LEXIS 147754 (S.D.N.Y. Dec. 20, 2011).  This is a collection of some 9,000 suits by clean-up workers, firemen, and policemen, among others, involved with the collapse of the World Trade Center.  This opinion deals with whether certain plaintiffs were entitled to certain "bonuses" pursuant to the terms of a settlement agreement.  Because the decision is pursuant to special federal legislation and contract law regarding the settlement agreement, the decision itself appears to be of little, if any, precedential value.  What might be of value to this audience is the extent to which a court can, or should, exercise supervisory authority over the conduct of the lawyers representing so many plaintiffs.  This is because the representations are rife with conflicts of interest.  The court correctly characterized these actions as something other than class actions or individual actions.

STANDING (To read full article, click here.)

(posted December 23, 2011) Hechavarria v. City & County of San Francisco, 2011 U.S. App. LEXIS 25526 (9th Cir. Dec. 22, 2011).  In this opinion the court upheld the denial of a motion to disqualify because the moving party had never been a client of the lawyer in question.

TRADE (AND OTHER) ASSOCIATIONS (To read full article, click here.)

Nothing current.

UNDERLYING WORK PROBLEM (To read full article, click here.)

Nothing current.

WAIVERS/CONSENTS (To read full article, click here.)

Advance Waiver

(posted January 2, 2012) Melville Capital, LLC v. Tennessee Commerce Bank, 2011 U.S. Dist. 149384 (M.D. Tenn. Dec. 29, 2011).  Law Firm filed this case, involving an insurance policy, for the plaintiff.  Law Firm represented, as local counsel, one of the defendants in this case ("TCB") as a creditor in an unrelated bankruptcy proceeding in another state.  The bankruptcy matter has been dormant for a year.  TCB moved to disqualify Law Firm.  In this opinion the court denied the motion.  The court relied most heavily on two factors: first, TCB had signed an advance waiver in in the bankruptcy matter; second, TCB had not conveyed any confidential information to Law Firm in the bankruptcy matter, Law Firm being only local counsel for TCB.

WITNESS - ADVERSE - CURRENT/FORMER CLIENT (To read full article, click here.)

Nothing current.

ZERO SUM GAMES (To read full article, click here.)

Nothing current.

There was evidence that appellant knew withdrawing money from the girls' trusts was wrong, and it should be repaid. Yet, he not only did not discourage the withdrawals, but created conflicts of interest through his simultaneous representation of various members of the Nederlander family. While he was a trustee of the girls' trusts, appellant also became the trustee of a separate trust for Scott, to which the funds withdrawn from the girls' trusts were transferred. His representation of Scott during the divorce proceedings prompted the family court to appoint a separate attorney for the girls. Most importantly, appellant injected his own personal interest ahead of the interests of the beneficiaries by conditioning the withdrawal of funds on Scott's payment of legal fees to appellant's firm. Attorney fees appear to have been paid after each of the seven withdrawals between 2004 and 2005. Since appellant knew withdrawing funds from the girls' trusts was wrong to begin with, conditioning the withdrawals so as to serve his own financial interest was in bad faith.


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