Freivogel on Conflicts
FREIVOGEL ON CONFLICTS
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Items posted here 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

Former Client; "Confidential Nonclient Relationship" (posted September 22, 2017) Lynn v. George, 2017 WL 4173330 (Cal. App. Sept. 21, 2017). This case involves interactions among several real estate firms and law firms. The plaintiffs moved to disqualify the defendants' law firm. The trial court granted the motion, not because the law firm had a current or former client relationship with plaintiffs, but rather because the law firm had a "confidential nonclient relationship" with the plaintiffs. In this opinion the appellate court reversed. The analysis was hugely fact-intensive, and reviewing the facts here would serve no precedential purpose. The court discussed a leading California case on "confidential non client relationships," Acacia Patent Acquisition, LLC v. Superior Court, 234 Cal. App. 4th 1091 (2015), as well as Restatement Sec. 121, and concluded that the facts of this case were not consistent with those authorities.

Standing; Passage of Time (posted September 22, 2017) Keane v. Jacksonville Police Fire & Pension Bd. Of Trustees, 2017 WL 4102302 (M.D. Fla. Sept. 15, 2017). This case is a claim by a former board person for enhanced pension benefits. Although the board is a creature of state law, and arguably separate from the city, the city's in-house lawyers appeared for the board. In this opinion the court denied Plaintiff's motion to disqualify those lawyers. The case revolves around Florida state and local government law, which we will not detail here. The court held that Plaintiff lacked standing because the lawyers' alleged conflict was not so "severe to call in question the fair and efficient administration of justice." Moreover, the court was influenced by Plaintiff's waiting until five months after the city lawyers appeared, and three months before discovery cut-off.

Class Action
(posted September 21, 2017) In re Insulin Pricing Litig., 2017 WL 4122437 (D.N.J. Sept. 18, 2017). The issue here was whether Law Firm had a conflict of interest preventing it from being appointed "interim class counsel." This is a fraud claim involving over-charging by pharmaceutical companies. At the same time Law Firm represents wholesalers against pharmaceutical companies in an antitrust class action. The court found that one representation did not conflict with the other under N.J. Rule 1.7(a)(2).

Current Client (posted September 21, 2017) Victorinox AG v. B&F Sys., Inc., 2017 WL 4149288 (2d Cir. Sept. 19, 2017). Trademark case. Law Firm represents Plaintiff, which was victorious in the trial court. Among other things, Defendants claim that Law Firm should have been disqualified because for about one year, while this case was pending, Law Firm represented a defendant on another matter. Law Firm has withdrawn from that representation. The trial court denied the motion to disqualify. In this opinion the appellate court affirmed. Evidently, no screen had been erected, but the court noted that neither trial team at Law Firm had exchanged information.

Former Client: Tax Court - Innocent Spouse (posted September 21, 2017) Gebman v. Comm'r of Int. Rev., T.C. Memo. 2017-184 (T.C. Sept. 18, 2017). H and W filed joint returns. The IRS found a deficiency and assessed penalties. H and W appealed and appeared together pro se for a trial. Amidst much confusion the court offered a volunteer lawyer ("Lawyer") to represent H and W, which they accepted. Almost immediately after conferring with Lawyer, H declared that he owed the deficiency and penalty. Lawyer continued on behalf of W under the theory that she was an innocent spouse. H later reneged on his concession. One of the issues in this opinion was whether Lawyer had a conflict in continuing to represent W. The court concluded that he did under Model Rule 1.9(a) (Tax Court applies ABA Model Rules). The court found that H was a former client of Lawyer, that the representation of W was materially adverse to H, and that the earlier representation of H was substantially related to W's case. [Our note: In seventeen years of publishing this site, the is the first "innocent spouse" conflict case we have seen. There may have been others; we just did not encounter them. We have omitted here much arcana of federal taxation and Tax Court procedures appearing in the opinion. Tax practitioners in the audience might give the opinion a look.]

Investing; Tax Shelter Penalties (posted September 21, 2017) Tucker v. Comm'r Int. Rev., T.C. Memo. 2017-183 (T.C. Sept. 18, 2017). Lengthy opinion involving highly complex federal tax issues. In this opinion the court overruled an assessment of penalties notwithstanding that the taxpayer relied in part on the opinion of the infamous Brown & Wood partner, R.J. Ruble, who had opined on many such transactions and went to prison as a consequence. The court found that, on balance, the taxpayer reasonably relied on several sources and was under no duty to obtain "second opinions," etc.

Of Counsel (posted September 21, 2017) Gen. Sec., Inc. v. Commercial Fire & Sec., Inc., 2017 WL 4119622 (E.D.N.Y. Sept. 15, 2017). Law Firm represents Defendants in this commercial litigation. Lawyer is held out as "of counsel" to Law Firm. Plaintiff moved to disqualify Law Firm because of Lawyer's various relationships. We will not detail those relationships. In short, the magistrate judge, in this opinion, denied the motion to disqualify, finding that Lawyer's various relationships did not create a conflict. Of particular interest to this audience is the court's discussion of whether an of counsel's conflict would be imputed to Law Firm. The court ducked making a decision on that point. However, the court noted, and discussed, those authorities holding that not all of counsel relationships are imputed to the law firm. The court said the issue required a "case-by-case" analysis, in part examining the nature of the matter and the extent to which the of counsel was integrated into the law firm.

Hot Potato
(posted September 19, 2017) Regal Cinemas, Inc. v. Shops at Summerlin No., LP, 2017 WL 4075760 (E.D. Cal. Sept. 14, 2017). Plaintiff, represented by Law Firm, sued Defendant for breach of contract and related remedies. Law Firm had earlier represented Defendant on unrelated matters. In October 2016 Law Firm sent to Defendant a letter informing Defendant that it had hired a lawyer who wanted to sue Defendant and that it was terminating its representation of Defendant "effective immediately." Law Firm later filed this suit. Defendant moved to disqualify Law Firm, relying on a "hot potato" theory. In this opinion the court denied the motion. In a fact-intensive analysis the court concluded that the matter mentioned in the letter had really ended earlier. Thus, this was really a former client matter, for which the "hot potato" doctrine would not apply. (The term "hot potato" does not appear in the opinion.)

                                                               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.]

Nothing current.

CONFLICTS - UNCATEGORIZED

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

Nothing current.

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

Nothing current.

BANKRUPTCY (To read full article, click here)

(posted September 13, 2017) In re Fish & Fisher, Inc., 2017 WL 3891784 (S.D. Miss. Sept. 1, 2017). This case relates to compensation to an accounting firm ("AF"), not a law firm. However, the principles discussed would apply to either. In short, in denying rehearing, the court compared §§ 207(a) and 208(c) of the Bankruptcy Act. In this case AF had failed to disclose properly a possible conflict when it was retained by the debtor. It is nevertheless requesting fees. The court reiterated that it had discretion under the Act to award fees under these circumstances. It upheld its earlier ruling that AF’s work had benefited the estate but that fees be reduced 12.5% as a sanction for failing to make the required disclosure.

(posted August 25, 2017) In re Cuzco Devel. U.S.A., LLC, 2017 WL 3616581 (D. Haw. Aug. 22, 2017). Law Firm for Debtor moved for approval of the remainder of its fee. A party objected because of Law Firm's earlier representation of a party arguably adverse to Debtor. In this opinion the bankruptcy judge rejected that position and approved the fee award. The court noted that Law Firm had fully disclosed the earlier representation at the outset of this case and that Law Firm's representation of the other party had ceased prior to the filing of this case. Also, events had resulted in the other party's and Debtor's interests having become largely aligned.

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.)

(posted September 21, 2017) In re Insulin Pricing Litig., 2017 WL 4122437 (D.N.J. Sept. 18, 2017). The issue here was whether Law Firm had a conflict of interest preventing it from being appointed "interim class counsel." This is a fraud claim involving over-charging by pharmaceutical companies. At the same time Law Firm represents wholesalers against pharmaceutical companies in an antitrust class action. The court found that one representation did not conflict with the other under N.J. Rule 1.7(a)(2).

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 September 21, 2017) Victorinox AG v. B&F Sys., Inc., 2017 WL 4149288 (2d Cir. Sept. 19, 2017). Trademark case. Law Firm represents Plaintiff, which was victorious in the trial court. Among other things, Defendants claim that Law Firm should have been disqualified because for about one year, while this case was pending, Law Firm represented a defendant on another matter. Law Firm has withdrawn from that representation. The trial court denied the motion to disqualify. In this opinion the appellate court affirmed. Evidently, no screen had been erected, but the court noted that neither trial team at Law Firm had exchanged information.

(posted September 13, 2017) In re Krishna, 2017 WL 3947405 (Ind. Sept. 8, 2017). Lawyer discipline. The facts were agreed to as were the rules violated, 1.7(a), 1.8(b), and 8.4(d). Still, an interesting case. Mother agreed that Couple No.1 could adopt her baby. Couple 1 then hired Lawyer to handle the adoption. Mother then told Lawyer that she might want to choose a different couple. Lawyer named several other couples that he represented. Mother chose Couple No. 2. Lawyer did not tell Couple No. 1 any of this until after Mother had chosen Couple No. 2. While Lawyer had Couple No. 2 sign conflict waivers, he did not do so for Couple No. 1. Bottom line, public reprimand.

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 August 25, 2017) In re Namenda Direct Purchaser Antitrust Litig., 2017 WL 3613663 (S.D.N.Y. Aug. 8, 2017). This is one of several antitrust cases arising out of the marketing of the drug memantine under the trade name, Namenda. Teva, not a party in this case, but a defendant in another related case, moved to disqualify Expert in this case. The magistrate judge denied the motion. In this opinion the district judge reversed. Expert, until 2012, had handled regulatory matters for Teva for 23 years, culminating in her being head of regulatory matters. Many of the documents produced in discovery, to or from Expert, related to memantine or Namenda. Noting the myriad ways Teva could be prejudiced in the related case by Expert's exposure in this case, the court said it "matters not a whit" that Teva was not a party in this case.

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

"Confidential Nonclient Relationship"

(posted September 22, 2017) Lynn v. George, 2017 WL 4173330 (Cal. App. Sept. 21, 2017). This case involves interactions among several real estate firms and law firms. The plaintiffs moved to disqualify the defendants' law firm. The trial court granted the motion, not because the law firm had a current or former client relationship with plaintiffs, but rather because the law firm had a "confidential nonclient relationship" with the plaintiffs. In this opinion the appellate court reversed. The analysis was hugely fact-intensive, and reviewing the facts here would serve no precedential purpose. The court discussed a leading California case on "confidential non client relationships," Acacia Patent Acquisition, LLC v. Superior Court, 234 Cal. App. 4th 1091 (2015), as well as Restatement Sec. 121, and concluded that the facts of this case were not consistent with those authorities.

Tax Court - Innocent Spouse

(posted September 21, 2017) Gebman v. Comm'r of Int. Rev., T.C. Memo. 2017-184 (T.C. Sept. 18, 2017). H and W filed joint returns. The IRS found a deficiency and assessed penalties. H and W appealed and appeared together pro se for a trial. Amidst much confusion the court offered a volunteer lawyer ("Lawyer") to represent H and W, which they accepted. Almost immediately after conferring with Lawyer, H declared that he owed the deficiency and penalty. Lawyer continued on behalf of W under the theory that she was an innocent spouse. H later reneged on his concession. One of the issues in this opinion was whether Lawyer had a conflict in continuing to represent W. The court concluded that he did under Model Rule 1.9(a) (Tax Court applies ABA Model Rules). The court found that H was a former client of Lawyer, that the representation of W was materially adverse to H, and that the earlier representation of H was substantially related to W's case. [Our note: In seventeen years of publishing this site, the is the first "innocent spouse" conflict case we have seen. There may have been others; we just did not encounter them. We have omitted here much arcana of federal taxation and Tax Court procedures appearing in the opinion. Tax practitioners in the audience might give the opinion a look.]

(posted September 12, 2017) Mt. Hebron Dist. Missionary Baptist Ass'n of AL, Inc. v. Sentinel Ins. Co. Ltd., 2017 WL 3928269 (M.D. Ala. Sept. 7, 2017). Lawyer represents Plaintiff. Third-Party Plaintiff ("TPP") moved to disqualify Lawyer because TPP had retained Lawyer to consult on the very matters raised by this action. In this opinion the magistrate judge granted the motion. Everyone agrees that TPP met with Lawyer at least twice. There was some dispute about what exactly was discussed. Lawyer billed TPP for each meeting. The magistrate judge held that TPP subjectively believed he had retained Lawyer and held that that belief was reasonable. The court also held that consulting with Lawyer about recovering money from Plaintiff for work done, was substantially related to this case, which is about recovering for that work from an insurance company.

Duty of Loyalty

(posted September 8, 2017) Ecclesiastical Insurance Office PLC v. Lady Iam Hazel Virginia Whitehouse-Grant-Christ, [2017] ScotCS CSIH_33 (26 May 2017). The Scottish appellate court, in a 2-1 decision, denied a disqualification on the basis that there is no duty of loyalty to a former client. The opinions include a review of authorities from leading common law jurisdictions, including the U.S.

(posted August 25, 2017) Watkins v. Trans Union, LLC, 2017 WL 3599780 (7th Cir. Aug. 22, 2017). For several years, until 12 years ago, Lawyer worked extensively on FCRA cases representing Trans Union. Lawyer brought this FCRA case against Trans Union. Trans Union moved to disqualify Lawyer. The trial court denied the motion. In this 2-1 decision the Seventh Circuit affirmed. Both the majority and dissent emphasized the role of Indiana Rule 1.9 and the commentary. The split occurs over the application of the "playbook" analysis - although neither the majority nor the minority use that term. Reading both opinions provides a classic glimpse into how courts can differ on the application of Rule 1.9 and the commentary to a lawyer possessing a great deal of general knowledge about a former client.

(posted August 25, 2017) Fidelity & Deposit Co. of Md. v. Travelers Cas. & Surety Co. of Am., 2017 WL 3594259 (D. Nev. Aug. 21, 2017). School District ("SD") hired Contractor No. 1 to do HVAC work for SD.  Contractor No. 1 provided a performance bond issued by InsCo No. 1. One of the subcontractors, Contractor No. 2, provided a performance bond issued by InsCo No. 2. Contractor No. 1 went bankrupt before finishing the work for SD. SD, represented by Law Firm, sued InsCo No. 1 for not living up to its performance bond. That case settled. One of the products of the settlement was an assignment by SD to InsCo No. 1 of certain of SD's rights. This case was brought by InsCo No. 2 against InsCo No. 1. After this case began, Law Firm appeared for InsCo No. 2. InsCo No. 1 moved to disqualify Law Firm in this case. In this opinion the court denied the motion. First, the court held that the terms of the aforesaid assignment did not make InsCo No 1 a former client of Law Firm. (That is a matter of contract interpretation, and we will not parse it here.) Second, the court noted that Law Firm was not privy to InsCo No. 1's confidences during the earlier case. Last, the court rejected the argument that the issues in this case are such that Law Firm may change positions requiring it to cross-examine SD employees. The court noted that SD had repeatedly declined InsCo No. 1's request to demand that Law Firm withdraw. Thus, the court said that InsCo No. 1's last argument was too thin a reed to justify disqualification.

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.)

(posted September 19, 2017) Regal Cinemas, Inc. v. Shops at Summerlin No., LP, 2017 WL 4075760 (E.D. Cal. Sept. 14, 2017). Plaintiff, represented by Law Firm, sued Defendant for breach of contract and related remedies. Law Firm had earlier represented Defendant on unrelated matters. In October 2016 Law Firm sent to Defendant a letter informing Defendant that it had hired a lawyer who wanted to sue Defendant and that it was terminating its representation of Defendant "effective immediately." Law Firm later filed this suit. Defendant moved to disqualify Law Firm, relying on a "hot potato" theory. In this opinion the court denied the motion. In a fact-intensive analysis the court concluded that the matter mentioned in the letter had really ended earlier. Thus, this was really a former client matter, for which the "hot potato" doctrine would not apply. (The term "hot potato" does not appear in the opinion.)

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

Nothing current.

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

One Client or Two

(posted August 30, 2017) LA County Op. 528 (April 2017) holds that where a lawyer retained by an insurer to defend an insured discovers a coverage defense, that lawyer may not inform the insurer of the discovery, and must withdraw. This result is predicated on cases such as Auto. Ins. Co. v. Federal Ins. Co., 72 Cal.App.4th 1422, 1429 (1999), which holds that insurance defense counsel has two clients.

Reservation of Rights

(posted August 25, 2017) Nat’l Union Fire Ins. Co. of Pgh., Pa. v. Donaldson Co., Inc., 2017 WL 3642120 (D. Minn. Aug. 23, 2017). One issue treated in this opinion was whether Minnesota or Mississippi law applies as to the effect of a reservation of rights letter. The court chose Minnesota, which provides that a general reservation of rights letter - the case here - does not amount to a “per se conflict of interest” triggering a duty of the carrier to notify the insured of its right to independent counsel.

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

Tax Shelter Penalties

(posted September 21, 2017) Tucker v. Comm'r Int. Rev., T.C. Memo. 2017-183 (T.C. Sept. 18, 2017). Lengthy opinion involving highly complex federal tax issues. In this opinion the court overruled an assessment of penalties notwithstanding that the taxpayer relied in part on the opinion of the infamous Brown & Wood partner, R.J. Ruble, who had opined on many such transactions and went to prison as a consequence. The court found that, on balance, the taxpayer reasonably relied on several sources and was under no duty to obtain "second opinions," etc.

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.)

(posted September 21, 2017) Gen. Sec., Inc. v. Commercial Fire & Sec., Inc., 2017 WL 4119622 (E.D.N.Y. Sept. 15, 2017). Law Firm represents Defendants in this commercial litigation. Lawyer is held out as "of counsel" to Law Firm. Plaintiff moved to disqualify Law Firm because of Lawyer's various relationships. We will not detail those relationships. In short, the magistrate judge, in this opinion, denied the motion to disqualify, finding that Lawyer's various relationships did not create a conflict. Of particular interest to this audience is the court's discussion of whether an of counsel's conflict would be imputed to Law Firm. The court ducked making a decision on that point. However, the court noted, and discussed, those authorities holding that not all of counsel relationships are imputed to the law firm. The court said the issue required a "case-by-case" analysis, in part examining the nature of the matter and the extent to which the of counsel was integrated into the law firm.

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.)

Nothing current.

STANDING (To read full article, click here.)

(posted September 22, 2017) Keane v. Jacksonville Police Fire & Pension Bd. Of Trustees, 2017 WL 4102302 (M.D. Fla. Sept. 15, 2017). This case is a claim by a former board person for enhanced pension benefits. Although the board is a creature of state law, and arguably separate from the city, the city's in-house lawyers appeared for the board. In this opinion the court denied Plaintiff's motion to disqualify those lawyers. The case revolves around Florida state and local government law, which we will not detail here. The court held that Plaintiff lacked standing because the lawyers' alleged conflict was not so "severe to call in question the fair and efficient administration of justice." Moreover, the court was influenced by Plaintiff's waiting until five months after the city lawyers appeared, and three months before discovery cut-off.

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.)

Passage of Time

(posted September 22, 2017) Keane v. Jacksonville Police Fire & Pension Bd. Of Trustees, 2017 WL 4102302 (M.D. Fla. Sept. 15, 2017). Five months under the circumstances probably too long.

Passage of Time

(posted August 30, 2017) Eolas Techs. Inc. v. Amazon.Com Inc., No 17-cv-03022-JST (N.D. Cal. Aug. 24, 2017). The primary issue in this opinion is whether Plaintiff waited too long to move to disqualify Defendant's law firm. After an extended factual analysis the court concluded that Plaintiff waited a year to file the motion. This constituted an "extended delay" and was grounds for denial.

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

Subpoena Current Client

(posted September 8, 2017) NYC Bar Op. 2017-6 (August 2017). This opinion recognizes that in most cases subpoenaing a current client for documents or testimony will be a conflict. It discusses all the ramifications of doing so and how to stay out of trouble. No surprises.

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

Nothing current.

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