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; Screening (posted November 22, 2017) Dollar Tree, Inc. v. Dollar Express LLC, No. 2017-0411-AGB (Del. Ch. Nov. 21, 2017). The Dollar Express Group bought 330 stores from the Dollar Tree Group. In June 2017 the Dollar Tree Group, represented by Law Firm, filed this action, claiming the Dollar Tree Group failed to pay millions of dollars required by the purchase agreement. The complaint also contained allegations of fraudulent transfer and illegal distribution under Delaware law. In early 2016 Dollar Express hired Consultant to provide an opinion on solvency related to a dividend Dollar Express contemplated. Consultant retained Law Firm to advise on Consultant's work for Dollar Tree. In this work Law Firm was exposed to confidential Dollar Tree information. Consultant moved to intervene in this case solely to seek, along with Dollar Tree, Law Firm's disqualification. In this opinion the court denied the motion. First, the court held that Dollar Tree could not reasonably have believed that Law Firm represented Dollar Tree in Law Firm's work for Consultant. The court further held that Law Firm's learning of Dollar Tree's confidences in the solvency work did not make Dollar Tree a client. The court also noted that Law Firm promptly set up a screen upon learning of the conflict claim, and that the Law Firm lawyers working for Consultant had not shared information with lawyers working on this case. Finally, on balance, the court held that Law Firm's presence in this case "does not prejudice the fairness of the proceedings."

Board Positions
(posted November 20, 2017) Freeman v. Beecher, 2017 WL 5329337 (N.Y. App. Div. Nov. 14, 2017). In this case Plaintiff sued for malpractice the lawyer who had negotiated a settlement for Plaintiff. The trial court granted a motion to dismiss. In this opinion the appellate court affirmed. One of the allegations of the complaint was that Plaintiff’s lawyer was serving on the board of a company in which Plaintiff was an investor. The court held that causation resulting from that position was “speculative.”

Expert Witness (posted November 20, 2017) United States v. Lindemuth, 2017 WL 5517947 (D. Kan. Nov. 17, 2017). In this criminal case Defendant sought to add as an expert witness the bankruptcy lawyer who previously represented Defendant in a bankruptcy proceeding. The government objected. In this opinion the court overruled the government, saying that there was nothing about the expert’s previous conduct, or relationship with Defendant, that was disqualifying.

Current Client; Lobbying
(posted November 17, 2017) United States v. HealthSouth, 2017 WL 5346385 (D. Nev. Nov. 10, 2017). Law Firm filed this qui tam case in 2013. In 2017 Defendant hired two Law Firm lawyers to do lobbying work in Georgia. As a result, Defendant moved to disqualify Law Firm in this case. The magistrate judge granted the motion. In this opinion the district judge affirmed. The court noted that while Georgia lawyers doing lobbying work in Georgia might not be subject to Georgia ethics rules, lawyers appearing in a Nevada case, are subject to Nevada rules. The court noted that Nev. Op. 52 holds that lobbying work is subject to Rule 1.7 (current client rule). Georgia’s version of Model Rule 5.7 appears to be contrary to the Nevada opinion.

Current Client (posted November 17, 2017) IPS Group, Inc. v. Duncan Solutions, Inc., 2017 WL 4654602 (S.D. Cal. Oct. 17, 2017). Patent infringement case. Law Firm has joined with other firms to defend it. Prior to this case Law Firm had done sporadic corporate work for Plaintiff. In this opinion the court denied Plaintiff's motion to disqualify Law Firm. In a fact-intensive analysis the court found that there was no current client relationship between Plaintiff and Law Firm.

Insurance Defense (posted November 17, 2017) Mount Verson Fire Ins. Co. v. VisionAid, Inc., 2017 WL 5476323 (1st Cir. Nov. 15, 2017). Employer fired Employee. Employee sued Employer for unlawful termination. Employer turned the case over to its employment practices carrier, InsCo, which appointed Law Firm to defend. Employer wanted Law Firm to assert a counterclaim against Employee for “misappropriation of funds.” The Massachusetts Supreme Judicial Court had answered a certified question to the effect that InsCo had no duty to prosecute the counterclaim. Thus, Employer had to hire its own lawyer to do it. The issue remained whether InsCo’s retained lawyer would have a conflict. If so,  Employer could hire its own defense counsel at InsCo's expense. In this opinion the court found no conflict. Thus, InsCo’s retained counsel could continue to defend the employment claim, while Employer could continue asserting the counterclaim against Employee.

Insurance Defense
(posted November 15, 2017) Tex. Op. 668 (Nov. 2017). InsCo assigns a staff lawyer ("Lawyer") to defend an insured in a personal injury case. The plaintiff also happens to be insured by InsCo. Unbeknownst to Lawyer, InsCo's adjuster takes a statement from the plaintiff. Lawyer obtains the statement in discovery. The statement is favorable to the defendant. InsCo may have been been guilty of bad faith in not informing the plaintiff that the statement may be used against the plaintiff. This opinion discusses whether Lawyer may continue in the case. The opinion appears to be very Texas-centric, so we will not discuss it further other than flagging it for Texas insurance defense lawyers.

Miscellaneous; Other
(posted November 14, 2017) Franco v. Ideal Mortgage Bankers, Ltd., 2017 WL 5195223 (E.D.N.Y. Nov. 9, 2017). This is a class action alleging Company's violation of FLSA. Plaintiffs joined Company and several officers allegedly in charge. One of the officers had pleaded guilty to a related criminal charge and was awaiting sentencing. The plaintiffs' lawyers emailed members of the class inviting them to comment to the Probation Office on their views on sentencing. The officer in question moved to disqualify the plaintiffs' lawyers, claiming they had violated N.Y. Rule 3.4(e). That rule prohibits a lawyer from threatening criminal charges to obtain an advantage in a civil case. (The ABA Model Rules have no such provision.) In this opinion the court denied the motion, noting that no prejudice to the defendants occurred in this case.

Conflict Uncategorized (posted November 14, 2017) In re Fagan, 2017 WL 5185449 (Ia. App. Nov. 8, 2017). The probate court appointed a guardian for Fagan.  Fagan appealed claiming that the guardianship should have been a limited one.  In this opinion the appellate court raised sua sponte that Fagan was denied representation in the trial court. The probate court had appointed Lawyer to represent Fagan. Instead of advocating for Fagan, Lawyer performed the role of guardian ad litem. The court held that Lawyer had a conflict of interest and remanded the case for appointment of counsel for Fagan and "further proceedings." One judge dissented on procedural grounds.

                                                               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.]

Other; New York's Unique Rule on Threatening Criminal Action

(posted November 14, 2017) Franco v. Ideal Mortgage Bankers, Ltd., 2017 WL 5195223 (E.D.N.Y. Nov. 9, 2017). This is a class action alleging Company's violation of FLSA. Plaintiffs joined Company and several officers allegedly in charge. One of the officers had pleaded guilty to a related criminal charge and was awaiting sentencing. The plaintiffs' lawyers emailed members of the class inviting them to comment to the Probation Office on their views on sentencing. The officer in question moved to disqualify the plaintiffs' lawyers, claiming they had violated N.Y. Rule 3.4(e). That rule prohibits a lawyer from threatening criminal charges to obtain an advantage in a civil case. (The ABA Model Rules have no such provision.) In this opinion the court denied the motion, noting that no prejudice to the defendants occurred in this case.

CONFLICTS - UNCATEGORIZED

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

(posted November 14, 2017) In re Fagan, 2017 WL 5185449 (Ia. App. Nov. 8, 2017). The probate court appointed a guardian for Fagan.  Fagan appealed claiming that the guardianship should have been a limited one.  In this opinion the appellate court raised sua sponte that Fagan was denied representation in the trial court. The probate court had appointed Lawyer to represent Fagan. Instead of advocating for Fagan, Lawyer performed the role of guardian ad litem. The court held that Lawyer had a conflict of interest and remanded the case for appointment of counsel for Fagan and "further proceedings." One judge dissented on procedural grounds.

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

Nothing current.

BANKRUPTCY (To read full article, click here)

Nothing current.

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

Nothing current.

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

(posted November 20, 2017) Freeman v. Beecher, 2017 WL 5329337 (N.Y. App. Div. Nov. 14, 2017). In this case Plaintiff sued for malpractice the lawyer who had negotiated a settlement for Plaintiff. The trial court granted a motion to dismiss. In this opinion the appellate court affirmed. One of the allegations of the complaint was that Plaintiff’s lawyer was serving on the board of a company in which Plaintiff was an investor. The court held that causation resulting from that position was “speculative.”

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

(posted November 22, 2017) Dollar Tree, Inc. v. Dollar Express LLC, No. 2017-0411-AGB (Del. Ch. Nov. 21, 2017). In this opinion the court found that the erection of a screen was, in part, grounds for denying disqualification in a case not involving a migratory lawyer. To read more about the case, go to "Former Client," below.

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.)

Lobbying

(posted November 17, 2017) United States v. HealthSouth, 2017 WL 5346385 (D. Nev. Nov. 10, 2017). Law Firm filed this qui tam case in 2013. In 2017 Defendant hired two Law Firm lawyers to do lobbying work in Georgia. As a result, Defendant moved to disqualify Law Firm in this case. The magistrate judge granted the motion. In this opinion the district judge affirmed. The court noted that while Georgia lawyers doing lobbying work in Georgia might not be subject to Georgia ethics rules, lawyers appearing in a Nevada case, are subject to Nevada rules. The court noted that Nev. Op. 52 holds that lobbying work is subject to Rule 1.7 (current client rule). Georgia’s version of Model Rule 5.7 appears to be contrary to the Nevada opinion.

(posted November 17, 2017) IPS Group, Inc. v. Duncan Solutions, Inc., 2017 WL 4654602 (S.D. Cal. Oct. 17, 2017). Patent infringement case. Law Firm has joined with other firms to defend it. Prior to this case Law Firm had done sporadic corporate work for Plaintiff. In this opinion the court denied Plaintiff's motion to disqualify Law Firm. In a fact-intensive analysis the court found that there was no current client relationship between Plaintiff and Law Firm.

(posted November 8, 2017) Guardant Health, Inc. v. Foundation Medicine, Inc., 2017 WL 5127733 (N.D. Cal. Nov. 6, 2017). This suit involves a Guardant patent for “liquid biopsy assay,” which facilitates the location of cancer tumors. Law Firm appeared for for the defendant FMI. Law Firm had earlier worked on the same technology for Guardant. Guardant moved to disqualify Law Firm in this case, contending that when Law Firm appeared for FMI, it was still representing Guardant. Because the Law Firm lawyer in charge of the Guardant work was leaving Law Firm, and because Law Firm was shedding its patent prosecution work, the Guardant relationship was clearly ending. But, whether that relationship had ended at the time Law Firm appeared for FMI, involved a very fact-intensive analysis of a messy set of circumstances. On balance, in this opinion, the magistrate judge concluded that Law Firm had a current client conflict when it appeared in this case and granted Guardant’s motion to disqualify.

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 November 20, 2017) United States v. Lindemuth, 2017 WL 5517947 (D. Kan. Nov. 17, 2017). In this criminal case Defendant sought to add as an expert witness the bankruptcy lawyer who previously represented Defendant in a bankruptcy proceeding. The government objected. In this opinion the court overruled the government, saying that there was nothing about the expert’s previous conduct, or relationship with Defendant, that was disqualifying.

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

(posted November 22, 2017) Dollar Tree, Inc. v. Dollar Express LLC, No. 2017-0411-AGB (Del. Ch. Nov. 21, 2017). The Dollar Express Group bought 330 stores from the Dollar Tree Group. In June 2017 the Dollar Tree Group, represented by Law Firm, filed this action, claiming the Dollar Tree Group failed to pay millions of dollars required by the purchase agreement. The complaint also contained allegations of fraudulent transfer and illegal distribution under Delaware law. In early 2016 Dollar Express hired Consultant to provide an opinion on solvency related to a dividend Dollar Express contemplated. Consultant retained Law Firm to advise on Consultant's work for Dollar Tree. In this work Law Firm was exposed to confidential Dollar Tree information. Consultant moved to intervene in this case solely to seek, along with Dollar Tree, Law Firm's disqualification. In this opinion the court denied the motion. First, the court held that Dollar Tree could not reasonably have believed that Law Firm represented Dollar Tree in Law Firm's work for Consultant. The court further held that Law Firm's learning of Dollar Tree's confidences in the solvency work did not make Dollar Tree a client. The court also noted that Law Firm promptly set up a screen upon learning of the conflict claim, and that the Law Firm lawyers working for Consultant had not shared information with lawyers working on this case. Finally, on balance, the court held that Law Firm's presence in this case "does not prejudice the fairness of the proceedings."

(posted November 3, 2017) W.C. Thornton v. Zamirski, 2017 ONSC 6464 (CanLII) (Super. Ct. Ont. Oct. 27, 2017). Plaintiff, represented by Lawyer, brought this suit for repayment of a loan. The loan was to assist Defendant in conducting a litigation funding business. Lawyer had earlier represented Defendant in the purchase of a golf course. Defendant moved to disqualify Lawyer in this case. In this opinion the court denied the motion, finding that the golf course purchase had nothing to do with this case. The court was especially critical of the weakness of the Defendant’s lawyers’ supporting materials.

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.)

Nothing current.

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

(posted November 17, 2017) Mount Verson Fire Ins. Co. v. VisionAid, Inc., 2017 WL 5476323 (1st Cir. Nov. 15, 2017). Employer fired Employee. Employee sued Employer for unlawful termination. Employer turned the case over to its employment practices carrier, InsCo, which appointed Law Firm to defend. Employer wanted Law Firm to assert a counterclaim against Employee for “misappropriation of funds.” The Massachusetts Supreme Judicial Court had answered a certified question to the effect that InsCo had no duty to prosecute the counterclaim. Thus, Employer had to hire its own lawyer to do it. The issue remained whether InsCo’s retained lawyer would have a conflict. If so,  Employer could hire its own defense counsel at InsCo's expense. In this opinion the court found no conflict. Thus, InsCo’s retained counsel could continue to defend the employment claim, while Employer could continue asserting the counterclaim against Employee.

(posted November 15, 2017) Tex. Op. 668 (Nov. 2017). InsCo assigns a staff lawyer ("Lawyer") to defend an insured in a personal injury case. The plaintiff also happens to be insured by InsCo. Unbeknownst to Lawyer, InsCo's adjuster takes a statement from the plaintiff. Lawyer obtains the statement in discovery. The statement is favorable to the defendant. InsCo may have been been guilty of bad faith in not informing the plaintiff that the statement may be used against the plaintiff. This opinion discusses whether Lawyer may continue in the case. The opinion appears to be very Texas-centric, so we will not discuss it further other than flagging it for Texas insurance defense lawyers.

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

Rule 1.8(i)

(posted October 23, 2017) In re Corp. Res. Servs., Inc., 2017 WL 4736686 (S.D.N.Y. Oct. 20, 2017). In this Chapter 11 bankruptcy, the trustee sued Company for fraudulent transfers, among other things. Lawyer and Law Firm appeared for Company. During discovery the trustee learned that Lawyer had an ownership interest in Company. The trustee moved to disqualify Lawyer and Law Firm. In this opinion the court granted the motion. The court found that Lawyer violated New York’s version of Model Rule 1.8(i) and that that  violation was imputed to Law Firm under Rule 1.10. The court also found Rule 3.7, lawyer-as-witness, issues as well.

Phony Tax Shelter

(posted October 23, 2017) NcNeill v. Comm’r, T.C. Memo. 2017-206 (T.C. Oct. 18, 2017). Tax shelter. The issue in this opinion was assessment of negligence penalties, which the court upheld. Given Taxpayer’s sophistication, the too-good-to-be-true nature of the tax savings, and the fact that a law firm was selected by the accounting firm to opine on the shelter (a conflict of interest) the court had little trouble upholding the penalties.

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.)

Nothing current.

STANDING (To read full article, click here.)

Nothing current.

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.)

Nonconsentable Conflict

(posted November 8, 2017) Waneck v. CSX Corp., 2017 WL 5157394 (S.D. Miss. Nov. 7, 2017). A CSX freight train struck a bus, in which Mr. and Mrs. Waneck were passengers. The Wanecks sued CSX and a number of other defendants. Although the crossing was in the City of Biloxi, the Wanecks did not sue Biloxi. Two of the Wanecks’ lawyers (“Lawyers”) are representing Biloxi in a separate case brought by CSX, arising out of the same accident. In this case the railroad moved to disqualify Lawyers. The magistrate judge granted the motion. In this opinion the district judge affirmed. The Wanecks had signed a conflicts consent. However, both the magistrate judge and district judge found that the conflict was nonconsentable.

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

Nothing current.

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

Nothing current.

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