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FREIVOGEL ON CONFLICTS WHAT'S NEW 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 Expert Witness; Important Opinion (posted February 5, 2025) In re Turquoise Hill Resource Ltd. Sec. Litig., 2025 WL 384549 (S.D.N.Y. Feb. 4, 2025). This is a securities class action arising out of the development of a copper mine in Mongolia. Investors have claimed Defendants concealed problems with the development progress. Defendants moved to disqualify Investors' expert ("Expert") on the technical aspects of the development, because Expert had previously done work for Defendants on at least one aspect of the mine project. In this opinion the court denied the motion. The opinion is a textbook on the law of expert disqualification. We take no position on the result, but can say the treatment of authorities from around the U.S. is exhaustive. It deals with, among other things: (1) what Expert learned in the earlier work that would be relevant in this case; (2) the passage of time; (3) what was publicly known; (4) what had been, or would be, known in discovery; and (5) the nature and coverage of confidentiality agreements. Keep this one handy. Conflict Uncategorized; Litigation Funding (posted February 4, 2025) Harish v. Arbit, No. 21-11088-EP-AME (D.N.J. Jan. 31, 2025). In this long opinion the magistrate judge disqualified two law firms from representing the defendants. Because we may not have heard the last of this matter, and because its precedential value appears limited, we will provide just a few basics. The plaintiff and defendants are contesting ownership of a patent. The defendants have sold their ownership rights in the patent to Buyer. Although Buyer is not a party in this case, Buyer appears to be providing litigation funding to the defendants -- that is, paying their lawyers. A major problem is that at least one of the two law firms also represents Buyer/funder. The core of the court's concern is the N.J. Supreme Court's interpretation of N.J. Rule 1.8(f) in In re State Grand Jury Investigation, 983 A.2d 1097 (N.J. 2009). The court felt that the law firm's representation of the Owner/funder fails one of the important tests in that case. This opinion contains much more than the above. If you have a one-off funding situation in New Jersey, you might find the opinion useful. Corporate Families; Keiretsu (posted February 4, 2025) Zappia v. Myovant Sciences Ltd., No. 24-253-cv (2d Cir. Jan. 30, 2025). Class action based upon S.E.C. Rule 14a-9. Big Company had a majority interest in Smaller Company and purchased the remainder of Smaller Company's shares. Smaller Company created a special committee "for the acquisition." Law Firm was hired to represent the special committee. The proxy statement for the acquisition stated Law Firm had no conflicts and was "independent." The primary claim in this case is Law Firm had conflicts not disclosed in the proxy statement. Both companies were members of a large and prominent Japanese keiretsu. Law Firm had, from time-to-time, represented other members of the keiretsu. The trial court granted Defendants' motion to dismiss. Its analysis was fact-intensive. Briefly, the court found the relationships of the various companies were attenuated, that all the players were very sophisticated, and information about the relationships of Law Firm and members of the keiretsu was publicly available. In this opinion the appellate court affirmed. Current Client (posted February 4, 2025) Catalpa Dev. LLC v. Joseph, No. 652091/2017 (N.Y. Sup. Ct. N.Y. County Jan. 17, 2025). The defendants are a married couple ("W" & "H"). Lawyer appeared for W and H in this case. After this case began, Lawyer began representing H in a divorce case against W. Lawyer, saying he had a conflict, moved to withdraw from representing W in this case. W claims she should review Lawyer's file to decide for herself if Lawyer should proceed. Nothing doing, said the judge in granting Lawyer's motion to withdraw. The conflict is "not waivable." Bankruptcy (posted February 3, 2025) In re Lalone, 2025 WL 350097 (W.D. Mich. Jan. 29, 2025). This matter involves two Chapter 12 cases, one filed by a blueberry farmer, and the other by an LLC wholly owned by the farmer. The issue is whether the same lawyer can represent both debtors in possession. In this opinion the bankruptcy judge said no. Among other things the LLC arguably owes the farmer compensation, while the farmer arguably owes the LLC rent, the farmer's residence being on LLC property. Thus, the lawyer would not be disinterested under Section 327(a) of the Bankruptcy Act. Expert Witness (posted February 3, 2025) U.S. v. Emergency Staffing Solutions, Inc., 2025 WL 346937 (N.D. Tex. Jan. 30, 2025). This is a qui tam case against two entities, which provided services to hospitals. They allegedly violated federal and state laws relating to kickbacks and over-billing. Relator objected to several expert witnesses tendered by Defendants. In this opinion the magistrate judge granted a motion to exclude one of them for a conflict of interest. This expert had two problems: (1) She is COO of both defendants and has "a financial interest and personal stake" in the case; and (2) "Defendants' silence" on her financial interest. The court said while cross-examination might have addressed her interest, her "inherent bias" alone in this case was enough to disqualify her. Insurance Defense; Cumis (posted February 3, 2025) Cerecedes v. Houston Cas. Co., 2025 WL 346082 (N.D. Cal. Jan. 30, 2025). Contractor did work on a house. Owner sued Contractor for faulty work. Contractor tendered the matter to InsCo. After squabbling about coverage, Contractor brought this case against InsCo. for breach of contract and related claims. One issue was whether Contractor had a right to Cumis Counsel (a California thing) in the underlying Owner's suit. In this opinion the magistrate judge denied InsCo's motion to dismiss, holding Contractor had stated a right to Cumis Counsel. The court cited only California authorities on the insurance issues. The resolution of those issues appears routine. We will leave it to our California brethren, who litigate insurance issues, to tease out the particulars. Joint Representation (posted January 30, 2025) Kukaj v. Town of Eastchester, 2025 WL 275533 (S.D.N.Y. Jan. 23, 2025). Plaintiff sued, in state court, Town and Town officers for wrongful arrest and related causes of action. The defendants removed the case, and in this opinion the court denied a motion to remand. One of Plaintiff's bases for remand was the same law firm would have a conflict of interest representing all defendants, and its removal on behalf of all was wrongful. Wrong, said the court. "Municipalities commonly provide counsel for their employees and themselves. . . " Waiver (posted January 30, 2025) Doe v. Rosdeutscher, 2025 WL 304314 (Tenn. App. Jan. 27, 2025). In this case Plaintiff sued two doctors and several lawyers. The trial court dismissed the case for failure to state a cause of action. Finding the case to be frivolous, the trial court awarded lawyers' fees to the defendants. The only issue of interest to this audience is raised by the defendant lawyers representing themselves and the two doctors. Plaintiff objected to the award of lawyers' fees in part because the lawyers had not obtained conflict waivers. The lawyers responded because the case was frivolous, there was no conflict to waive. The trial and appellate courts agreed. [Our note: We have greatly simplified the procedural aspects of this case, and of a related case, to make that point.] Expert Witness (posted January 28, 2025) SEC v. Cornerstone Acquisition & Mgmt. Co. LLC, 2025 WL 276318 (S.D. Cal. Jan. 23, 2025). SEC brought this enforcement action against Cornerstone, an investment advisor, and Cornerstone's two owners, Geiger and Ngo. SEC moved to exclude expert testimony of Geiger and Ngo. In this opinion the court granted the motion. Noting Geiger and Ngo, as parties, would be fact witnesses, the court felt their conflict of interest was simply too great to allow them "to bolster [their] testimony with the aura of [their] own expertise." (quoted language from Gately v. City of Port Hueneme, 2017 WL 8236269 (C.D. Cal. Oct. 2, 2017)). 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 at This and That. Nothing current. [Note: These, too, will appear at the This and That pages.] Litigation Funding (posted February 4, 2025) Harish v. Arbit,
No. 21-11088-EP-AME (D.N.J. Jan. 31, 2025). In this long opinion the
magistrate judge disqualified two law firms from representing the
defendants. Because we may not have heard the last of this matter, and
because its precedential value appears limited, we will provide just a
few basics. The plaintiff and defendants are contesting ownership of a
patent. The defendants have sold their ownership rights in the patent to
Buyer. Although Buyer is not a party in this case, Buyer appears to be
providing litigation funding to the defendants -- that is, paying their
lawyers. A major problem is that at least one of the two law firms also
represents Buyer/funder. The core of the court's concern is the N.J.
Supreme Court's interpretation of N.J. Rule 1.8(f) in In re State Grand Jury Investigation,
983 A.2d 1097 (N.J. 2009). The court felt that the law firm's
representation of the Owner/funder fails one of the important tests in
that case. This opinion contains much more than the above. If you have a
one-off funding situation in New Jersey, you might find the opinion
useful. APPEALABILITY (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.) (posted February 3, 2025) In re Lalone, 2025 WL 350097 (W.D.
Mich. Jan. 29, 2025). This matter involves two Chapter 12 cases, one
filed by a blueberry farmer, and the other by an LLC wholly owned by the
farmer. The issue is whether the same lawyer can represent both debtors
in possession. In this opinion the bankruptcy judge said no. Among
other things the LLC arguably owes the farmer compensation, while the
farmer arguably owes the LLC rent, the farmer's residence being on LLC
property. Thus, the lawyer would not be disinterested under Section
327(a) of the Bankruptcy Act. 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.) Screening (posted January 22, 2025) Electric Solidus, Inc. v. Proton Mgmt. LTD, No. 2:24-cv-08280 MWC (Ex) (C.D. Cal. Jan. 6, 2025). To read about the case, go to "Waivers," below. CLASS ACTIONS (To read full article, click here.) Nothing currrent. Nothing current. CO-COUNSEL/COMMON INTEREST (To read full article, click here.) Nothing current. COMMERCIAL NEGOTIATIONS (To read full article, click .) Nothing current. CORPORATIONS (To read full article, click here.) (posted January 8, 2025) ABA Op. 514 (Jan. 8, 2025). In representing an
entity, a lawyer must communicate with non-client persons. To whom does
the lawyer for the entity owe duties of competence, confidentiality,
loyalty, etc.? This wide-ranging opinion addresses many of these issues.
Among the Model Rules discussed are 1.2, 1.2, 1.4, 1.6, 1.7, 2.1, 2.3,
2.4, 1.13, 4.1, & 4.3. From our perspective, it is key for the
entity's lawyer to ensure non-clients understand they are not clients,
and if they face personal exposure, they will need separate
representation. It follows, as to anything the non-client tells the
lawyer, the non-client is not protected by Rule 1.6 confidentiality or
attorney-client privilege. There is more. CORPORATE FAMILIES (To read full article, click here.) Keiretsu (posted February 4, 2025) Zappia v. Myovant Sciences Ltd.,
No. 24-253-cv (2d Cir. Jan. 30, 2025). Class action based upon S.E.C.
Rule 14a-9. Big Company had a majority interest in Smaller Company and
purchased the remainder of Smaller Company's shares. Smaller Company
created a special committee "for the acquisition." Law Firm was hired to
represent the special committee. The proxy statement for the
acquisition stated Law Firm had no conflicts and was "independent." The
primary claim in this case is Law Firm had conflicts not disclosed in
the proxy statement. Both companies were members of a large and
prominent Japanese keiretsu. Law Firm had, from time-to-time, represented other members of the keiretsu.
The trial court granted Defendants' motion to dismiss. Its analysis was
fact-intensive. Briefly, the court found the relationships of the
various companies were attenuated, that all the players were very
sophisticated, and information about the relationships of Law Firm and
members of the keiretsu was publicly available. In this opinion the appellate court affirmed. CRIMINAL PRACTICE (To read full article, click here.) Nothing current. CURRENT CLIENT (To read full article, click here.) (posted February 4, 2025) Catalpa Dev. LLC v. Joseph, No.
652091/2017 (N.Y. Sup. Ct. N.Y. County Jan. 17, 2025). The defendants
are a married couple ("W" & "H"). Lawyer appeared for W and H in
this case. After this case began, Lawyer began representing H in a
divorce case against W. Lawyer, saying he had a conflict, moved to
withdraw from representing W in this case. W claims she should review
Lawyer's file to decide for herself if Lawyer should proceed. Nothing
doing, said the judge in granting Lawyer's motion to withdraw. The
conflict is "not waivable." 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.) Important Opinion (posted February 5, 2025) In re
Turquoise Hill Resource Ltd. Sec. Litig., 2025 WL 384549 (S.D.N.Y. Feb.
4, 2025). This is a securities class action arising out of the
development of a copper mine in Mongolia. Investors have claimed
Defendants concealed problems with the development progress. Defendants
moved to disqualify Investors' expert ("Expert") on the technical
aspects of the development, because Expert had previously done work for
Defendants on at least one aspect of the mine project. In this opinion
the court denied the motion. The opinion is a textbook on the law of
expert disqualification. We take no position on the result, but can say
the treatment of authorities from around the U.S. is exhaustive. It
deals with, among other things: (1) what Expert learned in the earlier
work that would be relevant in this case; (2) the passage of time; (3)
what was publicly known; (4) what had been, or would be, known in
discovery; and (5) the nature and coverage of confidentiality
agreements. Keep this one handy. (posted February 3, 2025) U.S. v. Emergency Staffing Solutions, Inc., 2025 WL 346937 (N.D. Tex. Jan. 30, 2025). This is a qui tam
case against two entities, which provided services to hospitals. They
allegedly violated federal and state laws relating to kickbacks and
over-billing. Relator objected to several expert witnesses tendered by
Defendants. In this opinion the magistrate judge granted a motion to
exclude one of them for a conflict of interest. This expert had two
problems: (1) She is COO of both defendants and has "a financial
interest and personal stake" in the case; and (2) "Defendants' silence"
on her financial interest. The court said while cross-examination might
have addressed her interest, her "inherent bias" alone in this case was
enough to disqualify her. (posted January 28, 2025) SEC v. Cornerstone Acquisition & Mgmt. Co. LLC,
2025 WL 276318 (S.D. Cal. Jan. 23, 2025). SEC brought this enforcement
action against Cornerstone, an investment advisor, and Cornerstone's two
owners, Geiger and Ngo. SEC moved to exclude expert testimony of Geiger
and Ngo. In this opinion the court granted the motion. Noting Geiger
and Ngo, as parties, would be fact witnesses, the court felt their
conflict of interest was simply too great to allow them "to bolster
[their] testimony with the aura of [their] own expertise." (quoted
language from Gately v. City of Port Hueneme, 2017 WL 8236269 (C.D. Cal. Oct. 2, 2017)). (posted January 27, 2025) Smithee v. Narayan, No. 1:19-cv-0004
JLT CDB (PC) (E.D. Cal. Jan. 22, 2025). Plaintiff is suing the chief
psychiatrist of the California Correctional Institution ("CCI"), and,
presumably the CCI, for allowing Plaintiff's son to commit suicide while
in captivity at CCI. Plaintiff proposes to use Salma Khan, M.D. as an
expert. Defendants objected to Dr. Khan because Dr. Khan is employed by
the California Department of Corrections and Rehabilitation ("CDCR").
Because CCI is part of CDCR, Defendants claim Dr. Khan has a conflict of
interest. The magistrate judge recommended that objection be overruled
and, relying in part on Dr. Khan's report, recommended Defendants'
motion for summary judgment be denied. In this opinion the district
judge adopted the magistrate judge's recommendations. The judge noted
Defendants failed to show that Dr. Khan had used her position at CDCR to
access the son's files at CDCR. [Our note: This is the first case we have seen where a witness offered expert opinions against her current employer.] FORMER CLIENT (To read full article, click here.) (posted January 24, 2025) Hayes v. Lewis, No. 24CVS004669-400
(N.C. Super. Ct. Bus. Case Jan. 21, 2025). Plaintiff Hayes (female) and
Defendant Lewis (male) were in a romantic relationship, including
children, joint property, and joint ownership and management of LLC.
They fell out, and Hayes sued Lewis directly and LLC derivatively,
including claims that Lewis embezzled money from LLC. Lawyer appeared
for Lewis and LLC. Hayes moved to disqualify Lawyer in this case. In
this opinion the special business court judge granted the motion. LLC
had been put in receivership and retained a new lawyer. Lawyer had
represented LLC in a number of matters including LLC's formation and
acquisition of property. Lawyer had also represented Hayes individually,
as well as LLC and Lewis, in litigation against a contractor. In
granting disqualification, the court applied an "objective" test; that
is, would Lawyer, in the earlier matters, have been in a position to
learn Hayes' confidences giving Lawyer a leg up in this case? (posted January 21, 2025) Bruck v. Walgreen Co., No. C24-1803 TSZ
(W.D. Wash. Jan. 17, 2025). Bruck is suing Walgreen for wrongful
termination. Bruck moved to disqualify Walgreen's law firm ("Ogletree").
In this opinion the court granted the motion. The problem was, for
about three months in 2023, Ogletree represented both Bruck and Walgreen
in a different employment-related case (the "Ashley case"). In the
Ashley case Ogletree would have learned a lot about Bruck that would be
useful in defending this case. Thus, Rule 1.9 and the substantial
relationship test control. A wrinkle relates to when Ogletree agreed to
represent Bruck and Walgreen in 2023, Ogletree did not know Bruck had
already brought an EEOC proceeding against Walgreen involving his
termination. Responding to this motion, Walgreen suggested Bruck
concealed from Ogletree the EEOC proceeding. The court's response was
Walgreen knew of Bruck's EEOC case against Walgreen, and it was on
Walgreen to tell Ogletree about it. GOVERNMENT ENTITIES - SUING ONE PART/REPRESENTING ANOTHER PART (To read full article, click here.) Nothing current. Nothing current. INITIAL INTERVIEW - HEARING TOO MUCH (To read full article, click here.) Nothing current. INSURANCE DEFENSE (To read full article, click here.) Cumis (posted February 3, 2025) Cerecedes v. Houston Cas. Co.,
2025 WL 346082 (N.D. Cal. Jan. 30, 2025). Contractor did work on a
house. Owner sued Contractor for faulty work. Contractor tendered the
matter to InsCo. After squabbling about coverage, Contractor brought
this case against InsCo. for breach of contract and related claims. One
issue was whether Contractor had a right to Cumis Counsel (a
California thing) in the underlying Owner's suit. In this opinion the
magistrate judge denied InsCo's motion to dismiss, holding Contractor
had stated a right to Cumis Counsel. The court cited only
California authorities on the insurance issues. The resolution of those
issues appears routine. We will leave it to our California brethren, who
litigate insurance issues, to tease out the particulars. In-House Lawyers (posted January 21, 2025) Dan Lepore & Sons Co. v. Liberty Mut. Ins. Co.,
No. 378 EDA 2024 (Pa. Super. Non-Precedential Jan. 15, 2025). Lepore
has a Liberty workers' compensation policy, with a $350,000 deductible.
In the claims in question Liberty used "a law firm in Liberty's
Corporate Law Division." Under the settlement in question, applying the
costs of defense, and applying the deductible, Liberty is claiming a
$112,000 balance from Lepore. Lepore is claiming Liberty breached its
contract and was guilty of bad faith. One of Lepore's claims is
Liberty's use of its in-house law firm was a conflict of interest. The
trial court found for Liberty on all claims. In this "non-precedential
decision" the appellate court affirmed the $112,000 award, including
rejecting the conflict-of-interest claim. INVESTING IN CLIENTS/STOCK FOR FEES (To read full article, click here.) Nothing current. Nothing current. JOINT/MULTIPLE REPRESENTATION (To read full article, click here.) (posted January 30, 2025) Kukaj v. Town of Eastchester,
2025 WL 275533 (S.D.N.Y. Jan. 23, 2025). Plaintiff sued, in state court,
Town and Town officers for wrongful arrest and related causes of
action. The defendants removed the case, and in this opinion the court
denied a motion to remand. One of Plaintiff's bases for remand was the
same law firm would have a conflict of interest representing all
defendants, and its removal on behalf of all was wrongful. Wrong, said
the court. "Municipalities commonly provide counsel for their employees
and themselves. . . " LAWYER AS EXPERT WITNESS OR CONSULTANT (To read full article, click here.) Nothing current. 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.) (posted January 31, 2025) Doe v. Rosdeutscher, 2025 WL 304314 (Tenn. App. Jan. 27, 2025).
In this case Plaintiff sued two doctors and several lawyers. The trial
court dismissed the case for failure to state a cause of action. Finding
the case to be frivolous, the trial court awarded lawyers' fees to the
defendants. The only issue of interest to this audience is raised by the
defendant lawyers representing themselves and the two doctors.
Plaintiff objected to the award of lawyers' fees in part because the
lawyers had not obtained conflict waivers. The lawyers responded because
the case was frivolous, there was no conflict to waive. The trial and
appellate courts agreed. [Our note: We have greatly simplified the procedural aspects of this case, and of a related case, to make that point.] Advance Waivers (posted January 22, 2025) Electric Solidus, Inc. v. Proton Mgmt. LTD,
No. 2:24-cv-08280 MWC (Ex) (C.D. Cal. Jan. 6, 2025). Gibson Dunn
("Gibson") represents Plaintiff ("Electric") in claims against Defendant
("Proton"), claiming Proton was stealing Electric's trade secrets.
Gibson moved to withdraw from representing Electric. In this opinion
Judge Court(!) granted the motion. But, it's not that simple. Proton is
an "affiliate" of Tether. In October 2024 several lawyers joined Gibson
from Kramer Levin ("Kramer"). At least one of new lawyers, while at
Kramer, had done work for Tether, but not on this case. Gibson screened the new lawyers from this case. In response to
this motion to withdraw, Electric asked the court to condition the
withdrawal on preventing Gibson from doing work for Tether. In granting
the withdrawal, the court refused Electric's requested condition
primarily for two reasons: (1) Gibson's engagement letter contained an
advance waiver; and (2) the aforesaid screen should prevent any mischief
regarding use of any Electric confidences against Electric in this
case. WITNESS - ADVERSE - CURRENT/FORMER CLIENT (To read full article, click here.) Nothing current. ZERO SUM GAMES (To read full article, click here.) Nothing current. Home/Table of Contents Website powered by Network Solutions® |
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