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

Joint Representation (posted April 25, 2018) Carrero v. Farrelly, 2018 WL 1900136 (D. Md. April 19, 2018). Suit against Officer and County for unlawful arrest. A County in-house lawyer ("Lawyer") attempted to represent both County and Officer. The procedural status of the case is messy, so we will skip that. The court had raised, sua sponte, whether Lawyer would have a conflict, which is the main issue in this opinion. The court held that Lawyer had a conflict and directed the defendants "to rectify this conflict forthwith." The court focused on a training issue. If Lawyer were to argue that County trained Officer well, that is a problem for Officer. If Lawyer were to defend the Officer by claiming his training was inadequate, that is a problem for County.

Former Client
(posted April 20, 2018) Balaban v. Philip Morris USA Inc., 2018 WL 1865035 (Fla. App. April 18, 2018). Lawyer worked at Law Firm 1 for several years and billed many hours defending tobacco tort cases. Lawyer moved to Law Firm 2, which was handling plaintiffs' cases against Lawyer's former tobacco clients. That caused Law Firm 2 to be disqualified in at least one of those cases. Lawyer has left Law Firm 2, but a defendant in this case has moved to disqualify Law Firm 2. The trial court granted the motion. In this opinion the appellate court reversed and remanded so that the trial court can conduct a hearing on whether, under Florida's version of MR 1.10(b) (Fla. Rule 4-1.10(c)), Law Firm 2 retains sufficient information about Lawyer's former client to disqualify Law Firm 2.

Settlement Agreement; Aggregate Settlement (posted April 20, 2018) Custer v. Cerro Flow Prods., Inc., 2018 IL App (5th) 160161 (Ill. App. April 18, 2018). This opinion concerns 131 mass tort cases involving 11,546 plaintiffs. The defendants allegedly caused hazardous materials to contaminate a landfill and a creek. The plaintiffs' lawyers and defendants reached a settlement. The trial court approved the settlement, and one defendant appealed. The primary issue was whether the settlement "was made in 'good faith' within the meaning of the [Illinois] Joint Tortfeasor Contribution Act." Much of this opinion dealt with the parties' failure to comply with that act. What is of special significance to this audience is the appellate court's recognition that the trial court and the parties failed completely to deal with the requirements of Rule 1.8(g) (aggregate settlements) and Rule 1.7 (more generally). There was no showing as to what disclosures were made to the plaintiffs or how conflicts would be dealt with. The appellate court remanded the case to the trial court with directions to deal with, among other things, those issues.

Underlying Work; Duty to Disclose Mistake
(posted April 17, 2018) ABA Op. 481 (April 17, 2018). In this opinion the Committee said a lawyer must disclose "material" errors to current clients, primarily under Model Rule 1.4. The Committee said Rule 1.4 does not apply to former clients. However, the Committee advised that there may be other reasons a lawyer would want to tell the former client about a mistake. The opinion also contains a helpful discussion of when a current client becomes a former client. The opinion is a very useful research tool.

Former Client; Standing
(posted April 16, 2018) Newton v. Stoneridge Apartments, 2018 WL 1773392 (Utah App. April 12, 2018). Newton lived in an apartment building. Peterson lived there, too, and was a part-time employee of Landlord. Peterson sexually assaulted Newton. In this case Newton sued Landlord. Newton retained Lawyer A at Law Firm to handle this case. Lawyer B at Law Firm had represented Peterson in a 2002 custody and support case. Peterson had been a defendant in this case, but was non-suited by Newton. Peterson remains a potential witness. Landlord has moved to disqualify Law Firm. The trial court granted the motion. In this opinion the appellate court reversed. We had difficulty following much of the opinion, so we will briefly describe it. First, the court held Landlord had standing to bring the motion, even without "a dog in the fight," under the court's "inherent power." Second, the court held no violation of Rule 1.9 because of the lack of relationship between the earlier custody and support case and this assault case.

Of Counsel; Office Sharing (posted April 16, 2018) United States v. Sargent, 2018 WL 1774554 (E.D. Ky. April 13, 2018). Criminal case with three co-defendants. They each have separate lawyers, but the lawyers have offices in the same building. In order to avoid Sixth Amendment conflicts issues, the court conducted a hearing to determine if they are a "firm." The court noted that the lawyers had separate offices, computer systems, insurance coverage, and "tax compliance." There was also no sharing of "core . . . personnel." As a result, the court held there was no Sixth Amendment issue, and the lawyers could continue. The court was guided, in part, by Ky. Op. E-418 (2001), which deals with what lawyers sharing space must do to avoid conflicts issues.

                                                               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; Award


On January 24, 2018, in New York City, we received this: "New York State Bar Association Committee on Professional Ethics Sanford D. Levy Memorial Award Presented to William Freivogel for His Contribution to the Field of Legal Ethics, 2017."

CONFLICTS - UNCATEGORIZED

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

(posted April 5, 2018) United States v. Prevezon Holdings, Ltd., 2018 WL 1605216 (S.D.N.Y. March 30, 2018). 2016 WL 6069181 (2d Cir. Oct. 17, 2016). For approximately nine months in 2008 and 2009, Law Firm represented Co. #1 in proceedings involving fraud in Russia. Co #1 then changed law firms. More recently, Co. #2 retained Law Firm to defend this case, a different case, which involves essentially the same fraud. Co. #1, not a party in this case, twice moved to disqualify Law Firm. The district court denied each motion. The Second Circuit reversed the second denial (granted mandamus). The crux of the decision was that  after terminating the relationship with Co. #1, and when the government turned its guns on Co. #2, Law Firm made arguments that the fraud was really Co #1’s fault. The Second Circuit treated this as a former-client situation, and found that the representations were substantially related, and that the current representation was adverse to Co #1, 2016 WL 6069181 (2d Cir. Oct. 17, 2016). Back in the district court (here) Co#1 sought sanctions against Law Firm, including some $1 million in lawyers' fees, for being so stubborn about not withdrawing. In this opinion the court denied sanctions, noting, among other things, that the rights of non-party witnesses was a question of "first impression," in the Second Circuit.

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.)

Nothing current.

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

Nothing current.

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

(posted March 30, 2018) Moore v. PetSmart, Inc., 2018 WL 1431060 (9th Cir. March 29, 2018). Motion to approve a class settlement. A class member objected, but never signed the objection. Both the trial court and Ninth Circuit rejected the objection because it was not signed, and approved the settlement. Notwithstanding, both courts looked at the merits. In this opinion the court spent just a half page upholding the settlement. Two classes are competing for the same pot of money, and the objector claimed that they should have had separate counsel. The plaintiffs claimed that the two classes are aligned. The court said that just because the class members differ "only with respect to the amount or value of their claims,...there is no fundamental conflict to defeat adequacy."

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 April 2, 2018) FMS Inv. Corp. v. United States, 2018 WL 1559993 (Ct. Cl. March 29, 2018). This is a post-award bid protest involving the award of a student-loan debt collection contract by the Department of Education. The plaintiff (Company A) was represented by Law Firm. Law Firm has, since 2011, been doing a variety of corporate tasks for Company B. In this case Company B is adverse to Company A. A lawyer at Law Firm disparaged Company B regarding the bid award in a Washington Post interview. That alerted Company B to the conflict, and it moved to disqualify Law Firm in this case. In this opinion the court granted the motion. The disparagement did not help Law Firm. Moreover, Law Firm claimed that it missed the conflict because Company B changed its name. That did not help, either, because Law Firm had advised Company B on making the name change.

(posted March 29, 2018) Cassels Brock & Blackwell LLP v. Trillium Motor World Ltd., No. 37767 (S. Ct. Can. March 29, 2018). In a one-liner, the Supreme Court of Canada denied leave to appeal in this closely-watched conflict-of-interest malpractice liability case. The case arose out of the "great recession" when General Motors of Canada Limited ("GMCL") nearly failed. The nub of the case is that Law Firm was representing the Canadian government and, at the same time, a collection of General Motors dealers, both representations involving the precarious financial condition of GMCL. The dealers brought a legal malpractice class action against Law Firm. After a trial the Ontario Superior Court found Law Firm liable (2015 ONSC 3824), and, after reconsideration, awarded the dealers $45 million "subject to a calculation, and possible reduction" depending upon the results of an appeal (2016 ONSC 666). In 2017 the Court of Appeal for Ontario affirmed (2017 ONCA 544), leading to the March 29, 2018 denial in the Supreme Court. [Our comment: The case was very complex, involved multiple findings of mixed questions of law and fact, and very long opinions. We express no view of the correctness of the findings or the decision by the Supreme Court to deny an appeal. One hard-to-ignore fact was that, while Law Firm informed the government it was representing the dealers, it did not inform the dealers that it was representing the government.]

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

(posted April 5, 2018) In re Westech Cap. Corp., 2018 WL 1605171 (W.D. Tex. March 29, 2018). "So why are we here?" Up front, that was a question posed by the bankruptcy judge and author of this opinion. Two director factions fought for control of Westech. Much litigation, including this bankruptcy, ensued. One piece of this litigation was a derivative action brought on behalf of Westech against Law Firm, which was transferred to the bankruptcy court (here). Law Firm moved to dismiss. In this opinion, the bankruptcy judge granted the motion. The analysis was very fact-specific. Because we believe lawyer malpractice litigation generally provides poor guidance in analyzing conflicts of interest, we will merely point out several interesting aspects. First, because the court felt that the interests of one board faction was aligned with Westech in underlying matters, Law Firm's representation of both was not a conflict. Second, the court held that a law firm doing only legal work for an entity cannot be charged with a breach of fiduciary duty. One comment was that Delaware courts refer to lawyers as fiduciaries only "colloquially." What is unsatisfying about such statements is the failure to recognize conflicts of interest as breaches of fiduciary duty. Plus, we have always thought that a lawyer's fiduciary duty to a client was something more than "colloquial." But, the court found no conflict, so that was that. Also interesting is a rather lengthy analysis of what is required to charge a law firm for aiding and abetting a breach of fiduciary duty by board-member clients. The court focused on the knowledge requirement and found that Law Firm did not have enough knowledge to be held an aider and abettor.

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

Nothing current.

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

Nothing current.

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

(posted April 20, 2018) Balaban v. Philip Morris USA Inc., 2018 WL 1865035 (Fla. App. April 18, 2018). Lawyer worked at Law Firm 1 for several years and billed many hours defending tobacco tort cases. Lawyer moved to Law Firm 2, which was handling plaintiffs' cases against Lawyer's former tobacco clients. That caused Law Firm 2 to be disqualified in at least one of those cases. Lawyer has left Law Firm 2, but a defendant in this case has moved to disqualify Law Firm 2. The trial court granted the motion. In this opinion the appellate court reversed and remanded so that the trial court can conduct a hearing on whether, under Florida's version of MR 1.10(b) (Fla. Rule 4-1.10(c)), Law Firm 2 retains sufficient information about Lawyer's former client to disqualify Law Firm 2.

(posted April 16, 2018) Newton v. Stoneridge Apartments, 2018 WL 1773392 (Utah App. April 12, 2018). Newton lived in an apartment building. Peterson lived there, too, and was a part-time employee of Landlord. Peterson sexually assaulted Newton. In this case Newton sued Landlord. Newton retained Lawyer A at Law Firm to handle this case. Lawyer B at Law Firm had represented Peterson in a 2002 custody and support case. Peterson had been a defendant in this case, but was non-suited by Newton. Peterson remains a potential witness. Landlord has moved to disqualify Law Firm. The trial court granted the motion. In this opinion the appellate court reversed. We had difficulty following much of the opinion, so we will briefly describe it. First, the court held Landlord had standing to bring the motion, even without "a dog in the fight," under the court's "inherent power." Second, the court held no violation of Rule 1.9 because of the lack of relationship between the earlier custody and support case and this assault case.

(posted April 2, 2018) United States v. Rolls-Royce N.A., Inc., 2018 WL 1547369 (March 29, 2018). George Gage brought this qui tam case against Rolls-Royce. Gage's lawyer ("Lawyer") had been Rolls' in-house lawyer from 1997 to 2008. He also represented Rolls in one matter as outside counsel. In granting disqualification of Lawyer, the court found that the matters are substantially related under Texas' version of MR 1.9. (This opinion does not reveal the nature of the relationship.) An interesting point made by Gage is that Lawyer should be able to proceed because of the bodily harm exception to Texas' version of Rule 1.6. The court sagely noted that the duty of confidentiality under Rule 1.6 (Tex. Rule 1.05) does not affect the duty not to have a conflict under the former-client rule.

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

(posted March 30, 2018) Wootan & Saunders, P.C. v. Diaz, 2018 WL 1517030 (La. App. March 28, 2018). This is a suit by Law Firm to enforce a fee-splitting agreement with Lawyer. After a fatal car collision the decedent's family hired Law Firm to perform various tasks regarding the estate and litigation involving the accident. Law Firm was doing work for various Louisiana state agencies, but not for the Louisiana Department of Transportation and Development ("DOTD"). Law Firm associated Lawyer, a PI specialist, to file suit and do most of the work. They signed a fee-splitting agreement. After settling with the defendants, including DOTD, Lawyer refused to remit any portion of the fee to Law Firm. Law Firm sued for its share of the fee. Law Firm won at the trial level. In this opinion the appellate court affirmed. Lawyer claimed, in part, that Law Firm should not be able to enforce the fee agreement because Law Firm had a conflict. Among other things, the court held that the representation of one state agency does not prevent a lawyer from being adverse to another state agency.

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.)

Nothing current.

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

Litigation Funding

(posted March 28, 2018) N.Y. Op. 1145 (March 7, 2018). Lawyer wants to be a significant investor in a litigation funding company. This opinion considers whether Lawyer or his law firm can, at the same time, handle litigation, in which the funding company has a stake. The opinion holds that such an arrangement violates New York's versions of Model Rules 1.8(e) & 1.8(i), and that the violation is not waivable. The opinion also discusses applicability of Rules 1.7 & 1.8(a), and holds that whether there would be a violation of either would depend upon the circumstances.

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

Nothing current.

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

(posted April 25, 2018) Carrero v. Farrelly, 2018 WL 1900136 (D. Md. April 19, 2018). Suit against Officer and County for unlawful arrest. A County in-house lawyer ("Lawyer") attempted to represent both County and Officer. The procedural status of the case is messy, so we will skip that. The court had raised, sua sponte, whether Lawyer would have a conflict, which is the main issue in this opinion. The court held that Lawyer had a conflict and directed the defendants "to rectify this conflict forthwith." The court focused on a training issue. If Lawyer were to argue that County trained Officer well, that is a problem for Officer. If Lawyer were to defend the Officer by claiming his training was inadequate, that is a problem for County.

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.)

Office Sharing

(posted April 16, 2018) United States v. Sargent, 2018 WL 1774554 (E.D. Ky. April 13, 2018). Criminal case with three co-defendants. They each have separate lawyers, but the lawyers have offices in the same building. In order to avoid Sixth Amendment conflicts issues, the court conducted a hearing to determine if they are a "firm." The court noted that the lawyers had separate offices, computer systems, insurance coverage, and "tax compliance." There was also no sharing of "core . . . personnel." As a result, the court held there was no Sixth Amendment issue, and the lawyers could continue. The court was guided, in part, by Ky. Op. E-418 (2001), which deals with what lawyers sharing space must do to avoid conflicts issues.

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.)

Aggregate Settlement

(posted April 20, 2018) Custer v. Cerro Flow Prods., Inc., 2018 IL App (5th) 160161 (Ill. App. April 18, 2018). This opinion concerns 131 mass tort cases involving 11,546 plaintiffs. The defendants allegedly caused hazardous materials to contaminate a landfill and a creek. The plaintiffs' lawyers and defendants reached a settlement. The trial court approved the settlement, and one defendant appealed. The primary issue was whether the settlement "was made in 'good faith' within the meaning of the [Illinois] Joint Tortfeasor Contribution Act." Much of this opinion dealt with the parties' failure to comply with that act. What is of special significance to this audience is the appellate court's recognition that the trial court and the parties failed completely to deal with the requirements of Rule 1.8(g) (aggregate settlements) and Rule 1.7 (more generally). There was no showing as to what disclosures were made to the plaintiffs or how conflicts would be dealt with. The appellate court remanded the case to the trial court with directions to deal with, among other things, those issues.

STANDING (To read full article, click here.)

(posted April 16, 2018) Newton v. Stoneridge Apartments, 2018 WL 1773392 (Utah App. April 12, 2018). Standing, even "with no dog in the fight."

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

Nothing current.

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

Duty to Disclose Mistake

(posted April 17, 2018) ABA Op. 481 (April 17, 2018). In this opinion the Committee said a lawyer must disclose "material" errors to current clients, primarily under Model Rule 1.4. The Committee said Rule 1.4 does not apply to former clients. However, the Committee advised that there may be other reasons a lawyer would want to tell the former client about a mistake. The opinion also contains a helpful discussion of when a current client becomes a former client. The opinion is a very useful research tool.


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

Nothing current.

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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