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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 Bankruptcy (posted November 29, 2022) In re Easterday Ranches, Inc., 2022 WL 17184713 (E.D. Wash. Nov. 23, 2022). Chapter 11. Two debtors, a corporation, and a partnership. Both debtors are owned by members of the Easterday family. This proceeding is the result of a massive fraud by owners and the president of the corporation, involving more than $244 million. Law Firm has served as debtors' counsel for both entities. Ultimately, a plan was negotiated and approved. The U.S. Trustee's objected to Law Firm's fee request, claiming that Law Firm had an unacceptable conflict of interest. The bankruptcy judge approved the fee request over Trustee's objection. Needless to say, the corporation and partnership had obligations and rights relative to each other as well as to creditors. The opinion discusses at length the role of debtor's counsel and the application of the Bankruptcy Act. On balance, the judge concluded that Law Firm did not have an actual conflict of interest, did the best it could, and best served the interests of all concerned. The court said Law Firm probably saved the estate years of costly litigation. [Our note: Given our inexperience in the practicalities of complex Chapter 11 cases, we have no clue as to whether the bankruptcy judge was correct.] Joint/Multiple Representation; Third-Party Action (posted November 22, 2022) Hazelwood v. Schlotter, 2022 ABKB 739 (CanLII) (Ct. K.B. Alberta Nov. 7, 2022). Client initially, represented by Lawyer A, sued Employer for wrongful dismissal (not this case). That was filed in June 2015. In March 2016 Client changed lawyers, dismissing Lawyer A and retaining Lawyer B. Amidst all this, Employer became insolvent, probably making Client's wrongful-dismissal claim worthless. In October 2016 Client, represented by Lawyer B, sued Lawyer A for malpractice (this case). Lawyer A then filed a third-party action in this case against Lawyer B for contribution and indemnity. Lawyer B then referred the third-party claim "as a candidate Apparent Vexatious Application or Proceeding." At this preliminary stage of this case the court expressed concern that Lawyer B may have a conflict of interest requiring his disqualification. After consideration of the parties' submissions, the court determined that removal of Lawyer B would be "premature." Among other factors, the claim against Lawyer A pertains to the period April 23, 2015 and March 2, 2016, while the third-party claim against Lawyer B pertains to the period March 3, 2016 and April 27, 2016. The only overlap between the two claims is failure to obtain a settlement from Employer while it was still solvent, but "from different points in time." The court noted that the conflict could ripen down the road, requiring removal of Lawyer B. One such event would be the need for Lawyer B to testify. Stay tuned. Class Action (posted November 21, 2022) Shanely v. Evereve, Inc., 2022 WL 17076753 (D. Minn. Nov. 18, 2022). FLSA collective action. Joint motion to approve settlement. In this opinion the court denied the motion. The problem was that plaintiffs' counsel would be paid a percentage of a common settlement fund of $200,000. The settlement amount and lawyer fees were not negotiated separately. This creates a conflict of interest between the lawyers and the plaintiffs in several different ways outlined in the opinion. Among other things, the lawyer's fee would be 1/3 of $200,000, regardless of how much the plaintiffs ultimately receive after administrative fees and after amounts reverting to the defendant. Joint/Multiple Representation (posted November 21, 2022) In re Lithium Ion Batteries Antitrust Litig., 2022 WL 16959377 (9th Cir. Nov. 16, 2022). In this opinion the appellate court affirmed a district court decision approving fees to Class Counsel. A party had objected because the law firm in question was representing plaintiffs from both "Illinois Brick repealer and non-repealer states." (Those terms are explained in Footnote 1 in this opinion.) Both courts ruled that that joint representation was not a conflict of interest and should not affect the fee awarded. Joint/Multiple Representation (posted November 21, 2022) Putnam v. Kibler, 2022 WL 17074878 (N.Y. App. Div. 4th Dept. Nov. 18, 2022). Snowmobile collision -- a first for this site. A was riding on one; B was driving. They collided with another driven by C. A and B hired Lawyer. Lawyer negotiated a settlement with C's carrier awarding A and B $25,000. A and B signed releases. Nevertheless, A brought this case against B and C. C moved to dismiss because of the release signed by A. A responded that the release should not be enforceable because Lawyer had a conflict of interest; he was representing both the driver and the passenger (A & B). The trial court denied the motion to dismiss without explanation. In this opinion the appellate court reversed, saying that, given the pretty clear evidence that C was completely at fault, it was not unreasonable for Lawyer to conclude that A and B did not have "differing interests." 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.] [Note: These, too, will appear at the This and That pages.] Collateral Estoppel (posted November 2, 2022) Tabrizi v. Nitto, Inc.,
2022 WL 16552859 (D.N.J. Oct. 31, 2022). Law Firm represents Plaintiff,
Tabrizi, in this employment discrimination case against Nitto. Law Firm
previously represented another plaintiff, Panzner, in a different
discrimination case against Nitto, in state court. Nitto moved to
disqualify Law Firm in this case. In this opinion the court denied
Nitro's motion to disqualify. The problem for Nitto is that it had made
an "identical" motion to disqualify Law Firm in the state case, and that
motion was denied. Thus, collateral estoppel precludes granting the
motion in this case. Both motions involved the relative roles that
Panzner and Tabrizi played in their cases. The state court judge had
found that Nitto failed to show that Tabrizi knew anything about
Panzner's case or that Tabrizi was, in any way, responsible for
Panzner's termination. Thus, the judge here ruled she was bound by that
result. Lots of reasoning about the application of collateral estoppel
to motions to disqualify. APPEALABILITY (To read full article, click here.) (posted November 19, 2022) Dietrich v. Dietrich, 2022 WL 16956542
(Pa. App. Nov. 16, 2022). The court said, "as a preliminary
matter," a denial of a motion to disqualify is "immediately appealable." ARBITRATION OF MALPRACTICE CLAIMS (To read the full article, click here. Nothing current. BANKRUPTCY (To read full article, click here.) (posted November 29, 2022) In re Easterday Ranches, Inc., 2022 WL
17184713 (E.D. Wash. Nov. 23, 2022). Chapter 11. Two debtors, a
corporation, and a partnership. Both debtors are owned by members of the
Easterday family. This proceeding is the result of a massive fraud by
owners and the president of the corporation, involving more than $244
million. Law Firm has served as debtors' counsel for both entities.
Ultimately, a plan was negotiated and approved. The U.S. Trustee's
objected to Law Firm's fee request, claiming that Law Firm had an
unacceptable conflict of interest. The bankruptcy judge approved the fee
request over Trustee's objection. Needless to say, the corporation and
partnership had obligations and rights relative to each other as well as
to creditors. The opinion discusses at length the role of debtor's
counsel and the application of the Bankruptcy Act. On balance, the judge
concluded that Law Firm did not have an actual conflict of interest,
did the best it could, and best served the interests of all concerned.
The court said Law Firm probably saved the estate years of costly
litigation. [Our note: Given our inexperience in the practicalities
of complex Chapter 11 cases, we have no clue as to whether the
bankruptcy judge was correct.] 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 November 19, 2022) Dietrich v. Dietrich, 2022 WL 16956542
(Pa. App. Nov. 16, 2022). This is one of four decisions by the same
appellate panel involving different parties. All four are marital cases.
The cites to the other three cases can be found in this opinion. The
four opinions appear to be identical; however, we did not fly-speck them
for variations. All four cases deal with Lawyer who moved from Firm A
to Firm B. Lawyer had represented one of the parties in each case at
Firm A. Firm B represents the other side. Firm B established a screen
for Lawyer, apparently in conformance with the Pennsylvania screening
rule. Nevertheless, the former client in each case moved to disqualify
Firm B. The trial court denied each motion. In these four opinions the
appellate court (same three judges) affirmed the trial court. The court
rejected the movants' arguments that Firm B was too small for a screen
to work, that the screen was not in writing, and that staff was not
informed adequately of the penalties for violating the screen. The
opinion provides a pretty good road map for dealing with a migratory
lawyer who would have information about the case from an earlier
representation. We should note that the court said, "as a preliminary
matter," a denial of a motion to disqualify is "immediately appealable." Screening (posted November 5, 2022) Helton v. The Geo. D. Warthen Bank,
2022 WL 16700386 (M.D. Ga. Nov. 3, 2022). Helton brought this action against
Bank for employment discrimination. Initially, Emily Walker was one of
Helton's lawyers. About six months in, Walker withdrew as Helton's
lawyer and joined the law firm ("Law Firm") representing Bank in this
case. Helton moved to disqualify Law Firm. In this opinion the court
granted the motion. First, the court held that under the circumstances a
delay of about two months to make the motion to disqualify was not a
waiver of the conflict. Last, the court held that, Georgia not being a
screening state, Law Firm's attempt to screen Walker from this case did
not avoid disqualification. Screening (posted November 2, 2022) Robinson v. First Key Homes of Ga., LLC,
2022 WL 16547139 (Ga. App. Oct. 31, 2022). Plaintiff, Robinson,
represented by Law Firm, sued his landlord, First Key, because the house
Robinson was renting had mold, causing Robinson health problems. Law
Firm had hired Lawyer who previously worked in-house for First Key.
Thus, First Key moved to disqualify Law Firm. The trial judge denied the
motion and ordered Law Firm to screen Lawyer. In this opinion the
appellate court reversed, finding Law Firm should be disqualified.
Although Lawyer had not worked on Robinson's matters while at First Key,
her work involved all sorts of considerations, legal and otherwise
("same general subject matter"), relevant to this case. Finally, the
court noted that Georgia is not a screening state as to lateral lawyers.
Although, the court did note that the Georgia Supreme Court had
approved screening for non-lawyers, Hodge v. URFA-Sexton, LP, 758 S.E.2d 314 (Ga. 2014). CLASS ACTIONS (To read full article, click here.) (posted November 21, 2022) Shanely v. Evereve, Inc., 2022 WL
17076753 (D. Minn. Nov. 18, 2022). FLSA collective action. Joint motion
to approve settlement. In this opinion the court denied the motion. The
problem was that plaintiffs' counsel would be paid a percentage of a
common settlement fund of $200,000. The settlement amount and lawyer
fees were not negotiated separately. This creates a conflict of interest
between the lawyers and the plaintiffs in several different ways
outlined in the opinion. Among other things, the lawyer's fee would be
1/3 of $200,000, regardless of how much the plaintiffs ultimately
receive after administrative fees and after amounts reverting to the
defendant. (posted October 31, 2022) McHugh, Chapman & Vargas, LLC v. McCarter & English, LLP, No. X03-CV-21-6151754-S (Conn. Super. Ct. Hartford Dist. Oct. 18, 2022). The McHugh law firm is suing the McCarter law firm for malpractice ("This Case"). In this opinion the trial court mostly denied McCarter's motion to dismiss. A little history: The McHugh firm had been 100% owned by Sean McHugh. At some point David Chapman became a minority "member" of the McHugh firm. Believing that Sean McHugh had been defrauding the McHugh firm, Chapman caused the McCarter firm to be hired by the McHugh firm to sue Sean McHugh for his misconduct (the "Underlying Case"). The Underlying Case was settled with Sean McHugh becoming the 100% owner/member again. In This Case the McHugh firm - now completely controlled by Sean McHugh - has sued the McCarter firm for, among other things, having a conflict of interest in the Underlying Case. The conflict is essentially that McCarter was, in effect, representing Chapman as well as the McHugh firm and that Chapman's causing the McCarter firm to be paid substantial - but unnecessary - fees from the McHugh firm's coffers was harming the McHugh firm. [Our note: This is a long opinion analyzing who the real parties were at various times leading up to This Case. To give you an idea how complex the analyses were, the court saw fit to bring in Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343 (1985), and Tekni-Plex, Inc. v. Meyner & Landis, 651 N.Y.S.2d 954 (N.Y. 1996), as well as a number of Connecticut statutes and cases.] CO-COUNSEL/COMMON INTEREST (To read full article, click here.) COMMERCIAL NEGOTIATIONS (To read full article, click .) 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.) Verein (posted November 10, 2022) RevoLaze, L.L.C. v. Dentons US, L.L.P.,
No. 109742 (Ohio Nov. 8, 2022). In this entry the Ohio Supreme Court
denied Dentons' motion to reconsider the Court's earlier decision not to
hear an appeal of the appellate court's upholding a $32 million jury
verdict against Dentons. This all had to do with whether a verein is one
firm for conflict-of-interest purposes. The trial court and the
appellate court held that it was. Without getting into the correctness
of that conclusion, we can say that the appellate court's opinion is an
excellent review of the facts and the issues. It is at RevoLaze LLC v. Dentons US LLP, No. 109742 (Ohio App. April 28, 2022). 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 16, 2022) Mill Creek Constr., Inc. v. Weldon,
2022 WL 16945002 (Wash. App. Nov. 15, 2022). Weldon hired Mill to build
a house. During construction, disputes arose about the work. Weldon
terminated the contract, and Mill filed this suit for payment. At some
point an engineer ("Engineer") visited the site, and, after discussions
with Weldon, agreed to provide an opinion to Weldon about some aspects
of the work. He never got around to providing the opinion. On the eve of
a bench trial Mill listed Engineer as a witness. On the first day of
trial Weldon moved to exclude Engineer. The trial court granted the
motion. The judge made findings for both parties, with Weldon seeming to
come out better than Mill. In this opinion the appellate court affirmed
the finding as to exclusion of Engineer, finding that exclusion was not
an abuse of discretion. FORMER CLIENT (To read full article, click here.) (posted November 19, 2022) Baer v. M/V Americana, 2022 WL 17054449
(11th Cir. Nov. 17, 2022). Plaintiff is suing for unpaid wages.
Plaintiff moved for disqualification of Defendant's law firm ("Law
Firm") because Law Firm had earlier represented Plaintiff in the
purchase of a boat. The magistrate judge denied the motion. In this
opinion the appellate court affirmed, holding that the earlier purchase
of a boat was not substantially related to this claim for unpaid
seaman's wages. (posted November 19, 2022) Staton Techie, LLC v. Samsung Elecs. Co., Ltd., 2022 WL 16964746 (E.D. Tex. Nov. 16, 2022). Earlier Ahn and Cho were in-house lawyers for Samsung. There, they were involved with software that is the subject of this patent infringement case. In this case, Ahn and Cho are owners of one of the plaintiffs claiming that Samsung is infringing the patent on that software. Samsung moved to have Ahn and Cho disqualified from certain aspects of this case. Given the clear relationship between their work at Samsung and this case, the magistrate judge ordered that their participation in this case be limited as to the patent issues. (posted November 5, 2022) Ryan v. Ryan, 2022 MBKB 198 (CanLII)
(Ct. K.B. Man. Oct. 26, 2022). In this divorce action Law Firm
represents W. Prior to this action H had retained Lawyer at Law Firm to
discuss separating from W and related property issues. The dates are not
nicely laid out, but it is apparent that W had retained Law Firm for
this case while Lawyer was still representing H. At some point Lawyer
informed H that Law Firm had a conflict and could no longer represent H.
Lawyer returned to H the retainer that H had given Lawyer. In this
opinion the court granted a motion by H to disqualify Law Firm. In a
fact intensive analysis the court concluded that H would have shared
confidential information with Lawyer that Law Firm could use to W's
advantage in this case. We will call that a former-client analysis. The
court went on to say that Law Firm's dropping H as a client in order to
continue for W was a violation of Law Firm's duty of loyalty to H, while
a current client. We will call that a "Hot Potato" analysis. Nothing current. HOT POTATO DOCTRINE (To read full article, click here.) (posted November 5, 2022) Ryan v. Ryan, 2022 MBKB 198 (CanLII) (Ct. K.B. Man. Oct. 26, 2022). To read about the case, go to "Former Client," above. INITIAL INTERVIEW - HEARING TOO MUCH (To read full article, click here.) (posted November 10, 2022) In re VUZ-Bank JSC, No. 5:21-mc-00011
(W.D. Va. Oct. 14, 2022). This is a discovery proceeding under 28 U.S.C.
§ 1782, arising out of litigation in Dubai between VUZ-Bank and other
entities ("Group"). After Law Firm began representing VUZ-Bank in the
Dubai proceeding, individuals connected with Group approached Law Firm's
Dubai office about representation on financial matters arguably related
to VUZ-Bank. Law Firm's conflict check came up clean. Members of Group
met with Law Firm and exchanged information. Ultimately, the conflict
was discovered, and individuals related to Group moved to disqualify Law
Firm in this proceeding. On July 21, 2022, in a different but identical
case involving the same players a magistrate judge in Georgia
recommended disqualification. On August 30, 2022, a district judge
adopted the recommendation, In re VUZ-Bank, No. 1:21-cv-04014-VMC (N.D.
Ga. Aug. 30, 2022). In this opinion the Virginia district judge adopted
the reasoning of the Georgia judges and ordered the law firm
disqualified. INSURANCE DEFENSE (To read full article, click here.) Nothing current. 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.) Third-Party Action (posted November 22, 2022) Hazelwood v. Schlotter,
2022 ABKB 739 (CanLII) (Ct. K.B. Alberta Nov. 7, 2022). Client
initially, represented by Lawyer A, sued Employer for wrongful dismissal
(not this case). That was filed in June 2015. In March 2016 Client
changed lawyers, dismissing Lawyer A and retaining Lawyer B. Amidst all
this, Employer became insolvent, probably making Client's
wrongful-dismissal claim worthless. In October 2016 Client, represented
by Lawyer B, sued Lawyer A for malpractice (this case). Lawyer A then
filed a third-party action in this case against Lawyer B for
contribution and indemnity. Lawyer B then referred the third-party claim
"as a candidate Apparent Vexatious Application or Proceeding." At this
preliminary stage of this case the court expressed concern that Lawyer B
may have a conflict of interest requiring his disqualification. After
consideration of the parties' submissions, the court determined that
removal of Lawyer B would be "premature." Among other factors, the claim
against Lawyer A pertains to the period April 23, 2015 and March 2,
2016, while the third-party claim against Lawyer B pertains to the
period March 3, 2016 and April 27, 2016. The only overlap between the
two claims is failure to obtain a settlement from Employer while it was
still solvent, but "from different points in time." The court noted that
the conflict could ripen down the road, requiring removal of Lawyer B.
One such event would be the need for Lawyer B to testify. Stay tuned. (posted November 21, 2022) In re Lithium Ion Batteries Antitrust Litig.,
2022 WL 16959377 (9th Cir. Nov. 16, 2022). In this opinion the
appellate court affirmed a district court decision approving fees to
Class Counsel. A party had objected because the law firm in question was
representing plaintiffs from both "Illinois Brick repealer and
non-repealer states." (Those terms are explained in Footnote 1 in this
opinion.) Both courts ruled that that joint representation was not a
conflict of interest and should not affect the fee awarded. (posted November 21, 2022) Putnam v. Kibler, 2022 WL 17074878 (N.Y. App. Div. 4th Dept. Nov. 18, 2022). Snowmobile collision -- a first for this site. A was riding on one; B was driving. They collided with another driven by C. A and B hired Lawyer. Lawyer negotiated a settlement with C's carrier awarding A and B $25,000. A and B signed releases. Nevertheless, A brought this case against B and C. C moved to dismiss because of the release signed by A. A responded that the release should not be enforceable because Lawyer had a conflict of interest; he was representing both the driver and the passenger (A & B). The trial court denied the motion to dismiss without explanation. In this opinion the appellate court reversed, saying that, given the pretty clear evidence that C was completely at fault, it was not unreasonable for Lawyer to conclude that A and B did not have "differing interests." (posted November 7, 2022) Monden v. Consol. Nuclear Sec. LLC,
2022 WL 16722353 (N.D. Tex. Nov. 4, 2022). Plaintiff sues Defendant, his
former employer, as a "whistleblower" under the National Defense
Authorization Act of 2013 and for common law fraud. Defendant moved to
disqualify Plaintiff's law firm. In this opinion the court granted the
motion. Plaintiff had a supervisory role at Defendant's factory.
Plaintiff claims that other employees fraudulently reported time they
did not work. Some of these employees claim that Plaintiff encouraged
them to falsify their time. Plaintiff's law firm also represents some of
these employees. The court found that Plaintiff and the other employees
would likely be testifying against each other and that this was a
conflict. While Plaintiff had signed a waiver, the other employees
hadn't. The opinion contains no mention of Defendant's standing to make
the motion to disqualify. 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. 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 November 5, 2022) Helton v. The Geo. D. Warthen Bank,
2022 WL 16700386 (M.D. Ga. Nov. 3, 2022). Under the circumstances, a delay of 7-8 weeks was not a waiver. Passage of Time (posted November 2, 2022) Reimer v. Pura Vida Holdings, Inc.,
2022 IL App (5th) 210409-U (Nov. 1, 2022). In this contentious business
dispute involving various feuding family members, one set of parties
moved to disqualify the law firm for other parties. The trial court
denied the motion. In this opinion the appellate court affirmed, finding
that the moving parties had waited four years to raise the issue and
had waived it. 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® |