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FREIVOGEL ON CONFLICTS WHAT'S NEW Home/Table of Contents 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 Investing; Phony Tax Shelter (posted December 7, 2018) Curtis Inv. Co., LLC v. Comm'r, 2018 WL 6380325 (11th Cir. Dec. 6, 2018). "CARDS" transaction. The IRS found the transaction invalid and also imposed a 40% "gross valuation misstatement" penalty. The Tax Court upheld the Tax Court findings. In this opinion the appellate court affirmed. The taxpayer attempted to rely upon an opinion by Brown & Wood, a law firm implicated in many such transactions. The court said that the taxpayer should have known that the opinion was provided as part of an investment firm's promotion of the CARDS plan. Thus the law firm had a conflict of interest. Regardless of the opinion, the taxpayer should have known the transaction was "too good to be true." The day after this opinion the 4th Circuit made very similar findings about a related CARDS transaction, including a 40% "accuracy-related" penalty, Baxter v. Comm'r, 2018 WL 6422483 (4th Cir. Dec. 7, 2018). The taxpayers were individual owners of Curtis Inv. Co. The other players, including Brown & Wood, were the same. Former Client; Adverse Witness (posted December 6, 2018) Sandhu v. Mangat, 2018 BCCA 454 (CanLII) (Ct. App. B.C. Dec. 3, 2018). Mandeep Sandhu, represented by Lawyer, brought this family dispute case against Rupinder Mangat. Several years ago Lawyer had represented Rupinder's brother, Roger Mangat, in a family dispute with Roger's former spouse. Rupinder moved to disqualify Lawyer. The chambers judge granted the motion. In this opinion the appellate court reversed. First, the court noted that Roger, not Rupinder, was the former client. That meant that different standards might apply as to the brother vs. a former client. Second, considering various family relationships in a fact-intensive analysis, the court held the earlier matter was not sufficiently related to this matter. In addition, the court felt that Rupinder's waiting eight months to bring the motion to disqualify, weighed in favor of denying the motion to disqualify. Last, the court acknowledged that Roger may be a witness in this case. The court said that bridge could be crossed when the situation arose. For example, Sandhu could always bring in another lawyer to cross-examine Roger. 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 November 30, 2018) In re Estate of M.L. and G.L., Minors, 2018 IL App (3d) 170712 (Nov. 27, 2018). This case involves custody of two minor children ("Children"). Their parents, Anthony and Christina never married. Christina died. A judge granted the children's grandparents ("Grandparents") temporary custody. Anthony designated his sister, Stephanie, as Children's "short-term guardian." In this proceeding Anthony and Stephanie, represented by the same lawyers ("Lawyers"), seek custody of Children. Grandparents moved to disqualify Lawyers, claiming that representing Anthony and Stephanie was a violation of Rule 1.7. The trial court granted the motion to disqualify. In this opinion the appellate court reversed. First, the court ruled that Grandparents did not have standing to bring the motion to disqualify. Although saying the standing finding was "dispositive" of Grandparents' "position," the court seemed to rule that Grandparents also waived the conflict by waiting three months, and after two substantive rulings, to raise the conflict. Last, despite the two findings above, the court looked at whether Rule 1.7 had been violated, saying that the standing ruling was "not dispositive." The court found that there was no direct adversity between Anthony and Stephanie (Rule 1.7(a)(1) and that there was no material limitation under Rule 1.7(a)(2). [Our note: We have a hunch the appellate court will revise its opinion to resolve whether or not the standing finding was "dispositive."] Nothing current. BANKRUPTCY (To read full article, click here) Nothing current. Nothing current. BOARD POSITIONS (To read full article, click here.) (posted November 23, 2018) Schluter v. Bethesda Healing Ministry, Inc., 2018 WL 6111284 (S.D. Ohio Nov. 21, 2018). Lawyer disqualified because his earlier board service could also be characterized as legal representation. To read more about the case, go to "Former Client," below. CHANGING FIRMS - SCREENING (To read full article, click here.) Nothing current. CLASS ACTIONS (To read full article, click here.) Nothing current. 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. Nothing current. CRIMINAL PRACTICE (To read full article, click here.) Nothing current. CURRENT CLIENT (To read full article, click here.) 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.) Nothing current. FORMER CLIENT (To read full article, click here.) (posted December 6, 2018) Sandhu v. Mangat, 2018 BCCA 454
(CanLII) (Ct. App. B.C. Dec. 3, 2018). Mandeep Sandhu, represented by
Lawyer, brought this family dispute case against Rupinder Mangat.
Several years ago Lawyer had represented Rupinder's brother, Roger
Mangat, in a family dispute with Roger's former spouse. Rupinder moved
to disqualify Lawyer. The chambers judge granted the motion. In this
opinion the appellate court reversed. First, the court noted that Roger,
not Rupinder, was the former client. That meant that different
standards might apply as to the brother vs. a former client. Second,
considering various family relationships in a fact-intensive analysis,
the court held the earlier matter was not sufficiently related to this
matter. In addition, the court felt that Rupinder's waiting eight months
to bring the motion to disqualify, weighed in favor of denying the
motion to disqualify. Last, the court acknowledged that Roger may be a
witness in this case. The court said that bridge could be crossed when
the situation arose. For example, Sandhu could always bring in another
lawyer to cross-examine Roger. Playbook (posted November 27, 2018) Nasdaq, Inc. v. Miami Int'l Holdings, Inc.,
No. 17-6664-BRM-DEA, 2018 WL 6171819 (D.N.J. Nov. 26, 2018). This is a suit for patent
infringement and trade secret violations, all related to electronic
trading technology. One of Defendants' law firms ("Firm 1") represented
Plaintiff until about seven years ago. Over some twelve years of
representing Plaintiff, Firm 1 prosecuted four of the seven patents
involved in this case. Recognizing the conflict issues, Firm 1 arranged
to bring in another law firm ("Firm 2") to handle the patent issues
relating to those four patents. Firm 1 also erected a screen around its
Boston office, the office that had done Plaintiffs' work. Plaintiff
moved to disqualify Firm 1. The magistrate judge granted the motion. In
this opinion the district judge affirmed. First, the court noted that
the patents and the trade secrets involved the same general field of
technology. The court also seemed sympathetic to Plaintiffs' claim the
Firm 1 was "intimately familiar" with Plaintiff's "strategic approaches
to managing its technology and inventions." On balance the court
believed Firm 1 simply knew too much about Plaintiff to continue. (posted November 23, 2018) Schluter v. Bethesda Healing Ministry, Inc.,
2018 WL 6111284 (S.D. Ohio Nov. 21, 2018). Schluter founded BHM in 1994
and was executive director until terminated in 2017. She wrote a
manual, "A Guidebook to Healing," for women affected by abortion. In
this suit Schluter is claiming that BHM is violating her copyright by
its continued use of the manual. Lawyer is Schluter's "local counsel."
BHM moved to disqualify Lawyer. In this opinion the court granted the
motion. Lawyer had served on BHM's board until 2011. While there he
provided advice to the board on, among other things, BHM's protection of
it copyrights. There was a dispute over whether Lawyer was acting as a
board member or acting as BHM's lawyer. In a fact-intensive analysis the
court found Lawyer was acting as BHM's lawyer. Last, the court found
that because Lawyer gave BHM copyright advice while the manual in
question was in existence, this case, which is a copyright dispute
involving the manual, is substantially related to the earlier advice. (posted November 14, 2018) Holmes v. Credit Prot. Ass'n, L.P.,
No. 1:17-cv-3995-WTL-MPB, 2018 WL 5777324 (S.D. Ind. Nov. 2, 2018).
Holmes, represented by Law Firm, sued Defendant ("CPA") for violating
the Telephone Consumer Protection Act ("the Act"). Hinshaw represents
CPA. CPA has moved to disqualify Law Firm. In this opinion the court
granted the motion. One of Law Firm's lawyers ("Lawyer") worked at
Hinshaw until recently. While at Hinshaw, Lawyer did extensive work on
another case against CPA ("Other Case") involving a different plaintiff
and different facts. However, both this case and the Other Case involved
alleged violations of the Act, in part through use of an automated
telephone dialing system. On balance, the court found Lawyer had too
many opportunities at Hinshaw to learn things about CPA, the technology,
and the law, that could be used against CPA in this case. A Bit of Playbook (posted November 13, 2018) Ancient Brands, LLC v. Planet Stuff, LLC,
2018 WL 5885502 (E.D. Mich. Nov. 9, 2018). Ancient Brands, represented
by Honigman, is suing Planet Stuff and its principal, Howard Goldman,
for violations of the Lanham Act and tortious interference with a
contractual relationship. Ancient Brands alleges Planet Stuff was
selling products misbranded as Ancient Brands products. Goldman moved to
disqualify Honigman, because Goldman had previously met with Honigman
lawyers about litigation, and about a possible acquisition. Neither
matter concerned the specifics of this case. However, Goldman claims he
did disclose to Honigman lawyers "confidential information about his
business model." In this opinion the court denied the motion to
disqualify, holding that "business model" information was not enough to
make the matters substantially related under Rule 1.9 or make the
information "significantly harmful" under Rule 1.18. Nothing current. HOT POTATO DOCTRINE (To read full article, click here.) Nothing current. INITIAL INTERVIEW - HEARING TOO MUCH (To read full article, click here.) (posted November 13, 2018) Ancient Brands, LLC v. Planet Stuff, LLC, 2018 WL 5885502 (E.D. Mich. Nov. 9, 2018). Considered "significantly harmful" in Rule 1.18. To read more about the case, go to "Former Client," above. INSURANCE DEFENSE (To read full article, click here.) Nothing current. INVESTING IN CLIENTS/STOCK FOR FEES (To read full article, click here.) Phony Tax Shelter (posted December 7, 2018) Curtis Inv. Co., LLC v. Comm'r,
2018 WL 6380325 (11th Cir. Dec. 6, 2018). "CARDS" transaction. The IRS
found the transaction invalid and also imposed a 40% "gross valuation
misstatement" penalty. The Tax Court upheld the Tax Court findings. In
this opinion the appellate court affirmed. The taxpayer attempted to
rely upon an opinion by Brown & Wood, a law firm implicated in many
such transactions. The court said that the taxpayer should have known
that the opinion was provided as part of an investment firm's promotion
of the CARDS plan. Thus the law firm had a conflict of interest.
Regardless of the opinion, the taxpayer should have known the
transaction was "too good to be true." The day after this opinion the
4th Circuit made very similar findings about a related CARDS
transaction, including a 40% "accuracy-related" penalty, Baxter v. Comm'r,
2018 WL 6422483 (4th Cir. Dec. 7, 2018). The taxpayers were individual
owners of Curtis Inv. Co. The other players, including Brown & Wood,
were the same. (posted November 15, 2018) Curielli v. Dep't of Fin. & Prof'l Regulation,
2018 Ill. App. Unpub. LEXIS 2000 (Ill. App. Nov. 13, 2018). Illinois
has a statute preventing a person from acting as a lawyer and a real
estate broker in the same transaction. The Department found that Lawyer
had violated that statute and imposed a $9,500 fine and a one-year
suspension as a broker. In this opinion the appellate court upheld the
fine but found the suspension unduly harsh and vacated it. [Our note:
Conventional wisdom is that lawyers should be awfully careful when
combining legal work with non-legal financial involvements. This is just
an example of what can happen when a lawyer wears two hats in a matter.] 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. 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.) (posted November 30, 2018) Schirnhofer v. Premier Comp Solutions LLC, No. 2:16-cv-00462 (W.D. Pa. Nov. 26, 2018). Employee sued Employer for violation of the ADA. Lawyer had advised Employer to deny the accommodation in question. Lawyer appeared for Employer in this case. Employee moved to disqualify Lawyer. In this opinion the court denied the motion. The court held Lawyer would not be a necessary witness because documents existed that would prove what Lawyer would otherwise testify about. [Our note: We learned of this opinion and the following Texas ethics opinion from Brian Faughnan's excellent blog, Faughnan on Ethics. We are also relying on the story at Law360 for the facts and holding of Schirnhofer.] Underlying Work (posted November 30, 2018) Tex. Op. 682 (Oct. 2018). This opinion
posits that Lawyer prepared and negotiated a contract for Client, and a
dispute between the parties has arisen. Can Lawyer handle the ensuing
litigation? In the opinion the committee analyzed the issue under Texas'
version of M.R. 3.7. The court also briefly discussed the conflict that
could arise under Texas' version of M.R. 1.7(a)(2) (material
limitation). The opinion concludes that Lawyer's partner may try the
case after Client is fully advised of the issues raised and consents. WAIVERS/CONSENTS (To read full article, click here.) Passage of Time as Waiver WITNESS - ADVERSE - CURRENT/FORMER CLIENT (To read full article, click here.) Former Client (posted December 6, 2018) Sandhu v. Mangat, 2018 BCCA 454
(CanLII) (Ct. App. B.C. Dec. 3, 2018). The court said substitute counsel might cross-examine the former client. To read more about the case, go to "Former Client," above. Nothing current. Home/Table of Contents Website powered by Network Solutions® |